Alerts

AD-ttorneys@law - July 25, 2017

Alerts / July 25, 2017

In This Issue:

Consumer Claims Pirate’s Booty Mostly an Empty Chest

B&G Foods slapped with slack-fill suit

Puffy Packaging

Consumer David Greenstein is pursuing excessive slack-fill claims against the producer of popular puffed rice and corn snack food Pirate’s Booty.

Greenstein, who is representing himself in the lawsuit, claims to have purchased one package of Aged White Cheddar Pirate’s Booty, manufactured by B&G Foods, Inc., in April for $2.00. According to his complaint, upon opening the product, Greenstein noted that there were three inches of empty space in the packaging. He alleges the packaging contained more than 40 percent slack-fill, which, if true, would constitute a violation of California’s consumer protection laws.

Rising Tide

Under federal, California and other states’ laws, nonfunctional slack-fill is prohibited. Certain products require functional slack-fill by their very nature – for example, packages for microwaveable foods that include room to expand during heating. Some pharmaceutical companies have argued that regulator-mandated patient information notices require the use of slack-fill, since larger package sizes are needed in order to fit the notices.

Slack-fill suits have become increasingly common. Some plaintiffs’ lawyers boast precise litigation templates that allow them to flood the courts with similar claims (more than a third of slack-fill suits originate in California’s Northern District, which is playfully nicknamed “the food court”). All told, the number of filings has increased sixfold since 2013. Nonetheless, consumer and competitor successes have been few and far between.

Treasure?

Greenstein’s suit, originally filed in California Superior Court, County of Los Angeles, was removed to the U.S. District Court for the Central District of California. The suit brings claims for false, misleading and deceptive advertising and seeks injunctive relief, legal fees and general damages. Attractive as that sounds, however, slack-fill cases have rarely resulted in a large payday. The one big exception is an action in the Northern District of California that successfully argued that tuna buyers were sold under-filled tuna cans; it resulted in a $12 million judgment.

The Takeaway

In 2013, the California governor signed a bill that changed how existing packaging laws are enforced, strengthening exemptions to the slack-fill laws. Despite this, the number of slack-fill cases filed in the state has continued to rise. We may eventually see a decrease in the number of slack-fill cases filed against companies given the lack of success they have had. In the meantime, product manufacturers should keep in mind that only nonfunctional slack-fill is prohibited. To assess risk, companies can review the available exemptions in California’s revised slack-fill law.

Marketing Green Paint Isn’t Just About the Hue

Four paint companies settle with the FTC over eco claims

Primer

In recent years, green marketing claims, including claims that certain paint products are “emission-free” or “VOC-free,” have become common. Other environmental claims popular with paint companies include assurances that their products are specifically safe for populations that face heightened risks from environmental toxins, such as infants, pregnant women and individuals with respiratory problems.

A Shellacking

The Federal Trade Commission (FTC) recently lodged separate complaints against paint manufacturers Benjamin Moore & Co., ICP Construction Inc., YOLO Colorhouse LLC and Imperial Paints LLC. The complaints shed light on the FTC’s approach to assessing green advertising in the paint industry. While each complaint addresses different actions and behaviors, the common elements are straightforward. The Commission alleged that 1) the companies lack adequate substantiation to back up their advertising, 2) specific claims that the products are emission-free during painting are false, and 3) the companies could not demonstrate that their paints would not issue chemicals that might harm customers.

All four companies settled, agreeing to the same four basic provisions. First, the companies will cease making unsubstantiated emission-free claims “unless both content and emissions are actually zero, or emissions are at trace levels, beginning at application and thereafter.” Second, they will cease making claims without scientific evidence to support them. Third, the companies are required to send letters and new packaging labels to their distributors, asking them to either eliminate or correct the misleading packaging labels. Finally, they are prohibited from providing other parties with the means to make the misleading claims. The public comment period on the proposed agreements ends on Aug. 10.

The Takeaway

In summarizing the settlements, the FTC offers advice to companies who are tempted to tout the safety or environmental benefits of paint products. Substantiation of claims, along with appropriate qualifications and limitations, is crucial. In the above complaints, for instance, the Commission focused on how “emission-free” claims needed to qualify whether the emissions were negligible during painting or after the paint had dried.
The FTC also focused on the tendency of companies to award themselves with “green seals”: logos with reassuring titles like “Green Promise” and “Eco Assurance.” These seals, according to the FTC, are misleading because they appear to be official designations by independent reviewers, when in fact, they were created by the companies themselves.

Whiskey-Makers Tussle in Hipster-Brand Bar Brawl

Diageo sues Deutsch over olde-tyme bottle design

Got a Kick

Multinational beverage giant Diageo has found a hit product in Bulleit Bourbon. A top-15 whiskey brand, Bulleit Bourbon sales grew by more than 17 percent between May 2016 and May 2017. The brand is making an impact in the market, and it’s no surprise that Diageo is protective of it.

On June 6, Diageo launched a lawsuit in the Southern District of New York against rival Deutsch Family Wine & Spirits, claiming that Deutsch’s competing Redemption brand infringed Diageo’s trademark and trade dress rights, “unfairly [trading] on the reputation of Diageo’s extremely popular Bulleit brand.”

Old Is the New New

With a canteen-shaped bottle and its brand name embossed in a vintage font above an aged paper label, Bulleit’s packaging has a distinct design. As the suit proclaims, the drink is being promoted as a “frontier whiskey,” with packaging intended to “evoke the rugged look and feel of the American Frontier.” Diageo obtained a federal trademark registration for the bottle design. According to the complaint, Deutsch’s competing brand Redemption strayed too close to that identity for Diageo’s comfort.

Diageo claims that the Redemption brand, formerly sold in cylindrical bottles with a modern silhouette, was retooled in Bulleit’s trademarked image shortly after the brand was acquired by Deutsch. Diageo points to the bottle’s shape and the label’s embossed lettering as evidence, and notes that Redemption is branded as “saloon era” and “pre-prohibition” liquor – another supposed echo of Bulleit’s frontier flavor. Diageo seeks destruction of infringing stock, injunctive relief, profits, damages and attorneys’ fees. Deutsch Family Wine & Spirits denies the charges and promises to fight the lawsuit.

The Takeaway

Diageo is no stranger to this type of litigation; last December, the company slapped competitor Sazerac with a trademark infringement suit, claiming that Sazerac’s line of Dr. McGillicuddy’s liqueurs bore too close a resemblance to Bulleit. The companies reached a settlement out of court in April, with Sazerac agreeing to modify its packaging. A spokesperson from Diageo said, “Diageo is committed to protecting the intellectual property rights of its well-known brands.”

Right of Publicity Bill Takes a Dive, for Now

New York Legislature pulls “right of publicity” bill

New Rights

Facing vocal opposition from a host of parties, the New York assemblyman sponsoring A08155, the so-called right of publicity bill, pulled it out of process.

The bill proposed to establish a new right of publicity, defining “an individual’s name, voice, signature and likeness [as] the personal property of the individual [that] is freely transferable and descendible.” Sponsored by State Assemblyman Joe Morelle (and co-sponsored in the state Senate by Senator Diane Savino), the bill would guarantee an individual’s control over his or her own image.

It would also extend those rights to the estate of a deceased person, which would become entitled to a portion of the sales proceeds of items that portray that person’s image. This right would extend for 40 years after a person’s death and establish registries of estate-controlled publicity rights to make enforcement possible.

Public Pressure

Similar bills have been floated in Albany in the past, but none has become law.

The players lining up in favor of the bill were the Screen Actors Guild, the estate of Jimi Hendrix and 21st Century Fox. Opposing the bill were publishers, broadcasters and other media organizations representing those who routinely use images of the deceased in artistic or commercial endeavors. The bill was also opposed by legal experts who claimed that it would have unseated decades of New York state case law built around an already-recognized right to privacy. Others objected to what they claimed were the bill’s negative First Amendment implications, including weakening protections for use of likenesses in news reporting and commentary.

Takeaway

Many commentators believe that another right of publicity bill is likely to be floated in the New York Legislature soon. Advertisers looking to use a celebrities’ name, image, or voice in advertising will need to plan for how they will handle a stark change in publicity law.

Backpage.com Sues Missouri Attorney General

Website claims AG’s investigation is barred by the Communications Decency Act

Ongoing Crusade

In May, Missouri Attorney General Josh Hawley announced that he intended to take on Backpage.com, the second-largest classified ad website in the country. Hawley’s investigation, launched on May 10, inaugurated a new unit in his office dedicated specifically to prosecuting human traffickers. Critics of the site allege that it has become a hub of sex exploitation, with traffickers using it to sell sex through the “adult” sections. The investigation comes on the heels of a report issued in January by the United States Senate Permanent Subcommittee on Investigations, headed in part by Missouri Senator Claire McCaskill, which criticized the ad publisher for disguising the illegal nature of the services being offered.

Backpage has drawn negative regulatory attention over the years for allegedly facilitating human trafficking, with the National Association of Attorneys General describing the company as a “hub” of “human trafficking, especially the trafficking of minors.” Backpage CEO Carl Ferrer was even arrested on charges of pimping in 2016, based on a warrant issued by then-California Attorney General Kamala Harris – charges that were later dismissed.

AG Demand

On May 10, Hawley’s office issued a civil investigative demand to Ferrer seeking documents and information regarding the site’s leadership, ownership structure, advertising materials, promotional materials and editorial policies.

Attorney General Hawley’s office took a novel approach against Backpage, basing its demand on the investigative powers established under the Missouri Merchandising Practices Act (MMPA). The law prohibits “the act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce.” Previous legal efforts against websites have foundered on Section 230 of the Communications Decency Act (CDA), which prohibits state-law civil or criminal claims against internet publishers based on content created by third parties.

Backpage Reply

Backpage responded by filing a complaint for injunctive and declaratory relief against the attorney general’s office on July 11, citing Section 230 of the CDA. The complaint maintains that the attorney general’s office is “misusing the MMPA to burden, harass and inhibit First Amendment-protected communications.” The complaint goes on to say that “the MMPA itself specifically recognizes that liability under the act should rest with the third parties who advertise, and not with the publishers that distribute the ads.”

The Takeaway

Companies intending to hide behind CDA protections should be aware that state investigators are exploring alternate legal theories in order to pursue investigations. Here, the AG hopes that investigating the site under Missouri laws governing merchandising practices – the first time a law enforcement agency has done so – will prove more fruitful than traditional inquiries. “Any violations of the law we may find, we can prosecute,” said the AG. “Civil and criminal penalties are possible here.”

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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