Alerts

AD-ttorneys@law – March 23, 2020

Alerts / March 23, 2020

In This Issue:

BakerHostetler’s Coronavirus Resource Center

How We Can Help

To provide guidance and to help address questions about legal concerns arising from the rapidly developing Coronavirus (COVID-19), BakerHostetler has established this online resource center to help address and answer legal questions about COVID-19. We are committed to providing companies with consistent, frequent and transparent communication regarding COVID-19.

And, in addition to this newsletter, our ADttorneys Law Blog addresses topical issues, including developments in advertising, marketing and digital media related to COVID-19. Check out our latest posts:

Former TV Preacher Claims Coronavirus Cure

Bakker is back with ‘12-hour’ virus killer, but CSPI sets FTC on his case

Perennial

Jim Bakker is the gift that keeps on grifting.

Let’s indulge in a quick review of the infamous televangelist’s dust-ups with the authorities: In the early ’80s, he ran afoul of the Federal Communications Commission for allegedly directing donations promised to missions overseas … elsewhere; in the mid-80s, he was investigated by the IRS for directing funds dedicated to his ministry to himself; he resigned from his ministry after it came to light that he had paid off Jessica Hahn to silence her sexual assault allegations; and in the late ’90s, he was found guilty of mail fraud and wire fraud related to fundraising offers.

Guess what?

Poltergeist

You might have missed it, but Bakker is back. For quite a while, in fact. He’s been broadcasting a retooled show with his second wife since 2003 – his first wife, Tammy Faye Bakker (she of the famed running mascara), divorced him in the early ’90s.

We won’t spend time on the new twists he’s put on his old theology, but he’s taken a new tack in the troublesome fundraising department by embracing diet supplements. Specifically, colloidal silver suspensions that he claims can cure all sorts of things, from all venereal diseases to – you must know what’s next, right? – coronavirus.

Check out his claims here and here.

Science!

Advertisements like this make the folks at the Center for Science in the Public Interest (CSPI) foam at the mouth, a reaction the watchdog channeled into an outraged letter to the Federal Trade Commission (FTC).

Silver suspensions, the letter notes, are “both ineffective for any known health condition and dangerous to consumers.” The letter notes that such supplements may lead to a strange condition that permanently changes a user’s skin tone to blue, and in fact may interfere with the absorption of legitimate medications, including antibiotics.

The Takeaway

The letter urges the FTC to go after Bakker for false claims, but also for the advocacy of Doctor Sherrill Sellman, who appears on Bakker’s spots for the products. Sellman, it turns out, holds her doctorate in naturopathy from a non-federally accredited school. “Because viewers are likely to mistake Sellman for a medical doctor, the advertisement is deceptive under FTC rules,” CSPI maintains.

The FTC (along with the Food and Drug Administration) stepped in, sending its usual opening salvo of strongly worded letters to Bakker and six other companies offering similar products. Where will it all lead? “The Commission may seek a federal court injunction and an order requiring money to be refunded to consumers,” the FTC states.

The New York Attorney General’s Office waded into the fray as well, with its own missive sent to Bakker in early March. This letter is a cease and desist notification that promises concrete action: “Your show is hereby advised to immediately cease and desist from making misleading claims regarding the [product’s] effectiveness …” the letter reads.

The Missouri attorney general went so far as to file a lawsuit seeking a temporary restraining order against Bakker and his production company, asking the Missouri Circuit Court to temporarily halt the advertising and sale of the supplements at issue.

Who knows whether Bakker will pay the letters – or the lawsuit – any heed?

And if he does, what will he think of next?

Performance Claim or Money-Back Guarantee?

NAD takes ovulation bracelet manufacturer to task over unclear ads

The Tracking Years

Apps have been invented to track everything and anything, from footsteps to calories to hours of sleep to spending habits and so on, ad infinitum. Historians of the future, looking back over hundreds of years at this particular decade, might be astounded at the brief, narcissistic tracking fad that momentarily consumed global culture; or they may correctly identify our present as the moment when every scrap of information about the human race began to be vacuumed up by the singularity, our ravenous digital overlord.

Rather than turning this column into a (Philip K.) Dickensian nightmare, let us examine a more prosaic narrative: The recent collision between Ava Science Inc. and the National Advertising Division (NAD).

Ava claims to have created yet another new tracking device – the Ava Ovulation Bracelet – that measures key physiological indicators that help predict the most fertile days in a woman’s cycle. NAD, in the course of its routine monitoring efforts, raised the issue of whether guarantee language used by the company in advertisements for the bracelet led consumers to confuse being offered a money-back guarantee for being promised a certain level of performance.

Or vice versa.

Spliting Hairs?

NAD claims that on social media posts, Ava included the words “1-year pregnancy guarantee” circling a “stamp” graphic next to a pregnant woman. Ava claimed that it later modified the slogan to read “1-year guarantee.” Along with the wording that appeared in the posts, NAD determined that consumers would read the ad as a money-back guarantee, rather than a performance claim.

NAD concluded that on the website advertisement, however, the corresponding text might be misread as a performance claim and not a money-back guarantee – in spite of the fact that the guarantee graphic served as a hyperlink to the terms of the money-back guarantee. Without more obvious signs on the advertisement itself, consumers might be confused.

The Takeaway

First, context matters. The (relatively) same string of words can signify a money-back promise or a performance promise depending on the surrounding images or text. It is important to assess the guarantee language to determine whether, even standing alone, it can be interpreted both ways. This will help determine whether the language needs modification, additional context or both. Speaking of context …

Second, context can save you, if you shape it correctly. Burying the link to the money-back guarantee terms in the graphic itself without any other indication that it’s there is a problem. Making disclosures and term sheets clearly available can fend off the sort of negative attention that Ava attracted.

Third, take NAD seriously. This is the easiest takeaway, but also the most consequential. NAD recommended that Ava modify the advertisements appropriately, but the company “failed to confirm that it would comply” with the advice. And now, Ava’s NAD problem has become its FTC problem.

Bipartisan Counterfeit Cooperation Could Change Online Service Provider Liability Standards for Distributed Content

Trump and a mix of Dems and Repubs spearhead sweeping new act that may reshape internet commerce

All Together, Now

What do Reps. Doug Collins, R-Ga., Jerrold Nadler, D-N.Y., Martha Roby, R-Ala., and Hank Johnson, D-Ga., have in common?

Yes, they all were elected at some point to Congress, but no, despite the vicious partisanship that plagues the legislative branch, the similarity doesn’t end there.

It turns out that they all have an intense love for an awkwardly shoehorned acronym. In this case, we’re talking about the SHOP SAFE Act, which, in its more prosaic form, is officially titled the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act.

We’re glad that Democrats and Republicans can come together on more than one level.

CATS! CATS SLEEPING WITH DOGS!

In terms of substantive bipartisanship, the SHOP SAFE Act would create liability for companies that sell counterfeits that “pose a risk to consumer health and safety.” Online retailers would be required to create best practices that would “vet sellers to ensure their legitimacy, remove counterfeit listings, and remove sellers who repeatedly sell counterfeits,” and ask online marketplaces to “prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.”

The background? The bill sponsors claim that recent studies found that almost half of purchases made from third-party sellers and “popular consumer websites” were fakes. Many of these fake products, the sponsors warn, pose a health threat to consumers – think cosmetics, baby products and automotive accessories – because they have not been vetted properly for safety or adherence to standards.

Moreover, the effort got a push from President Donald Trump, who issued a memorandum last year outlining possible efforts to combat counterfeit products online.

The president and Jerrold Nadler, working together? Whodathunkit?

The Takeaway

This latest legislative effort raises echoes of the current, much-publicized battle over online free speech, particularly as it relates to politics.

It’s all about the platform. In the free-speech fracas, social media platforms are being pilloried for allowing hateful and otherwise controversial speech to be posted on their services. The platforms respond by claiming to be a neutral forum for speech, with no rightful oversight function because they are distributors, not producers, of news and opinion.

The analogy in legal battles over counterfeits is clear: Online marketplaces that connect sellers and buyers have denied responsibility for the sale of shoddy or counterfeit material – they’re a neutral marketplace, and the seller is responsible for the quality of the goods they sell and the representations they make about them. Online service providers have had certain immunity regarding content others distribute on their platforms, where the platform does not create or influence the content under Section 230 of the Communications Decency Act (CDA). The CDA, however, does not provide immunity regarding intellectual property claims of the platform’s acts and content. However, attempts to go after online sales platforms under such theories have been largely unsuccessful. The foundational legal decision for this state of affairs was handed down in Tiffany (NJ) Inc. v. eBay Inc. (2010). In that decision, the Southern District of New York ruled that eBay was not liable for trademark infringement despite counterfeit goods having been sold through its online auctions.

The fight over the SHOP SAFE Act’s passage will certainly generate a lot of work for lobbyists and lawyers. How exactly will online marketplaces verify whether products sold through their sites are legitimate enough, given the arm’s-length relationship between the platform and the seller – the very relationship that allows the platforms to be profitable?

Sturm Foods Settles Instant Coffee Rumpus

And plaintiffs’ attorneys hand the mic over to embittered consumer

Professional Betrayal?

Look, we’re lawyers. We take pride in our written word. We spent grueling years of law school and associate practice perfecting the arts of reasoned argument and persuasive prose; when we write a complaint, we like it to be perfect. Or as perfect as we can make it.

So, imagine our shock when we stumbled across the second amended complaint in Suchanek v. Sturm Foods, Inc. A lengthy letter, written by a consumer to Walmart and Sturm Foods, is quoted in the claim overview. Actually, it serves as the claim overview.

We were taken aback, at first. Why give up our professional prerogatives?

Strange Brew

But man, what a letter. We won’t reproduce the whole thing here – it’s in the complaint document above. But whoever this author is, don’t cross them.

Here’s the start, which establishes a terse, Hemingwayesque tension:

I feel ripped off by your company and by Walmart. I purchased two boxes of the “Grove Square Coffee” (one light roast and one medium roast) from Walmart designed for the Keurig coffee maker. Being that these need to be individual packages for single serving, I understand that they are more expensive. I accept that.

And then the tone shifts into outrage:

However, I do expect to get ground coffee that is inside the cup OR I would expect that there is CLEAR marking on the package that says “INSTANT COFFEE.” The product that you put out is at best a deception. I do not expect to find deception coming from a company that sells products through a U.S. retailer. I do expect that it would be clearly marked as such …

… Yes, while SOLUBLE means that it can be dissolved so that means you avoided an outright lie, you are deceiving people into expecting something that all other Keurig coffee providers are doing. That is ground coffee in the individual Keurig cups, not simply instant coffee.

And, finally, a pert promise of future berating:

I will now proceed to find each one of the various websites where I can write a review of the product and share my honest opinions.

The case in question was an agonizing, ever-evolving grind (sorry) first launched in 2011. The main thrust of the complaint is that Sturm Food’s Grove Square Coffee cup product packaging misleadingly claimed to be plain old coffee rather than instant.

The suit accused Sturm of departing from the traditional contents of coffee pods manufactured for use in Keurig’s single-serve coffee machines. Keurig’s pods contain ground coffee; the plaintiffs accused Sturm of using instant without saying a word about it.

We’ll give the last word to the unnamed consumer:

Heck, if I wanted instant coffee, I probably would have purchased the Starbucks VIA coffee and use my hot water pot to make my coffee.

Fightin’ words.

The Takeaway

The whole matter came to a thick, frothy head last year as a settlement agreement was reached and approved.

Sturm is agreeing to pay $25 million to settle the claims for consumers from Alabama, California, Illinois, New Jersey, New York, North Carolina, South Carolina and Tennessee who purchased the allegedly mislabeled cups between 2010 and 2014. There are different reimbursement levels for the various state classes, ranging between $25 and $275 with no proof of purchase required.

SDNY Pecks Apart Unhappy Hen Claims

Most of the charges flew the coop, but a few are left to stew

Poppycock?

Nellie’s Free Range Eggs, a product of Pete and Gerry’s Organics, received some negative attention when they were sued in the Southern District of New York for fraudulent misrepresentation and false and misleading claims early last year. For a brand that specifically pitches to animal welfare lovers, this was serious business.

The packaging is designed to make a point. Aside from the vibrant classroom colors, the packaging shows cute tykes frolicking with poultry – running with them across verdant fields or hugging them tight while gazing dreamily into the camera. Claims on the packaging assert, according to the suit, that Nellie’s hens “enjoyed lives free from unnecessary pain and distress, had access to green fields, space to spread their wings and engage in natural behaviors, and the opportunity to thrive in functional social groupings.”

Unprintable

The suit alleges that, despite the lovely representations, Nellie’s hens are subjected to a suite of horrific practices that we’re not going to reprint here – although if you are at all acquainted with recent media treatments of animal abuse by the food industry, you’ll have a notion of what we’re not describing.

Recently, the Southern District addressed a motion to dismiss by the defendants, ending some of the charges and letting others go. The court’s order presents a helpful review of just how subjective misrepresentation claims can be.

The Takeaway

The plaintiffs’ attempt to seek injunctive relief was dismissed, as there was no indication that they intended to ever buy the eggs again, even though the complaint maintained that they would buy them were Nellie’s to mend its ways.

The false and misleading claims charges fell partly by the wayside. A number of claims based on website advertising were tossed, because they were not viewed by the plaintiffs prior to their purchase. Packaging claims survived in part, however.

First, for the packaging claims that died: Statements such as “better lives for hens mean better eggs for you” were held up as perfect exemplars of puffery. However, other statements kept the case alive.

“Plaintiffs have, however, alleged a viable claim in regards to Defendant’s statement that ‘[m]ost hens don’t have it as good as Nellie’s. ... Our hens can peck, perch, and play on plenty of green grass,’” maintained the court. “Unlike Defendant’s other statements, which make vague claims about love, this statement makes a factual claim – namely, that Defendant’s hens have better lives than other hens because they have more access to the outdoors – upon which a reasonable consumer could rely.”

And so, the case squeaked forward.

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.