Kirkland FACTA Case May Create Circuit Split

Kirkland, Inc. will face a putative class action for allegedly violating the Fair and Accurate Credit Transactions Act (“FACTA”). The plaintiffs filed their complaint against Kirkland in April 2017 for displaying the first six and the last four digits of their credit card or debit card numbers on their purchase receipts.  According to the plaintiffs, this increased their risk of facing credit card fraud and identity theft.  Kirkland countered, arguing that the case should be dismissed, in part, because they suffered no concrete injury.  The judge sided with the plaintiffs, finding that the consumers did not need to allege actual or imminent identity theft to show standing.

TAKEAWAY:  The decision was a departure from three other district court cases since the Supreme Court’s decision in Spokeo, and indicates that courts are willing to find standing for a class under FACTA claims.

Court Says Don’t Cry Over Steamed Milk

A federal court granted Starbucks’ motion for summary judgment in a putative class action in which plaintiffs alleged Starbucks underfills lattes and mochas. The plaintiffs alleged that the underfilling of Starbucks drinks was a breach of warranty and constituted unfair competition and false advertising based on three arguments: (1) consumers should receive beverage volume equal to the maximum cup capacity; (2) milk foam should not be counted toward beverage volume; and (3) barista pitchers and beverage card measurements do not add up to the promised beverage volume.

The court rejected all of these arguments due to contradictory evidence and unreliable studies. With regard to the argument about milk foam, the court determined that no reasonable consumer would be deceived into believing lattes contain promised beverage volume, excluding milk foam.  The court also noted that Starbucks’ signage does not explicitly identify liquid measurements and that reasonable consumers understand lattes include milk foam.  According to the court, just as consumers can increase the amount of their cold drink by ordering light or no ice, consumers are free to order light or no foam.

Takeaway: This is one of a handful of cases filed last year regarding beverage volumes in which courts have been less sympathetic to plaintiffs that distill false advertising disputes down to frivolous technicalities. Advertisers should instead focus on ensuring their practices satisfy a reasonable consumer standard.

Class Action Aims to Catch Canned Salmon Manufacturer for False Advertising

A class action complaint was recently filed against Bumble Bee Foods, LLC (“Bumble Bee”), the makers of canned fish and seafood. The false advertising lawsuit stems from the plaintiff’s assertion that Bumble Bee falsely implies its Premium Select Medium Red Smoked Salmon Filets in Oil are high quality, wild-caught, and naturally smoked.  The plaintiffs believe the fish is low-quality, farm-raised Chilean salmon that Bumble Bee colors from its natural gray flesh to red and flavors with artificial smoke flavoring in order to charge a price premium.  Specifically, the plaintiffs assert that Bumble Bee omits referring to this product as “farm-raised,” a phrase that the plaintiffs state Bumble Bee uses on other products.  Moreover, the plaintiffs claim that Bumble Bee’s product label includes the phrases “Premium Quality” and “Premium Select Medium Red” alongside an image of a medium-red colored salmon jumping out of water surrounded by mountains and evergreen trees, implying a wild-caught message.

Takeaway: Although we do not yet know how the court will decide this case, advertisers are responsible for all reasonable takeaways of their express and implied claims and should carefully consider use of imagery to determine whether such imagery communicates a claim requiring substantiation.

FTC Comes Down Hard on Mass-Mail Fraud Schemes

The Federal Trade Commission has issued a default judgment against David Raff, Millenium Direct Incorporated, and Ian Gamberg over charges alleging that they engaged in a mass-mail fraud scheme inducing mostly elderly consumers to pay money in order to receive a cash prize that never arrived.

According to the order, announced December 18, the defendants mailed fake prize notifications addressed to the victim, telling them that they had won a cash prize. Victims were tricked into paying $25 to receive the supposed $1 million cash prize, which never materialized. Some victims were tricked into making repeated payments, adding up to significant sums. Along with fraudulently collecting these payments, the defendants allegedly sold consumers’ personal information to other marketers.

The defendants have been ordered to pay $501,895 and may not participate in the prize promotion business or misrepresent any good or service.

TAKEAWAY: Advertisers should be vigilant when purchasing lists of personal contact information that can be used as marketing leads, as these lists can sometimes be gathered illicitly or compiled to target vulnerable populations such as the elderly.

 

Jason Gordon Will Deliver Free ANA Webinar on FTC Issues on January 9, 2018

Jason Gordon will be speaking on Tuesday, January 9th to the Association of National Advertisers. The free one-hour webinar, titled “The # FTC Review” will provide an update on the latest enforcement actions brought by the FTC and the types of enforcement actions the industry can expect to see from the FTC in 2018. Click Here for more details and to register.

Brands Tap Into GM’s In-Vehicle Marketplace Feature

In early December, General Motors Co. (“GM”) unveiled Marketplace, an in-vehicle commerce platform facilitating on-demand goods and services, including the ability to make reservations, order food, and locate the nearest gas station through dashboard screens of eligible Chevrolet, Buick, GMC, and Cadillac vehicles. Brand partners include Dunkin’ Donuts, Wingstop, IHOP, Priceline.com, Parkopedia, and delivery.com. Marketplace is only one feature of a suite of services that GM plans to roll out to nearly four million drivers in the next few years.  The Marketplace platform will use machine learning from drivers’ real-time interaction data to generate personalized offers and experiences, including offers specific to GM vehicles, such as discounts for oil changes or accessories.  Connected cars provide new opportunities for brand interaction but also create new legal challenges, even when companies adhere to driver safety guidelines.

Takeaway: Advertisers should consider how forming partnerships with connected car companies might expose them to new regulatory frameworks and liability, especially as they relate to data ownership and consumer privacy.

 

Judge Hits Ctrl+Alt+Delete on Facebook User Tracking MDL

Judge Edward J. Davila of the Northern District of California recently administered the coup de grâce to an expansive multidistrict litigation over Facebook’s data use policy filed in 2012. The plaintiffs alleged that Facebook’s data use and privacy policy violated the federal Wiretap Act, the Stored Communications Act, California’s Invasion of Privacy Act, California consumer protection statutes, and common law, seeking over $15 billion in damages and injunctive relief.  The scope of the suit was first narrowed in 2015, then again in July 2017, cutting all causes of action with leave to amend granted only for the plaintiffs’ claims for breach of contract and breach of the implied covenant of good faith and fair dealing

The plaintiffs alleged that they entered into a contract with Facebook that consisted of its statements of rights and responsibilities (SRR), its privacy policy, and relevant pages from its help center. The policy at issue was Facebook’s collection of data—including user IDs—that the company receives when users visit a third-party site with a Facebook feature such as a plugin “if [the user] is logged into Facebook.”  The plaintiffs claimed that this statement “implicitly promises to the average user that Facebook will not receive [a user-identifying] cookie when the user is not logged in,” and was incorporated by reference into the SRR from Facebook’s privacy policy and help center pages.

However, this argument had little support. Judge Davila found that the version of Facebook’s data use policy containing the language about not collecting logged-out users’ IDs was published in September 2011, four months after the publication of the version of the SRR upon which the plaintiffs rested their arguments.  He found that the privacy policy and help center pages were not incorporated into the SRR and therefore could not form the basis of the plaintiffs’ claims for breaches of contract and good faith, and dismissed them without leave to amend.

Takeaway: This decision indicates that statements of rights and responsibilities and separate privacy policies or help center pages may not be viewed as one incorporated contract for purposes of contract litigation.  Drafters of such policies should consider this when writing and updating their companies’ terms of use.

Preliminary Injunction Could Hinder Equinox Hotel Opening

Luxury fitness chain Equinox recently announced that it will be debuting its first fitness-oriented hotel in New York City in 2019, with additional sites planned for Los Angeles and other major cities. Certainly aware of this announcement was the San Francisco-based hotel company Equinox Hotel Management Inc., which already has existed in the hotel industry for years under its EQUINOX-formative trademarks.  Equinox Hotel Management sued Equinox under the Lanham Act and California state consumer protection laws for trademark infringement, false designation of origin, false advertising, and unfair competition, and moved for a preliminary injunction to prevent Equinox “from using EQUINOX or similar marks in a manner that causes confusion with Plaintiff or its mark.”

Equinox Hotel Management’s case rests on a theory of reverse confusion, i.e., that its admittedly smaller—but senior—market space would be overwhelmed by Equinox’s massive advertising and branding power if the fitness chain were allowed to enter the hotel industry under EQUINOX trademarks. The complaint and preliminary injunction motion characterize it as “a classic David and Goliath situation.”  Whether the court will side with the purported David or Goliath here remains to be seen; the preliminary injunction hearing is set for January 16.

Takeaway: Larger brands expanding into goods and services unrelated to their usual market spaces may present a risk of reverse confusion trademark infringement actions.

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