Split FTC Moves Ahead with Fines

New Nectar Sleep consent order proves the Commish isn’t down for the count

Perchance to Scheme?

Nectar Sleep—the upstart mattress manufacturer and daughter company of Resident Home LLC—keeps popping up in this newsletter like a recurring...hmmm...we’re at a loss—is there a decent metaphor somewhere in this story?

In 2019 we covered a controversy involving a Nectar offer that failed to resolve when pushed by the National Advertising Division to the Federal Trade Commission. And even further back, in 2018, we reported on a consent order that the company entered into with the FTC over allegedly dodgy made-in-the-USA claims.

Back in ’18, the Commission accused Nectar of stating its products were “Designed and Assembled in USA” when they were “wholly imported from China” and the company performed “no assembly operations in the United States.”

They’re Baaaaaack!

The decree, among other things, banned Nectar from making unqualified made-in-the-USA claims without proving that the manufacture of the mattresses, including all the components involved, took place in the United States.

But according to the FTC’s account of its latest encounter with the mattress mavens, Resident Home CEO Ran Reske claimed that the claims were eliminated, even though they remained on the company’s website in 2019 and 2020. The Commission swung into action, hitting Nectar and Reske with $753,000 in fines and a brand-new consent order that covered Resident Home as well as Nectar.

Nectar’s latest dust-up with the federales might have remained a relatively straightforward case if it had not taken place in the wake of AMG Capital Management v. FTC, which found that Section 13(b) of the FTC Act did not permit the Commission to seek monetary remedies. The case generated a split decision among the commissioners, with FTC Chair Khan and Commissioners Chopra and Slaughter arguing for the penalty and Commissioners Phillips and Wilson dissenting.

The Takeaway

The former group contends that the hefty fine is justified by Section 19 of the Act, which “expressly authorizes payment of redress and damages.” Phillips and Wilson “[attempt] to sidestep this clear statutory authority by narrowly equating ‘damages’ with restoration of money to particular consumers,” Khan and company write. “However, such an interpretation runs contrary to the standard legal meaning of the term.”

There’s some first-class FTC snark in these letters, especially from Phillips and Wilson. “That didn’t take long,” their letter begins. “Soon after the Supreme Court unanimously rebuked the Federal Trade Commission for seeking monetary remedies not permitted by Section 13(b) of the FTC Act...the Commission now votes to accept monetary remedies not permitted by Section 19.”

Together, the letters sketch out the developing friction about how exactly the Commission should proceed in a post-AMG world. For now, it’s clear that the Commission isn’t taking the decision lying down.

What Do Clint Eastwood and Carmen Electra Have in Common?

Imperiled public images hit the comeback docket

Cry Loco

Clint Eastwood locked up $6.1 million in the resolution of a right-of-publicity and false endorsement case last month.

Originally, Dirty Harry sued a trio of CBD product manufacturers in the summer of 2020 for using his name and likeness in a fake news ad. The headline was attention-grabbing: “Big Pharma in Outrage Over Clint Eastwood’s CBD.” The text was, well, hilarious: “In an emotional 1-on-1 interview, one of America’s most respected icons revealed that he wouldn’t be where he is without CBD.”

“Emotional”? Come on. When did the Man with No Name get emotions?

Then the twist: Eastwood and the product manufacturers settled late last year, and the three companies were dropped from the case. Eastwood turned his sights on Mediatonas, a “Lithuanian private limited company with its principal place of business in Lithuania.” Clint claims Mediatonas owned the websites where the article appeared, created the fake article, and, most outrageously, “created and sent to Sera Labs’ marketing company...a fake website advertising products that did not mention Mr. Eastwood” to dodge suspicion.

Eastwood sued for right of publicity, false endorsement, trademark infringement, defamation, and invasion of privacy. The $6.1 million default judgment was based on the amount the court reckoned Eastwood could have charged for a campaign of similar length and visibility.

Lady Power

A case involving similar accusations—but very different plaintiffs—saw action in North Carolina federal court in October.

Remember Carmen Electra? (If you don’t, you’re too young to be reading this blog.)

The model, actress, Baywatch star, and anchor celebrity for a seemingly endless string of parody movies must have an active social media life, because somehow she (or perhaps one of her retainers, henchmen, or rabid fanboys) noticed that Cherry’s Gentleman’s Club of Havelock, North Carolina, was appropriating photos of her and using them to advertise on Facebook and other social media outlets. Electra claims she never worked for the club and that the images were used without her consent.

It's an obscure catch, but enough for her to launch a lawsuit in mid-October. She is among nine other plaintiffs who made roughly the same allegations; they have sued as a group for violations of the Lanham Act, common-law right of privacy, and North Carolina state law; defamation; negligence; unjust enrichment...you get the idea.

A similar case, sans Electra but featuring some of the same models, was filed against another club in the same jurisdiction just a day earlier.

The Takeaway

If these cases weren’t enough to prove that right-of-privacy and image misappropriation cases are enjoying something of a renaissance, we’ll give you yet another—one that’s reached the highest court in the land. Electra and several models from the North Carolina cases are petitioning for certiorari before the Supreme Court in Carmen Electra, et al., Petitioners v. 59 Murray Enterprises, Inc.

The models in this case advance claims similar to those in the two cases mentioned above but are seeking review of a Second Circuit ruling that might leave the less-famous plaintiffs out of a future win: “[L]ower courts have divided over whether an individual asserting a claim...based on the misuse of their image, likeness, or identity by another in an advertisement must establish they have a ‘commercial interest’ in their identity,” the petition states, “or whether they must establish a higher, unspecified, and necessarily arbitrary level of ‘celebrity,’ ‘recognition,’ or ‘public prominence’ to sustain a claim.”

Together with the Eastwood case, the Electra and Electra-adjacent suits are good indications of a recent spike in right-of-publicity cases. Best practice, of course, is to clear these third-party rights in all of your advertising materials—even if the individuals depicted are not as famous as, say, Clint Eastwood or Carmen Electra.

Chobani Tries to Shrug Off Flawed Greek Yogurt Complaint

But is this messy suit just the first of many?

Fetish for Briefs?

It’s fair to say no one wants to get sued. But if you’re going to get sued, you probably couldn’t do better than pulling a plaintiff like Lori Gilker.

Consider Gilker v. Chobani, LLC. Chobani, of course, is the well-known producer of yogurt and other wholesome-ish products. Back in March, Gilker sued Chobani in the Southern District of Illinois for violation of that state’s Consumer Fraud and Deceptive Business Practices Act, a handful of warranty claims, fraud, negligent representation, and unjust enrichment.

Gilker, an Illinois consumer who purchased Chobani Complete Greek yogurt in a Walmart, took umbrage with the “complete” in Chobani Complete, but that’s where her trouble started.

“The Product’s name, ‘Complete Nutrition,’ is false, deceptive, and misleading,” Gilker maintains in her complaint, “because it fails to provide ‘complete’ nutrition as this term is understood by reasonable consumers. Reasonable consumers understand ‘complete’ the same way as defined by the dictionary—‘having all the necessary or appropriate parts.’”

With Plaintiffs Like These...

Which might serve as the beginning of a reasonable analysis. But she got the name of the product wrong.

The product she purchased—the label is included in her complaint, by the way—is named “Chobani Complete.” Not “Complete Nutrition.” To make matters worse, as Chobani points out in its exasperated motion to dismiss, “[t]he phrase ‘Complete Nutrition’ does not appear anywhere on the Product’s label.”

Youch.

Gilker made other missteps, even if not as dramatic as the first. For instance, she alleges that the “Advanced Nutrition Yogurt” tag on the front of the package “is false, deceptive, and misleading” because Chobani had not gone “beyond what others have already introduced into the marketplace.” But she fails to define which “others” she means and how to compare their products against Chobani’s.

She also takes issue with a “+” symbol that appears in a circle with the words “prebiotic” and “probiotic.” “Through use of the + (plus) symbol...defendant tells consumers the Product has ‘more’ of these nutrients or ingredients than other comparable foods.” For starters, she doesn’t mention the foods she’s alleging are involved in the comparison. But even worse, Gilker defines the “+” symbol in a different context on the same label as “equivalent to a bullet point or checkmark, ticking off attributes of added value.”

The Takeaway

The takeaway? If you’re going to be embroiled in a lawsuit, you might pray for legal challenges that are riddled with mistakes and self-contradiction. (For what it’s worth, Gilker has promised to file an amended complaint.)

But be careful what you wish for—we’ve seen the legal team behind Gilker’s suit before. They’re the same folks who brought us the 100 putative class actions against Mars Wrigley Confectionary which we covered back in January. So what at first glance seems to be a hopeless lawsuit may be the velociraptor just beginning to test the fence.

Godiva Settles Origin Class Action for $20M

Plaintiffs sue over Pennsylvania chocolate production

Foreground Noise

We never noticed it. But it’s there.

Like other slightly enigmatic messages or symbols, Godiva Chocolatier’s “Belgium 1926” tag hovers on the edge of consumer consciousness.

There’s “L.S./M.F.T.” on a pack of Luckies. Or the “57” on a Heinz bottle. Cryptic tags that are just sitting there, unexplained on the familiar packaging of a beloved product; you might wonder about the meaning for a moment, even silently ponder a quick search for the answer before being distracted by something else. But it’s there, so it must mean something, right?

(Check the links, if you haven’t already.)

But questions about the precise meaning of “Belgium 1926”—a tag visible on multiple Godiva products and even on their storefront signage—got under the skins of two consumers back in 2019. So much so that when they discovered the meaning, they sued Godiva in the Southern District of New York.

The most important of their charges, filed under New York and California state law, were for deceptive practices and false origin claims. Godiva chocolates, you see, are actually manufactured in the prosaic environs of Reading, Pennsylvania—not in legendary, poetic, European Belgium, as the plaintiffs claimed they were led to believe. “Belgium is widely understood and recognized as producing among the highest quality chocolates in the world,” declare the plaintiffs in their complaint.

They wouldn’t have paid the same price for Pennsylvania chocolate, they claimed, and so the suit was off to the races.

Expiration Date

Godiva moved to dismiss in April of 2019 and won on a number of charges—including blocking the plaintiffs from pursuing injunctive relief. But they failed on the most important state law claims; it’s an instructive result, in terms of both how Godiva argued the motion and how even innocuous design choices can lead to legal exposure.

The chocolatier argued that a reasonable consumer could not have been deceived by the “Belgium 1926” tag into believing that the chocolates were manufactured in Belgium. In its order denying the motion, the court took apart Godiva’s arguments piece by piece.

“Godiva attempts to escape [the plaintiffs’ argument] by noting that it was founded in Belgium in the year 1926,” the court writes, “...thus arguing that the representation is a ‘factually accurate phrase that imparts an unambiguous and historically accurate message.’ However, an equally, if not more, plausible inference is that the phrase represents both the provenance of the company—Belgium, in 1926—and a representation that its chocolates continue to be manufactured there.”

Godiva had also argued that the inclusion of “1926” in the tagline “cures any likelihood of deception” because if the tag led a consumer to believe that the chocolates had been made in Belgium, it must also lead them to believe the absurd notion that the chocolates had all been made in 1926. “This argument, however, is too clever by half,” the court wrote. “A consumer could reasonably believe that Godiva was founded in Belgium in 1926, as Godiva contends, and that the representation on its products of this heritage means that its products continue to be manufactured in that location.”

The Takeaway

The big takeaway from this case: Make smart decisions regarding any advertising or packaging that might be construed as an origin claim.

First, companies should note another point drawn by the court: The context of the tag’s placement was crucial to preserving the claims.

Godiva, the court noted, used “Belgian” and “Belgian Chocolate” in other advertisements for its goods; that overall approach meant that “Belgium 1926” might cause a consumer to suspect the chocolates had been manufactured in that country.

More important: A case like this serves notice that any and all origin claims are potential subjects of scrutiny—not just “made in the USA” claims. In this instance, the exposure was significant: Godiva paid $20 million to settle, which meant that it was worried about losing a lot more.

Within the right context, a legacy tag like “Belgium 1926”—even if it was documented as celebrating the birth of the company and nothing else—leaves the door open for financial and legal exposure. And who wants to celebrate that?

Scourge of the TCPA Bar Faces Character Attack in Florida Case

Deceptive tactics meant to prolong “illegal” calls put an end to Do Not Call class

You Call This Retirement?!

Ohio citizen Kenneth Johansen is, according to a recent deposition, a retiree who claims to make roughly $60,000 a year as a Telephone Consumer Protection Act plaintiff.

To your average civilian, this might be the perfect opportunity to rail, once again, against unnecessary lawsuits: “They oughta change the law,” we can hear them shouting. “Why can’t these plaintiffs make an honest living?!”

We get it. But from our point of view—we’ve worked our share of TCPA cases—we don’t envy Johansen in the slightest. Managing dozens of TCPA class actions across multiple jurisdictions sounds nothing at all like retirement. Or...perhaps...he finds these lawsuits relaxing?

We shudder at the thought.

T(CPA)hermopylae

A recent order in one of Johansen’s current class actions, Johansen v. Bluegreen Vacations Unlimited, Inc., however, may have put him out of business.

Bluegreen is a seller of vacation packages located in Florida. Johansen claims that Bluegreen called him at least nine times without his consent and despite his number being registered with the National Do Not Call Registry. He filed suit in July 2020 in the Southern District of Florida.

The case wound its way through two amended complaints and two motions to dismiss before being brought up short by the court. Did Johansen fail on any of the finer points of the law? No—and let’s face it, a mistake would be remarkable at this point. Given his considerable income, he must have these complaints down to a science by now.

The court denied Johansen’s motion for class certification, opening its order with this sardonic salvo: “Plaintiff appears to have an extensive history with filing lawsuits alleging violations of the TCPA.”

You don’t say?

The court goes on to summarize Johansen’s interactions with Bluegreen’s phone representatives—conversations riddled with deception, as Johansen himself admitted under deposition.

The Takeaway

During one call, “the representative began the conversation by telling Plaintiff that she was calling on behalf of Defendant about a vacation package that Plaintiff had previously purchased in 2010,” the court wrote. “Plaintiff continued the conversation and proceeded to pose as Defendant’s customer. During the May 27, 2020 telephone call, Plaintiff actively engaged with the telemarketing representative for approximately thirty minutes—verifying his personal information, requesting additional information on available products and services, and knowingly verifying false contact information.”

He also admitted to requesting more information from the Bluegreen representative and providing false contact information in a deliberate effort to prolong the supposedly unwelcome calls.

This didn’t fly with the court.

“Plaintiff’s claim differs from those of putative class members’ claims,” the court noted. “The record clearly demonstrates the deceptive and dishonest tactics employed by Plaintiff to establish his claim. Thus, Plaintiff’s claim is inherently different than those of the putative class members who presumably did not use similarly deceitful methods.” The court also held that Johansen’s conduct rendered him an inadequate class representative, citing previous cases of his in which he admitted to similar conduct.

We’re not sure how many other TCPA actions he has cooking right now, but if this order is any indication, Kenneth Johansen might want to take up macrame.