Every brand that has designed a product label has felt the call of the asterisk. Visual real estate on packaging and in advertisements is limited, and marketing departments often groan at the piles of clumsy language that legal departments insist make it onto the page. But the elegant solution—dropping an asterisk and including the disclaimers, clarifications, or required disclosures in tiny print at the bottom—has traditionally drawn the ire of regulators or private plaintiffs who complain that such disclosures are ineffective because nobody actually reads them. Now, a line of California federal court cases has begun taking the plaintiffs’ argument at their word, and not in a way that class plaintiffs like: by using Federal Rule of Civil Procedure 9(b) to dismiss complaints that don’t specifically allege whether or not a consumer followed an asterisk and weighed the information in the disclaimer.
In Anthony v. Pharmavite, No. 18-CV-02636-EMC, 2019 WL 109446 (N.D. Cal. Jan. 4, 2019), the court examined a purported class action by consumers allegedly misled into buying biotin supplements labeled with the claim, “May help support healthy hair, skin and nails.” According to the plaintiffs, the average human already obtains a surfeit of biotin in his or her daily life and any amount beyond what can be synthesized is automatically flushed from the body. Indeed, according to the plaintiffs’ studies, “99.9962 percent of people have no possibility of benefiting” from biotin supplements. Only those with exceedingly rare genetic disorders, the plaintiffs explained, could possibly derive any material benefit from supplemental biotin.
In its defense, the supplement manufacturer pointed to its asterisked disclosures, which read, “Biotin may help support healthy hair, skin, and nails in those that are biotin deficient” and “May help support healthy hair, skin and nails in those deficient in biotin” in an attempt to argue that its products were marketed only to the biotin deficient. The court was unimpressed and held that “[a] reasonable consumer could understand ‘may’ to mean a reasonable possibility or a reasonable probability, rather than merely a vanishingly small possibility on the order of 0.00138 percent.” Further, the court quoted some forceful denunciations of disclaimers by the Ninth Circuit: “The Ninth Circuit has rejected the premise that ‘reasonable consumers should be expected to look beyond misleading representations on the front of the box to discover the truth from the . . . small print on the side of the box'” (citations omitted).
Despite its seeming endorsement of the plaintiff’s theory, though, the court nevertheless dismissed the complaint without prejudice. The reason? A lack of particularity under Rule 9(b). The court fastidiously observed that “[t]he complaint is devoid of any allegations regarding whether Plaintiffs saw the asterisk, read the corresponding disclaimer, and if they did read it, how the disclaimer affected their purchasing decision. In fact, the complaint makes no mention of the asterisk or disclaimer at all. Plaintiffs merely allege, in vague and general fashion, that they ‘saw and relied upon Defendant’s health benefit representations by reading the Biotin Product label,’ and ‘purchased the Product . . . in reliance on Defendant’s health benefit representations.’ They do not specify what part of the labels and representations they saw and relied upon” (citations omitted).
Plaintiffs must have found the court’s citation to Rule 9(b) surprising. If Rule 9(b) is meant to demand the “who, what, when, where, and how” of an alleged fraud, as a common formulation puts it, it would seem pedantic to require plaintiffs to plead visual observation of disclaimers after analyzing and finding them inadequate. Yet, the court in Anthony stood in good company, pointing out its accordance with Chase v. Hobby Lobby Stores, Inc., No. 17-CV-00881-GPC-BLM, 2017 WL 4358146, at *9 (S.D. Cal. Oct. 2, 2017). There, the court considered as evidence on a motion to dismiss a placard reading, “Photo Frames ALWAYS 50% OFF THE MARKED PRICE*” with the asterisk directing consumers to a disclaimer in smaller print stating, “DISCOUNTS PROVIDED EVERY DAY; MARKED PRICES REFLECT GENERAL U.S. MARKET VALUE FOR SIMILAR PRODUCTS.” But despite the plaintiff’s expressly pleaded theory that the defendant “is engaging in the unlawful business practice of advertising fictitious prices and phantom discounts by referencing a fake ‘Marked’ price, that is then offered for sale at a deeper ‘discounted’ price,” the court held that “Plaintiff did not plead whether or not she saw the word ‘Always,’ whether she saw the ‘asterisk’ next to the Marked price, the distance she viewed the advertisement from, or whether she even read the disclaimer at issue.”
Any relief the defendants felt by the dismissal may be short-lived, though, as an amended complaint with specific allegations regarding the plaintiffs’ seeing (or not seeing, as the case may be) the asterisks returns these unfair competition claims back to court. Another question raised by this specificity, however, is whether the idiosyncratic nature of the plaintiffs’ review of the label will make class treatment more challenging. For that one we’ll have to wait.
*You better plead so.