Last Friday, the Ninth Circuit upheld California’s 2018 net neutrality law in the face of arguments that the law was preempted by FCC action. The court held that the FCC can’t preempt states since it gave up its own regulatory authority over broadband in its 2017 repeal of the federal net neutrality rules.
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The first rule of comparative advertising has always been that you can say pretty much whatever you want so long as you don’t lie. But there is a new wrinkle—don’t threaten or stalk the competition. A recent Ninth Circuit decision in Thunder Studios v. Kazal, has shed new light on the extent of protection afforded by the First Amendment to reprehensible and confrontational speech. The case is quirky in that the individuals protected by the First Amendment were not US Citizens and were not themselves in the US when the “protests” occurred, but the case is a cautionary tale as to the limits of First Amendment protection of comparative claims. Importantly, however, the case cannot—and should not—be read to provide for an open invitation for competitors to promote or otherwise engage in extraterritorial smear campaigns with impunity. Indeed, there is nothing in the Ninth Circuit’s opinion to suggest that it should be read to preclude or immunize parties from claims of defamation, product disparagement, or even invasion of privacy torts arising out of similar behavior. Nor would it likely protect a party from liability from organizing a secondary boycott. The case is pending en banc review by the Ninth Circuit so stay tuned.
Following the souring of a multimillion-dollar business deal between Australian citizens Roderick David, on the one side and Charif Kazal, Adam Kazal, and Tony Kazal on the other, the Kazals undertook an international campaign to inform the citizens of Los Angeles, California about the “despicable crimes” allegedly committed by David (then a resident of Los Angeles). The Kazals sent hundreds of emails to David and his employees, hired protesters to picket and distribute flyers near his residence and business—Thunder Studios Inc., in Los Angeles—and had vans emblazoned with their message driven around the city. Leaflets and signs held by protesters described David as a “corporate thief” and a “fraudster” who “robbed his business partners of $180 million.”
Continue Reading Sticks and Stones May Break Your Competitor, But Protests May Be Protected
On June 17, 2020, the Ninth Circuit Court of Appeals issued a published opinion affirming the dismissal of a consumer class action seeking $32,000,000 against Venable client Premier Nutrition Corporation. The Court held that federal equitable principles must apply to class actions pending in federal court, even where state law rules the underlying causes of action. See Sonner v. Premier Nutrition Corp., No. 18-15890, 2020 WL 3263043 (9th Cir. June 17, 2020).
Plaintiff-Appellant Kathleen Sonner sued Premier on behalf of a class of California consumers claiming that Premier’s product, Joint Juice, did not provide its advertised joint health benefits. Sonner sought damages, restitution, and injunctive relief under the Consumer Legal Remedies Act (CLRA), as well as restitution and injunctive relief under California’s Unfair Competition Law (UCL).
Continue Reading Ninth Circuit Blocks Class Plaintiffs’ Efforts to End Run Jury Trial
The California Supreme Court has held that causes of action under two of the state’s most prominent consumer protection statutes—the unfair competition law (“UCL”) and the false advertising law (“FAL”)—are to be tried by the court rather than a jury. In doing so, the court affirmed decades of California Court of Appeal precedent and overturned a lower court’s ruling that a jury trial is required when civil penalties are sought in state court.
In Nationwide Biweekly Administration Inc. v. Superior Court, the district attorneys of four counties filed a complaint alleging that mortgage servicer Nationwide Biweekly, its subsidiary and its owner (collectively, “Nationwide”) had violated the UCL and FAL through false and misleading advertising practices and operating without a license, among other allegations. The government sought an injunction, restitution of all money wrongfully acquired by Nationwide from California consumers and civil penalties of up to $2,500 for each violation found.
The advertised-discount provision of California’s False Advertising Law, California Business and Professions Code § 17501, lives to fight another day. A coalition of national department stores, having found themselves brought together by the regulatory lasso of the Los Angeles City Attorney, recently took a big swing at the validity of that statute by objecting to its constitutionality on vagueness and free-speech grounds. The stores’ argument connected with the district court, but was ultimately thrown out by the California Court of Appeals.
The statute at issue is undoubtedly wonky:
For the purpose of this article the worth or value of any thing advertised is the prevailing market price, wholesale if the offer is at wholesale, retail if the offer is at retail, at the time of publication of such advertisement in the locality wherein the advertisement is published.
No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.
Continue Reading California Advertised-Discount Law Safe—For Now
Thought that the FTC and California planned to cool off on enforcing trial and subscription programs? Think again. The FTC and California continue to bring these actions with alarming regularity.
For those of you who haven’t been tracking these issues, last year California’s Automatic Renewal Law was amended to tighten the restrictions on continuity programs. The amendments increased restrictions on companies providing trial or discounted introductory programs, and required companies to provide an “exclusively online” cancellation mechanism for consumers who originally accepted the service agreement online.
In addition, both the FTC and the California Autorenewal Task Force (a team of district attorneys who enforce the statute) have brought multiple challenges against companies offering continuity programs. We wrote a few weeks ago about the FTC’s settlement with Urthbox, which included charges challenging how that company’s free trial and subscription offerings were disclosed.
Continue Reading Updates in FTC and California’s Continuing Enforcement of Continuity Programs
“On August 30, 2018, businesses will be required to provide revised “clear and reasonable” warnings under California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (known as Proposition 65 or Prop 65) if they would like to avail themselves of the safe harbor provided by the implementing regulations of the Office of Environmental Health Hazard Assessment (OEHHA or the Agency). Retailers and manufacturers/distributors alike should ensure that they are in compliance with the new rules, keeping in mind that there are specific requirements related to products sold via the Internet and product catalogs.
Under Prop 65 and the implementing regulations, businesses with 10 or more employees must provide “clear and reasonable” warnings to Californians before exposing them to a chemical listed by OEHHA as a carcinogen or reproductive toxicant (more than 900 chemicals are now on the list). The current regulations, adopted in 1988, established criteria for what OEHHA considered to be a “clear and reasonable” warning, including specific language that, if used, would be deemed compliant with the regulations (known as “safe harbor” warning language).
In 2016, OEHAA adopted new safe harbor warning regulations that become effective later this month. The new regulations place a significantly heavier burden on manufacturers/distributors to provide consumer product warnings. Specifically, manufacturers/distributors must provide revised warnings on the labels of their consumer products or provide notice and materials to retailers so that retailers can post the revised warning on signs or shelf tags at the point of purchase. Manufacturers/ distributors must update the notice to retailers periodically and obtain electronic or written confirmation from the retail seller that it received the notice.
In light of a new California decision interpreting California’s wage and hour law, brand companies should take a careful look at their influencer compliance programs not only for FTC compliance, but also potential employment law consequences. How a company establishes and maintains influencer compliance can potentially convert the influencer from an independent contractor to an employee.
We know the FTC’s view is that it takes a village to ensure influencers disclose any material connection to a brand company with which they have a relationship and that the Commission will hold brands, agencies, influencer networks, and influencers all responsible for compliance lapses. The basic expectation is that brands will train their influencers on the rules of the road, monitor for compliance, and enforce consequences for noncompliance. The consent orders in cases like CSGOLotto, Inc. lay out more detail as to what the FTC expects, including:
Scrolling online through the California Business and Professions Code the other day, I was struck by a frightening sight. My pulse raced. My jaw dropped. I called out to an associate for help. I wanted to make sure that what I was seeing was real, i.e., that I wasn’t out of my mind. Many lawyers have read California Business and Professions Code Section 16600 by which California outlaws covenants not to compete. But click a few code sections over and you’ll be shocked!
Section 16603 has to be one of the strangest (and most seasonally appropriate) laws ever. It targets the two-for-one sale of comic books, stating: “Every person who, as a condition to a sale or consignment of any magazine, book, or other publication requires that the purchaser or consignee purchase or receive for sale any horror comic book, is guilty of a misdemeanor” punishable by jail time up to six months or a fine up to $1000. The section goes on to define a horror comic book with specificity:
Continue Reading Creepy Code Section Alert: Cal. Bus. and Prof. §16603
Many time-strapped consumers count on household subscription services to simplify life. One quick purchase agreement with automatically renewing payments, and consumers can receive uninterrupted access to the latest streaming shows, months of lifestyle subscription boxes, or online cloud storage to back up all the family vacation photos. But sometimes consumers aren’t clear on how to unsubscribe or exactly what price they’ll pay after a discounted or free trial period. Thus, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.
On the heels of increased class action filings under California’s current ARL (see e.g., Kruger v. Hulu; Wahl v. Yahoo! Inc.), the state continues to tighten the reins on automatic renewals and continuous service providers with newly enacted Senate Bill 313. California’s expiring ARL was enacted in 2010. It requires auto-renewing consumer contracts to clearly and conspicuously disclose terms, obtain affirmative consumer consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and a simple cancellation method. California’s 2010 ARL was already broader and more specific than the federal Restore Online Shoppers’ Confidence Act, commonly known as ROSCA and enforced by the FTC. (Read more about ROSCA here.)
Continue Reading California Tightens Auto-Renewal Requirements