Advertising Law

Manatt Expands National Financial Services Litigation Practice

Preeminent consumer financial services lawyer Richard E. Gottlieb has joined the Los Angeles office of Manatt as a litigation and government enforcement partner in the multidisciplinary Financial Services practice. He comes to the firm from BuckleySandler LLP, where he was a partner.

Gottlieb is widely known as one of the country's top consumer financial services litigators. He counsels and defends clients, including banks, mortgage lenders, servicers, finance companies, student lenders, marketplace and peer-to-peer lenders, retailers, insurers, and others, on a wide array of litigation and enforcement matters.

In addition to trial work, Gottlieb's regulatory and enforcement practice includes representation of clients in both examination and enforcement proceedings. Gottlieb also provides ongoing regulatory and compliance advice to some of the world's largest banks and financial services organizations.

Highly regarded for his work, Gottlieb is recognized by Chambers USA as one of only 15 "Leading Lawyers" in the category of Financial Services Regulation: Consumer Finance Litigation. He is a fellow of the prestigious American College of Consumer Financial Services Lawyers and the American College of Mortgage Attorneys. Gottlieb is a prolific author, lecturer and commentator in the media on financial services, data privacy and other related issues. He has been a guest on both NBC Nightly News and National Public Radio's "All Things Considered."

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New Jersey Statute Causing Uptick in Class Actions

Businesses in New Jersey are facing an influx of consumer class actions over common terms of service based on a plaintiff-friendly interpretation of a 36-year-old state statute.

Last December a panel of the Third Circuit Court of Appeals released an unpublished opinion interpreting New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). That law, found at N.J.S.A. Section 56: 12-14, states that a seller may not enter into a written contract that "includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller … as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed."

A federal district court judge dismissed a plaintiff's TCCWNA suit challenging the terms and conditions of a "Used Vehicle Service Contract" that included a prohibition on recovering attorneys' fees. But the panel reversed in Johnson v. Wynn's Extended Care, Inc., because "the New Jersey Supreme Court has clearly held that clauses preventing the recovery of attorney's fees and costs, when mandated by statute, are unconscionable," including such a provision violated the state statute. The plaintiff was not required to establish any actual harm in order to recover the statutory damages: a $100-per-offense penalty, plus attorneys' fees.

With the low threshold set by the Third Circuit, New Jersey plaintiffs have responded with class action lawsuits, with more than a dozen suits already filed in 2016. The cases are based on documents ranging from sales contracts to website terms and conditions.

To read the decision in Johnson v. Wynn's Extended Care, Inc., click here.

Why it matters: In light of the consumer-friendly interpretation by the court, New Jersey businesses should review their terms and conditions and consider eliminating provisions that could violate "any clearly established legal right of a consumer," such as a prohibition on attorneys' fees or consequential damages.

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VPPA Doesn't Cover Free App, Court Rules

Plaintiffs continue to struggle in their attempts to apply the Video Privacy Protection Act to 21st-century technology, with a Georgia federal court judge dismissing a putative class action against CNN.

A CNN app maintains a record each time a user views a news story, video clip, or headline. When a user closes the app, a complete record of the user's activities and a media access control (MAC) address is sent to a third-party data analytics company that specializes in tracking the behaviors of individual users via the Internet and mobile applications.

Ryan Perry downloaded the CNN app in early 2013 to read news stories and watch video clips. According to his complaint, CNN had not obtained his consent to disclose any of his personally identifiable information to third parties and the transfer of his viewing history and MAC address violated the VPPA.

CNN countered with a motion to dismiss, arguing that Perry was not a "consumer" as defined by the statute, nor was the data passed along "personally identifiable information."

U.S. District Court Judge Eleanor L. Ross agreed. The VPPA defines a consumer as "any renter, purchaser, or subscriber of goods or services from a video tape service provider," while the term "personally identifiable information" includes "information which identifies a person as having requested or obtained specific video materials or services from a video tape service provider."

In reaching its conclusion, the court relied on a "strikingly similar" case from the Eleventh Circuit Court of Appeals, where the federal appellate panel held that an individual who viewed video content on Cartoon Network's free mobile app was not a consumer within the meaning of the statute.

Like the plaintiff in that case, Perry did not sign up for or establish an account with CNN, did not make any payments or establish a profile with the app, and did not make any commitment or establish any relationship that would allow him to have access to exclusive or restricted content.

"[T]his Court finds that Plaintiff does not qualify as a subscriber," Judge Ross wrote. "Plaintiff has not alleged that he did anything other than watch video clips on the CNN app, which he downloaded onto his iPhone for free. Further, there is no indication that he had any ongoing commitment or relationship with Defendants, such that he could not simply delete the CNN app without consequences."

The court rejected the plaintiff's argument that CNN expressly designed the app to create an ongoing relationship with its users, noting that CNN's motivation would not alter its conclusion. Nor did Perry qualify as a "renter" under the statute, as the plain and ordinary meaning of the term implies the payment of money, the court added. "Because the CNN app was free of charge, and Plaintiff has not indicated that he made any sort of payments to Defendants, he is not a 'renter.'"

Judge Ross also found that Perry's MAC address and associated video logs did not qualify as personally identifiable information. An anonymous string of numbers, such as the MAC address, is insufficient to qualify under the statute, the court said, citing decisions from courts across the country in VPPA suits that found the transmission of device serial numbers, an IP address and browser setting, and a unique identifier without more did not violate the statute.

"Plaintiff has merely pled that Defendants disclosed his MAC address along with the viewing history tied to that address," the court wrote. "He has not, however, pled any facts to establish that the video history and MAC address were tied to an actual person and disclosed by Defendants. Because Plaintiff has not established that Defendants disclosed any personally identifiable information, his claim must fail."

To read the order in Perry v. Cable News Network, click here.

Why it matters: The Georgia federal court decision joins the growing number of courts that have similarly declined to apply the VPPA to technology such as devices and streaming services, such as Netflix.

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NAD: Keep Affiliate Marketers on a Short Leash

Claims made by affiliate marketers triggered an advertising review by the National Advertising Division for KLF International Inc., the maker of Venus Factor Weight Loss System for Women.

Ads found on the Venus Factor websites and in promotional videos featured claims such as "Dramatically increasing your female metabolism," "Drop up to three dress sizes in a week," "Burn fat around the clock, even while you sleep," and "The key to Venus Factor method of weight loss is that it has been created specifically to reverse leptin resistance in women."

NAD added that Venus Factor also produced online advertising that appears to be independent product reviews, but where the reviewer failed to disclose the material connection that existed between the reviewer and Venus Factor.

In response to the NAD's inquiry, KLF said the challenged claims were permanently discontinued and that some of them were made by affiliate marketers, not KLF. To help assuage the self-regulatory body's concerns, the advertiser outlined the steps it had taken to ensure that advertising by affiliates for Venus Factor is truthful and accurate.

KLF's terms and conditions now require affiliates to disclose that they receive compensation for their marketing of Venus Factor and directs affiliates to refrain from making false claims about the product. Affiliates are advised that their Venus Factor advertising must comply with all government regulations.

If an affiliate violates these terms and conditions, KLF will sever the relationship. The company also has a procedure in place to keep an eye on affiliate marketing. KLF reviews the advertising for its affiliates with the highest sales volume on a monthly basis to make sure their advertising complies with the affiliate marketing terms and conditions. KLF also monitors keywords for Venus Factor on major search engines on a weekly basis.

The NAD "appreciated the efforts taken by KLF to ensure that marketing by its affiliates is truthful, accurate and not misleading," according to the decision. In reliance on the advertiser's representation that the challenged advertising claims had been permanently discontinued or modified, the NAD did not review the claims on the merits.

To read the NAD's press release about the case, click here.

Why it matters: While the self-regulatory body noted its appreciation that KLF has discontinued the claims, it took the opportunity to emphasize the importance of ensuring that marketing by "affiliates is truthful, accurate and not misleading," and noted that KLF had instituted a process to monitor its affiliate marketers.

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Chipotle GMO Dispute Moves Forward in Florida Court

Can an advertiser promote a product as non-GMO when it includes meat from an animal that consumed GMO soy and corn?

That question is at the heart of a false advertising lawsuit in Florida federal court against Chipotle Mexican Grill. Leslie Reilly challenged Chipotle advertising that "all of [its] food is non-GMO," arguing that animals that eat feed from genetically modified organisms cannot produce non-GMO meat or products. Because the sour cream, cheese, and meat used by Chipotle are sourced from farms where the animals eat GMO feed, the national chain is deceiving consumers, Reilly charged.

The restaurant moved to dismiss Reilly's claims under Florida's Deceptive and Unfair Trade Practices Act, arguing that her claim was "implausible" and therefore nonactionable. Her subjective interpretation of the term "non-GMO" was "nonsensical," the company told the court, and "would not plausibly be espoused by a reasonable consumer."

But U.S. District Court Judge Marcia G. Cooke was not persuaded. "The reasonableness of her definition, upon which her interpretation of Chipotle's advertisements is based, is a question better decided upon examination of the evidence," the court said. "While Chipotle has presented evidence that scientific as well as some proposed legal definitions of GMOs explicitly exclude the very items Ms. Reilly includes in her own definition, Ms. Reilly has responded with evidence that some consumers and legislators carry the same interpretation of the term espoused in her allegations."

With both sides refusing to budge, the court said the case should move forward. "The divergence in the parties' positions only indicates that, at this point, more evidence is needed to establish both a definition of the term and whether a reasonable consumer would share Ms. Reilly's interpretation of the term," Judge Cooke wrote. She declined to dismiss the suit on an implausibility basis at this stage.

The court also denied the motion to dismiss on the plaintiff's unjust enrichment claims, but did toss Reilly's claims for injunctive relief without prejudice.

To read the order in Reilly v. Chipotle Mexican Grill, Inc., click here.

Why it matters: The debate and litigation over what constitutes a "natural" product advertising claim for non-GMO foods has heated up. The Florida case presents an interesting question: Can a company promote a product as non-GMO when the animals used for meat and dairy products were fed GMO feed? The judge declined to answer on her own, instead allowed the litigation to move forward for additional evidence.

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Noted and Quoted . . . Wasserman Teaches a Lesson on 100% Natural in DRMA Voice

Consumer demand for "natural" products is showing little sign of slowing, and marketers are eager to meet that demand. The problem, of course, is the question: just what is "natural"? In Response Magazine's DRMA Voice, Ivan Wasserman, partner in Manatt's Advertising, Marketing and Media practice, outlined the current legal climate surrounding "natural" claims and the trouble with the FDA and FTC defining—or not defining—the term. To read "This Article Is 100% Natural (I Hope the FTC Agrees)," click here.

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