Hunton Retail Law Resource

In this post-Spokeo world, a defendant facing the all-too-common “no-injury” putative class action might be tempted to seek dismissal of the lawsuit on Article III grounds. But a panel of Ninth Circuit judges recently gave a compelling reason why defendants should strongly consider otherwise. In Polo v. Innoventions Intern. LLC, a Ninth Circuit panel reversed the dismissal of a putative class action based on a lack of jurisdiction, with instructions to remand the case to state court. We previously reported about this possibility following the issuance of Spokeo, into which a Ninth Circuit panel now has breathed life.

This past week, several consumer and regulatory actions made headlines:

Federal Guidance

D.C. Federal Judge Vacates Part of FDA Tobacco Guidance

A D.C. federal judge vacated a portion of FDA guidance relating to the labeling of tobacco products. The key issue before the court was whether changing a tobacco product’s label to a distinct new label creates a new tobacco product subject to FDA approval. The court also considered the question of whether changing a product’s quantity resulted in the creation of a new tobacco product subject to the FDA’s “substantial equivalence review process.” The court found that while a change in the existing product’s label did not create a new tobacco product, a change in a product’s quantity did.

This past week, several consumer and regulatory actions made headlines:

FTC Warns Marketers of Zika-Prevention Products: Claims Must Be Substantiated

The Federal Trade Commission has issued warning letters to 10 marketers of products that purport to protect users from Zika infection. The letters remind marketers that health-related claims must be supported by competent, reliable scientific evidence. Specifically, the FTC warned that claims as to the efficacy of the various products must be supported by “well-controlled human clinical testing using the species of mosquitos that carry the disease in question, and must demonstrate that the effects last as long as advertised.” Additionally, claims that a product applied to a specific part of the body will confer full-body protection must be supported by scientific evidence. The FTC has urged the marketers to review their ads and to alter or remove any unsupported claims.

On August 8, 2016, the Federal Trade Commission sued 1-800 Contacts, alleging that it entered into anticompetitive bidding agreements with 14 of its rivals. According to the administrative complaint, these bidding agreements are an unfair method of competition because they unreasonably restrain competition for bidding on online search advertising auctions and restrict truthful, non-misleading ads. Previously, 1-800 Contacts alleged that its rivals had engaged in trademark infringement by purchasing advertising space from online search engines when consumers searched for “1-800 Contacts.” Most of 1-800 Contacts’ rivals agreed to settle or avoid lawsuits by entering into the allegedly anticompetitive bidding agreements, which prohibit parties from bidding on their rivals’ trademarked terms. Additionally, all but one of the contracts also require the use of “negative keywords,” which will prevent an advertiser’s name from appearing if a rival’s name is used as a search term.

Last month, legislation seeking to reduce private litigation under Title III of the Americans with Disabilities Act (“ADA”), regarding accessibility barriers for disabled citizens in public accommodations, passed the House Judiciary Committee by a vote of 15 to 6. Industry sources applaud the proposed legislation as a defense against serial nuisance suits by unscrupulous lawyers and plaintiffs, while advocates of the disabled claim it is an unfair new hurdle to private action under the ADA.

On July 29, 2016, President Obama signed into law a bill that will establish federal standards for labeling of food products that contain ingredients from genetically modified organisms (“GMOs”). Several consumer advocates opposed the bill, as it preempts more stringent labeling requirements in states like Vermont. However, several advocates on the other side favored the notion of national, uniform standards, as opposed to a patchwork of individualized state labeling laws.

This past week, several consumer protection and regulatory actions made headlines:

Class Plaintiffs Just Keep Swimming Against Safeway in Underfilled Tuna Case

On July 13, 2016, Safeway escaped negligent misrepresentation claims in a putative class action consumer suit alleging that Safeway violated federal guidelines when it chronically underfilled two of its private label canned tuna products. Safeway filed a limited motion to dismiss the class plaintiffs’ unjust enrichment and negligent misrepresentation claims. The court found that, though duplicative, unjust enrichment was properly plead, but the negligent misrepresentation claim failed because class plaintiffs could not show that they suffered any loss other than an economic loss. Unfortunately for the grocer, eight other claims in the suit survived, including various breaches of warranty, unjust enrichment and California unfair competition counts. 

This past week, several consumer protection and regulatory actions made headlines:

Federal Trade Commission

FTC Settlement Casts Shadow Over Online Video Game Reviews

This past week, the FTC settled with Warner Bros. Home Entertainment over online influencer charges. The FTC alleged that Warner Bros. deceived consumers while marketing its video game, Middle Earth: Shadow of Mordor. Warner Bros. paid online “influencers,” like the popular gamer “PewDiePie,” to post positive reviews of the game online through YouTube, Twitter, Facebook and other social media. While Warner Bros. instructed these influencers to disclose the connection, they told them to do so in a description box below the video, not in the video itself, so that the monetary connection was not immediately apparent. The FTC has been particularly focused on cracking down on misleading online reviews in the past few years.

Consumer class actions are on the minds of virtually all consumer product manufacturers and service providers. Class actions based on privacy and consumer protection statutes are increasing at a remarkable rate, and can be a challenge to predict, budget and defend, given the difficulty in valuing consumer privacy rights. In an article, “Second Circuit Reminds Consumer Product Companies That Insurance Options Exist for Big Data Blunders and Privacy Faux Pas,” published in FC&S Legal’s Eye on the Experts column, Hunton lawyers Syed S. Ahmad, Neil K. Gilman and Paul T. Moura ...

The tidal wave of New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) claims just swept up a novel argument: a class complaint against Facebook, Inc. argues that the popular social media site’s terms of use is subject to TCCWNA because Facebook profits from users’ personal information and intellectual property.

This past week, several consumer protection and regulatory actions made headlines:

FTC Issues Closing Letter in Bedrock “Made in USA” Labeling Investigation

On June 16, 2016, the FTC issued a closing letter in its investigation of Bedrock Manufacturing Company, the parent of Filson and Shinola. The FTC had raised concerns regarding Bedrock’s unqualified use of the phrases “Made in USA” and “Built in USA.” Despite using these labels, many of Shinola and Filson’s products were made with materials mostly or entirely sourced from outside of the US. The FTC closed its investigation as a result of Bedrock’s self-imposed corrective actions, including replacing hangtags and information cards for various products, updating employee training materials and advertising materials, and changing labelling integrated on the products themselves.

Information posted to social media accounts can be highly relevant in suits brought by individuals, but too often requesting parties ask for “any and all” content, rendering their requests overly burdensome and subject to objection. Especially now, with the December 2015 changes to the Federal Rules of Civil Procedure, courts are grappling with how social media discovery fits into this new world of proportional discovery. In the recent case of Rhone v. Schneider Nat’l Carriers, Inc., No. 4:15-cv-01096-NCC, 2016 WL 1594453, the court settled this question with a unique approach.

On June 14, 2016, two lawyers in Hunton’s Insurance Coverage Counseling and Litigation practice, Syed Ahmad and Jennifer White, published an article in Risk Management Magazine about how commercial general liability (“CGL”) policies may help policyholders looking to recover attorney’s fees or fund settlements in trademark infringement litigation. Historically, CGL policies were the wrong place to look for coverage, and insurers raised often successful defenses to covering such trademark infringement cases under CGL policies. Or, policyholders would avoid CGL ...

TCCWNA. The very acronym evokes head scratches and sighs of angst and frustration amongst many lawyers in the retail industry. You have probably heard about it. You may have even been warned about it. And you may currently be trying to figure out how best to minimize your risk and exposure this very moment. But what is it and why has virtually every retailer been hit with a TCCWNA class action demand letter or lawsuit in the past few months? And why are most retailers scrambling to update the terms and conditions of their websites?

As reported on the Hunton Insurance Recovery blog, in a June 1, 2016 decision, the Second Circuit Court of Appeals reminded retailers and product manufacturers to look to their insurance coverages when defending against consumer class actions. In National Fire Insurance Co. of Hartford et al. v. E. Mishan & Sons Inc., the Second Circuit required CNA Financial Corporation to defend E. Mishan & Sons, Inc.(“Emson”) – best known for its “As Seen on TV” products – in two class actions alleging a conspiracy to trap customers into recurring credit card charges and that Emson sold private consumer information that it obtained through its product sales.

This week, the following consumer protection actions made headlines:

Litigation

Claims Dismissed in San Francisco Soda Suit

A federal judge dismissed several constitutional claims in a suit against the city of San Francisco over its ban on ads for sugary drinks, because the ordinance has since been repealed. Both San Francisco and the plaintiffs, including the American Beverage Association and other trade groups, asked the judge to dismiss the free speech and due process violation claims from the original complaint. Although the advertising component of the ordinance was repealed in December, the suit continues over a new ordinance, set to take effect on July 25, 2016, that requires ads for soda and other sugary drinks to display a mandatory health warning. The judge previously declined to enjoin the ordinance, saying that it was not likely for the plaintiffs to succeed on their First Amendment claim under the rational basis test for commercial speech.

As we previously reported, the Supreme Court’s decision in Spokeo v. Robins has been nearly universally lauded by defense counsel as a new bulwark against class actions alleging technical violations of federal statutes. It may be that. But Spokeo also poses a significant threat to defendants by defeating their ability to remove exactly the types of cases that defendants most want in federal court. The decision circumscribes the federal jurisdiction, with all its advantages, that defendants have enjoyed under Class Action Fairness Act (“CAFA”) for the past decade.

On May 16, 2016, the United States Supreme Court rendered its decision in Spokeo, Inc. v. Robins, Case No. 13-1339, a case that businesses and the plaintiffs’ bar have been following closely, due largely to its potential effect on class actions predicated on alleged statutory violations and seeking solely statutory damages. In an opinion authored by Justice Alito, the Court held that a plaintiff must do more than plead a statutory procedural violation to establish standing; to plead an injury in fact, a plaintiff also must allege a harm that is both “concrete” and “particularized.” However, the Court did not apply its holding to the facts, instead remanding for further analysis by the Ninth Circuit. While both plaintiffs’ attorneys and defense attorneys are claiming a “victory,” Spokeo provides some ammunition for businesses that find themselves facing so-called “no-injury” class action lawsuits predicated on consumer protection statutes. 

The due date for the next Form SD filing for those public companies required to report to the Securities and Exchange Commission (“SEC”) on the inclusion of conflict minerals in their products is May 31, 2016.

Background

In response to a challenge of the SEC conflict minerals rule by a coalition of trade associations, the Court of Appeals for the D.C. Circuit issued an opinion in April 2014. That opinion upheld parts of the rule, but also effectively struck down on First Amendment grounds the portion of the rule that required companies to describe their products as “DRC Conflict Free,” “DRC conflict undeterminable” or “not found to be ‘DRC Conflict Free,’ ” as the case may be. On rehearing in August 2015, the D.C. Circuit reaffirmed its April 2014 decision. The D.C. Circuit then denied an SEC and NGO’s petition for rehearing en banc the following November. Finally, in March 2016, Attorney General Loretta Lynch notified Congress that the federal government would not petition for a writ of certiorari to the Supreme Court. The deadline to file the petition passed in April. Thus, the appellate process has been exhausted.

As reported on the Hunton Insurance Recovery blog, the New York Court of Appeals held that each of several excess liability insurers can be wholly responsible for the entire extent of their policyholders’ asbestos liabilities. The Court further held that “vertical” exhaustion would apply; rejecting the insurers’ attempt to apply “horizontal” exhaustion before upper-layer policies must respond.

This week, the following consumer protection actions made headlines:

Federal Trade Commission:

FTC Obtains Multimillion Dollar Judgment Against Repeat Offender

At the FTC’s request, the U.S. District Court for the Southern District of New York entered a $13.4 million judgment against BlueHippo’s CEO, Joseph Rensin, as well as finding Rensin, BlueHippo Funding LLC and BlueHippo Capital LLC, in contempt for violating a 2008 federal court order concerning BlueHippo’s operation of a deceptive computer financing scheme. The FTC charged BlueHippo with contempt in 2009, alleging that the company contracted with thousands of consumers to finance new computers, but failed to provide those computers, in addition to having a deceptive refund policy. In July 2010, the Court issued an order partially granting the FTC’s motion for contempt. The FTC appealed the compensatory sanctions portion of that order, and in August 2014, the United States Court of Appeals for the Second Circuit vacated the damages portion of the order and remanded the case for a reconsideration of damages. The contempt judgment will go towards consumer redress.

This week, the following consumer protection actions made headlines:

Self-Regulatory Decisions:

Steuart’s Pain Formula Referred to the FTC

The National Advertising Division (“NAD”) referred Steuart Laboratories, Inc., the producer of Steuart’s Pain Formula, to the FTC for the second time after it failed to provide the NAD with substantiation for challenged claims. Steuart was initially referred to the NAD by Steuart’s competitor, EuroPharma, Inc., who challenged several efficacy and testimonial claims.

On April 27, 2016, a federal district court judge in the Western District of Washington ruled that the Federal Trade Commission (“FTC”) had proven that Amazon.com had engaged in unfair business practices in billing Amazon account holders for in-app charges without express, informed consent to such charges. At the same time, the judge denied the FTC’s request for a permanent injunction against Amazon, finding no cognizable danger of a recurring violation. The judge ordered additional briefing on calculating monetary relief.

Mars, Inc. and its M&M’s Minis candy are the latest targets in a wave of “slack-fill” litigation.

Slack-fill is empty space in product packaging – i.e., the difference between the maximum capacity of a product’s container and the actual volume of product inside. Slack-fill litigation has increased in recent years as class plaintiffs allege that companies are deliberately including empty space in their packaging to deceive consumers into paying higher prices for lower product quantities.

This past week, several consumer protection actions made headlines:

FTC to Let the Sun Shine on Consumer Protection Issues in Rooftop Solar Panel Businesses

The FTC announced that it will be holding a workshop focused on competition and consumer protection in the growing industry of consumer-oriented rooftop solar panels. The workshop, which will take place in Washington D.C. on June 21, 2016, is meant to expand the FTC’s understanding and approach to the growing consumer solar panel industry. Planned topics of discussion include: (1) how consumers can get needed information when deciding whether to install rooftop solar panels; (2) how utility regulators currently approach compensating consumers for power generated on their solar panels; and (3) competition in the solar power generation industry.

As reported on the Hunton Insurance Recovery Blog, data breach claims involving customer data can present an ever-increasing risk for many retailers and other companies. A recent case further supports efforts to recover the costs associated with such claims. Specifically, a panel of the Fourth Circuit confirmed that general liability policies can afford coverage for cyber-related liabilities, and ruled that an insurer had to pay attorneys’ fees to defend the policyholder in class action litigation in Travelers Indemnity Company v. Portal Healthcare Solutions, No. 14-1944. Syed Ahmad, a partner in the Hunton & Williams LLP insurance practice, was quoted in a Law360 article concerning the importance of this decision.

We previously reported on the United States Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), wherein a 6-3 majority held that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case.” As part of its decision, however, the Supreme Court expressly left open one critical question: whether a defendant can moot a case by tendering—as opposed to simply offering—complete relief to the plaintiff. The Ninth Circuit has now weighed in on that issue and has answered that question in the negative.

We previously reported on the U.S. Food and Drug Administration’s (“FDA’s”) request for public comment concerning the use of the term “natural” on food labels, and we noted that businesses should consider seeking a stay of any pending lawsuits challenging their use of the term “natural” on food labels under the primary jurisdiction doctrine. The Ninth Circuit, home of the infamous “Food Court,” has now invoked that doctrine and has ordered the stay of a pending “natural” mislabeling class action in Kane v. Chobani, LLC, No. 14-15670.

On April 12, 2016, the Federal Trade Commission announced a package of four settlements and one lawsuit against the marketers of sunscreen, body lotion and hair care products. Each of these matters was brought in the FTC’s administrative forum and allege a single count: that the products could not be considered all natural because each product contained at least one synthetic ingredient.

This past week, the following consumer protection actions made headlines:

Litigation Halted:

Jury finds Pom Wonderful Failed to Prove Coke Misled Customers

A California federal jury found that Pom Wonderful failed to prove by a preponderance of the evidence its claims under the Lanham Act that Coca-Cola misled customers into thinking that Minute Maid’s “Enhanced Pomegranate Blueberry Flavored 100% Juice Blend” contained more than 50 percent of pomegranate and blueberry juice combined. Pom Wonderful had sought $77.5 million from Coca-Cola, claiming that the company had stolen its business by tricking consumers into buying its juice.

Over the past two years, Hunton & Williams has been carefully monitoring the application of Daimler AG v. Bauman in trial and appellate courts throughout the country. The U.S. Supreme Court’s landmark Daimler decision articulated a standard that significantly limits the types of contacts sufficient to subject a defendant to general jurisdiction in a particular forum. Under that standard, a plaintiff must demonstrate that the defendant’s contacts with the forum are so continuous and systematic as to render it “essentially at home” there. In most instances, a company is “essentially at home” only in the state where it is incorporated and the state where it operates its principal place of business. Since the opinion was issued, the risk of a company becoming subject to general jurisdiction outside its home states has substantially decreased—a largely positive outcome for companies in the retail products industry that have traditionally been subject to “all purpose” general jurisdiction in each state where they conduct business.

This past week, the following consumer protection actions made headlines:

NAD Actions

Rust-Oleum to Appeal NAD Ruling on “2X” Product Names and Marketing

The National Advertising Division of the Advertising Self-Regulatory Council (“NAD”) has recommended that Rust-Oleum Corp. stop making claims that its “Painter’s Touch Ultra Cover 2X Spray Paint” has double the coverage capacity as competing spray paints. The NAD also has recommended that Rust-Oleum change the product name. Rust-Oleum plans to appeal NAD’s decision to the National Advertising Review Board. NAD also found Rust-Oleum’s in-house testing to be lacking and its marketing claims to be unsupported by testing.

This past week, the following consumer protection actions made headlines:

Food Marketing: Consumers Respond to Motion to Dismiss their Claims Against Walmart’s Missing Pork

On March 9, 2016, plaintiffs in a suit against Walmart Stores, Inc. responded to the company’s  motion to dismiss, saying that their complaint sufficiently put the retailer on notice of allegations that Walmart’s Great Value Pork & Beans in Tomato Sauce lacked an important ingredient: pork. The plaintiffs argue that the USDA requires pork and beans products to contain at least 12 percent pork in order to advertise pork on its labels, and that plaintiffs’ testing did not show any traces of pork in the product. Walmart contends in its motion to dismiss that its labels plainly state that the product contains less than 2 percent pork, and that plaintiffs’ claims are preempted by food labeling laws.

As reported in the Hunton Employment and Labor Law Blog, under the Fair Labor Standards Act (“FLSA”), employers who use a tip credit to satisfy their minimum wage obligations for tipped employees must follow certain rules related to those tips. One of those rules relates to the use of tip pools – i.e., pooling of tips received by multiple tipped employees and then dividing the total among the pool participants based on a specified formula. Under Section 3(m) of the FLSA, employers who rely on the tip credit and who require their tipped employees to contribute their tips to a tip-pooling arrangement must ensure that the only employees who participate in the pool are those that “customarily and regularly” receive tips. This typically means that managers, hostesses, cooks, dishwashers and other non-tipped employees cannot participate in the tip pool if the employer wants to rely on the FLSA’s tip credit.

On February 29, 2016, News Corporation reached a $244 million settlement with a consumer product manufacturer class to end claims that it monopolized the market for third-party, in-store promotions by entering into long-term, exclusive contracts, and that it overcharged its advertisers by over $674 million in the last seven years. News Corp. acts as an intermediary between retailers and consumer product manufacturers by buying up advertising space on shelves and store floors and then reselling that space to consumer product manufacturers. Plaintiffs alleged that News Corp. used exclusive contracts to tie up nearly 90 percent of the in-store promotions market, and manufacturers, including Dial and Heinz, claimed News Corp. used that monopoly power to extract unfairly high prices.

This past week, the following consumer protection actions made headlines:

Retail Pricing: Class Action Complaint Against Gap Dismissed

A putative class action, alleging that The Gap, Inc.’s deceptive advertising in stores confuses customers as to what products are actually discounted and tricks many into buying products at full price, was tentatively tossed by a California state judge last week. The Court granted Gap’s demurrer in part because the named plaintiff failed to identify particular advertisements relied upon in her purchases and, more importantly, could not allege that she was actually injured by Gap’s alleged practices. In fact, the Court stated that being “psychologically committed” to an item such that the named plaintiff did not return it was not enough to state a claim. The court gave the plaintiff one last chance to allege an injury.

There is general consensus that 3D printing has potentially revolutionary implications for industry and, along with it, for the law. Its consequences for consumers injured by 3D-printed products are potentially just as far-reaching.

Consider this fact pattern: A plumbing parts manufacturer makes CAD files available to plumbing stores so that they may 3D print replacement parts on demand and on-site in response to customer requests. A plumbing store sells such a 3D-printed part to a customer, but the part malfunctions, causing significant damage to the customer’s home.

For the past several years, the industry and the plaintiffs’ bar have been litigating over what is “natural” and what is not when it comes to food products. This issue hit home with retailers with news of multimillion dollar settlements resolving claims concerning use of the term “natural” on food product labels. The issue certainly became blurred when it came to modern processing methods and advances in biotechnology, particularly with respect to ingredients like high fructose corn syrup or genetically modified fruits and vegetables. Late last year, however, in response to four consumer petitions, the U.S. Food and Drug Administration (“FDA”) requested public comments concerning the use of the term “natural” on food labels. Whether and how the FDA ultimately defines the term “natural” will surely impact cases in the long-run. But the FDA’s decision to request comment has more immediate effects. It arms defendants with potential means to bring pending litigation to an immediate halt.

This past week, the following regulatory and consumer protection actions made headlines:

Outlet Retailers Sued over Allegedly Deceptive Pricing Practices

Class action lawsuits against several retailers, including Burberry and Dooney & Bourke, allege that outlet discount prices tags that compare the outlet price with purported retail prices deceive consumers into believing they are getting a bargain when, in fact, they are not. Reference pricing rules (e.g., the FTC’s Guides on Deceptive Pricing) prohibit sellers from offering fictitious bargains. In these cases, the plaintiffs allege that the retailers’ practice of offering for sale made-for-outlet goods that never were sold at the referenced price is deceptive.

As we previously reported in Looking Back: Retail Antitrust Enforcement in 2015, last year was a booming year for consumer products mergers (and the antitrust review of those mergers). With a robust market and incentives strongly in favor of further acquisitions, we expect the trend to continue in 2016.

2015 was a record year for mergers and acquisitions activity, with over $4.7 trillion in transactions announced. This record volume has kept U.S. antitrust authorities fully engaged.

Federal antitrust agencies reviewing more M&A transactions. Increased M&A activity in 2015 kept U.S. antitrust agencies busy. The number of transactions reported under the Hart-Scott-Rodino Act increased by 25 percent from FY2013 to FY2014, and the upward trend appeared to continue, although official statistics are not yet available.

The antitrust cops are on the beat. Implementing their “litigation readiness” focus, the U.S. antitrust agencies brought many merger challenges in 2015. Combined, the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) sued to block over 25 mergers, including Staples/Office Depot, Sysco/US Foods, Electrolux/General Electric appliances business, Dollar Tree/Family Dollar and more.

This past week, the following regulatory and consumer actions made headlines:

National Advertising Division Weighs in on “Scary Bleach” Claims

After a challenge by The Clorox Company, the National Advertising Division (“NAD”) recommended that Church & Dwight, the maker of OxiClean White Revive non-chlorine bleach, modify its television ad campaign suggesting that chlorine bleach could be “scary.” The commercials in question highlighted garment care labels directing consumers to “use only non-chlorine bleach, when needed,” thus implying that Chlorox’s product was damaging to the kinds of white garments depicted in the ads. The NAD found that Church & Dwight was required to provide a reasonable basis for its use of care labels in its ads, particularly advertising claims that denigrated Chlorox’s product. This decision followed on a 2014 NAD recommendation that Church & Dwight avoid conveying the unsupported message that chlorine bleach is damaging to white garments.

As reported on the Hunton Employment and Labor Law Blog, the United States Supreme Court has denied a restaurant manager’s petition seeking review of whether parties may stipulate to the dismissal with prejudice of a lawsuit alleging violations of the Fair Labor Standards Act (“FLSA”), or whether judicial or Department of Labor (“DOL”) approval is a prerequisite to such a dismissal, as the Second Circuit held in his case, Cheeks v. Freeport Pancake House, Inc. Having declined the petition for writ of certiorari, FLSA lawsuits will remain more difficult to resolve for employers in New York, Connecticut and Vermont.

M&A in 2015: Shattering prior records. With the economy in a modest recovery and with cheap financing readily available, M&A activity was at an all-time high in 2015. Surpassing the prior record of $4.3 trillion in deals in 2007, 2015 saw M&A activity of $4.7 trillion worth of transactions, of which approximately half involved U.S. companies. In fact, U.S. deals alone exceeded $2 trillion for the first time ever.

Each week, we will present a summary of key consumer protection developments affecting the retail industry. This past week, the following regulatory and consumer actions made headlines:

FTC Continues Focus on False Weight Loss Claims, Settles with Sale Slash for $43 million

After a nearly year-long litigation, California company Sale Slash LLC has agreed to pay $43 million to settle Federal Trade Commission charges that the company deceptively sold “bogus” weight loss pills, including through unauthorized celebrity endorsements. As part of the settlement, Sale Slash may not represent that its products are endorsed by any specific individual, or claim that its products aid in weight loss or are safe for consumers unless the claims are supported by “competent and reliable scientific evidence.”

Large-scale food safety issues have been hard to miss in the news lately. Chipotle’s multi-state E. Coli outbreak and listeria monocytogenes found in samples of Blue Bell Creamery ice cream products are some of the recent examples. After a product recall, retailers and other companies involved must focus resources on finding out what went wrong, remedying the problem and rectifying the company image. Hunton & Williams Insurance Coverage Counseling and Litigation attorneys recently authored an article, Insureds Find Place to Roost in Foster Poultry Contamination Case

Earlier this month, a group of former delivery drivers filed a putative collective action lawsuit against an online retailer and Courier Logistics Services, LLC (“CLS”). The case is pending before the United States District Court for the District of Arizona. The plaintiffs allege that the two companies willfully misclassified them as independent contractors and denied overtime pay properly due under the federal Fair Labor Standards Act (“FLSA”).

As reported on the Hunton Employment Labor and Law Blog, on January 20, 2016, the United States Supreme Court issued its ruling in Campbell-Ewald v. Gomez, No. 14-857 (U.S.), in which a 6-3 majority held that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case,” thus resolving an ongoing split among the Circuits on this issue. While this is seemingly a positive development for the plaintiffs’ bar, the Court expressly left open one critical question that is almost sure to be revisited: whether a defendant can moot a case by tendering—as opposed to simply offering—complete relief to the plaintiff.

Last month, the American Tort Reform Foundation (“ATRF”) released the 2015-2016 edition of its annual “Judicial Hellholes” report. Each year, the report identifies the venues it deems the least favorable for defendants and highlights notable pro-plaintiff rulings and practices in each jurisdiction.

On Tuesday, December 22, 2015, the US Court of Appeals for the Federal Circuit issued a much-anticipated opinion regarding the constitutionality of the prohibition against “disparaging” trademarks. In an 9-3 en banc opinion, the Federal Circuit held that the exclusion of disparaging trademarks under Section 2(a) of the Lanham Act violates the First Amendment.

Many of the marks rejected as disparaging convey hurtful speech that harms members of stigmatized communities. But the First Amendment protects even hurtful speech …. The  government cannot refuse to register disparaging marks because it disapproves of the expressive  messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others.

As reported in the Hunton Employment & Labor Perspectives Blog, Retailer Big Lots Stores, Inc. is facing a putative class action in Philadelphia, wherein the plaintiff alleges that the company “systematically” violated the Fair Credit Reporting Act’s (“FCRA”) “standalone disclosure requirement” by making prospective employees sign a document used as a background check consent form that contained extraneous information. Among other things, the plaintiff alleges that Big Lots’ form violates the FCRA because it includes the following three categories of ...

Over the last 18 months, patrons of the nation’s most popular outlet stores have hit well-known retailers, including Gap Outlet, Banana Republic Factory Store and Saks Off 5th, with a flood of class action lawsuits for false and misleading advertising. In early 2014, four members of Congress wrote to the Federal Trade Commission (“FTC”) asking the agency to begin an investigation into the sales practices at outlet stores.

As reported in the Privacy & Information Security Law blog, the United States District Court for the District of Minnesota, in large part, upheld Target’s assertion of the attorney-client privilege and work-product protections for information associated with a privileged, internal investigation of Target’s 2013 data breach.

On October 22, 2015, staff in the Division of Corporation Finance (the “Division”) at the Securities and Exchange Commission (the “Commission”) issued Staff Legal Bulletin 14H (the “Bulletin”). The Bulletin is the latest in a series of Division interpretations under Rule 14a-8 governing shareholder proposals. The Bulletin focuses specifically on circumstances in which the Division will grant no-action relief to exclude a shareholder proposal under two hot-button issues from last year’s proxy season: (1) Rule 14a-8(i)(7), for proposals dealing with a company’s ordinary business operations, and (2) Rule 14a-8(i)(9), for a proposal that directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting. We discuss the Bulletin below.

An important Federal Trade Commission (FTC) decision was announced yesterday that trains a spotlight on claims of “biodegradability.” The FTC found that a manufacturer’s unsubstantiated claims regarding the biodegradability of plastic pellets used as product additives deceived industry and end-use customers. The case reemphasizes the FTC’s intent to enforce the FTC Act against unsupported “green” claims. For retailers and consumer product manufacturers, this case and the recent increase in consumer false advertising class actions emphasizes the importance of:

• due diligence regarding product claims made by vendors – ask for and maintain material to back up the claims and stick to the claims that can be supported; and
• strong indemnities against false and deceptive advertising claims.

As reported in the Privacy & Information Security Law blog, the Seventh Circuit rejected Neiman Marcus’ petition for a rehearing en banc of Remijas v. Neiman Marcus Group, LLC, No. 14-3122. In Remijas, a Seventh Circuit panel found that members of a putative class alleged sufficient facts to establish standing to sue Neiman Marcus following a 2013 data breach that resulted in hackers gaining access to customers’ credit and debit card information. No judge in regular active service requested a vote on the rehearing petition. Additionally, all members of the original panel voted ...

As reported in the Privacy & Information Security Law blog, Judge Magnuson of the U.S. District Court for the District of Minnesota certified a Federal Rule of Civil Procedure 23(b)(3) class of financial services institutions claiming damages from Target Corporation’s 2013 data breach. The class consists of “all entities in the United States and its Territories that issued payment cards compromised in the payment card data breach that was publicly disclosed by Target on December 19, 2013.”

The en banc US Court of Appeals for the Federal Circuit issued its opinion today in SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., Case No. 2013-1564. In a 6-5 decision, the court reaffirmed that laches is a defense to a suit for damages for patent infringement. In reaching this decision, the Federal Circuit distinguished Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), in which the US Supreme Court held that laches is not a defense to a suit for damages under the Copyright Act.

A federal court in New York recently found that litigation concerning damages related to a third party’s product recall required a defense under a commercial general liability policy. Thruway Produce, Inc. v. Mass. Bay Ins. Co., 2015 U.S. Dist. LEXIS 94846 (S.D.N.Y. July 20, 2015). Thruway Produce sold apples to Milnot Holding Company for use in baby food. The parties’ contract required the apples to be free of certain rodenticides (used to kill rats and mice). After discovering that certain apples were contaminated with rodenticide, Milnot was forced to recall its baby food ...

As reported in the Privacy & Information Security blog, the U.S. District Court for the Central District of California recently granted, only in part, a motion to dismiss a data breach class action against Sony Pictures Entertainment, Inc. (“Sony”) in Corona v. Sony Pictures Entertainment, Inc. The case therefore will proceed with some of the claims intact.

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Yesterday, the US Supreme Court in Kimble v. Marvel Enterprises, No. 13-720 (June 22, 2015), upheld the longstanding precedent provided by Brulotte v. Thys Co, 379 U.S. 29 (1964), which stated that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.” Id. at 32. Justice Kagan, writing the opinion of the Court, stated that stare decisis requires the Court to adhere to the decision in Brulotte.

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On Friday, January 30, 2015, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in POM Wonderful, LLC, et al. v. Federal Trade Commission, affirming the Federal Trade Commission's ruling in 2013 that a series of advertisements for POM’s pomegranate juice and supplements were deceptive and thus violated the FTC Act. However, the court provided some limited, yet important, relief to POM Wonderful and the other petitioners. The D.C. Circuit’s decision provides important guidance to companies advertising consumer products.

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As reported in the Privacy & Information Security Law blog, various technology companies, academics and trade associations filed amicus briefs in support of Microsoft’s attempts to resist a U.S. government search warrant seeking to compel it to disclose the contents of customer emails that are stored on servers in Ireland. On December 23, 2014, the Irish government also filed an amicus brief in the 2nd Circuit Court of Appeals.

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As reported in the Privacy & Information Security Law blog, a recent decision by the United States Court of Appeals for the Ninth Circuit reinforces the importance of obtaining affirmative user consent to website Terms of Use for website owners seeking to enforce those terms against consumers. In Nguyen v. Barnes & Noble Inc., the Ninth Circuit held that Barnes & Noble’s website Terms of Use (“Terms”) were not enforceable against a consumer because the website failed to provide sufficient notice of the Terms, despite having placed conspicuous hyperlinks to the Terms ...

This week, the US Court of Appeals for the Federal Circuit issued a precedential decision addressing two important patent damages issues: the entire market value rule and the proper application of the Nash Bargaining Solution in VirnetX, Inc. v. Cisco Systems, Inc., No. 13-1489 (Fed. Cir. Sept. 16, 2014). In vacating a $386 million damages award against defendant Apple Inc., the Federal Circuit first resolved conflicting treatment of the application of the entire market value rule (EMV) by the district courts in cases where the smallest saleable unit is the entire accused device ...

The Supreme Court during its 2013–14 term decided on six patent cases, the last on June 19, 2014. These cases will have significant consequences for companies as they work to advance their strategy for protecting their intellectual property. The attached client alert provides highlights of each case.

On May 13, 2014, in Millennium Laboratories, Inc. v. Darwin Select Insurance Company, Case No. 12-CV-2742 H (KSC), a California federal district court ruled that Darwin Select Insurance Company breached its duty to defend Millennium in a pair of lawsuits in which two business rivals accused Millennium of false advertising, finding that the underlying lawsuits sufficiently alleged covered disparagement claims. In so doing, the court reaffirmed the longstanding rule in California that a carrier’s duty to defend is broad and requires the carrier to defend where there exists a ...