Wednesday, February 10, 2016
Casey Fiesler et al. have written An Archive of Their Own: A Case Study of Feminist HCI and Values in Design (CHI 2016), a paper about feminist principles and human-computer interaction in the Archive of Our Own. As a noncommercial website, the AO3 has a different perspective on policies and practices than entities trying to monetize fandom, and that matters!
Monday, February 08, 2016
Here's the story. Apparently Pike just got another C&D from the holder of the rights in the play The Whipping Man, which is apparently represented in Pike's work by the sound of 72 pages flipping (because there are no women in the play at all). The emptiness of that claim perhaps makes even clearer that the objections are based in not liking criticism, especially criticism that is damning precisely because it's quotation.
PSEG Long Island LLC v. Town of North Hempstead, No. 15-cv-0222 (E.D.N.Y. Feb. 3, 2016)
Around the country, construction companies and similar businesses are routinely required to post warning signs of various sorts in order to proceed with their work. Here, the court holds that the First Amendment requires such sign requirements to survive strict scrutiny, because they compel speech and aren’t triggered by associated commercial speech; thus it’s not a commercial speech disclosure. It’s a troubling holding, and could have benefited from some consideration of, among other things, Robert Post’s useful work on the matter (link is to just one of his works).
The facts: North Hempstead, arguably for bad motives, required public utility providers to post warning signs on wooden utility poles that have been treated with certain chemical preservatives. In 2014, PSEG (through LIPA, an entity that is its public face) began replacing 23 utility poles in the town. Wooden poles 40-45 feet high were replaced with similar poles having a height of 80-85 feet, in order to accommodate a higher-power transmission line. Both the shorter outgoing poles and the taller incoming poles were pre-treated with a wood- preserving chemical known as Pentachlorophenol (penta). Town officials objected to the appearance of the new poles. A report by a hydrogeologist named described testing of Penta-treated utility poles in the Town of East Hampton, and of a sampling of the soil adjacent to those poles. A cover letter said:
The results indicate that significantly elevated concentrations of penta were detected in the soil at both shallow and deep locations at two of the three poles. . . . The penta concentrations at [these] Poles [ ] ranged in concentration from 29,900 micrograms per kilogram (mcg/kg) to 250,000 mcg/kg. These concentrations represent significant exceedances of the New York State Department of Environmental Conservation 6 NYCRR Part 375.6 Unrestricted Use Soil Cleanup Objective for penta of 800 mcg/kh.
The use of penta was banned in 26 countries. It was widely used in the United States until it was banned for public use by EPA in 1987. Its use in the United States is now limited to wood preservation of utility poles and railroad ties. The presence of penta on the poles and in the soil in the vicinity of the poles appears to represent a significant risk to human health and the environment.
As stated previously, the EPA considers penta highly toxic and, therefore, its presence on utility poles presents an inhalation and ingestion risk. Its presence in the soil presents a dermal contact, ingestion, and inhalation risk. At the poles where penta is present, there is also a high potential for the penta to leach downward through the soil and contaminate the groundwater.
The hydrogeologist’s recommended precautions included: installing fencing around the poles to prevent incidental contact by children, pets, and wildlife; installing placards to warn residents not to touch or otherwise make contact with the pole or the soil in its vicinity; notifying residents in the area of the potential hazard associated with the new poles; and instructing them to avoid the new poles to prevent inhaling or ingesting the chemical.
The town suggested that PSEG affix warning signs to the poles. PSEG rejected this suggestion, though its website contained information about penta, including a “Penta Poles FAQ”:
What should I do if I come into contact with a Penta treated wood pole?
Common sense care should be taken to limit prolonged skin contact with Penta treated poles or the soil at the base of the pole, just as care should be taken to limit exposure to other products containing pesticides like household garden and insect sprays. Avoid prolonged direct contact with Penta treated wood poles and wash hands or other exposed areas thoroughly.
Thomas B. Johnson, Ph.D., a research scientist in the Bureau of Toxic Substance Assessment of the New York State Department of Health, wrote a letter to James Tomarken, MD, the Commissioner of the Suffolk County Department of Health Services. The letter said (setting aside questions about its admissibility):
[P]eople would be unlikely to contact soil near the poles with sufficient duration and frequency to result in a significant risk for adverse health effects. To further evaluate exposure to this soil, we examined the potential for acute (short-term) health effects in a child who might sit at the base of a pole and eat some of the soil. Even at the highest pentachlorophenol soil concentration reported in the April 22, 2014 Dermody Consulting letter (250 milligrams per kilogram of soil), the exposures that might result from this kind of activity are well below exposure levels that might cause health effects.
Regarding the health risks to people who might, for example, put their hands on the utility poles, there is ample scientific information to indicate that direct contact with pentachlorophenol can irritate the skin and eyes. Therefore, it is possible that people who have direct skin contact with a utility pole treated with pentachlorophenol- containing product could experience skin irritation. However, we would not expect frequent, routine or long duration skin contact with utility poles.
The town ultimately passed a new rule with an explicit legislative finding that “wood utility poles that are treated with hazardous chemicals such as pentachlorophenol, creosote, inorganic arsenic, or other similar chemicals constitute a potential danger to the public and that the public should be informed of such potential danger.” Thus:
In a line of utility poles, the public utility shall post a sign on every fourth pole. The sign shall be posted in a conspicuous location at least four feet and no more than five feet from the base of the pole. The sign shall contain the following warning: “NOTICE – THIS POLE CONTAINS A HAZARDOUS CHEMICAL. AVOID PROLONGED DIRECT CONTACT WITH THIS POLE. WASH HANDS OR OTHER EXPOSED AREAS THOROUGHLY IF CONTACT IS MADE.” The sign shall be oriented towards pedestrian traffic wherever possible. The text of the sign shall be of a font size that is no less than 36 point. The text of the sign shall be black on a white background.
This provision defined the term “hazardous chemical” as “[a]ny chemical compound used as a wood preservative to treat wood utility poles to protect them from fungal decay and wood-destroying pests.”
A scientist with 28 years of experience in environmental consulting, environmental and analytical chemistry, and undertaking human and ecological risk assessments, opined that the Town did not perform an adequate assessment of the risk posed by the Penta-treated utility poles, failing to use EPA-approved methods and reaching a conclusion about risk that was contrary to the EPA’s own findings that “assuming all pentachlorophenol exposure results from pentachlorophenol treated poles . . . the total risks result in no unreasonable adverse effects from the currently registered wood preservative use.” Although the Town didn’t dispute these findings, it offered contrary information from the National Pesticide Information Center, which stated that Penta is “considered a probable human carcinogen and exposure to high levels can also have other health risks.” (There were similar factual issues with another wood preservative, chromated copper arsenate, also implicated by the law.)
PSEG also submitted evidence that approximately 60 million chemically-treated wooden utility poles were in service across the United States. In addition to the 23 utility poles at issue in this case, PSEG also owned more than 25,000 chemically-treated utility poles throughout the Town, to which warning signs would also have to be added, at great cost. Also, PSEG submitted evidence that there were a number of wooden structures, other than utility poles, treated with similar chemical compounds and involving higher risks of extended human contact, such as dock walkways comprising wood flooring, guard rails, and hand rails. The Town did not require warning signs for these.
The court noted that the right not to speak is highly protected by the First Amendment, except in the commercial speech context. The court first noted that the facts of this case weren’t similar to other cases that it or the parties had identified. (In part this is because it is such a radical argument—lots of companies have disagreed with lots of safety warnings, but it’s only in recent years that First Amendment compelled speech arguments against them became “on the wall,” to borrow a phrase.) However, the court looked at common definitions of commercial speech as speech proposing a commercial transaction, or speech related solely to the economic interests of the speaker and its audience.
National Electric Manufacturers Association v. Sorrell, 272 F.3d 104 (2d Cir. 2001), upheld a Vermont statute requiring manufacturers of mercury-containing products to place labels on their packaging to inform consumers that the products should be recycled or disposed of as hazardous waste. The law was intended “to better inform consumers about the products they purchase” and was thus “inextricably intertwined with the goal of increasing consumer awareness of the presence of mercury in a variety of products.” Commercial speakers had no fundamental right not to disclose truthful information about their products.
By contrast, Safelite Group v. Jepsen, 764 F.3d 258, 264 (2d Cir. 2014), struck down a Connecticut statute that prohibited insurance companies and claims administrators from referring insureds to affiliated glass companies for repairs, unless they also gave the name of a competing glass company in the area. Forcing Safelite to promote competitors deterred commercial speech without furthering consumer information goals:
The law does not mandate disclosure of any information about products or services of affiliated glass companies or of the competitor’s products or services. Instead, it requires that insurance companies or claims administrators choose between silence about the products and services of their affiliates or give a (random) free advertisement for a competitor. This is a regulation of content going beyond disclosure about the product or services offered by the would-be speaker.
From these precedents, the court here concluded that, “in order to qualify as commercial speech, the message sought to be regulated must necessarily bear some discernible connection to the commercial interests of the speaker.” The mandated warning signs here weren’t commercial speech under that standard, because they bore “no discernible relationship to the Plaintiffs’ products, services, or other commercial interests.” The signs didn’t propose a commercial transaction, and PSEG was a local monopoly with no competitors, which is why it doesn’t bother to promote the sale or transmission of energy. And even if they did, “the warning signs would serve no commercial purpose in an open market for electricity because they relate solely to the chemical treatment of the utility poles, which the Plaintiffs neither make nor sell.” Nor could the information cause consumer behavior in terms of purchasing electricity to change.
Comment: what a bizarre conclusion. The poles transmit the energy, and (at least as found by the relevant legislative body) pose some health hazard. In order to provide the service, then, PSEG uses the poles—it’s not like PSEG erected them for some reason unrelated to the provision of the electricity it sells. Indeed, as the court pointed out for other reasons, the poles are used instead of underground lines because that makes the electricity cheaper. The poles are an integral part of the service PSEG sells. Although the poles aren’t sold to customers, so what? The electricity provided via the poles is.
Under this reasoning, here are other things that should also be subjected to strict scrutiny (and probably fail, given the analysis applied below): regulations requiring that delivery trucks bear clear markings warning consumers to stay back, as applied to a company that delivers vegetables to grocery stores and doesn’t sell trucks. Regulations requiring construction companies to post warnings to passers-by about watching for falling material and staying back from the construction site, as applied to construction companies that only build big projects. Regulations requiring airplanes (or for that matter commercial buildings) to have clearly marked exits and other safety information.
The court thought that it mattered that “it appears to be wholly immaterial to Chapter 64B’s objective that the wooden poles happen to carry electric transmission wires, or any commodity for that matter.” True, but so what? If the problem is caused by the delivery method, then the regulation makes sense applied to anything using that delivery method, just as with required markings on delivery trucks. And the electricity is in fact both carried via the poles and sold into the market. Obviously, the real problem with this regulation is that it is, on the evidence, both burdensome and not particularly well-justified in singling utility poles out for the burden. But that’s Lochner. The legislature is generally allowed to make stupid laws—unless the plaintiff succeeds, as here, in using the First Amendment to resurrect Lochner.
Likewise, the court found the information required to be disclosed—that people who come into contact with the pole should wash their hands—unconnected to the economic interests of PSEG or the people reading the signs. First of all, the “solely” part of “expression related solely to the economic interests of the speaker and its audience” could never be taken literally, because advertising is almost always about non-economic interests, aka preferences—my preferences for cereal that tastes good, or coffee that is sustainably harvested, or ice cream made by crunchy Vermont liberals. PSEG’s interest in having the poles is solely commercial: the poles enable it to sell electricity at a price less than it would have to charge without poles. True, it’s not speaking at all via the poles until required to make the disclosure, but that just means that this particular framing of the commercial speech test doesn’t work, not that the poles are noncommercial speech or that PSEG’s silence on the matter is noncommercial silence.
(As for the bit about there’s no possible change of consumer behavior here, and the court’s related point that consumers don’t have a choice about getting their electricity from the local monopoly, consider this: the Court in Central Hudson and Virginia Pharmacy defended truthful commercial speech as useful to consumers both in helping them find the products they wanted and in helping them make decisions about important matters of economic regulation. To the extent that the signs inform consumers of the danger of preservative-treated poles, they definitely help people make decisions about the relative value of cheaper energy and utility poles v. more expensive energy and underground wires. Most likely, most people will choose to live with the tradeoff. But it’s still information that is potentially relevant to them.)
Having found that this wasn’t commercial speech, the court quickly determined that it wasn’t government speech either, because the government wasn’t the speaker and wasn’t appropriating public funds to transmit its message through private speakers.
With that out of the way, strict scrutiny applied. Even assuming that the risk of exposure to the poles constituted a compelling government interest—something the court seemed dubious about—there were less restrictive means of addressing the problem, such as signs on public property or a public education campaign funded by the Town itself. The Town’s argument that this was less likely to reach people who were about to lean on poles was insufficient to survive strict scrutiny. First, the Town didn’t prove that warning signs were most likely to be effective; common sense wasn’t enough to justify the Town’s argument. Plus, the Town failed to explain why it didn’t choose less restrictive means, such as creating and displaying the same warning signs on any and all Town property, “of which there is far more than the 23 privately-owned utility poles at issue in this case.” It could also send mail to residents about the issue.
H/T Mark McKenna.
Mezzadri v. Medical Depot, Inc., 113 F. Supp. 3d 1061 (S.D. Cal. 2015)
The rule against claim-splitting clashes with the injustice of the ability of a defendant to destroy a form of relief by removing a complaint from state to federal court, and the rule against claim-splitting wins. Mezzadri filed a class action claim against Medical Depot for allegedly falsely marketing full-body patient slings, asserting the usual California claims in state court. Mezzadri sought injunctive as well as monetary relief; Medical Depot removed under CAFA. Mezzadri sought remand on the injunctive relief claims, because federal courts often (not always) hold that they lack Article III jurisdiction over injunctive relief in consumer protection claims, where the named plaintiff’s knowledge of the untruth makes future injury to the named plaintiff unlikely.
California allows injunctive relief if there is a likelihood that the harm will reoccur, even if the harm will not reoccur to the particular named plaintiff. In re Tobacco II Cases, 207 P.3d 20 (Cal. 2009) (“An injunction would not serve the purpose of prevention of future harm if only those who had already been injured by the practice were entitled to that relief.”). In Lee v. American Nat’l Ins. Co., 260 F.3d 997 (9th Cir. 2001), the 9th Circuit held that, in a diversity action removed from state court, the entire case does not need to be remanded if the plaintiff lacks Article III standing as to one of several defendants. However, the court stated in dicta that a case that is “properly removed in its entirety may nonetheless be effectively split up when it is subsequently determined that some claims cannot be adjudicated in federal court” and that a partial remand might be appropriate where dismissal would require the plaintiff to forfeit an otherwise viable state-law claim. Machlan v. Procter & Gamble Co., 77 F. Supp. 3d 954 (N.D. Cal. 2015), made just such a partial remand for injunctive relief on similar California consumer protection claims. Machlan relied on Carnegie–Mellon University v. Cohill, 484 U.S. 343 (1988), which allowed a federal court to remand to state court a removed case upon a proper determination that retaining jurisdiction over the case would be inappropriate. Otherwise, the case could get stuck in a perpetual loop of costly re-filing in state court, then removal, then dismissal by the federal court, preventing adjudication on the merits. Machlan concluded that “[a]llowing a defendant to undermine California’s consumer protection statutes and defeat injunctive relief simply by removing a case from state court is an unnecessary affront to federal and state comity.”
The court sided with Medical Depot. The case was properly removed under CAFA, and the court had subject matter jurisdiction over the California claims. “CAFA’s policy in favor of litigating interstate class actions in federal court trumps the general presumption against removal jurisdiction,” even if the federal court lacks power to decide on injunctive relief. Moreover, under California’s primary rights theory, a cause of action is comprised of a primary right of the plaintiff, a corresponding primary duty of the defendant, and a wrongful act by the defendant constituting a breach of that duty. A single violation of a primary right gives rise to a single cause of action; injunctive relief is not a separate cause of action. (Fair enough, but have California courts made this holding when, because of federal law, injunctive relief is not available in federal court but would be in state court?) Primary right doctrine prevents claim-splitting except in extraordinary cases. (Which I’d say this is.)
Medical Depot argued that a partial remand would require both the federal and state courts to simultaneously adjudicate the same causes of action based on the same underlying acts. Mezzadri responded that the remanded case would be stayed pending the resolution of the federal case, and res judicata would apply to any issues adjudicated on the merits.
The court concluded that splitting the cause of action from the remedy was different than splitting causes of action from a case. “This effectively distinguishes much of the authority cited, including Lee, which discussed the possibility of splitting claims in the context of all claims against one defendant being sent to state court while all claims against the other defendant remained in federal court.” Without subject matter jurisdiction over injunctive relief, the court couldn’t remand and “direct the state court’s actions regarding that relief.” While Machlan was on all fours, it was “unworkable once a federal court has determined that subject matter jurisdiction does not exist.” Instead, the request for injunctive relief must simply be dismissed. Ses Lee, 260 F.3d at 1001–02 (“[A] plaintiff whose cause of action is perfectly viable in state court under state law may nonetheless be foreclosed from litigating the same cause of action in federal court, if he cannot demonstrate the requisite injury.”). Mezzadri might well be able to refile in state court, but that claim-splitting result wasn’t the federal court’s problem.
Wednesday, February 03, 2016
Twentieth Century Fox Television, et al. v. Empire Distribution Inc., No. 15-2158 (C.D. Cal. Feb. 1, 2016)
Sometimes it’s nice to see the law work itself pure, as a court clears out some plaintiff-postulated ambiguities in Rogers v. Grimaldi. Fox produces Empire, a TV show following a fictional entertainment industry family struggling for control of “Empire Enterprises.” Music features heavily on the show; Fox partners with Columbia to release the show’s songs, including a compilation for the season. These are sold in record stores and online. In connection with Empire, Fox also enters into contracts with artists, produces and releases music, and promotes the artists and their music at radio stations and live performances.
Defendant Empire Distribution is a record label, music distributor, and publishing company founded in 2010. It produces and distributes urban, hip hop, rap, and R&B music, and has released over 11,000 albums/singles, 6,000 music videos, and 85,000 songs, including multiple platinum and gold records and works by famous artists such as T.I., Snoop Dogg, Kendrick Lamar, and Gladys Knight. It uses the trademarks “Empire,” “Empire Distribution,” “Empire Publishing,” and “Empire Recordings,” and has some pending registration applications.
Unsurprisingly, Empire Distribution alleged that Empire caused affiliation confusion. Fox brought a declaratory judgment, and the court granted it summary judgment based on Rogers (which dealt with the federal dilution and state claims as well).
The Ninth Circuit follows Rogers, protecting artistic works unless their use of a mark has no artistic relevance to the underlying work whatsoever or, if there is artistic relevance, the use is explicitly misleading about source or content. Sleekcraft’s multifactor test didn’t apply, despite Fox’s extensive use of Empire. Moreover, contrary to what some past cases held, E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095 (9th Cir. 2008), made clear that there’s no threshold test of whether the plaintiff’s mark is a cultural icon. The threshold test is “whether the allegedly infringing use is contained in an expressive work.” [Pause for obligatory note: not including an ad for a product, even though an ad is an expressive work.]
Artistic relevance: Um, yeah. The characters are “struggling for literal control over an entertainment company called ‘Empire Enterprises,’ and figurative control over the vast ‘empire’ that Lucious Lyon has built,” and it’s set in New York, the Empire State. Empire Distribution argued that the use also had to be referential—that is, it had to refer to the trademark owner to trigger Rogers. Some courts, mistakenly, have agreed with this argument. Rogers simply requires that the junior user didn’t arbitrarily choose to use the mark just to exploit its publicity value. That doesn’t require the work to be “about” the trademark. A contrary rule could chill a lot of protected speech; Empire Distribution’s argument was essentially that “the common word ‘Empire’ cannot be used in an expressive work unless it is referencing Empire Distribution.”
All that’s left is explicit misleadingness. As that prong of the test indicates, the proper inquiry is whether there’s an “explicit indication, overt claim, or explicit misstatement” as to the source of the work. Empire Distribution wanted to apply Sleekcraft, but then Rogers wouldn’t be a defense at all. Brown v. EA made crystal clear that evidence of consumer reaction, as opposed to evidence about what the user said, was irrelevant to Rogers; Brown involved “strong consumer survey evidence,” which the Ninth Circuit said was irrelevant:
Adding survey evidence changes nothing. The [second prong of the Rogers] test requires that the use be explicitly misleading to consumers. To be relevant, evidence must relate to the nature of the behavior of the identifying material’s user, not the impact of the use. Even if Brown could offer a survey demonstrating that consumers of the Madden NFL series believed that Brown endorsed the game, that would not support the claim that the use was explicitly misleading to consumers.
“Thus, it is clear that no amount of evidence showing only consumer confusion can satisfy the ‘explicitly misleading’ prong of the Rogers test because such evidence goes only to the ‘impact of the use’ on a consumer.”
Also, I'm glad to get the chance to use a Sisters of Mercy reference again.
Martin v. Living Essentials, LLC, 2016 WL 374142, No. 15 C 01647 (N.D. Ill. Feb. 1, 2016)
Ted Martin, who holds the world record for most consecutive kicks in hacky sack (no knees, no partner) sued for invasion of privacy and false advertising based on a television commercial in which an actor claims to have accomplished a series of seemingly impossible feats, including mastering origami “while beating the record for Hacky Sack,” under the influence of an energy drink. The court found that the ad “is clearly a comedic farce and in no way trades on Martin’s identity.”
The ad, apparently part of 5-hour ENERGY’s “The Last Five Hours” series, shows an actor claiming that “in the last 5 hours” he: disproved the theory of relativity; swam the English Channel and back; found Bigfoot; and mastered origami while beating “the record for Hacky Sack,” all because he took a 5hE shot. Mouseprint at the bottom of the screen says, “For comedic purposes only. Not actual results[,]” and “Not proven to improve physical performance, dexterity or endurance.” Martin claimed that the hacky sack statement was a false representation of fact and an appropriation of his identity.
The court first found that the one-year statute of limitations for right of publicity claims in Illinois barred the claim, given the complaint’s statement that the ad came out soon after Nov. 16, 2012, and that the complaint was filed in February 2015.
Even if the claim weren’t time-barred, it couldn’t win. Martin’s argument was that, by claiming that the record holder for hacky sack used 5hE to set the record, the ad said that Marin used 5hE. Sadly, Illinois law covers the unauthorized use of “any attribute of an individual.” But the court nonetheless found that “the record for Hacky Sack” was far too ambiguous to identify him. There are many kinds of hacky sack records, and the ad shows a man kicking two hacky sacks, not one; the Guinness World Record book lists 14 different records, and the ad doesn’t claim any particular one.
But all of this misses the more fundamental point. The Commercial is a joke, a comedic farce. The claims it makes are not intended to be taken as true—and to the extent that there could be any doubt on that score, the commercial includes a clear disclaimer advising the most gullible among us that these are “not actual results.” No one could watch the Commercial and reasonably conclude that the product spokesman actually holds “the record for Hacky Sack” ….
And anyway, the actor claimed to have done a number of other improbable things that didn’t identify Ted Martin.
Martin neither claims to have done these other things nor explains why anyone would believe that, in addition to unrivaled skill at keeping a footbag aloft, he possesses genius surpassing that of Einstein, twice the endurance of Diana Nyad, and hunting skills so refined that he is able to locate even mythical creatures. The Commercial’s implication is to the contrary: whoever this remarkable human may be, he is someone other than Ted Martin (or Einstein, Nyad, or the biggest of big-game hunters, all of whom the Commercial portrays as being left in the wake of anyone who might consume a dose of 5HE).
Thus, the court cautioned, “defectum humoris non curat lex—the law does not reward humorlessness.” No reasonable person could find a use of Martin’s identity. (Query: could a reasonable person find a use of Einstein’s identity?)
The Lanham Act claim failed for the same reason: it was a joke. Also, without any use of Martin’s identity, Martin failed the Lexmark test for statutory standing, though this was a non-jurisdictional argument that could be, and was, waived by defendant’s failure to raise it.
Living Essentials argued that its claim was ambiguous because it wasn’t clear which hacky sack record the actor claimed to have broken. The court rejected this claim, and rightly so: whatever records there were, the actor had broken none of them; the claim was literally false in that sense. But there was no way that a reasonable person could take that false claim literally; it was a humorous exaggeration posing no risk of consumer deception, “better described as farce than mere puffery.” Martin thus couldn’t plausibly allege consumer confusion that injured him. He didn’t identify lost endorsement opportunities (he had no such deals) and his emotional angst didn’t count. Even if his record had commercial value, it would be among “Hacky Sack cognoscenti,” but Martin didn’t allege that those people would be misled.
Monday, February 01, 2016
The deadline for the ABA Section of Antitrust Law’s Janet Steiger Fellowship Program has been extended to Friday, February 5th. Steiger Fellows receive a $6,000 stipend for summer internships in the offices of 36 State Attorneys General where they’ll work primarily on consumer protection issues – debt collection, technology, privacy, false advertising, consumer credit, etc. Students may apply in their home states or with AGs’ offices from Vermont to Honolulu and everywhere in between. There’s even the possibility for a need-based housing or travel allowance. The Steiger Fellowship is also open to 1Ls, some of whom may not be thinking about summer employment yet. The application process is simple and it’s a great foot in the door.
Chris Jay Hoofnagle, Federal Trade Commission Privacy Law and Policy (2016)
Review copy. The book will be available on Amazon Feb. 5. This is a detailed, clearly written guide to the FTC, with specific attention to its privacy practices but including an extensive discussion of its overall history and jurisdiction, at least on the consumer protection side; the antitrust side receives much less attention, which is not a complaint (at least not from me!). I learned a lot, and I’m going to recount some of the highlights.
Hoofnagle regards the FTC’s activities, mostly through settlements, as “the most important regulation of information privacy in the United States,” likely to be so for the near future given our choked-off political system. Nor is rulemaking a possibility, given the special, non-APA legal regime that makes rulemaking incredibly difficult for the FTC. And that incrementalism is not a bad thing: he thinks the FTC is well-positioned to meet the challenge, having “matured into a careful, bipartisan, strategic, and incrementalist policy actor.”
Because its regulatory scope is so broad, it hasn’t been subject to capture by any particular industry, and has been able to target the biggest actors in relevant markets. When it goes too far, it risks a Congressional backlash, but it is also constantly under pressure to prove its worth. First by using its deception authority, and increasingly with unfairness, the FTC has pushed companies to improve privacy policies substantively, which is needed since mere disclosure, we know, doesn’t change a thing. Hoofnagle regards the fact that the FTC isn’t constrained by common-law requirements like a specific harm to an identifiable person as its great strength, and rejects the idea that the FTC should have to follow common-law harm principles. His emphasis on the desirability of a reasonably active regulator to protect well-behaved businesses against outliers in their own fields is welcome; business interests are not libertarian interests.
Hoofnagle goes into great detail about the structures of the FTC, with both practical and ideological effects. He identifies a tension between “legal, more moralistic culture” of the Bureau of Consumer Protection and the economists—the former “view a misrepresentation as an inherent wrong,” while the latter want harm outside of that before the government should act. He views the FTC’s history as one of continuity, arguing that the FTC has always been a technology agency responding to new developments in marketing and otherwise.
Not everything is perfect. In the past decade, only about 25 percent of FTC judgments and settlements result in full payment, due to resistance by companies (one $16 million case required subpoenaing sixty-four different entities and getting thirty-five garnishments); lack of money remaining in the hands of fraudsters; and asset hiding. This fact serves as a good reminder that the FTC goes after some truly bad actors, which is one reason that case law is generally so favorable to the FTC; the incorrigible/litigious respondents “create terrible precedents for other companies.” At the same time, the FTC has trouble enforcing consent orders, because courts
require the FTC to prove by clear and convincing evidence that the respondent has violated an express and unequivocal command in order to find contempt. Where the issue is something like privacy, it’s difficult to reach the right level of specificity: “respect consumer privacy and … secure data” are hard obligations to define. Google, which is under 20 years of monitoring for its ill-fated Buzz initiative, promised to create a “comprehensive privacy program that is reasonably designed to address privacy risks related to the development and management of new and existing products and services for consumers.” Hoofnagle points out that this order could be complied with “substantially” and “still be inadequate to protect privacy in a meaningful way. … [A] weak or partial embrace of the duty may be practically difficult to police.”
When it comes to privacy, Hoofnagle argues that the FTC’s broad authority to police unfair and deceptive trade practices can take it very far. Deception is available in at least some circumstances, where people are misled into a false sense of security. Historically, he contends, the FTC has begun regulatory interventions with its deception authority, moving towards unfairness when market manipulations become more subtle and hard to deem deceptive, which is what is happening with privacy now. The more companies write their contracts to excuse themselves from any constraints in the fine print, the more of a role unfairness, and generalized consumer expectations, will have to play in enforcing privacy protections.
One example of the use of deception is when, in part to stave off government action, industry engages in self-regulation. Then, violations of self-regulatory rules can be enforced under the FTC’s deception authority. Self-regulation also avoids First Amendment challenges and may be appealed to as reasonable standards of industry behavior when the FTC goes after outliers under its unfairness authority. “Perhaps for these reasons, the FTC exhibits a kind of credulity when new groups appear claiming to represent entire industries and claiming a commit ment to a set of rules. To privacy advocates, this activity is galling and empty, but to the Commission the industry has just rested its foot in a trap.”
Hoofnagle makes the conventional arguments against disclosure as sufficient to protect privacy such as the failure of disclosures and the third-party problem of information collection/use by third parties with no relation to the consumer or reputational checks on their behavior (think collection agencies or the servicing agent for your mortgage). He draws on Gordon Hull’s argument that current neoliberal ideas treat privacy as an individual economic choice, setting people up for failure (because self-management of privacy is impractical). Individualization obscures the true social nature of the problem.
However, Hoofnagle doesn’t think that privacy law is the appropriate place to deal with discrimination in credit offers or pricing based on individualized targeting. Price discrimination, he says, is about power, and information companies are natural monopolies. Therefore, competition policy, rather than privacy law, is the place to work on disturbing uses of data to discriminate on price.
Later chapters discuss specific areas of privacy, such as children’s privacy/COPPA, where fears for children’s safety “caused Congress to build a framework with scant regard to how children might want to use interactive services.” COPPA created incentives to develop services that are one-way, television-like broadcasting services. Designers do this because interactivity triggers
legal duties under COPPA, but it makes the information environment less healthy. Children also learn to lie about their age in order to join fun, highly interactive services that are supposedly only used by adults.
There are good parts of COPPA, Hoofnagle contends, but they should be available to everyone, not just kids: “the allocation of privacy responsibilities for the behavior of vendors, such as third-party trackers, to the service; limitations on how data can be used; limitations on tracking; rules on how much data can be collected; a regulatory incentive for contextual advertising and against behavioral tracking; and ceilings on how long data can be retained.” These non-consent related provisions, he concludes, provide much more protection for privacy than parental consent does.
Information security cases raise both deception and unfairness concerns. Hoofnagle relies on Ross Anderson’s argument that, even in competitive markets, insecure products tend to drive out secure ones because of first-mover advantage. Consumers have trouble evaluating security, and don’t rank it highly when choosing products; it’s a latent safety defect. Companies often build security into products “to transfer risk to others, or to enable differential pricing, or to cause customer lock-in, such as through digital rights management technologies.” For example, for credit cards, issuers have successfully defined the problem of fraud as one of merchant security, putting a “Sisyphean” burden on merchants: keeping a widely shared number secret. A more comprehensive approact to the structure of payment systems would define and deal with the problem differently. Hoofnagle argues for a public health-type approach, dealing with insecurity as a collective action problem.
Anti-marketing laws, e.g., anti-spam laws: Here I learned of research by Brian Krebs asking why anyone buys from spammers. He looked at records from a large online pharmaceutical sales network and interviewed 400 purchasers. Many couldn’t afford the US prices of drugs—they could save hundreds of dollars per month to treat chronic conditions, and get Indian drugs that looked just the same as those from the local pharmacy (perhaps because most of those drugs are made in India too). Others were embarrassed to see a doctor; thought it was more convenient to self-diagnose and buy treatments online; or couldn’t get legal prescriptions because they were dependent on the drugs. This too seems like a series of political problems. But because spammers benefit, they impose huge externalities on the rest of us: $20 billion estimated annually, for revenue for spammers of $200 million a year. This is apparently an externality ratio greater than that for auto theft. Worse, techniques created to spread spam create an infrastructure for other malicious software.
Hoofnagle briefly addresses Eric Goldman’s arguments that we should like ad targeting because then we’d only see information useful to us. Among other things, he makes the nice point that no commercial entity will have the incentive to develop such a filter, to which we provide input about our preferences, so long as data about us are readily available other ways and we have no legal means to stop that. Goldman’s related critique that Do Not Call isn’t granular enough to let through calls people really would want is not persuasive—not only is it outrageously popular, suggesting a revealed preference for not getting the calls, the cost of erecting a screen and choosing which you might be interested in—even if you could really figure that out in advance—is itself a cost consumers don’t want to bear.
Hoofnagle also sounds the alarm about First Amendment constraints on regulation. Since we don’t have to worry any more about paying for each email we receive, regulations may not seem justified under the strict standards the Court now applies, even if we don’t want all this spam. I would have liked a bit more First Amendment analysis, fitting Hoofnagle’s policy arguments into the First Amendment scheme.
Financial privacy: I didn’t know that other countries, such as France and Australia, don’t have the kind of credit reporting we do, where all our transactions are tracked. They only create records when there’s nonpayment—and yet, Hoofnagle notes, France and Australia are modern markets. The US, by contrast, uses a model of “total surveillance. It gives individuals incentives to pay bills on time – and to have them monitored by [Credit Reporting Agencies] – in order to have a report dominated by positive information.” He doesn’t mention this, but that also puts priority on participating in the formal economy.
He also notes the history of financial entities putting lots of people at risk because it paid them to do so, with prescreened credit offers that could be swiped out of people’s mailboxes. To check your credit report/opt out of offers, you need to provide your Social Security number—but business users can search for you using your name alone, without that number. “This dynamic is typical for opt-out schemes – opting out is subjected to higher security requirements than the much riskier act of delivering a full consumer report to a business.”
Hoofnagle suggests that financial privacy laws could be protected somewhat against First Amendment challenges by tying immunity for credit report providers from tort suits to the burdens of the law—if they aren’t going to be required to protect consumers’ ability to access and contest credit reports, and to omit information that’s old or contested, then they shouldn’t get federal preemption of negligence and other tort claims.
International privacy efforts: Unfortunately, the US-EU Safe Harbor rules were invalidated just as this book was going to press, so most of it discusses the situation as if the Safe Harbor existed. Hoofnagle sets out the different US and EU approaches, based on different history and values:
The atrocities committed during the Holocaust were assisted through information technology, and private companies were complicit in Nazi activities. Furthermore, the penetration of reliable census-taking activities is one explanation of why so many Dutch Jews were killed in the Holocaust while nearby countries with fewer information collection activities had higher rates of Jewish survival. Stasi and Communist tracking of individuals and their social networks, and citizens “informing” on others reinforced the lesson that information can become a tool of oppression.
But he cautions against understanding the European approach as simply fear-based. Instead, European values of respect for private life and individual dignity reflect a positive view of the self as well.
I was particularly interested in his description of conflicting legal cultures: “US lawyers seek rules that will help bring clients into full legal compliance. But international rules are often stated as general, high-level principles for data handling. Read literally, these rules would be impossible to implement because they would regulate personal, inconsequential matters.” E.g., data protection laws, on their plain terms, make many a Facebook post unlawful (and there’s at least one woman who was held liable for doing just that). So US lawyers, who often want to be within the law, look at European law and say it’s impossible, especially given national variations. Mostly, he suggests, European regimes want “good enough” privacy, like “good enough” parenting, but that’s really hard to define in advance. And the privacy version of the precautionary principle—delete data after a reasonable time, and don’t do new things with them without consent—conflict with the Silicon Valley approach of collecting information now and figuring out how it might be valuable later.
Turning to the future, Hoofnagle endorses the approach of David Vladeck (my colleague), who suggested that the FTC would include threats to individual dignity as one reason it might choose to pursue a case. “Harm supporters reacted hysterically, labeling Vladeck’s views emotional, questionable, vague, nontraditional, and subjective…. In critiquing Vladeck, harms-based supporters almost always put dignity in quotes, as if it were some Germanism.” But dignity, Hoofnagle notes, is a good way to describe why people seek privacy (and why they don’t generally poop in public). Being spied on in your own home—as actually happened to some people in cases pursued by the FTC—isn’t primarily or measurably an economic invasion.
In his view,
the FTC’s case selection is causing American law to converge with some European norms. For instance, the FTC’s matters concerning malware reject traditional contract notions in favor of fairness principles that one would expect from European consumer protection efforts. Similarly, FTC actions against companies that collect information for one specified purpose and resell it for another reflect European ideals of purpose specification and limitation. Finally, the US–EU Safe Harbor Agreement itself, while only legally applicable to Europeans’ data, causes some companies to extend Continental-style protections to American consumers.
The Bureau of Economics is, in Hoofnagle’s view, a barrier to more effective FTC policies on privacy. The BE doesn’t generally see privacy violations as having an economic value, and “it perceives there to be no market for pro-privacy practices.” Hoofnagle suggests ways that a more dynamic market for privacy might be encouraged and value. For example, there is a “privacy differential” between the policies of free, consumer-oriented services and for-pay, business-oriented services, and the value of that differential to consumers could be studied. This could result in disgorgement and restitution penalties for violations of the FTCA. More aggressively, the BE could help change the incentives of industry participants who lack incentives to protect privacy. Hoofnagle analogizes to the market for auto safety:
automakers once claimed that consumers did not really care about safety, that consumers chose cars based on appearance, and that auto safety was the domain of a small group of malcontents. In the 1950s, there was no ability to express a preference for safety, but once seat belts became an option, they proved tremendously popular. The BE could be part of a movement to create the “seat belt” for internet commerce.
I love analogies, but I’m not sure how exactly this would work, because understanding the options is probably always going to be difficult, by Hoofnagle’s own account of consumer decisionmaking. But Hoofnagle has more practical suggestions, too. He suggests drawing on methods used by the plaintiffs’ bar for measuring how consumers conceive of the value of personal information:
For instance, in one case involving illegal sale of driver record information, an economist polled citizens to explore what kind of discounts they would accept in renewing their driver’s license in exchange for this information being sold to marketers. While the market valued the information at $0.01 per record, 60 percent of respondents said they would reject an offer of a $50 discount on their license in exchange for allowing the sale of their name and address to marketers.
Most importantly, however, Hoofnagle advocates that the FTC should reject any return to the “common law,” which means limiting FTC action to addressing pecuniary injuries. (As he points out, the common law also provides criminal punishment for frauds on the public, which the proponents of harm requirements don’t support.) Affronts to dignity and violation of consumer expectations also deserve protection. And this means a willingness to use the unfairness power to address inherent wrongs. The FTC has begun to do this with awful behavior like revenge porn sites, and with spyware, and he contends it should do more. For example, he considers Facebook to be an “information-age bait and switch.” After consumers had become locked into the platform, it changed its privacy policies to make us far more exposed, relying on its market dominance to keep defections to a minimum.
As part of this regulatory attention, privacy advocates will have to hold their own in cost-benefit analyses. Hoofnagle argues that deregulation advocates produce biased work that ignores the externalities of privacy intrusions, such as the disruption caused by telemarketing calls and the costs of developing technologies such as caller ID to fend them off. Privacy-side work could provide a fuller picture of the externalities and transaction costs to consumers of ugly industry practices.
Reese v. Pook & Pook, LLC., 2016 WL 337022, No. 14-5715 (E.D. Pa. Jan. 27, 2016)
The Reeses collected antique toys, and filed for bankruptcy, at which point they were required to sell some of their collection. Defendant Pook & Pook, LLC was approved by the Bankruptcy Court as the auctioneer to sell the collection. The Reeses alleged that the sale was conducted in a flawed and corrupt manner, so that it raised only $560,000, far less than it should have raised. In particular, they alleged that “the staging of the sale was deliberately flawed to diminish the value of the toys: toys were presented in piles with no effort to match parts into complete toys, parts of various two– and three-part toys were not matched, allowing, for example, the front end of one horse-drawn toy to go in one box lot with the back end placed in a different lot.” Thus, online and phone bidders couldn’t know the contents. Defendant Jay Lowe, however, allegedly knew where the mismatched parts were, bid accordingly, and put them back together for resale at a significant markup. Lowe allegedly previously disparaged their collection at the James Julia Auctions in Maine, where he worked on commission. Moreover, the P&P catalogue of the Reese sale allegedly promoted fake antiques called “newtiques,” created by Lowe using original parts from antique toys and placing them on new toys, further disparaging the quality of toys in the Reese collection. P&P also allegedly sent an employee to the Reninger Antique Mall to criticize the collection as “junk.”
Defendant Lita Solis-Cohen, the senior editor of the Maine Antique Digest (MAD), wrote “Pook’s First Toy Auction.” Allegedly relying on information from Lowe, the article said that:
Everyone in the toy world seemed to know the major consignor was Carter Reese, a longtime collector who bought toys that he loved before collectors got hung up on condition. It didn’t matter to him if the toy had replaced figures, was repainted, or if much of the paint was missing. If the toy had charm and was cheap, he bought it.
It continued that “‘[t]he consensus was that many of the toys that Pook offered brought all they were worth...’ because, in the words of Jay Lowe, ‘condition is king.”’
The court dismissed the Lanham Act claims against MAD because its speech wasn’t “commercial advertising or promotion.” Rather than (correctly) saying that MAD’s speech wasn’t commercial speech, the court ignored/was not directed to Lexmark and held that the parties had to be in competition, an element of the older “commercial advertising or promotion” that courts have generally acknowledged didn’t survive Lexmark. More persuasively, the court noted that the article was published after the auction, and thus it was implausible that any alleged falsity could have damaged the Reeses by affecting the value of the collection. The same reasoning defeated the common law unfair competition claim.
As for commercial disparagement and injurious falsehood, plaintiffs failed to plausibly plead actual malice or any actual pecuniary loss arising from the publication of the article. Regardless of whether the plaintiffs were public figures, the two torts clearly required actual malice. (This is something that is less important today because of the constitutionalization of defamation, but here it clearly matters.) They couldn’t plausibly plead disparagement and actual malice as a matter of law; the article was, if anything, critical only of P&P and its inexperience, concluding that its inclusion of too many lots in the auction may have resulted in “quite a few rarities sold under the money.”
The only references to the Reeses were that Carter bought toys “that he loved” rather than for their condition (i.e., investment potential) and that “if the toy had charm and was cheap he bought it.” The only reference to the quality of their collection is the quote from Lowe describing the sale as a “good test of the middle market” (as opposed, one would assume, to the high end of the collectible toy market).
There were no facts pled suggesting that a reasonable publisher would have been on notice of these statements’ falsity or that MAD acted with reckless disregard for truth. This also doomed the plaintiffs’ false light claims; in addition, the content of the article wouldn’t be highly offensive to reasonable people in the Reeses’ position.
The Reeses also sued Lowe,who argued that his speech to MAD recounting the events of the auction after it occurred couldn’t be commercial advertising or promotion; the court agreed (though I would caution that his speech might plausibly be commercial under some circumstances even if it wasn’t commercial with respect to the entities that reported it). Perhaps especially relevant was that his comments went to the quality of the toys sold, not the quality of toys remaining in the Reeses’ collection or the quality of his own inventory of toys. Related claims also failed.
Friday, January 29, 2016
General Mills, Inc. v. Chobani, LLC, No. 16-CV-58 (N.D.N.Y. Jan. 29, 2016)
In the digital content, the Yoplait image is presented with several ingredients identified as “artificial” in large, red font. Beneath the Yoplait image, the Chobani website describes potassium sorbate as both “an allowable chemical preservative for foods” as well as an “allowable minimum risk pesticide product.”
GM also sued Chobani, and received an almost identical preliminary injunction, accompanied by an almost identical opinion, as that in Dannon’s case, reported earlier. Yoplait Greek 100 was the other target of Chobani’s campaign. The key difference is the video ad, which “opens with a woman seated behind the wheel of a vintage convertible, examining a cup of peach Yoplait Greek 100 yogurt.” Narrator: “Yoplait Greek 100 actually uses preservatives like potassium sorbate. Potassium sorbate? Really? That stuff is used to kill bugs!” The woman scrunches her face in disgust and tosses the Yoplait, replacing it with Chobani “as the details of a roadside stand packed with fresh racks of produce become visible in the background.” Voiceover: “Now, there’s Chobani Simply 100. It’s the only 100 calorie light Greek yogurt with zero preservatives.” Happy woman consumes Chobani; camera pans to “reveal a happy child returning to the vehicle with a bag of produce in hand.” The final shot includes a hashtag: #NOBADSTUFF.
In the digital content, the Yoplait image is presented with several ingredients identified as “artificial” in large, red font. Beneath the Yoplait image, the Chobani website describes potassium sorbate as both “an allowable chemical preservative for foods” as well as an “allowable minimum risk pesticide product.”
Potassium sorbate is generally recognized as safe by the FDA. According to the U.S. Department of Agriculture, “few substances have had the kind of extensive, rigorous, long-term testing that sorbic acid and its salts [like potassium sorbate] have had. It has been found it be non-toxic even when taken in large quantities, and breaks down in the body into water and carbon dioxide.” In food products, it works to inhibit the growth of mold and yeast, and has been used widely and safely for decades in food products. It’s also found in various pesticide products classified as “Minimum Risk” by the EPA and exempted from certain regulatory requirements.
GM argued that the statement “that stuff is used to kill bugs” conveyed the literally false by necessary implication message that the potassium sorbate used in Yoplait Greek 100 rendered it unsafe to eat. Chobani argued that its claims were literally true, and the rest of its claims were puffery. In context, however, the claims were literally false. In the context of “no bad stuff” and the like, the ads painted GM’s yogurt as a safety risk because it contains potassium sorbate.
Presumption of irreparable harm from literally false comparative claim applied; even without a presumption, the inference of irreparable harm was easily made from the same circumstances, especially given the difficulties of quantifying the harm caused.
Note: After I posted about Dannon’s victory against Chobani, I got a request from a Chobani PR person to update my story with Chobani’s “statement and social media post.” In writing about legal cases, I try to confine myself to what’s in the opinion and, occasionally, the papers or other publicly accessible sources. When I read the statement/social media post, I didn’t see any disagreement with the law or the facts, so I don’t think there’s any reason for me to include Chobani’s press release.
Chobani, LLC v. Dannon Co., No. 16-CV-30 (N.D.N.Y. Jan. 29, 2016)
Chobani sued for a declaratory judgment that it wasn’t falsely advertising about Dannon; Dannon immediately filed its answer and counterclaims, and the court a bit over two weeks later granted a preliminary injunction against Chobani.
Dannon Light & Fit is the leading brand of light yogurt in the US, and Dannon’s top seller. Dannon added Light & Fit Greek as an eighty-calorie Greek nonfat yogurt. Dannon alleged that its highest proportion of light yogurt sales routinely occurs during the first three months of the year, “as this is the time when most American consumers resolve to make positive changes relating to weight loss, fitness, and overall health and diet.” It’s also the time of year when consumers experiment with new yogurt products, making marketing and sales efforts during each year’s first quarter crucial.
Chobani, meanwhile, actively seeks to differentiate itself from its competitors in the Greek yogurt market by emphasizing its commitment to “natural, non-GMO ingredients” and “environmental sustainability practices.” Its latest offering, Chobani Simply 100 Greek Yogurt, has “100 calories per serving with no preservatives or artificial sweeteners.” Its January 2016 campaign included a TV ad, a print ad, and digital/social media content, all on the same theme.
The video ad’s opening shot focuses on a cup of Dannon Light & Fit Greek Yogurt sitting on a table, which is immediately picked up by a young woman lounging in a pool chair. As she scrutinizes the ingredients label, a voiceover proclaims: “Dannon Light & Fit Greek actually uses artificial sweeteners like sucralose. Sucralose? Why? That stuff has chlorine added to it!” The woman scrunches her face in disgust and tosses away the cup of Dannon yogurt. She then chooses Chobani Simply 100 Greek Yogurt, which is sitting on a table to her right, as a swimming pool becomes visible in the background. Voiceover: “Now, there's Chobani Simply 100. It's the only 100 calorie light yogurt sweetened naturally.” “As she tears open the packaging, the Commercial pans to a wide shot of the swimming pool, where a child jumps in, making a big splash. The camera returns to the woman, now smiling contentedly, before finishing with a wide shot.” The final shot includes a hashtag: #NOBADSTUFF.
The print ad’s headline is “Did You Know Not All Yogurts Are Equally Good For You?” It continues, “[y]ou think you are doing something good for yourself and your family [b]y buying yogurt and instead of bad stuff [a]nd then you find that the bad stuff* [i]s in your yogurt!” The asterisk refers to a mouseprint footnote explaining that “bad stuff” means “Artificial Ingredients.” The text above and below the Dannon product displayed is the same as that in the ad. Further: “If you want to do healthy things, know what’s in your cup. Chobani Simply 100 is the only 100-[c]alorie Greek Yogurt without a trace of any artificial sweeteners or artificial preservatives.”
The digital content is similar. The website asks “Do You Know What’s In Your Cup? . . . . Scroll over to compare our ingredients with those in other light yogurts to see what’s really inside[.]” Ingredients of Dannon’s product are identified as “artificial,” and the site has a link to the print ad.
Sucralose, which Dannon uses, has been approved by the FDA since 1999, and Dannon provided evidence that the FDA reviewed more than 110 safety studies in connection with its use as a general purpose sweetener for food. Sucralose is a molecule with twelve carbon, nineteen hydrogen, eight oxygen, and three chlorine atoms linked together in a stable form that is safe to consume. It’s made through a process in which three atoms of chlorine are substituted for three hydrogen-oxygen groups on a sucrose molecule. This trio of chlorine atoms is known as a chloride, that is, a compound of chlorine that is bound to another element or group. Chlorides are found in many natural food sources, from table salt to cow’s milk.
Pool chlorine, by contrast, is a lay term for calcium hypochlorite, “a powerful bleach and disinfectant that is harmful if added to food or ingested.” It’s distinct chemically and practically from the chlorine atoms found in sucralose, and it’s not in, or used to manufacture, any of Dannon’s products.
First, the court ruled that Dannon sought a prohibitory injunction to return the parties to the status quo ante, rather than a mandatory injunction requiring affirmative acts by Chobani. Thus, the standard was no higher than that applied as a result of Winter/eBay.
Likely success on the merits: Chobani argued that it was literally true that sucralose had chlorine added to it, and that the other challenged messages about “good” or “bad stuff” were mere puffery. Nope. Although “no bad stuff” might be puffery if it weren’t tethered to a comparative claim about Dannon, here Chobani used that phrase in connection with statements and images that portrayed Dannon’s yogurt as a safety risk because it contains sucralose. Some of the digital content didn’t give the full comparison, but it did include a link to the full print ad.
Even if Chobani’s statements about “chlorine” were literally true, there could still be literal falsity if the clear meaning, in context, was false. (The court wasn’t so sure about literal truth. The statement that chlorine was “added to” sucralose was inaccurate, if sucralose is created by adding chlorine to a precursor compound; sucralose doesn’t exist until the chlorine is combined with the precursor, and adding additional chlorine to a stable sucralose compound would likely have no effect. Chobani’s own expert claimed that it was scientifically accurate to say “chlorine has been added to form sucralose.” A factfinder is likely to conclude that the campaign unambiguously conveys the literally false message that Dannon’s product contains sucralose and is therefore unsafe to consume. Chobani argued that sucralose’s safety was the subject of legitimate scientific debate, but the record didn’t support that claim: “the balance of record evidence reflects that sucralose is an unusually well-studied compound repeatedly determined to be safe for ordinary consumption.” While some research suggested that high doses could be toxic, that’s also true of salt and water. Further, it was “telling” that Chobani’s own products contained the same type of “chlorine”—the chloride found in all-natural, non-GMO milk, but Chobani made no mention of that fact.
Dannon was entitled to a presumption of irreparable harm given the literally false direct comparative advertising at issue. Even if such presumptions are illegitimate because “categorical” in a way precluded by eBay, Dannon still showed irreparable harm. Given the difficulty of showing how many sales or how much goodwill would be lost, it was enough to show (1) competition in the relevant market and (2) a logical causal connection between the alleged false advertising and the claimaint’s own sales position. That’s a no-brainer here.
The balance of hardships also favored relief, since Chobani has no protectable interest in advertising falsely. And barring false advertising is in the public interest, especially when it comes to serious issues like food safety.
The parties agreed on a $1 million bond, which the court accepted. The injunction blocked the existing ads, as well as similar claims related to chlorine content, healthfulness because of the presence or absence of chlorine, the presence of pool chlorine in Dannon yogurt, the danger of sucralose, the lack of safety of Dannon products, or “bad stuff” in connection with Dannon products.