Source: https://consumer.jenner.com/upcoming-cases/
Timestamp: 2019-04-23 16:01:56+00:00

Document:
Four of the eleven judges who participated joined three special concurrences, however, explaining why they believed the majority had erred even though it reached the right result. Those three concurrences highlight a number of issues related to commercial speech for courts to address in the wake of the Supreme Court’s decision in National Institute of Family & Life Advocates v. Becerra (NIFLA), 138 S. Ct. 2361 (2018).
The American Beverage Association v. City and County of San Francisco centers on a 2015 ordinance that required ads for certain “Sugar-Sweetened Beverages” to include the following: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.” Slip op. 8.
On September 12, 2018, Judge Loretta Preska of the District Court for the Southern District of New York dismissed the New York State Attorney General’s (“NYAG”) suit against RD Legal Funding, LLC, and related entities (collectively, “RD Entities”) for allegedly defrauding individuals awaiting payouts from two separate funds—the September 11th Victim Compensation Fund of 2011 (“VCF”) and the fund arising out of the NFL Concussion Litigation Settlement Agreement (“NFL Fund”). The Court’s ruling demonstrates the potentially far-reaching implications of the ongoing debate over the constitutionality of the CFPB’s structure in terms of not only the CFPB’s enforcement actions but also those of state actors.
The lawsuit, commenced jointly by the NYAG and the Consumer Financial Protection Bureau (“CFPB”) in February 2017, alleges that the defendants’ transactions with individuals that the defendants characterized as “purchases” or “assignments” of VCF or NFL Fund payouts are substantively high-interest loans. The CFPB and the NYAG assert that the alleged loans are usurious and violate provisions of the Consumer Financial Protection Act (“CFPA”)—also known as Title X of the Dodd-Frank Act—and various New York state fraud and usury laws.
Since its inception, the Consumer Financial Protection Bureau (the “CFPB”) has faced controversy over its structure as an independent agency headed by a single director who can be removed by the President only for cause. Critics have invoked the unitary executive theory to argue that the Constitution permits an agency to enjoy independence from at-will termination by the President only if the agency is headed by multiple commissioners, directors, or board members. About six months ago, the D.C. Circuit took a step toward silencing those critics by rejecting en banc a constitutional challenge to the CFPB’s structure. But in another twist, two weeks ago news broke that the issue may remain unsettled, because in Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC, U.S. District Judge Loretta Preska of the Southern District of New York explicitly rejected the PHH majority opinion and held the CFPB’s structure to be unconstitutional. As discussed below, the new split of authority raises interesting questions going forward.
In RD Legal Funding, the defendant companies had offered cash advances to consumers waiting for settlement payouts. The CFPB and the New York Attorney General (the “NYAG”) alleged that these transactions were not sales transactions but loans and that these loans were made in violation of certain provisions of the Consumer Financial Protection Act (the “CFPA” or the “Act”). Defendants moved to dismiss the complaint on three grounds, including that the CFPB is unconstitutionally structured and therefore lacks authority to bring claims under the CFPA.
On June 21, 2018, the US Supreme Court issued its much-anticipated decision in South Dakota v. Wayfair, Inc., No. 17-494. In a 5-4 opinion by Justice Kennedy, the Court held that the Dormant Commerce Clause does not bar a state from requiring an out-of-state seller lacking in-state physical presence to collect and remit sales tax. In reaching this conclusion, the Court took the unusual step of overruling two of its own prior opinions: National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Court held that stare decisis was an insufficient basis to uphold a rule it viewed as anachronistic, particularly in light of the explosive growth of e-commerce.
Wayfair is a major victory for states, who can now collect tax from out-of-state sellers and brick-and-mortar retailers, subjecting the latter to the same tax burdens as their online competitors. Wayfair, however, does not hold that all tax regimes will pass constitutional muster. To the contrary, it holds that such regimes will be subject to traditional Dormant Commerce Clause doctrines designed to prevent undue burdens on interstate commerce.
Wayfair's issue was one the Court had decided twice before. In Bellas Hess, the Court held that states could not impose sales tax collection obligations on out-of-state sellers who relied solely on the mail and common carriers to deliver their goods because the sellers “lacked the requisite minimum contacts with the State required by both the Due Process Clause and the Commerce Clause.” In Quill, the Court overruled Bellas Hess’s due process holding, but reaffirmed Bellas Hess’s holding that the Dormant Commerce Clause forbids the imposition of sales tax collection obligations on sellers lacking an in-state physical presence. In a concurring opinion, Justice Scalia, joined by Justices Kennedy and Thomas, emphasized that his vote was based solely on stare decisis.
On Monday, June 19, the Supreme Court held 8-1 in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County that California courts lacked specific jurisdiction to entertain claims brought by plaintiffs who were not California residents, as there was an insufficient connection between the forum and the specific claims at issue.
In Bristol-Myers Squibb Co., a group of plaintiffs—86 California residents and 592 residents from other states—filed several state law claims in California Superior Court, alleging health damage caused by Plavix, a drug manufactured and sold by Bristol-Myers. The nonresident plaintiffs did not claim that they procured Plavix through any California source, nor did they claim they were injured or treated for their injuries in California. Bristol-Myers did not develop, market, manufacture, or otherwise work on Plavix in California, though the drug was sold in the state. Bristol-Myers asserted lack of personal jurisdiction, and after the Supreme Court’s decision in Daimler AG v. Bauman, the California Court of Appeal held that California courts had specific jurisdiction over the nonresidents’ claims. The California Supreme Court affirmed, applying a “sliding scale approach to specific jurisdiction.” Under that approach, “the more wide ranging the defendant’s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” The Supreme Court granted certiorari to decide whether the California courts’ exercise of jurisdiction in this case violated the Due Process Clause and subsequently reversed and remanded.
In Baker, the plaintiffs had filed a putative class action against Microsoft alleging that a defect in the Xbox 360 resulted in scratched discs. After the district court granted Microsoft’s motion to strike the plaintiffs’ class allegations, the named plaintiffs voluntarily dismissed their claims against Microsoft so that there would be a “final decision” from which they could appeal the denial of class certification. The Ninth Circuit held, inter alia, that a stipulated dismissal of an individual claim is an adverse and appealable final judgment. The Supreme Court granted certiorari to address this jurisdictional issue and subsequently reversed.
A federal court in Chicago recently dismissed a lawsuit brought by Dale Sabo, an Illinois resident seeking to represent a multi-state class of consumers who bought defendant Wellpet LLC’s pet food products. Sabo alleged that the products were falsely labeled “Made in the USA,” but instead contain vitamins and minerals sourced from outside the United States in violation of Illinois, California, New York and six other state consumer fraud statutes. Sabo alleged that he places a premium on American-made products and is willing to pay more for them. In addition, he claims that a majority of Americans feel the same way, particularly given recent reports of recalls linked to foreign-sourced ingredients.
To prevail on a consumer fraud claim, though, a plaintiff must plead actual damages, i.e., actual pecuniary loss. The court found that plaintiff failed to do so. While Sabo alleged that he “paid more for the products than they were actually worth,” the court held that he failed to provide the factual foundation “to moor his subjective estimation of the products’ worth.” Neither did he allege that products that lacked domestic-source designations were less expensive. As a result, “while he alleges that he (and other consumers) are willing to pay a premium for goods made in the United States, he stops short of alleging that he in fact paid more for defendant’s . . . American-made” products. Because the damages allegation was too speculative, the Court dismissed the lawsuit.
Sabo v. Wellpet, LLC, 2017 WL 1427057, ___ F. Supp. 3d ___ (N.D. Ill. Apr. 4, 2017).
On March 29, 2017, the United States Supreme Court held that a New York law prohibiting sellers from “impos[ing] a surcharge on a holder who elects to use a credit card” was a regulation of speech—not conduct—but the Court remanded the case to the Second Circuit to determine whether the speech regulation survives First Amendment scrutiny.
The Supreme Court recently declined to wade into a developing circuit split on the question of just what constitutes an ascertainable class under Fed. R. Civ. P. 23(b)(3) class. In the case of many consumer products, particularly those that are consumable, like food, cosmetics, and supplements, the defendant is unlikely to have records to document individual customers’ purchases, and the consumers are unlikely to have kept receipts. In such cases, some court have permitted class members to self-identify by affidavit and have held that this identification method is acceptable to create an ascertainable class.
Is the Chobani Yogurt False Advertising Dispute a Sign of Growing Food Fights?
On January 29, 2016, U.S. District Judge David Hurd in the Northern District of New York ordered Greek Yogurt maker Chobani to end its recent advertisements negatively referencing the products of its biggest competitors, Yoplait (General Mills) and Dannon.
Chobani’s series of advertisements that began running in early January 2016 advertised their “Chobani Simply 100 Greek Yogurt,” which has “100 calories per serving with no preservatives or artificial ingredients.” In one of the advertisements, a woman reads the ingredients on a cup of Yoplait Greek 100 Yogurt while a voice is heard saying, "Potassium sorbate? Really? That stuff is used to kill bugs." In another advertisement, a woman throws a container of Dannon’s Light and Fit into a trash can as a voiceover questions, "Sucralose? Why? That stuff has chlorine added to it." As found by the court, sucralose is an artificial sweetener and potassium sorbate is preservative that prevents yeast and mold growth; both are used in many food products and they have been found safe by the federal government.

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