Clarifying Standing In False Ad Cases At 9th Circ.

04 June 2018 Law360 Publication
Author(s): Erik K. Swanholt Kendall E. Waters

Recent decisions by and within the Ninth Circuit elucidate the contours of Article III standing when plaintiffs seek injunctive relief in false advertising cases despite already having awareness of the claimed false advertising of the product. Although these decisions present a threat of coaching plaintiffs to navigate through potential standing pitfalls in federal courts within the Ninth Circuit, they also offer insights for companies defending against false advertisement or labeling class action claims.

Davidson: An Inability to Rely on Product Labeling Prospectively Amounts to Harm Sufficient to Confer Standing

In October 2017, the Ninth Circuit addressed for the first time the issue of whether a plaintiff can be deceived in the future by facts known presently to be false or misleading. In Davidson v. Kimberly-Clark Corporation,[1] or Davidson I, a unanimous three-judge panel reversed and remanded the trial court’s dismissal of a putative class action complaint that alleged Kimberly-Clark falsely advertised cleaning wipes as “flushable.” In addressing “the most challenging issue in this case,” the appellate panel concluded that the plaintiff “properly alleged that she faces a threat of imminent or actual harm by not being able to rely on Kimberly-Clark's labels in the future, and that this harm is sufficient to confer standing to seek injunctive relief.”[2] Acknowledging that “district courts applying California law have split dramatically on this issue,” the panel stated that “a previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase, because the consumer may suffer an ‘actual and imminent, not conjectural or hypothetical’ threat of future harm.”[3]

The Ninth Circuit’s Davidson I opinion discussed two possible scenarios where the threat of future harm could be sufficient for standing, including the “consumer’s plausible allegations that she will be unable to rely on the product’s advertising or labeling in the future, and so will not purchase the product although she would like to” or that “she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the product was improved.”[4] Importantly, both of these scenarios assume the defendant’s continued use of the complained-of labels as part of the plaintiff’s ongoing harm. Taking as true Davidson’s allegations that she desired to “purchase wipes that are suitable for disposal in a household toilet” and that she “would purchase truly flushable wipes manufactured by” Kimberly-Clark if available, the panel reversed the district court’s dismissal of this claim and remanded the case.[5]

The court noted that, while its conclusion was not based on this consideration, its Davidson I holding alleviates the possibility of a “perpetual loop” whereby a defendant removes the plaintiff’s state court complaint to federal court only to have state law claims dismissed for lack of Article III’s standing requirements, although those claims otherwise would be justiciable in state court. Further, the panel recognized that whether Davidson’s claims survived the motion to dismiss phase was a close question, signaling that plaintiffs in comparable cases will need to offer specific, relevant allegations to survive a motion to dismiss for lack of standing and, later in the case, support those allegations with admissible evidence.

Kimberly-Clark petitioned the Ninth Circuit to rehear the case en banc, which was supported by the National Association of Manufacturers as amicus. Amici argued that the “future harm alleged here self-evidently cannot be described as ‘actual’ or ‘imminent’” because — despite the plaintiff’s stated desire to purchase Kimberly-Clark's flushable wipes in the future — the plaintiff also claims that “the wipes currently on the market are not the kind of ‘flushable’ product she wants.”[6] In other words, there is no risk of future harm because there is no Kimberly-Clark product for Davidson to buy.

Denying the Kimberly-Clark petition, the Ninth Circuit issued an order amending its prior opinion and finessing the requisites for demonstrating an intent to repurchase. In Davidson v. Kimberly-Clark Corporation,[7] or Davidson II, the court affirmed that "misled consumers may properly allege a threat of imminent or actual harm sufficient to confer standing to seek injunctive relief,”[8] but circumscribed its practical application. The Ninth Circuit juxtaposed decisions from other circuits where consumers lacked standing and explained that those cases were factually distinguishable from the present case [because i]n none of these cases did the plaintiffs sufficiently allege their intention to repurchase the product at issue as Davidson does here.”[9] Thus, while Ninth Circuit law may permit such standing, the court limited the potentially broad result in Davidson II to the facts at hand and clarified that meeting that threshold is not to be expected. Davidson II also alleviated concerns that an inability to pursue injunctive relief at the federal level will gut consumer protection laws, noting that state courts are available and expressing skepticism toward a perpetual removal, remand and dismissal loop. Taken as a whole, the amended opinion tempers Davidson I by showing that an intent to repurchase must be properly alleged through sufficient facts and is insufficient on its own to confer standing.

To be sure, the Ninth Circuit made clear that the remaining tenants of Article III’s standing requirements must also be satisfied. The court found that “[a]t this motion to dismiss stage, based on Davidson's allegations that she would purchase truly flushable wipes manufactured by Kimberly-Clark if it were possible, her injury is concrete — it is real and not merely abstract”[10] and that injury was particularized because Davidson, a direct consumer, would be harmed in a personal and individual way. Similarly, her injuries were redressable because a favorable ruling — requiring Kimberly-Clark’s representations on their wipe products to be accurate — would allow Davidson to reasonably rely on the product. Thus, Davidson II underscores that an intent to repurchase alone is insufficient to confer standing.

Bigelow: Requisite Intent to Repurchase Required to Show Harm and Establish Injunctive Standing

Two months after its Davidson opinion, the Ninth Circuit was at it again when it further refined the injunctive standing requirements in the misbranding context in Victor v. R.C. Bigelow Inc. (2017)[11] affirming Victor v. R.C. Bigelow Inc. (2014),[12] and Khasin v. R. C. Bigelow Inc. (2016)[13]. In Bigelow, the plaintiffs alleged that the defendant’s family-run tea company mislabeled its black tea by printing the phrase “healthful antioxidants” on its products’ labels. In an unpublished Dec. 20, 2017, opinion, a three-judge panel for the Ninth Circuit upheld the district court’s grant of summary judgment for the defendant based on a lack of Article III standing.

The Ninth Circuit in Bigelow focused again on the potential for future harm. Unlike in Davidson where the plaintiff alleged that she would purchase the defendant’s wipes again, the Bigelow standing challenge was evaluated under the summary judgment record, and both Bigelow plaintiffs had conceded in their depositions that they would not purchase Bigelow tea again, even with updated labeling. Instead, the plaintiffs testified that they would only purchase Bigelow tea again following the grant of an injunction. As such, the Ninth Circuit panel reasoned that “[b]ecause they will not consider buying even properly labeled tea until they receive an injunction,” the plaintiffs would “not be harmed by wondering if the tea is still mislabeled or by buying the tea without knowing if it is still mislabeled.”[14]

Davidson and Bigelow show the eye of the needle that must be threaded by plaintiffs seeking injunctive relief in false labeling cases within the Ninth Circuit: the ability to offer relevant “intent to purchase” allegations or testimony. Davidson held that a plaintiff’s knowledge of an advertisement’s falsity does not divest a federal court of Article III standing so long as the plaintiff alleges a present intent or desire to repurchase the challenged product in the future.[15] Bigelow illustrates the converse: The absence of a present intent to repurchase the product is fatal to a plaintiff's Article III standing to seek injunctive relief. Further, Bigelow’s outcome juxtaposes how the standing issue plays out in a summary judgment context as compared to the motion to dismiss posture in Davidson. Although a standing challenge may not succeed at the pleading stage of a case, when the court accepts all well-pleaded factual allegations as true, the outcome may be very different on summary judgment, when the allegations are put to their proof.

Bruton v. Gerber Products Company: Removal of Challenged Labeling Eliminates Ongoing or Future Harm Required for Injunctive Standing

A February 2018 decision by a federal court judge for the Northern District of California offers defendants a path to defeat a plaintiff’s standing for injunctive relief in false advertising cases. In Bruton v. Gerber Products Company,[16] the plaintiff alleged that defendant Gerber’s baby food contained unlawful and deceptive nutrient content and “no-sugar added” claims in violation of California’s consumer protection statutes. The plaintiff challenged Gerber’s content claims because, among other asserted grounds, the U.S. Food and Drug Administration did not authorize nutrient content claims on foods intended for children under the age of two.

After the matter had gone up to the Ninth Circuit and was remanded on certain class certification issues, the district court concluded that where the allegedly misleading labels are no longer used on the defendant’s products, a plaintiff suffers no threat of ongoing or future harm and therefore lacks standing to pursue injunctive relief. In Bruton, Gerber ceased using the challenged label statements entirely on all of its products “years ago,” eviscerating the plaintiff’s assertion that there was a threat of ongoing or future harm. The district court’s opinion contrasted Davidson, where Kimberly-Clark continued to use the allegedly misleading term “flushable.” In Bruton, Gerber had changed its labeling to remove the alleged inaccuracies, such as for example, the claim that its baby food was “As Healthy As Fresh.” Thus, because “the harm Bruton seeks to enjoin — Gerber’s mislabeling of its baby food — no longer exists,” there is no threat of repeated injury and, accordingly, no standing to pursue injunctive relief.[17]

Article III Standing Issues in Other Statutory Contexts: Real Risk of Harm to Concrete Interests That the Statute Was Designed to Protect

The “lack of harm” calculus in false advertising cases has permeated standing analyses for federal statutory claims recently, such as in cases alleging claims under the Fair Credit Reporting Act, or FCRA, and the Fair and Accurate Credit Transaction Act, or FACTA. In the wake of its most recent Robins v. Spokeo opinion,[18] the Ninth Circuit has analyzed Article III standing in such statutory cases by analyzing whether (1) “the statutory provisions at issue were established to protect his concrete interests (as opposed to purely procedural rights);” and, if so (2) whether “the specific procedural violations alleged in the case actually harm, or present a material risk of harm to, such interests.” In Spokeo, the Ninth Circuit reasoned that because the FCRA was enacted to protect consumers from inaccurately transmitted information in consumer reports, the plaintiff Thomas Robins had a concrete interest satisfying the first prong. The court explained that consideration of the second prong is a fact-specific inquiry that “requires some examination of the nature of the specific alleged reporting inaccuracies to ensure that they raise a real risk of harm to the concrete interests that FCRA protects.”[19] In that case, Robins alleged various inaccuracies related to age, marital status, wealth, degrees and employment. Although these claimed mischaracterizations were “inaccurately flattering” (e.g., because they generally presented Robins as wealthier and more educated than he was), the Ninth Circuit held that there was a risk of real harm to the consumer, such as if a prospective employer doubted the veracity of a job application or found him to be overqualified.[20] Similarly, in Davidson the Ninth Circuit focused on the potential for future harm based on allegedly inaccurate information.

However, other courts have determined that a plaintiff’s FCRA claims can fail where the plaintiff did not demonstrate an appreciable risk of harm necessary for Article III standing. For example, a California federal court granted dismissal of a putative class action against Lyft where the plaintiff alleged he was denied a disclosure of his rights to request credit and background information in violation of the FCRA.[21] Because the plaintiff did not allege that he “was confused about his rights or that he would not have consented to the background checks had he understood his rights,” or “that he was harmed by the background check in any way,” dismissal for lack of standing was appropriate.

The Ninth Circuit recently dismissed FACTA cases on lack of standing grounds where the plaintiffs attempted to rest on mere alleged procedural violations. For example, where credit card expiration dates were printed on a receipt in violation of FACTA but there was no corresponding allegation that anyone else would or did receive copies of the receipt — as was the case in Bassett v. ABM Parking Services Inc.[22] — there is no requisite risk of harm to confer standing. The nature of the printed information coupled with the lack of risk that it was disseminated did not constitute an actual or imminent harm. Similarly, in Noble, et al v. Nevada Checker Cab Corporation, et al,[23] the Ninth Circuit held that receipts printed with the first digit and last four digits of card numbers were not a concrete injury sufficient to support Article III standing. As in Bassett, Noble’s allegations of a mere procedural violation did not create actual harm or a risk of future harm. The court held that FACTA did not prohibit card issuer identification on receipts, which can be deduced from a card’s first digit, and therefore did not create a threat of potential identity theft. Like Bruton, there was no ongoing harmful behavior or risk of harm to enjoin.

Looking Forward: Proactive Mitigation and Selectively Raising Standing Issues

As the federal courts continue to develop and refine the requirements for Article III standing for injunctive relief claims in the false advertising context, defendants should find some solace in the recent focus on the presence or absence of actual or imminent harm. Notwithstanding the intellectual gymnastics in Davidson and Bigelow, the courts have consistently held that when there is no threat of being misled in the future by inaccurate advertisement or labeling, the plaintiff will not have standing for injunctive relief. The absence of harm can be supported by admissions that the plaintiff does not intend to use the product again or by a change in the labeling eliminating the alleged inaccuracies and the risk of future harm. Courts may be receptive to narrowing discovery to this type of threshold issue needed to determine whether there is jurisdiction. Whether the requirement of a future intent to purchase will lead to improper “coaching” of plaintiffs remains to be seen, and would be difficult to prove in any event, but the long-muddled state of Ninth Circuit law with respect to injunctive standing is now clearer.

More broadly, a court's willingness to find that standing exists turns on the facts of the case, the purpose of the underlying law or statute, and the nature of the claimed violation. Although the Ninth Circuit has demonstrated a willingness to find standing in a wide array of cases, it has been circumspect about doing so if the harm alleged is too attenuated. Mere technical violations are insufficient to support standing and alleged harm must relate back to the statute’s intent. Where plaintiffs fail to allege or testify to actual or imminent present or future harm, defendants can and should mount Article III standing challenges.

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[1] Davidson v. Kimberly-Clark Corporation, 873 F.3d 1103 (9th Cir. 2017).

[2] Davidson, 873 F.3d at 1113.

[3] 1115.

[4] Id.

[5] 1108.

[6] Brief for the Chamber of Commerce of the United States, et al. as Amici Curiae Supporting Appellees at 6-7,Davidson v. Kimberly-Clark Corporation, 873 F.3d 1103 (9th Cir. 2017) (No. 15-16173).

[7] Davidson v. Kimberly-Clark Corp., No. 15-16173, 2018 U.S. App. LEXIS 12204, at *5 (9th Cir. May 9, 2018).

[8] Davidson v. Kimberly-Clark Corp., 2018 U.S. App. LEXIS 12204, at *4.

[9] *26 n.7 (comparing cases from Second, Third and Seventh Circuit); see also Conrad v. Boiron Inc., 869 F.3d 536 (7th Cir. 2017) (holding that consumer putative class action against the manufacturer of a homeopathic flu remedy could not seek injunctive relief); Nicosia v. Inc., 834 F.3d 220 (2d Cir. 2016) (holding consumer class for weight-loss product from an online retailer lacked standing to pursue injunctive relief); McNair v. Synapse Grp. Inc., 672 F.3d 213 (3d Cir. 2012) (holding that former customers lacked standing to pursue injunctive relief against marketer of magazine subscriptions).

[10] Davidson v. Kimberly-Clark Corp., 2018 U.S. App. LEXIS 12204, at *29.

[11] Victor v. R.C. Bigelow Inc., 708 F. App'x 333 (9th Cir. 2017).

[12] Victor v. R.C. Bigelow Inc.,No. 13-cv-02976-WHO, 2014 U.S. Dist. LEXIS 34550 (N.D. Cal. March 14, 2014).

[13] Khasin v. R. C. Bigelow Inc., 2016 U.S. Dist. LEXIS 115850 (N.D. Cal., Aug. 29, 2016).

[14] Victor, 708 F. App'x at 334.

[15] Aware of the potential unintended consequences of these rulings, the Ninth Circuit warned that “coaching witnesses [to falsely testify that they would purchase the product again] would be a serious violation of professional standards and could amount to criminal conduct.” Id. at 334 n.2.

[16] Bruton v. Gerber Products Company, No. 12-CV-02412-LHK, 2018 U.S. Dist. LEXIS 30814, at *1 (N.D. Cal. Feb. 13, 2018).

[17] Bruton, 2018 U.S. Dist. LEXIS 30814, at *14.

[18] Robins v. Spokeo, Inc., 867 F.3d 1108, 1113 (9th Cir. 2017) (deciding issue on remand from Spokeo Inc. v. Robins, 136 S. Ct. 1540 (2016)),cert. denied sub nom., Spokeo Inc. v. Robins, 138 S. Ct. 931 (2018).

[19] Robins, 867 F.3d at 1116.

[20] See Robins, 867 F.3d at 1114.

[21] Nokchan v. Lyft Inc., 2016 U.S. Dist. LEXIS 138582, at *1 (N.D. Cal. Oct. 5, 2016).

[22] Bassett v. ABM Parking Services Inc., 883 F.3d 776, 777 (9th Cir. 2018).

[23] Noble, et al v. Nevada Checker Cab Corporation, et al, No. 16-16573, 2018 U.S. App. LEXIS 5963, at *1 (9th Cir. March 9, 2018).

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