Ninth Circuit Finds Lower Court Erred in Flushing “Flushable” Wipes False Advertising Claims

laks_alexandra_webroibal_lucia_webGuest Commentary

By Alexandra Laks and Lucía Roibal, Associates with Morrison & Foerster LLP in the firm’s San Francisco, CA office. This commentary is reposted with permission, originally appearing on December 4, 2017 in the firm’s Class Dismissed  blog.

On October 20, 2017, a unanimous Ninth Circuit panel in Davidson v. Kimberly-Clark Corp., 873 F.3d 1103 (9th Cir. 2017), resolved a circuit-wide split on injunctive standing requirements in the misbranding context.  The panel addressed whether a plaintiff allegedly deceived by false advertising has Article III standing to enjoin a false statement despite knowing the statement’s “true” meaning.  The panel answered in the affirmative, reversing the district court’s decision and reviving plaintiff’s “flushable” wipes false advertising claims.  The panel also held that plaintiff had adequately alleged that defendants’ wipes advertisements were false and that she had suffered an economic injury as a result.

Case Background

Kimberly-Clark and affiliates manufacturer pre-moistened wipes, which they market and sell as “flushable.”  Plaintiff Jennifer Davidson alleged that that this “flushable” label was false and misleading, and she sued Kimberly-Clark for violations of California consumer protection laws.  Plaintiff sought restitution and damages in the form of the price premium resulting from the “flushable” label, as well as an injunction requiring Kimberly-Clark to discontinue labeling the wipes as “flushable.”

Kimberly-Clark moved to dismiss plaintiff’s first amended complaint.  The district court granted the motion, finding that: (1) plaintiff lacked standing to seek injunctive relief because she was unlikely to purchase defendants’ flushable wipes in the future; (2) plaintiff had failed to adequately allege why the representation “flushable” on the package was false; and (3) plaintiff had failed to allege damage under the UCL, FAL, CLRA, or common law fraud causes of action because she had not alleged that she suffered any harm due to her use of the wipes.  Plaintiff appealed.

Knowledge that an Advertisement Is False Does Not Foreclose Injunctive Relief

The crux of the panel’s decision addressed the split in district court decisions as to whether a plaintiff seeking an injunction requiring a company to cease allegedly deceptive labeling can establish Article III standing once he or she understands the truth of an alleged misrepresentation.  On one side, courts would conclude that a plaintiff lacked standing because, now aware that an advertisement is false, he or she could not be misled by it in the future.  On the other side, courts would conclude that a plaintiff has standing because “the plaintiff may be unable to rely on the defendant’s representations in the future, or because the plaintiff may again purchase the mislabeled product.”

The panel resolved the split in favor of plaintiffs seeking injunctive relief, holding that a consumer who is aware that a label is falsely advertised still suffers an actual threat of future harm necessary for Article III standing because, without an injunction, he or she may be unable to rely on the labeling in the future or might reasonably, but incorrectly, believe that the product has improved.

“Either way,” the panel held, “we are ‘not persuaded that injunctive relief is never available for a consumer who learns after purchasing a product that the label is false.’”  (citation omitted).  The panel noted that its decision alleviated concerns that the opposite conclusion would effectively gut California’s consumer protection laws as an injunction is the primary form of relief under those statutes.

The First Amended Complaint Adequately Alleged Why the Term “Flushable” Was False and Alleged Sufficient Harm

The panel also reversed the district court’s holding that plaintiff failed to allege that “flushable” was false and failed to allege sufficient economic harm.  As to the former, the panel found that plaintiff had adequately alleged that the term “flushable” was false by claiming that the wipes did not “disperse and disintegrate within seconds or minutes.”  Dismissal on this basis was therefore inappropriate.  As to the latter, the panel held that plaintiff had sufficiently pled an economic injury by alleging that she was exposed to false information about a product, which caused the product to be sold at a higher price, and that absent the misrepresentation, she would not have purchased the product or would have paid less for it.  This is all that California law requires, the panel confirmed.

Takeaway

Davidson forecloses the argument that a plaintiff lacks injunctive standing because he or she now knows the truth about an allegedly false advertisement.  But the panel’s decision may be cabined to the facts:  a situation where a plaintiff expresses interest in buying a product but cannot rely on the label because the company continues to use the allegedly false statement.

But what if a plaintiff has no interest in purchasing a challenged product again or if a company voluntarily discontinues use of a challenged statement?  Davidson doesn’t speak to whether a plaintiff would have injunctive standing under these circumstances.  In fact, the Ninth Circuit is addressing whether a plaintiff has injunctive standing based on these facts in the Victor v. Bigelow and Khasin v. Bigelow appeals, which were heard on November 15, 2017.  The plaintiff in Bigelow relied heavily on Davidson, but the Bigelow panel suggested that Davidson was distinguishable.  See Victor v. Bigelow, No. 16-16639 (9th Cir. argued Nov. 15, 2017); Khasin v. Bigelow, No. 16-16641 (9th Cir. Argued Nov. 15, 2017).

Davidson nevertheless helps define the contours of injunctive standing in the misbranding context and puts to rest disagreement in the Ninth Circuit as to the fundamentals of these standing requirements.  The Ninth Circuit will continue to refine these standards in the Bigelow and similar appeals addressing different factual circumstances.  We will provide relevant updates when these decisions are released.

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