A September 7 WLF Legal Pulse commentary, Court Pours Cold Water on Unreasonable Serving-Size Class Action vs. Starbucks, discussed the US District Court for the Central District of California’s dismissal of a fraud suit alleging that Starbucks duped iced-drink consumers into purchasing a 12-ounce iced coffee/tea which, because it included ice, contained somewhat less than 12 ounces of liquid. The post noted that copycat suits were pending in federal courts in Illinois and New York. On October 14, Judge Thomas M. Durkin of the Northern District of Illinois granted Starbucks’s motion to dismiss the seven-count suit of disenchanted customer Steven Galanis. (Galanis v. Starbucks Corp.)
What Mr. Galanis, and Mr. Forouzesh before him in Forouzesh v. Starbucks Corp., in essence argue is that when purchasing a “tall” iced coffee, for which there is a 12-ounce cup, they expect to get 12 ounces of coffee plus ice. Upon receiving their drink, they, and the thousands of consumers whom they claim to represent, realize they were deceived, and that the deception made them pay more than what the product was worth. The Illinois consumer fraud law under which Galanis sued requires that the defendant’s action would mislead a reasonable consumer. Just as in Forouzesh, that requirement proved to be Mr. Galanis’s downfall.
“Galanis’s claims ask the Court to interpret Starbucks’s menus in an unreasonable fashion,” Judge Durkin explained. Referencing a screen capture of iced coffee on Starbucks’s online menu reproduced in the opinion, Judge Durkin noted that the company lists the serving size separately from the product’s contents, which specifically include “Ice” and “Brewed Coffee.” The description of the drink also references that it is coffee served “over ice.” The court added that as a matter of law, a reasonable consumer understands that “‘fluid ounces’ is a measurement of a drink’s volume, not a description of a drink’s contents.”
Featured Expert Contributor — Corporate Governance/Securities Law
Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law
Over a three-year period from 2004 to 2007, Citigroup investment banker Maher Kara disclosed confidential nonpublic information about upcoming mergers and acquisitions to his brother Michael Kara. In turn, Michael disclosed the information to his close friend Bassam Salman, who then indirectly traded in the affected stocks. When Salman was tried on charges of illegal insider trading, the government offered evidence that he knew the information originated with Maher.
The case presented two issues: First, what is the basis of liability when an insider tips information to an outsider? Second, what must the government prove in order to hold a remote tippee liable when the information is passed down a chain from tipper to tippee to a tippee of that tippee and so on? Continue reading
Featured Expert Contributor — Civil Justice/Class Actions
Frank Cruz-Alvarez, a Partner in the Miami, FL office of Shook, Hardy & Bacon L.L.P. with Ravika Rameshwar, an Associate with the firm.
On August 23. 2016, the US District Court for the Eastern District of New York dismissed a class-action suit that alleged the makers of Similac® Advance® Organic Infant Formulas fraudulently misrepresented the products as “organic,” holding that the state claims are preempted by federal law—specifically, the Organic Foods Production Act of 1990. Marentette et. al. v. Abbott Laboratories, Inc., 2016 WL 4444787 (E.D.N.Y Aug. 23, 2016). The court stated that Congress designed the OFPA to create a national standard for organic labeling that would be “disrupted, if not thwarted,” by inconsistent state and federal court decisions. Marentette, 2016 WL 4444787, at *8. Continue reading
Today, September 12, the United States Court of Appeals for the Ninth Circuit will hear oral arguments in two class-action food-labeling cases. The issues before the court are similar and the cases arise from nearly identical facts: the plaintiffs allege that the defendants’ product labels are false or misleading in violation of various state laws because they claim to be “natural.” The appeals will also be heard by the same panel—Judges Fletcher, Christen, and Friedland. In considering these two appeals, the Ninth Circuit will have a chance to set a major precedent that could either reduce the flow of food-labeling suits into California-based federal courts or open the spigot even wider.
The similarities between the two cases, Brazil v. Dole Packaged Foods, LLC and Briseno v. ConAgra, Inc., are striking. The plaintiffs filed putative class actions alleging that the defendants violated various statutory and common-law causes of action by labeling some of their products as “All Natural” or “100% Natural.” Brazil claims that Dole’s use of “All Natural” on several of its juices’ labels is false or misleading because the company added ascorbic acid (vitamin C) and citric acid. Both additives occur naturally in the juice products. Similarly, Briseno claims that ConAgra’s “100% Natural” label is false or misleading because the Wesson Oil in question contains genetically modified organisms (GMOs). Continue reading
By Trey Wassdorf, a Judge K.K. Legett Fellow at Washington Legal Foundation in the summer of 2016 who is currently a third-year student at Texas Tech University School of Law.
Recently, online video-on-demand service Hulu decided to migrate from a business model that had provided either a free ad-supported service or a subscription-based premium service. The new service is a bit complicated; there will be a $7.99 per month ad-supported service, an $11.99 per month ad-free service, and users will still be able to watch some Hulu content for free through their distribution partners, most notably Yahoo’s new Yahoo View. Hulu will also offer customers that currently use its free service a 30-day free trial to the subscription service.
Hulu’s decision is one that many digitally-based businesses, especially developers of mobile-device applications, are making. They accept that some users won’t be thrilled with having to pay for what they previously got gratis, but it’s unlikely that many businesses have contemplated the threat of litigation when making such a move. Recent litigation against app developer LogMeIn, however, should act as a wake-up call to digital businesses large and small. Continue reading
Matthew G. Kaiser, Partner, Kaiser, LeGrand & Dillon PLLC
A court case that should be on the radar screen of all business executives and white-collar criminal-defense attorneys in 2016 is United States v. Clay, in which the U.S. Court of Appeals for the Eleventh Circuit heard oral argument on October 2.
The case, about which I authored a Washington Legal Foundation Legal Backgrounder last March, implicates the fundamental question of who decides the meaning of a law—a judge or a jury? The Eleventh Circuit will also implicitly decide whether the government can cast aside more appropriate civil or administrative remedies and prosecute corporate officers operating a business in a complex regulatory environment when their interpretation of a law is objectively reasonable. Continue reading
On Friday, October 2, the U.S. Court of Appeals for the Eleventh Circuit will hear oral arguments in a closely followed criminal health-care fraud case, U.S. v. Clay. Earlier this year, Washington Legal Foundation published a Legal Backgrounder on the case and its broader ramifications, Clay v. United States: When Executives Receive Jail Time for Ordinary Business Decisions.
In Clay, federal prosecutors converted a contract dispute between a medical services provider, WellCare Health Plans, and the State of Florida Agency for Healthcare Administration (AHCA) into a criminal action. The company had interpreted a complex state law regarding the repayment of Medicaid premiums to the state in a manner that was contrary to AHCA’s interpretation. AHCA’s interpretation was not memorialized in a state regulation or guidance document. Despite this lack of guidance, federal prosecutors indicted WellCare and its executives for health care fraud. The company entered into a deferred-prosecution agreement, leaving the executives to fend for themselves. Continue reading