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Beware of Phantom Price Markdowns: Ruling Against Hobby Lobby Highlights Risk

February 16, 2018


Over the past several years, there has been a rise in class action lawsuits against retailers for allegedly deceptive price comparison advertising. Many of these lawsuits have alleged that retailers advertised “phantom” discounts from their own “former” or “original” prices, or “retail” or “list” prices at which the products were never actually offered for sale.

As we recently reported, fashion retailer Ann Taylor recently settled for $6.1 million a false discounting class action in New York federal court alleging that prices at its outlet stores were listed as “marked down” from prices that never applied to the items.

In another recent example, last week a California federal court denied Hobby Lobby’s motion to dismiss a proposed class action lawsuit alleging the retailer used a fake marked price to create the false perception that products were being sold at a discounted rate. In Chase v. Hobby Lobby Stores, Inc.,

A New Year for Online Businesses: DOJ Ends 2017 by Withdrawing Website Accessibility Rulemaking

2017 was a busy year for retailers and businesses with an online presence, as they faced a wave of demand letters and lawsuits alleging that their websites are inaccessible to the visually impaired and/or hearing impaired in violation of Title III of the Americans With Disabilities Act of 1990 (the “ADA”).  As we have previously reported, courts across the country weighed in on the issue throughout the year.  To bring an end to 2017, the Department of Justice (“DOJ”) withdrew its proposed rulemaking for accessible websites.

In July 2010, the DOJ announced an Advanced Notice of Proposed Rulemaking related to the issuance of new regulations to cover the accessibility of websites of public accommodations.  While businesses with an online presence were waiting for those regulations to be promulgated, plaintiffs began taking the issue to the courts, resulting in a patchwork of conflicting decisions.  As we previously reported, in

Online Retailers Support Challenges to Repeal of Net Neutrality Rules

December 15, 2017


In response to the Federal Communications Commission’s vote yesterday to dismantle the net neutrality rules regulating businesses that connect consumers to the internet, online retailers have responded that they will support legal and legislative efforts to challenge the repeal.

The FCC’s action reversed the agency’s 2015 Open Internet Order, during the Obama administration, to have stronger oversight over broadband providers. That order, commonly referred to as net neutrality rules, prohibits internet service providers from blocking websites, charging more for access to certain websites, or secretly slowing, or “throttling,” website content. The federal government will also no longer regulate high-speed internet delivery as if it were a utility, like phone service.

“The FCC has effectively ended net neutrality, undoing years of hard work and bipartisan agreement,” said Bill McClellan, Vice President of Government Affairs for the Electronic Retailing Association (ERA). “It is unfortunate that the FCC has disregarded the will of

Online Retailers Beware: Court Holds Website Violates ADA Despite Lack of Physical Store

Courts across the country continue to weigh in on the issue of website accessibility. Last week, the U.S. District Court for the District of New Hampshire denied a motion to dismiss filed by online food delivery servicer Blue Apron.  In denying the motion, the court found that Blue Apron’s website is a place of public accommodation – despite the fact that Blue Apron operates only online and has no traditional brick and mortar locations. Access Now, Inc. v. Blue Apron, LLC, Case No. 17-cv-00116, Dkt. No. 46 (D. N.H. Nov. 8, 2017).

In so finding, the court relied on binding precedent in the First Circuit, and noted that other Courts of Appeals, namely the Third, Fifth, Sixth and Ninth Circuits, have held that in order to be considered a “public accommodation,” an online business must have a nexus to an actual, physical space. Id. at pp. 9-10.  This decision highlights

California Proposition 65 Actions Expected to Target Furfuryl Alcohol in Food and Beverages

The next wave of lawsuits involving California Proposition 65 and food products may allege exposure to furfuryl alcohol, a chemical commonly found in a wide variety of thermally processed foods and listed as a carcinogen under Proposition 65. The warning requirement for furfuryl alcohol took effect on September 30, 2017.  As of the date of this post, there have been no 60-day notices alleging exposure without a warning. Given the prevalence of this chemical, however, future enforcement actions seem likely.

Furfuryl alcohol forms when amino acids react with sugar in a process known as the “Maillard reaction” that gives many foods a golden brown color.  Much like acrylamide, which has been the subject of numerous 60-day notices and lawsuits, furfuryl alcohol can be found in a wide variety of foods, including:

  • baked goods
  • coffee
  • pasteurized milk
  • alcoholic beverages such as wine and beer
  • ice cream
  • juice beverages
  • toasted nuts

Ninth Circuit Blocks San Francisco’s Warnings Ordinance for Sweetened Beverages

In a decision likely to have important implications for regulation of commercial speech, the Ninth Circuit Court of Appeals has blocked a San Francisco ordinance requiring warnings about the health effects of certain sugar-sweetened beverages on fixed advertising.

In American Beverage Association v. the City and County of San Francisco, a three-judge panel held that the California Retailers Association, American Beverage Association, and the California State Outdoor Advertising Association are likely to prevail in their lawsuit challenging the ordinance as violating the First Amendment, and reversed the district court’s denial of a preliminary injunction against enforcement of the ordinance.

The ordinance, S.F. Health Code § 4200 through 4206, was enacted in June 2015 and would require the following warning on any advertisement that “identifies, promotes, or markets a Sugar-Sweetened Beverage for sale or use”:

“WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This

Tiffany’s Trademark Infringement Victory a Costly Lesson for Costco

Tiffany’s Trademark Infringement Victory a Costly Lesson for Costco

September 19, 2017

Authored by: Bryan Cave, Merrit Jones, Alex Whitworth and Nancy Franco

A federal district court has ordered Costco to pay Tiffany at least $19.4 million in a trademark infringement battle based on generic diamond engagement rings bearing the “Tiffany” name.

Judge Laura Taylor Swain in the Southern District of New York ruled that Tiffany is entitled to $11.1 million as profits for trademark infringement, plus interest, representing triple its lost profits, plus $8.25 million in punitive damages awarded by a jury last October. Judge Swain also permanently barred Costco from using “Tiffany” as a stand-alone term, without modifiers such as “setting,” “set” or “style.”  Tiffany did not assert any infringement claims based on Costco’s use of the terms “Tiffany style” and “Tiffany setting,” leaving open the question of whether these modifiers could provide a fair use defense.  Costco has appealed the ruling.

In an unsuccessful bid to dismiss the case before trial, Costco had argued that “Tiffany” has become a generic

DOJ Puts Website Accessibility Regulations on Inactive List

Retailers and other businesses that have been waiting for the Department of Justice (“DOJ”) to promulgate regulations concerning website accessibility under Title III of the Americans with Disabilities Act (the “ADA”) will now have to wait a lot longer. Eight years after the DOJ began the rulemaking process on this issue, it has now listed the rulemaking as “inactive.”

Federal agencies typically provide public notice of the regulations that are under development twice a year in the Unified Regulatory Agenda. The first Agenda was issued by the Trump Administration on July 20, 2017, and contains noteworthy changes from the last Agenda issued by the Obama Administration.

For the first time, the Agenda breaks down all agency regulatory actions into three categories: active, long-term, or inactive. While the Agenda does not define these terms, only the active and long-term matters receive a description and projected deadlines. The inactive matters appear in a

Ninth Circuit Reconsiders, Nixes Deceptive Labeling Claim Against Gerber

Baby food maker Gerber has scored a partial victory in a false labeling would be class action. The Ninth Circuit in Bruton v. Gerber Prods. Co., Case No. 15-15174, has reversed itself and thrown out a deceptive labeling claim based on the plaintiff’s lack of evidence that reasonable consumers would be deceived.

Plaintiff Natalia Bruton filed the putative class action against Gerber Product Co. alleging that labels on certain baby food products included claims about nutrient and sugar content that were impermissible under Food and Drug Administration (FDA) regulations that prohibit such claims on products intended for children less than 2 years old. Bruton did not allege that the labels were false, but that the lack of such claims on competitors’ products (in compliance with FDA regulations) made Gerber’s labels likely to mislead the public into believing that Gerber’s products were healthier.

As we reported in a previous

Website Accessibility Update: California Federal Court Denies Hobby Lobby’s Motion to Dismiss

Another website accessibility decision against a retailer, this time involving Hobby Lobby Stores, Inc. in the Central District of California, highlights the uncertainty of the law and of litigating such cases while courts continue to reach different conclusions.

In Gorecki v. Hobby Lobby Stores, Inc., Case No. 2:17-cv-01131-JFW-SK (C.D. Cal. June 15, 2017), the district court denied Hobby Lobby’s motion to dismiss and held that the retailer’s website constitutes a “public accommodation” under Title III of the Americans With Disabilities Act (“ADA”).  In so holding, the court noted that the website allows consumers to purchase products, search for store locations, view special pricing offers, obtain coupons, and purchase gift cards.

The court also relied on Department of Justice (“DOJ”) regulations requiring public accommodations to use auxiliary aids and services to “communicate effectively” with disabled customers.

This decision was issued only two days after a federal judge in the Southern

Retailer Loses ADA Website Accessibility Trial

Retailers with both physical locations and a website should take note that a United States District Court has held that Winn-Dixie violated Title III of the Americans with Disabilities Act (“ADA”) because its website was inaccessible to the visually impaired plaintiff.

The Court’s decision in Gil v. Winn-Dixie Stores, Inc., No. 16-cv-23020, Dkt. No. 63 (S.D. Fla. June 13, 2017) is significant for a number of reasons.  First, Gil appears to be the first website accessibility lawsuit to go to trial.

Second, despite the fact that Winn-Dixie does not conduct sales through its website, the Court found that the website was “heavily integrated” with the physical store locations because customers can use the website to access digital coupons, find store locations, and refill prescriptions through the website.

Third, the Court considered the cost of making Winn-Dixie’s website accessible in light of the total cost to launch and upgrade a website. While the

FDA Delays Implementing Nutrition and Supplement Facts Label Rules

The FDA has announced that it is delaying implementation of the Nutrition Facts and Supplement Facts Label and Serving Size final rules.  As we previously reported, the rules were finalized in May 2016 and initially set a general compliance date of July 26, 2018, although manufacturers with annual food sales of less than $10 million were given an additional year to comply.

The FDA did not elaborate on the new timeframe for implementation, but stated in a revised online guidance that it will provide details of the extension through a Federal Register Notice at a later time.

The rules require a revamped Nutrition Facts format that would increase the type size of certain nutrition information, require mandatory declarations for “added sugars,” Vitamin D and potassium, impose a new definition of “dietary fiber,” and revise serving sizes for certain food products.

The FDA explained that the extension was in response to

Retailers and Other Food Importers Must Ensure Food They Import Meets U.S. Safety Standards

Requirements take effect today under the FDA’s new Foreign Supplier Verification Program (FSVP), which makes retailers and other businesses that import food into the United States responsible for verifying that the food has been produced in a manner that meets applicable U.S. safety standards.

FSVP is one of the seven foundational rules of the FDA’s Food Safety Modernization Act (FSMA), the most sweeping reform of our food safety laws in more than 70 years. It aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it.

A central tenet of the FSVP is that the same preventive food safety standards should apply to all food consumed in the U.S., regardless of where the food is produced. The FSVP therefore requires that importers have a program in place to verify that their foreign suppliers are producing food in a manner that satisfies

FDA’s Delay in Implementing Calorie Labeling Law Leaves Fate Uncertain

The latest delay by the Food and Drug Administration (FDA) in implementing new calorie labeling rules gives restaurants and food retailers a little breathing room. Originally set for May 5, the agency pushed back the deadline a second time, now requiring compliance by May 2018.

Seven years ago, the menu labeling law was passed as Section 4205 of the Affordable Care Act (ACA), and the FDA has been working on the details ever since.  Its final rule requiring calorie labeling requires restaurants and “similar retail food establishments” (such as convenience stores, grocery stores, concession stands, and food takeout or delivery establishments) that are part of a chain of 20 or more locations and that sell substantially the same menu items to, among other things, post the following on menus and menu boards:

  • calorie information;
  • a succinct statement on suggested daily caloric intake; and
  • a statement that written nutrition

Ninth Circuit Revives Baby Food False Advertising Class Action

The Ninth Circuit has revived a proposed class action against Gerber, saying the mother who sued it for labeling its sugar-laden baby food as “natural” only had to prove the labels were misleading, not necessarily false. “Even technically correct labels can be misleading,” the panel wrote in an unpublished order reversing the district court’s dismissal of the putative class action.

In Bruton v. Gerber Food Products Co., Case No. 5:12-cv-02412-LHK, the plaintiff alleged that labels on certain Gerber baby food products included claims about nutrient and sugar content that were impermissible under Food and Drug Administration regulations incorporated into California law. She challenged the labels that describe the food as “excellent source,” “good source,” “as healthy as fresh,” “no added sugar” and “natural.” The products include a variety of snack foods that allegedly mislead consumers about being good sources of vitamins C and E, iron and zinc, and support “healthy

Court Dismisses Website Accessibility Case as Violating Due Process, Since DOJ Still Has Not Issued Regulations

Recent court decisions from California and Florida may provide ammunition to retailers battling claims that their websites and mobile applications are inaccessible in violation of Title III of the Americans With Disabilities Act (the “ADA”). As we reported in a previous blog post, retailers and other businesses have faced a wave of such demand letters and lawsuits.  Most of these claims settled quickly and confidentially.

However, a California district court recently granted Dominos Pizza’s motion to dismiss under the primary jurisdiction doctrine, which allows courts to stay or dismiss lawsuits pending the resolution of an issue by a government agency. In Robles v. Dominos Pizza LLC, U.S. Dist. Ct. North Dist. Cal. Case No. CV 16-06599 SJO, the court held it would violate Domino’s due process rights to hold that its website violates the ADA, because the Department of Justice still has not promulgated regulations defining website accessibility –

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