One of the latest efforts by a municipality to address public health concerns by requiring warnings on certain products may be revived depending on the outcome of a recent rehearing before an 11-judge en banc panel of the Ninth Circuit. The en banc panel is reconsidering its 2017 decision blocking on First Amendment grounds a San Francisco ordinance that would require soda and other sugary drink sellers to provide a prominent health warning on billboard and other outdoor advertising. Continue Reading Ninth Circuit Reconsidering San Francisco Soda Health Warning

2018 Amendment to California’s Auto-Renewal Law Adds New Requirements For Promotional Offers and Cancellation Mechanisms

Often cited as one of the most aggressive efforts to curb automatically recurring charges to consumers, California’s Auto-Renewal Law (Cal. Bus. & Prof. Code § 17600 et seq.) has become a popular tool for both plaintiff’s lawyers and government regulators. The California Auto-Renewal Law (“ARL”) applies, with limited exceptions, to any arrangement in which a paid subscription or purchase agreement is automatically renewed until the consumer cancels. Continue Reading Subscription Services, Beware

In light of the recent uptick in litigation involving the decade-old Illinois Biometric Information Privacy Act (BIPA), the Illinois state legislature is now considering amending the Act to allow for business efficiency and to bring the Act back to what some believe to be its original intent. Continue Reading BIPA: Exemptions May Be On The Horizon For The Decade-Old Statute

On July 6, 2018, Leandra English, through her attorney via Twitter, announced she would be resigning from the Consumer Financial Protection Bureau (“CFPB”). In so doing, Ms. English is also dropping her lawsuit against the CFPB in which she challenged Mick Mulvaney’s status as the acting director and claimed that she was the true acting director. Ms. English attributed her resignation decision to President Trump’s nomination of Kathy Kraninger, a White House aide, to be the CFPB’s director.

Ms. English was previously promoted by then-Director Richard Cordray before his departure the day after last November’s Thanksgiving holiday. Later, during that holiday weekend, Ms. English filed suit to block President Trump’s appointment of Mr. Mulvaney as the CFPB’s acting director. In her suit, Ms. English argued that she was the rightful successor to Director Cordray and challenged the President’s authority to appoint Mr. Mulvaney under the Federal Vacancies Reform Act of 1998 (“FVRA”). Ms. English pursued the lawsuit even though the U.S. Department of Justice’s Office of Legal Counsel had issued a memorandum that concluded the president had the authority to appoint a temporary replacement since the statute provided him with the “exclusive means” to do so unless there was a supervening statute that specified otherwise.

The U.S. District Court for the District of Columbia denied relief to Ms. English over Mr. Mulvaney’s appointment. She appealed that decision to the D.C. Circuit, which appears poised to reject her claim due, in part, to her lack of standing. If the Senate confirms Ms. Kraninger’s nomination, the confirmation will moot Ms. English’s lawsuit. Although Ms. English’s decision may end that lawsuit, the CFPB faces other challenges, and several courts have found the agency’s statutory structure unconstitutional. For additional information, see our prior alerts on this issue here.

Executive Summary and Takeaway. User agreements for websites and apps have become increasingly prevalent in recent years, and courts have had to adapt traditional rules of contract interpretation to the new digital frontier. On June 25, 2018, the First Circuit reversed a district court decision enforcing an arbitration clause contained in the terms of service for the defendant’s smartphone app, finding that those terms were not sufficiently “conspicuous” for a user to know that he or she had agreed to be bound by them. The First Circuit’s decision continues a trend of judicial hostility to arbitration clauses, and is notable for its scrutiny of the record below: the court studied in minute detail the design and content of the registration screen containing a hyperlink to the terms of service—including the size, shape, color, font, and location of the hyperlink—and concluded that the link to the terms of service failed “to grab the user’s attention.” Businesses with similar user agreements governed by Massachusetts law or that could potentially apply to Massachusetts consumers should review their websites and/or apps to ensure that their platforms disclose any terms of use in a clear and conspicuous manner in relation to the rest of the content on the screen.

Additional Background. To use the services provided by the defendant company (the “Company”) via its smartphone app, a customer must first register with the Company by creating an account. As part of the registration process, users are shown a screen that requests their payment information and notifies them that by creating an account they are agreeing to the Company’s Terms of Service and its Privacy Policy:

The words “Terms of Service & Privacy Policy” are in a clickable box that includes a hyperlink. Upon clicking on that hyperlink, the user is directed to a screen with two other links: one to the Terms of Service, and the other to the Privacy Policy. The user can view either document by clicking on the appropriate link.

Continue Reading First Circuit Invalidates Arbitration Clause in Mobil App User Agreement

On June 21, 2018, in deciding a motion to dismiss a complaint brought the Consumer Financial Protection Bureau (“CFPB”)and the State of New York, Judge Loretta Preska of the U.S. District Court for the Southern District of New York held that the CFPB’s structure is unconstitutional.

Previously the D.C. Circuit, sitting en banc in PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018), had held that Title X of the Dodd-Frank Act, which “established the CFPB as an ‘independent bureau’ within the Federal Reserve System,” was validly enacted. Judge Preska disagreed with the panel and adopted the minority view proposed by the dissent in that case. First, she accepted Judge Brett Kavanaugh’s conclusion that the CFPB was unconstitutionally structured because it is an “independent agency that exercises substantial executive power and is headed by a single Director.” Namely, Judge Kavanaugh took issue with the CFPB’s unchecked authority vested in a single director, where history, liberty, and presidential authority dictate otherwise. Continue Reading An SDNY Dilemma: CFPB Held Unconstitutional Over Director Removal Provision

In China Agritech, Inc. v. Resh, the Supreme Court recently held that pending class actions do not toll the limitations period for successive class actions. The ruling limits plaintiffs’ ability to bring successive class actions and will increase certainty for defendants sued in class actions. Continue Reading Supreme Court Rules that Class Actions Do Not Toll the Limitations Period for Successive Class Actions

Certain restaurants, grocers, and other food establishments will soon be required to comply with the Food and Drug Administration’s (“FDA”) menu labeling rules. The FDA previously finalized menu labeling rules in connection with the Affordable Care Act to make calorie and nutritional information more available to consumers dining out. Last year, the FDA extended the compliance deadline to May 7, 2018. Continue Reading FDA Menu Labeling Rules Unfreeze

A federal judge recently held that a plaintiff cannot state a claim for false advertising under Illinois law by cherry picking statements in isolation if, on the whole, the information available to plaintiff dispelled the alleged deception. On April 6, 2018, the Northern District of Illinois dismissed a proposed class action that unsuccessfully claimed that a fast food restaurant and an Illinois franchisee had misrepresented the value of certain value meals. The proposed class action, filed in Illinois in 2016, was one of hundreds of cases filed that year alone in a recent surge in food consumer class action litigation.

According to a recent report by the U.S. Chamber Institute for Legal Reform, food marketing class actions increased from about 20 in 2008 to over 425 active cases in federal courts in 2015 and 2016. During this same two-year period, Illinois ranked as a favorite of the class action bar by hosting the fourth largest number of food class actions in federal courts and only trailed California, New York and Florida.

Background

Plaintiff filed a class action complaint against a fast food restaurant and its franchisee alleging that certain value meals were not a good value because consumers could have purchased the meal items separately at a lower cost than the bundled meal. Plaintiff claimed that marketing the meals as “values” suggests that the meals cost less than ordering each item individually. Plaintiff therefore argued that labeling such meals as value meals was false, deceptive, and misleading in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.

Judge Elaine Bucklo rejected Plaintiff’s claims. She held that, under Illinois law, consumers who simply don’t bother to compare prices easily visible at the point of purchase cannot claim they have been misled. Judge Bucklo reasoned that, although Plaintiff’s argument had “superficial appeal,” she and the consumers she sought to represent had all the information necessary to compare prices. Judge Bucklo noted that, if Plaintiff had “take[n] the time to compare prices,” she would have realized that she could have saved a few cents by purchasing the items individually.

In holding that there could be “no possibility for deception,” Judge Bucklo relied on a line of cases dismissing similar claims where plaintiff consumers received all the information they needed to make an informed purchasing decision. Judge Bucklo distinguished the fast food restaurant’s prominent display of all prices near the chain’s registers from situations where “consumers would have to consult an ingredients list or other fine print to determine whether prominent images or labels a defendant uses in connection with its product accurately reflect the product’s true nature or quality.”

Takeaway

The court’s decision is a victory for food chains and other restaurants. Restaurants and retailers should consider prominently displaying all information necessary to evaluate pricing claims in advertisements or at the point of purchase.

The battle for control of the Consumer Financial Protection Bureau (“CFPB”) raged on this Thursday during oral argument before the United States Court of Appeals for the District of Columbia Circuit in English v. Trump. All three panel judges seemed skeptical of English’s claim that she should be acting director of the CFPB, but two judges questioned whether President Trump could appoint Mulvaney as acting director when a provision in the Dodd-Frank Act states that a subsection on budgeting and financial management “may not be construed as implying … any jurisdiction or oversight over the affairs or operations of the [CFPB]” by the Office of Management and Budget (“OMB”).  Continue Reading D.C. Circuit Questions English’s Standing to Challenge CFPB Control