Reese Witherspoon and Draper James in COVID-19 Giveaway Suit
Safety concerns heightened by virus-inspired Internet boom
Prêt à Despair
Draper James’ dress “giveaway” was a public relations disaster.
The Reese Witherspoon-fronted design company, perhaps inspired by a glut of fashion-related coronavirus charity, tried to cook up an offer of its own. The powers that be at Draper James announced that they would honor educators with a free dress giveaway.
According to The Cut, the Instagram announcement read like this:
“During quarantine, we see you working harder than ever to educate our children. To show our gratitude, Draper James would like to give teachers a free dress.”
What happened next made headlines: A million teachers visited the Draper James website to apply for a free dress, eventually crashing the company’s servers. But Draper James had only 250 dresses to give away. The company tried to backpedal, attempting to pivot what was read as a giveaway into a sweepstakes. It maintained that a disclaimer on the form (“offer valid while supplies last”) made it clear that it never planned to distribute a million dresses, but it was too late.
Catwalk of Shame
Chances are you bore witness to the ensuing media circus, which was especially brutal because the country’s three million teachers started comparing notes about the offer on social media. Disappointing an enormous market of underpaid and overworked heroes is bad enough, but at the height of the crisis?
With only 250 winners out of a pool of 1 million applicants, a class action suit was almost inevitable. And it came, less than a month after the original Instagram post on April 2, filed in California Superior Court, Los Angeles (the suit was later removed to federal court in the Central District of California).
The plaintiffs – we presume they’re teachers – make an interesting argument in their complaint. Because the teachers who signed up for the giveaway (or sweepstakes, or what have you) provided their personal data when they signed up for the offer, the plaintiffs say, a contract was established between the entrants and the company. Draper James breached that contract when it revealed that it intended to give away only the 250 dresses it had on hand.
The Takeaway
“[The Draper James signup page] did not disclose that according to Defendants this was a [sweepstakes],” the complaint claims, “or any of the material representations later disclosed by Defendants as to the unreasonable limitations in quantity, that Defendants intended to use these data for subsequent commercial uses, or any of the protections Defendants would employ to secure this sensitive personal information.”
The plaintiffs present the whole scheme as a cynical ploy to swell Draper James’ mailing lists while profiting from the publicity – the 30 percent discount coupon the company offered to disappointed applicants would still pull a profit for the company, they claim. They even quantify the value of the personal records to bolster their claim; at “50 cents to $5 per name in a commercial database,” the exchange with the class was unfair for “an unreasonably limited number of products.”
We’re in the early days of the suit, but we’ll be following it with interest, as should anyone who has their hands in promotional offers. Will the plaintiffs’ main conceit – that there was an exchange of value between the parties – hold water in court? Or was the offer fairly represented? Will it be enough for Draper James to simply delete the data, or will the company have to pay damages related to the value of the information?
Stay tuned.
Southern District Says the Post Is the Story
Paparazzo’s Cardi B snaps are fair use when it comes to lipstick and hurled shoes
Sole Music
At the center of this case is one of the more high-profile celebrity beefs of the past few years: Cardi B vs. Nicki Minaj.
Frankly, it’s unclear whether their conflict was generated by any real animosity between the rappers. But in 2020, who needs real anything?
All you need for a conflict today is the mysterious, spontaneous workings of internet celebrity culture. You can read a full (?) account of the back-and-forth here, with all the usual caveats about strong language and such.
But on to the story: Back in 2018, at a New York Fashion Week party, Cardi B got angry and allegedly hurled a shoe at … someone. No one seems sure who she chucked her chuck at, but it might have been Minaj. Two nights later, Tom Ford’s beauty brand announced that Cardi B was being honored with her own lipstick color (a “bold blue shade”). What do these two seemingly unrelated things have to do with each other?
Triptych
Well, hip-hop mainstay XXLMag.com covered the controversy over whether Cardi B deserved her own shade, ostensibly because of the fight with (maybe) Minaj or similar behavior in the past. At the end of the article, the site included three Instagram posts that were referenced in the text of the article, one of which featured a snapshot of Cardi B.
Cue paparazzo lawsuit in 3 … 2 … 1.
The photographer who caught the snaps, Rebecca Walsh, sued XXL Mag’s parent company in May 2019, claiming the company violated her copyright by displaying the photograph beneath the story (Walsh had registered the photo with the United States Copyright Office).
The company responded with a motion for summary judgment that summer, arguing that the inclusion of the photograph was protected under the fair use doctrine, an affirmative defense to copyright infringement. On June 1, the Southern District of New York ruled in XXL Mag’s favor, finding that its use of the photo was fair.
The Takeaway
Considering the purpose and character of XXL Mag’s use of the photo, the court favored the defense. “Defendant did not publish the Photograph simply to present its content,” the court held. “It did not use the Photograph as a generic image of Cardi B to accompany an article about Cardi B … or as an image of her at Tom Ford’s fashion show alongside an article about the fashion show … Rather, Defendant published the [Instagram post], which incidentally contained the Photograph, because the Post – or, put differently, the fact that Cardi B had disseminated the Post – was the very thing the Article was reporting on.”
The court similarly found the other three fair use factors favored the defense. In assessing the nature of the copyrighted work, the photo was judged to be, like other paparazzi photos, “further from the core of copyright protections than creative or fictional works would be” because it was less creative than factual. Moreover, regarding the portion of the image used, the court noted that “although Plaintiff complains that Defendant could have used any other image of Cardi B to accompany its article or requested a license from Plaintiff, the Post is the only image that could have accomplished XXL Mag’s journalistic objective of describing a social media story and providing readers with the relevant posts.” Finally, because “the Photograph did not appear on its own, but as part of the Post, alongside text and another image, it is implausible that Defendant’s use would compete with Plaintiff’s business or affect the market or value of her work.”
And that was that. If you’re like us, you’re down with Cardi B and eagerly await the next lawsuit that involves her in some way. Until then, take Walsh’s suit as an object lesson on the boundaries of fair use the next time you include a copyrighted picture in your work, and brands beware that this is a news publication case not a commercial speech case.
Appellate Petition Predicts TCPA Liability Tumult
DISH wants a Seventh Circuit reevaluation of agency ruling, lest business as we know it perish from the earth
Guilt Trip
Who’s to blame, and when?
It’s a question that has fascinated moralists (and bored almost everyone else) since Plato founded the Academy; this year, we have a developing story that puts a modern twist on the question of culpability – a Telephone Consumer Protection Act (TCPA) twist on it, to be precise.
The concept of agency is central to application of the TCPA. Broadly speaking, companies that hire firms to conduct TCPA-governed activities, such as telemarketing or mass texting, are not liable for the TCPA violations of their contractors. Agency – the responsibility for violations –has generally been difficult to establish for the hiring company when contractors run afoul of the TCPA. Any old agreement between the parties does not make a contractor an agent of the hiring company; the standard has generally required extensive control by the hiring company over the conduct of its contractors.
Citations
Consider the following federal appeals court decisions:
Jones v. Royal Admin. Servs., Inc. (2018), in which the Ninth Circuit held that “a seller could not be held vicariously liable for a telemarketer’s violations of the telemarketing laws, even though the marketing agreement ‘contained authorized sales and marketing methodologies with which [the telemarketer] was required to comply.’”
Hodgin v. UTC Fire & Sec. Ams. Corp. (2019), in which “the Fourth Circuit … concluded that a manufacturer could not be held liable for illegal telemarketing calls placed by its authorized dealers, even though the dealership agreements dictated the prices that the dealers could offer and imposed various other restrictions on their conduct in marketing the dealer’s product.”
Caveman Lawyers
We’re citing these decisions (and their interpretations) as background to a recent petition before the Seventh Circuit requesting a rehearing of an appellate decision en banc. It’s an uncommon request; under federal rules, such petitions are allowed when necessary to “secure or maintain uniformity of the court’s decisions” and “the proceeding involves a question of exceptional importance.”
So, what, you ask, is the underlying case that demands such a reevaluation?
In 2009, DISH was sued in Illinois’ Central District by the feds, California, Illinois, North Carolina and Ohio for violations of federal and state do-not-call laws, triggering charges under the TCPA (among a long list of other statutes). In 2017, DISH lost in a bench trial that determined the satellite television provider was liable for the violations of what DISH termed “four rogue retailers”: companies hired to execute telemarketing services. The company was hit with a $280 million penalty.
The finding was appealed. This March, a Seventh Circuit panel upheld the lower court’s decision (but vacated the penalty for recalculation).
The Takeaway
The precise dollar figure of the penalty is not what’s weighing on DISH’s mind, however. The petition aims to address “errors [that] effect a seismic shift in the rules of agency and vicarious liability under federal law.”
According to DISH, the Seventh Circuit’s original opinion (and the lower court’s decision) determined that “a single quality-control provision in a contract between two independent companies [is] sufficient to create an agency relationship” and “a principal [can] be found to have ratified an agent’s action based on imputed knowledge, rather than actual knowledge.”
Together, DISH argues, this interpretation of agency under the TCPA departs from the cases cited above – previous decisions in the Seventh Circuit and other appellate courts – and radically expands vicarious liability. And not just for the TCPA.
“On the panel’s reading,” DISH maintains, businesses in a wide range of industries from banking to hospitality will “unwittingly create an agency relationship simply by imposing basic standards of performance. And because the panel also held that ratification occurs based merely on imputed knowledge, an agent’s every action, even if prohibited, is necessarily ratified, and principal liability is limitless.”
The petition hopes to stuff this nightmare scenario back into the land of make-believe. If it is granted, everyone in the telemarketing business needs to keep a sharp eye on the Seventh Circuit’s reevaluation. Is DISH overstating the scope (or consequence) of the original court rulings? Do they present a potential liability Armageddon? Is the apocalypse actually nigh?
We’ll be there to calmly discuss it with you in either case.
All-Natural Fragrance Fisticuffs Sees NAD Split Its Vote
Glade fragrance manufacturer calls out rival Reckitt Benckiser on natural ingredient claims
Reviewing the Situation
Consider Reckitt Benckiser (RB), the British consumer goods company. The name itself is roguish. “Reckitt” suggests a city tough with a tilted bowler hat over one eye, rolling up his sleeves for a scuffle. “Benckiser” suggests a devil-may-care, you-can-kiss-my-you-know-what impertinence. If there’s a corporate name that comes closer to suggesting a lovable rogue out of Dickens, or maybe Twain, we have yet to hear of it.
RB makes a baffling array of products, many of which rank among the most familiar of brand names: Air Wick, Woolite, Mucinex, Easy-Off, KY and Calgon, to name a handful. With a roster like this, it’s no surprise that RB gets its share of attention before the National Advertising Division (NAD); we’ve covered its conflicts before, including challenges to its “#1” claims for its carpet shampoo and dishwasher detergent.
After all this time, RB is still a scrapper. In the latest round, rival S.C. Johnson & Son, owner of Glade home fragrance products, challenged the company to a showdown before NAD. The dispute involved commercials and packaging claims for RB’s Air Wick Fragrance Essential Mist and Air Wick Scented Oil products; S.C. Johnson wanted to take certain of the company’s “natural” and duration claims to the mat.
The Takeaway
NAD ruled on a number of mixed express and implied claims and split the decision. RB raised its fists triumphantly over a duration claim that its Scented Oil refills last “up to 60 days.” The company’s in-house testing passed NAD’s muster.
But RB took hits on various “natural” claims about both product lines. Here, the company made some straightforward errors. NAD noted that both the Essential Mist and Scented Oil products contained natural and synthetic components, and that the commercials conveyed “unsupported messages about ‘natural’ content.”
For the Essential Mist product, “the [ad] language ‘transforming natural essential oils into a fragrant mist,’ combined with the imagery in the commercials, reasonably conveys an unsupported message that the essential oils are the only or primary ingredient.” The advertising for the Scented Oils met a similar fate: NAD recommended the company “discontinue … ‘infused with essential oils that are 100% natural’ in its Scented Oils commercial,” or tone down the commercial’s use of “100%.”
It’s a simple note for advertisers: Don’t make gauzy claims about distinct ingredients.
For example, consider one phrase that NAD almost let stand: The phrase “Infused with Natural Essential Oils” on the Scented Oil packaging was “not misleading” on its own. But again, context proved to be king: Its appearance “on the front panel of the Scented Oils packaging … could reasonably convey a misleading message that the products contain more natural content than they do.”
FTC Pounces on Maker of Children’s App Menagerie
HyperBeard used third-party collectors to build ad profiles
If I Can’t See Them, They Won’t See Me
A year and change ago, we reported on an investigation by the Children’s Advertising Review Unit (CARU) of grotesquely named children’s app developer HyperBeard.
CARU called out one of HyperBeard’s apps, Kleptocats, for allegedly allowing third-party companies to siphon off personal data from users in (presumed) violation of the Children’s Online Privacy Protection Act.
We say “presumed” because at the time, the inquiry was completely ignored by HyperBeard and a detailed response to the accusation was not forthcoming. (Although, if a company names its app with the prefix “klepto” ….)
Predictably, CARU forwarded the investigation on to the Federal Trade Commission (FTC) – Why does anyone ignore them? – and now we have a better idea of what HyperBeard was up to.
ZOMG!
A full third of the apps promoted on the company’s website are variations on the “klepto” moniker; the FTC’s complaint cites 10 of these: Axolochi, BunnyBuns, Chichens, Clawbert, Clawberta, KleptoCats, Klep2Cats, KleptoDogs, Monkeynauts and NomNoms (the descriptions of the apps in the FTC’s complaint are humorously deadpan).
Several of them were cross promoted through a children’s book, plush toys, stickers, bookmarks and other swag, as well as interviews of company officials on children’s entertainment website YayOMG!
The Takeaway
All the while, the FTC maintained, the company was allowing third-party networks to skim the kiddies’ personal information from the apps for use in behavioral advertising – without informing the networks or seeking parental consent.
HyperBeard – along with the company’s CEO and its managing director, who were named defendants – settled the case in the usual fashion: Released the same day as the complaint, the agreement requires HyperBeard to start following the rules, destroy the data it had gathered on kids and pay $150,000 of a $4 million fine. The whole $4 million will be collected if the company is fudging its books.
In a press release that may betray a slight tone of exasperation, CARU Vice President Dona Fraser reminded companies of the difficulties that ensue when industry self-regulation is flouted:
“When companies find themselves caught in the crosshairs of an investigation by one of BBB [Better Business Bureau] National Programs’ self-regulation programs … it is not our desire to be punitive in nature, but instead to help them align their practices with established standards for the benefit of their stakeholders.”
Cooperate with CARU and the other industry regulators, folks. Why add a financial penalty when you’re going to wind up adopting their suggestions anyway?
Check Out Our Latest Blog Post
The Destruction of Privilege and Work Product Protection for Data Breach Investigations?
Attorneys play an important role in the incident response process. A skilled and experienced attorney can help organizations effectively respond to a security incident in a way that complies with obligations, protects key relationships, and prevents or mitigates financial consequences. Unfortunately, some have sold the value of involving an attorney in the incident response process as the ability to cloak an investigation in privilege and work product. So there have been surprised reactions to recent decisions finding that work product did not apply to a report written by a forensic investigation firm that had been engaged by a law firm on behalf of the organization. There are legitimate grounds for criticizing the analysis used to reach those decisions based on the facts of each case. But the decisions reveal a path for steering through the process. Read more here.
