• Court Awake to Plaintiff’s Deceptive Sleep-Tracking Claims Against Fitbit
• Tech Support Scammers Settle With FTC, Florida AG
• Congress Passes GMO Bill, Preempting State Laws
• More Than $4.2M Returned by FTC for “Auto Warranties”

Court Awake To Plaintiff’s Deceptive Sleep-Tracking Claims Against Fitbit

A challenge to Fitbit’s claims that certain models of its exercise monitoring device tracked users’ sleep patterns will move forward after a California federal court judge denied the company’s motion to dismiss.

In May 2015, James P. Brickman filed suit alleging that Fitbit made specific advertising claims that customers could purchase a device for an extra cost that also contained a “sleep-tracking” function that would allow them to track “how long you sleep,” “the number of times you woke up,” and “the quality of your sleep.”

Brickman’s putative class action alleged that, “In fact, the sleep-tracking function does not and cannot do these things,” and that the $30 add-on feature found in certain Fitbit models is based on technology that falls “far below an acceptable standard of accuracy to render it useful in any way for scientific purposes.”

Fitbit moved to dismiss the suit, arguing that a reasonable consumer would not have been misled by the company’s claims, which did not state that the monitoring was sophisticated or accurate.

But U.S. District Court Judge James Donato disagreed, finding that the plaintiffs had stated sufficient facts to survive a motion to dismiss.

“The number and depth of the factual allegations may not be overwhelming but [Federal Rule of Civil Procedure] 9(b) does not demand that plaintiffs research and present a detailed expose in their complaint,” the court said. “All that is required is sufficient specificity to fairly apprise the defendant of the nature of the alleged fraud and enough facts to warrant discovery and further proceedings. Plaintiffs have met these requirements.”

Brickman identified statements on Fitbit’s product packaging representing claims for sleep tracking, he alleged pre-purchase notice and reliance on those statements, and he cited to specific documents stating that in reality the devices could only measure movement and could not track sleep. He added his personal experience that the sleep tracking function was ineffective. These allegations were enough, the court said.

Fitbit’s position that the complaint failed to show that a reasonable consumer would have been misled about the sleep functionality was incorrectly timed, Judge Donato found, as the “reasonable consumer” test generally occurs at the merits stage rather than the pleading stage. “It is a ‘rare situation in which granting a motion to dismiss is appropriate,’ and nothing here makes this case one of those rare situations,” he wrote.

While the parties “clearly have sharply divergent views about sleep monitoring technology and what works and what does not,” those issues of fact “are far beyond the scope of this motion to dismiss,” the court said. “And even if Fitbit’s studies might validate the use of accelerometers for sleep monitoring, plaintiffs’ claims arise out of Fitbit’s representations on product packaging and similar sources. Consumers are not expected to do research ‘beyond misleading representations on the front of the box.’”

Characterizing the challenged statements as inactionable puffery also failed to persuade the court. Fitbit’s statements that the product will “TRACK YOUR NIGHT,” including “Hours slept,” “Times woken up,” and “Sleep quality,” “are not the kind of vague and empty taglines like ‘KNOW YOURSELF, LIVE BETTER’ that courts have treated as non-actionable,” the judge wrote. Instead, the statements challenged by the plaintiff “are the type of particularized statements that can be sued on because they make measurable claims about a product’s characteristics and functionality.”

Finally, the court declined to dismiss the breach of implied warranty of merchantability claims on the basis that the Fitbit had a multitude of other uses despite the allegedly poor functionality of a single application. “The Flex and other devices offer sleep tracking as a key feature that is central to their intended purpose of monitoring fitness and well-being,” Judge Donato determined.

To read the order in Brickman v. Fitbit, Inc., click here.

Why it matters: Although the court did not seem overwhelmed by the complaint, Judge Donato found that the allegations were sufficient to overcome the defendant’s motion to dismiss and move the case forward, noting that the test of a “reasonable consumer” is more appropriately considered during the merits stage of the process and not the pleadings stage.

Tech Support Scammers Settle With FTC, Florida AG

In their latest collaboration, the Federal Trade Commission and the Florida Attorney General reached a deal with the lead generators involved in a “massive” tech scam.

The regulators filed suit in November 2014 against defendants, Cashier Myricks and corporate entities PC Cleaner Inc., Netcom3 Global Inc., and Netcom3 Inc., alleging they offered “free trial” software that claimed to improve the security or performance of users’ computers.

But once downloaded, the software always reported problems, even when no real problems existed, that could only be cured by buying a paid version of the software ranging from $29 to $49, the FTC and Florida AG said. To “activate” the software, consumers were required to call a number that connected them with telemarketers who used high-pressure sales tactics to pitch additional unnecessary computer support services costing hundreds of dollars.

The FTC and Florida AG charged the defendants with violations of Section 5 of the Federal Trade Commission Act as well as the Florida Deceptive and Unfair Trade Practices Act.

Myricks and his related corporate defendants elected to settle, agreeing to pay $258,000 (of a suspended $29 million judgment). The stipulated consent order also prohibits the defendants from deceiving consumers when selling goods and services and requires them to perform due diligence on businesses before they generate and sell leads in the future to ensure that the companies are not misleading consumers or violating either the FTC Act or the FDUTPA.

To read the complaint and the stipulated final order in FTC v. Inbound Call Experts, click here.

Why it matters: Tech scams have been a particular target for the FTC recently, as evidenced by a deal a technology company reached with the agency after being charged with replacing a Web browser game with a program that installed apps on mobile devices without permission and a complaint filed in June by the FTC and Florida AG against defendants who allegedly deceived consumers with bogus computer scans and false claims of malware.

Congress Passes GMO Bill, Preempting State Laws

Both houses of Congress passed legislation establishing a national law on the labeling of genetically modified organisms (GMOs), sending the bill to the desk of President Barack Obama for a signature.

Senate Bill 764 would require food companies to disclose the use of GMOs for the first time. The food companies would have three options to inform consumers about the presence of genetically modified organisms: text, a symbol, or a code on the label that could be scanned by a smart device.

If enacted, the U.S. Department of Agriculture would be tasked with drafting regulations within two years that would include the amount of a bioengineered substance that may be present in food for it to require a GMO label.

Manufacturers of food contained in small packages would be provided with alternative reasonable disclosure options (including an on-package telephone number for consumers to call for additional information) as well as additional time to achieve compliance with the new law. Food derived from an animal that consumed feed produced from, containing, or consisting of a bioengineered substance would not be considered to contain GMOs.

A divided Senate approved the measure by a vote of 63 to 30, followed by approval in the House with a vote of 306 to 117. If signed by the President, the bill would also preempt any state GMO labeling statutes that have been enacted in Vermont, Connecticut and Maine.

To read SB 764, click here.

Why it matters: The controversial option of digital disclosure (critics argue that many consumers either don’t have the necessary technology or service to make use of a digital label code) will be the subject of a study by the USDA upon passage “to identify potential technological challenges that may impact whether consumers would have access to the bioengineering disclosure through electronic or digital disclosure methods.” The availability of landline telephones in stores or wireless cellular networks will be considered.

More Than $4.2M Returned By FTC For “Auto Warranties”

The Federal Trade Commission has distributed 5,790 checks totaling $4,255,209 to consumers who were deceived by a defendant’s bogus “extended auto warranties,” the agency announced.

According to the Commission, The Dolce Group Worldwide and owner Fereidoun “Fred” Khalilian (doing business as My Car Solutions) used illegal robocalls to mislead consumers into believing that the defendants were affiliated with automobile dealers and manufacturers in order to sell extended vehicle warranties.

Consumers were “bombarded” with robocalls warning that their car’s warranty was about to expire, urging them to “press one” to speak with a representative. If consumers did so, they were transferred to the defendant’s telemarketers, who identified themselves as from the “service contract department” and needed to “verify” information about their cars. Calls were then transferred to a “senior specialist,” who made claims such as “I’m from Honda,” or “I’m from your authorized Honda dealer.”

None of the purchasers ever received an actual warranty extension despite paying between $1,300 and $2,485, the FTC said, and consumers had a “nearly impossible” time trying to get their money back from the defendants.

A Florida federal court judge entered the $4.2 million judgment in 2011, further banning the defendants from telemarketing or helping others to telemarket and prohibiting them from making any misrepresentations or omissions when selling any goods or services.

After years of efforts, the FTC recovered the entire judgment from the defendants and mailed full refund checks to affected consumers.

To read the complaint and order in FTC v. Khalilian, click here.

Why it matters: Khalilian was already well known to the agency from a deceptive travel advertising case in 2001 that required him to pay $185,000 in consumer redress and banned him from travel-related telemarketing. Despite obtaining a judgment against the defendants in 2011, it took the FTC another five years to obtain the full $4.2 million in order to provide refunds to affected consumers.