Settlement in False Advertising Class Action Leaves First Amendment Questions Unanswered

by Foley Hoag LLP - Trademark, Copyright & Unfair Competition
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VibramOn April 30, 2014, the plaintiffs in Bezdek v. Vibram, a class action in the District of Massachusetts, filed for court approval of a class wide settlement. The case had been brought against Vibram, the Italian manufacturer of “five finger” minimalist footwear, by consumers who alleged that the company committed false advertising when promoting health benefits of its product for which there was allegedly no scientific support. Last year, Judge Douglas Woodlock denied Vibram’s motion to dismiss, and settlement negotiations followed.

Under the settlement terms, Vibram will pay a total of $3.75 million, to be used for attorneys’ fees and damages to be paid to consumers who submit a claim. Vibram also promises to cease untruthful advertising, and to publicize the settlement in multiple publications aimed at runners. Vibram, no doubt discouraged by denial of its motion to dismiss, is entering into this settlement even though it plausibly contends that both it and reputable scientists believe, with good reason, that there are health benefits to running in shoes that lack traditional heels and arch support.

Is a Motion to Dismiss Always a Good Idea?

Clients are often eager to file a motion to dismiss because some perceive the need to demonstrate an “aggressive” early response. However, this can be a grave error, the net effect of which is often an expensive failure whose only impact is to legitimize the plaintiffs’ claims. This is because, at the motion to dismiss stage, the court must assume the alleged facts to be true and, within the realm of plausibility, make every inference in the plaintiffs’ favor.  Moreover, trial judges know that an early dismissal will be reviewed carefully on appeal.

Judge Woodlock’s decision denying Vibram’s motion to dismiss followed this pattern, repeatedly noting that Vibram’s factual contentions “may be so” but “ha[d] no place at the motion to dismiss stage.”  The judge then endorsed, “[a]t this stage in the proceedings,” the plaintiffs’ theory that purchasers of Vibram shoes who got what they expected might nonetheless be able to sue, in a class, for recovery of a purported “price premium” that Vibram supposedly garnered based on overselling the health benefits of “natural style” running.  Had Vibram waited until summary judgment, or alternatively concentrated its efforts on denial of class certification, it could have avoided this plaintiff-biased standard.

The Effects of a Premature Motion to Dismiss

Vibram’s settlement outlay probably isn’t too much more than what it would have paid to litigate the case, but the negative effect on its brand may be substantial.  That effect is hard to measure – perhaps the public is so skeptical of consumer class actions that few people care.  Certainly, many people think that class actions are mainly about lawyers’ fees (the class counsel here apparently intend to seek just under $1 million), and that assumption is arguably confirmed by the very low rate of claims actually made by consumers in these types of cases, rarely above 20%.

Perhaps settlement is expedient for Vibram after an early loss, and of course it is remunerative for class counsel. However, in my view it is regrettable. It prevents adjudication of important First Amendment issues about the limits that may be placed on a company’s assertions of product benefits that it reasonably and actually believes to be true, particularly when there is no scientific consensus or irrefutable truth.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley Hoag LLP - Trademark, Copyright & Unfair Competition | Attorney Advertising

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