AD-ttorneys@law – February 2021 #2

BakerHostetler
Contact

BakerHostetler

Google Bests Consumer Class Action with Section 230 Defense

But district court leaves door open for an amended complaint

Four Americans = 12 Opinions

The tsouris invoked by Section 230 of the Communications Decency Act is a weird, bipartisan, messy legal and cultural phenomenon. Because it addresses a foundational element of online speech—immunity for platforms like social media companies for the content of posts made on their services—it rings everybody’s bells, for all sorts of reasons.

Some opposed to hate speech want to throw out Section 230 so that platforms will experience the sting of liability. Social media companies want to preserve it, so they don’t. Many of the users of these services want to keep it around as well because it is often quite easy to remain anonymous online in any case, and platforms that do not have to police content provide the best cover for spreading ideas.

Even former President Donald Trump embodies two sides of the issue. Despite being shielded from the platforms’ censorship by Section 230 for much of his early political career, he became convinced that it needed to be dismantled as social media companies began to penalize him for certain of his statements. That removing Section 230 would have driven online platforms to crack down on his speech seemed not to occur to (or discourage?) him.

Platform Guilt

But we’re not here to talk about free speech—not strictly, at least.

No, a recent class action filed in the Northern District of California in June wound up invoking Section 230 within the context of gaming and children’s marketing regulation.

The defendant was the ubiquitous Google, which was taken to the woodshed by John Coffee, Mei-Ling Montanez and her son, named by the court as “S.M.” Their complaint? That loot boxes featured in games downloaded from Google’s Play Store allegedly violate consumer protection laws.

The Pause that Refreshes

(For those who need it, here’s a quick refresher: Loot boxes are small, in-game purchases that offer in-game advantages—items and skills that better the user’s odds of dominating in the game, or new character skins that provide pleasure in or confer status on the user’s in-game appearance. Because loot boxes feature a random element—truly valuable boxes are rare—repeated purchases can take on an addictive flavor that some have alleged resembles gambling.)

And We’re Back

The class action maintains that because Google provides the platform for the games and extracts a fee for use of the payment systems consumers use to purchase the boxes, it essentially “engages in predatory practices enticing consumers, including children, to engage in gambling and similar addictive conduct in violation of this and other laws designed to protect consumers and to prohibit such practices.”

The plaintiffs alleged unlawful and unfair business practices under California’s Unfair Competition Law and unfair and deceptive acts and practices in violation of the California Consumers Legal Remedies Act.

The Takeaway

Google moved to dismiss last August, asserting that under Section 230, the company was not responsible for any of the behaviors attacked by the action.

In its order granting Google’s motion, the court applied a three-pronged test derived from an earlier Ninth Circuit decision: “Immunity from liability exists for ‘(1) a provider or user of an interactive computer service (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker (3) of information provided by another information content provider.’”

“Plaintiffs do not dispute Google’s status as an interactive computer service provider as that term is used in Section 230,” the court noted. However, “Plaintiffs’ counsel argued that Section 230 offers protection only to publishers of ‘speech,’ and that because the content published in this case is video game apps, the statute does not apply.” The court rejected this argument, concluding that “as currently framed, the complaint does not allege claims based on conduct that goes beyond Google’s role as a publisher of third-party content.”

Finally, the court accepted that the loot boxes and the underlying games were produced solely by the app manufacturers, not by Google. Therefore, all three prongs of the test were satisfied, and Google prevailed.

A Reprise?

Except … the court left the action open to amendment, stating that it was still possible for the consumers to make a viable case under the second prong. “Plaintiffs could amend their claims to show that Google’s conduct goes beyond the mere publishing of third-party content. Plaintiffs make reference to ‘Google’s predatory Loot Box scheme’ in their complaint … [and] may be able to allege more facts to support that characterization of Google’s conduct.”

So, the action hangs by a thread. The consumers have until mid-March to file an amended complaint; we’ll be watching.

‘Thoughtful’ Turkey Farm Ducks Class Action

Diestel Ranch accused of abusing birds, but plaintiff enjoys Thanksgiving Day

Conscious Dismembering?

If Gwyneth Paltrow decided to raise turkeys, she’d probably buy Diestel Turkey Ranch.

The California-based turkey farm’s advertising is filled with Paltrowian values and turns of phrase. The turkeys themselves are “thoughtfully raised” at Sonora Ranch, receive the highest level of certification from the Global Animal Partnership, and are “slow grown” in a small family farm environment without antibiotics or chemicals.

Unfortunately for Diestel, these marketing assertions were a red flag for Robert Donovan, a California resident who broke out the carving knife in a class action suit filed in the Northern District of California back in October, with an amended complaint landing in January.

Switcheroo?

Donovan leveled some serious allegations, the worst of which involved an alleged shell game run by the farm. “The vast majority of Diestel’s turkeys go to the Sonora Ranch only for slaughter and processing,” the complaint read. “Some turkeys never make it to Sonora Ranch at all and are slaughtered and processed far away from Sonora and outside California, at the conclusion of lives spent in deplorable conditions at Off-Site Facilities.”

Even worse, the suit alleged that Diestel admitted to “government regulators” that it “raise[d] several hundred chickens and turkeys [at the Sonora Ranch] for noncommercial purposes. Commercial turkeys are raised off-site and delivered by truck to the Ranch for processing.”

Among other charges, Donovan labeled the “thoughtfully raised” tag as mendacious. “Although Diestel falsely claims that its turkeys are ‘Thoughtfully Raised with plenty of fresh air and space to roam, whether indoors or outdoors,’” Donovan states, “the turkeys are rarely, if ever, allowed outside the agro-industrial barns where they spend their lives.”

Diestel moved to dismiss in late January. The company fielded the arguments one might expect: that Donovan failed to establish a class (his purchases were limited to California), lacked standing because the scope of his complaint covered products he never purchased and advertisements he never saw, had his claims preempted by the United States Department of Agriculture, and failed to allege sufficient facts for any of his claims.

The Takeaway

How did the court respond? We will never know, because the case flew the coop on the Feb. 9 when Donovan voluntarily dismissed his claims.

What actually went down? In the motion, Diestel claims that it is “no stranger to the claims and allegations set forth in Plaintiff’s FAC.” Donovan’s suit “challenges the same advertising and labeling statements based on the same theories of deception and falsity that were ultimately rejected” in an earlier case brought by the ominously named animal rights organization Direct Action Everywhere. Diestel won that case in Alameda County Superior Court in a weeklong bench trial that wrapped up in September of last year.

Why did Donovan dismiss? Did the amended complaint present arguments too close to those that lost the earlier trial? We’ll likely never know.

Epic Games Faces Contract Nullification for Kiddies' In-Game Buys

Mom-and-son’s suit against gaming giant alleges manipulation of children into virtual currency purchases

Slip Stream

Epic Games is a hitmaker. Before its blowout Fortnite franchise started devouring the free time of children and teens everywhere, Epic had a string of successes, from the Unreal series to the mobile Infinity Blade franchise to Gears of War. It’s hard to wrap your mind around it, but Epic has been churning out games for 30 years. It’s older than most video game players ever thought they would be (take it from us).

CEO and company founder Tim Sweeney was 21 when he released his first game in 1991; today, in his early 50s, he’s become an elder statesman of a respected industry. But a lawsuit filed in February by California resident Jillian Williams and her co-plaintiff, a minor known only as K.W., alleges that magister Sweeney is taking advantage of the masses of kids to which he once belonged.

Getting Height

It all comes down to in-game currency.

While the Fortnite franchise comes in free-to-play and pay-to-play flavors, the suit claims that “Epic makes most of its money from the sale of in-game content that players purchase electronically while in the game environment.” These purchases are the usual in-game swag: skins, dance moves, ammo and so forth. Players purchase the items using virtual currency, or “V-Bucks” as Epic likes to call it, which are in turn purchased with real greenbacks. These transactions are worth billions for Epic.

Williams goes on to claim that Epic “manipulates and misleads” players regarding V-Buck purchases. The currency is not refundable, she alleges, but that’s just the beginning. The price of the currency itself is continually reset to keep players from grasping the amount the currency is worth—and therefore the real-life dollar value of the purchased items themselves.

Moreover, purchasing V-Bucks is just too easy. Players “can buy V-Bucks in Fortnite without reflection and at the push of a button,” the suit alleges. “As a result, a minor can use his or her parent’s credit card or his or her own money from gift cards to make a virtually limitless number of purchases of V-Bucks, items, and game content in Fortnite.”

The Takeaway

Most important—Williams alleges that Fortnite contains no parental notifications or controls to keep kids from purchasing the currency and does not send receipts or other records to parents when transactions are completed.

Williams accuses Epic of a few run-of-the-mill violations you’d expect to see in an action like this: unlawful and unfair business acts, negligent misrepresentation, and violations of California consumer protection laws.

But the suit also attempts to compel Epic to disaffirm the contract established between K.W. and the company for his purchases of in-game items and to void the contract created between Williams and the company when K.W. made the purchases. This attempt to render the purchase contract itself invalid is a first as far as we know.

Will it work? Stay tuned for further developments—this battle is just beginning to build.

FTC Cuts Straight to the Chase in Multilayered Discount Scheme

Moves for judgment against multiple companies and officers

Prêt à Tromper

Here’s an old-fashioned collapsible spyglass of a Federal Trade Commission (FTC or Commission) lawsuit for your enjoyment.

Back in 2013, a company called EDP sold the “Discount Club” business to another company called Hornbeam Special Situations. Did the business represent a sound investment? Did the purchase open new business opportunities for Hornbeam?

No, says the FTC in a recent memo supporting summary judgment against Hornbeam shareholder Jim McCarter, who served on the company’s board.

EDP’s Discount Club was a membership program that offered “online coupons for restaurants, travel, and retail offers” but allegedly “generated steady revenues by billing consumers without authorization” and boasted “a history of legal actions, extraordinary bank return rates, and ongoing consumer complaints.”

EDP had already caught heat from the Commission, but the Hornbeam team allegedly picked up the football and kept right on running once the purchase went through. They took over “every critical component of the Discount Club scheme,” including club customer lists, customer financial information (which was used to continue the billing), employees, office space, marketing material and financial processing services.

Leaping Tower of Chutzpah

The FTC alleges that Hornbeam began peddling loan offers on websites including boomcashnow.com and cash-in-onehour.com. “Tens of thousands of consumers—scattered across the United States—submitted loan applications through the sites,” the Commission’s motion states. These customers wound up “turning over sensitive information to [Hornbeam], including their bank account numbers.”

Hornbeam took this data, sold off the best loan prospects to a third party and then redirected the remaining customers—those that “third-party lenders found too worthless to purchase”—to Discount Club application websites, “often pre-filling some, or all, of the data fields, and charging consumers for memberships without authorization.”

Over a three-year period, more than “90,420 consumers fell victim to the Hornbeam Defendants, losing at least $16,220,921,” the motion states.

The Takeaway

Read the FTC’s motion for more details, including McCarter’s alleged hijinks—for instance, the time when he (allegedly) noted to colleagues that “the Company was ‘[n]ot really selling anything’ and that the Discount Club scheme was nothing more than ‘a shitty coupon product’ that consumers did not use.” There’s more eyebrow-raising behavior that led to a flood of consumer complaints detailed in the motion.

Five similar documents were filed by the FTC on Feb. 8, the same day as the McCarter motion, covering 10 other companies and individuals.

If there’s a takeaway here, it’s not about the underlying behaviors but rather is for anyone who might be tempted by a potential acquisition’s ridiculously high return rates. If you’re buying new leads or a whole new lead-generation business, do what McCarter and the Hornbeam team didn’t do (and, if the allegations are true, didn’t want to do in any case)—look under the hood and reject prospects with extremely high return and complaint rates.

Kingsford Products Latest Target of Nature Bar

Leading charcoal maker attacked for “cleaner burn” claims

The New World

If you’ve ever yearned for a primer on the origin of charcoal—and who among us hasn’t? —check out New York consumer Timothy Lee’s class action suit against Kingsford Products Co., filed this month in New York’s Southern District.

We’re sure there are barbecue aficionados out there (read “obsessive maniacs”) who are fully aware of the difference between “lump” charcoal and charcoal briquettes; we happened to *not* know the difference. Spare the eye-rolling hate mail, please.

Here’s the deal: Lump charcoal, according to Lee, was invented by Native Americans, who would “slowly [burn] wood pieces in the absence of oxygen until all the natural chemicals, sap and moisture are removed.” To complete this bucolic origin story, Lee claims that the use of lump charcoal was taught to the Pilgrims on the first Thanksgiving.

Enter the Villain

The barbeque scene was complicated by the arrival of charcoal briquettes, popularized by Henry Ford (cue the silent movie bad-guy music). These briquettes, in contrast to lump charcoal, “typically contain additives like starch, limestone, sodium nitrate, and sodium tetraborate pentahydrate (borax).”

“A growing number” of consumers, Lee asserts, prefer lump charcoal because it is more likely to be natural and be free of additives and fillers. And here’s where the lawsuit starts.

Kingsford uses several tags on the packaging for its Hardwood Briquets product that Lee takes exception to, including, according to the complaint, “100% Natural Hardwood Briquets” and “cleaner burn.” These claims are accompanied by a green flame icon that gives buyers the mistaken “impression the Product is beneficial, or less harmful to the environment, compared to other fire sources such as propane gas and lump charcoal.” What’s more, there’s a qualifying asterisk on the claim noting that the Hardwood Briquets meet the claims when “compared to Kingsford Original Charcoal.”

The Takeaway

Lee alleges violations of New York State’s Deceptive Acts or Practices Law, breach of express warranty, breaches of the implied warranty of merchantability and the Magnuson Moss Warranty Act, negligent misrepresentation, fraud, and unjust enrichment.

These claims seemed familiar to us, so we looked a little closer and noticed that Lee’s counsel is the same as the team that’s been bringing a slew of “natural” product claims against Mars Wrigley for its Dove Bars and chocolate-covered berries (see here, here and here).

Are there more “natural” lawsuits in Kingsford’s future? These natural lawsuits seem to grow on trees, with no end in sight and creative plaintiffs expanding their scope to products beyond foods and cosmetics.

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.

© BakerHostetler | Attorney Advertising

Written by:

BakerHostetler
Contact
more
less

BakerHostetler on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.