AD-ttorneys@law – September 2020 #2

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Hemp and CBD Supplements: Free at Last?

Bipartisan sponsors introduce House bill to clear marketing haze

It’s a Mouthful

Hemp-derived and CBD product manufacturers are feeling hopeful.

HR 8179, the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2020 (HHDCBDCPMSA2020), promises to lift the cloud of uncertainty surrounding hemp- and CBD-derived dietary supplements. Individual state regulations combined with a weak and uncertain federal regulatory regime have kept manufacturers and marketers on their toes, and this legislation should bring some much-needed relief.

The HHDCBDCPMSA2020—yes, you read that right—would “make hemp, cannabidiol derived from hemp, and any other ingredient derived from hemp lawful for use under the Federal Food, Drug, and Cosmetic Act as a dietary ingredient in a dietary supplement, and for other purposes.”

Bottom Line

Proving once again that hemp brings people together, the bill is a rare expression of bipartisan camaraderie: It was sponsored by representative Kurt Schrader, Democrat of Oregon, and representative Morgan Griffith, Republican of Virginia. We have a good bead on how the folks in Oregon feel about hemp-derived products, but why do they matter to the citizens of Virginia?

“Hemp was historically an important crop for Virginia farmers, and dietary supplements made from it do not possess dangerous addictive qualities,” representative Morgan shared in a release. “Nevertheless, the current state of regulation creates confusion about its legal uses. I joined this bipartisan bill to provide certainty for hemp farmers that their crop may find legal uses.”

Ah yes, the most American of common denominators: business.

The Takeaway

Dietary supplement industry associations rushed to approve: the American Herbal Products Association, Consumer Healthcare Products Association, Council for Responsible Nutrition and United Natural Products Alliance penned a letter praising the legislation for “[allowing] hemp and hemp derived CBD to be legally marketed in dietary supplements so long as manufacturers comply with new dietary ingredient requirements and other Food and Drug Act dietary supplement policies.”

Basically, hemp and CBD oils will become one set of ingredients among others, subject to the consumer protections offered by the Food and Drug Administration.

We’ll pay close attention to the progress of the legislation, but note that it leaves one burning question unanswered: Why couldn’t Schrader and Morgan have come up with a better acronym for this bill?

The Dead Have Risen, and They’re Retaining Counsel

New York Legislature passes law that extends right to privacy beyond the grave

Can’t Take It with You

In our second legislative bulletin in this issue, we’re taking a look at a bill recently passed by the New York State Assembly: S05959, which extends publicity and privacy rights beyond the grave.

As with many topics of conflict and controversy, state laws defining publicity rights vary among jurisdictions from nonexistent and quite strong. But right-to-publicity laws arising from the two major epicenters for entertainment in the United States—California and New York—have elevated consequences.

S05959 takes a significant leap forward for New York, extending protections for 40 years after death to “any deceased natural person domiciled in this state at the time of death whose name, voice, signature, photograph, or likeness has commercial value at the time of his or her death, or because of his or her death….”

So while current law protects everyone’s rights to publicity during their life, only certain people—famous people, or people who gained notoriety because of their death—will gain after-death protection.

The Takeaway

The bill contains a few other features of note. Unlike current law, there are specific criteria covering exemptions (the courts decide on exemptions for those of us unfortunate enough to be living). The rights to the deceased’s publicity can be transferred, protecting estate income.

Most interesting is the wording around “digital replica”—“a newly created, original, computer-generated, electronic performance by an individual in a separate and newly created, original expressive sound recording or audiovisual work in which the individual did not actually perform, that is so realistic that a reasonable observer would believe it is a performance by the individual being portrayed and no other individual.” Such replicas are not permitted “if the use is likely to deceive the public into thinking it was authorized by” the living rights holders.

More to come when, and if, this law is signed and put into practice.

Wasabi Pea Case Cools Down After Hot Start

Misrepresentation arguments undermined by general industry practices

Melting Pot

After nearly 300 years of American cuisine, it shouldn’t surprise you—the green stuff that coats wasabi peas isn’t made from wasabi. The coating consists of a much cheaper horseradish paste that has been tinted with green food coloring.

This sort of revelation bores the average American. They’ve heard the old “Chinese food in America isn’t the same as real Chinese food” saw repeated endlessly, and still they buy chop suey.

So, go ahead and add wasabi peas to the list of food Americans have barbarically refashioned: fettucine Alfredo, English breakfast tea, pad see ew and General Tso’s chicken (there’s even a documentary about this last entry).

Americans will shrug off the purity test and slurp up the next dish.

Said Too Much

So although deceptive wasabi coating was the central preoccupation of Yothers et al. v. JFC International, Inc. et al., the case was a thoroughly American lawsuit. The defendants, JFC and Hapi Products, are both California-based companies; the plaintiffs are consumers from California and New York.

At issue was a 2019 purchase by the plaintiffs of wasabi peas that were coated with the horseradish substitute—a practice that, by the plaintiffs’ own admission, is used to create “95–99% of ‘wasabi’ products sold in North America.” Wasabi, it turns out, will run you a whopping $110-plus per pound, while horseradish only costs around $6.

But the plaintiffs’ case stumbled on that very admission. The product packaging declared that the peas were “wasabi” peas, but the ingredient list was up front about horseradish being the prime ingredient.

Fool Me Once…

In a recent order granting JFC and Hapi’s motion to dismiss, California’s Northern District Court agreed with the defendants that the plaintiffs lacked standing to sue. Because they understood that most wasabi products sold in the United States use horseradish, the plaintiffs could not establish misrepresentation by the manufacturers.

Additionally, because the price of their purchase was in the same ballpark as that of similar products, the court maintained that “it is unclear how plaintiffs ‘paid a premium’ when the product they bought was not priced differently from other similar products.”

The plaintiffs’ request for injunctive relief failed because they would no longer be able to argue that the packaging was unreliable. “Plaintiffs now know, even if they did not when they purchased defendants’ product, that 95–99% of wasabi products sold in North America do not actually contain wasabi,” the court wrote. “They now can rely on labelling, in particular ingredient lists, to know whether the products they are purchasing fall into that vast majority.

The Takeaway

There are more lessons here for plaintiffs’ than for defendants’ counsel—the consumers failed to prevent evidence, making it difficult for the court to find in their favor.

But let’s say this: Perhaps companies that offer products with names that scrape uncomfortably against their own ingredient lists should adhere to industry marketing conventions. You might get sued, but you just might win.

FDA Fast-Track Clearance Hides Risks

Electrical therapy company that missed one detail is now mailing out checks

Stare into the Light…

We’re constantly catching news of class action cases and regulatory actions involving science-fictiony treatments sold to consumers at a premium. Recently there was the baseball cap with lasers on the inside, which supposedly helped stimulate hair growth. And we covered the Willow Curve, a sleek low-level laser therapy device designed for application to multiple body parts that are often subject to chronic pain.

There’s something about shooting light and electricity at the body that captures the imagination—particularly the imaginations of people with chronic or untreatable pain. They’ll try anything, even if it sounds like it’s a plot device straight out of an Ed Wood movie.

But…

Approval in the Shadows

There is one “out there” pain therapy that shows some promise. Transcutaneous electrical nerve stimulation, or TENS, uses electrical currents applied by a pad or other device placed over the painful area to provide relief from discomfort.

The scientific reviews are mixed, to be sure, but some are positive. For that reason, and because of the relatively low risk posed by such devices to the user, the Food and Drug Administration (FDA) has classified TENS devices as “class II” devices, which require “a less stringent regulatory review, known as the 510(k) regulatory pathway, that does not require clinical data demonstrating efficacy or safety.”

Additionally, under the 510(k) path, marketers of new devices “need only demonstrate that [their product] is substantially equivalent to an existing device … that is already legally marketed in the United States.”

Locus Focus

Was that easier path on the mind of NeuroMetrix CEO Shai Gozani when he claimed that the FDA “cleared” his Quell device?

Possibly. Quell is a TENS pad that is strapped below the user’s knee and purports to apply electrical currents there—currents that will relieve pain in other parts of the body.

Quell was backed up by a slick video marketing campaign stocked with animations demonstrating how Quell “gently accesses the central nervous system.” “It sends neural pulses to the brain that trigger your body’s own natural pain blockers,” the announcer claims in one of the videos.

Weren’t Gozani and company in the clear with this claim? Isn’t Quell a TENS device, and therefore cleared by the FDA as class II?

Not according to the Federal Trade Commission (FTC or Commission), which sued the company and its CEO in the District of Massachusetts in early March of this year.

Gozani’s marketing claims, the FTC maintained, prevented Quell from benefiting from the approval granted to previously marketed TENS devices. Quell was not “substantially equivalent” to products on the market because TENS devices had only been approved for boasting about pain relief at the point of application—not throughout the body.

The Takeaway

The suit charged NeuroMetrix and Gozani with falsely claiming FDA clearance; they were also hit with false efficacy and proof claims. In an order filed the day after the complaint, the FTC settled with the defendants, who agreed to fork over “$4 million to the Commission for refunds and to stop making the allegedly deceptive claims.”

This month, refunds began to be mailed out. The Commission claims that it is sending out more than 70,000 checks and PayPal payments to the tune of $3.86 million to consumers who purchased Quell. The average refund is $55 per customer (a bit of a comedown from Quell’s original $250-$300 price range).

The lesson? If Quell delivered the relief that NeuroMetrix claimed, then it required (and deserved) the thorough review and clearance merited by an innovative new device. FDA fast-track clearance is a boon to device manufacturers, but only if they’re following a well-worn path.

SC Johnson Wants to Wipe the Class

Windex manufacturer savages class action complaint for lack of specificity

With a Quickness

Remember Mike Tyson in his prime? When he was the most feared human to set foot in the ring? There are fights from that era of his career in which he knocked out opponents in less than a minute—30 seconds for the unfortunate Marvis Frazier, Tyson’s fastest win.

Lawyers generally don’t get the satisfaction of a quick KO. Disputes can stretch out for decades.

But in Shimanovsky v. S. C. Johnson & Son, Inc., you get the sense that the defendant’s counsel believes it’s going to end this match pronto.

Who? What? When?

Normally, we’d summarize the underlying facts of the class action—the date and price of the purchase, toxic studies produced (and answered), and so forth. But there’s nothing like that here, because the complaint is short on detail, and that is the weakness that has SC Johnson (SCJ) smelling blood in the water.

The defendant, SCJ, maintains, in a terse and bitter motion to dismiss, that named plaintiff Katherine Shimanovsky lacks standing to sue and that her claims fail as a matter of law, mainly because she provides little or no detail about what happened or her theory of the case. “Plaintiff’s threadbare Complaint lacks basic facts necessary to state a false advertising claim under New York law,” the defense writes. “While Plaintiff asserts she was injured by the ‘non-toxic formula’ labels on a Windex cleaning product, she does not specify what Windex product she purchased or why the product she purchased as formulated is toxic.”

The Takeaway

The defendant’s motion to dismiss claims that because the plaintiff failed to specify which product she purchased, she cannot represent whether the ingredients she objects to in the mystery product are present in amounts that warrant the term “toxic”—or even if they give the lie to the “non-toxic” tag she objects to.

The plaintiff cannot allege injury because without a specific purchase, she cannot specify any harm, economic or otherwise; she cannot claim that she was misled by the packaging because she did not specify which product packaging she relied on; she cannot allege specific harm because she cannot establish the premium she paid on the product; and so on, and so on.

Read the complaint, and then read the motion, and draw your own conclusions—it will be interesting to see whether, and in what form, this case moves forward.

Check Out Our Latest Blog Post

Beware of Dark Patterns

Yoda cautioned Luke Skywalker to beware of the Dark Side. In The Golden Compass, we were told to beware of dark materials. For those old enough to remember, the town of Collinsport was told to beware of Barnabas Collins, who lurked in Dark Shadows. And little kids in general are just plain scared of the dark. It is time now, apparently, for advertising lawyers to beware of dark patterns. Read more here.

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.

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