Advertising Law - Feb 28, 2014

Manatt, Phelps & Phillips, LLP

In This Issue:

  • 9th Circuit Pulls the Shades Down on “Shine the Light” Lawsuit

  • Massachusetts Zip Code Suit Settles for $875,000

  • Animated Sneaker Ad Could Still Mislead Kids, CARU Says

  • Legal Publishers Agree to Pay $6M Over Auto Renewal Program

  • Data Broker Legislation Introduced; Ad Industry Reacts

  • Noted and Quoted . . . The Hollywood Reporter Turns to Manatt Partner Gary Gilbert Regarding Representation of “American Idol” Entertainers

9th Circuit Pulls the Shades Down on “Shine the Light” Lawsuit

The Ninth U.S. Circuit Court of Appeals recently rejected an appeal of a district court’s dismissal of a claim made under California’s “Shine the Light,” holding that the plaintiff failed to demonstrate harm, since she never actually requested information from the defendant under the law, and thus lacked standing to sue.

Seeking $3,000 in statutory damages per violation, Charlotte Baxter filed suit against publisher Rodale in January 2012. The Shine the Light law, California Civil Code §1798.83, mandates that companies that sell consumer lists must allow Californians to either opt out or, upon request, be notified about who purchased their information. Companies must provide contact information (a toll-free phone number or mailing address) for customers making requests under the law; Internet-only businesses have specific requirements about posting contact information in their privacy policies about how to make a request.

Baxter, a Runner’s World subscriber, said Rodale “collects and stores a wealth of information about its subscribers, and shares such data with third parties for direct marketing purposes.” She alleged that the publisher willfully denies users the opportunity to exercise their rights under the Shine the Light law by failing to make the required disclosures on its website.

A federal court judge dismissed the suit and Baxter appealed. In a brief unpublished opinion, the 9th Circuit affirmed, albeit on different grounds. The three-judge panel relied upon a decision from the California Courts of Appeal holding that Shine the Light plaintiffs have to allege they suffered a statutory injury in order to establish standing to sue.

Following the ruling, the court said that Baxter had not actually suffered an injury under the statute. “Because Baxter has failed to allege that she submitted a request to Rodale under the [Shine the Light] law, or that she would have, had accurate contact information been provided, the district court erred when it found she had statutory standing,” the panel wrote.

The court also dismissed the plaintiff’s claim under the state’s unfair competition law because California does not recognize informational injury, leaving Baxter without an alleged injury in fact.

To read the complaint in Baxter v. Rodale, click here.

To read the opinion in Baxter v. Rodale, click here.

Why it matters: Plaintiffs have yet to achieve success under California’s 2003 Shine the Light law. In addition to the decision in Baxter, the 9th Circuit issued nearly identical opinions days earlier in two other suits against Hearst Communications and Conde Nast. The trio provides a good example of plaintiffs’ struggles to establish standing and injury under the statute. Although the 9th Circuit’s opinion is unpublished, the court’s recognition that California does not recognize informational injury should allow businesses a sigh of relief.

Massachusetts Zip Code Suit Settles for $875,000

To settle a pair of class actions alleging that the defendant violated the Massachusetts Consumer Protection Act by collecting zip codes at the time of a credit card purchase, Michaels craft stores has agreed to pay $875,000.

U.S. District Court Judge William G. Young granted preliminary approval of the deal earlier this month.

The suit was filed in the wake of the seminal Pineda v. Williams-Sonoma case in California, where the state’s highest court found that zip codes constitute “personal information” for purposes of the state’s Song-Beverly Credit Card Act.

Hoping to find similar success in Massachusetts, Melissa Tyler filed a putative class action against Michaels.  According to the complaint, consumers have a mistaken belief that they must provide their zip code upon request to complete a transaction, and that Michaels “uses a customer’s zip code and name to identify that customer’s address using commercially available databases. Michaels is thus able to use that personal identification information to send unwanted marketing material.”

Although Judge Young initially dismissed her suit, Massachusetts’ highest court ruled last year that zip codes fall under the statute’s definition of “personal information.” Once the suit was reinstated, it was consolidated with a similar class action against Michaels. The parties then reached a deal.

The settlement class is divided into two groups: about 15,000 consumers who received marketing materials solely because they provided their zip codes at the time of purchase, and a group of roughly 4,300 customers who provided their zip codes but whose addresses were obtained from a different source. The first group will receive Michaels vouchers worth $25; the second group will receive $10 vouchers.

In addition to the vouchers, Michaels agreed to comply with Massachusetts’ consumer protection laws going forward and promised to “take reasonable steps” to purge or delete all the consumer addresses gained solely from a zip code request.

On top of the estimated $418,000 in vouchers, Michaels said it would pay $7,500 for incentive awards and $425,000 in class counsel fees. 

To read the settlement memorandum, click here.

To read the court’s preliminary approval order, click here.

Why it matters: Similar to the Pineda decision in California, the Tyler case in Massachusetts has launched analogous consumer class actions in the state challenging the collection of zip codes by retailers. Whether the settlement will also provide a model for other cases remains to be seen.

Animated Sneaker Ad Could Still Mislead Kids, CARU Says

Skechers agreed to modify television advertising for its “Air-Mazing” shoes in response to concerns from the Children’s Advertising Review Unit that kids might believe the product could make them run faster and jump higher, as well as encourage them to engage in unsafe activities.

The animated commercial was set at a school and featured the “Air-Mazing kid” sporting the Air-Mazing shoes. First, he runs through the school “with superhero-like speed and agility,” and then outside into the middle of a basketball game where he steals the ball from the players on the court and slam-dunks it. Next, he runs onto the outdoor track and flies over the high hurdles before returning to the school cafeteria. Using a lunch tray as a skateboard, he flies across the top of lunch tables.

Without slowing down, the animated kid then returns outside, this time to the football field, where he outraces the receivers to catch the ball. Running back inside, he defies gravity by leaping on and off the hallway walls before flying into a classroom and sitting down between two girls in cheerleader uniforms.

A voiceover states, “Air-Mazing shoes, new from Skechers. Designed for kids who want to run faster, jump higher…Go beyond the amazing to Air-Mazing.”

CARU expressed two principal concerns about the ad: whether young children might believe they could run as fast and jump as high as the animated boy and the possibility that children could try to imitate the boy by skateboarding on cafeteria tables.

Looking at the overall net impression, the self-regulatory body “determined that one reasonable takeaway message was that some young children may believe that wearing Air-mazing shoes make them run faster and jump higher,” and “generate unrealistic performance expectations among young members of the overall child audience.”

CARU rejected Skechers’ argument that the animated, fantasy nature of the commercial would not confuse children into thinking they would have special abilities by wearing the shoes. The group’s guidelines apply to commercials in all media, the opinion emphasized, from animation to live action to stop action, all of which can still convey a misleading message to children.

Skechers’ contention that the ad constituted puffery was similarly unpersuasive. “CARU has long held that young children are not like adults when it comes to puffery and because of their still developing abilities young children cannot understand advertising techniques like puffery,” according to the decision.

A lack of consumer complaints about the ad – touted by Skechers – was irrelevant, CARU added, as a lack of complaints is not dispositive of whether claims may be confusing or misleading.

Skechers voluntarily stopped airing the commercial during CARU’s proceedings and made edits, including deleting the cafeteria skateboarding scene and changing the voiceover to: “Are you a kid who runs fast, jumps high, and plays hard? We have the shoe for you! Why just be UH-mazing when you can be AIR-mazing?”

CARU said it was “pleased” with Skechers’ modifications and recommended “that in future child directed advertising, Skechers either refrain from making claims about its products or be able to offer substantiation for all reasonable takeaways from such claims that children may have.”

To read CARU’s press release about the case, click here.

Why it matters: “Children are not just little adults,” CARU cautioned. “Advertisers should take into account that children are prone to exploration, imitation and experimentation and may imitate product demonstrations or other activities depicted in advertisements without regard to risk.”

Legal Publishers Agree to Pay $6M Over Auto Renewal Program

An automatic renewal program operated by legal publishers Thomson Reuters Tax Accounting and West Publishing Corp. could cost the companies up to $6 million in restitution after the Florida attorney general questioned their legality.

Following an investigation, AG Pam Bondi said the companies placed lawyers and law firms into automatic subscription renewals and automated shipment plans for books, newsletters, and other publications in print, CD, and e-book formats without adequate disclosures over a four-year period.

In the legal publishing context, Thomson and West would sell a book on a particular statute or law, for example, and then send supplements or updates to the law firm on the negative option plan.

To settle charges that the publishers violated Florida’s Deceptive and Unfair Trade Practices Act, both agreed to modify their business practices to ensure that they provide appropriate disclosures (like sending an announcement prior to each shipment) for auto renewal subscriptions and obtain affirmative consent to all terms before they ship.

In addition, Thomson and West promised to pay up to $6 million in consumer redress. Neither publisher admitted liability.

To read the settlement agreement, click here.

Why it matters: AG Bondi has been keeping a close eye on the legal publishing industry. In 2009, she settled similar charges with Matthew Bender and Company, Inc., and made a similar deal last year with CCH for $5 million.

Data Broker Legislation Introduced; Ad Industry Reacts

As long promised, Sen. Jay Rockefeller (D-W. Va.) introduced legislation aimed at regulating the data broker industry.

Joined by Sen. Ed Markey (D-Mass.), Sen. Rockefeller filed the Data Broker Accountability and Transparency Act (the DATA Act), which would prohibit the use of deceptive means to gather data, would give consumers the right to access their information at least once a year and at no cost, the opportunity to correct errors in their record, and the choice to opt out from the collection and sale of their information for marketing purposes.

“Consumers deserve to know what information about their personal lives is being collected and sold to marketers by data brokers,” Sen. Rockefeller said in a statement about the bill. “This booming shadow industry, that generated more than $150 billion in 2012 and operates with very little scrutiny and oversight, is making tremendous profits off practices that can be disturbing and totally unfair to consumers.”

The DATA Act would grant the Federal Trade Commission enforcement authority and the power to impose civil penalties. FTC Commissioner Julie Brill (who has been a vocal advocate for a “Reclaim Your Name” program for data brokers) already declared her support for the proposed law. “This bill will allow us to begin the next phase of the very important conversation about giving consumers control over the profiles, often rich in sensitive information, that data brokers collect about them,” she told Adweek

Members of the ad industry were less excited. “Imposing an access and correct regime on marketing data is not necessary to protect consumer privacy and doing so would make it harder for companies to keep data secure at a time when consumers are more concerned about identity theft than ever before,” Direct Marketing Association’s senior vice president of government affairs, Peggy Hudson, said to Adweek.

To read the Data Broker Accountability and Transparency Act, click here.

Why it matters: Sen. Rockefeller finally made good on his promise to introduce a bill providing oversight of the data broker industry after conducting a yearlong investigation and releasing a report on industry practices that found data brokers “operate behind a veil of secrecy.” The question remains: What are the bill’s chances of passage? Though Sen. Rockefeller could push hard, having focused on the issue for years and as a final hurrah before he retires later this year, the legislation will face serious pushback from the industry.

Noted and Quoted . . . The Hollywood Reporter Turns to Manatt Partner Gary Gilbert Regarding Representation of “American Idol” Entertainers

Manatt partner Gary Gilbert’s comments were featured in The Hollywood Reporter on February 14, 2014, regarding Manatt’s selection to represent 31 “American Idol” semi-finalists. Gilbert, who counts several alums of the television show as current clients, spoke with the publication about the process for campaigning to represent the “American Idol” participants in an article titled, “ ‘American Idol’: Landing the Role of Season 13 Lawyer Is A Lot Like Auditioning for the Show.”

To read the full interview, click 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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