Another One Bytes the Dust: Court Dismisses Flash Drive False Advertising Suit Based On Back-Of-Package Clarifying Disclosures

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A few months ago, we wrote about courts’ inconsistent application of the “reasonable consumer” standard when labeling statements are claimed to be false or misleading, despite clarifying information elsewhere on the product label.  In Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), the Ninth Circuit (in)famously held that a “reasonable consumer” should not be “expected to look beyond misleading representations on the front of the box to discover the truth … on the side of the box.”  Id. at 939-40.  As we explained in our prior post, Williams is in tension with longstanding authority that “reasonable consumers” are expected to read the entire advertisement, including disclaimers and clarifying language.  We observed that numerous lower-court decisions, recognizing Williams’ shaky foundation, have sought to distinguish it and narrow it to its facts.

Add to this list Dinan v. SanDisk LLC, No. 5:18-cv-5420 (BLF), 2019 U.S. Dist. LEXIS 91633 (N.D. Cal. May 31, 2019), a recent decision out of the Northern District of California.  While Dinan was not a food, drug, or cosmetic case, its discussion of Williams and the “reasonable consumer” test bears directly on such cases, and should help manufacturers dispatch some false advertising claims at the pleadings stage when their packages include proper clarifying disclosures. 

The defendant in Dinan, SanDisk, manufactures USB flash drives, with varying storage capacities prominently noted on the front of the packaging (“64 GB,” “128 GB,” etc.):

Plaintiff Dinan’s false-advertising theory was based on the fact that the tech world uses two different systems to measure data-storage capacity.  In the binary system, a gigabyte contains 1,073,741,824 (2^30) bytes.  By contrast, in the decimal system, a gigabyte contains just 1,000,000,000 (10^9) bytes.  Dinan claimed that, in purchasing a SanDisk flash drive, he believed he was receiving binary GBs rather than decimal GBs, and so received 6.7% less actual storage capacity than he expected.  SanDisk moved to dismiss the complaint, arguing that a reasonable consumer would not be misled as Dinan alleged.

The district court took judicial notice of several facts in deciding the motion.  First, and most critically, the front-of-package storage capacity claim included an asterisk next to the term “GB,” which linked to a disclosure on the back of the package stating that “1 GB = 1,000,000,000 bytes”:

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Second, the front of the packaging also stated that the product was “For iPhone, iPad, and computers”—and iPhones and iPads, unlike most personal computers, store data in decimal form, not binary form.  Third, the decimal system is the official standard set by the U.S. Government and Department of Commerce.  And fourth, standard dictionaries define “gigabyte” in both decimal and binary terms.

Turning to the law, the court acknowledged Williams, but observed that “[t]ime and again, the Ninth Circuit and district courts therein have held that allegations do not satisfy the reasonable consumer standard where the packaging containing the alleged misrepresentation includes disclosures that make the meaning of the representation clear.”  The court construed Williams as something of an aberration, limited to situations where the alleged front-of-package deception is extreme in its “scope or pervasiveness”—rather than as disturbing the longstanding rule that reasonable consumers should inspect the entire product label before making purchasing decisions.  In Williams, the court emphasized, “there [were] a number of features of the packaging … which could likely deceive a reasonable consumer” (emphasis added): the name of the product, various images on the front of the package, and a front-of-package ingredient claim.  Moreover, in Williams, there was “nothing on the [front of] the package [that] told the consumer to look to the ingredient list” for clarifying information.

Here, by contrast, it was “simply not plausible that a reasonable consumer … would be deceived by the number of bytes in the storage device.” For starters, unlike in Williams, where “the package … [was] rife with potentially misleading representations,” the alleged misrepresentation in this case was “limited” to the single statement “64 GB.”  And “this sole [challenged] representation” was “not strictly false,” as “the drives do contain 64 GBs, just in decimal, not binary.”  Any confusion on that score would be easily dispelled by the disclosure on the back of the box.  Unlike in Williams, the existence of that disclosure was signaled by an asterisk right next to the challenged “GB” statement—a “common” device that “directly informs the consumer … that he needs to look elsewhere on the package before applying his own assumptions.” 

In our view, the court reached the right result here.  Viewed in its totality, the SanDisk package unambiguously states that the product’s claimed number of gigabytes is intended to be understood in decimal, not binary.  The court’s two ways of distinguishing Williams are intuitively reasonable, although they do raise further questions.  For example, when is a package’s front “rife” enough with alleged misrepresentations to cross the line into Williams territory?  And isn’t it almost universally known that food products have ingredient lists containing additional clarifying information, such that an asterisk on the front of a food package should effectively be understood?  (As we noted in the prior post referenced above, many surveys show that most consumers “often or always” consult ingredient lists; surely, the proportion of consumers who are aware of such lists approaches 100%.)

Somewhat surprisingly, the Dinan court granted the defendant’s motion to dismiss with leave to amend.  Apparently, the plaintiff’s counsel had raised an alternate theory of deception for the first time at oral argument.  Under this new theory, a “reasonable consumer” does not expect a storage-capacity claim to refer either to the binary or to the decimal system; “in fact, he does not understand that these two different systems exist at all.”  All he knows is that the “64 GB” SanDisk drive that he purchased isn’t large enough to hold a file that his Windows computer tells him takes up 64 GB.  The court “agree[d] that this scenario plausibly would lead the reasonable consumer to be misled,” but it thought that such a claim is “more appropriately directed at the computer manufacturers” than at SanDisk, who “has done all the law requires it to do by telling the consumer how many bytes of storage each [SanDisk] device provides.”

We are not fans of courts granting leave to replead based on theories that plaintiffs raise at the last minute, especially during oral argument.  And it remains to be seen whether Dinan will, in fact, take the court up on its suggestion that he sue his computer’s manufacturer for not distinguishing between binary and decimal storage systems in its own literature.  Regardless, Dinan is another arrow in manufacturers’ quiver when hit with false-advertising claims by plaintiffs who failed to read the entirety of their package or advertisement.

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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