Tag: consumer fraud

Consumer Fraud PFAS Lawsuits Update: Two Cases Dismissed

On several instances, we have written regarding consumer fraud PFAS class action lawsuits filed in several states. The number of product types targeted for these lawsuits are growing and diverse in terms of the industries targeted. While there has been at least one significant settlement in these lawsuits to date, recently two of the lawsuits that we previously reported on related to PFAS consumer fraud allegations were dismissed by separate courts.

While it is too early to say that these dismissals are a preview of a coming trend in the litigation, the rulings at least provide companies with assurance that there are defenses available in these cases. Nevertheless, with the number of consumer fraud lawsuits likely to continue increasing for the time being, consumer goods industries, insurers, and investment companies interested in the consumer goods vertical must pay careful attention to these lawsuits.

Consumer Fraud PFAS Lawsuits – Overview

The consumer fraud PFAS lawsuits filed to date follow a very similar pattern: various plaintiffs bringing suit on behalf of a proposed class allege that companies market consumer goods as safe, healthy, environmentally friendly, etc., or that the companies themselves market their corporate practices as such, yet it is allegedly discovered that certain products marketed with these buzzwords contain PFAS. The lawsuits allege that since certain PFAS may be harmful to human health and PFAS are biopersistent (and therefore environmentally unfriendly), the companies making the good engaged in fraud against consumers to entice them to purchase the products in question.

In the Complaints, plaintiffs typically allege the following counts:

  • Violation of state consumer protection laws and the federal Magnuson-Moss Warranty Act
  • Violations of various state consumer protection laws
  • Breach of warranty
  • Fraud
  • Constructive fraud
  • Unjust enrichment

The plaintiffs seek certification of nationwide class action lawsuits, with a subclass defined as consumers in the state in which the lawsuits are filed. In addition, the lawsuits seeks damages, fees, costs, and a jury trial. Representative industries and cases that have recently been filed include:

  • Cosmetics industry:
    • Brown v. Cover Girl, New York (April 1, 2022)
    • Anderson v. Almay, New York (April 1, 2022)
    • Rebecca Vega v. L’Oreal, New Jersey (April 8, 2022)
    • Spindel v. Burt’s Bees, California (March 25, 2022)
    • Hicks and Vargas v. L’Oreal, New York (March 9, 2022)
    • Davenport v. L’Oreal, California (February 22, 2022)
  • Food packaging industry:
    • Richburg v. Conagra Brands, Illinois (May 6, 2022)
    • Ruiz v. Conagra Brands, Illinois (May 6, 2022)
    • Hamman v. Cava Group, California (April 27, 2022)
    • Azman Hussain v. Burger King, California (April 11, 2022)
    • Little v. NatureStar, California (April 8, 2022)
    • Larry Clark v. McDonald’s, Illinois (March 28, 2022)
  • Food and drink products:
    • Bedson v. Biosteel, New York (January 27, 2023)
    • Lorenz v. Coca-Cola, New York (December 28, 2022)
    • Toribio v. Kraft Heinz, Illinois (November 29, 2022)
  • Apparel products:
    • Krakauer v. REI, Washington (October 28, 2022)
  • Hygiene products:
    • Esquibel v. Colgate-Palmolive Co., New York (January 27, 2023)
    • Dalewitz v. Proctor & Gamble, New York (August 26, 2022)
  • Feminine hygiene products:
    • Gemma Rivera v. Knix Wear Inc., California (April 4, 2022)
    • Blenis v. Thinx, Inc., Massachusetts (June 18, 2021)
    • Destini Canan v. Thinx Inc., California (November 12, 2020)

Recent Rulings In Consumer Fraud PFAS Cases

In California, the Yeraldinne Solis v. CoverGirl Cosmetics et al. case made allegations that cosmetics were marketed as safe and sustainable, yet were found to contain PFAS. The defendants in the lawsuit filed a Motion to Dismiss, arguing in relevant part that the plaintiff had no standing to file the lawsuit because she did not sufficiently allege that she suffered any economic harm from purchasing the product. The plaintiff put forth two theories to counter this argument: (1) the “benefit of the bargain” theory, under which the plaintiff alleged that she bargained for a product that was “safe”, but received the opposite. The court dismissed this argument because the product packaging did not market the product as safe, and the ingredient list explicitly named the type of PFAS found in testing; and (2) an overpayment theory, under which plaintiff alleged that if she knew the product contained PFAS, she would not have paid as much for it as she did. The Court dismissed this argument because the product packaging specifically listed the type of PFAS at issue in the case.

In Illinois, the Richburg v. Conagra Brands, Inc. alleged that popcorn packaging was marketed as containing “only real ingredients” and ingredients from “natural sources”, yet the popcorn contained PFAS (likely from the packaging itself), which was allegedly false and misleading to consumers. The defendant moved to dismiss the lawsuit on several grounds and the Court found in defendant’s favor on one important ground. The Court held that the statements on the popcorn packaging would not mislead an ordinary and reasonable consumer because a consumer would understand “ingredients” to mean those items that are required to be disclosed by the FDA and not materials that may have migrated to the food from the product packaging. In fact, the Court ruled that the FDA “exempts substances migrating to food from equipment or packaging;” and those “do not need to be included in the ingredients list.”  The defendant argued that reasonable consumers would not consider PFAS to be an “ingredient” under this regime.  In other words, whether or not PFAS migrated into the popcorn, the representations that the popcorn contained “only real ingredients” and “100% ingredients from natural sources” were “correct as a matter of law.” The court dismissed plaintiffs claims on this basis.

Conclusion

Several major companies now find themselves embroiled in litigation focused on PFAS false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as test cases for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Companies must consider the possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS. It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from consumer products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

While the above rulings are encouraging for companies facing consumer fraud PFAS lawsuits, it is far too early to tell if the trend will continue nationally.  Different courts apply legal standards differently and these cases are very fact specific, which could lead to differing results.

It is of the utmost importance that businesses along the whole supply chain in the consumer products industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the consumer products industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2023 CMBG3 Law, LLC. All rights reserved.

What You Need to Know About the DOJ’s Consumer Protection Branch

The Consumer Protection Branch of the United States Department of Justice (DOJ) is one of the most overlooked and misunderstood parts of the country’s largest law enforcement agency. With a wide field of enforcement, the Branch can pursue civil enforcement actions or even criminal prosecutions against companies based in the United States and even foreign companies doing business in the country.

Here are four things that Dr. Nick Oberheiden, a defense lawyer at Oberheiden P.C., thinks that people and businesses need to know about the DOJ’s Consumer Protection Branch.

The Wide Reach of “Protecting Consumers”

According to the agency itself, the Consumer Protection Branch “leads Department of Justice enforcement efforts to enforce consumer protection laws that protect Americans’ health, safety, economic security, and identity integrity.” While “identity integrity” is relatively tightly confined to issues surrounding identity theft and the unlawful use of personal data and information, “health,” “safety,” and “economic security” are huge and vaguely defined realms of jurisdiction.

Under the Branch’s enforcement focus or interpretation of its law enforcement mandate, it has the power to prosecute fraud and misconduct in the fields of:

  • Pharmaceuticals and medical devices

  • Food and dietary supplements

  • Consumer fraud, including elder fraud and other scams

  • Deceptive trade practices

  • Telemarketing

  • Data privacy

  • Veterans fraud

  • Consumer product safety and tampering

  • Tobacco products

Business owners and executives are often surprised to learn that the Consumer Protection Branch has so many oversight powers. But the Consumer Protection Branch’s wide reach is not limited to the laws that it can invoke and enforce; it also has a wide geographical reach, as well. In order to carry out its objective, the Branch brings both criminal and affirmative civil enforcement cases throughout the country. In one recent case, the Consumer Protection Branch prosecuted a drug manufacturer for violations of the federal Food, Drug, and Cosmetic Act (FDCA) after the drug maker hid and destroyed records before an inspection by the U.S. Food and Drug Administration (FDA). The drug manufacturer, however, was an Indian company that sold several cancer drugs in the U.S. The plant inspection took place in West Bengal, India.

The Branch Has Lots of Laws at Its Disposal

The extremely broad reach of the Consumer Protection Branch comes with a significant implication: There are numerous laws that the Branch can invoke as it regulates and investigates businesses. Many of these are substantive laws that prohibit certain types of conduct, like:

Others, however, are procedural laws, which prohibit using certain means to carry out a crime, like:

  • Mail fraud (18 U.S.C. § 1341), which is the crime of using the mail system to commit fraud

  • Wire fraud (18 U.S.C. § 1343), which is the crime of using wire, radio, or television communication devices to commit fraud, including the internet

This can mean that many defendants get hit with multiple criminal charges for the same line of conduct, drastically increasing the severity of a criminal case. For example, in one case, a group of pharmacists fraudulently billed insurers for over $900 million in medications that they knew were not issued under a valid doctor-patient relationship. They were charged with misbranding medication and healthcare fraud, in addition to numerous counts of mail fraud for shipping that medication through the mail.

The Branch Has the Power to Pursue Civil and Criminal Sanctions

Lots of business owners and executives are also unaware of the fact that the DOJ’s Consumer Protection Branch has the power to pursue both civil and criminal cases if the law being enforced allows for it.

This has serious consequences for companies, and not just because the Branch can imprison individuals for putting consumers at risk: It also complicates the strategy for defending against enforcement action.

A good example of how this works in real life is a healthcare fraud allegation that is pursued by the Consumer Protection Branch under the False Claims Act, or FCA, because the alleged fraud implicated money from a government healthcare program, like Medicare or Medicaid. For it to be the crime of healthcare fraud, the Consumer Protection Branch would have to prove that there was an intent to defraud the program. If there is no intent, though, the Branch can still pursue civil penalties.

This complicates the defense strategy because keeping prosecutors from establishing your intent is not the end of the case. It just takes prison time off the table. While this is a big step in protecting your rights and interests, it still leaves you and your company open to civil liability. That liability can be quite substantial, as many anti-fraud laws – including the FCA – impose civil penalties on each violation and impose treble damages, or three times the amount fraudulently obtained.

As Dr. Nick Oberheiden, a consumer protection defense lawyer at the national law firm Oberheiden P.C., explains, “While relying on a lack of intent defense can work with other criminal offenses, it is a poor choice when fighting against allegations of fraud because it tacitly admits to the fraudulent actions. Enforcement agencies like the DOJ’s Consumer Protection Branch can then easily impose civil liability against your company.”

The Branch Works in Tandem With Other Agencies

The Consumer Protection Branch only has about 200 prosecutors, support professionals, embedded law enforcement agents, and investigators. However, between October 2020 and December 2021, the Branch charged at least 96 individuals and corporations with criminal offenses and another 112 with civil enforcement actions, collecting $6.38 billion in judgments and resolutions.

The Branch can do this in large part because it works closely with other federal law enforcement agencies, like the:

By pooling their resources with other agencies like these, the DOJ’s Consumer Protection Branch can bring more weight to its enforcement action against your company.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more consumer protection legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

REI PFAS Consumer Fraud Lawsuit Continues Trend of Similar Lawsuits

On October 28, 2022, a PFAS consumer fraud class action lawsuit was filed in Washington against REI over alleged PFAS content in various articles of waterproof clothing sold by the company. The REI PFAS consumer fraud lawsuit is but the latest in a growing line of PFAS lawsuits that allege that certain consumer goods contain PFAS, that the products or company’s values were marketed as healthy or environmentally friendly, and that consumers would not have purchased the products if they knew that the products contained PFAS.

As we predicted in early 2021, the increased attention on PFAS content in consumer goods in the scientific community and media presented significant risks to various industries, including the apparel and cosmetics industry, and our prediction was that the developments would lead to a significant number of lawsuits alleging consumer fraud. Consumer goods industries, insurers, and investment companies interested in the consumer goods vertical with niche interest in cosmetics companies must pay careful attention to the cosmetics lawsuits and the increasing trend of lawsuits targeting the industry.

REI PFAS Consumer Fraud Lawsuit

On October 28, 2022, plaintiffs Jacob Krakauer and Joyce Rockwood filed a lawsuit in Washington federal court seeking a proposed class action against REI. The lawsuit alleges that REI markets the company and its products as environmentally friendly and sustainable. Further, the lawsuit cites to statements made by REI that the company is taking proactive steps with respect to chemical use in its products to argue that such statements were false, misleading or induced consumers to purchase products when the presence of PFAS in the products was not disclosed.

In the Complaint, plaintiffs allege the following counts against REI:

  • Violation of state consumer protection laws and the federal Magnuson-Moss Warranty Act

  • Breach of warranty (implied and express)

  • Fraud (actual and constructive)

  • Fraudulent inducement

  • Money had and received

  • Fraudulent omission or concealment

  • Fraudulent misrepresentation

  • Negligent misrepresentation

  • Unjust enrichment

  • Negligent failure to warn

The plaintiffs seek certification of a nationwide class action lawsuit, with subclasses defined as consumers n Washington and Arizona. In addition, the lawsuit seeks damages, fees, costs, the establishment of medical monitoring, and a jury trial.

Just the Beginning For Consumer Products Companies

With studies underway, legislation pending that targets consumer goods, and increasing media reporting on PFAS in consumer goods and concerns over human health, product manufacturers should be increasingly wary of lawsuits similar to the REI lawsuit being filed against them. There are an increasing number of PFAS consumer fraud cases being filed, with some of the below as representative of recent trends:

  • Cosmetics industry:

    • Brown v. Cover Girl, New York (April 1, 2022)

    • Anderson v. Almay, New York (April 1, 2022)

    • Rebecca Vega v. L’Oreal, New Jersey (April 8, 2022)

    • Spindel v. Burt’s Bees, California (March 25, 2022)

    • Hicks and Vargas v. L’Oreal, New York (March 9, 2022)

    • Davenport v. L’Oreal, California (February 22, 2022)

  • Food packaging industry:

    • Richburg v. Conagra Brands, Illinois (May 6, 2022)

    • Ruiz v. Conagra Brands, Illinois (May 6, 2022)

    • Hamman v. Cava Group, California (April 27, 2022)

    • Azman Hussain v. Burger King, California (April 11, 2022)

    • Little v. NatureStar, California (April 8, 2022)

    • Larry Clark v. McDonald’s, Illinois (March 28, 2022)

  • Feminine hygiene products:

    • Gemma Rivera v. Knix Wear Inc., California (April 4, 2022)

    • Blenis v. Thinx, Inc., Massachusetts (June 18, 2021)

    • Destini Canan v. Thinx Inc., California (November 12, 2020)

As the above is indicative of, several major companies now find themselves embroiled in litigation focused on PFAS false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as test cases for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Companies must consider the possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS.

It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from consumer products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

Conclusion

It is of the utmost importance that businesses along the whole supply chain in the consumer products industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the consumer products industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

For more Environmental Law news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.