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advertising claims. In class actions, the class plaintiffs’counsel typically is retained on a contingency basis,
and therefore, unlike in most Lanham Act cases, theplaintiffs in false advertising class actions often are
not motivated to keep legal costs down, and indeed,could well have the opposite motivation.
A recent decision in the Second Circuit, Pelman v.McDonald’s Corp., 2005 U.S. App. LEXIS 1229 (2d Cir.
Under §43(a) of the Lanham Act, standing to sue for
2005), appears to open the door for additional false
O false advertising is limited to competitors and others advertising consumer class actions in the New York
who can claim to have suffered a business injury as a
federal courts, where more Lanham Act false
result of the defendant’s advertising claims. E.g.,
advertising cases have been filed than anywhere else
PR Telecom Int'l Am., Ltd. v. AT&T Corp., 280 F.3d 175,
in the United States. In Pelman, the Second Circuit
197 (2d Cir. 2001). Consumers do not have standing
reversed a lower court decision and reinstated the
to bring false advertising suits under §43(a).
claims of a consumer class that McDonald’s useddeceptive advertising to mask the health risks
Traditionally, this limitation on standing has had a
associated with its products. The suit alleged that
substantial, albeit little recognized, minimizing effect
McDonald’s created the false impression that its food
on the litigation risk and costs associated with
products are nutritionally beneficial, and, as a result,
consumer advertising. Because competitive injury
caused health problems for potentially millions of
resulting from a particular false advertisement is often
difficult to prove, the principal remedy in Lanham Actfalse advertising cases is injunctive relief. As a result,
The trial court had dismissed the claims in 2003
(1) the law firms representing plaintiffs in Lanham
principally because the plaintiffs had failed to allege
Act false advertising typically charge by the hour,
particularized reliance on the allegedly false
instead of receiving contingent fees; (2) therefore,
statements, which the trial court held is required by
litigating Lanham Act false advertising cases tends to
§350 of the New York General Business Law. See
be approximately equally expensive for plaintiffs and
McGill v. GMC, 231 AD 2d 449, 450 (1st Dep’t 1996).
defendants; and (3) the heavy expense associated with
However, the Second Circuit, citing precedent from
Lanham Act false advertising cases frequently causes
New York’s highest state court, held that §349 of the
potential plaintiffs to choose the far less expensive
General Business Law, under which the plaintiffs also
route of challenging an advertisement before the
sued, does not require proof of actual reliance, and
National Advertising Division or the national
therefore reversed. 2005 U.S. App. LEXIS 1229 at *6.
In the context of a false advertising lawsuit, this was apuzzling ruling. Section 349 principally authorizes
In the last few years, however, a number of false
lawsuits by the State Attorney General to remedy
advertising class actions have been brought by
deceptive acts and practices. See id §§ a-g. Section
consumer classes under state laws in various state
349(h) does permit private actions to be brought
and federal courts. These cases not only create an
under this statute, but only by persons who “have
additional source of potential liability for false
been injured” by reason of a violation of the statute.
advertising, but also have the potential to increase
It is true, in a sense, that reliance and injury are
substantially the legal costs of defending false
separate concepts, in that it is possible for a person to
rely on a false advertisement without being injured by it. Class Action suit re: fountain sodas
But it is difficult to understand how the converse would bepossible: in other words, how can a person who does not
rely on a false statement in an advertisement be injured by
Coca-Cola and PepsiCo are facing multiple class actions
claiming they had not disclosed that bottled and canneddiet colas are different from the fountain versions and that
In an opinion which was rather less than clear, it may be
the fountain versions contain saccharin.
that the Court was speaking merely of pleadingrequirements, rather than requirements of proof. Indeed,
commenting on the trial court’s holding that plaintiffs had
Separate class actions against the two companies have been
“failed to draw an adequate causal connection between their
filed in Middlesex (MA), Chicago, Miami, San Diego and
consumption of McDonald’s food and their alleged
injuries,” id. at *8, the Second Circuit explained that this“is the sort of information that is appropriately the subjectof discovery,” and therefore permitted the claims to proceed
Class Action against Anheuser Busch-Co and
so that plaintiffs could gather such information. Id. *8-*9. Miller Brewing Co. Dismissed
The likely effect of Pelman will be to embolden plaintiffs
class action law firms to file class action false advertising
Class-action suit claimed that Anheuser-Busch Co. and
suits. By setting an extremely low bar for the successful
Miller Brewing Co. encouraged underage drinking by
defense of motions to dismiss in such suits, the decision
targeting teens with their advertising.
could well provide class action plaintiffs’ firms with theincentive to pressure defendant/advertisers into expensive
settlements to avoid the substantial expense of discovery
that the Second Circuit’s opinion openly invited.
This case was decided in the context of an already increasing
body of consumer false advertising class actions filed in thelast few years, including the potentially significant casesnoted below:
Resolution: Case dismissed. Court ruled that under state law, regulating Moviegoers sue Sony
alcohol ads is the job of the Department of AlcoholicBeverages Control, not the courts. He also stated that thesuit had failed to identify beer ads that were literally false
and the plaintiffs failed to show how they had suffered any
A lawsuit was brought against Sony Pictures Entertainment
direct harm as a result of the marketing campaigns.
by moviegoers who saw films that were allegedly endorsedby a fake critic. The lawsuit alleges that Sony advertisedcertain films using quotations attributed to “David
Manning” and incorrectly indicated that he was affiliated
The Los Angeles Times reports that there are similar class-
with The Ridgefield Press; it also alleged that Sony advertised
action suits against beer and spirits makers in Ohio,
The Patriot using endorsements of persons who were its
Colorado, North Carolina, and D.C. that allege they use
employees without disclosing that they were its employees.
sexually charged ads to induce illegal drinking by teens.
Advertisements violated §§ 17200 and 17500 of the
MGM was sued in a class action alleging that the studio
California Business and Professions Code and the
falsely advertised many of its DVD titles as widescreen.
Other defendants named in the case are retailers that carriedthe DVD titles in question. Resolution: Sony denied liability, but has agreed to settle the action by
paying up to $1.5 million to plaintiffs. A hearing to
determine whether the settlement should be granted finalapproval will be held on April 15, 2005.
deceptive advertising and bait-and-switch tactics to
systematically deceive Dell customers. The alleged deceptionis that Dell advertised low prices and then told those who
asked that the computers are no longer available for the
Without admitting wrongdoing, MGM agreed to compensate
advertised price, but then attempted to sell them another PC
consumers who bought DVDs in certain ratios during a
or ship one of lesser value. The claim against CIT Bank is
specific timeframe. The offer is for a $7.10 cash refund or a
that it increased interest rates and added hidden charges
without notice. A class action against Dell Inc., DellFinancial Services L.P. and CIT Bank has also been filed in
the Southern District of New York challenging the sameadvertising and financing practices under New York law.
At least three class action false-advertising lawsuits were filed
recently against the makers of Splenda, claiming consumersare wrongfully led to believe the product is sugar. McNeilNutritionals, a Pennsylvania-based unit of Johnson &
Johnson, has denied the allegations, saying the sweetener
Challenged statement: “Splenda is made from sugar, so it
Class actions have been filed against AstraZeneca regarding
tastes like sugar.” (on advertisements and product packaging)
the marketing of Nexium alleging that AstraZeneca’spromotion and advertising of Nexium to physicians and
State Consumer Class Actions:
consumers is unfair, unlawful and deceptive conduct,particularly as the promotion relates to comparisons of
1. Patton v. McNeil Nutritionals LLC (filed in Santa Clara
Nexium with Prilosec. They also allege that AstraZeneca’s
conduct relating to the pricing of Nexium was unfair,unlawful and deceptive. The plaintiffs allege claims under
2. Backer v. McNeil Nutritionals LLC (filed in Los Angeles
various state consumer protection, unfair practices and false
3. Green v. McNeil Nutritionals LLC (filed in Duval County,
1. Los Angeles Superior Court (10/04) – by the AFL-CIO,
two unincorporated associations and an individual on
Florida and California statutes designed to protect
behalf of themselves, the general public and a class of
consumers against misleading corporate statements.
CA consumers, third party payers, cash payers and thosemaking co-pay.
2. A second suit in Los Angeles Superior Court on behalf
of a similar putative class of consumers.
Verizon Wireless Inc. is being sued by a class of itssubscribers for allegedly disabling some Bluetooth short-
3. Actions making similar allegations were filed on behalf
range wireless features of its Motorola v710 handset.
of a putative class of consumers in the Circuit Court of
California law firm Kirtland and Packard has filed a class
Searcy County, Arkansas and on behalf of a putative
action suit on behalf of subscribers in the state accusing
class of third party payers in the Superior Court of the
Verizon Wireless of false advertising.
State of Delaware in and for New Castle County. Dell Computer Fen-Phen
A class action had been filed in San Francisco against Dell
In 2001 a class action was filed against Nutraquest, alleging
Inc. and its finance partner, CIT Bank, claiming they used
that Nutraquest falsely advertised Xenadrine RFA-1 as safe
and effective. The class action lawsuit, which ultimatelyresulted in a $12.5 million judgment, sought to force thecompany to reimburse California consumers who purchasedthe diet aid. Pfizer What: A number of purported class actions recently have been filed against Pfizer in the U.S. and in Canada alleging consumer fraud as the result of false advertising of Celebrex and Bextra and the withholding of information from the public regarding the alleged safety risks associated with Celebrex and Bextra. The plaintiffs seek damages in unspecified amounts for economic loss. N E W Y O R K z L O S A N G E L E S z WA S H I N G T O N B O S T O N z B O C A R AT O N z N E WA R K N E W O R L E A N S z PA R I S Proskauer's False Advertising Practice Proskauer has one of the leading false advertising litigation practices in the country, with unparalleled expertise in the field of advertising law. Proskauer regularly represents a variety of major national advertisers and advertising agencies in all facets of false advertising dispute resolution and counseling. Lawrence I. Weinstein
212.969.3240 – [email protected] Amy R. Terry
Proskauer Rose is an international law firm that handles a full spectrum of legal
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