Court Relies on Due Process Argument to Dismiss Website Accessibility Suit

Over the past few years, a handful of law firms have filed hundreds of lawsuits – and sent many hundreds of letters threatening lawsuits – over website accessibility issues. This has been a lucrative business for these firms. Many of these suits and letters are essentially cut-and-paste jobs, and the recipients often decide to quickly settle, rather than face the uncertainties and costs of litigation. But a new decision in California may give defendants something to think about.

Last year, a plaintiff filed a lawsuit against Domino’s complaining that he could not order pizza from the ADA Keyboardcompany’s website using his screen reader. Domino’s argued that websites are not places of public accommodation under the ADA, but the court didn’t agree. Nevertheless, Domino’s argued that the court should dismiss or stay the action because the Department of Justice has not promulgated concrete guidance regarding the accessibility standards.

As we’ve noted before, the DOJ issued a Notice of Proposed Rulemaking in 2010 regarding regulations on website accessibility. In the Notice, the DOJ acknowledged that “clear guidance on what is required under the ADA does not exist.” Dominos argued that, in the absence of clear guidance, the plaintiff’s “request to impose liability under the ADA for Defendant’s alleged failure to abide by certain accessibility standards would violate Defendant’s constitutional right to due process.” The court agreed, and dismissed the action without prejudice.

Although the DOJ has issued several “Statements of Interest” and has entered into settlements obligating companies to abide by certain standards, the court held that those statements and settlements still do not provide companies with concrete guidance regarding their requirements. Moreover, the Statements of Interest “even suggest that Domino’s provision of a telephone number for disabled customers satisfies its obligations under the ADA.”

It’s too early to predict how this decision will affect the wave of lawsuits in this area, but the decision does suggest at least two things. First, if your company’s site isn’t fully compatible with a screen reader, you should at least consider an alternate method – such as a toll-free telephone number – through which you can enable people with visual impairments to enjoy the benefits of what is on your website. Second, if you are considering fighting a threatened lawsuit, you may want to consider a due process argument.

For more information, you can attend our webinar on March 30.

Oregon Attorney General Announces $545,000 Settlement with Retailer

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The Oregon AG recently announced a $545,000 settlement with the Vitamin Shoppe over allegations that the store violated Oregon state law by selling dietary supplements containing ingredients that FDA has deemed unsafe or unlawful. The new settlement agreement places significant burdens on the Vitamin Shoppe to monitor developments on ingredient status. The burdens are the same regardless of whether the Vitamin Shoppe sells a product under one of its own brands – or if it sells a product that was manufactured, labeled, and sold to it by a third party vendor.

Under the terms of the agreement, if the Vitamin Shoppe “receives or learns of” a “written notice” from FDA that an ingredient may be unsafe or unlawful, it must “take immediate action to suspend the sale of such products or products known to contain the ingredients.” If the Vitamin Shoppe becomes aware of any other “public announcement, warning, alert, publication, notice, or report” suggesting that the U.S. government, Australia, Canada, Britain, or the EU might consider a dietary ingredient unsafe or unlawful under the FDCA, then the Vitamin Shoppe must conduct a “reasonable due diligence review,” which may result in a decision not to sell any products containing the ingredient.

This settlement is notable for at least two reasons:

  1. It identifies FDA warning letters sent to the Vitamin Shoppe or anyone else as “written notice” that FDA has deemed an ingredient unsafe or unlawful.  Warning letters, however, state only allegations and are not considered “guidance” under FDA’s rule on “good guidance practices.”  Well after a warning letter is issued, the lawfulness of a particular dietary ingredient can be the subject of much ongoing debate, and even the FDA’s official guidance document on ingredient status remains in flux after years of debate.
  2. The settlement represents an aggressive stance by Oregon on a retailer’s liability for product formulation and labeling by third parties.  As we’ve discussed before, there isn’t a whole lot of precedent for regulators going after the retailer, rather than the product seller.

The Oregon Attorney General is currently in litigation against another retailer over similar allegations related to the legal status and safety of a dietary ingredient.

Kelley Drye Ad Law publishes News & Views: Dietary Supplement Advertising, which covers developments ranging from FTC and FDA regulation, class actions, Customs developments, and Prop 65. Subscribe to future issues by filling out your information and checking the Dietary Supplements Practice Group box here.

New Mexico Set to Become 48th State To Enact Data Breach and Safeguards Law

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Last week, the New Mexico Legislature passed The Data Breach Notification Act (“Act”). Once the Act is signed by Governor Susana Martinez, New Mexico will join 47 other U.S. states (along with D.C., Guam, Puerto Rico, and the Virgin Islands) who have enacted a data breach notification law, leaving South Dakota and Alabama as the two hold-out states without a breach notification law.

In most material respects, this legislation tracks the common provisions of other states’ breach notification laws.  A few notable points:  notification of a data breach would be required, within 45 days of discovery, to New Mexico residents if their personal information is breached. Personal information is defined as an individual’s first name or first initial and last name, in combination with their social security number, driver’s license number, government issued identification number, unique biometric data, or financial account information and the required access code/password. If more than 1,000 residents are affected, the data holder must also notify the New Mexico Office of the Attorney General within this same timeframe. Notice is not required if the data holder determines the breach does not give rise to a significant risk of identity theft or fraud.  The law provides for civil penalties for knowing or reckless violations.

Other notable provisions:

  • Disposal of Records Containing PII Requirement. Data holders must arrange for secure disposal of records containing personal identifying information (“PII”) when records are no longer needed for business purposes.
  • Security Measures for Storage of PII Requirement. Data holders must implement and maintain reasonable security procedures and practices to protect PII from unauthorized access, destruction, use, modification or disclosure.
  • Service Provider Security Measures Agreed to by Contract Requirement.  Service provider data processing contracts concerning PII must have provisions requiring service providers to:
    • implement and maintain reasonable security procedures and practices and
    • protect PII from unauthorized access, destruction, use, modification or disclosure.

The legislation exempts data holders subject to the Health Insurance Portability and Accountability Act or the Gramm-Leach-Bliley Act.

New Lawsuit Highlights Risks of Using User-Generated Content

In 2014, Anheuser-Busch ran a contest on Facebook in which consumers were invited to submit photos of themselves “acting natural.” The contest rules stated that entrants could only submit their original works, and that the photos could not infringe anyone else’s copyrights, privacy rights, publicity rights, or other rights. Moreover, the rules stated that entrants granted Anheuser-Busch a broad license to use their photos in any media. After the contest ended, the company started using some of the photos on materials for its “Every Natty Has a Story” campaign, including coasters and posters that were distributed in bars.

So far, this story is fairly typical, and could represent any number of contests that are run in the US every year. What makes this story different, Kayla Kraft Photothough, is that the owner of one of the photos Anheuser-Busch used filed a lawsuit against the company for copyright infringement, invasion of privacy, and violation of her right of publicity. Kayla Kraft argues that she owns the copyrights to a photo of her drinking beer while wearing a fake mustache that Anheuser-Busch used in its campaign, and that the company used the photo without her consent. She is seeking unspecified damages.

It’s difficult to piece together what may have happened. According to press reports, Anheuser-Busch says that Kraft’s picture was submitted as a contest entry. The company hasn’t answered the complaint yet, though, and the complaint doesn’t specifically mention the contest, so we don’t have a lot of details. Obviously, the case is going to turn on facts that we don’t have, including who submitted the picture. But although it’s too early to draw clear lessons from the case, the suit still highlights some important issues related to the use of user-generated content (otherwise known as “UGC”).

Companies can – and should – put provisions in rules that (among other things) tell people what they can and can’t submit, specify what rights the company has to submissions, and release the company from any liability. Keep in mind, though, that not everyone will read the rules, and that submitters may not even have the authority to grant the necessary rights. There are some things companies can do to address these risk. For example, it might make sense to highlight key provisions outside of the rules. And although you may be able to rely on online releases for some things, there are instances – such as when you want to use content offline – in which an offline written release make more sense.

Almost every campaign that includes UGC involves a careful balancing of risks. Because a “perfect” solution may be cumbersome in many cases, most companies will accept some level of uncertainty. But lawsuits like this serve as good reminders of what can go wrong.

NAD Director Andrea Levine Retiring After 20 years

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ASRC President & CEO Lee Peeler has announced the retirement of Andrea C. Levine, Director of the National Advertising Division (NAD). During her 20-year tenure, the NAD published more than 2,600 case decisions and built what has been described as the largest body of advertising precedent in the United States.

In announcing the retirement, Mr. Peeler stated that Ms. Levine will be remembered for her transformative leadership, promotion of the competitor challenge process, and development of the NAD Annual Conference.

A search for her successor has begun and a position description will soon be posted on the CBBB website.   Ms. Levine will remain in her role as Director until a successor has been hired.  Expectations are that a new Director could be in place as early as this summer. 

 

Keeping Up with the Consumer Product Safety Commission: Update on Recent CPSC Developments – 3/29/2017

Register Now for Keeping Up with the Consumer Product Safety Commission: Update on Recent CPSC Developments, the latest in our 2017 Advertising and Privacy Law Webinar Series

Keeping Up with the CPSCWith the complexity of today’s product safety regulatory environment and the civil penalty amounts for failure to report safety hazards, it is more important than ever for manufacturers and retailers to identify and resolve potential liability issues confidentially before they draw scrutiny from regulators and negative publicity.

Please join chair of Kelley Drye’s Advertising and Marketing and Consumer Product Safety practice Christie Grymes Thompson for an update on consumer product safety. The webinar will cover hot button legal issues and summarize significant developments in consumer product safety and at the Consumer Product Safety Commission.

Kelley Drye Speakers:

Christie Grymes Thompson, Partner

To register, please click here.

CLE Information:

Kelley Drye is an accredited provider of NY, IL & CA CLE. This non-transitional continuing legal education program has been approved for 1.0 NY Professional Practice credit, 1.0 Illinois credit, and 1.0 CA General credit. We will apply for CLE credit in other jurisdictions, upon request, but cannot guarantee approval. If you are interested in applying to receive CLE credit, please include your desired jurisdiction and your bar registration number when you register.

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More Regulators Focus on Price Comparisons

Yesterday, the Virginia Attorney General announced that it reached a settlement with Hobby Lobby over the retailer’s price comparisons. According to the press release, Hobby Lobby advertised discounts compared to “other sellers,” but failed to disclose the basis of comparison, thus making it difficult for consumers to determine whether they were getting a good deal.

The Attorney General stated that “comparison price advertising only works if businesses are clear about their prices and how they compare to competitors.” As part of the settlement, Hobby Lobby is required to more clearly disclose the basis of its price comparisons, in accordance with Virginia’s Comparison Price Advertising Act. In addition, the company must pay $8,000.

Regulators in other countries are also focusing on these issues. For example, earlier this year, Canada’s Competition Bureau announced that Amazon had agreed to pay $1.1 Million to resolve an investigation into the company’s use of “list” prices. Amazon would frequently advertise a list price with a line through it, followed by the selling price and a savings claim. For example:

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The Bureau picked a sample of 12 products and investigated the prices at which those products were sold by Amazon and its competitors over a two-year period. According to the Bureau, those items were rarely sold at the advertised list price. Amazon stated that it required its suppliers to provide accurate price information, and had relied on this information, without independently verifying it.

The Bureau noted that Amazon had initiated various changes to its pricing practices, including (a) suppressing the list prices of certain products, (b) adopting policies and procedures to ensure compliance with the requirements the Competition Act, and (c) including the requirement that list prices be set in good faith for all products offered for sale by Amazon for Amazon Retail.

Based on recent trends, we expect to see more of these types of investigations in 2017. Retailers need to pay close attention to these developments and pricing laws, particularly when they advertise discounts, sales, or other price reductions.

 

 

How Not to Get Burned by “First” Claims

When a company comes up with a new product or feature, it will usually want to advertise the benefits of that product or feature. If the company believes that it is also the first or only company to have that product or feature, it may also want to tout its status as an innovator. For example, the company may advertise that it is the “first” company to introduce something, that it is the “only company” to offer it, or that it is “exclusive” to them. As with all objective claims, these claims require substantiation. In other words, the company must take steps to ensure that they are true. Sometimes, this can become a difficult exercise of trying to prove a negative, but there are good places to start.

SnappyScreen sells an automatic sunscreen application vending machine into which a person can walk in pale, and walk out nicely-bronzed ten seconds later. The SnappyScreencompany touted this benefit to prospective customers, and it advertised that its machine was “the World’s First Touchless Sunscreen Application System.” All is not sunny in the world of sunscreen machines, though, and SnappyScreen was sued by a competitor who argues that this claim is false. Sunscreen Mist Holdings argues that it has sold and promoted similar products since 2006, and that those products are protected by a patent. The company is suing for patent infringement and false advertising.

It’s too early to predict how this case will turn out, but it’s not too early to identify a key lesson here. If you want to advertise that you are the first or only company to have a product or feature, it’s often a good idea to commission a search by a patent attorney.  A good patent attorney will look for issued patents and other pre-existing products and public disclosures that can help you identify whether you are, in fact, the “first and only.” The results can help you figure out whether you can support the claim you want to make or, if not, whether there are ways to narrow it down.  For example, if you can’t claim that your company was the first to come up with a certain type of product, maybe you can focus on the uniqueness of a certain feature.

Aside from providing advertising guidance, the search can also be used for other purposes, such as determining whether there are patents your product might be infringing (and how to design around them), and whether it makes sense to explore patent protection for your product or any of its unique features.

The analysis may require additional steps, but if you skip this first one, you might find yourself getting burned later.

Don’t Like Negative Reviews? Read This Before You Delete Them

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Late last year, the Consumer Fairness Review Act became law, placing new restrictions on what companies can include in form contracts that impede consumers’ ability to communicate honest reviews of products, services, and companies in any forum. Quietly last month, the Federal Trade Commission released non-binding business guidance on how organizations can comply with the Act.  Given the widespread use of such terms in form agreements, such as online terms of use, it’s a good idea to determine whether any of your company’s contract terms are covered, and, if so, what changes you will need to make to such agreements.

Time is of the essence: as of March 14, 2017, the Act voids and makes unlawful such agreements containing the triggering terms.  By December 14, 2017, the FTC and State Attorneys General and other state consumer protection officials can enforce such violations as unfair and deceptive trade practices.

Who Should Pay Attention?

The law applies to organizations that use form contracts when selling or leasing that party’s goods or services, and do not provide the other contracting party with a meaningful opportunity to negotiate the terms of that contract. Standard term sheets and website agreements come immediately to mind, but given the broad scope of the law, the statute also could apply to various codes of conduct and other agreements that apply to commercial activity, both on- and offline.

What Kind of Form Contract Terms Are Prohibited?

The law prohibits and voids form contracts if they:

  • Prohibit or restrict the ability of an individual who is a party to the form contract to engage in a covered communication;
  • Impose a penalty or fee against an individual who is a party to the form contract for engaging in a covered communication; or
  • Transfer or require the other party to the contract to transfer any intellectual property rights in review or feedback content except for certain non-exclusive licenses.

For example, if your website terms of use prohibits customers from posting a review of your product or service as a condition for using the Site, or cites a consequence if they do, such terms are prohibited by the law. It also pays to closely look at Site terms that allow the company to remove postings for any reason, and what type of criteria is used operationally to remove offensive reviews.

What Communications Are Protected?

The law’s main intent is to protect honest reviews of goods, services, and the conduct of the contracting party. It thus broadly protects written, oral, or pictorial reviews, performance assessments of, or other similar analyses of the goods, services, or conduct of the party that issues the form contract in the course of selling or leasing the person’s goods or services.

What Communications Are Not Covered?

The Act has a number of exemptions and does not apply to:

  • Employer-employee or independent contractor contracts, including photographs or videos owned by a party that are subject to such contracts;
  • False and misleading content;
  • Content that is defamatory, libelous, slanderous, or similar;
  • Content containing personal information, or another person’s likeness;
  • Content that is libelous, harassing, abusive, obscene, vulgar, sexually explicit, or is inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristic;
  • Content that is unrelated to the goods or services offered by or available on the party’s website; or
  • Content impacting a party’s duty of confidentiality imposed by law, including via agency guidance.

For websites that host online consumer reviews and comments, the Act also does not prohibit the website host from reserving the right to remove:

  • Privileged or confidential trade secrets, commercial, or financial information;
  • Personnel, medical, and similar files, which, if disclosed, would constitute an unwarranted invasion of privacy;
  • Law enforcement records, which, if disclosed, would constitute an unwarranted invasion of privacy;
  • Unlawful content; or
  • Content that poses security risks, such as viruses or worms.

Does This Law Preempt State Laws?

Notably, the law does not preempt state laws, so businesses will still need to comply with states that regulate this space, such as California’s similar law, which lacks the long list of exceptions in the federal statute, and carries its own civil penalties for non-compliance.

Conclusion

Given the common use of these terms in a variety of agreements, a little Spring (contract) cleaning is in order for most organizations. Proactive efforts on this front can prevent expensive lawsuits and government investigations in the future.

So What’s In the “Fairness in Class Action Litigation Act of 2017”?

On Feb. 9, the Chair of the House Judiciary Committee introduced a bill titled the “Fairness in Class Action Litigation Act of 2017” (FCALA) (H.R. 985).  Although the FCALA has a worthy goal and several provisions that build on existing, successful class action reforms, it may have too many “poison pills” to pass the Senate, as did its predecessor bill of the same title introduced in 2015 (H.R. 1927).  Before businesses suit up for a fight over those more controversial aspects of the bill, however, they should consider the likelihood of unintended consequences if those provisions become law.

Two provisions of the FCALA would extend to all class actions some of the beneficial changes Congress imposed on securities fraud class actions in the 1995 Private Securities Litigation Reform Act.  The bill would require named plaintiffs to provide certifications attesting to their willingness to serve as class representatives and disclosures of any other class action cases they have brought.  It also would presumptively stay discovery in all class actions while motions to dismiss are pending.  Both of those steps would be helpful to class action defendants and preclude class plaintiffs from exerting undue settlement pressure until the Court has determined the plaintiff has a plausible claim.

The FCALA then would go beyond the securities reforms by also requiring class counsel to disclose any employment, familial, or contractual relationship it has with the named plaintiff and precluding courts from certifying classes represented by people possessing such relationships.  The bill seems to preclude a law firm from representing the same client in multiple class actions — a requirement the bar will resist.  It also would stay discovery during the pendency of “any motion to transfer” or “motion to strike class allegations.”  In that respect, the FCALA would become the first federal law or rule explicitly recognizing the propriety of pre-discovery challenges to class claims.  The bill does not contain an express exception allowing discovery on class issues while a motion to strike class allegations is pending, which would set up an interesting and perhaps untenable dynamic if the defendant seeks to introduce materials beyond the pleadings while preemptively attacking class claims.

The bill would substantially tighten class certification requirements.  Under current law, before certifying classes, courts must find (among other things) that the named plaintiff is a “typical” and “adequate” class representative, and that questions common to the class “predominate” over questions individual to each putative class member.  The FCALA would impose a new “super-typicality” requirement that “each proposed class member [must have] suffered the same type and scope of injury” as the named plaintiff.  What this would mean in practice is unclear.

Every Court of Appeals to opine on the subject of class definitions has precluded so-called “fail-safe” classes and held that classes must be “defined with reference to objective criteria.”  The FCALA would codify that requirement.

The FCALA also weighs in on the current Circuit split over “ascertainability” and resolves that split in the Third Circuit’s favor.  It would preclude class certification unless “there is a reliable and administratively feasible mechanism” to determine whether someone is a member of the class.  The bill is silent, however, as to whether accepting say-so affidavits from class members is such a “feasible mechanism.”  If affidavits are not acceptable, the net effect of the FCALA likely would be to preclude class certification in consumer products cases where the defendants do not have contact information for their end-purchasers.  That potential effect already has generated major opposition to the bill from consumer advocates.

In fact, the FCALA would go well beyond the Third Circuit’s holding by prohibiting courts from certifying classes unless a means exists to “distribut[e] directly to a substantial majority of class members any monetary relief secured for the class.”  Businesses, however, should be at least as wary of that provision as the plaintiffs’ bar is, if not more so.  Although one possible outcome, if this aspect of the FCALA becomes law, is that classes rarely will be certified, another is that plaintiffs will push harder to maximize claims rates, including by demanding intrusive third-party discovery from the defendants’ business partners and insisting on ever-more-expensive and burdensome steps to provide notice to class members.

Where defendants find themselves on the wrong end of a class certification ruling, current Federal Rule of Civil Procedure 23(f) already permits interlocutory appeals from those orders.  Rule 23(f), though, allows the Courts of Appeals to accept or reject those appeals based on any criteria they may set.  The FCALA would require the Courts of Appeals to hear these appeals mandatorily.  That change would be a boon to defendants who believe a class was certified wrongly, but it also would mean defendants must bear the costs and risks of defending appeals from disappointed plaintiffs that, under the current procedures, never would have made it past the petition stage.

The most recent round of major class action reform, the Class Action Fairness Act of 2005, came in the last year of unified Republican control of Congress and the Presidency.  The return of that unified control stirs hope for further class action reform, which is badly needed.  The FCALA is a helpful first shot in that battle, but it could use some additional input from the proverbial front lines of the consumer class action wars.

To learn more about Class Action Litigation, please tune in for our webinar on February 22 at 12 PM ET on “Litigation is Inevitable: Update on Recent Advertising Class Actions.” For more information and to register, please click here.

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