In the first half of 2018, on the heels of the Equifax breach last fall, a number of state legislatures addressed privacy and data security issues, and in particular, data breach notification. Most notably, Alabama and South Dakota passed their first breach notification laws, making it so there now breach notification laws in all 50 states. In addition, Arizona, Louisiana, Colorado and Oregon updated their existing laws.

Both the new laws and the revisions reflect national trends over the last several years to clarify (and shorten) notification periods, broaden the scope of information that prompts notification requirements, and increase engagement with regulators. The changes add complexity, but because they are in line with changes made by other states, they should not require substantial changes to existing procedures for responding to larger incidents. Continue Reading What You Need to Know Regarding The New Data Breach Notification Laws

Takeaways:

  1. Regulators continue to emphasize that relative comparisons in advertising must be supported by fact-based evidence.
  2. Each claim in an advertisement remains subject to review by the National Advertising Division.

Continue Reading National Advertising Division Recommends that Maker of Reusable Storage Bags Discontinue Unsupported Comparative Advertising Claims

The annual ABA Antitrust Law Spring Meeting held in Washington, D.C., last month included sessions on consumer protection. Key takeaways include the following:

  • The FTC Act remains broad in scope, claims about products treating serious diseases must be supported by clinical testing, and companies promoting their products as “Made in the USA” must meet the “all or virtually all” standard, meaning that all significant parts and processing that go into the product must be of U.S. origin.
  • When the GDPR goes into effect on May 25, 2018, U.S. companies that target their goods and services to EU residents or track the behavior of EU residents will be subject to its new requirements, regardless of whether they have a physical presence in the European Union.
  • Absent congressional action, the current debate on net neutrality is likely to continue for years to come.
  • A website or online service directed toward children that collects personal information (or an online service with knowledge of the data collection) must comply with COPPA, and regulators observe that it is less expensive for companies to build compliance on the front end than to retrofit a service.

This update details discussions on the above topics covered at the April meeting. Read the full Update here.

  • An increasing number of individuals who are deaf or hard of hearing are challenging the absence of closed captioning as a violation of the Americans with Disability Act (ADA).
  • Companies placing video on their websites should consider whether they need to include closed captioning under the ADA.

Computer Keyboard with Glasses

Website accessibility under the ADA continues to be a trending legal area, with multiple complaints filed against companies each week. Although most complaints allege that a website violates the ADA for failing to be accessible for users who are blind or visually impaired, an increasing number of complaints allege that online video without closed captioning violates the ADA. These plaintiffs assert that the failure to provide closed captioning makes the videos inaccessible to individuals who are deaf or hard of hearing. In March and April 2018, more than 25 complaints were filed in federal courts across the country alleging that a failure to provide closed-captioning violates the ADA.

Title III of the ADA generally requires that places of public accommodation provide equal access to the goods and services they offer. The DOJ has not issued rules regarding website accessibility, but various courts have held that the ADA requires certain websites to be accessible to people who are blind and visually-impaired.  Some courts have held there must be a nexus between the website and a physical place of public accommodation, but other courts do not require such nexus.  Because plaintiff’s lawyers continue to focus on this area, companies will want to pay attention to the accessibility of their websites, including closed captioning.

Because pricing discount and sales class actions are likely to continue and retailers, especially brick-and-mortar ones, may have difficulty enforcing arbitration agreements and class action waivers, companies will want to not only check the ways in which they draft and enforce arbitration agreements, but carefully monitor compliance with pricing laws.

The Tenth Circuit recently affirmed a district court’s denial of J.C. Penney’s bid to compel arbitration in a putative class action challenging J.C. Penney’s pricing discounts and sales in Cavlovic v. J.C. Penney Corp., Inc., No. 2:17-CV-02042-JAR-TJJ (10th Cir. March 7, 2018). The case involved an in-store transaction. The Court of Appeals rejected J.C. Penney’s attempt to enforce (1) an arbitration clause contained in a credit card agreement; and (2) an arbitration clause contained in the agreement governing J.C. Penney’s rewards program.Shopping bags in the mall

Plaintiff purchased a pair of earrings at a J.C. Penney retail location with an advertised price of $209.99. The earrings were marked with a previous price of $524.98, and Plaintiff also received 25% off due to an additional sale. After purchasing the earrings and retuning home, Plaintiff claimed that she noticed an original price tag of 225, which was blacked out. Alleging the former price of $524.98 was fraudulently inflated and that she should have been given a discount off the $225 price, she sued J.C. Penney. She alleged false advertising under the Kansas Consumer Protection Act and asserted that she suffered emotional distress.

In response, J.C. Penney tried to enforce two different arbitration clauses–one from a J.C. Penney’s branded credit card (used to purchase the earrings) and the other from a rewards program (of which Plaintiff was a member). J.C. Penney lost on both arguments. The Tenth Circuit held that J.C. Penney was not a party to the credit card agreement formed between the issuing bank and the Plaintiff, and could not enforce the contract as a third party under Utah law, which governed the agreement. As for the rewards program, while J.C. Penney was a party to that agreement, the Court determined Plaintiff’s complaint was outside the scope of the arbitration clause, which governed disputes only “arising from or relating to” the rewards program itself.

Arbitration Poison Pill Spells Doom for AT&T’s Arbitration Hopes

Takeaways:

  1. California Supreme Court recently held that an arbitration agreement that waives the right to seek public injunctive relief regardless of forum is (1) contrary to public policy and (2) not preempted by the Federal Arbitration Act.
  2. District Court for the Northern District of California granted a motion to reconsider its earlier order compelling arbitration of putative class action because the arbitration agreement at issue waived consumers’ right to seek public injunctive relief and was, by its terms, not severable from the remainder of the arbitration agreement.
  3. Parties may agree to arbitrate claims for public injunctive relief, but they cannot agree to waive consumers’ right to assert those claims at all.
  4. Drafters of arbitration agreements should reconsider poison-pill provisions that invalidate the entirety of the arbitration agreement if only the portion addressing injunctive relief is unenforceable.

Continue Reading California Federal Court Rescinds Order Compelling Arbitration in Consumer Class Action Because Arbitration Agreement Prohibited Public Injunctive Relief

Cy pres remedies … are a growing feature of class action settlements. … In a suitable case, this Court may need to clarify the limits of the use of such remedies.” Marek v. Lane, 134 S. Ct. 8, 9 (2013) (Roberts, C.J., respecting denial of certiorari).

In Marek, the U.S. Supreme Court denied cert in a case questioning the propriety of a cy pres award in a class action settlement. But Chief Justice Roberts suggested he might nevertheless be on the lookout for “an opportunity to address the more fundamental concerns surrounding the use of such [cy pres] remedies in class action litigation, including when, if ever, such relief should be considered; how to assess its fairness as a general matter; … what the respective roles of the judge and parties are in shaping a cy pres remedy; how closely the goals of any enlisted organization must correspond to the interests of the class; and so on.” Id. Continue Reading Is SCOTUS Going to Tackle Cy Pres Awards in Class Action Settlements?

The Federal Trade Commission (FTC) and the State of Maine recently delivered yet another “gut check” to businesses engaging in weight loss advertising, Map of Maineobtaining a $2 million dollar settlement against an advertising agency related to allegedly false claims. While challenges related to weight loss claims and related offers are all too familiar for brands, this settlement serves as a heavy reminder to ad agencies that they can also be held responsible for false advertising.

In its complaint against Marketing Architects Inc. (MAI), the FTC and Maine alleged that radio ads created and disseminated by MAI for its client, Direct Alternatives (the maker of Puranol, Pur-Hoodia Plus, PH Plus, Acai Fresh, AF Plus, and Final Trim) made a number of (1) false or unsubstantiated  weight loss claims; (2) false or inadequately-disclosed “free trial” claims; and (3) false testimonials or ads disguised as testimonials. Continue Reading Agency Beware: False Advertising Liability Applies to Agencies Too