It is not a stretch to assert that Spencer Sheehan has achieved notoriety for his prolific filing of consumer class actions. He is referred to by some as the “Vanilla Vigilante”—an apt moniker derived from suing manufacturers claiming products are made with vanilla when in reality they contain artificial flavoring. According to a recent New Yorker profile, Sheehan’s firm has filed over 500 similar class action lawsuits. But as Sheehan has recently discovered, when alleging labels are not true and that consumers would be misled, especially in the volume that Sheehan has done, courts are particularly vigilant that allegations are substantiated.

A recent plaintiff represented by Sheehan alleged that Starbucks, by marketing one of its coffees as “French Roast Ground 100% Arabica Coffee,” misrepresented that its coffee was without additives such as potassium. The Court found the plaintiff's claim was groundless. While the complaint cited to “reports based on laboratory analysis,” the sources of the report were found to be a New York Post article and a “study [that] appeared to be an advertisement,” as well as Sheehan’s own investigation completed after the complaint was filed. Moreover, even if the plaintiff had alleged evidence of a higher potassium content, the Court found that no reasonable consumer would take "100% Arabica Coffee" to mean anything other than that its beans are from an Arabica coffee plant.

The Court not only dismissed the claim, but it also sanctioned Sheehan for filing frivolous claims. The 18 actions Sheehan filed in the Northern District of New York since 2021—all of which stalled at the motion to dismiss phase—may have been top of mind for the Court.

Sheehan's own words from the past were also cited in the Court’s opinion. A prior defendant company filed an amicus brief describing a separate lawsuit Sheehan filed, where in response to a threatened motion for sanctions, Sheehan stated, "So go file your rule 11 motion [sic] I hear such sanction threats from people like you all day long."

Citing the number of failed lawsuits Sheehan filed in the District, along with the lack of substantiation for the claims against Starbucks and the faulty theory at the heart of the case, the Judge ultimately sanctioned Sheehan and held him in civil contempt of court.

The CPSC currently has one vacant seat, but a second seat will open up this October, at the termination of Commissioner Elliot Kaye’s hold-over year. A third slot will then become available at the close of Acting Chairman Adler’s term.

The Senate Committee on Commerce, Science, and Transportation will need to hold one or more hearings to consider the three nominees before they can be confirmed. However, it is unlikely that one of those hearings will be held before the Senate’s August recess, making action on all three nominees likely for the fall.

If the nominations are confirmed, the CPSC will have a full slate of five Commissioners for the first time since 2019. Currently split with two Democratic and two Republican Commissioners, the CPSC will have a 3-2 split between Democrats and Republicans if the nominees are approved.

Each of the three nominees has some experience on matters involving CPSC. Hoehn-Saric served as the Deputy General Counsel for the Department of Commerce after being senior counsel for the Senate Committee on Commerce, Science and Transportation. Mary Boyle, current CPSC Executive Director, has over a decade of experience at CPSC in various positions, including working on policy, agency administration, product recalls, and civil penalty negotiations. Trumka Jr., son of AFL-CIO President Richard Trumka, has assisted the subcommittee on Economic and Consumer Policy investigate consumer safety issues relating to children’s booster seats, JUUL e-cigarettes, and talc baby powder.

Summer associate Elizabeth Hamner contributed to this post. Ms. Hamner is not a practicing attorney and is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

Fulfilled by Amazon

The CPSC voted 3-1 to file its complaint against Amazon for allegedly not recalling hazardous third-party products sold on its Fulfilled by Amazon platform. Those hazardous products include flammable children’s pajamas, faulty carbon monoxide detectors, and hair dryers without protections against electrocution. Though Amazon has stopped selling some of these potentially harmful products, the CPSC still wants Amazon to issue recalls with the Commission and to destroy any of the goods returned to them.

The CPSC’s complaint reflects its ongoing challenge with how to handle massive third-party platforms while still effectively protecting consumers. Under the Fulfilled by Amazon program, merchants can keep their products at an Amazon fulfillment center, and Amazon will pack and ship the products for them for a fee. Those merchants maintain legal titles to their products while Amazon provides its packing and shipping services. CPSC, however, emphasizes that when a consumer returns a Fulfilled by Amazon product, it goes back to Amazon, not the merchant. Amazon then examines the product to see if it can be resold. If an item cannot be resold, then the merchant can have the product mailed back to its own facility.

In its complaint, the CPSC considers Amazon as a “distributor” that may be liable for the safety of the products it packs and ships.

Amazon, like many similar platform providers, does not consider itself a “distributor” of these products. Indeed, the Texas Supreme Court’s Amazon.com, Inc. v. McMillan ruling this June supports Amazon’s stance. The Texas Court found that the company is not considered a “seller” of Fulfilled by Amazon products under the state's product liability law, because the platform does not actually hold title to the products.

Amazon has notified consumers who purchased the products identified in CPSC’s complaint about the potential hazards and offered to refund customers with Amazon gift cards, but the CPSC said those efforts are not enough. The CPSC wants Amazon to recall the defective carbon monoxide detectors, hair dryers and youth garments and facilitate their returns so the retailer may destroy them. And the CPSC has requested documentation proving the items’ destruction as well as monthly progress reports on the process. They further ask that Amazon notify those who purchased defective items and issue them full refunds.

The outcome of this case could jeopardize the existence of third party marketplaces or at least require them to completely revamp their current business models. In addition, it could have broader implications for entities that help third parties sell their products.

Thyssenkrupp Access Corp.

The CPSC also voted 3-1 to file the complaint against Thyssenkrupp Access Corp. (“Thyssenkrupp”), a major elevator company. The complaint alleges Thyssenkrupp’s residential elevators contain defects in the elevators’ design and installation materials, presenting a substantial product hazard.

The CPSC alleges that the elevators are dangerous due to a narrow gap between the hoistway door and elevator car door. Small children can slip between the doors into that space and become trapped or fall under a moving elevator car.

The lawsuit seeks to require Thyssenkrupp to inspect the elevators installed in customers’ homes and offer free installations of space guards in the elevators.

In another example of CPSC’s growing willingness to take unilateral action to notify the public of a potential safety issue, Acting CPSC Chairman Adler followed the lawsuit with a notice to vacation rental platforms, including Airbnb and Vrbo, urging them to disable elevators immediately until they have been inspected.

We will continue to watch this case and the ramifications it could have for companies that manufacture or distribute products for a third party’s installation.

Summer associate Elizabeth Hamner contributed to this post. Ms. Hamner is not a practicing attorney and is practicing under the supervision of principals of the firm who are members of the D.C. Bar.

• RETAILERS: New Colorado Consumer Protection Law Requires Redemption of Gift Cards with a Cash Value of $5 or Less May 10, 2010
• Dietary Guidelines for Americans, 2010 February 2, 2011
• Insurance Coverage for Lanham Act False Advertising Claims April 2, 2012
• How to Properly Use Establishment Claims in Advertising October 28, 2013
• White House Objects to Commercial Use of President’s Photo April 8, 2014
• Applying the Video Privacy Protection Act to Online Streaming June 2, 2015
• The Regulatory Landscape for Indirect Auto Lenders After Ally January 30, 2016
• Read This Before Scanning A Driver’s License In New Jersey July 26, 2017
• GDPR Sidebar: Comparing the California Consumer Privacy Act to the GDPR July 13, 2018
• CCPA Update: California Governor Signs Seven Amendments to the CCPA October 13, 2019

• California Consumer Privacy Act (CCPA) CCPA was far and away the most popular topic of 2019 and, as mentioned in one of our last posts of the year, “businesses and privacy professionals would do well to catch their breath over the holiday season. Next year is going to need focus and investment to reach the [CCPA] finish line (which, yes, will continue to move because this is privacy law, after all).​” Here are a few CCPA related posts you may want to read if you haven’t already:
  • Broad Range of Implementation Worries Surfaces at CCPA Rulemaking Hearing in LA December 5

• • Be Careful What You Say About the CCPA November 12

• • CCPA Update: California Attorney General Issues Draft Privacy Rules October 11

• • CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year September 15

• The FTC’s Powers Under Section 13(b) The continuing questions over the extent of the FTC’s enforcement authority to obtain monetary relief under Section 13(b) were a popular topic with Ad Law Access readers. So popular that we created a Section 13(b) sub-blog:
  • Direct Seller Stands Its Ground: Neora Seeks Declaratory Judgment Against the FTC, Challenging the Agency’s Section 13(b) Authority November 5
  • Business As Usual? FTC Practice in the Wake of Shire ViroPharma and Credit Bureau Center October 22
  • A Potential New Fight Over FTC’s 13(b) Authority May 19

Other posts that resonated with readers:

• FTC Releases New Guide for Influencers November 9
• CBD and False Advertising: Lessons Learned From The Food Court August 9
• Nevada and Maine Advance Legislation Addressing the “Sale” of Personal Data June 4
• FDA and FTC Issue Joint Warning Letters to Three Online CBD Marketers April 2
• FTC to Use 6(b) Authority to Examine Tech Companies’ Data Practices March 22
• Taking Stock of the TCPA in 2019: What is an “Autodialer”? March 4
• The Direct Selling Self-Regulatory Council: What it Means for Multi-Level Marketers January 10

AD LAW ACCESS PODCAST

2019 also saw the launch of the Ad Law Access podcast. Top episodes included:

• CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year
• Privacy Update: The Terms of the Facebook Settlement; CCPA Amendments Advance in Calif. Senate
• Cause Marketing - Commercial Co-Ventures: What You Need to Know Before Getting Started (12:30)
• CCPA Update (Amendments, Draft Regulations, and Classification issues) (12:00)
• Texting 101 - The Hot Button Issues to Consider When Running a Texting Campaign (11:25)
• Challenging Competitors' Claims
• Making it in the USA – When Product Origin and Origin Marketing Claims Matter (13:00)
• Influencers Gone Wrong (10:30)
• Influencers and Endorsers: Understanding the Upfront Legal Requirements (9:10)

• Call frequency limitations. The proposed rule would generally prohibit collectors from calling consumers more than seven times per week regarding a specific debt and require a collector to wait at least a week before calling the consumer once a conversation takes place. While consumer advocates have argued that this provision would effectively green light seven calls per week in connection with each consumer debt, debt collectors would continue to be subject to preexisting laws that already prescribe requirements for contacting consumers by phone generally, such as the Telephone Consumer Protection Act (TCPA). Some in industry, on the hand, have countered that an absolute call frequency limit would neither be workable nor practical, and have asserted that appropriate call frequency should instead be determined on a case-by-case basis.
• Text messages and emails as acceptable communication methods with new limitations. The proposed rule acknowledges that emails and text messages are regularly used for debt collection purposes and permits that use subject to certain restrictions, such as requiring instructions that permit the consumer to opt out from receiving messages. The rule would impose new limitations that would operate in addition to existing requirements under the TCPA and state laws, which are not preempted under the proposal. The proposed rule would also create a new category of messages called a “limited-content message,” which would only contain certain information and not be deemed a “communication” for purposes of general limitations under the FDCPA.
• Disclosures and validation notices. The proposed rule provides more details regarding the information that must be included in written notices following an initial communication a debt, and requires collectors to provide prompts that a consumer could use to dispute a debt, request information about the original creditor, or take certain other actions. The proposal offers a model validation notice that could be used to comply with these requirements and creates a safe harbor if a collector complies with certain steps when delivering the validation notice.
• Recordkeeping. The proposed rule would also require collectors to retain evidence of compliance, including records evidencing that collectors perform the actions and made the disclosures required under the rule. The rule allows such records to be retained by any method that reproduces the records accurately (including electronically) and that ensures that the debt collector can easily access the records.

• A list of rulemakings, petitions, applications, complaints, requests, and other items pending before the CPSC, including the length of time the matter has been pending and associated staff;
• The total number of reports of unsafe products received through saferproducts.gov from FY 2016-2019;
• Information pertaining to the number of investigations opened and closed by the Office of Compliance & Field Operations from FY 2016-2019;
• Details about involvement in voluntary standards development;
• A list of all FOIA requests from FY 2016-2019;
• A list of civil penalties, including lists of internal “referrals” for civil penalties; and
• A list of all matters from which CPSC leadership or staff has been recused from FY 2016-2019 and the reason for each recusal.

Here’s how the shutdown is affecting federal agencies responsible for overseeing and enforcing advertising and privacy laws:

• The FTC closed as of midnight December 28, 2018. All events are postponed and website information and social media will not be updated until further notice. While some FTC online services are available, others are not. More information here.
• The CPSC is also closed, although a December 18, 2018 CPSC memorandum summarizing shutdown procedures indicates that certain employees “necessary to protect against imminent threats to human safety” will be excepted employees and continue work during the shutdown. The CPSC consumer hotline also continues to operate. Companies should remember that obligations to report potential safety hazards are not furloughed, so the mantra of “when in doubt, report” still applies, even if public announcement of a recall may be delayed.
• Roughly 40% of FDA is furloughed according to numbers released by its parent agency, the Department of Health and Human Services. In a post on its website, the agency explained that it will be continuing vital activities, to the extent permitted by law, including monitoring for and responding to public health issues related to the food and medical product supply. The agency is also continuing work on activities funded by carryover user fee balances, although it is unable to accept any regulatory submissions for FY 2019 that require a fee payment.
• Because the CFPB is funded through the Federal Reserve and not Congress, it remains in operation.

Kraninger is set to serve a five-year term pursuant to the Dodd-Frank Act. However, current litigation challenging the constitutionality of the CFPB’s structure raises questions as to whether Kraninger will ultimately serve the full five-year term, particularly if a Democratic president is elected in 2020. As we previously discussed here, the D.C. Circuit initially ruled that the CFPB was unconstitutionally structured because its single director can only be removed for “inefficiency, neglect of duty, or malfeasance in office,” but subsequently reversed the holding in an en banc decision. The constitutionality of the CFPB’s structure is also being challenged in the Second and Fifth Circuits – increasing the likelihood that the Supreme Court will take up the issue at some point soon.

Once Mr. Feldman is sworn in, the five-member Commission will have a Republican majority for the first time since 2006, although Acting Chairman Ann Marie Buerkle’s (R) nomination to become Chairman is still pending. Despite this delay, with the Commission back to full strength, we will watch for policy and enforcement developments, particularly as the Commission votes on the FY 2019 Operating Plan next month.

If he is confirmed, the Republicans will return to the majority after almost 12 years. Senator Jerry Moran (R-Kan.), Chairman of the Subcommittee on Consumer Protection, Product Safety, Insurance and Data Security, has stated that he hopes the Committee will move “expeditiously” with Feldman’s confirmation and that his “expertise in regards to the issues before the Commission and extensive qualifications will be an asset as the Commission gets back on track in advancing product safety policies that reflect the principles of sound regulation.” Similarly, Congressman Bob Latta (R-OH), Chairman of the Digital Commerce and Consumer Protection Subcommittee, has urged the Commerce Committee to move forward with not only Feldman’s confirmation, but also Acting Chair Ann Marie Buerkle’s confirmation. Buerkle’s (R) nomination to become Chairman has been pending for 10 months with no indication of when a vote will be scheduled.

Prior to his nomination, Mr. Feldman spent the past seven years as Senior Counsel on the Commerce Committee, where he focused on privacy, technology, data security, motor vehicle safety, product liability, and sports law. Before graduating from American University Washington College of Law in 2010, Feldman oversaw media operations for John McCain’s presidential campaign and worked as an associate with the National Republican Congressional Committee.

• Best practices for mitigating against safety hazards. The BCP staff’s comments placed security and safety hand in hand with the following recommendations for companies offering connected devices: (1) risk assessments to evaluate their security programs and pinpoint possible threats before launching a product; and (2) oversight of service providers, including the incorporation of security standards into contracts and ensuring that the providers are complying with applicable security standards.
• Registration for safety alerts and information related to recalls. The BCP staff recommended implementing a process similar to the CPSC’s current protocol for alerts related to infant and toddler products, wherein manufacturers and retailers are required to provide a safety registration card with the product. Instead of requiring the consumer to mail-in a registration, however, a URL could be included for online registration.
• The role of government in regulating IoT security. The BCP staff did not take a position on whether the CPSC should implement regulations specific to IoT device hazards, but suggested that, if the CPSC considers such regulation, it should take a technology-neutral approach so that any such regulation does not quickly become obsolete.

Prior to this nomination, Baiocco was a litigator at Jones Day who counseled clients on CPSC recalls and class-action lawsuits. Concerns have been raised as to her potential conflicts of interest stemming from her representation of companies such as Mattel and Yamaha, but she has committed to assess the need for possible recusal on matters on a case-by-case basis. Ms. Baiocco attended Duquesne University School of Law and clerked for The Honorable Gustave Diamond of the U.S. District Court for the Western District of Pennsylvania. Based on testimony during her confirmation hearing, Ms. Baiocco can be expected to focus on emerging technology, including Internet of Things issues, and the subsequent hazards. She will serve a 7-year term to end on October 27, 2024.

Ann Marie Buerkle (R) continues as Acting Chairman, and her nomination to become Chairman is still pending.

The CPSC has identified two product safety challenges associated with IoT products: (1) preventing or eliminating hazardous conditions designed into products intentionally or without sufficient consideration; and (2) preventing and addressing incidents of hazardization. While the former falls into the CPSC’s wheelhouse of preventing and correcting consumer product issues, the latter is a non-traditional area of product safety activity and could pose some challenges with the high rate of growth of connected products. The CPSC defines hazardization as “the situation created when a product that was safe when obtained by a consumer, but which, when connected to a network, becomes hazardous through malicious, incorrect, or careless changes to operational code.” Examples include a connected cooktop with a software glitch that ignites without the consumer’s knowledge and starts a fire or an integrated home security system that fails to download a software update and the default condition is to deactivate the system, disabling the smoke alarms without the consumer’s knowledge.

The Commission wants to hear about a wide range of topics such as whether current voluntary standards sufficiently address safety hazards specific to connected devices, the role the government should play in keeping consumers safe regarding IoT devices, and who should be considered responsible for hazards or injuries among various contributors to an internet-connected product associated with an incident.

If you would like to present at the hearing, transcripts of oral comments must be submitted by May 2. Anyone can attend the hearing on May 16. For further details, click here for the full text of the CPSC’s notice.

The CPSC claims that the three-wheel strollers’ quick release mechanism can fail to secure the front wheel to the fork, allowing that front wheel to detach during use. Furthermore, due to the design of the stroller, consumers are allegedly likely to believe that the wheel is secured when it is not. The CPSC states that it has received over 200 reports of incidents since January 2012 – 97 of which resulted in injuries, some severe, to 50 children and 47 adults. In a press release on the B.O.B. website, Britax counters that the strollers are safe when used as instructed and do not contain a defect. The company points out that the QR mechanism is “widely-used” in bicycles and strollers, and front wheel detachments only occur when wheels are installed improperly – and contrary to available written and video instructions.

The complaint requests a finding that the strollers present a “substantial product hazard” under the CPSA and an order Britax that implement a corrective action plan that includes initiating a stop-sale, notifying consumers and the public of the recall, and providing a remedy. The Commissioners voted to approve the complaint along party lines, with Acting Chairman Ann Marie Buerkle opposing the filing. As we have previously reported, the Commission’s priorities could shift if she and Republican nominee Dana Baiocco are confirmed.

Under the CPSA, manufacturers, distributors, and retailers have an obligation to report to the CPSC as soon as they obtain information that reasonably supports the conclusion that a consumer product contains a defect that could create a substantial product hazard, or creates an unreasonable risk of serious injury or death. The CPSC takes this reporting obligation very seriously, and staff do not hesitate to reach out to companies after receiving a number of consumer complaints related to a single consumer product (or set of products).

Michaels sold about 200,000 vases, and the CPSC and DOJ alleged that the products could shatter in consumers’ hands because they were too thin to withstand the pressure of normal handling. Injuries reportedly associated with the breaking glass included permanent nerve damage and lacerations requiring stitches. Michaels, as the complaint asserts, “possessed information that the vases had injured one consumer in 2007 and at least four customers in the first half of 2009,” but did not report to the CPSC until February 2010.

In an unusual move for DOJ and CPSC, the original complaint alleged that, once Michaels notified the CPSC, it falsely conveyed how the glass vases were acquired, so DOJ also brought a material representation count. Specifically, the report Michaels submitted to CPSC stated that the vases were purchased from a vendor, but records identified Michaels as the importer. In April 2017, dropped the material misrepresentation claim to focus on the civil penalties and injunctive relief.

In addition to paying the civil penalty, consistent with previous civil penalties, Michaels must implement a compliance program to ensure timely and accurate reporting to the CPSC in the future.

To avoid similar consequences, companies should remember the very low bar for what triggers a Section 15(b) Report to the CPSC, even for products like glass vases that have inherent properties that could cause an injury.

As reported in our Ad Law News and Views newsletter, Kelley Drye’s Advertising Law practice posted 106 updates on consumer protection trends, issues, and developments to this blog in 2017. Here are some of the most popular:

• New Lawsuit Highlights Risks of Using User-Generated Content
• FTC Announces $1.3 Million Settlement in Negative Option Case
• Read This Before Scanning A Driver's License In New Jersey
• FTC Staff Reminds Brands and Influencers About Disclosure Requirements
• "OK, Google. Send a Letter to the CPSC”: Privacy Groups Request Recall of Google Home Mini
• New NAD Decision Addresses Product Reviews
• Judge Upholds FTC Staff Opinion that Avatar Calls are Prerecorded Messages under TSR
• Instagram Announces a New Tool for Influencers
• EU Data Protection Authority Issues GDPR Action Plan, Swiss Sign Privacy Deal with U.S.
• Don’t Like Negative Reviews? Read This Before You Delete Them
• More Regulators Focus on Price Comparisons
• CIT Adds New Requirements for ‘Assembled in USA’ Claims Analysis
• How Not to Get Burned by “First” Claims
• NAD Gives Bill of Good Health to Dietary Supplement Immunity Claims
• Court Relies on Due Process Argument to Dismiss Website Accessibility Suit

2018 Advertising and Privacy Law Webinar Series

Please join Kelley Drye in 2018 as we continue our well attended Advertising and Privacy Law Webinar Series. Like our in-person events, this series gives key updates and provides practical tips to address issues faced by counsel as well as CLE credit. This webinar series will start again in February 2018. Please revisit the 2017 webinars here.

In the short term, the Commission will have a 3-1 Democrat majority, but Dana Baiocco (R) has been nominated to fill the seat of Commissioner Marietta Robinson (D) as her term ends this month. Once that nomination is confirmed, the Commissions would have two Republicans (Ms. Baoicco and Acting Chair Ann Marie Buerkle), two Democrats (Commissioners Robert Adler and Elliot Kaye), and one open slot.

The groups claim that this glitch resulted in Google intercepting and recording private conversations without consumers’ knowledge or consent, and that the device therefore poses a risk to consumer safety. Although they acknowledge that “the privacy concerns associated with Internet-connected devices appear different from traditional public safety concerns,” the groups call on the CPSC and its “broad mandate” to respond to such concerns, particularly in light of the “failure” of the FTC to investigate complaints involving Internet-connected devices.

Under the Consumer Product Safety Act, manufacturers, importers, distributors, and retailers have an obligation to immediately report to the CPSC when they obtain information that reasonably supports the conclusion that a consumer product contains a defect that could create a substantial product hazard, or creates an unreasonable risk of serious injury or death. While the groups note that the CPSC recently announced a recall of Internet-connected devices, the cited recall involved a product that posed an actual injury to consumers. CPSC action based on a non-physical injury, such as invasion of privacy, would be breaking new ground, but manufacturers, distributors, and retailers of IoT and other connected products should continue to watch for new developments and consider the potential safety issues associated with the products.

The Senate Committee on Commerce, Science and Transportation approved Acting Chairman Ann Marie Buerkle’s nomination to become CPSC Chairman last Thursday in a 14-13 vote along party lines. She is expected to be confirmed by the full Senate, and would then be able to move forward with staff appointments. Buerkle has served as Acting Chairman since February, and was nominated to become Chairman in July. For more information about Acting Chairman Buerkle's priorities at the CPSC, please view our previous blog posts here and here.