Arbitration provision on company website kills false advertising action
We’re always coming back to Sensa. The now-defunct weight-loss-supplement company sold shakers filled with “tastant crystals” that consumers were supposed to sprinkle on their food. But the company tanked after it was fined $26.5 million in a settlement with the Federal Trade Commission (FTC or Commission), which penalized the company for misleading product claims. The alleged claims were … outlandish by many accounts. According to the Commission, Sensa claimed to enhance “food’s smell and taste, making users feel full faster, so they eat less and lose weight, without dieting, and without changing their exercise regime.” It should come as no surprise that litigation followed in the wake of the settlement. But that’s not the interesting part.
After a byzantine series of complaints, consolidated cases and amended complaints, Stokes v. Sensa Products reached its more-or-less recognizable form in November 2016. In her complaint lodged that month, Susan Grace Stokes charged Sensa Products and a slew of codefendants with violations of the Magnuson-Moss Warranty Act; violations of California’s Consumers Legal Remedies Act, Unfair Competition Law, and False Advertising Law; violation of Florida’s Deceptive and Unfair Trade Practices Act; and breach of express and implied warranties and negligent misrepresentation. Unsurprisingly, Stokes referenced the FTC settlement and fine and a nest of other actions and claims involving the defendants and their principals.
What might have seemed to be a surefire filing was derailed by the Southern District of California in September, in an order denying class certification of Stokes’ proposed class. At issue was an arbitration clause on Sensa’s website that stated that all customers agreed to arbitrate claims individually. Stokes did not contest the claims made by the defendants that more than 80 percent of the purchases made during the proposed class period had been made through the website. For this reason, the court argued, Stokes failed to meet the predominance requirement for certification. Furthermore, the court found that the proposed class did not exclude customers already reimbursed by the original FTC settlement. Thus, for now, a many-tentacled litigation has ceased to squirm. We’ll see if an appeal shocks it back to life.