Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Cal.: Crib bumper marketer not liable for fraud by omission in product labels, (Jan 17, 2014)

By Edward L. Puzzo, J.D.

The maker of baby crib bumper pads could not be held liable under the CLRA for failing to disclose the hazardous nature of crib bumpers, unless facts are adequately alleged which establish that use of the product as directed is hazardous, the federal district court in Fresno, California has ruled (Corral v. Carter’s, Inc., January 16, 2014, Ishii, A.).

Aida Corral brought claims against Carter’s, Inc. and the William Carter Company, alleging false or misleading advertising, in violation of the California Consumers Legal Remedies Act (CLRA) and California’s Unfair Business Practices statute. Defendants moved to dismiss.

Corral alleged that baby crib bumper pads made and marketed by defendants presented a significant risk to infants of entrapment and/or suffocation, a risk defendants were obligated to disclose. Plaintiff alleged that a warning label on the product, and a fact sheet enclosed with the product, were deceptive because they implied that crib bumpers were safe if properly installed, a conclusion she disputed.

In responding to defendants’ motion to dismiss, the court noted, Corral clarified that she was not alleging any affirmative misrepresentation by defendants, but instead “deception by concealment.” Nondisclosure or concealment of a material fact that a defendant was obliged to disclose can be actionable, the court explained, when the defendant had exclusive knowledge of material facts not known to the plaintiff; when the defendant actively conceals a material fact from the plaintiff; or with the defendant makes a partial representation but also suppresses some material fact.

Establishing facts. The court stated that it must consider whether the disclosure sought by Corral, that crib bumpers present a risk of suffocation even when installed properly, is indeed a “fact” within the meaning of the CLRA. To establish this “fact”, the court continued, plaintiff must allege some supportive evidence. Plaintiff cited a single study linking 27 accidental deaths directly to the crib bumpers over a 20-year period from 1985 to 2005. This study, however, did not state the extent to which fatalities could be linked to faulty installation of the product or product failure, the court noted. In short, Corral did not present any study linking the use of defendants’ product in accordance with instructions to an increase in the frequency of infant death.

Corral also cited recommendations by infant safety advocacy groups against the use of bumper pads in cribs. However, this was not proof that the use of defendants’ product as directed will substantially increase the risk of infant death, the court stated. Instead, the recommendations may be based on other factors, such as the lack of any verifiable benefit from the use of crib bumpers.

Fraud by omission requirements. A claim of fraud by omission cannot, as a practical matter, require the same degree of adherence to the “who, what, when, and where” standard imposed by Rule 9(b) on claims of affirmative misrepresentation, the court stated. But the complaint must adequately allege why the omitted fact is true, as well as material to consumer decision-making. The study and recommendations cited by plaintiff did not suffice to establish the “fact” that defendants were required to disclose, the court concluded. If defendants are to be affirmatively required to warn consumers of a significant risk of harm to infants from the use of its product, plaintiff will be required to draw a more direct line between actual harm to infants and defendants’ product. The court therefore granted defendants’ motion to dismiss, without prejudice, with leave for the plaintiff to further amend the complaint.

The case is No. 1:13-cv-0262 AWI SKO.

Attorneys: Aleksandra M. S. Vold, PHV (Synergy Law Group, LLC) for Aida Corral. Matthew R. Orr (Call Jensen and Ferrell) for Carter’s, Inc. and William Carter Co.

Companies: Carter’s Inc.; The William Carter Company

Cases: Advertising StateUnfairTradePractices CaliforniaNews