ROTHMAN v. SANTA FE NATURAL: Class Action Complaint (Nov. 3, 2015) (PDF)

November 4, 2015 11:18 am by Gene Borio

The PDF is Here

EXCERPT:

1. This Action seeks to redress Defendants Santa Fe Natural Tobacco Company, Inc. and Reynolds American, Inc.’s deceptive marketing of their “Natural American Spirit” brand cigarettes1 as “Additive-Free Natural Tobacco.” The terms “Natural” and “Additive-Free” imply a safer cigarette, allowing Defendants to charge a price premium for the cigarettes. A reasonable consumer, faced with the choice between Defendants’ cigarettes and those with labels that do not bear these deceptive statements, would understand that Natural

1 Defendants’ Natural American Spirit cigarettes are sold in a variety of flavors, all of which are uniformly labeled and marketed as “Natural” and “Additive-Free.”

American Spirit cigarettes are in fact substantially healthier and cause substantially less harm than other cigarettes.

2. Unfortunately, such a reasonable consumer would be wrong. In fact, Natural American Spirit cigarettes are not natural (because they contain ammonia), and they are no safer than other cigarettes.

3. This suit is brought pursuant to New York General Business Law § 349 et seq. (“N.Y. G.B.L. § 349”) and New York General Business Law § 350 et seq. (“N.Y. G.B.L. § 350”), and under the common law theory of unjust enrichment, on behalf of a class of New York consumers who purchased Natural American Spirit cigarettes from November 3, 2009 to the present. This suit seeks, inter alia, actual damages and refunds, statutory damages, injunctive relief, restitution, attorneys’ fees, and the costs of this suit.

END EXCERPT

FULL TEXT:

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

THEODORE ROTHMAN, individually and on behalf of all others similarly situated,

Plaintiff,

v.

SANTA FE NATURAL TOBACCO COMPANY, INC. and REYNOLDS AMERICAN, INC.,

Defendants.

Civil Action No. ____________

Class Action Complaint

Plaintiff Theodore Rothman, by his attorneys, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP and The Richman Law Group, as and for his class action complaint, alleges, with personal knowledge as to his own actions, and upon information and belief as to those of others, as follows:

Nature of the Case

1. This Action seeks to redress Defendants Santa Fe Natural Tobacco Company, Inc. and Reynolds American, Inc.’s (collectively, “Defendants”) deceptive marketing of their “Natural American Spirit” brand cigarettes1 as “Additive-Free Natural Tobacco.” The terms “Natural” and “Additive-Free” imply a safer cigarette, allowing Defendants to charge a price premium for the cigarettes. A reasonable consumer, faced with the choice between Defendants’ cigarettes and those with labels that do not bear these deceptive statements, would understand that Natural

1 Defendants’ Natural American Spirit cigarettes are sold in a variety of flavors, all of which are uniformly labeled and marketed as “Natural” and “Additive-Free.”

American Spirit cigarettes are in fact substantially healthier and cause substantially less harm than other cigarettes.

2. Unfortunately, such a reasonable consumer would be wrong. In fact, Natural American Spirit cigarettes are not natural (because they contain ammonia), and they are no safer than other cigarettes.

3. This suit is brought pursuant to New York General Business Law § 349 et seq. (“N.Y. G.B.L. § 349”) and New York General Business Law § 350 et seq. (“N.Y. G.B.L. § 350”), and under the common law theory of unjust enrichment, on behalf of a class of New York consumers who purchased Natural American Spirit cigarettes from November 3, 2009 to the present. This suit seeks, inter alia, actual damages and refunds, statutory damages, injunctive relief, restitution, attorneys’ fees, and the costs of this suit.

Parties

4. Plaintiff Theodore Rothman is a citizen of the State of New York with residence in Westchester County. During the proposed class period, Mr. Rothman viewed Defendants’ advertisements representing the Natural American Spirit cigarettes as “Natural” and “Additive- Free” and regularly purchased varieties of Natural American Spirit cigarettes in New York that were all uniformly labeled as “Natural” or “Additive-Free.”

5. Defendant Santa Fe Natural Tobacco Company, Inc. is a New Mexico corporation whose principal place of business is in Santa Fe, New Mexico.

6. Defendant Reynolds American Inc. is a North Carolina corporation whose principal place of business is in Winston-Salem, North Carolina. Santa Fe Natural Tobacco Company, Inc. is an operating subsidiary of Defendant Reynolds American, Inc.

Jurisdiction and Venue

7. This court has jurisdiction pursuant to 28 U.S.C. § 1332(d) because the aggregate claims of the Class (as defined below) exceed the sum or value of $5,000,000.00, and there is minimal diversity of citizenship between Plaintiffs and proposed Class members, and Defendant.

8. This Court has personal jurisdiction over Defendants because they intentionally avail themselves of the rights and privileges of conducting business in New York and they have continuous and systematic contacts with New York State, owing to Defendants’ advertising targeting New York citizens and sales of the their products in New York.

9. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) because substantial acts in furtherance of the alleged improper conduct giving rise to the claims herein, including the dissemination of false information regarding Natural American Spirit cigarettes, occurred within this District.

Factual Allegations

10. Defendants sell a variety of Natural American Spirit cigarettes (such as regular, light, organic and menthol), all of which Defendants uniformly and prominently label and advertise with representations that the cigarettes are “Natural” and “Additive-Free.”

11. By marketing Natural American Spirit cigarettes as “Natural” and “Additive-Free,” Defendants represent explicitly and/or implicitly that Natural American Spirit cigarettes present a lower risk of tobacco-related disease and/or are less harmful than other commercially marketed tobacco products.

12. For example, the label of Natural American Spirit cigarettes prominently states that the cigarettes are “Natural” and “Additive-Free.” A true and correct copy of the Natural American Spirit cigarettes label is reproduced below:

O:\American Spirit\Complaint\20151030_161639.jpg

13. Similarly, throughout the proposed class period Defendants’ advertising for Natural American Spirit cigarettes has been replete with the uniform representations that cigarettes are “Natural” and “Additive-Free.”

14. A collection of Defendants’ advertisements for Natural American Spirit cigarettes shows use of the “Natural” and “Additive-Free” representations has grown increasingly prominent during the proposed class period.2

15. While consumers understand that smoking cigarettes is generally unhealthy, Defendants deceive reasonable consumers into believing that cigarettes that are “Natural” and “Additive-Free” are less unhealthy than other cigarettes. As a result, consumers are willing to pay a price premium for Natural American Spirit cigarettes as compared to other cigarettes that are not so labeled, and Defendants do in fact charge a substantial price premium for their cigarettes.

16. As Defendants are well aware, consumer research and cigarette industry documents establish that smokers associate the terms “Natural” and “Additive-Free” with reduced risk. Indeed, reasonable consumers buying cigarettes marketed as “Natural” and “Additive-Free” expect to get a healthier product.3

17. Unfortunately, Natural American Spirit cigarettes are not safer than other cigarettes. In fact, the Food and Drug Administration (“FDA”) recently sent a “warning letter” to Defendants informing them that the use of descriptors like “Natural” and “Additive-Free” lead consumers to believe that such cigarettes pose less of a health risk than other cigarettes, when there is no scientific support for such a claim.4

18. According to the advocacy group Campaign for Tobacco-Free Kids, the marketing for Natural American Spirit is the most deceptive of any major U.S. cigarette brand currently on

2 Slideshow: Advertising for Natural American Spirit Cigarettes 2000-2015, Campaign for Tobacco Free Kids, www.tobaccofreekids.org/p… (last visited November 2, 2015).

3 McDaniel, Patricia A. & Ruth E. Malone, “I Always Thought They Were All Pure Tobacco”: American Smokers’ Perceptions of ‘Natural’ Cigarettes and Tobacco Industry Advertising Strategies, 16 Tobacco Control e7 (2007), available at www.ncbi.nlm.nih.gov/pmc/… (last visited Nov. 2, 2015).

4 FDA Warning Letter to Santa Fe Natural Tobacco Company, Inc. (Aug. 27, 2015), available at www.fda.gov/ICECI/Enforce… (last visited Nov. 2, 2015).

the market. Defendants’ deceptive marketing of Natural American Spirit cigarettes has helped the brand increase sales by 86 percent from 2009 to 2014, even as overall cigarette sales in the United States fell by 17 percent during the same period.5

19. Defendants themselves concede that just because Natural American Spirit cigarettes are “natural” and do not have additives does not render them safer than other cigarettes.

Placed on the side of Natural American Spirit packages, in a location reasonable consumers would likely overlook or not expect to have to view in order to determine the truthfulness of a statement made on the front of the label, is the following admission: “No additives in our tobacco does NOT mean a safer cigarette.” However, Defendants’ deceptive marketing claims overwhelm their disclaimers.

20. Moreover, Natural American Spirit cigarettes are also not “natural,” because they contain ammonia. Researchers at the Oregon Health and Science University looked at 11 U.S. cigarette brands and found that some had up to 20 times more freebase nicotine—a form of the drug that is quickly absorbed and transmitted to the brain and central nervous system. Natural American Spirit cigarettes, for example, had 36% freebase nicotine, compared to 1% in a benchmark cigarette, 2.7% in Camel, 5-6.2% in Winston, and 9.6% in Marlboro.6 Natural nicotine is not typically this potent; on information and belief, the high level of freebase nicotine in Natural American Spirit cigarettes is achieved through the addition of ammonia.

5 Meyers, Matthew L., “FDA Warning About Deceptive Marketing of Natural American Spirit Cigarettes, Other Brands Is Critically Important to Protect Consumers,” PRNewsire-USNewswire (Aug. 27, 2015), available at www.prnewswire.com/news-r… cigarettes-other-brands-is-critically-important-to-protect-consumers-300134309.html (last visited Nov. 2, 2015).

6 Waterhouse, Rosie, “The tobacco additives that keep you hooked,” The Telegraph (Jul 28, 2013), available at www.telegraph.co.uk/news/… hooked.html (last visited Nov. 2, 2015).

Class Action Allegations

21. Plaintiff brings this action on his own behalf and additionally, pursuant to Rule 23 of the Federal Rules of Civil Procedure, on behalf of all others similarly situated.

22. The Class that Plaintiff seeks to represent is defined as:

All persons who purchased Natural American Spirit cigarettes in New York State from November 3, 2009 to the present.

23. Excluded from the Class are Defendants; any parent, subsidiary, or affiliate of Defendants; any entity in which Defendants have or had a controlling interest, or which Defendants otherwise control or controlled; and any officer, director, employee, legal representative, predecessor, successor, or assignee of Defendants.

24. This action is appropriate for class treatment for the following reasons:

a. The Class consists of many thousands of persons and is therefore so numerous that joinder of all members, whether otherwise required or permitted, is impracticable;

b. There are questions of law or fact common to the Class that predominate over any questions affecting only individual members, including:

i. whether Defendants violated N.Y. G.B.L. § 349;

ii. whether Defendants violated N.Y. G.B.L. § 350;

iii. whether Defendants engaged in deceptive acts or practices by marketing Natural American Spirit cigarettes as “Natural” and “Additive-Free”;

iv. whether Defendants are being unjustly enriched by their deceptive marketing;

v. whether Plaintiff and the Class have sustained damages and, if so, the proper measure thereof;

vi. whether Plaintiff and the Class are entitled to restitution, and if so, the proper measure thereof;

vii. whether Defendants should be enjoined from continuing to sell Natural American Spirit cigarettes as currently labeled;

c. The claims asserted by Plaintiff are typical of the claims of the members of the Class;

d. Plaintiff will fairly and adequately protect the interests of the Class, and Plaintiff has retained attorneys experienced in class and complex litigation, including class litigation involving consumer protection;

e. Prosecuting separate actions by individual class members would create a risk of inconsistent or varying adjudications with respect to individual class members, which could establish incompatible standards of conduct for Defendants;

f. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, for at least the following reasons:

i. Absent a class action, Class members as a practical matter will be unable to obtain redress, Defendants’ violations of their legal obligations will continue without remedy, additional consumers and purchasers will be harmed, and Defendants will continue to retain their ill-gotten gains;

ii. It would be a substantial hardship for most individual members of the Class if they were forced to prosecute individual actions;

iii. Once the liability of Defendants has been adjudicated, the Court will be able to determine the claims of all members of the Class;

iv. A class action will permit an orderly and expeditious administration of Class claims, foster economies of time, effort, and expense, and ensure uniformity of decisions;

v. The lawsuit presents no difficulties that would impede its management by the Court as a class action; and

vi. Defendants have acted on grounds generally applicable to Class members, making class-wide relief appropriate.

25. Defendants’ violations of N.Y. G.B.L. § 349 and N.Y. G.B.L. § 350, and Defendants’ unjust enrichment at the expense of Plaintiff and the Class members, are applicable to all members of the Class, and Plaintiff is entitled to have Defendants enjoined from engaging in illegal and deceptive conduct in the future.

FIRST CAUSE OF ACTION

(Violation of N.Y. G.B.L. § 349)

26. Plaintiff incorporates by reference the allegations set forth above.

27. New York General Business Law § 349 provides, inter alia:

Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful.

28. Plaintiff and the members of the Class are consumers who purchased Natural American Spirit cigarettes in New York.

29. As sellers of goods to the consuming public whose conduct affects similarly situated consumers and has a broad impact on consumers at large, Defendants are engaged in consumer-oriented conduct within the intended ambit of G.B.L. § 349.

30. Defendants’ misrepresentations and false, deceptive, and misleading statements with respect to Natural American Spirit cigarettes, as described above, constitute deceptive acts or

practices in the conduct of business, trade, or commerce in violation of the New York General Business Law.

31. Defendants’ deceptive acts were knowing and intentional.

32. Defendants’ actions have caused direct, foreseeable, and proximate damages to Plaintiff and the Class.

33. As a consequence of Defendants’ wrongful actions, Plaintiff and the other members of the Class suffered an ascertainable loss of monies based on either the purchase price of Natural American Spirit cigarettes or the price premium Defendants are able to charge, and that Plaintiff and the Class pay, as a direct result of Defendants’ deceptive marketing scheme.

34. By reason of the foregoing, Defendants are liable to Plaintiff and the other members of the Class for actual damages or fifty dollars ($50) for each sale of Natural American Spirit cigarettes (whichever is greater), injunctive relief, attorneys’ fees, and the costs of this suit.

35. Plaintiff and the other members of the Class further seek to enjoin the unlawful and deceptive acts and practices described above.

36. Absent injunctive relief, Defendants will continue to deceptively market their cigarettes

37. THEREFORE, Plaintiff prays for relief as set forth below.

SECOND CAUSE OF ACTION

(Violation of N.Y. G.B.L. § 350)

38. Plaintiff incorporates by reference the allegations set forth above.

39. The New York General Business Law § 350 provides, inter alia:

False advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state is hereby declared unlawful.

40. GBL § 350-a defines “false advertising,” in relevant part, as “advertising, including labeling, of a commodity . . . if such advertising is misleading in a material respect.”

41. Plaintiff and the members of the Class are consumers who purchased Natural American Spirit cigarettes in New York.

42. As sellers of goods to the consuming public, Defendants are engaged in the conduct of business, trade or commerce within the intended ambit of GBL § 350.

43. Defendants’ representations made by statement, word, design, device, sound, or any combination thereof, and also the extent to which the Defendants’ advertising fails to reveal material facts with respect to Natural American Spirit cigarettes, as described above, constitute false advertising in violation of the New York General Business Law.

44. Defendants’ false advertising was knowing and intentional.

45. Defendants’ actions have caused direct, foreseeable, and proximate injury to Plaintiff and the Class.

46. As a consequence of Defendants’ wrongful actions, Plaintiff and the other members of the Class suffered an ascertainable loss of monies based on either the purchase price of Natural American Spirit cigarettes or the price premium Defendants are able to charge, and that Plaintiff and the Class pay, as a direct result of Defendants’ deceptive marketing scheme.

47. By reason of the foregoing, Defendants are liable to Plaintiff and the other members of the Class for actual damages or five hundred dollars ($500) for each sale of Natural American Spirit cigarettes (whichever is greater), injunctive relief, attorneys’ fees, and the costs of this suit.

48. Plaintiff and the other members of the Class further seek to enjoin the false advertising described above.

49. Absent injunctive relief, Defendants will continue to deceptively market Natural American Spirit cigarettes.

50. THEREFORE, Plaintiff prays for relief as set forth below.

THIRD CAUSE OF ACTION

(Unjust Enrichment)

51. Plaintiff incorporates by reference the allegations set forth above.

52. Plaintiff and members of the Class conferred benefits on Defendants by purchasing Natural American Spirit cigarettes at a premium price.

53. Defendants have knowledge of such benefits.

54. By engaging in the conduct described above, Defendants have unjustly enriched themselves and received a benefit at the expense of Plaintiff and the other members of the Class.

Defendants appreciated the benefit and it would be inequitable for Defendants to retain this benefit because Defendants falsely and materially misrepresented as “Natural” and “Additive-Free” when, in fact, the Natural American Spirit cigarettes are not healthier than other cigarettes. Plaintiff and members of the Class were unjustly deprived of payments because they would not have purchased (or paid a price premium) for Natural American Spirit cigarettes had the true facts been known.

55. Because it would be unjust and inequitable for Defendants to retain payments Plaintiff and the Class made for Defendants’ Natural American Spirit cigarettes or to retain the price premium they charge for their cigarettes, Plaintiff and members of the Class are entitled to restitution for Defendants’ unjust enrichment.

THEREFORE, Plaintiff prays for relief as set forth below.

Prayer for Relief

WHEREFORE, Plaintiff, individually and on behalf of the other Class members, respectfully requests that the Court enter judgment against Defendants as follows:

1. Certifying this action as a class action, with a Class as defined above;

2. Requiring that Defendants pay for notifying the Class members of the pendency of this suit;

3. Awarding Plaintiff and the Class injunctive relief pursuant to §§ 349 and 350 of the New York General Business Law, without limitation;

4. Awarding Plaintiff and the Class monetary damages in an amount to be determined at trial, together with prejudgment interest;

5. Awarding Plaintiff and the Class statutory damages in the maximum amount provided by law;

6. Awarding Plaintiff and the Class restitution of Defendants’ ill-gotten gains;

7. Awarding Plaintiff and the other Class members the reasonable costs and expenses of suit, including their attorneys’ fees; and

8. For any further relief that the Court may deem appropriate.

Demand for Jury Trial

Plaintiff hereby demands a trial by jury on all claims in this action.

Dated: November 3, 2015

THE RICHMAN LAW GROUP

By: /s/ Kim E. Richman

Kim E. Richman

81 Prospect Street

Brooklyn, New York 11201

Telephone: (212) 687-8291

Facsimile: (212) 687-8292

krichman@richmanlawgroup….

FINKELSTEIN, BLANKINSHIP,

FREI-PEARSON & GARBER, LLP

D. Greg Blankinship

Jeremiah Frei-Pearson

Todd S. Garber

1311 Mamaroneck Avenue

White Plains, New York 10605

Tel: (914) 298-3281

Fax: (914) 824-1561

gblankinship@fbfglaw.com

jfrei-pearson@fbfglaw.com

tgarber@fbfglaw.com

Attorneys for Plaintiff and the Class

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