SPECIAL FOCUS: California Proposes Emergency Prop 65 Regulation for Products Containing BPA
Authors: Matthew Williamson and Ted Wolff
Why it matters: BPA remains prevalent in the packaging of food and beverage items sold by retailers throughout California. Most commonly, it is found in the lining used inside of metal-based food and beverage containers, as well as lids for glass jars and bottles. Beginning May 11, 2016, all such products containing BPA must comply with all applicable Prop 65 warning requirements. Responding to concerns raised by retailers and others, on April 18, 2016, California regulators approved an emergency regulation offering retailers a temporary point-of-sale safe harbor warning message as an option to comply with this rule change.
Detailed discussion: A new California regulation, effective May 11, 2016, will require Prop 65 warnings for all products that expose customers to BPA. This rule change will have widespread implications to retailers that sell food and beverages with packaging that contains or is lined with BPA.
Given the volume of products impacted by this rule change, regulators recognize that this sudden and substantial increase in the prevalence of Prop 65 warnings on packaged food and beverages would likely confuse and potentially overwhelm consumers. To address these concerns, California approved an emergency interim regulation offering retailers a standard point-of-sale "safe harbor" warning message for oral BPA exposure from canned and bottled food and beverages. The proposed safe harbor message, which must be prominently displayed at all points of sale, is as follows:
WARNING: Many food and beverage cans have linings containing bisphenol A (BPA), a chemical known to the State of California to cause harm to the female reproductive system. Jar lids and bottle caps may also contain BPA. You can be exposed to BPA when you consume foods or beverages packaged in these containers. For more information, go to: www.P65Warnings.ca.gov/BPA.
There are a number of important limitations to the safe harbor. First, it is set to expire on October 18, 2016. Second, it only applies to food and beverages—meaning on May 11, 2016, nonfood and nonbeverage products exposing customers to BPA must comply with standard Prop 65 warning requirements.
Because the safe harbor was only approved last week, it leaves very little time for retailers to develop and implement a compliance plan. If you have questions about these developments, please contact Ted Wolff, Matthew Williamson, or any member of Manatt's Environmental Law practice.
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Rise of Online Shopping Yields Questions About Pricing
Why it matters: What value does a list price have? Not much, The New York Times reported in a story about the growing number of lawsuits alleging retailers engage in deceptive pricing by claiming a markdown from an arbitrary "list price." For example, the Times checked online prices for a Le Creuset iron-handle skillet in cherry red, measuring 11 ¾ inches wide. While half a dozen sites offered the product for $200, each seller said that price was a markdown from a different list price, ranging from $285 to $260.
Deceptive pricing has caught the eye of federal lawmakers, who requested that the Federal Trade Commission take a closer look at the issue with regard to outlet stores, even suggesting the agency consider establishing a formal definition of terms like "factory outlet" or "outlet store." Agency action may be a possibility as the use of a "list price" continues to trigger controversy and lawsuits.
Detailed discussion: The issue first made headlines in 2014, when a group of California district attorneys brought a false advertising suit against Overstock.com, accusing the online marketplace of using misleading list prices in order to exaggerate the amount of a customer's savings. One example cited in the complaint referenced an incident where Overstock advertised a patio set for $449.99 with a list price of $999. A consumer claimed that when he received the set, it had a retailer sticker on it with a list price of $247.
"Overstock has consistently used [advertised reference prices] in a manner designed to overstate the amount of savings to be enjoyed by shopping on the Overstock site," California Judge Wynne Carvill wrote, ordering the company to pay $6.8 million.
Overstock.com appealed the decision. But the case launched a trend among consumers, who have filed dozens of putative class actions alleging deceptive pricing, targeting outlet stores and other discount retailers. The suits are costing retailers millions of dollars, as demonstrated by Michael Kors agreeing to pay almost $5 million last year to reach a deal in over pricing in its outlet stores.
A new complaint in New York federal court follows this trend, this time against J. Crew's outlet Web site. The national retailer offered sale prices on its factory store Web site that had no basis for comparison because the original "valued at" price was never actually charged, Joseph D'Aversa told the court.
In addition, the defendant "perpetually held" a series of site-wide "sales" that purported to discount, for a limited time, all items on the Web site by a certain percentage, often claiming the sale price was available only for a limited time (such as a 24-hour period, for example). Because the purported sale prices never end "but rather continue on a daily basis and are available anytime a customer visits the website, they are not actually discounts at all, but rather the everyday, regular prices of the items," the plaintiff alleged.
The New Jersey resident—who purchased two sweaters from the factory site—sought damages for a proposed class and subclass totaling at least 10,000 members under state consumer protection laws.
However, not all plaintiffs are successful. A federal court in Massachusetts recently tossed a deceptive pricing suit after concluding that the plaintiff had not suffered a cognizable injury in her suit against Kohl's Department Stores.
The Times pointed to the rise of the Internet as the reason behind the fall of the list price. Online shoppers want to believe they are getting a bargain and retailers are willing to help them believe just that, consumer protection advocates and plaintiff's attorney argued. As the former director of the Federal Trade Commission's Bureau of Consumer Protection, David C. Vladeck, told the Times, "If you're selling $15 pens for $7.50, but just about everybody else is also selling the pens for $7.50, then saying the list price is $15 is a lie."
To read the complaint in D'Aversa v. J. Crew Group, click here.
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Technical Violation of FCRA Enough to Continue Suit Against Employer
Why it matters: Reiterating the need for employers to ensure compliance with every word of the Fair Credit Reporting Act (FCRA), an Illinois judge let a suit proceed against Sprint over background checks, holding that the alleged technical violation of the statute can move forward despite the fact that the plaintiff suffered no actual harm. An applicant for a position at a Sprint store in Chicago signed a form titled, "Authorization for Background Investigation." He then sued the company asserting a violation of Section 1681 of the FCRA, arguing that Sprint willfully ran afoul of the statute because the authorization form did not consist solely of the required disclosure. The employer responded with a motion to dismiss because the applicant suffered no actual harm.
Whether or not the applicant suffered any harm was irrelevant, the court said, as the "FCRA exists to protect the privacy and economic interests of consumers." Congress established enforceable statutory rights in the FCRA, the judge wrote, and created a remedy within the Act that was not dependent upon evidence of harm.
Detailed discussion: In June 2015, Roberto Rodriguez applied for a job at a Sprint retail store in Chicago. As part of the application process, Sprint provided Rodriguez with a form seeking his authorization to perform a background check.
Titled "Authorization for Background Investigation," the form contained "third party authorizations, a blanket release of multiple types of information from multiple types of entities, state specific information, and various statements above and beyond a disclosure that a consumer report would be procured." Rodriguez signed the form and Sprint obtained a consumer report on him from a consumer reporting agency.
Rodriguez then filed suit against Sprint in November 2015, alleging a violation of Section 1681b(b)(2)(A) of the Fair Credit Reporting Act (FCRA). That provision provides that a "person may not procure a consumer report" unless: "(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of that disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person."
Because Sprint's authorization form did not "consist[] solely of the disclosure," Rodriguez claimed the company committed a willful violation of the statute. The complaint requested statutory damages and punitive damages as well as costs and attorneys' fees.
Sprint offered the plaintiff $1,000 to settle his claim. When Rodriguez let the offer lapse, the defendant moved to dismiss the suit for lack of subject matter jurisdiction based on the purported absence of a case or controversy.
Relying in part upon the U.S. Supreme Court's recent decision in Campbell-Ewald Co. v. Gomez, an Illinois federal court judge denied the motion. In that case, the Justices determined that a lapsed offer of judgment has no effect on the justiciability of a case and does not nullify a live controversy between the litigating parties.
As an alternative, Sprint contended that Rodriguez lacked standing because he failed to allege any actual harm and did not seek any actual damages, leaving him without a concrete injury capable of judicial redress. While that argument would generally prevail, Congress has the power to confer standing with the creation of statutory rights, U.S. District Court Judge Matthew F. Kennelly wrote, as the Legislature did with the FCRA.
"[I]t is readily apparent that Rodriguez has alleged an injury in fact sufficient to confer standing to sue under Article III," the court said. "The FCRA exists to protect the privacy and economic interests of consumers. The purpose of the law is to protect consumers by requiring consumer reporting agencies to meet the needs of commerce 'in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.' "
One way that Congress attempted to achieve this purpose was through Section 1681b(b)(2)(A)'s disclosure provision, providing that a consumer's private information may be disclosed only after he or she has signed a clear and decipherable authorization, the court explained. A separate provision, Section 1681n(a), established an enforcement mechanism where "[a]ny person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to … damages of not less than $100 and not more than $1,000."
"Section 1681b(b)(2)(A) exists to ensure that consumers who authorize disclosure do so freely and knowingly, and together with the private enforcement provision in Section 1681n(a), it imposes a binding, mandatory obligation on a party in Sprint's position," Judge Kennelly wrote, with harm not a necessary component of the equation. "Congress enacted the FCRA to protect consumer control over personal information the exposure of which, though often necessary in the modern economy, can result in a significant invasion of privacy and can jeopardize a consumer's personal, reputational, and financial well-being. The statute provides that when a person or entity willfully violates a mandate of the FCRA that is designed to protect these interests, the aggrieved consumer may recover statutory damages."
The court cited similar conclusions from the Sixth, Eighth, and Ninth Circuit Courts of Appeals. Sprint's argument that those decisions were balanced by opposite authority from the Second, Third, and Fourth Circuits—as well as the fact that the Ninth Circuit case, Robins v. Spokeo, is currently pending before the U.S. Supreme Court—did nothing to change the court's mind.
"[T]he fact that at least four Justices of the Supreme Court voted to grant certiorari in Robins says nothing about whether at least five Justices will be convinced to reverse the court below," the court wrote. He also distinguished the contrary authority based on the underlying statutes in those cases, the Employee Retirement Income Security Act and the Americans with Disabilities Act.
To read the opinion in Rodriguez v. Sprint, click here.
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As an Unsubstantiated Express Performance Claim, Product Name Must Be Changed, NAD Says
Why it matters: The product name for Rust-Oleum's "Painter's Touch Ultra Cover 2X Spray Paint" is an express performance claim and should be changed because it falsely implies it provides twice as much coverage as competing spray paint products, the National Advertising Division recently determined.
The decision reminds advertisers that product names can be advertising claims. Here, NAD recommended that the advertiser discontinue the brand name Ultra Cover 2X without requiring extrinsic evidence of consumer confusion because it determined that the product name was an express performance claim that the product would deliver two times the coverage of competing cans of paint.
Detailed discussion: Competitor Sherwin-Williams Company challenged Rust-Oleum's express claims, including "Twice the coverage" and "Ultra Cover 2X," as well as arguing that the advertiser made implied claims that all of the Ultra Cover 2X paints and clearcoats of all finishes are proven to cover twice as much area in ordinary consumer use than all competing products and that competing spray paints, such as Sherwin-Williams' Krylon brand, provide insufficient coverage.
Rust-Oleum defended its advertising, providing comparative testing from 2008, 2009, 2014, and 2015 to support its claims and telling the self-regulatory body that the product name was not a performance claim but simply a category of general purpose aerosol paint products.
Calling the challenged claim "impactful," the NAD said it could "influence consumers' purchasing decisions." Product packaging featured a "very prominent 2X" adjacent to a gold seal stating "made with double cover technology," with a depiction of "one = two cans" next to the word "coverage," all of which led the NAD to conclude that the product name is an express performance claim "because 2X is followed directly by the claim 'Cover.' "
With that in mind, the NAD considered Rust-Oleum's product testing to support the claim. The 2008 and 2009 testing occurred on paints that are no longer on the market. As it is "well-established that comparative performance claims must be based on testing on products that are currently in marketplace," the self-regulatory body said the advertiser could not rely on those tests.
Although the 2014 and 2015 comparative testing of multiple samples and finishes constituted a sufficiently large sampling, the NAD expressed a number of other concerns about the test methodology and results. The testing was conducted in house and the advertiser had insufficient controls in place to prevent bias—for example, the test samples were not blinded, "which creates the potential for bias in favor of the Rust-Oleum products," according to the decision.
In addition, it was unclear whether the use instructions for Krylon's products were followed or if the distance at which the spray paints were sprayed correlated with the coverage (if sprayed at a closer distance, the chart may have been completely covered more quickly, the NAD noted). Most problematic, testing results varied greatly, from 0.41X to over 6X. Such wide variations could not be averaged to form the basis of the 2X coverage claim, the self-regulatory body wrote.
"[T]he impactful 2X claim (along with the one = two cans of spray paint imagery adjacent to the claim) appears on each and every color and finish of Painter's Touch Ultra Cover 2X," the NAD said. "Thus, consumers will reasonably expect that the 2X coverage claim is true for every color—not that it is true 'on average' and, hence, that there is the possibility that the Ultra Cover 2X product a consumer chooses to buy may not provide 2X coverage."
Product testing results must not only be statistically significant, but also consumer meaningful, the self-regulatory body added. "The advertiser presented no statistical analysis of its test results to explain the variation between test results," the NAD wrote. "The advertiser chose the basis of the comparison—a prominent quantified performance claim—yet the variations in the test results within each test mean that the averaged results (2X) might be inaccurate (and sometimes vastly inaccurate) for nearly 50 percent of the products in the category."
Therefore, the NAD recommended that the advertiser discontinue the challenged 2X coverage claims—including the product name—along with accompanying visuals.
In its advertiser's statement, Rust-Oleum indicated it will appeal the part of the NAD's decision with regard to the product name. "Rust-Oleum does not believe that the statement 'Ultra Cover 2X' is a claim that requires, as support, testing evidence that each color provides at least twice the coverage of each color … of competing general purpose paints," the company said. "Rust-Oleum believes that this finding is inconsistent with NAD precedent, reasonable marketing practice and consumer understanding."
To read the NAD's press release about the case, click here.
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False Advertising Lawsuits: Security Systems and Oatmeal
Why it matters: False advertising lawsuits remain a popular consumer class action fixture with no signs of abating, challenging products and services ranging from home security systems to oatmeal.
Detailed discussion: A Florida resident filed suit against ADT Corporation in federal court, asserting that the largest residential and small business electronic security provider in the country deceptively markets its equipment and monitoring systems as safe and reliable, using claims such as "We Save Lives," "Get Security You Can Count On. Every Day of the Year," and "ADT takes pride in using the most advanced technology."
"In truth, ADT's wireless signals are anything but safe and reliable, as the wireless signals are both unencrypted and unauthenticated, and can easily be intercepted and interfered with by unauthorized third parties," according to Santiago Hernandez's complaint. "As such, ADT's customers are far more vulnerable and less safe than ADT leads them to believe."
According to the complaint, all it takes to hack the ADT system is a simple and inexpensive device that can enable a third party to see transmissions from ADT's sensors, track when people are opening and closing doors, manipulate the system by falsely triggering an alarm, jam the system so that alarms are not triggered, and remotely disconnect or disable security systems.
ADT was aware of the vulnerability of its customers, Hernandez added, but the company turned "a blind eye" to its problems and failed to notify consumers that its signals are unencrypted and unsecure. "ADT's misleading marketing statements and omissions are particularly egregious given that they provide a false sense of security to those individuals and businesses that are most vulnerable: individuals and businesses who are seeking the comfort of an extra level of security that a home security system provides," the plaintiff said.
The defendant's misrepresentations violated Florida's consumer protection law, Hernandez alleged, requesting declaratory and injunctive relief requiring ADT to change its marketing materials, secure customers' wireless systems, and pay damages to an estimated class of hundreds of thousands of consumers.
As for Darren Eisenlord's oatmeal, he claimed in a putative class action in California federal court that Quaker Oats Company's labels for six different types of oatmeal—featuring the image of a maple syrup jug and the words "maple and brown sugar" prominently displayed—tricked him into purchasing what he thought was oatmeal flavored with maple and brown sugar but didn't actually contain any maple syrup or maple sugar.
Maple syrup and maple sugar are premium ingredients that companies add to sweeten food products, according to the complaint, with a material bearing on consumers' purchasing decisions. Maple is also a substance derived from the heat treatment of sap from the maple tree, Eisenlord added, and none of the defendant's products qualify as maple syrup under this definition.
This deceptive labeling constituted a breach of express warranty and violations of various California laws, including the Consumer Legal Remedies Act, the False Advertising Law, and the Unfair Competition Law, as well as both the federal Food, Drug, and Cosmetic Act and its state analogue, the plaintiff said. Requesting that the court certify a nationwide class and a subclass of California residents who purchased the Quaker Oats oatmeal products during the previous four years, Eisenlord asked for actual damages, an injunction, and disgorgement of profits.
To read the complaint in Hernandez v. The ADT Corporation, click here.
To read the complaint in Eisenlord v. The Quaker Oats Company, click here.
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Lord & Taylor Settles With FTC for Not Disclosing Native Ads
Authors: Lauren B. Aronson and Linda A. Goldstein
Why it matters: Less than three months after the Federal Trade Commission issued its December 2015 Policy Statement and Business Guide on native advertising ("Native Advertising Guidance"), the Commission announced its first enforcement action and settlement in a native advertising case with department store chain Lord & Taylor. The action stems from a highly successful social media campaign launched by Lord & Taylor to promote its private label clothing brand Design Lab. The campaign included branded blog posts, photos, video uploads, native advertising editorials in online fashion magazines, and online endorsements by a team of specially selected "fashion influencers."
According to the FTC, Lord & Taylor failed to disclose that the native articles and posts were paid commercial content and the fashion influencers failed to disclose that they had been paid by Lord & Taylor and received free product. Thus, because the case involves compliance with both the FTC's native advertising guidelines and the Testimonial and Endorsement Guides, it provides important lessons for marketers utilizing any form of native advertising or more broadly engaging in social influencer campaigns.
Detailed discussion: According to the FTC's complaint, Lord & Taylor engaged fashion magazines to produce native content designed to promote the Design Lab Paisley Asymmetrical dress. As part of the campaign, Nylon, an online magazine, posted a photograph to its Instagram account of the dress along with a caption. Lord & Taylor edited and approved the post without disclosing the commercial arrangement between itself and Nylon. Additionally, Nylon also ran an article regarding Design Lab, pre-approved by Lord & Taylor, without disclosing that the article was paid advertising content.
Furthermore, the FTC alleged that Lord & Taylor also engaged social media influencers to promote Design Lab on Instagram without ensuring compliance with the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising. Lord & Taylor gifted the Paisley dress to 50 fashion influencers with sizeable social media followings and paid them between $1,000 to $4,000 to post stylish photographs of themselves wearing the dress on Instagram along with a caption. While the influencers were contractually obligated to mention and tag the company by using the user designation @lordandtaylor and to add the hashtag #DesignLab to the caption, they were not contractually obligated to disclose any material connection with the company. None of the posts disclosed that the dress was given for free, that the influencer was compensated, or that the posts were part of a Lord & Taylor advertising campaign.
According to the FTC, Lord & Taylor's failure to disclose the commercial connections between itself and Nylon and the social media influencers communicated the false message to consumers that the Instagram images, captions and Nylon article were all independent content produced by unbiased consumers and an unbiased publication when in fact they were all part of Lord & Taylor's advertising campaign.
Not surprisingly, the Proposed Consent Order, which is up for public comment through April 14, 2016, prohibits Lord & Taylor from misrepresenting that "paid commercial advertising is a statement or opinion from an independent or objective publisher or source," that endorsers are independent users or ordinary consumers, or otherwise failing to disclose an unexpected connection with an endorser. Importantly, the Order also imposes significant compliance obligations on the company similar to those that the FTC imposed in a case brought several months earlier against Machinima. The company must:
- Provide each endorser with a clear statement of responsibility regarding disclosure obligations and obtain a signed and dated statement acknowledging receipt and agreeing to comply;
- Establish a monitoring system to monitor and review advertisements and communications made by endorsers as part of an Influencer Campaign; and
- Immediately terminate any endorser for misrepresenting impartiality or failing to disclose a material connection.
The FTC has made it clear that it is closely watching Influencer Campaigns and that advertisers are responsible for ensuring that material disclosures by endorsers—social media influencers and publishers—are clearly and conspicuously disclosed. Advertisers should take note of the obligations imposed on Lord & Taylor and consider incorporating the following requirements as they develop future Influencer Campaigns.
- Put Disclosure Obligations in the Contract. Obtain a signed agreement from endorsers with a clear statement of responsibility and agreement to comply with disclosure obligations.
- Closely Monitor Endorsers. Create a monitoring system designed to ensure that endorsers are properly representing their relationship to the advertiser and clearly and conspicuously disclosing the material connection.
- Training is Crucial. Make sure that affiliates are trained to properly review sponsored content and endorsements.
- No Third Chances. If an influencer makes a mistake and fails to adequately disclose a material connection, the advertiser may give them a second chance if the advertiser has reason to believe the failure to disclose was inadvertent. However, the advertiser must inform the influencer that they will be immediately terminated in the event of a subsequent compliance failure.
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Employer Dodges Liability for Employee's Disparaging Social Media Posts
Why it matters: Taking a commonsense approach to a lawsuit seeking to hold an employer responsible for an employee's social media posts about a customer, a federal court judge in Hawaii noted that "the law does not impose strict liability on an employer every time an employee steps out of line," dismissing the suit. A Hertz employee posted disparaging and discriminatory remarks about a client on his Facebook page that coworkers liked and commented on. When the customer saw the post, he sued, claiming he suffered reputational harm and post-traumatic stress disorder.
Considering claims for negligent supervision, retention, and training, the court said Hertz owed no duty to the plaintiff with regard to the employee's social media posts. Although the employee had posted disparaging comments before, the comments about the plaintiff were not foreseeable, the court determined, as his supervisor was not friends with him on Facebook and would not have seen the prior comments. Antidiscrimination language in the employer's handbook did not create a specific duty with regard to social media, the court added, as such a duty "would require employers to monitor every statement by every employee, as discriminatory statements might be made in person, over the phone, over the Internet, and in letters or other written materials. This is an impossible burden."
Detailed discussion: On February 27, 2012, Maurice Howard visited a Hertz location at the Maui Airport. Later that day, Hertz lot manager Shawn Akina saw Howard walking near the location and posted, "I seen Maurice's bougie ass walking kahului beach road … n**** please!" Three coworkers commented on his post, with Akina posting additional comments in response including that Howard was "a broke ass faka who act like he get planny money," and "it's too bad his CC declines all the time." A fourth coworker liked the comments.
A Facebook friend of Akina's showed the post to Howard, who visited the Hertz location to complain. Akina's supervisor reviewed the post and found it offensive and inappropriate, as well as a violation of Hertz's corporate policy. Akina and three others were either terminated or resigned as a result.
Howard followed up with a lawsuit against Hertz, Akina, and the other employees. He alleged that he suffered post-traumatic stress disorder and was financially damaged because he lost customers as a result of the post. Hertz moved to dismiss the suit and U.S. District Court Judge Susan Oki Mollway granted the motion with respect to some of the claims.
She let Howard's claims for negligent supervision, negligent retention, and negligent training move forward, however. Hertz then moved for summary judgment on these remaining claims.
The relevant question for each claim was whether Hertz owed Howard a duty, with foreseeability as the pivotal issue, the court said.
With respect to negligent supervision and negligent retention, Howard argued that Hertz owed him and other customers a duty of care to prevent Akina from posting harmful social media content at work. He pointed to evidence that in 2009 or 2010 Akina posted a Facebook comment that "made light" of his supervisor after she nearly walked into a coconut tree and made previous negative comments about a customer online.
But the parties agreed the question of foreseeability should be viewed from the perspective of Akina's supervisor, and she testified that she had no knowledge about the prior post about a customer, Hertz countered. She wasn't friends with Akina on Facebook and just because other employees were aware of the post, that knowledge could not be imputed to the supervisor.
The court agreed. "That some of Akina's peers knew of his alleged posts about customers does not create a genuine issue of material fact as to whether … his supervisor also knew of such posts," the judge wrote. The post about the supervisor and the coconut tree also failed to support Howard's foreseeability argument, the court added, because she viewed it as "fairly innocuous" and unthreatening.
"However imprudent the prior post may have been, its content gives no indication that Akina would later make a racist, homophobic, or threatening post about a customer, or that he would post financial nonpublic information about a customer," Judge Mollway said. "Two or three years elapsed between the post about the tree and the post about Howard, making the likelihood of Akina's offensive post about Howard difficult to foresee. The post about the tree did not give rise to a duty on Hertz's part to prevent the harm that eventually occurred."
The court was clear that Akina's post and many of the follow-up comments were "indisputably despicable." But this fact wasn't lost on Hertz, which disciplined all of the employees involved, the court noted. "Howard has not demonstrated the existence of a genuine issue of material fact that [the supervisor] or Hertz foresaw or should have foreseen the danger posed by Akina and should have been more closely supervising his Facebook use earlier or should have fired him earlier," the court said.
Howard alternatively urged the court to base a duty on Hertz's employee handbook, which contained provisions addressing safeguarding customer information, nondiscrimination, and a lack of tolerance for violence. "While Hertz therefore could be said to have recognized these dangers, the law does not impose strict liability on an employer every time an employee steps out of line," Judge Mollway wrote.
Claims of negligent supervision and negligent retention require an inquiry into whether the employer knew or should have known of the danger posed by the particular employee who caused the injury, and the handbook alone was insufficient for Howard to establish a duty.
"Hertz's acknowledgement of possible dangers in its handbook does not suffice by itself to establish a duty of care running from Hertz to Howard," the court said. "It is reasonable and proper for employers to warn against possibilities, but nothing in Hawaii law equates the recognition of possibilities, without more, with the establishment of a duty. Here, the only 'more' is Akina's Facebook posting some years earlier about seeing [the supervisor] nearly walk into a tree. Howard's argument would require employers to monitor every statement by every employee, as discriminatory statements might be made in person, over the phone, over the Internet, and in letters or other written materials. This is an impossible burden."
Turning to the question of negligent training, the court again found Howard's failure to establish the duty element fatal to his claim. The duty to train must be tied to a particular job task that poses a foreseeable risk of harm if performed without adequate training, the judge explained, such as a security guard taught how to apprehend a suspected shoplifter or a social worker trained to handle psychiatric patients.
Howard was unable to identify any specific aspect of Akina's, his supervisor's, or any other Hertz employee's job that posed a risk of danger to Hertz customers as a result of the company's failure to train. Although he suggested the employer had "a duty to properly train its employees to conduct themselves in a lawful manner in their interactions with their customers and the public," this "limitless duty" would require Hertz to train its employees to avoid all unfavorable interactions with or relating to customers, the court said, and could not serve as the basis for a negligent training claim.
Attempts to establish a contractual duty (based on a letter from Hertz's CEO to the company's employees) and argue the plaintiff was in a "special relationship" with Hertz as a business visitor similarly failed to sway the court. And even if Hertz was under a duty to train Akina and others to prevent the harm allegedly suffered by Howard, the plaintiff provided no evidence that such a duty was breached, making no attempt to describe what additional training Hertz should have provided, the court said.
Judge Mollway granted Hertz's motion for summary judgment on all of the remaining claims and directed the clerk to close the case.
To read the order in Howard v. The Hertz Corporation, click here.
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