436 P.3d 857
Wash. Ct. App.2019Background
- State sued Living Essentials (maker of 5-Hour ENERGY®) under Washington’s Consumer Protection Act (CPA), alleging deceptive advertising for three claims: “Superior to Coffee,” Decaf provides energy "for hours," and an "Ask Your Doctor" ad implying 73% of doctors would recommend the product.
- After an 11-day bench trial with extensive evidence, the trial court found those three campaigns deceptive and violating the CPA, awarded civil penalties and attorney fees to the State.
- Trial court relied on FTC guidance (prior substantiation doctrine) and found Living Essentials lacked competent, reliable scientific substantiation for the Superior-to-Coffee and Decaf claims, and that the Ask-Your-Doctor ad conveyed a misleading "net impression."
- Court imposed a $2,183,747 civil penalty based on the number of Washington airings/sales and awarded the State roughly $2.1 million in fees and costs.
- Living Essentials appealed, arguing: (1) trial court improperly adopted FTC prior-substantiation as per se rule, (2) doctrine is unconstitutional under state and federal free-speech principles, (3) claims were puffery, (4) trial court applied wrong substantiation standard, (5) Ask-Your-Doctor ad was not deceptive, and (6) penalties/fees were improper.
Issues
| Issue | Plaintiff's Argument (State) | Defendant's Argument (Living Essentials) | Held |
|---|---|---|---|
| Whether trial court improperly adopted FTC prior-substantiation as a per se CPA violation | Trial court properly used FTC guidance to assess reasonable-basis substantiation, not as an automatic per se rule | Adoption creates new per se violation and exceeds judicial authority | Court: No error — trial court used prior-substantiation as guidance but weighed pre- and post-claim evidence and reached fact-based deception findings |
| Whether prior-substantiation doctrine violates Washington Constitution (art. I, §5) or First Amendment | Regulation of misleading commercial speech is permissible; Central Hudson applies; prior-substantiation has been upheld by federal courts | Doctrine is vague and requires strict scrutiny under state constitution; shifts burden and chills speech | Court: Doctrine constitutional here; commercial speech not more protective under state law; misleading speech gets lesser protection under Central Hudson |
| Whether the challenged claims are nonactionable puffery | State: claims were factual, testable representations about physiological effects and duration, not mere puffery | Living Essentials: statements subjective/feelings and unimpaired consumer evaluation amount to puffery | Court: Claims were factual and capable of objective substantiation—not puffery |
| Appropriate substantiation standard ("competent and reliable scientific evidence" v. higher health-claim standard) | State: reasonable-basis/recognizable substantiation required; FTC guidance appropriate | Living Essentials: trial court applied an overly demanding "health-claims" standard and misstated requirement | Court: Trial court misstated standard in places but error was harmless — substantial evidence supports lack of reasonable substantiation |
| Whether the Ask-Your-Doctor ad was deceptive despite literal truth | State: ad’s net impression was that a large majority of doctors recommended 5-Hour ENERGY®; surveys were biased and presentation misleading | Living Essentials: literal statements were true and expert testimony supports non-deceptive meaning | Court: Net impression analysis supports deception finding; State’s experts and ad context show likely misleading interpretation |
| Whether penalties and fee awards were excessive or abused discretion | State: civil penalties and fees are authorized and intended to deter/prohibit profit from deceptive conduct; award tailored to violations and litigation complexity | Living Essentials: penalty violates Excessive Fines/Due Process and fee award excessive given partial success | Court: Penalty and fee awards not an abuse of discretion or unconstitutional; amounts below statutory maxima and fees reasonably incurred |
Key Cases Cited
- Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557 (established four-part test for regulation of commercial speech)
- In re R.M.J., 455 U.S. 191 (misleading commercial speech not protected)
- Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778 (Washington framework for CPA deception and reliance on federal law)
- Ralph Williams’ N.W. Chrysler Plymouth, Inc. v. State, 87 Wn.2d 298 (civil penalty principles under CPA)
- POM Wonderful LLC v. Federal Trade Comm’n, 777 F.3d 478 (FTC/competent-and-reliable-evidence standard for health-related marketing claims)
- Federal Trade Comm’n v. Pantron I Corp., 33 F.3d 1088 (reasonable-basis theory and prior-substantiation doctrine)