The Class Action Lawsuit That Managed to Take Down Nike and Apple [e212]

August 5, 2015

Nasir and Matt discuss the settlement from a class action lawsuit involving Nike and Apple for an underperforming product.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and our legal twist. My name is Nasir Pasha.

MATT: And I am Matt Staub.

NASIR: Right on cue. Did you see how I pointed to you? I was going to do the “three, two…” with the silent one and then for you to go.

MATT: Always helpful.

NASIR: No problem. That’s why I’m here – to make sure you’re on-time.

MATT: Who do we talk about today? Cecil, the Lion?

NASIR: No, poor Cecil.

MATT: Oh.

NASIR: They still can’t find the dentist. I guess the authorities went to his door and knocked on the door and then he didn’t come out. Like, literally that was the article I read. Like, they don’t know where he is. But, if you’re just going to his house and knock on the door, that’s probably not the best way to find him.

MATT: “We saw his car. We saw somebody walk in five minutes earlier but, when we knocked, nobody answered. So, you can only assume he’s not there.” Well, no Cecil, the Lion. But, we are going to talk about these FuelBands.

NASIR: Yeah, Nike Fuel.

MATT: Nike Fuel. Do you have one of these? Did you buy this?

NASIR: No, I didn’t buy that version. Nike Fuel’s actually been out for a while, but I did know people that used to have it and I think that my dad ended up buying one, eventually, but what’s goofy about it, is that he would just shake his arm – and I’ve seen other people do that – and basically it acts like you are moving or whatever so you could reach your goal pretty quickly that way.

MATT: Well, that’s probably why we’re talking about it and there was this class action settlement, and not only Nike but Apple was involved as well in this too. So, let me get to the class action part of it, I guess, the settlement terms. Basically, the agreement is, if you bought a FuelBand from January 2012 through June 2015, you are going to be entitled to either a $15.00 payment or a $25.00 gift card which reminds me, I never received any Red Bulls.

NASIR: Yeah, I haven’t either. Sometimes it takes time.

MATT: I haven’t moved. I’m still here. Red Bull, if you’re listening, I haven’t got my two Red Bulls that are probably going to be not tasting very good because it’s going to be so hot and bottom of the barrel Red Bull.
Anyways, there is this class action settlement and it kind of centers around this false advertising claim essentially saying that the things that it’s supposed to do – the FuelBands are supposed to do like, track steps and count calories – actually didn’t do that very accurately and that comes as no surprise based on what you just told me that you essentially move your wrist around and you’re burning tons of calories.

NASIR: Yeah, exactly. There’s plenty of these things now. I had the FitBit when it came out – well, actually, after it came out about a year or two ago – and then now I have a Samsung Gear Fit that goes really well with my phone. But, frankly, I mean, these are all pretty useless when it comes to accuracy. In fact, when I was buying mine, I remember to figure out what was the most accurate. People would take like five or six arm bands and wear them for the day and they’d all have different numbers. So, I guess, in theory, one of them could be accurate. But, most likely, they weren’t and I think the most important thing is consistency because, just the nature of measuring steps and distances, it’s not a complete science – you know, it’s not a ruler where you’re measuring something in that respect. But, the problem is that, when you’re selling something – in other words, okay, they settled, right? Nike and Apple, they say that they want to avoid litigation costs so let’s just get rid of these guys and settle this lawsuit and that’s well and good and that possibly may be the case but there could have been liability here because, think about it, if I’m selling any kind of other device that measures, what’s the expectation of the consumer that it’s going to give me a measurement that is accurate? And there’s been tons of other cases very similar to this. Just when it comes to medical tests of marijuana, you know, sometimes they’re not accurate but, if you sell this test to test for marijuana use and it’s not accurate, why shouldn’t you be responsible if you’re saying that this is how you measure for drug use? In the same sense, Nike is selling this FuelBand that measures calories burned and all this and so forth and I’m sure it’s an estimate or whatever. The sophisticated user can understand the limitations of it. But, from another person, if they’re following a diet based upon this, then it’s understandable why people may feel like they’ve been wronged.

MATT: And it was only a $2.4 million settlement which, for those companies, it’s essentially nothing.

NASIR: Yeah, relatively very low and these are products that are… it seemed like they were products anyway, right?

MATT: Yeah.

NASIR: The class goes up to recently June 2015. So, If you bought something recently, but I think that the Nike FuelBand – and I’m just trying to figure out why Apple is included in this because I believe they only sold these Nike FuelBands at the retail store online but I don’t think they actually manufactured them so they just kind of just got thrown into the mix.

MATT: Under those circumstances, you would think that Nike is paying the bulk of that. Oh, I guess the things that are coming out are either a gift card for Nike or cash from Nike. So, maybe Apple is contributing to some of that cash. I don’t know.

NASIR: Actually, I think it said that Apple didn’t contribute anything, including any legal fees. Nike may have had some kind of identification that was triggered and that’s why they put up the funds for that.

MATT: Yeah. I mean, it’s good for them. They’re still alleged. Initially, in the lawsuit, it was both of them that these allegations of false advertising and the warranty terms and things like that. This is more clear cut it looks like because we have a product that is meant to track the number of steps and tell you how many calories you’re burning and, if it’s clearly no doing that, then it hasn’t lived up to what was advertised. But, in instances where it’s not as clear cut, I mean, to me, it’s very hard to draw the line on when this is false advertising or when something doesn’t live up to the warranty terms that were as were advertised. You know, there’s a lot more for ambiguity. That, to me, is the much harder angle to look at.

NASIR: No, absolutely, and when you’re selling products, especially that you manufacture, you have to balance. I mean, obviously, you want to be able to sell that it functions in the way that it’s intended. But, at the same time, you have to understand the limits and the craziness of consumers. I shouldn’t even say “consumers.” The craziness of lawyers that will take advantage of even the simplest, smallest misstep that you may have in any of your marketing material. All it takes is one advertisement that makes some claim that can be read in a way that is not in your favor. Just think about things that are very popular nowadays – I don’t know, maybe less so – and we always see this on Shark Tank and Mark Cuban always attacks them, of course – these wristbands with magnets in them and they do all these holistic kind of… you know, have holistic effects and so forth. But yet there is no proof to it and those kinds of statements aren’t really evaluated by any kind of FDA or other similar regulatory body and so, those kinds of statements, you have to be very careful about what people take from that because people may want them anyway. Even if they have no real effect, they may think that it just makes them feel better and it has some kind of placebo effect but you’ve got to be kind of clear with that.

MATT: It’s difficult because, in this case, I think it’s pretty straightforward. It’s supposed to do very objective things and it didn’t. You can tell that it was wrong but, you know, when you actually look to consumer expectations, it’s a much different space because this is a Nike product. I mean, that’s the top of the line brand and people have pretty high expectations of that. But what if you bought an off-brand of a similar thing? It was much cheaper. I mean, the expectation is going to be lowered. But at what point is it so lowered that you feel that you were taken advantage of and you should get some money back on it? It’s a really hard area and, like you said, an attorney can bring something on any other of this if they really want to if there is some problem so you’re never going to get out of that unless you’re absolutely perfect with it but it’s just a really weird area that companies that are producing products or even services too need to kind of tow the line and figure out the best way to approach it.

NASIR: You mentioned something in there as expectations and I think that’s the most important thing. This is kind of my mantra for our clients – that it doesn’t matter what put in your advertisements, it doesn’t matter what you put in your contracts, if somehow the expectations aren’t met by the other party – or your employees, for example, or whatever – there is going to be conflict and dispute. And so, that’s why little things like making sure your contract is clear and understood, making sure that when you’re presenting your product or service that you’re open and upfront, and so long as you meet your expectations, no one is going to care. Well, lawyers will care. Like I said, they’re going to find anything and everything but they still need a cooperating client. An attorney still needs the cooperation of a disgruntled employee to file a lawsuit against you or another attorney still needs a cooperating business to file lawsuit against you for some business dispute. So, expectations are by and far the most important thing you can focus on when you are presenting your product, service, or dealing with other parties.

MATT: I hate to keep going back to this but, for this specific example, I mean, the expectations were that it would count the number of steps to at least a very close approximation of what it was and that it would tell you how many calories you were burning and the expectations are going to be even higher with a product that’s branded Nike. So, this to me makes perfect sense but we do obviously deal with a lot of small – obviously smaller – companies than Nike are our clients but…

NASIR: A little smaller.

MATT: But, yeah, it’s much more difficult for them because the room for error is just a much smaller window. I mean, Nike only paid out $2.4 million and whatever the attorney’s fees, blah blah blah, and other costs but, you know, for a small business, this is a game-changer if there’s some sort… I don’t expect there to be class action lawsuit against smaller businesses but it just takes one person to cause problems for you as a business owner.

NASIR: Yeah, absolutely. By the way, if you guys have purchased a Nike FuelBand, just go to nikefuelbandsettlement.com and you can find all the information you need to file a claim, and the deadline to that is January 4th 2016 so you have time.

MATT: Yeah, that’s a long time.

NASIR: You only have about a couple of months to opt out of the class action in case you want to file a separate lawsuit against Nike and Apple so keep that in mind as well too.

MATT: I am sure people actually do that but I don’t know why you would.

NASIR: Yeah, you’re right. I’m sure people do that but that would be very silly. If you think you can do better than the $25.00 or I should say the $15.00 payment or the $25.00 gift card that they’re offering, then, you know, feel free to go right ahead.

MATT: I mean, you’re already out, like, almost five hundred bucks just to file a lawsuit so probably not worth it.

NASIR: Yeah, you can get your cost back supposedly.

MATT: Well, it’s too late for us to buy FuelBands or else we can get out in this class action and wait for our gift card.

NASIR: I should have bought a bunch of FuelBands back in June 201 and made a bunch of money.

MATT: I was going to say, when was the settlement agreement executed?

NASIR: I was trying to look at that but I think somewhere around earlier this year because I think the court still has to have a fairness hearing to adopt it and I think that’s happening in November or so.

MATT: It looks it was signed by Apple, May 26, 2015 – end of May. I guess they gave them another couple of weeks to get into the class hearing but, yeah, class action is a whole different ball game. I think we’ve talked about that a few times before on here.

NASIR: All right. Well, thanks for joining us on our episode about being truthful in your advertising.

MATT: Keep it sound and keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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