Tuesday, November 08, 2016

Evidence of good faith not relevant for liability, but relevant for damages in false advertising cases

A.L.S. Enterprises, Inc. v. Robinson Outdoor Products, LLC, No. 14-CV-500, 2016 WL 4260062 (W.D. Mich. May 9, 2016)

ALS sued Robinson for false advertising over odor control claims for its hunting apparel; the court in this and a related order resolves some false advertising-related evidentiary issues.  First, ALS moved to preclude Robinson from offering evidence or argument that its ad claims are supported by testing, in general, as opposed to specific tests; and to preclude Robinson from presenting evidence that it acted in good faith reliance on test results.

challenged 40/200 claims

When an establishment claim is at issue, “the defendant must identify the cited tests.” Where a superiority claim does not purport to rest on test results, the plaintiff can prove falsity only by adducing evidence that affirmatively shows that the claim is false.  Robinson’s ads claimed that its product adsorbed “up to 40% more [odor] than carbon” ad claim; that it had “[m]ore odor adsorbing capacity than any competitor”; provided retailers with charts showing adsorption rates; and claims “blocks odor 8x better than zeolite and 3x better than carbon alloy.” The court agreed that these were establishment claims, yet, during discovery, Robinson’s witnesses failed to identify specific tests supporting these claims.  Instead, they cited general product development and testing processes or extrapolations from unspecified noncomparative tests.  The court granted ALS’s motion in limine to preclude references to such tests, other than one identified test known as the Aspen Report

ALS also argued that Robinson should be precluded from presenting testimony that it relied in good faith on the Aspen Report or any of the other unspecified testing that Robinson claimed supported its advertising statements.  ALS responded that its good faith was relevant to damages if it’s held liable. “With regard to liability for false advertising under the Lanham Act, the law appears settled that a defendant’s state of mind is not relevant to the issue of liability.” Not so with damages; the law is unsettled because the 1999 amendment to § 35(a) of the Lanham Act made it unclear whether willfulness is required for an award of profits.  The most recent Sixth Circuit precedent says willfulness isn’t required, but is an element that can be considered in weighing the equities, and bears on relevant factors, such as whether the defendant had the intent to confuse or deceive and whether sales had been diverted. Thus, evidence pertaining to Robinson’s good faith was relevant to damages.  Moreover, such evidence, even if self-serving, had more than minimal probative value and didn’t present enough of a danger of unfair prejudice or confusion to outweigh that value.  “In fact, it is entirely possible that testimony from Robinson’s witnesses that ‘dodg[es] substantive questions about its testing with vague assertions and conclusory statements about its intent,’ as ALS describes it, may be the most powerful evidence the jury may hear supporting a damage award for ALS.” [Yikes.]

A.L.S. Enterprises, Inc. v. Robinson Outdoor Products, LLC, No. 14-CV-500, 2016 WL 4257453 (W.D. Mich. May 9, 2016)

Robinson moved to exclude evidence and argument (1) about a prior lawsuit against Robinson under the Lanham Act, Wildlife Research Center, Inc. v. Robinson Outdoors, Inc., No. 02-CV-2773 (D. Minn) and (2) relating to Robinson’s offer to remove from its apparel hangtags containing the allegedly false or misleading “40/200” claims.  

In Wildlife Research Ctr. v. Robinson Outdoors, Inc., 409 F. Supp. 2d 1131 (D. Minn. 2005), a jury awarded the plaintiff close to $5 million for Robinson’s false advertising, consisting of damages and Robinson’s profits.  Robinson argued that the jury would wrongly treat reference to the case as propensity evidence, and that it wasn’t relevant to the issue of willfulness because the litigation occurred nearly ten years ago and involved a different product and different executive decision maker.

ALS responded that Robinson’s present corporate personnel testified in the trial, and ALS intended to show that Robinson learned from the litigation that it had to be “very careful” in its advertising claims, but instead acted in a completely different manner in promoting the products at issue here. Because this was evidence of past wrongdoing, Rule 403(b) concerns applied.  Although rebutting Robinson’s claim of good-faith reliance on testing in connection with damages “would seem to be a permissible use,” it still had minimal probative value to show Robinson’s knowledge of the need for care, while the potential for jury confusion and unfair prejudice at the mention of prior false advertising litigation “is both apparent and substantial, and certainly outweighs any probative value of the evidence.” ALS could ask Robinson’s witness whether Robinson knew it had to be “very careful” in its advertising; if the witness denied this fact, ALS could refer to the prior litigation for the limited purpose of impeachment.

Robinson also asked the court to exclude evidence and testimony concerning Robinson’s removal of hangtags containing the “40/200” claims at issue from its apparel, because this offer occurred in the context of settlement discussions early on in the case. Robinson cited Rule 408 (settlement negotiations and discussions) and Rule 407 (subsequent remedial measures), and argued that the evidence was irrelevant.

ALS responded by noting “Robinson’s shifting story during discovery about hangtag removal—first that it was unable to specify when removal took place, and then stating that it first began to remove hangtags in late June of 2014,” then testimony that hangtags were still being sent to retailers in September 2014, then a June 2015 email instructing Robinson’s warehouse to remove or cover all tags, and then photos from a store in April 2016 of a Robinson product bearing the hangtag and accompanying sticker.  ALS argued that this evidence was relevant to the propriety of injunctive relief, ALS’s entitlement to treble damages or attorney fees based on an exceptional case finding, and the credibility of Robinson’s witnesses.

Evidence of Robinson’s lagging hangtag removal was relevant to ALS’s allegation that Robinson continued to run false ads even after it had test results showing that its products were no better at adsorbing odors than comparable carbon products. This evidence didn’t concern “conduct or statements made during compromise negotiations about the claim.” Fed. R. Evid. 408(a)(2). All of the conduct occurred outside of compromise negotiations. Nor was Rule 407 on subsequent remedial measures implicated, because ALS wasn’t presenting the evidence to show that Robinson removed the hangtags, but rather, to show that it failed to remove them even once it knew the truth. This was relevant to good faith, among other things.

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