Sunday, July 08, 2007

This case won't improve this blog's MPAA rating

Christopher A. Cole of Manatt Phelps Phillips sent word of a Manatt client’s recent victory in CKE Restaurant v. Jack in the Box, Inc. (C.D. Cal. 2007). Here’s Manatt’s description of the case:

Jack in the Box has been sued by Carl Karcher Enterprises (owner of Carl’s Jr. and Hardees restaurants) over its television commercials touting its new “100% Sirloin Burger.” In the commercials, Jack, the clown-headed fictional CEO of Jack in the Box, makes fun of its competitors’ products made from Angus beef by using a play on the word “Angus,” but does not mention any specific competitor by name. In one commercial, Jack is in a meeting when he points to an area on a butcher’s diagram and says: “For those of you not from Texas, that’s the sirloin area.” An employee raises his hand and says: “Jack, our competitors serve Angus burgers. Could you point to the Angus area?” Jack responds: “I’d rather not.” In the second commercial, an employee gives a report on what the competitor is doing with its Angus burger while her co-workers laugh each time she says the word “Angus.” Jack then describes the new “100% Sirloin Burger” to his staff and asks if there are any questions. An employee raises his hand and says: “Are you saying that people will find our sirloin more attractive than their” Laughter erupts. (The commercials can be viewed in full at [Editor’s note: or on YouTube.]

Plaintiff, which has heavily promoted its Angus burgers, alleged state and federal false advertising claims based on the theory that consumers would think that Angus burgers were from the “unsavory end of the cow.” Angus is a breed and sirloin is a cut, so the commercials compare, as it were, apples and oranges. That can be false advertising in some circumstances – for example, when a pregnancy test touts itself as a “one-step” test compared to competing multiple-step tests, but counts physical steps for the former and chemical reactions for the latter.

Here, the ads allegedly claimed that sirloin burgers are superior to Angus burgers, and falsely implied that Angus burgers came from cows’ anal areas by emphasizing phonetic similarity between Angus and anus. Since literal falsity wasn’t at issue, the Lanham Act claims required evidence of deception; plaintiff offered a pilot survey. The pilot survey instructed consumers to answer questions based only on the commercials they saw, then asked them whether “Angus” referred to a cow part or a cow breed (with both/neither/don’t know options). Then it asked whether the commercial affected the likelihood they’d buy an Angus burger. The court found the survey questions leading, and criticized the survey for not offering consumers an open-ended opportunity to give their own interpretations of the ad. Moreover, the court deemed the survey to be worded in a way that discouraged consumers from indicating that they got the joke.

Likewise, plaintiff’s survey didn’t persuade the court on materiality. Seventeen percent of respondents said they were less likely to buy Angus burgers as a result of the commercial, but 14% said they were more likely to do so. (If these results are accurate, defendant won the false advertising battle but may be losing the advertising war.) The court thought that these results showed that consumers are not as “unsophisticated and gullible” as plaintiff contended. Also, asking about consumers’ general feelings about Angus burgers didn’t provide any evidence that their feelings about Carl’s Jr. or Hardees in particular had changed.

Requiring a showing that a particular statement is material through survey evidence is a relatively recent trend; in the past, the type of statement has often been enough for the court to conclude that it was material, and beef quality would have been a reasonable candidate for that treatment. To my knowledge, courts have not required survey evidence of materiality in literal falsity cases, even though such survey evidence would logically be required just as much when the statement was literally false as when it was misleading.

Separately, plaintiff argued that injury could be presumed because the advertising was comparative, but the court disagreed, because there was no direct reference to plaintiff (and there are many competitors in the fast food market, despite the ad’s reference to “our competitor”).

Plaintiff’s state law claims failed because the requirements of a California false advertising claim are “quite similar” and “substantially congruent” to those of the Lanham Act. Inexplicably, plaintiff failed to point to the California state cases that reject application of the Lanham Act’s false/misleading distinction to California law, allowing a plaintiff to prevail without survey evidence of misleadingness. (Well, the explanation is that they’re state cases, and Lanham Act litigators rarely pay attention to state cases; moreover, having determined to reject the Lanham Act claim, the court is extremely unlikely to find the ads misleading based on its own analysis of the ads.)

Finally, the court rejected defendant’s unclean hands defense, which was that plaintiff’s own advertising had engaged in similar techniques. While one of plaintiff’s ads equated milkshakes to shaking a cow, and another might be understood to equate chicken nuggets with testicles, neither suggested that the food itself came from an unsavory part of the relevant animal, and thus the ads were neither misleading nor relevant to this claim.

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