Pissing contest: urine removal lawsuit continues

Medallion Products, Inc. v. McAlister, 2008 WL 5046055 (N.D. Ill.)

Some previous reporting; there are a lot of parties and I have ignored a large number of claims; the post title is actually pretty appropriate.

Interestingly, the parties agreed that Lanham Act standing requirements applied to the Illinois UTPA and Consumer Fraud Act claims, which I’m not sure is established law. In any event, the defendants argued that plaintiffs lacked standing because they never sold a pet stain product directly to consumers, as defendants did. Rather, they sell only to distributors, who ultimately sell to retailers and consumers. The court noted other cases requiring the plaintiff to show that it competes at the same level of business as the defendant. I’m not sure this makes sense, depending on the composition of the market—if the causal chain of injury is pretty obvious, I’m not sure why plaintiffs need a retailer on their side; the retailer may lack sufficient incentive to sue given its multiple sources of revenue, while the individual product manufacturer may be in the best position. Moreover, the parties appear to be dealing with different levels of business in part because of the somewhat unusual nature of the “as seen on TV” market, where products are sold via infomercials and fulfillment is accomplished through complicated business arrangements.

The court, however, found that there was no competition for sales and thus no standing. In any event, plaintiffs couldn’t show actual reliance on the allegedly false representations at issue.

Medallion also sued defendant Harriet Carter, a mail-order company, for defamation per se, for falsely telling dissatisfied customers that the urine removal product was manufactured by Medallion. The court granted summary judgment because this statement was not defamatory per se. Medallion’s only evidence was that Harriet Carter referred dissatisfied customers to Medallion. The court found that this didn’t count as uttering an actionable defamatory statement. I think the necessary implication that the bad product was Medallion’s fault could plainly be defamatory, but the court held that it didn’t fall into the five categories of defamation per se under Illinois law.

For reasons I don’t quite understand, the court denied summary judgment on a very similar claim against another defendant, who allegedly gave test results to a Fox news reporter, identifying them as results from tests performed on Medallion’s product, knowing that the product wasn’t actually made by Medallion. Since the tests showed minimal levels of enzyme activity, contrary to the product’s ad promises, the natural result was harm to Medallion’s reputation. The court found that this was not defamation per se because of the lack of an explicit statement, but there were enough factual issues that it might constitute defamation per quod. Maybe defamation law needs the Lanham Act’s doctrine of falsity by necessary implication?

Medallion did better with a defamation per se claim against defendant NPI, which told some of the other defendants that it was looking for a new supplier for the urine removal product because it was having problems with its current supplier (Medallion), including failure to deliver product on time, poor-quality product and inability to make orders. Medallion alleged that these statements were false. NPI argued that it didn’t identify Medallion by name and that it didn’t make the statement to one of Medallion’s competitors, both of which would be necessary for defamation. The court, unsurprisingly, disagreed. There was evidence in the record to create a triable issue that the other defendants knew who NPI was talking about; also, given that the other defendants could supply the product, they were competitors (not sure why that matters for defamation anyway). Summary judgment was denied.

The court also denied summary judgment on defendants’ counterclaims for trade libel and defamation based on plaintiffs’ complaints to the FTC and to third parties. There were material issues of fact on plaintiffs’ defense of absolute privilege (which would require a pending FTC investigation) and qualified privilege (as to which there’s a fact issue on plaintiffs’ good faith). Moreover, plaintiffs’ statements that defendants lied about having enzymes in their product and that the product didn’t work as advertised aren’t, as a matter of law, subject to an “innocent construction” sufficient to avoid liability for defamation per se.