Plaintiff, a seller of street-legal 100 octane racing fuel, sued for federal and state false advertising claims based on alleged misrepresentations of the octane rating of defendant’s racing fuel. Defendant distributes racing fuel under the Sunoco brand; plaintiff argued that it sold 97 octane fuel as 100 octane. Plaintiff alleged that it collected samples of defendant’s product from ten fueling stations in California, and lab tests showed that none were 100 octane; they tested at 97 octane or below. Defendant argued that the claims were preempted by the Petroleum Marketing Practices Act and that plaintiff failed to plead fraud with particularity.
Preemption: Defendant argued that the PMPA doesn’t have a private right of action, and that the FTC has exclusive authority to enforce its provisions. States have traditionally regulated petroleum products, though, creating a presumption against preemption. The PMPA regulates the testing and disclosure of octane ratings, in accordance with FTC guidelines. Each entity in the distribution chain must certify the octane rating to the next recipient, based either on its own determination or certification from its distributor. Each retailer must display the octane rating clearly and conspicuously. Initially, the PMPA had a broad express preemption clause preempting state laws unless they were “the same as” the PMPA. In 1992, Congress amended the law to allow states to provide for any remedy or penalty with respect to any law permitted by the preemption clause. The intent was to allow the states more authority to enforce the law, given that an investigation found that 9% of a nationwide sample in 1988 was mislabeled by at least half an octane point, which is considered a significant violation. And the feds had failed to test or enforce octane compliance since 1981. Result: so long as state law is not different from or in addition to PMPA requirements, it can be used to enforce the PMPA and is not preempted.
So the question was whether plaintiff’s state law claims were “the same as” PMPA’s requirements. The UCL prohibits unlawful, unfair, or fraudulent acts or practices along with false or misleading advertising. The “unlawful” provision borrows violations of other laws, turning a violation of the underlying law into a per se violation of the UCL. Though the PMPA has no private right of action, plaintiff isn’t trying to bring a PMPA action, but a UCL claim. The 1992 amendment allows states to do this sort of thing.
Defendant argued that the UCL isn’t “the same as” the PMPA. But the UCL doesn’t attempt to set stricter standards, only to enforce the federal standard. Because it adopts the underlying law for purposes of the action, the UCL is “the same as” the PMPA here. There’s also no implied preemption or field preemption.
What about the false advertising claim under California’s FAL? Defendant argued that a ban on false advertising isn’t the same as the PMPA. But plaintiff is complaining about intentional misrepresentation of octane level, which is unlawful only if the advertiser knows or should know of the falsity or misleadingness. Defendant argued that under the PMPA a distributor need not know the actual octane level and may rely on the refiner’s certified octane level. Here, though, plaintiff is alleging that defendant engaged in misleading or false advertising, not certification or display of the octane rating.
The PMP doesn’t regulate the act of advertising petroleum products, so there is no preemption. The legislative history states: “This rule of construction is not, however, intended to authorize intentionally deceptive or misleading identification of automotive gasoline. Such would be the case if the trademark to be utilized were ‘100 Octane’ and this trademark were to be utilized to identify automotive gasoline with an octane rating of less than 100 under the statutory definition.”
What about preclusion (not preemption, though often called that) of the Lanham Act claim? When two federal statutes conflict, the more specific prevails. The court found that this result was required here, barring the Lanham Act claim. The specific provisions of the PMPA allow the distributor to rely on a supplier’s certification. Because knowing falsity isn’t a prerequisite to a §43(a) violation, a defendant could be complying with the PMPA and still falsely advertising under the Lanham Act. Thus, the Lanham Act claim was “preempted.” (Compare the results for Lanham Act cases about false patent markings—the courts manage the tension between the regimes by requiring a showing of intentional falsehood, and preserving Lanham Act claims in that subset of cases. I’m not sure why this couldn’t have been done here, especially given the result on the state law claims.)
In federal courts, California consumer protection claims have to be pled with particularity, even though they need not be in state courts. The court found the complaint sufficiently well-pleaded under the “fraudulent” and “unfair” prongs of the UCL, though not the “unlawful” prong because the only legal violation alleged was the Lanham Act. (Apparently the court forgot what it said about the relationship between the UCL and the PMPA at the beginning of the opinion.)
The false advertising claims under the UCL and the FAL failed, however, for want of factual allegations about the key element of “some type of advertising statement” by defendant. These claims were dismissed with leave to amend.
No comments:
Post a Comment