Wednesday, September 29, 2010

Organizational standing produces default victory for plastic bottlers

International Bottled Water Ass’n v. Eco Canteen, Inc., 2010 WL 3719313 (W.D.N.C.)

IBWA is a nonprofit whose members are bottled water producers, distributors, and suppliers in the United States and abroad.  Some of the members use bottles containing polyethylene terephthalate ("PET"), and others use bottles containing Bisphenol-A ("BPA").  Defendant Eco Canteen sells reusable stainless steel water bottles, which contain neither PET nor BPA. It ran ads claiming that drinking water from bottles containing PET and BPA posed health risks, and underscoring the cost and environmental impact of plastic water bottles.  IBWA complained, then filed a complaint with NAD, but then issued a press release about the challenge.  This violates NAD’s rules against publicizing NAD proceedings, and so the challenge was closed.  (Practice tip: make sure the PR folks know this rule!)  IBWA then sued for false advertising under the Lanham Act and deceptive trade practices under the North Carolina UDTPA.

Eco Canteen ultimately defaulted, but not before challenging IBWA’s standing, which was especially important in a default case because IBWA had the burden of demonstrating its standing to seek injunctive relief and damages. 

IBWA did not have organizational standing, the right to sue on its own behalf.  It argued that Eco Canteen’s ads had harmed its goodwill and reputation with the public.  However, it hadn’t alleged injury suffered by the organization itself.  IBWA contended that, because Eco Canteen’s statements disparaged plastic water bottles, that would likely cause economic injury by disparaging IBWA’s reputation.  “This theory might hold water [sic] if IBWA's goodwill and reputation depended on the general public's opinion.”   But IBWA doesn’t promote bottled water through its own ads, but rather by lobbying and enforcing its Code of Practice among members.  “There is no indication that the general public is even aware that IBWA exists.”  IBWA needed to allege a loss in revenue or a decline in membership resulting from the ads to establish actual injury; it didn’t.  Nor was IBWA’s abstract concern with the quality and safety of bottled water sufficient to confer standing.

IBWA did, however, have associational standing on behalf of its members.  Associational standing exists when (1) an organization’s members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. IBWA’s allegations met this standard.  The allegations of harm to individual producers met the constitutional requirements for individual standing, and IBWA’s individual members would have standing under the Lanham Act, because they have a commercial interest that’s being harmed, and they’re in direct competition with Eco Canteen. 

While I think this is correct, it is not clear to me that a court applying the execrable Phoenix of Broward test should reach the same result—especially if there are a number of producers who aren’t members or if the court looked at the difficulty of apportioning damages across multiple producers.  Here, however, the test for associational standing only assesses whether individual participation is required for the relief requested, and it’s not required for injunctive relief.  Also, there was no indication of a conflict of interest among members requiring them to act individually to protect their own interest.  (Hmm.  Aren’t there other companies touting BPA- and PET-free bottles?  Are none of them members of the association?)  IBWA did not, however, have associational standing to assert damages claims or ask for disgorgement of Eco Canteen’s profits.

Because of the default, IBWA got injunctive relief and costs, but the court did not find that the allegations (which have to be taken as true) showed that this was an exceptional case, and so refused to grant attorneys’ fees.

No comments: