Lanham Act claims don't require pleading with particularity

Priority Intern. Animal Concepts, Inc. v. Bryk, 2012 WL 6020044 (E.D. Wis.)

Here’s a well-reasoned opinion explaining why Rule 9(b) doesn’t apply to Lanham Act false advertising claims. I have to admit I’m surprised when I see courts going the other way, though they do (though not for trademark claims brought pursuant to virtually identical statutory language with virtually identical, nonrequired allegations of intent, go figure).

Priority, which makes dietary products for livestock, sued Gleisner, a former employee, and Bryk and Lowe, two former consultants, alleging they conspired to form a competing business.  Defendants moved to dismiss Priority’s claims of false advertising (and breach of agency duty).  The court denied the motion because Lanham Act claims aren’t subject to Rule 9(b)’s fraud pleading standards.  Priority alleged that defendants claimed that their products could be used with Priority’s P-One Program for feeding, instead of Priority’s own products.

Here, though there were general allegations that defendants made false/misleading representations with intent to deceive the public, these allegations weren’t essential to the false advertising claims, which would survive without them.  Defendants argued that Rule 9(b) was designed to protect defendants from unfair prejudice, since fraud accusations can do serious damage to goodwill; the particularity requirement makes plaintiffs investigate before making such allegations.  “But there are worse allegations than fraud that one can level against another person or business, and the heightened pleading standard does not apply to them. There are also ways of protecting parties from unfair allegations made without factual support or simply to harass. The need to protect litigants from embarrassing allegations made without a solid basis is not a sound reason for expanding the heightened pleading standard of Rule 9 to claims that do not sound in fraud, an expansion that would only lead to more unproductive motion practice.”

Defendants cited district court decisions applying Rule 9(b) to false advertising claims. “The court finds little by way of analysis in any of these cases, however, and declines to follow them.”  Making a false statement, not fraud, is the essential element of a Lanham Act false advertising claim.  A Lanham Act claim doesn’t require knowledge or a specific intent to harm the victim and defraud him/her, whereas 9(b) requires specifics giving rise to a strong inference of fraudulent intent. 

Practical reasons also counseled against applying Rule 9(b):

Advertising is often conducted by large corporations through other corporate advertisers. The specific personnel involved in producing and authorizing the allegedly false advertising within the corporate structure will typically be unknown, absent discovery. A business injured by false advertising should not be deprived of a remedy to address such harm simply because it has yet to discover all of the details as to who is responsible and whether they acted with intent or not, especially since these facts are not even material to the claim.

The fact that intent isn’t an element also makes the damage from allegations of false advertising less harmful to a defendant’s reputation.  Plus, false advertising claims serve a public interest: protecting consumers from harm.

Finally, even if Rule 9(b) applied, the complaint satisfied it; Priority shouldn’t have to identify the exact person who made the allegedly false statements at this stage since that information was peculiarly within defendants’ knowledge.  Nor did Priority need to identify specific customers to whom the allegedly false ads were sent, since ads by their nature are directed to an “anonymous public audience.”  (Well, not quite, but ok.)  Allegations that the ads were disseminated to customers and potential customers in New York, Virginia, and Ohio were sufficient.