Ameritox, Ltd. v. Millennium
Laboratories, Inc., No. 11–cv–775, 2014 WL 1456347 (M.D. Fla. Apr. 14, 2014)
Previously,
there have been several
opinions in this false
advertising case between competitors in the urine testing market. Here, Millennium won summary judgment on some
parts of the case.
Ameritox alleged a number of misrepresentations
by Millennium, starting with billing letters for doctors to give to patients
stating a policy (1) not to collect the difference between the amount
Millennium billed for its services and the amount the patients’ insurance
companies agreed to pay, and (2) not to require patients to pay deductible or
co-pays. Ameritox alleged that these were deceptive as to those who weren’t
required to pay anything anyway (or who only had a $1 copayment). This was an illusory benefit as to them, and
also Ameritox alleged that waiving these payments was illegal under federal and
some state law, so Millennium gained business by falsely representing that
these actions were proper.
Second, Millennium allegedly created
a press release advocating for higher Medicare reimbursement rates for doctors
performing drug screening, falsely representing that Millennium had no vested
interest in advocating for this change and gaining credibility for its supposed
altruism.
Millennium also allegedly engaged in
various misrepresentations about billing, deceptively representing that its
billing scheme was proper, when it wrongly encouraged doctors to bill multiple
times or multiple ways for the same procedures.
Relatedly, it allegedly encouraged doctors to send samples to Millennium
for more expensive testing than that performed in the doctor’s office.
Finally, Millennium allegedly falsely
stated and implied that giving doctors free or below-market-priced products and
services (testing cups, assistance for obtaining certain waivers necessary to
conduct drug testing, and chemical analyzers) was legal. The free testing cups could only be used to
collect samples and then send them to Millennium, not for billable testing. Millennium’s cup agreements enabled it to
convert accounts from Ameritox.
Similarly, assistance in obtaining waivers was supposedly $50 in order
to avoid antikickback laws, but Millennium didn’t actually charge the fee until
this lawsuit was filed; this also helped Millennium get accounts.
The court agreed that statements
about the legality of the cup agreements couldn’t found a Lanham Act claim,
because no court or agency had held them illegal. Laypersons’ purported
interpretations of statutes and rules are opinion, not fact, in the absence of
a clear and unambiguous judicial or agency holding. There was no clear case law on the cups, only
an inquiry letter from a Florida agency that didn’t result in any action. (However, to the extent that the conduct of
giving the cups amounted to unfair competition because it was illegal, Ameritox
could continue to pursue this state law claim.)
As to the below-market chemical
analyzers, Millennium argued that it didn’t offer them. Ameritox presented evidence that Millennium
sought out the third-party vendors, negotiated preferential pricing for
Millennium customers, and would benefit from the transactions, so summary
judgment was denied. The court also rejected Millennium’s “commercial
advertising or promotion” argument on this topic, since there was evidence that
Millennium sales reps told doctors about the offer and told them that it was
legal.
As for the representations about
billing, the parties didn’t sufficiently identify the specific representations
at issue or show how they were proper or improper. Ameritox provided evidence that Millennium’s
sales representatives would tell customers: (1) how the customers and
Millennium could both bill for testing the same urine specimen; and (2) how the
customers could bill multiple units. But
the court was still unclear on the specifics or the propriety of these
practices. (I take it this uncertainty includes whether there was a definitive
court or agency statement about the practices.) Summary judgment denied.
The court also found that Millennium’s
marketing of assistance for obtaining waivers wasn’t improper, because it advertised that it charged $50. Thus, it didn’t falsely advertise the
legality of its assistance. But the
conduct of not collecting the fee might still be unfair competition.
Millennium argued that Ameritox
couldn’t show injury entitling it to damages, but the court ruled that both
damage to Ameritox and disgorgement of Millennium’s profits might be available.
Because “marketplace damages and actual confusion are notoriously difficult and
expensive to prove,” courts routinely presume that literally false ads deceive
consumers. And many courts presume that
willfully deceptive, comparative advertisements cause financial injury to the targeted
party. But none of the challenged representations here were comparative ads, so
there was no presumption of causation.
Ameritox mostly pointed to evidence
of harm from the cup agreements, which weren’t the proper basis for a Lanham
Act claim, as well as evidence of missed financial projections. But “change in the parties’ sales positions
without a showing that the change was caused by a specific advertising
representation is not sufficient evidence of causation.” Ameritox’s analysis of customers’ proffered
reasons for switching to Millennium was hearsay. Given the presence of an
expert report, which was under challenge, the court deferred ruling on damages.
In order to obtain disgorgement,
Ameritox wouldn’t need to show actual damages.
Disgorgement is appropriate where (1) the defendant’s conduct was
willful and deliberate, (2) the defendant was unjustly enriched, or (3) it is
necessary to deter future conduct. When a profits award is appropriate, the
plaintiff must establish only defendant’s sales of the product at issue; “the
defendant bears the burden of showing all costs and deductions, including any
portion of sales that was not due to the allegedly false advertising.” The statutory text requires the plaintiff to
prove sales only, not “sales due to the false advertising” or “sales due to the
violative conduct.”
This may seem like a windfall, but
defendants can avoid it by apportioning their profits, and if they can’t, as
violators of the Lanham Act they may fairly suffer the consequences of their
own failure to do so. Also, Ameritox
would still have to prove causation, and prove sales of the falsely advertised
products. Whether Ameritox could prove
causation, as noted above, wasn’t yet decided.
No comments:
Post a Comment