SCIPR: false advertising

Lexmark Int'l v. Static Control Components (Standard for determining standing for false advertising claim under the Lanham Act.)

POM Wonderful v. Coca-Cola (Standing under the Lanham Act to challenge food or beverage label as false or misleading though regulated by the Food, Drug, and Cosmetic Act.)

Moderator: Scott Burow, Partner, Banner & Witcoff Ltd.: is the new test in Lexmark, zone of interests plus proximate causation, better?

Panelists: Jameson Jones, Counsel to Static Control Components, Partner, Bartlit Beck LLP: Yes.  Focuses back on text and history of statute more than some unmoored 5-factor test.

RT: real Q is what proximate causation will mean. Will a competitor w/20% market share be able to plead proximate cause from false advertising by another competitor w/20% market share.

Thomas Saunders, Counsel to POM Wonderful, Partner, WilmerHale LLP: Static Control had huge market share according to SCt.  Big question mark remains.

Jones: definitely open-ended.  Background principle for all federal statutes.  Interesting parallel w/RICO cases.  Cts of appeals had developed theory of RICO standing, and SCt just decided that proximate cause was the right standard. Reputational interest in subject matter = generally proximate cause.  Small market player when someone else is falsely touting themselves = maybe you have trouble.  Suppliers to Static Control = not be able to establish proximate cause.

RT: worry about not allowing producers in competitive markets to sue, since they don’t have huge market share. Cause of action shouldn’t be reserved for monopolists/near monopolists.

Q: consumer standing?

Jones: SCt was clear, no. Defensible line in context of how Lanham Act came to be. Designed to enforce treaty obligations to protect people who entered the US market.  “Those engaged in commerce.” 

Saunders: “any person” language—as outside observer: opinion doesn’t like language of prudential standing.  Zone of interest = look at statute. But then you have very broad statutory language, to which they didn’t give effect.  What supplies the context/content?

Jones: text, context, history of statute. SCt has long history of saying “any person” doesn’t mean “any person.”

RT: protecting consumers was part of the text, context, and history. And consumers  also engage in commerce.

Jones: state consumer protection acts give protection anyway. Sellers need uniform federal remedy.

Q: will judges have more discretion to throw out claims?

Jones: not more than prior tests, especially reasonable interest circuits or Conte Bros. circuits.

RT: real issue is pleading standards. Some courts accept allegations of damage, others require further allegations.

Q: who’s in better position to enforce the law, FDA/private party?

Saunders: Private party. FDA is focused on health/safety, limited enforcement resources and information.

RT: not a competition. Some things FDA is needed for. Don’t want to denigrate FDA’s capabilities.

Saunders: complementary: not a preapproval regime where FDA looks at every label.  Pom has its own research surrounding pomegranate juice and a 100% product; Coca Cola’s cheaper product deceives consumers into thinking they’re getting the premium product not apple and grape.  Different from FDA’s separate health concerns.

RT: also FDA has interest in consistency/consumers’ ability to rely on statements being the same across different foods.  Adding information into the market.

Jones: if FDA requires something, Lanham Act couldn’t require its removal.

Q: Kennedy says competitors know more about the market.

Saunders: certainly right.  It’s really less about undermining FDA than national uniformity: what if one jury says label should’ve been larger and another says something different. Coca-Cola’s argument was let FDA be the centralized figure answering the question.

RT: FDA does know stuff about the market; they generalize: small print doesn’t work generally; don’t need a study specifically about yours.  Don’t threaten that!

Saunders: Preclusion remains. Express preemption for certain state law claims.  Opinion’s discussion of uniformity: standards based approach can be applied by individual juries but can be nationally uniform if it comes from one statute, like the Lanham Act.

Q: more cases?

Jones: modest uptick. Not necessarily huge.

Saunders: litigation economics matters. Still might not make sense to sue over low-level harm. Or more as an added claim in an existing case. The cases before the Court are big deals for the core businesses of the Ps.

RT: compare Dastar and Wal-Mart: Court sent strong signals about narrowness and here breadth of statute.  Seeing similar use of Pom Wonderful and Lexmark: introductory statements about breadth of statute are picked up in other cases not really about the same things.

Jones: publicity matters; being in the SCt matters.

Q: did Lexmark weaken reliance on prudential standing?  Declaratory judgments maybe.

Jones: Designed to give guidance across fed statutes.  Court signals that it hates prudential standing as a term because it suggests judicial freedom, but it’s a similar inquiry w/different words. Shift in focus/semantics. Proximate causation still remains an issue.

RT: lower courts are clearly ignoring that semantic shift.  Substance: Starting to see sporadic use of the zone of interests/proximate cause test in TM, but not much yet. Can imagine it increasing.

Ed Lee: is the bottle misleading?

Jones: yes. Surprised at how little pomegranate juice was in it.

RT: Justice Kennedy clearly thought it was a fraud.  Conventional wisdom: if the judge thinks it’s deceptive, it is, reasonable consumer standard aside.