Wednesday, October 26, 2016

Republication of online articles was commercial speech and not protected by CDA

Western Sugar Coop. v. Archer-Daniels-Midland Co., 2015 WL 12683192, No. CV 11-3473 (C.D. Cal. Aug. 21, 2015)

More belated blogging.  The sugar industry and the corn refining industry accused each other of falsely advertising  high-fructose corn syrup (HFCS).  Plaintiffs were manufacturers, trade groups, and associations active in the sugar industry; defendants ditto for the corn and HFCS industry. Plaintiffs alleged three types of false and/or misleading representations about HFCS in the Campaign: (1) use of the term “corn sugar;” (2) statements that HFCS is a “natural” product; and (3) representations that “sugar is sugar” and that “your body can’t tell the difference” between sugar and HFCS. The counterclaim alleged that plaintiff Sugar Association falsely represented that HFCS causes obesity, cancer, and cirrhosis of the liver, among other things, when in fact, HFCS and sugar are nutritionally equivalent.

The court found that, even if defendants’ statements that HFCS is “natural” were in accordance with policies and guidance promulgated by the FDA, that didn’t preclude a Lanham Act falsity/misleadingness claim under Pom Wonderful.  There were genuine issues of material fact on falsity as to the claims and counterclaim.

Plaintiffs argued that they were entitled to a presumption of injury because this was a false comparative advertising case.  By contrast, recovery of damages in a false non-comparative advertising case requires “actual evidence of some injury resulting from the deception is an essential element of the plaintiff’s case.”  Defendants argued that the challenged campaign didn’t directly compare HFCS to any particular sugar product or brand.  However, the campaign directly compared defendants’ sweetener product, HFCS, to plaintiffs’ competing sweetener product, sugar.  According to defendants’ own evidence, the creative messaging strategy was to “directly compare HFCS and sugar.”  From 2008 to 2011, key campaign messages included that HFCS is “nutritionally the same as sugar,” and the “facts prove there is no difference between HFCS and other sugars.”  This was not a case where defendants merely emphasized the positive aspects of their own products; they specifically claimed that HFCS was equivalent to and the same as sugar.  The aim was to stop consumers from switching from using HFCS to using sugar, and thereby to stop plaintiffs from gaining market share.  “Thus, while the instant case is not a typical comparative false advertising case in that it does not involve comparisons between name-brand products, the Court finds that the presumption of causation and injury applies because the products are in head-to-head competition and Defendants’ Campaign directly targets Plaintiffs’ competing product.”

The court also addressed defendants’ argument that the Noerr-Pennington doctrine precluded liability for First Amendment-protected petitioning conduct, which can include “concerted efforts to influence ... government [ ] through direct lobbying, publicity campaigns, and other traditional avenues of political expression,” as well as litigation. Private petitioning conduct “incidental to a valid effort to influence government action” can’t be the foundation of liability.  Defendant CRA filed a “Citizens Petition” with the FDA on September 14, 2010, seeking to allow food and beverage manufacturers the option of using the name “corn sugar” to identify HFCS on ingredient labels, and the court found that certain challenged materials were incidental to the Citizens Petition and protected under Noerr-Pennington.  By contrast, statements challenged in the counterclaim weren’t “incidental to valid efforts to influence” the FDA or the prosecution of the instant lawsuit.

Counterclaim defendant SAI argued that its reposting and dissemination of articles wasn’t actionable commercial advertising or promotion under the Lanham Act.  The counterclaim challenged, inter alia, statements in articles authored by non-parties, Dr. John McElligott and Linda Bonvie: “Dr. John McElligott weighs in on the high fructose corn syrup debate in Land Line Magazine,” and Bonvie’s blog post, “The Corn Processors ‘get their way’ with UCLA, or do they?” SAI republished the articles on its website and distributed them in its electronic monthly newsletter, “The Sugar Packet.”  (Cute!)  SAI argued that reposting didn’t transform otherwise protected, non-commercial articles into “commercial speech” because SAI didn’t alter or incorporate the articles into traditional advertising, or distribute them to targeted potential customers, with a commercial motive.

The articles, as noted, were available on SAI’s website, and the Sugar Packet was distributed to approximately 3,500 recipients, including approximately 1,750 individual consumers and members of the media. “SAI had a clear economic motive for distributing the Articles—to promote the consumption (and thereby sales) of sugar.” The Sugar Packet itself stated, in the same issue that disseminated the McElligott article, that  SAI is “on a mission to educate consumers and promote the consumption of sugar through sound scientific principles.”  Citing Gordon & Breach, the court concluded that SAI’s republication promoted its own business and was commercial in nature.

SAI also raised a CDA defense.  Under Batzel v. Smith, 333 F.3d 1018, 1032 (9th Cir. 2003), the question of whether SAI was an “interactive computer service” for these purposes is whether under the circumstances, “a reasonable person ... would conclude that the information was sent [to them] for internet publication.”  The court found that SAI hadn’t shown that its website or electronic distribution service qualified as a “provider[ ] or user[ ] of an interactive computer service” within the meaning of the CDA.  Moreover, “[i]f information is provided to [SAI] in a capacity unrelated to [its] function as a provider or user of interactive computer services, then there is no reason to protect [it] with the special statutory immunity.” SAI showed that it obtained permission to republish the articles.  That was not evidence that SAI “passively displayed Articles from third parties who actively provided them to SAI in its capacity as a user or provider of interactive computer services.”  Thus, SAI wasn’t entitled to CDA immunity.

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