Thursday, December 15, 2016

When does a false advertising case create a right to a jury trial?

Ferring Pharmaceuticals, Inc. v. Braintree Laboratories, Inc., --- F.Supp.3d ----, 2016 WL 7223279, No. 13–12553 (D. Mass. Dec. 13, 2016)

The parties compete for the market in products used for bowel preparation before colonoscopies, and each alleged that the other had engaged in false advertising. Braintree’s moved to strike Ferring’s demand for a jury trial.  “Parties have the right to a jury trial when a statute or the Seventh Amendment so requires.” The Lanham Act does not create such a right if a plaintiff seeks “the remedy of an accounting of defendant’s profits,” nor does Massachusetts Chapter 93A, the coordinate state false advertsing law.

The key to the Seventh Amendment analysis here was whether the remedy sought was legal or equitable in nature.  If legal, then there would be a right to a jury trial; an equitable remedy can also be “of a legal nature” sufficient to entitle a party to a jury trial.  “For instance, an accounting of profits can act as a proxy for a legal claim in some circumstances.” The court determined that it would apply the proxy rationale “if 1) the case involves similar products, 2) there is no adequate remedy at law and 3) the products compete directly.”

Braintree argued that its requested disgorgement remedy was equitable. Ferring was entitled to a jury trial with respect to its defenses to Braintree’s counterclaims, which the parties agreed were legal in nature. But the proxy argument was closer—the first two factors weighed in favor of finding that Ferring’s claim was a proxy for legal damages. The competing treatments were very similar, and there was no alternative legal remedy, because Braintree’s purported false advertising began as soon as Ferring’s treatment entered the market, “making it impossible for Ferring to measure its alleged losses by decreased sales.”

However, it wasn’t clear if there was direct competition.  Though the two products perform the same function and were prescribed by the same doctors, and though Braintree’s advertising directly targeted Fering’s product, there were other colonoscopy preparation drugs on the market during the time period at issue.  [They’re direct substitutes.  They may be in head-to-head-to-head competition, but reading an extra requirement of being the only two competitors on the market into the standard for “direct competition” seems to need more justification.  I guess the justification would have to be that “direct competition” is a poor shorthand for the actual standard: you have to be relatively sure that any of defendant’s sales were taken from plaintiff’s hands, and that isn’t as clear when there are other competitors in the market.  But then, if there might well have been other victims, is disgorgement likely to be appropriate?  I’m not sure how the underlying standard for recovery interacts with the Seventh Amendment argument.]

The court decided to go ahead and have the jury trial first, as required no matter what.  “If Ferring has failed to show that it is entitled to a jury trial at that time, the Court will treat the jury’s verdict as advisory.”

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