Tuesday, April 11, 2017

No evidence of harm means no disgorgement in false advertising case

MB Imports, Inc. v. T&M Imports, LLC, No. 10-3445, 2016 WL 8674609 (D.N.J. Dec. 23, 2016)

MB Imports imported and sold Sicilia brand lemon and lime juice products, and sold them to Safeway from 2001-2003; for many years, they were the only squeezable lemon and lime juices sold in Safeway’s produce department. Safeway discontinued Sicilia in favor of Tantillo juices offered by T&M after a 2009 meeting in which Safeway’s representatives didn’t recall receiving a proposed label for the juices. “Safeway representatives stated that Safeway was interested in selling the Tantillo juices because of the name-brand recognition, price, and Defendants’ willingness to engage in product promotions (and not due to any representations about the product’s quality, country of origin, or anything relating to their labels).”

The front label of Tantillo’s lemon juice stated “Product of Italy,” “Sicilian Lemon Juice,” “Not from Concentrate,” and “All Natural.” The back label listed ingredients, including “Lemon Juice (99.97%)” and “Potassium Metabisulfites (Antioxidant E224).” The lime juice was similar. Laboratory tests commissioned by MB indicated that Tantillo lemon juice contained added water, added non-fruit citric acid, and were not dervived from lemons of Italian or Sicilian descent, and MB concluded that the lime juice could not be “Sicilian” because there was no commercial lime juice exportation from Italy.  Despite getting this report, Safeway continued to sell the juices.

After a bit of litigation, MB was left with Lanham Act and coordinate New Jersey Unfair Competition Statute claims, with “disputed issues of fact regarding whether a consumer would consider the alleged misrepresentations material to his or her purchase; whether the current lemon juice label and previous lime juice labels still being used in advertising are false or misleading;” and “whether, if false and misleading, the representations at issue are material to consumers.”

Here, the court found that defendants were entitled to summary judgment on MB’s request for disgorgement. The Third Circuit has provided six non-exhaustive factors to evaluate whether disgorgement is appropriate: “(1) whether the defendant had the intent to confuse or deceive, (2) whether sales have been diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the plaintiff in asserting his rights, (5) the public interest in making the misconduct unprofitable, and (6) whether it is a case of palming off.”

Previously, the court found that “no reasonable factfinder could find that Safeway relied on Defendants’ alleged misrepresentations in deciding to sell Tantillo lemon and lime juice products.”  Moreover, MB failed to show that the false advertising caused MB any harm.  Without “at least some evidence of harm,” no award of profits or damages was appropriate.  For damages purposes, the court wouldn’t presume that any of defendants’ sales would have gone to MB but-for the false advertisement.

The court declined to address the appropriateness of attorneys’ fees at this stage. An award of attorney’s fees doesn’t require intentionally false advertising, or the existence of damages.  The court could potentially find culpable conduct if defendants were still using their original ad on the internet, and other claims related to be litigated. It was too early to decide that this wasn’t an exceptional case.

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