Likely success & irreparable harm still doesn't justify ex parte TRO against false ad. given counterspeech

Verified Nutrition, LLC v. Sclar, 2017 WL 4785948, No. 17-cv-07499 (C.D. Cal. Oct. 23, 2017)

Verified sells ProstaGenix, which is “an all-natural supplement with a proprietary form of Beta-sitosterol” (BetaRexin). Verified primarily advertises ProstaGenix through an infomercial featuring Larry King, available on Verified’s website, Prostate Report.  Prostate Report also provides “reviews” of various prostate supplements on the market, including Verified’s product ProstaGenix and defendants’ competing product, Prostate Miracle. Plaintiff Buckley also publishes a magazine called “The Men’s Guide to Prostate Supplements,” which provides similar reviews. The website allegedly discloses that Buckley is the inventor of ProstaGenix and writes the reviews on the website, and that Verified Nutrition sponsors the website. Buckley claims he has “spent approximately $150,000 to have five reputable and independent laboratories conduct more than 280 laboratory tests on over 150 different prostate supplements.”

On Prostate Review, Buckley wrote about his determination that his product was superior to Prostate Miracle because ProstaGenix contained almost twice as much Beta-sitosterol.  He included Prostate Miracle’s ingredient list on Prostate Review (which the court suggests might be the source, however unjustified, of defendants’ “plagiarism” claim).

Defendants began operating three websites: http://www.larry-king-prostate-report.com, http://LarryKingProstate.com, and http://www.best-prostate-formulas.com. They take images directly from the Larry King infomercial and superimpose negative text over them. [Verified also sued for copyright infringement; even if the claims are false, it’s hard to see how this isn’t fair use—the problem if any is in the falsity, not in the exploitation of a market to which Verified has a right.] Defendants’ claims allegedly include: 1) calling ProstaGenix and Buckley’s business a “total scam;” 2) claiming that Verified Nutrition “does not exist;” and 3) calling Buckley a “liar, plagiarist, and conman,” a “career huckster,” a “slimeball,” a “serial fraudster,” a “career con artist,” a “despicable schmuck,” and a “sociopath.” They also accuse Buckley of pretending to be an “independent, unbiased 3rd party” reviewer, “fraudulently selling one bogus product after another, since 2005,” and having a “long history of defrauding consumers.”

Verified alleged that these negative statements were false and had an adverse effect on their sales and goodwill. Searches for “Larry King prostate,” among others, returned links to defendants’ websites, and a YouTube video that is also embedded on the websites, which states, among other things, that “In the Larry King Prostate report, Larry King stages a fake interview with career huckster Fred Buckley and partner in crime, wife Corinne Buckley.”

Verified sought the TRO based on its claims for false advertising, defamation, trade libel, and unfair competition.  The court found that falsity appeared likely, and that the allegedly false statements were material, because “statements that certain reviewers or distributors are fraudsters would be material.”  Plaintiffs submitted evidence that Verified Nutrition exists as a Nevada limited liability company, disproving the claim that it is a “fake company,” as well as evidence that they spent approximately $150,000 in testing the ingredients of prostate supplements to review them on Prostate Report, which goes to the “fake review” statements.

Thus, the court found likely success on the merits for false advertising, as well as for the defamation/trade libel claim, though I’m not sure where the special damages are alleged/proved—claims about general goodwill/reputation are usually insufficient to plead special damage. This is what happens when only one side shows up to litigate—which is why it’s good to be nervous about ex parte proceedings.  Plaintiffs were also likely to succeed on their UCL claim.

Plaintiffs claimed irreparable harm to their reputation and also the decline in sales of their product, but lost sales “is just the type of harm that could be remedied by monetary compensation after a full trial on the merits.” So, was potential harm to reputation enough?  Many of plaintiffs’ allegations of harm relied on the fact that defendants’ websites were “gaining traction on the Internet, and rising in the results when Buckley entered certain search terms on Google, which typically would have resulted in Plaintiffs’ websites being on the top of the list.” [At some point, courts are going to have to note the importance of personalized results—if Buckley clicked on defendants’ websites before, they’re going to come up again for him, but that’s less helpful evidence about what J. Random Searcher will see.]  In order to counter this false advertising, plaintiffs alleged that they’d have to spend a lot of money on ads, but money could be recovered after a full trial on the merits.  Only 400 people had seen the YouTube video at the time of filing, after about 30 days (so much for “rising in the results”). The court found that reputational harm could increase over time, tipping the irreparable harm factor in favor of plaintiffs.  [Not clear how this is less speculative than in other cases, but ok.]

Balancing the equities/public interest. The harm to defendants seemed limited, “given they do not have a right to disseminate allegedly false statements.” As for the public interest, “while the public has an interest in not being exposed to false information, currently the public is able to view both Plaintiffs’ and Defendants’ advertisements regarding their respective prostate supplements, and can come to their own conclusions. Much of the information Plaintiffs use to demonstrate their claims are true and that Defendants’ are false, is also available on Plaintiffs’ website, Prostate Report, and thus also available to consumers to weigh the parties’ claims themselves.”  This reasoning is interesting and troubling in equal measure; it seems to suggest that the parties ought to fight it out in the marketplace of ideas—but will consumers actually consult both websites?  The answer might well be yes, if this is the kind of product that consumers do seek to educate themselves a bit about, but applied outside the TRO context it would seem worrisomely in conflict with the basic premises of false advertising law.  However, applied to the ex parte TRO, where the speech ultimately might be true/nonactionable, caution is more understandable—and consistent with a First Amendment tradition of protecting speakers from speech-suppressive orders they have not been able to contest.

As the court noted, none of the defendants had yet appeared, and plaintiffs hadn’t filed proofs of service for the individual defendants. There’s no requirement of formal service of process before a TRO can issue, but the court was troubled by the possible lack of notice. On balance, the court found that a TRO was not indicated, but they did provide sufficient evidence warranting an order to show cause as to statements that Verified Nutrition “does not exist”; ProstaGenix is ineffective and “just a cheap imitation of Prostate Miracle”; Prostate Report is a “fake review site” using “fake lab tests” and fake lab reports, promoted through a “gang of fraudsters”; and Buckley is “a liar, plagiarist, and con man” as well as a “sociopath” who publishes plagiarized and “fake review magazines” promoting his business and ProstaGenix. [Query whether “sociopath” can be proven true or false, and thus capable of defamatory meaning.]