Monday, September 24, 2018

falsity from former customer satisfies Lexmark standard; not so for once-potential customer

Frompovicz v. Niagara Bottling, LLC, No.. 18-54, 2018 WL 4465879  (E.D. Pa. Sept. 18, 2018)

Prior ruling covered here. Plaintiff (on behalf of a putative class) is a water extractor. Defendant Land is a directly competing extractor and the bottler/distributor defendants who use his water are Niagara, Ice River, and Crossroads. Land allegedly extracts well water, which “does not satisfy the FDA’s definition of ‘spring water’ ” and which is permitted by the Pennsylvania Department of Environmental Protection (DEP) as a “well water” site, and not a “spring water” site. Land’s water allegedly “has been extracted, handled, or treated with equipment or techniques that are inconsistent with a ‘spring water’ classification criteria” and “has tested as containing more particulates or trace elements than are otherwise permissible or recommended under industry standards for ‘spring water.’ ”  Niagara and Ice River sourced their spring water from plaintiff before switching to Land, and Crossroads also considered plaintiff’s water before choosing Land.  Plaintiff also allegedly bottled and sold his own water directly.

Plaintiff satisfied Lexmark’s zone of interests test by alleging that his spring water sales were depressed as a result of the misleading labels. Also, Niagara allegedly “falsely told industry participants that Plaintiff should not be dealt with, and has misrepresented to the public that Plaintiff’s spring contaminated.” Land also allegedly disparaged the plaintiff, which affected the necessary commercial interest in reputation or sales.

Proximate cause: simple as to Land, because they’re direct competitors. Lexmark also allows suits against indirect competitors, though the circumstances have to be relatively unique. Here, the alleged disparagement by Niagara qualified: “when a party claims reputational injury from disparagement, competition is not required for proximate cause.”  Plaintiff also alleged that if the bottler defendants wanted to meet the demand for spring water without Land’s “phony” spring water, they’d have to use his and other putative class members’ true spring water. The bottler defendants argued that this allegation was merely speculative because there was no reason to think they would have bought from Land instead. But as to defendants who formerly bought from Land, the theory that they would have continued to buy from him in the absence of the mislabeling was a plausible theory of proximate cause.  Crossroads never bought from Land, though, and it wasn’t enough to allege that they were in negotiations at one point.

The Pennsylvania unfair competition claims were preempted by the FDCA, which has promulgated
 a standard of identity for bottled water, including a definition of “spring water.” The allegation that it was misleading to market Land’s water as “spring water” when the Pennsylvania DEP permit identified the source as a “well water” site was precisely the kind of claim prohibited by the FDCA.  The FDCA also impliedly preempts a state law claim based on conduct that is wrongful only because it conflicts with the FDCA or FDA regulations.  Land’s allegations were, in effect, a prohibited attempt to enforce alleged violations of the FDCA and FDA regulations.

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