Tuesday, February 12, 2019

Allegedly rigged "review" site was commercial speech, but falsity still not pled

GOLO, LLC v. Higher Health Network, LLC, No. 18-cv-2434-GPC-MSB, 2019 WL 446251 (S.D. Cal. Feb. 5, 2019)

GOLO sells a weight loss program and a proprietary supplement to help promote weight loss. HHN defendants published a review of this supplement, allegedly with inaccuracies, misleading statements, and blatant falsehoods, which led to this lawsuit. HHN moved to dismiss and moved to strike the state law trade libel claim under California’s anti-SLAPP law. The court granted the motion to dismiss but denied the special motion to strike because HHN make a prima facie showing that GOLO’s claim arose from an act in furtherance of HHN’s right of petition or free speech in connection with a public issue.

HHN (and its founder Shanks) allegedly compete with GOLO in the diet and weight-loss industry. Shanks specializes in SEO, and he and HHN allegedly bought and created dozens of information websites that generate revenue exclusively through advertising sales. One such website, SupplementPolice.com, claims to be a “product review website” aiming to introduce “honesty and transparency to the world of online reviews” through “detailed reviews of popular products.” Supplement Police states that it “doesn’t currently accept affiliate income from any company in exchange for favorable reviews – instead, it makes it money exclusively from [Google] AdSense revenue.”

GOLO alleged that the reviews were “predominantly bogus,” not based on any testing or analysis conducted by Supplement Police, biased, and designed solely to benefit HHN rather than the public. Supplement Police allegedly promotes and links to products the defendants are affiliated with, manufacture, and/or sell. Specifically, Supplement Police positively reviewed SilaLive Silica, giving it “an overall score of 4.6 out of 5” and said that it is “clearly a product that works for a lot of people.”  SP provided multiple links to the SilaLive website, which offers the product for sale, but doesn’t disclose that Shanks and HHN are affiliated with, and manufacture, distribute, and/or sell SilaLive, and own and/or operate the SilaLive website. Further, the review allegedly contains false statements, including that SilaLive is “formulated with the greatest quartz crystals” and that its main ingredient will help fight common health problems “from the inside,” giving a healthier more permanent solution that artificial cures cannot promise.

SP’s GOLO review allegedly inaccurately describes how GOLO was created, as well as what GOLO “promises,” and allegedly falsely states that the supplement should be taken “30 minutes before a meal” in order to “enjoy health benefits while also purportedly normalizing your insulin levels.” It further says: “Out of all of the ingredients listed [in the Release Supplement], only Salacia bark has been linked to reduced diabetes symptoms...Meanwhile, none of the other ingredients in Release have been linked to weight loss or normalized insulin levels.” And its bolded headlines allegedly “pose misleading questions which would cause readers to doubt GOLO’s effectiveness and/or decide not to purchase GOLO.”

Lanham Act claims: The specific falsities alleged were as above—non-obviously, GOLO alleged that it was false to say GOLO made any “promises” to consumers.  The court found that Rule 9(b) applied and that GOLO failed to plead why these statements were false and misleading. GOLO didn’t explain how GOLO was actually created or why it was false to say they made “promises,” nor about why it was false to make the statements about recommended intake time or about the ingredients.  As for the bolded headlines, “GOLO – Insulin Resistance for Weight Loss?” and “How Does GOLO Claim to Work?” the court found it unlikely that a question could be an actionable “statement,” but even if it could be, the complaint didn’t plead how those specific questions would mislead or confuse consumers, rather than simply framing the review.

As for the SilaLive review, GOLO likewise didn’t adequately allege the falsity of  “formulated with the greatest quartz crystals” or “will help you fight [common health] problems from the inside and thus give you a healthier, more permanent solution that artificial cures cannot promise you.”

Standing: Under Lexmark, “a plaintiff must allege an injury to a commercial interest in reputation or sales” proximately caused by violations of the Lanham Act. HHN argued that this claim failed because SilaLive is not a weight-loss product and does not compete with GOLO; nor does the GOLO review mention SilaLive. But Lexmark makes direct competition unnecessary. The complaint alleged competition between the parties in the diet & weight loss industry generally, and alleged that SilaLive was promoted as a supplement that could “help detox or kickstart[ ] a diet.” It also sufficiently alleged “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising” including foregone sales. Although the GOLO review, in fact, called the GOLO diet a “cost-effective” program, the court nonetheless accepted GOLO’s allegations of lost sales as factual for purposes of the motion to dismiss—which is a take on plausibility that not every judge would have.

Was the GOLO review commercial speech?  HHN argued that the review didn’t mention SilaLive or direct readers to the page hosting the SilaLive review.  So was it a consumer review or an ad? GOLO alleged that the review was “surrounded by advertisements and links to products and websites unrelated to but, in many cases, in direct competition with GOLO,” and that Supplement Police was affiliated with and/or received compensation from sales of “some or all” of the linked products.  Moreover, the positive review of SilaLive also allegedly generated sales/diverted sales from GOLO.  Thus, GOLO successfully alleged that defendants’ speech was an ad for competing products, and that the review was meant to discourage use of GOLO products and use products defendants promoted instead.

GOLO, LLC v. HighYa, LLC, 310 F. Supp. 3d 499 (E.D. Pa. 2018), dismissed a claim that GOLO reviews were commercial speech, but the court here found HighYa distinguishable. First, in that case, when the plaintiff objected to the review, the defendants amended the review and advised its readers that changes to the review were made based on additional information provided by GOLO. Under those circumstances, the facts didn’t plausibly support an inference that the review was meant to create an economic advantage for competing products.  Here, however, defendants removed the GOLO review after receiving a C&D, without attempting to correct the alleged misrepresentations. [Ugh. Talk about creating seriously bad incentives. Plus, I just don’t see how this connects to commerciality. Why isn’t “wanted to avoid the hassle of litigation”/ “had its speech chilled” at least as plausible as “wanted not to say anything nice about the competition,” especially given that the review doesn’t seem to have been particularly harsh in the first place?]

Also, “defendants disclosed a commercial relationship with another fitness product negating any indication that it was engaged in covert competition.”  But covertness has never been an element of the commercial speech test.  A clear ad should not deceive about whether it is an ad, and that’s important (and indeed where the only alleged falsity is the appearance of lack of financial interest, disclosure may be all that’s needed to avoid liability), but we still need to know whether it is an ad.  Anyway, the court also found it important that Supplement Police allegedly doesn’t disclose the identity of its owners and actively hides its association with SilaLive. HighYa said that “liability can arise under the Lanham Act if websites purporting to offer reviews are in reality stealth operations intended to disparage a competitor’s product while posing as a neutral third party.” This was sufficiently alleged.

The trade libel claim failed for want of sufficient allegations of special damages, which usually requires identification of specific lost sales/customers or (in Pennsylvania, whose law GOLO sought to use) really clear evidence of a sales decline traceable only to the disparagement, including allegations about sales for a substantial period before the challenged publication and sales after. The same falsity problems as with the Lanham Act claim also justified dismissal of this claim as well.

The anti-SLAPP laws of California differ from those of Pennsylvania (transferring district) and Delaware (another potentially interested state).  California’s law is broader, and California has a strong interest in protecting its speakers. “ ‘California would appear to object strongly to the absence of a robust anti-SLAPP regime.’ On the other hand, Pennsylvania’s or Delaware’s interests would be less harmed by the use of California law.” So the court applied California’s law, but it still didn’t help HHN.

An “act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue” triggering anti-SLAPP protection includes “any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest.” HHN argued that the reviews were a matter of public interest because GOLO itself described its product as a “leading weight loss and wellness program,” “the top-searched diet on Google in 2016,” and “endorsed, and even used by, multiple doctors.” In Wong v. Jing, 189 Cal. App. 4th 1354 (2010), the court reasoned that a negative review of a dentist’s services on the rating website Yelp.com constituted an issue of public interest because “consumer information that goes beyond a particular interaction between the parties and implicates matters of public concern that can affect many people is generally deemed to involve an issue of public interest for purposes of the anti-SLAPP statute.”

The court distinguished Wong because “it dealt with the more general issue of the effects of dentists’ use of certain products, not just a highly critical opinion of a particular dentist.” It implicitly dealt with the more general issues of whether it was ok to use nitrous oxide and mercury in dental treatments for children, and wasn’t just about one dentist.  Also, “[i]t is well established that commercial speech that does nothing but promote a commercial product or service is not speech protected under the anti-SLAPP statute.” Consumer Justice Ctr. v. Trimedica Int’l, Inc., 107 Cal. App. 4th 595 (2003) concluded that “speech about a specific product was not a matter of public interest because the speech was not about herbal dietary supplements in general, but about the specific properties and efficacy of a particular product.” So too here. Even if GOLO was popular, it’s not true that “simply because a lawsuit affects a large number of consumers and involves a life-threatening illness, it will satisfy the public interest requirement of the statute.” Scott v. Metabolife Int’l, Inc., 115 Cal. App. 4th 404 (2004). HHN thus failed to make a prima facie case that the GOLO’s suit arose from an act in furtherance of its rights of petition or free speech.

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