variety in superiority claims can add up to disparagement

Deerpoint Group, Inc. v. Agrigenix, LLC, 2019 WL 2513756, No. 18-CV-0536 AWI BAM (E.D. Cal. Jun. 18, 2019)

Deerpoint sued Agrigenix for violating the Lanham Act and California’s UCL via false advertising, violating California and federal trade secret law, and related claims. Deerpoint allegedly provides chemical water treatment solutions for agriculture irrigation, using custom-blended fertilizers and patented precision feeding equipment.  Its former CEO allegedly took confidential information, sued Deerpoint/filed an administrative complaint with the California Department of Fair Housing and Employment, and formed a competitor, Agrigenix.  Its fertilizer blends were allegedly copied from Deerpoint and it allegedly installed at least four devices that copy the feeding equipment. Agrigenix allegedly told Deerpoint’s customers that it is “the same as Deerpoint with a twist,” and four large clients of Deerpoint, representing $2.4 million in revenues, switched to Agrigenix. The parties settled the ex-CEO’s case with an agreement including a provision that acknowledged that his obligations to keep Deerpoint’s trade secrets secret were still in force.  Unsurprisingly given the posture, the trade secret claims were not dismissed.

Intentional interference with prospective economic advantage: defendants argued that the requisite independently wrongful act alleged, disparagement, wasn’t sufficient because the alleged statements were puffery, opinions, too vague, or hyperbole and invective from a competitor.

The challenged statements: (1) Agrigenix is the same as Deerpoint with a twist; (2) Deerpoint is failing and will lose all of its customers to Agrigenix; (3) Mahoney is not obligated to maintain Deerpoint trade secrets; and (4) Agrigenix’s products are 20% better than Deerpoint’s while being 20% cheaper. Deerpoint argued that these were necessarily claims that “Agrigenix had superior products when, in reality, it only had copies of Deerpoint’s proprietary products.”  Viewing the allegations in the light most favorable to Deerpoint, statement (2) could be disparaging. “While some courts have held that statements about a company’s future financial stability are non-actionable opinions, the statement alleged in the FAC is alleged in current terms – Deerpoint is failing. Moreover, given [the ex-CEO’s] past connection with and knowledge of Deerpoint’s operations, Deerpoint’s customers may have been more likely to believe the statements were true ….” 

Perhaps more surprisingly, (1) and (4) when read together could be disparaging.  By themselves, they were either opinion or puffery, given the meaninglessness of “with a twist” and the uncertainty of what it would mean to be “20% better.”  But read together, they reasonably indicated superiority when in fact they were the same.  [The problem that other courts would find is that the nature of the superiority is still completely undefined.]

(3) was a statement about the ex-CEO’s own obligations, and it didn’t disparage Deerpoint or indeed say anything about Deerpoint.

The UCL claim survived because it was based on the intentional interference claim, which is a little backwards (why not just go for false advertising directly?) but ok.