Friday, July 19, 2019

Monster Energy can't show falsity, can show tortious interference (but not irreparable injury)

The court denied a preliminary injunction on Monster’s claim that Vital falsely advertised its “Super Creatine” as “creatine,” because there wasn’t sufficient evidence that the two were distinct (in meaning or more significantly in function), and on tortious interference for lack of a showing of irreparable harm.

Monster argued that using “creatine” on the labels of Vital’s energy drink BANG (as part of a promise of “Creatine, Caffeine, CoQ10, & BCAAs”) was literally false, because BANG does not contain creatine, and that “Super Creatine” was impliedly false because BANG actually contains an entirely different molecule, creatyl-L-leucine.

Monster’s expert tested four cans and found no creatine, or only trace amounts, in the products.  Vital’s principal also made public statements that the products didn’t contain “regular creatine.” The expert’s declaration stated that “Super Creatine,” Vital’s term for creatyl-L-leucine, was a “chemically synthesized compound” which is created from the linking of two distinct amino acids, creatine and leucine, with properties “distinct from [those of] the constituent amino acids.”

The court found Monster’s definition of “creatine” to be “overly narrow,” since its own cited evidence established that “[m]any forms of creatine exist in the marketplace,” including formulations combining creatine with other amino acids. Monster also argued that creatyl-L-leucine does not provide any of the benefits of creatine, but its evidence did not establish that fact; it supported “only the more general conclusion that the chemical and physical properties of a new substance formed from the combination of two amino acids differs from their constituent parts.” Monster’s cited scientific journal articles didn’t discuss creatyl-L-leucine, “but both state that at least some of common creatine compounds provide similar or superior effects to those provided by creatine alone.”  The burden of proof was on Monster, and it did not meet that burden.

Monster also argued that BANG doesn’t contain enough Super Creatine to provide the benefits that VPX promises consumers. But testing only four cans of a single flavor of BANG purchased from the same retail store in Southern California wasn’t enough to conclude that the results were representative of BANG products generally. “The Court will not order a nationwide recall on the basis of such a limited sample size.”

Intentional interference with contractual relations: Monster showed that it had valid contracts for specific amounts of in-store shelf and/or cooler space with retailers across the country, and also showed that Vital disrupted those agreements, leading to BANG products being stocked in Monster’s contracted-for retail shelving space in retail locations across the country.  This wasn’t a matter of “wayward cans,” given the scope and duration of the problem and documented statements from Vital’s leadership. One former Vital account manager declared that district and regional managers directed him to use “guerilla tactics” and “be aggressive” in order to obtain shelf and cooler space for BANG at retail stores. “They made specific demands about the location in which BANG should be placed … and instructed [him] to document the space he acquired with photographs,” though he knew that competitors had contracts with retailers about placement. There was also evidence that placement contracts were industry custom, and that Vital’s principal made Instagram posts showing intent, such as one that shows an image of a VPX products placed in front of Monster products accompanied by the text “When in doubt block them out. In life when they tell you there’s no shelf space – make your own shelf space! When multibillion-dollar competitors pay for space retaliate with a vengeance,” and another which states that VPX will “not placate to [a retailer’s] tomfoolery and rigged system of paying for shelf space.”

Defendants argued that Monster failed to show that Vital or its agents had knowledge of the existence of the specific shelving-space contracts between Monster and its retailers with which they interfered. The evidence was to the contrary, including public statements made by the principal which object to the industry practice of paying for shelf space and state his intention to “make [his] own shelf space” and “retaliate” against competitors who pay for space. [Ah, clients and their social media.] “In light of the extent of this practice, Plaintiff need not demonstrate specific knowledge of each contract in question in order to demonstrate a likelihood of success on the merits.”  Likewise, the evidence showed that the “wayward” cans in Monster’s shelving space were likely the result of defendants’ intentional conduct.

But there was very little evidence of damages. While it may be the case that BANG’s sales growth has been “fueled by VPX’s theft of Monster’s shelf and cooler space,” Monster didn’t have good evidence backing this up.  There was no evidence connecting contractual interference with “the loss of customer goodwill, the loss of market share, or the loss of profits,” making harm speculative at this stage. So too with irreparable harm.

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