A press release about a lawsuit against a supplier wasn't commercial speech

Townsend Farms, Inc. v. United Juice Corp., --- Fed.Appx. ----, 2019 WL 6358780, No. 18-55067, No. 18-55068 (9th Cir. Nov. 27, 2019)

Townsend included pomegranate arils supplied by Göknur in its Townsend Farms Organic Antioxidant Blend; some of those arils were contaminated with hepatitis A. After consumers of the frozen fruit mixture contracted the virus, Townsend recalled the product in coordination with the FDC and the CDC. In the wake of the outbreak and subsequent recall, injured consumers filed numerous lawsuits against Townsend. Townsend and its insurers defended and settled most of those lawsuits. Townsend then sued Göknur seeking equitable indemnification Göknur raised a counterclaim arguing that Townsend’s recall press releases constituted false advertising under the Lanham Act. This was correctly dismissed because the recall press release didn’t propose a commercial transaction.

Denouement: The parties stipulated that Townsend and its insurers incurred over $13.7 million in relevant litigation and settlement costs; a jury awarded Townsend $2.7 million for underlying settlements and associated litigation expenses and $4.8 million in punitive damages. It was ok for the jury to award only that amount in compensatory damages, because Townsend bore the burden of proving the degree of Göknur’s fault in causing the stipulated damages. However, the punitive damages award had to go because California law required “meaningful evidence of the defendant’s financial condition” in order to obtain punitive damages. Townsend provided only evidence of Göknur’s income and assets, not about its expenses and liabilities, which wasn’t enough; remanded with instructions to dismiss the punitive claims.