no Lanham Act claims, including false advertising, allowed over cannabis

Shulman v. Kaplan, 2020 WL 7094063, No. 2:19-CV-05413-AB (FFMx) (C.D. Cal. Oct. 29, 2020)

The parties compete in the cannabis market, and some defendants formerly worked with Shulman, but that relationship broke down. Shulman sued, alleging four federal claims and 21 state law business and/or contract-related claims.

RICO claims failed because “[a] court order requiring monetary payment to Plaintiffs for the loss of profits or injury to a business that produces and markets cannabis would, in essence (1) provide a remedy for actions that are unequivocally illegal under federal law; and (2) necessitate that a federal court contravene a federal statute (the CSA) in order to provide relief under a federal statute (RICO).”

Likewise, Lanham Act claims failed because cannabis is federally illegal and thus the plaintiff couldn’t have trademark priority. This reasoning also applied to “derivative” false advertising claims. Note: I don’t think that conclusion necessarily follows—other courts have held, in other contexts, that lacking enforceable trademark rights doesn’t preclude either a §43(a)(1)(A) or (B) claim under appropriate circumstances. If generic terms and terms in which there are only foreign rights can found a claim when there is consumer deception, why not terms for cannabis? Note that this is also the issue obviated by Tam and Brunetti with respect to unregistrable-on-public-policy-grounds marks.

The court bolstered its conclusion by reasoning that plaintiffs lacked statutory standing because they weren’t engaged in “lawful” commerce and thus didn’t come within the zone of interests protected by the statute.

The court declined to exercise supplemental jurisdiction over the remaining claims.