Wednesday, September 22, 2021

even admissions and severe financial distress don't justify TRO/asset freeze in false advertising case

SI03, Inc. v. Musclegen Research, Inc., 2021 WL 765293, No. 1:16-CV-274 RLW (E.D. Mo. Feb. 26, 2021)

The parties compete to sell protein powder to consumers. SI03 originally sued for false advertising and related claims, and Musclegen counterclaimed similarly.

SI03 alleged that Musclegen markets its Genepro protein powder product by falsely claiming it contains 30 grams of protein in a roughly 11.15 gram (1 tablespoon) serving, when Genepro actually has 10 or fewer grams of protein per 11.15 gram (1 tablespoon) serving; and by claiming the protein in Genepro is absorbed by the human body at a rate that is 300% higher than the rate at which a human body absorbs “traditional whey.” It further alleged that Musclegen’s marketing and packaging statement that it contains “medical grade” protein is incorrect, false, and misleading, as no industry or FDA standard exists for “medical grade” protein.

Musclegen initially said that its product had “three times the protein absorption rate as traditional whey protein—meaning that consuming one scoop of Genepro is the functional equivalent of consuming 30 grams of whey protein,” as supported by a clinical trial. Then it sought to amend its answer and admit many of the allegations when its founder and COO pled guilty to a federal felony count of distributing unapproved new drugs with the intent to defraud and mislead. As a result, Musclegen was “experiencing severe financial distress” and sought to resolve the case. That was good cause to amend! However, the court declined to grant a protective order to pause discovery. There were still issues about willfulness, entitlement to damages/disgorgement of profit, and exceptionality under the Lanham Act. Nor were declaratory judgment claims necessarily moot.

The court also denied SI03’s motion for a TRO to prevent sales of Genepro and to freeze Musclegen’s assets. “The evidentiary support it offers for the TRO motions is fairly slim at this point and based in part on speculation, and the Court finds the motions are premature. Plaintiff points to Defendant’s refusal to participate in discovery, but this cannot serve as a substitute for evidence to show Plaintiff’s likelihood of success.” Plus, Lanham Act trademark infringement/counterfeiting cases about asset freezes didn’t show that similar relief was appropriate in a Lanham Act false advertising case. (I really don’t understand why courts make the TM/false advertising distinction when they do as opposed to ignoring it when they don’t.)

SI03 also failed to show irreparable harm, because a misrepresentation about the defendant’s own product didn’t justify a presumption of harm. (The TMA changes this for irreparable harm, but we have yet to discover whether this will affect courts’ decisions on whether the elements of the underlying cause of action for false advertising have been satisfied.)

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