natural decay of nicotine complicates evaluation of literal falsity of nicotine content claims

Bidi Vapor, LLC v. Vaperz LLC, 2021 WL 2433642, No. 21 C 1430 (N.D. Ill. Jun. 15, 2021)

“The novel question of how the electronic cigarette industry should approach labeling nicotine content in the face of nicotine degradation is both significant and unsettled.” Thus, the plaintiff was not going to get a preliminary injunction against its competitor for falsely advertising 6% nicotine content.

All nicotine degrades with time, so all e-cigarette products contain different amounts of nicotine than reported. This undermined Bidi’s literal falsity theory.

Bidi’s lab reports found that Vaperz’s stick, which advertises 6% nicotine, had an average nicotine level between 3.06% to 3.43%. It’s cheaper than Bidi’s stick, and this allegedly caused Bidi to lose business. It brought state and federal false advertising claims.

In context of inevitable degradation, 6% was not shown to be literally false. “Even though Bidi’s reply argues that a +/- 10% degradation is the industry norm, the mere existence of some norm acknowledges the fact that some degradation is inevitable and even expected.” A case that must inevitably be about what is acceptable variation within the industry cannot be about literal falsity. The court pointed out that the package never made any claims about when the stick had 6% nicotine. “[A] linguistically competent person could, when considering nicotine degradation, reach at least two conclusions about what 6% means in this context. This inherent ambiguity means that Vaperz’s statement is not indisputably or undeniably false.”

Comment: One annoying thing about Seventh Circuit precedents is that they are often sloppily phrased even when they intuitively have the result right. The court of appeals did not mean “linguistically” competent despite what it said, and the court here isn’t applying linguistic analysis. It is considering cultural competence. Indeed, immediately following this statement, the court concludes: “Rather, this case presents a genuine dispute about market norms in the e-cigarette industry and whether Vaperz has defied those norms.”

Bidi tried to argue that the statement was literally false because defendant’s stick contained less nicotine than the industry-accepted +/- 10%. But there was little evidence that such a standard existed. [The court probably goes overboard saying that a literal falsity theory could prevail if all sides agree that 6% doesn’t mean 6%--if there really were an industry standard that defendant violated, or if there were 0% nicotine from the start, that seems literally false.]

Likewise, Bidi didn’t have a clearly enough defined or well enough evidenced theory of misleadingness. Also, there was at least one lab report finding that defendant’s stick had 5.38% nicotine, which was within the 10% tolerance proposed by Bidi.

Even if it showed falsity, Bidi didn’t show materiality. It presented little evidence that rates of nicotine degradation are “actually salient to consumers”— “especially when nicotine degradation appears to be an industry-wide issue.” “Instead, it is distinctly possible that customers base their purchasing decisions on factors like taste, convenience, or price.”

Finally, Bidi didn’t make a strong showing on causation, just a bare assertion of a tradeoff in sales, and Bidi’s sales had also been increasing, which weighed against showing likely success.

Because of all this, Bidi wasn’t entitled to the statutory presumption of irreparable harm (of which the court did not seem very fond, citing Winter despite its obsolescence in the Lanham Act context). And Vaperz largely rebutted any presumption, by which the court seems to mean “made arguments that Bidi didn’t do a good job providing evidence.” Lost profits aren’t generally irreparable injury and a sales tradeoff would be “purely financial, easily measured, and readily compensated.” Claims about “customer relationships, goodwill, and reputation” were mere bare assertions. Market dynamics—specifically the existence of other 6% products on the market, as well as the inevitability of nicotine degradation for all participants—made irreparability of harm hard to assess.

And the balance of harms didn’t favor Bidi, since a preliminary injunction would essentially be a mandatory recall. The court was also influenced “by the very strong likelihood that the Bidi Stick also does not contain exactly 6% nicotine. … The available record evidence suggests that the Bidi Stick could have as low as 5.47% nicotine.” This could constitute unclean hands.

The court was also concerned that any injunction would incentivize e-cigarette manufacturers to add more nicotine in the manufacturing process, but the FDA usually worries more about products with too much nicotine than too little. It’s much worse for a user to consume too much nicotine than too little, and the current situation errs on the side of too little. Plus, the FDA is actively regulating this market, and the court didn’t want to interfere.

The court did caution that discovery might reveal a very different picture; this was just how it looked now.