Friday, September 10, 2021

tortious interference claim from false advertising survives, but why bother?

Logistick, Inc. v. AB Airbags, Inc., --- F.Supp.3d ----, 2021 WL 2433944, No. 3:21-cv-00151-BEN-MDD (S.D. Cal. Jun. 15, 2021)

Logistick sells disposable load bars which are used to secure cargo freight during transport. AB allegedly began advertising for a similar product, claiming that its load bars have “30% more Holding Power than similar Disposable Load Bars,” allegedly an admitted reference to Logistick. AB allegedly acquired one of its older products and performed faulty testing on the load bars in order to incorrectly claim that its product has 30% more holding power.

Here, AB moved to dismiss the negligent interference with prospective economic relations claim, and didn’t succeed. The tort requires (1) the existence of a valid economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge (actual or construed) of (a) the relationship and (b) that the relationship would be disrupted if the defendant failed to act with reasonable care; (3) the defendant’s failure to act with reasonable care; (4) actual disruption of the relationship; and (5) resulting economic harm.

AB argued that its ad never mentioned or referenced Logistick, so it couldn’t interfere with Logistick’s business. Further, it argued, Logistick basically just recited the elements about future relationships and knowledge. Although that seems right to me, the court disagreed.

Courts have held that a tortious interference claim that rests on “a hope of future transactions” is insufficient to support a claim of tortious interference. But here it was sufficient to allege that “Plaintiff had an ongoing business relationship with John Doe customers that probably would have resulted in a future economic benefit to Plaintiff,” and “Defendant knew or should have known of this relationship between Plaintiff and John Doe customers,” at least where “the Complaint confirms that Plaintiff will disclose the customers’ names upon the entry of a protective order.” The facts were specific enough to put “the defendant on notice that a third-party, indeed, existed.”

Plaintiff also sufficiently alleged knowledge by alleging that “Defendant knew or should have known of this relationship between Plaintiff and John Doe customers.” As a direct competitor, it knew or should have known of these relationships when it engaged in comparative advertising referencing Logistick’s product.

Likewise, Logistick plausibly alleged that AB knew or should have known that its relationships would be disrupted, even without alleging that any third party saw the ads. And it plausibly alleged actual disruption in its relationships causing economic harm by alleging pretty much that. “[G]iven both parties were competitors, it is reasonable to infer that an allegedly false statement based on allegedly faulty testing comparing Defendant’s product with ‘similar products,’ could damage competitors, like Plaintiff.”

The court did express doubt about whether these claims would survive summary judgment. Comment: I often tell students that, absent individually negotiated contracts for six figures or more, tortious interference claims just run up the lawyers’ bills. This case does not convince me otherwise.

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