slack fill can be misleading despite numbers on box

Maisel v. Tootsie Roll Indus., LLC, 2021 WL 3185443, No. 20-cv-05204-SK (N.D. Cal. Jul. 27, 2021)

Courts have divided on the reasonability of being deceived by alleged slack-fill violations when box contents/weight are clearly marked. This court sided with the consumer for purposes of a motion to dismiss:

[A] reasonable consumer might not necessarily comprehend the differential between the size of the box and the amount of the candy contained inside, even with that amount listed numerically. The size of the box suggests something to the average person that a recitation of numbers might not be sufficient to overcome; the common experience of opening up an expensive box of movie theater candy to reveal a paltry few pieces inside speaks to that fact.

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TM choice of law: P's primary place of business determines which state's law applies

Lontex Corp. v. Nike, Inc., 2021 WL 3170600, No. 18-5623 (E.D. Pa. Jul. 27, 2021)

A rare choice of law opinion involving competitors. This is a trademark infringement claim but Lontex asserted claims under various state unfair trade practices law. The court declined to allow it to do that and confined it to the law of Pennsylvania, whose UTPCPL does not grant competitors standing. Thus, Lontex was left with only common-law and federal trademark claims.

Following the Restatement of Conflicts, courts consider: “the place where the injury occurred; the place where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation and place of business of the parties; and the place where the relationship, if any, between the parties is centered.” Place of the injury is most important where “the injury occurred in a single, clearly ascertainable, state” and less important where “there may be little reason in logic or persuasiveness to say that one state rather than another is the place of injury, or when...injury has occurred in two or more states.” With respect to unfair competition specifically, it notes:

The effect of the loss, which is pecuniary in its nature, will normally be felt most severely at the plaintiff’s headquarters or principal place of business. But this place may have only a slight relationship to the defendant’s activities and to the plaintiff’s loss of customers or trade. The situation is essentially the same when misappropriation of the plaintiff’s trade values is involved, except that the plaintiff may have suffered no pecuniary loss but the defendant rather may have obtained an unfair profit. For all these reasons, the place of injury does not play so important a role for choice-of-law purposes in the case of false advertising and the misappropriation of trade values as in the case of other kinds of torts. Instead, the principal location of the defendant’s conduct is the contact that will usually be given the greatest weight in determining the state whose local law determines the rights and liabilities that arise from false advertising and the misappropriation of trade values.

As for the third factor, the plaintiff’s “principal place of business[] is the single most important contact for determining the state of the applicable law as to most issues in situations involving the multistate publication of matter that...causes him financial injury.”

There was a true conflict between the states’ unfair competition statutes because other states did grant competitors standing.

Here, the plaintiff’s principal place of business was the key, and that was Pennsylvania.  Lontext argued that “Illinois was the single state in which Lontex had the most pre-infringement unit sales...but fell back to fourth place in the infringement period when Nike flooded the Illinois market.” But that was no matter. “In a trademark infringement case such as this, every state in which both parties do business may have some relationship to the issues. There is evidence in this case that the allegedly infringing products were sold in all 50 states.”

"Natural" trade name can mislead consumers, court holds

Early v. Henry Thayer Co., 2021 WL 3089025, No. 4:20-CV-1678 RLW (E.D. Mo. Jul. 22, 2021)

Thayer markets THAYERS Natural Remedies, which are sold in drug stores, grocery stores, and other retail stores nationwide. Early sued Thayer for violations of the Missouri Merchandising Practices Act, breach of express warranty, and for unjust enrichment for misleading consumers into believing its products are natural and do not contain synthetic ingredients.

After other holdings, such as finding no FDCA preemption, the court turned to Thayer’s argument that its trade name couldn’t be an express warranty. Trade names, Thayer argued, “only ‘communicate[ ] that any product bearing said trademark is authentic.’ ”

But there were factual issues about the trade name: the ® only appeared after THAYERS, not after “Natural Remedies.” Still, Thayer argued, it was part of a registration it had, albeit a disclaimed part. [Which really should answer the question: it’s not a protectable part of the trade name as such.] But anyway, the court declined to find any rule that a trade name can’t create an express warranty.  “The Court does not agree that authenticity is the only message a trade name can convey. As other courts have found, it is not unreasonable for consumers to attach meaning to the names of products, particularly when descriptive words are part of the name.” Seems right, especially after Tam and Matal!

However, the court dismissed any claims based on Thayer’s online statements because the plaintiff didn’t allege that she was personally exposed to or relied on those statements.

The court also found that listing ingredients on the side panel wasn’t enough to avoid misleadingness for purposes of a motion to dismiss, and that the plaintiff alleged a sufficient risk of future harm to allow her claim for injunctive relief.  

selling infant & child pain reliever in different boxes (& prices) wasn't plausibly misleading

Eldmann v. Walgreen Co. 2021 WL 764121, No. 5:20-cv-04805-EJD (N.D. Cal. Feb. 26, 2021)

Eldmann argued that Walgreens falsely marketed its Infants’ Pain & Fever product in contrast to its Children’s Pain & Fever Acetaminophen product. Infant products used to contain 80 mg of acetamiophen per mL, whereas children’s product contained 160 mg per 5 mL. An industry-wide effort to prevent accidental infant overdoses changed the concentration to be 160 mg per 5 mL uniformly. Thus, both products now have the same concentration, display age ranges of 2-3 years and 2-11 years respectively, and are otherwise distinguished by dosing mechanism: syringe for infants, cup for children’s. Consumers were allegedly injured because “the Infants’ Product can cost almost four times as much per ounce than the Children’s Product, despite being identical medicines.” Eidmann brought the usual California claims.

The court found no plausible deception. The front label (and the highlighted “drug facts” information on the back) showed that they had the same composition. They had different dosage devices, but that didn’t plausibly suggest different formulations, given the front-label representation. The infant product instructs consumers to “use only with enclosed syringe,” and the side said that the “enclosed syringe [is] specifically designed for use with this product.” “Thus, the infant-specific branding is less suggestive of a formulation specially designed for infants, as Eidmann alleges, rather it more reasonably pertains to the infant-specific dosing mechanism included to administer the product.”

Also, the overlapping age ranges would allow a consumer to “readily compare the products and find not only that they contain the same acetaminophen concentration, but also that they can be used by children of identical ages.” Plus, the images were cartoon-like illustrations, not photos. “It is hard to imagine that a reasonable consumer would believe the medicine is specially formulated for infants based on an illustration, especially one so simplistically one-dimensional as the one on the Infants’ Product.”

While some cases have come out this way, other courts have found deception plausible in similar circumstances, but the court relied on the fronts of these particular products.

There was, likewise, no fraudulent omission claim on these facts.

DMCA gives Walmart only a gleam of light in sculpture infringement case

Russell v. Walmart Inc., No. CV 19-5495-MWF (JCx), 2020 WL 9073046 (C.D. Cal. Oct. 16, 2020)

Russell owns registered copyrights in certain photos of sculptures that appeared on Walmart’s marketplace. Previously, the court found that all of Walmart’s affirmative defenses failed as a matter of law, except its DMCA defense, which remains for trial. There were genuine disputes of material fact as to whether Walmart was responsible for posting the photographs on the Walmart Marketplace. [What is being infringed here: the photos or the sculptures? Since the court concluded she owned both, that doesn’t matter for liability; it could matter a lot for damages and whether the DMCA applies, but the court seems uninterested.] [Looking back on previous orders in the case, it does not seem that Walmart got the right witness for its DMCA defense; she didn’t seem to have detailed personal knowledge of any DMCA policy, and more generally Walmart may be running behind Amazon in dealing with third-party seller misbehavior on its platform, despite the fact that Amazon is taking all the heat for this kind of thing.]

Russell created four sculptural works: “Medusa,” “Polyp,” “Hydra,” and “Ophelia”; there was a dispute about whether the sculptures resemble or embody natural aspects of real-life jellyfish and whether Russell intentionally designed them to look like freshwater jellyfish. Medusa seems to be the key one; Walmart argued that the sculpture’s “sole intrinsic function is providing light,” while Russell responded that the sculptures are works of art, “not simply light fixtures.”

the pictures and lights in suit

The key facts around Walmart’s responsibility for marketplace sellers have been redacted from the opinion, so it’s impossible to tell what’s going on there. Discussions about whether the accused product was a “poor quality replica” also include redactions, as do the discussion of damages. “In sum, the parties do not agree on much,” but the public can have no idea of where they diverge.

The court here concluded that there were disputed issues of material fact on substantial similarity (and excluded a proposed expert report from Mark McKenna). The Medusa lamp was separable from its lightbulb, so the useful articles doctrine didn’t diminish the protection granted by copyright. Nor was it “so lifelike in its resemblance of a jellyfish that it lacks copyright protection.”

Though the Medusa sculpture may borrow certain elements from jellyfish in nature, it does not appear, and was not intended to appear, like a lifelike jellyfish. The sculpture is not held in a glass container intended to mimic a jellyfish’s natural habitat like the sculpture in Satava; it is oversized and hangs from the ceiling on a string connected to the center of the sculpture. [Not sure why this fact in particular matters to whether it’s taken from life, though the rest seems relevant.] The top piece of the sculpture is constructed of overlapping sections of fabric, differing significantly from the large bulbous head of an actual jellyfish. Tendrils of varying length and patterned textures flow from the center of the sculpture, unlike the largely uniform tentacles of an actual jellyfish.

In other words, Plaintiff’s sculpture is “stylized and not lifelike.” Because of the “gazillions of ways to combine” jellyfish-like elements to create a stylized, jellyfish-inspired work of art, Plaintiff’s stylized sculpture is entitled to broad copyright protection.

Substantial similarity: Russell argued that substantial similarity wasn’t the appropriate test in cases involving direct copying [very wrong], but even if that test did apply, there were genuine issues of material fact. “[T]he lamps are the same color, have three distinct sections, have a circular top piece constructed out of overlapping panels with curved sides and scalloped edges, have a center part that is thicker than the bottom part, and have two sets of long, thin tendrils with two different patterns.” A reasonable jury could find substantial similarity.

Willful infringement: This requires actual awareness of the infringing activity or reckless disregard/willful blindness. The photographs posted on Walmart’s marketplace were strikingly similar to Russell’s copyrighted pictorial works, but there was a genuine dispute of material fact on whether Walmart was responsible for posting them, which precluded summary judgment in Walmart’s favor on willfulness. Walmart argued something else redacted, but those allegations were “hotly disputed,” and anyway “Plaintiff produced evidence showing that although Walmart had [redacted]. And in November 2018, [redacted] Walmart claims that [redacted].Walmart also knew that [redacted],” creating an inference of willful blindness/reckless disregard. Comment: This is not law. How is anyone to use this decision to guide their conduct with an understanding of what constitutes willful blindness or reckless disregard?

Russell could also cover profits attributable to the infringement, and some sort of dispute about that is redacted.

Lanham Act/unfair competition claims.  Again, there was a genuine issue of fact about Walmart’s responsibility for the posting. Apparently on the premise that the posting was literally false about something, if Russell proved Walmart’s responsibility, “actual deception and materiality will be presumed.” Her damage expert calculated that the false listings cost her thousands of dollars in lost profits and harm to her goodwill and reputation. Not clear how she worked around Dastar.

ThermoLife wins appeal of Lexmark-based dismissal of claims

Thermolife Int’l, LLC v. Compound Solutions, Inc., No. 20-16138, --- Fed.Appx. ----, 2021 WL 963782 (9^th Cir. Mar. 15, 2021)

ThermoLife got a significant success in this appeal of the dismissal of its false patent marking, false advertising, and unfair competition claims.

One part was affirmed: TL alleged that Compound falsely marked one of its products, “VASO6,” as patented even though VASO6 does not practice a patented invention and is merely common green tea extract. Although TL sufficiently pled false marking by alleging that lab results confirmed that there were no patented materials in it, it didn’t plausibly allege an intent to deceive the public. It wasn’t enough to allege that Compound was a “sophisticated” seller.

TL also alleged that Compound falsely advertised that VASO6 has vasodilative properties, “and therefore potential customers were deceived into purchasing VASO6 and that such false advertising diverted sales away from ThermoLife’s nitrates.” Was TL allowed to sue under Lexmark? Yes. Its injury was in the Lanham Act’s zone of interests because ThermoLife alleged that customers chose VASO6 over ThermoLife’s nitrates, which is a commercial injury to sales. And it alleged proximate cause by alleging that its nitrates directly compete with Compound’s falsely advertised VASO6. It alleged that both its nitrates and VASO6 [purportedly] increase vasodilation “and are sold at the same level in the dietary supplement supply chain to pump and pre-workout manufacturers for licensing and use in their own products.” Further, some of TL’s customers considered replacing or replaced TL’s nitrates with VAS06.  Products containing the ingredients are allegedly displayed side-by-side in the “pump and pre-workout” sections of online shops and brick-and-mortar stores. This sufficed, and so the Lanham Act and congruent state law claims were revived.

"tested and certified" can be false if in fact products were merely "certified" by non-tester

Wedi Corp. v. Wright, 2021 WL 1054463, No. 20-35242 (9^th Cir. Mar. 3, 2021)

Wedi alleged that three statements were literally false in violation of the Lanham Act and the Washington Consumer Protection Act:

All Hydro-Blok Products Are IAPMO Tested and Certified. (IAPMO is a relevant certifier).

Hydro-Blok Products Are ICC-ES Tested and Certified. (ditto).

What is HYDRO-BLOK? Put simply it is the easiest, quickest and most user-friendly way to build a water-proof shower or tub surround at a price you can afford.

The last (easiest, quickest, most user-friendly, affordable) was non-actionable puffery.

As to the first, Wedi didn’t provide enough evidence to show that the products weren’t IAPMO tested.

However, the district court erred in granting summary judgment on the ICC-ES statement. Wedi presented evidence that ICC-ES did not request product samples from Hydro-Blok to test, but rather relied upon IAPMO’s tests. “A legitimate claim could be made that no testing of Hydro-Blok products was conducted by ICC-ES.” This is interesting because some courts won’t inquire further into a certifier’s practices—query whether there is a material difference between “ICC-ES Certified” and “ICC-ES Tested and Certified.”

Vanilla claim comes closer than most b/c of label image, still falls short

Budhani v. Monster Energy Co., 2021 WL 1104988, No. 20-cv-1409 (LJL) (S.D.N.Y. Mar. 22, 2021)

Monster “sells espresso energy drinks blended with European milk and purporting to be flavored with vanilla under their Monster brand.” E.g., the Espresso Monster Vanilla Cream Triple Shot says “Vanilla Cream,” “Triple Shot,” and has an image of the vanilla flower on the front label. But it allegedly had only trace/de minimis amounts of vanilla from the vanilla bean, not predominantly/exclusively vanilla. Plaintiff’s survey allegedly showed that over 56% of respondents believed that the flavor in Defendant’s Product “came from vanilla beans from the vanilla plant.”

Even that wasn’t enough, despite the court’s conclusion that the presence of a vanilla bean image could plausibly mislead consumers, because plaintiff failed to sufficiently plead falsity.

Previous cases held that the word “vanilla,” by itself, indicates a flavor, and dismissed complaints when the labels in question made no further representation as to any ingredient(s) or the source of that flavor. “In each of these cases the court noted that a different result might follow if the defendant had used additional language that made representations about an ingredient and not a flavor or contained additional modifiers or where consumers have a demonstrated reasonable belief about the inclusion of a particular ingredient.” By contrast, courts in the Second Circuit “have sustained claims where the language of a product label, in context, referred not only to a flavor but also indicated the presence of an ingredient.”

The product in suit didn’t have “made with” language, which has been significant in the past, or other verbal indicia of using recognizable ingredients such as touting a commitment to “clean food” and “menu transparency,” or promoting the nutritional values of vanilla from vanilla beans. But defendant did use the image of a vanilla flower, “prominently, next to the image of a coffee bean, and alongside the use of the word ‘vanilla.’” That image and context plainly suggested the presence of extract from a vanilla bean. And Monster admitted that the coffee bean images were intended to convey ingredients, not just flavors or “facsimiles.” So too with the word “cream.” The text on the side of the can confirmed both of those things, with some marketing blather ending in “Three shots of espresso[] blended with milk and enhanced with Monster’s Espresso Energy Blend.”

So: a reasonable consumer “could understand it to convey that the Product contains some non-negligible amount of extract derived from a vanilla bean, but would not understand the Product’s vanilla flavor to be derived predominantly or exclusively from vanilla bean extract.” Thus, it was plausibly deceptive if, as alleged, the product contained only trace amounts of vanilla from vanilla beans. As the Second Circuit has already held, a defendant can’t “lead consumers to believe” that its products were made with an ingredient “so long as [the product] contained an iota of [that ingredient].”

Monster argued that most vanilla-flavored products aren’t made exclusively or primarily from vanilla beans, so no reasonable consumer would believe that of its product.  “At this stage, however, the Court cannot assume that a reasonable consumer will necessarily be knowledgeable about the compounds that create the vanilla taste, the artificial and natural sources from which they derive, and where the compounds are obtained for commercial use.”

Although the survey and other allegations about what consumers want and believe wouldn’t alone be enough to sustain the complaint in the absence of the court’s conclusions about the label itself, they did reinforce the court’s reasoning.

However, reasonable consumers wouldn’t conclude that vanilla bean extract was the predominant or exclusive source of the vanilla flavor, because the label didn’t say anything about that, and the ingredient list included “natural flavors.”

Now: “A plaintiff cannot simply obtain discovery into a product’s ingredients by making the conclusory assertion that the defendant is falsely representing those ingredients.” It was not enough to allege that a chemical analysis showed differences in compounds in Simply Organic Madagascar Vanilla Extract—represented to be vanilla derived from vanilla bean—with the compounds in the drink that “are responsible for the bulk of vanilla’s flavor.” Plaintiff alleged that “the Product contains an abnormal excess of vanillin ... which is a strong indicator it contains vanillin from non-vanilla sources.” That wasn’t enough to plead that there was only a trace or de minimis amount of vanilla from vanilla beans in the drink.

Pleading that the label violated FDA standards for food labeling also failed, since the FDCA doesn’t provide for private enforcement, and NY, unlike California, hasn’t adopted all federal food rules as its own to be enforced via the UCL. “To state a GBL claim, the challenged act must be ‘inherently deceptive,’ and ‘such acts cannot be re-characterized as ‘deceptive’ simply on the grounds that they violate another statute which does not allow for private enforcement.’ ”

Other common-law causes of action also failed, though plaintiff had leave to replead the Section 349 & 350 claims.

"free-run" chicken was plausibly misleading, but "wild-caught fish" claims needed more

Sultanis v. Champion Petfoods USA Inc., 2021 WL 3373934, No. 21-cv-00162-EMC (N.D. Cal. Aug. 3, 2021)

Sultanis alleged that petfood sold as being made with “free-run” poultry and “wild-caught” fish was falsely advertised. (Champion’s website also allegedly described its chicken supplier as “Todd of Clark Farms in Lexington, Kentucky,” even though the person depicted alongside that statement was in fact Greg Hefton of Tyson Foods.) She alleged that reasonable consumers expected the poultry products were made with chickens “raised in better, more humane conditions than typical chickens grown for meat,” and that “have access to the outdoors.” She further alleged that “[to] reasonable consumers...‘free-run’ is synonymous with ‘free range.’ ” For example, an Amazon review said that “[f]ree range chicken is the meat in [the Products].” But in fact, she alleged, the products are made from “factory-farmed birds raised under standard industrial conditions— confined in crowded barns without outdoor access.”

Similarly, marketing for fish products allegedly depicted a fisherman next to what looks like a fresh body of water with the caption “trusted supplier of fresh wild-caught fish,” and the website promised that “[Champion’s] saltwater fish are sustainable and wild-caught from New England’s cold and fertile waters, and [their] freshwater fish from American waters.” However, the products are allegedly actually made with “rainbow trout from industrial fish farms” in Idaho and “do not use wild-caught fish.” Animal Equality allegedly commissioned laboratory tests that revealed the fish products tested positive for ethoxyquin, a chemical that is only found in farmed fish, not wild-caught fish.

admittedly wrong "wild-caught rainbow trout" description online

"wild=caught fish" description

The court dismissed claims to represent a multi-state class under Rule 23 because Champion identified “substantial variations in the consumer protection laws of the [13] states at issue,” including whether notice, intent, reliance, or causation are required, as well as whether a three-, four-, five-, or six-year statute of limitations applied.

California statutory claims: The term “free-run,” on its own, could reasonably be read to imply that the chickens used to make the products can freely run outside, especially because the label also depicts chicken running freely on a spacious, grassy, and outdoor field without any disclaimer that those are not the chickens in the products.

Champion argued that its statements were true because “Canadian trade organizations” define it as chickens that are “free to run throughout the barn in which they were raised.” Even if the court were to take judicial notice of the Canadian definition, “it is highly implausible that Ms. Sultanis was aware of this Canadian definition given that she lives in the United States,” and it certainly wasn’t dispositive of what reasonable US consumers would think.

Wild-caught fish: Champion argued that “brimming with wild-caught fish” wasn’t false or misleading because the fish products contained wild-caught catfish and white perch, even though they also contained farmed rainbow trout. Its photos of fishermen in fresh-water lakes were photos of the Kentucky fishermen who supply Champion with wild-caught catfish and white perch.  None of the products claimed that “all” or “100%” of the fish was wild caught, and other parts of the packaging tout rainbow trout from Idaho and wild-caught catfish and white perch from Kentucky.

But “whether a reasonable consumer read the inconspicuous disclaimers that explain the ingredients include wild-caught and farmed fish is, at the very least, a question of fact.” And, even if a consumer did, it’s not clear that would disabuse her of misconceptions; they didn’t specify percentages or explicitly say the Idaho trout was farmed. Nor was the absence of “all” or “100%” dispositive, especially with the phrase “brimming with wild-caught fish.”  And Champion acknowledged that it at least once “inadvertently” claimed to make the product with “wild-caught rainbow trout.”

For poultry, Sultanis also alleged both that she relied on the representations and that reasonable consumers would attach importance to them, citing studies showing that, for example, “84% of food shoppers say it is ‘important’ or ‘very important’ to provide better living conditions for animals”; “74% stated that they were willing to pay more for humanely raised meat products”  three-quarters of respondents “said they were concerned about how chickens are raised for meat”; and even studies showing that consumer concerns with how farm animals—particularly chickens—are raised are “increasingly carrying over to pet foods.”

However, the fish complaint didn’t plead reliance with sufficient particularity. Sultanis didn’t see the erroneous “wild-caught rainbow trout” statements. And the statements she did see “to some extent explain that the Products are made with rainbow trout and wild-caught blue catfish/white perch.” She didn’t explain what part of the labels she saw and relied on.

Champion's disclosure that there were three fish species involved

"rainbow trout from Idaho plus wild-caught blue catfish and whole perch"--better, but not great

pharmaceutical equivalence isn't therapeutic equivalence/FDA approval

Concordia Pharmaceuticals Inc., S.À.R.L. v. Winder Laboratories, LLC, 2021 WL 3573118, No. 16-cv-00004-RWS (N.D. Ga. Feb. 17, 2021)

Concordia makes DONNATAL, a combination of phenobarbital and belladonna alkaloids (PBA) used to treat irritable bowel syndrome (IBS) and acute enterocolitis. Winder makes generics.

When the FDCA was amended to require proof of efficacy, FDA began an administrative process called the Drug Efficacy Study Implementation (DESI) to retroactively evaluate prescription drugs that were previously only evaluated and approved for safety between 1938 and 1962. Drug manufacturers still need an NDA or ANDA to sell their drugs, but, during the pendency of an open DESI proceeding, the FDA permits the subject product or drug to remain on the market. Drugs that are “identical, related, or similar” to a product that is subject to an ongoing DESI proceeding can also remain on the market during the proceeding. Drugs that contain the same active ingredients are considered identical, related, or similar.

People in the industry use subscription pharmaceutical drug information databases to fulfill prescriptions and determine whether generic substitutes are available for brand named products. “When companies submit drugs to the Drug Databases for listing, FDA regulations require that the drug products’ labels and package inserts list the drug’s active ingredients, strengths, usage, and dosage form.” The databases rely on the information submitted by drug manufacturers to classify drugs based on pharmaceutical equivalence, that is, the same active ingredients, in the same amounts, in the same dosage forms, and the same route of administration. Pharmaceutical equivalents are given the same generic alphanumeric identifier and linked in the databases so that a search for one returns information on both. Pharmaceutical equivalence is not bioequivalence, therapeutic equivalence, FDA approval, or a rating by the FDA. As another case said: “In fact, they explicitly warn that drugs that are listed together as pharmaceutically equivalent may have different efficacies.”

The FDA publishes the “Orange Book,” which lists all approved drugs and their therapeutic equivalence determinations, and which is “the primary mechanism used in the pharmaceutical industry to determine whether drugs are therapeutically equivalent, rather than only pharmaceutically equivalent.” Orange Book therapeutic equivalences are also published in the databases; if the FDA hasn’t evaluated a drug’s therapeutical equivalence, then that drug will not appear in the Orange Book.

State law governs how and when pharmacists and health care professionals can and must make generic substitutions. “Some states, including Georgia, permit substitution based solely on the pharmaceutical equivalence of drug products, while others require that the drugs be therapeutically equivalent before they can be substituted.”

Donnatal dates to the 1930s and has had conditional ANDAs for tablets and elixir since 1980; DESI review remains ongoing. According to their labels and package inserts, Defendants’ B-Donna and Phenohytro products contain the same active ingredients, in the same amounts, and in the same dosage forms, and have the same route of administration, as the DONNATAL products. They are therefore allowed on the market during the DESI review pendency and qualify as pharmaceutically equivalent. But they aren’t listed in the Orange Book as therapeutically equivalent to any other product, and the labels and package inserts state that “[t]his drug has not been found by FDA to be safe and effective, and this labeling has not been approved by FDA.”  They were linked in the databases, but the listings “explicitly indicated that the products were ‘unapproved’ and ‘Not Rated’ as therapeutically equivalent to any other product.” (Nor were they labeled as bioequivalent.)

Around the same time as defendants listed their products, Concordia began a letter writing campaign to the databases, the three largest drug wholesalers and distributors in the United States, and retail pharmacy chains and supermarkets, warning that defendants “were illegally advertising and promoting their drugs as therapeutically or FDA-approved generic equivalents that are substitutable for DONNATAL.” Concordia specifically asserted that: Defendants’ products were “unapproved, “non-substitutable,” “unsafe,” and “present[ ] a high risk for FDA enforcement action, including seizure and recall”; Defendants had “previously tried to launch an unlawful drug product that claimed to be a generic version” of DONNATAL; Defendants’ product listings were “inaccurate”; Defendants’ products were being “illegal[ly] market[ed] and substitut[ed]” for DONNATAL; and Defendants “d[id] not appear to have any basis for claiming that [their] products are equivalent or substitutable for Donnatal.” Concordia suggested that the letter recipients could face civil and criminal liability by continuing to list and distribute the products. This was the basis of the counterclaims.

“Several entities, including Red Oak Sourcing, a pharmaceutical buying agent that negotiates contracts for the purchase of generic drug products on behalf of Cardinal and CVS, and AmerisourceBergen, subsequently terminated contracts or contractual negotiations with Defendants.” One database contacted the FDA for additional guidance; the FDA responded that, based on its review, the products qualified as “identical, related, or similar” and that  “[t]he final determination regarding the regulatory status, and therefore lawful marketing, of a drug subject to a pending DESI proceeding (including both a drug product that is approved for safety only and has been specifically identified as being subject to that proceeding and products identical, related or similar to that drug product) is reached only when the DESI proceeding has been closed.” Concordia, possibly in a fit of pique, responded to the FDA by stating that it was “now considering launching numerous new unapproved products that [they] believed would qualify for marketing under [the FDA’s] letter.”

Concordia alleged that defendants falsely advertised or promoted their B-Donna and Phenohytro products as “generic” to DONNATAL, thereby misleading wholesalers and the pharmaceutical supply chain to believe that these products were “therapeutically equivalent and/or FDA-approved ‘generic’ products that are A-rated to and/or automatically substitutable for DONNATAL.” This claim was based o: (1) the information that they submitted to the databases on their drug products’ labels and package inserts for inclusion on their product listings; and (2) four email threads that included representatives of defendants. However, the court had previously concluded that the labels/packages were accurate and not false or misleading. They explicitly stated that the their drugs “ha[ve] not been found by [the] FDA to be safe and effective,” and the subsequent product listings on the databases clearly indicated that the drugs were “unapproved” and not therapeutically equivalent to any other drug. Their statements couldn’t reasonably be interpreted to convey FDA approval, therapeutic equivalence, or automatic substitutability.

As to the email threads, the presence of the word “generic” in an email thread didn’t “transform an otherwise innocuous email into false advertising.” In full context (including the parties’ contracts and attachments that disclosed the nature of the products), none of the emails reasonably could be interpreted as false or misleading.

Contributory false advertising:  This required direct false advertising, here either by the databases or pharmacies. Those allegedly advertised and promoted defendants’ products as “FDA-approved ‘generic’ products that are therapeutically equivalent or A-rated to and/or substitutable for DONNATAL.” But the evidence didn’t show any such statements, only that the databases linked the parties’ products. Database linking alone isn’t false or misleading, since it means only pharmaceutical equivalence. Again, the listings for defendants’ products explicitly stated that the drugs are “Not Rated” for therapeutical equivalence and are “unapproved” by the FDA.

Moreover, even if Concordia had sufficiently alleged direct false advertising, it didn’t show that defendants “intended to participate in or actually knew about the false advertising” and “actively and materially furthered the [third party’s] unlawful conduct.” All they did was submit product labels and package inserts with explicit statements that they lacked FDA approval.

This also knocked out state-law deceptive practices claims and tortious interference claims based on the alleged misrepresentations.

Lanham Act counterclaims based on Concordia’s letters: Concordia argued that its letters were written to industry legal departments to protect its legal rights and weren’t commercial speech (or misleading).

Commercial advertising or promotion: “[W]hile it is true that Plaintiffs’ letters do not directly market their own DONNATAL products, it is undeniable that Plaintiffs sent the letters to prevent the recipients from purchasing Defendants’ products, which would therefore influence consumers to buy Plaintiffs’ products instead.” And the letters went broadly to the relevant purchasing public: the databases, the three largest drug wholesalers and distributers in the country, and “countless” retail pharmacy chains and supermarkets. That qualified.

The court declined to grant summary judgment in defendants’ favor on falsity or misleadingness, though a jury could so find. There were genuine disputes of material fact on materiality and losses sustained. While defendants presented testimony from existing and prospective consumers “stating that the allegations in Plaintiffs’ letters were the reason they chose to either move on from contractual relationships with Defendants or terminate discussions regarding prospective relationships,” plaintiffs offered conflicting testimony and evidence. The result was the same for tortious interference and state-law deceptive practices counterclaims.

Advocacy organization lacked standing to litigate over foie gras claims

Voters for Animal Rights v. D’artagnan, Inc., 2021 WL 1138017, No. 19-CV-6158 (MKB) (E.D.N.Y. Mar. 25, 2021)

Plaintiff, a nonprofit dedicated to advancing the interests of citizens who support animal protection, alleged that defendants violated sections 349 and 350 of the NYGBL by deceptively marketing their foie gras products as originating from humanely treated ducks, which injured it by “(1) setting back its organizational mission to reduce demand for foie gras and obtain the passage of laws banning its sale, and (2) requiring it to spend money and resources to counter Defendants’ misleading messages.” The court dismissed the complaint; these injuries were not cognizable and indirect.

Plaintiff maintained that its efforts had been harmed because “[r]esearch commissioned by the foie gras industry specifically shows that consumers who support a ban on foie gras production may change their views, to oppose such legislation, once they are exposed to misleading pro-industry messaging.”

The NY Court of Appeals has denied recovery for a plaintiff’s “derivative injuries,” that is, injuries that arise solely as a result of injuries sustained by another party. This was the case here; plaintiff did not suffer diversion of trade, which is “direct” injury by reason of deceived consumers. [This is, as the Lexmark court recognized, playing with the concept of directness; proximate cause really does better as an explanation because it’s more honest about being a legal judgment and not some ontological step-counting exercise.]

Plaintiff argued that it was directly injured when defendants’ misleading ads decreased support for its mission, analogous to lost sales, and that it was injured by being forced to expend additional resources to counteract the effects of the advertising, as in opioid litigation, where government entities have been held to have suffered relevant injury based on the costs of addiction/overdose to their law enforcement/healthcare resources.

The court disagreed. The NY Court of Appeals has held that an insurer could not sue a tobacco company that “misrepresented the dangers of smoking and engaged in a campaign to encourage consumers to smoke” even though the plaintiff insurer was required to bear the increased medical costs that resulted, because the plaintiff insurer’s claims were “too remote” and derivative of consumers’ injuries. The Court of Appeals found no legislative history in support of the insurer’s theory, and it “warned against ‘the potential for a tidal wave of litigation against businesses that was not intended by the [l]egislature.’ ” So too with later claims by the State that defendants had misrepresented internet purchases of cigarettes as tax-free and New York consumers had bought them, depriving the state of tax revenue.

I have to admit, if the Court of Appeals is serious that “[a]n injury is indirect or derivative when the loss arises solely as a result of injuries sustained by another party,” then I don’t see how any competitor can logically sue under these statutes, but I have no doubt that the magic word “goodwill” will bring different results in practice. (Even disparagement only occurs when a wrong has been done to the consumer—deceiving them about something; the harm to the plaintiff’s goodwill is the changed mental state of the consumer.) Indeed, the court distinguishes other cases as involving “direct harms to a business,” e.g., via allegedly misleading claims to consumers that the defendants provided independent/unbiased mattress reviews. What makes that “direct”? Well, deceived consumers withheld trade from plaintiffs. [That sounds … indirect.] But here, defendants weren’t targeting the plaintiff directly, but merely affecting public opinion, “which in turn affects how Plaintiff allocates resources to fulfill its organizational mission.” The legislative history supported the court’s holding because it “suggest[ed] a balance between allowing individual plaintiffs to seek relief while limiting the potential for mass litigation.” [The legislature was dubious about class actions, which doesn’t seem like the same thing as here and also is trumped by the Federal Rules of Civil Procedure, if I recall correctly.]

Plaintiff’s allegedly unique situation—with empirical research establishing the harm to its mission—didn’t change things, any more than the state’s special position with respect to cigarette taxes did for it.

 

Be kind, certify a class

In re KIND LLC “Healthy and All Natural” Litig., 2021 WL 1132147, Nos. 15md2645, 15mc2645 (S.D.N.Y. Mar. 24, 2021)

Plaintiffs sought class certification of their false advertising claims based on the claims that KIND falsely advertised “All Natural / Non-GMO,” “Non-GMO,” and “No Genetically Engineered Ingredients”; KIND sought to exclude expert reports. Both were partially successful.

Plaintiffs allege that KIND products contain “a conglomeration of chemically-synthesized and highly-processed ingredients,” that “[t]esting ... detected the presence of GMOs in at least some of the products,” and that “approximately 90% of canola, 89% of corn, and 94% of soybeans grown in the United States are genetically modified.” They brought NY, California, and Florida claims.

Numerosity, adequacy, commonality, and typicality were satisfied. “Even if a named Plaintiff did not see all of the label variants, the typicality requirement would still be met. … The differences are slight and all can be litigated in this action with the current class representatives.”

The class was also ascertainable. “While KIND labels varied, all the labeling over the putative class period is allegedly deceptive. As such, the possibility that a potential class member could join the litigation without ever seeing the allegedly deceptive advertising cannot occur here.” Nor was the lack of a receipt requirement fatal. “Imposing a receipt requirement would severely constrict consumer class actions where most consumers do not keep receipts because the purchase price is low and part of a minerun retail transaction.”

The court thought that the three states’ laws were similar enough on the key aspects to analyze predominance together, focusing on (1) the deceptive act, (2) materiality, and (3) injury.

The court agreed that common questions about deceptiveness/materiality predominated, given the extreme similarity in meaning of the three label variants. None of the labels displayed “All Natural” on its own, but always with “Non-GMO.” They could be proved true or false on a classwide, as could materiality (which is an objective inquiry about reasonable consumers under the governing laws). Nor was the fact that plaintiffs offered various definitions of “All Natural” fatal; none of the definitions contradicted each other. Finding commonality also served “important policy considerations”:

This consumer class action spins a familiar tale. A large company produces similar products with different labels. Should employing slightly different labels allow a company to escape liability? … The labels on these products vary slightly but all are sufficiently similar to draw potential customers to the KIND brand. Moreover, as every company does, KIND refined its advertising strategy with the passage of time and market research, resulting in gradual changes to its labeling. … If this Court declined to certify the proposed classes, consumer-product companies would have a roadmap to avoid class actions. And given the relative low cost of most consumer products, those companies could avoid any liability for deceptive labeling.

KIND also argued that the number of ingredients challenged as non-natural defeated predominance. But, if a product contains (what a jury finds to be) a single non-natural or GMO ingredient, the label is incorrect and plaintiffs may be entitled to damages.

Plaintiffs were also prepared to have their expert quantify the alleged price premium. A damages model for a false advertising case must “isolate the premium due only to the allegedly misleading marketing statement.” Plaintiffs’ expert proposed to use a hedonic regression and a conjoint analysis; this could be workable despite the label variations. KIND’s argument to the contrary assumed that different variations of the label would lead to different premiums. First, a liability class could be certified even if damages weren’t amenable to classwide proof. Second, all purchasers were exposed to allegedly misleading advertising and therefore may have paid a premium. Third, the differences among the labels were slight, making it unlikely that any differences were significant.

The court also rejected KIND’s Daubert motion to exclude the damages expert; he did all that was required at this stage: opine what could be done to assess damages and that the data to do so were available. A rebuttal expert from plaintiffs was, however, excluded as untimely.

Finally, superiority favored certification because a class action was the best way to resolve this kind of dispute about a low-cost problem, and it was already consolidated as MDL.

Plaintiffs were, however, not allowed to seek injunctive relief under Rule 23(b)(2). Berni v. Barilla S.p.A., 964 F.3d 141 (2d Cir. 2020), held that past purchasers couldn’t maintain an injunctive class. They weren’t definitely going to buy again, and they knew they’d been deceived before, so they wouldn’t be fooled again. In the Second Circuit, inability to rely on a continuing representation is not sufficient injury.

patent misrepresentations to prospective dealer could be false advertising under Dastar/Lexmark

Three very similar cases involving the same plaintiff.

Roof Maxx Technol., LLC v. Holsinger, 2021 WL 3617153, No. 2:20-cv-03154 (S.D. Ohio Aug. 16, 2021)

Roof Maxx distributes “a soy-based liquid product that is sprayed on asphalt shingle roofs to extend the life of the shingles.” It enters into dealership agreements, often geographically exclusive, around the country. It did so with Holsinger (Shingle Savers) and included a noncompete. Shingle Savers ultimately terminated the agreement, alleging misrepresentations by Roof Maxx; RM denied any misrepresentations and sued, seeking declaratory judgment of the validity of the noncompete clause.

Shingle Savers counterclaimed, alleging, among other things, false advertising under the Lanham Act and violation of the Ohio Deceptive Trade Practices Act. It alleged that RM enticed Holsinger to sign the agreement by falsely representing that two generations of the product were patented, when it knew the patent lapsed in 2014 due to failure to pay maintenance fees.

The resulting fraudulent inducement counterclaims were pled with sufficient particularity under Rule 9(b). They also required justifiable reliance:  

Here, the circumstances involved in the agreement show that Mr. Holsinger had no reason to doubt the veracity of Roof Maxx’s representation that the Product was subject to a valid patent. The Feazels have a long history of starting roofing companies, and Roof Maxx (his most recent roofing company) is a national distributor of roofing products. Mr. Holsinger, on the other hand, is a layperson with no previous experience in the roofing industry. Indeed, Shingle Savers alleges that Roof Maxx and the Feazels specifically targeted individuals with no roofing or business background for the purpose of entering into exclusive dealer agreements. Moreover, the alleged misrepresentations concerned the nature of Roof Maxx’s own roofing Product and were presented in official marketing material and conversations. Given Mr. Holsinger’s relative inexperience and the formality in which the representations were made, it was not unreasonable for Mr. Holsinger to trust them and rely upon them when he signed the agreement.

RM argued that reliance wasn’t justifiable because patents are a matter of public record, but the court declined to extend real estate cases to cover this situation. “[T]he transaction at issue here revolved around forming a dealership relationship, and the patent representations constituted an inducement to enter the dealership agreement. Under these facts, a person ‘is under a duty to reasonably investigate’ only if he was ‘put on notice as to any doubt about the truth of representation.’” Because the facts in the counterclaim didn’t suggest that Holsinger should have known he was being deceived, “he was not obligated to verify the patent status by independently checking the USPTO website.”

Lanham Act/ODTPA claims: First, the court declined to hold that Rule 9(b) applied to Lanham Act false advertising claims, which don’t require fraud.

Did RM misrepresent “the nature, characteristics, or quality” of its product? Its Prospective Dealer Guide represented that “Roof Maxx has worked closely with our strategic partners … to develop an optimal formula....The product formula is patented.” In a sales pitch:

In 2016, Roof Maxx entered into a worldwide exclusive licensing agreement … for the rights to the patent covering the Roof Maxx product. … Click HERE to review the patent.

In an effort to continually bring value to our Dealers and their customers (property owners), Roof Maxx has entered into another worldwide exclusive licensing agreement … for a new and improved Roof Maxx formulation. This formulation is the subject of a separate patent filed in 2017 and is currently in the final phases of testing. [patent application number]

Despite Roof Maxx’s best efforts to provide superior products which are covered by various patents, the business opportunity should be evaluated on the basis of the underlying value of the Roof Maxx product, Roof Maxx’s world-class Onboarding and Success teams and resources, national brand recognition, and the other systems and resources provided to the Dealer as part of the Roof Maxx opportunity.

However, RM petitioned the PTO to accept a late payment of the maintenance fee and was rejected, and thus was allegedly “keenly aware” that the original patent lapsed at the end of 2014, and the PTO rejected the patent application for this second-generation Product numerous times.

The court thought that patent status was part of the covered “nature, characteristics, qualities, or geographic origin” of the product. Dastar doesn’t exclude coverage. The defendant in Dastar was in fact the origin of the products it sold, so there was no misrepresentation of origin. Thus, the Lanham Act does not protect a company against a rival that “steal[s] its product ideas to manufacture a rival, facsimile product,” but Dastar didn’t cover “misrepresentations that its Product was subject to an active, valid patent,” which weren’t the same thing as claims about who originated or authored a product. Filing for a patent isn’t a Lanham Act-covered act, but falsely representing patent coverage “on marketing materials and in meetings with prospective dealers” is. This allegedly created the impression that RM was the exclusive source of the product and that exclusive dealers would face little or no direct competition. “As such, these statements go directly to the Products’ nature, characteristics, and qualities.” More generally, Section 43(a) of the Lanham Act “does reach a seller who, by exaggerating the scope of a patent, creates a false impression that he is the exclusive source of the product.”

Was this commercial advertising or promotion? RM argued that it wasn’t in competition with Lexmark, but most of the cases it cited preceded Lexmark, which removed any competition requirement, and the others failed to grapple with Lexmark. Without discussing whether Shingle Savers should be treated as a customer of RM—who is not within the Lanham Act’s zone of interests—the court found that Shingle Savers sufficiently pled “damages to its commercial interest in sales and business reputation.” Individual RM officers were also sufficiently alleged to be personally liable given that they allegedly were aware that the patent lapsed and participated in making the challenged marketing materials. 

Roof Maxx Technol., LLC v. Tabbert, 2021 WL 3617158, No. 2:20-cv-03156 (S.D. Ohio Aug. 16, 2021); Roof Maxx Technol., LLC v. Rourk, 2021 WL 3617154, No. 2:20-cv-03151 (S.D. Ohio Aug. 16, 2021)

In addition to the claims discussed above, defendants/counterclaimants also alleged that RM breached the parties’ agreement by publishing disparaging statements. The agreement said, inter alia:

The parties jointly agree to not post for public consumption, any disparaging remarks, comments, accounts, or other relationship detail. Such disagreements shall be first submitted to a licensed Mediator/Arbitrator for informal adjudication....Any violation of this paragraph is a material breach, and breaching party will remove, caused to be removed, or authorize removal, of such offending public statements.

RM told a group of RM Certified Dealers:

Recently, there have been some questions regarding why certain Roof Maxx dealers terminated their dealerships. Roof Maxx and these dealers have disagreements regarding various practical and legal matters pertaining to those dealerships and their related activities.

Roof Maxx and those dealers engaged in good faith attempts to informally resolve these issues. Initial discussions failed to resolve the matter. In the meantime, Roof Maxx has filed lawsuits in Franklin County, Ohio, pursuant to the terms of the respective EDAs, to have these matters adjudicated according to law.

Roof Maxx has filed these actions to preserve the integrity of the industry and brand that all our dedicated dealers have built (and continue to build), as well as ensure that the time, dedication, and resources that you have committed your success to are not diluted....

Roof Maxx respects the legal process and will not comment on or discuss pending litigation.

The counterclaimants argued that this amounted to an assertion that they were a threat to the integrity of the industry and brand. [I find this statement innocuous, unlike the other alleged activity.] The court disagreed: it didn’t specify them as one of the dealers, and thus didn’t disclose details in contravention of the agreement.

Even a default can't make false claims made to Amazon violate the Lanham Act

Wilco Trading LLC v. Shabat, 2021 WL 1146634, No. 8:20-cv-579-TPB-JSS (M.D. Fla. Mar. 8, 2021) (R&R)

Wilco is an online reseller, primarily on Amazon. It allegedly sold authentic beauty products made or branded by defendant EL Sales, which nonetheless filed complaints on Amazon claiming that Wilco was selling counterfeit products, and also posted a warning on the webpage for the product warning against purchasing “counterfeits” and telling consumers only to buy from the authorized account. Amazon suspended Wilco as a result of the complaints, and refused to reinstate it for several months.

Defendants defaulted. Despite this, the magistrate found that there was no valid Lanham Act claim. False complaints to Amazon weren’t “commercial advertising or promotion.”  

Defendants’ warning on their website regarding “unauthorized dealers” arguably was “commercial advertising” under the Lanham Act. Wilco alleged that the warning falsely stated “that all other products are not only ‘unauthorized,” but ‘counterfeit’ and therefore dangerous.” But the complaint didn’t identify any literally false allegations that the products could only be found through authorized dealers. The warning would only be literally false if no unauthorized dealers sold counterfeit Predire Paris products, and the complaint didn’t so allege. Thus, Wilco was required to offer some evidence of consumer deception. Even with the default, it wasn’t enough to allege that the website was “likely to deceive and confuse the public.” Nor did it adequately allege materiality; its claims of injury also focused on the Amazon suspension.

FDUTPA: Doesn’t allow for consequential damages, including lost profits, so that went too.

Tortious interference and defamation per se (false accusations of selling counterfeits) did work, though, resulting in damages over $166,000 but no injunction or attorney’s fees.

claims that "infant" formula misleadingly implies special formulation survives

Youngblood v. CVS Pharmacy, 2020 WL 8991698, No. 20-cv-06251-MCS-MRW (C.D. Cal. Oct. 15, 2020)

Youngblood bought an acetaminophen product for infants, believing based on its packaging that it was specifically formulated for infants and therefore different from CVS’s acetaminophen product for children. The word “infants,” photo of a mother and infant, and instruction to “Compare to the active ingredients in Infants’ Tylenol Oral Suspension” allegedly drove that belief. Comparing it to the Children’s product would allegedly reinforce that belief, because the children’s product displays an image of a parent holding what appears to be an older child and states that it is “For Ages 2 to 11.” However, they are both dosed at 160 mg/5 mL. The formulations are identical; the only difference is that the Infant Product comes with a syringe while the Children’s Product comes with a plastic cup. But the Infant product costs $6.49 per ounce of medicine and the Children’s Product costs $8.79 per eight ounces of medicine. Plaintiffs brought the usual California statutory claims.

Children's Version

Infant Version

Although the consumer protection statutes don’t authorize the court to set retail prices, that’s not what the complaint did. Plaintiffs didn’t contend that the price was the source of the deception, but relied on: (1) the name “Infants’ Pain + Fever”; (2) the instruction to “Compare to active ingredients in Infants’ Tylenol Oral Suspension”; and (3) the picture of what appears to be a mother holding a young child relative to the older child featured on the Children’s Product. Without any express disclosure that the medicine in the bottle is exactly the same, and provided at the exact same concentration, this could plausibly lead a significant portion of the general consuming public to concluded that the product was unique or specially formulated for children under two. Merely displaying the acetaminophen concentration on each package, or including a syringe in the box, didn’t foreclose all reasonable inferences that the medicine is specially made for infants. Even if the box had no literal untruths, a reasonable juror could nevertheless conclude that it is “has a capacity, likelihood or tendency to deceive or confuse the public.’ ”