Failure to show causation leads court to overturn jury verdict against false advertising

A.L.S. Enters., Inc. v. Robinson Outdoor Prods., LLC, No. 14-CV-500,
2017 WL 393307 (W.D. Mich. Jan. 30, 2017)
ALS sued Robinson for false advertising of Robinson’s
Trinity scent-control hunting clothing. The jury returned a verdict for ALS, awarding
ALS $1.3 million in lost profits plus $2 million in damage control costs, and
found that ALS was entitled to disgorgement of Robinson’s profits in the amount
of $500,000. Finally, the jury found that Robinson acted willfully. The court
granted judgment as a matter of law on all the money and denied attorneys’
fees, though it did grant a permanent injunction.
The parties sell scent-control clothing designed to mask (adsorb)
human scent or odor from animals, and market their products primarily to bow
hunters. They share many of the same retail customers.  Robinson began to use synthetic polymers,
specifically a product called Macronet.  Robinson had Dr. Roger Pearson perform a
static adsorption test using the same size pieces of fabric containing four
different adsorptive technologies using butyric acid to mimic human scent.  The product that Robinson ultimately sold as
Trinity contained one-sixth of the Macronet per square meter than the fabric
sample Pearson tested.
Robinson told retailers: (1) 1 ScentBlocker Jacket with
Trinity has the scent adsorbing capacity of 3 Scent-Lok jackets with carbon
alloy and 8 Under Armour jackets with Zeolite (the 8-3-1 claim); (2) activated
carbon technology has 44% of the odor adsorption capacity of the Trinity
technology (the 100-44 claim); and (3) Trinity technology adsorbs up to 40%
more odor than carbon and up to 200% more than Zeolite (the 40/200 claim). Only
the 40/200 claim was made to all of Robinson’s retail customers and to
consumers.
Robinson ordered another test to determine the validity of
ALS’s national ad campaign stating that Scent-Lok products were 16 times more
effective than ScentBlocker products. The results of the test showed that ALS’s
and Robinson’s products performed at about the same level.
In deciding a motion for judgment as a matter of law, the
question is “whether there is sufficient evidence to raise a question of fact
for the jury.” The evidence must be viewed in the light most favorable to the
party against whom the motion is made.
Robinson admitted that the 8-3-1 and 44-100 claims were
literally false. However, ALS was still required to show that these statements
were material to the retailers’ purchasing decisions and that there was a
causal link between these statements and some harm, but it didn’t. As to
materiality, while both statements could influence a purchasing decision, both
statements were always presented together to the retailers, and often near the
40/200 claim. “Given that these statements were mathematically at odds with one
another, it is implausible (without testimony from the retailers) that
sophisticated and knowledgeable retail buyers would have relied on either
statement.”  [Given the court’s argument
below that “technology” is not the same as “product,” these statements are not
mathematically at odds with one another. 
Also, expecting even sophisticated retail buyers to do
non-purchase-related ratio math is probably expecting too mcuh.]
And ALS failed to offer any evidence sufficiently linking
these statements to any retailer’s purchasing decision.  It wasn’t enough to show that one retail
representative “was impressed” with a slide making the 8-3-1 claim and said
that Robinson “truly ha[d] innovation that changes the game.” Being impressed
with a single slide out of many that were presented doesn’t show that it
actually influenced buying decisions, especially since Robinson was marketing
its Trinity technology as something new that allowed for more flexible, less
bulky fabrics. ALS argued that, after being shown the 8-3-1 and 100-44 slides, another
retailer ordered Trinity products, but “inferences of causation based solely on
the chronology of events” cannot alone establish a link to harm “where the
record contains…other equally credible theories of causation.” It was equally
plausible that the product’s other new features, rather than the 8-3-1 and
100-44 statements, influenced the retailer’s purchasing decisions. The jury
didn’t hear from the retailer.
The evidence established that the 40/200 claim, made to
retailers and consumers, was literally true, given that Robinson showed that
the underlying tests used an acceptable methodology (there was no industry
standard).  ALS argued that the prototype
used in that test was never commercialized, and the only product at issue
contained 1/6th the amount of Macronet used int hat test.  But the first test compared technologies,
while the second compared products. 
Because the 40/200 claim only referred to “Trinity Technology,” it
wasn’t literally false.  [Ugh.  Why would a reasonable consumer or retailer
think that “technology” meant something other than “the technology as applied
to the product actually being touted to you”? I’d have gone with falsity by
necessary implication]
The court did find that the 40/200 claim was misleading to
consumers, as proved by a consumer survey. 
Among other things, many consumers [naturally!] interpreted the 40/200
claim as referring to the product itself—meaning that the ScentBlocker product
itself allowed a hunter to get closer to a deer. Also, around 70 percent of
respondents thought that the “up to 40 percent odor claim” meant that the
product’s superior adsorption would last the whole time hunting and not just up
through 7.5 hours, which was all that was supported.
But ALS didn’t show survey or other witness testimony about
deception of retailers.  The fact that
two retailers repeated Robinson’s claim showed that those two were deceived,
but not that a “ ‘significant portion’ of the [retailer] population was
deceived.”  [This again seems
bizarre.  Why isn’t that a reasonable
inference for the jury to make, under the circumstances?  It’s hard to get direct evidence of consumer
deception, and individual examples can be representative, or we wouldn’t admit
them at all.]
The court also found that ALS showed materiality to
consumers, but not to retailers.  ALS
presented evidence at trial that there is a well-established market for
scent-control hunting apparel and that scent control is an important feature in
hunting apparel, and that was enough for the jury to find materiality.  The jury was properly instructed that a
statement is material if it likely influenced purchasing decisions. “Evidence
that a statement concerned an inherent quality or characteristic of a product
is evidence of a likely influence on purchasing decisions.”
But for the retailers, that wasn’t enough—not the centrality
of the claim, and not the fact that Robinson “inundated” retailers with the
40/200 claim. [What did ALS do to make this judge disbelieve its claim?  Those sound like decent pieces of evidence to
me.]  Robinson was an established player
in the market for scent-control clothing, and there was no evidence that,
without the statement, their purchases would have been lower, and there were
other claims made about the Trinity products that might have motivated
retailers’ purchases.  [What happened to
“evidence that it’s an inherent quality is evidence of likely effect on
decisions,” one paragraph ago?]
ALS also failed to establish causation at the consumer
level.  It argued harm at the retailer
level—lost clothing and fabric sales to one retailer, lost clothing sales to another,
and institution of a buy-back program at a third.  Although ALS may have been entitled to a
presumption of damage because the ad specifically targeted its product, any
presumption was overcome by evidence of no marketplace injury.  Two factors unrelated to Robinson’s advertising
affected the market during the relevant period: first, Under Armour entered the
scent-control hunting clothing space and was having a noticeable impact on the
market.  For example, one respondent
indicated that Under Armour was beating ALS because Under Armour was “new
in…the hunting industry and ha[d] inundated it with marketing,” and a
retailer representative told ALS that “UA sells” regardless of whether its
scent-control clothing worked. Second, retailers showed increasing preference
for their own in-house brands.  ALS’s
fluctuating sales revenue didn’t show that false advertising had caused sales
declines; there were downward trends before the ads, and Robinson’s sales to
one retailer also went down or were flat, which suggested that Robinson hadn’t
taken sales from ALS.
ALS argued that it initiated a guaranteed buy-back program
at Dick’s in 2014 in response to Robinson’s advertising statements, which
resulted in $53,000 in reduced profit for that year. But ALS didn’t link that
to the false statements, since the program was voluntarily adopted “to temper
the negative effects of Robinson’s false advertising.”  [I don’t quite get that—in a footnote, the
court suggests that the program wasn’t a factual rebuttal of Robinson’s ads,
which makes a bit more sense—though I agree that this rationale makes the
damages “more akin to damage control expenses rather than marketplace damages.”]
Retailer testimony was “noticeably absent.”  Plaintiffs are often reluctant to solicit
customers, who might be at risk of being subpoenaed, out of fear of alienating
them.  But that doesn’t remove the
requirement of evidence that Robinson’s advertisements influenced the
retailers’ purchasing decisions.  “At
bottom, ALS tried its case on a theory of post hoc ergo propter hoc,” but that
wasn’t enough in the presence of other equally credible theories of
causation.  [Why wasn’t that a question
for the jury to answer?]
For the same reasons, the jury’s award of Robinson’s profits
went away.  Also, ALS entered into several
contracts with Bone Collector, a celebrity hunting group with its own hunting
television show, as part of a marketing campaign. The agreements called for ALS
to pay Bone Collector a total of $5 million. ALS claimed that the Bone
Collector deal was necessary for ALS to effectively respond to Robinson’s
40/200 advertisements; the jury awarded ALS $2 million as damage control
expenses. But this deal wasn’t a necessary corrective measure to address the
false advertising, and so it had to go. To be recoverable as damage control
costs, corrective measures must be “reasonable under the circumstances and
proportionate to the damage that was likely to occur.” They can’t be “general
image polishing costs” but must instead be incurred to correct specific false
representations made by a competitor. “For example, Ford could not recover its
total advertising costs from Volkswagen if Volkswagen falsely represented the
fuel economy of its vehicles.”  [I see
the point, and it seems fair, though if we were really serious about goodwill
being a kind of lump thing we should be more open to general image advertising
to restore goodwill.]
Also, before trial, ALS described the Bone Collector deal as
being about other things, such as correcting a lack of celebrities in a “celebrity-centric
industry.”
In the alternative, the court granted Robinson’s motion for
a new trial.
The court did grant a permanent injunction.  Likely confusion satisfies the requirement of
irreparable harm.  [I’m a little
surprised the court didn’t discuss eBay,
given how hard it’s been on ALS in every other element.]  Robinson argued that there was no irreparable
harm because Robinson ceased using the 40/200 campaign in mid-2014, and as part
of its settlement efforts, it took steps to remove the 40/200 hangtags from
clothing in its warehouse and at retailers. Also, ALS’s inability to quantify
its damages, and its decision not to seek damages for 2015 or 2016, allegedly
showed lack of injury. 
The court found this to be a “close call,” but still warranting
injunctive relief.  In spite of
Robinson’s efforts, ALS showed evidence that the 40/200 claim remained in the
marketplace, on retailer websites and on products at retail stores.  The risk of harm was continuing, and there was
no adequate remedy other than an injunction requiring further removal efforts,
including steps to ensure that references to the 40/200 claim are removed from “non-retailer
hunting-related websites.”
This was not an exceptional case justifying attorneys’ fees
for ALS, even under the more forgiving Octane
Fitness
standard.  Robinson’s defense
was fairly strong, given its evidence that the product worked.  Though it conceded that the 8-3-1 and 100-44
claims were false and that it showed them to retailers in multiple
presentations, there was no evidence of materiality. “As for the 40/200 claim,
Robinson showed that a significant portion of retailers were not deceived by it
and that the 40/200 claim was not material to the retailers’ purchasing
decisions.”  Robinson also had
“compelling” evidence about the lack of connection to any lost sales.  Also, Robinson didn’t litigate in an
unreasonable manner, with only typical “hiccups.”

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