No evidence of harm means no disgorgement in false advertising case

MB Imports, Inc. v. T&M Imports, LLC, No. 10-3445, 2016
WL 8674609 (D.N.J. Dec. 23, 2016)
MB Imports imported and sold Sicilia brand lemon and lime
juice products, and sold them to Safeway from 2001-2003; for many years, they were
the only squeezable lemon and lime juices sold in Safeway’s produce department.
Safeway discontinued Sicilia in favor of Tantillo juices offered by T&M after
a 2009 meeting in which Safeway’s representatives didn’t recall receiving a
proposed label for the juices. “Safeway representatives stated that Safeway was interested
in selling the Tantillo juices because of the name-brand recognition, price,
and Defendants’ willingness to engage in product promotions (and not due to any
representations about the product’s quality, country of origin, or anything
relating to their labels).”
The front label of Tantillo’s lemon juice stated “Product of
Italy,” “Sicilian Lemon Juice,” “Not from Concentrate,” and “All Natural.” The
back label listed ingredients, including “Lemon Juice (99.97%)” and “Potassium
Metabisulfites (Antioxidant E224).” The lime juice was similar. Laboratory
tests commissioned by MB indicated that Tantillo lemon juice contained added
water, added non-fruit citric acid, and were not dervived from lemons of
Italian or Sicilian descent, and MB concluded that the lime juice could not be
“Sicilian” because there was no commercial lime juice exportation from Italy.  Despite getting this report, Safeway continued
to sell the juices.
After a bit of litigation, MB was left with Lanham Act and
coordinate New Jersey Unfair Competition Statute claims, with “disputed issues
of fact regarding whether a consumer would consider the alleged
misrepresentations material to his or her purchase; whether the current lemon
juice label and previous lime juice labels still being used in advertising are
false or misleading;” and “whether, if false and misleading, the
representations at issue are material to consumers.”
Here, the court found that defendants were entitled to summary
judgment on MB’s request for disgorgement. The Third Circuit has provided six
non-exhaustive factors to evaluate whether disgorgement is appropriate: “(1)
whether the defendant had the intent to confuse or deceive, (2) whether sales
have been diverted, (3) the adequacy of other remedies, (4) any unreasonable
delay by the plaintiff in asserting his rights, (5) the public interest in
making the misconduct unprofitable, and (6) whether it is a case of palming
off.”
Previously, the court found that “no reasonable factfinder
could find that Safeway relied on Defendants’ alleged misrepresentations in
deciding to sell Tantillo lemon and lime juice products.”  Moreover, MB failed to show that the false
advertising caused MB any harm.  Without “at
least some evidence of harm,” no award of profits or damages was appropriate.  For damages purposes, the court wouldn’t presume
that any of defendants’ sales would have gone to MB but-for the false
advertisement.

The court declined to address the appropriateness of
attorneys’ fees at this stage. An award of attorney’s fees doesn’t require
intentionally false advertising, or the existence of damages.  The court could potentially find culpable
conduct if defendants were still using their original ad on the internet, and
other claims related to be litigated. It was too early to decide that this wasn’t
an exceptional case.

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