Likely success & irreparable harm still doesn’t justify ex parte TRO against false ad. given counterspeech

Verified Nutrition, LLC v. Sclar, 2017 WL 4785948, No. 17-cv-07499
(C.D. Cal. Oct. 23, 2017)
Verified sells ProstaGenix, which is “an all-natural
supplement with a proprietary form of Beta-sitosterol” (BetaRexin). Verified
primarily advertises ProstaGenix through an infomercial featuring Larry King,
available on Verified’s website, Prostate Report.  Prostate Report also provides “reviews” of
various prostate supplements on the market, including Verified’s product
ProstaGenix and defendants’ competing product, Prostate Miracle. Plaintiff
Buckley also publishes a magazine called “The Men’s Guide to Prostate
Supplements,” which provides similar reviews. The website allegedly discloses
that Buckley is the inventor of ProstaGenix and writes the reviews on the
website, and that Verified Nutrition sponsors the website. Buckley claims he
has “spent approximately $150,000 to have five reputable and independent
laboratories conduct more than 280 laboratory tests on over 150 different
prostate supplements.”
On Prostate Review, Buckley wrote about his determination that
his product was superior to Prostate Miracle because ProstaGenix contained
almost twice as much Beta-sitosterol.  He
included Prostate Miracle’s ingredient list on Prostate Review (which the court
suggests might be the source, however unjustified, of defendants’ “plagiarism”
claim).
Defendants began operating three websites: http://ift.tt/2hgbLls,
http://ift.tt/2i9plGT, and http://ift.tt/2hgbLSu. They
take images directly from the Larry King infomercial and superimpose negative
text over them. [Verified also sued for copyright infringement; even if the
claims are false, it’s hard to see how this isn’t fair use—the problem if any
is in the falsity, not in the exploitation of a market to which Verified has a
right.] Defendants’ claims allegedly include: 1) calling ProstaGenix and
Buckley’s business a “total scam;” 2) claiming that Verified Nutrition “does
not exist;” and 3) calling Buckley a “liar, plagiarist, and conman,” a “career
huckster,” a “slimeball,” a “serial fraudster,” a “career con artist,” a
“despicable schmuck,” and a “sociopath.” They also accuse Buckley of pretending
to be an “independent, unbiased 3rd party” reviewer, “fraudulently selling one
bogus product after another, since 2005,” and having a “long history of
defrauding consumers.”
Verified alleged that these negative statements were false
and had an adverse effect on their sales and goodwill. Searches for “Larry King
prostate,” among others, returned links to defendants’ websites, and a YouTube
video that is also embedded on the websites, which states, among other things,
that “In the Larry King Prostate report, Larry King stages a fake interview
with career huckster Fred Buckley and partner in crime, wife Corinne Buckley.”
Verified sought the TRO based on its claims for false
advertising, defamation, trade libel, and unfair competition.  The court found that falsity appeared likely,
and that the allegedly false statements were material, because “statements that
certain reviewers or distributors are fraudsters would be material.”  Plaintiffs submitted evidence that Verified
Nutrition exists as a Nevada limited liability company, disproving the claim
that it is a “fake company,” as well as evidence that they spent approximately
$150,000 in testing the ingredients of prostate supplements to review them on
Prostate Report, which goes to the “fake review” statements.
Thus, the court found likely success on the merits for false
advertising, as well as for the defamation/trade libel claim, though I’m not
sure where the special damages are alleged/proved—claims about general
goodwill/reputation are usually insufficient to plead special damage. This is
what happens when only one side shows up to litigate—which is why it’s good to
be nervous about ex parte proceedings. 
Plaintiffs were also likely to succeed on their UCL claim.
Plaintiffs claimed irreparable harm to their reputation and
also the decline in sales of their product, but lost sales “is just the type of
harm that could be remedied by monetary compensation after a full trial on the
merits.” So, was potential harm to reputation enough?  Many of plaintiffs’ allegations of harm relied
on the fact that defendants’ websites were “gaining traction on the Internet,
and rising in the results when Buckley entered certain search terms on Google,
which typically would have resulted in Plaintiffs’ websites being on the top of
the list.” [At some point, courts are going to have to note the importance of
personalized results—if Buckley clicked on defendants’ websites before, they’re
going to come up again for him, but
that’s less helpful evidence about what J. Random Searcher will see.]  In order to counter this false advertising,
plaintiffs alleged that they’d have to spend a lot of money on ads, but money
could be recovered after a full trial on the merits.  Only 400 people had seen the YouTube video at
the time of filing, after about 30 days (so much for “rising in the results”).
The court found that reputational harm could increase over time, tipping the
irreparable harm factor in favor of plaintiffs. 
[Not clear how this is less speculative than in other cases, but ok.]
Balancing the equities/public interest. The harm to defendants
seemed limited, “given they do not have a right to disseminate allegedly false
statements.” As for the public interest, “while the public has an interest in
not being exposed to false information, currently the public is able to view
both Plaintiffs’ and Defendants’ advertisements regarding their respective
prostate supplements, and can come to their own conclusions. Much of the
information Plaintiffs use to demonstrate their claims are true and that
Defendants’ are false, is also available on Plaintiffs’ website, Prostate
Report, and thus also available to consumers to weigh the parties’ claims
themselves.”  This reasoning is
interesting and troubling in equal measure; it seems to suggest that the
parties ought to fight it out in the marketplace of ideas—but will consumers
actually consult both websites?  The
answer might well be yes, if this is the kind of product that consumers do seek
to educate themselves a bit about, but applied outside the TRO context it would
seem worrisomely in conflict with the basic premises of false advertising law.  However, applied to the ex parte TRO, where
the speech ultimately might be true/nonactionable, caution is more
understandable—and consistent with a First Amendment tradition of protecting
speakers from speech-suppressive orders they have not been able to contest.

As the court noted, none of the defendants had yet appeared,
and plaintiffs hadn’t filed proofs of service for the individual defendants.
There’s no requirement of formal service of process before a TRO can issue, but
the court was troubled by the possible lack of notice. On balance, the court
found that a TRO was not indicated, but they did provide sufficient evidence warranting
an order to show cause as to statements that Verified Nutrition “does not
exist”; ProstaGenix is ineffective and “just a cheap imitation of Prostate
Miracle”; Prostate Report is a “fake review site” using “fake lab tests” and
fake lab reports, promoted through a “gang of fraudsters”; and Buckley is “a
liar, plagiarist, and con man” as well as a “sociopath” who publishes
plagiarized and “fake review magazines” promoting his business and ProstaGenix.
[Query whether “sociopath” can be proven true or false, and thus capable of defamatory
meaning.]

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