falsity from former customer satisfies Lexmark standard; not so for once-potential customer

Frompovicz v. Niagara Bottling, LLC, No.. 18-54, 2018 WL
4465879  (E.D. Pa. Sept. 18, 2018)
Prior
ruling covered here
. Plaintiff (on behalf of a putative class) is a
water extractor. Defendant Land is a directly competing extractor and the
bottler/distributor defendants who use his water are Niagara, Ice River, and
Crossroads. Land allegedly extracts well water, which “does not satisfy the
FDA’s definition of ‘spring water’ ” and which is permitted by the Pennsylvania
Department of Environmental Protection (DEP) as a “well water” site, and not a
“spring water” site. Land’s water allegedly “has been extracted, handled, or
treated with equipment or techniques that are inconsistent with a ‘spring
water’ classification criteria” and “has tested as containing more particulates
or trace elements than are otherwise permissible or recommended under industry
standards for ‘spring water.’ ”  Niagara
and Ice River sourced their spring water from plaintiff before switching to
Land, and Crossroads also considered plaintiff’s water before choosing
Land.  Plaintiff also allegedly bottled
and sold his own water directly.
Plaintiff satisfied Lexmark’s
zone of interests test by alleging that his spring water sales were depressed
as a result of the misleading labels. Also, Niagara allegedly “falsely told
industry participants that Plaintiff should not be dealt with, and has
misrepresented to the public that Plaintiff’s spring water…is contaminated.”
Land also allegedly disparaged the plaintiff, which affected the necessary
commercial interest in reputation or sales.
Proximate cause: simple as to Land, because they’re direct
competitors. Lexmark also allows
suits against indirect competitors, though the circumstances have to be
relatively unique. Here, the alleged disparagement by Niagara qualified: “when
a party claims reputational injury from disparagement, competition is not
required for proximate cause.”  Plaintiff
also alleged that if the bottler defendants wanted to meet the demand for
spring water without Land’s “phony” spring water, they’d have to use his and
other putative class members’ true spring water. The bottler defendants argued
that this allegation was merely speculative because there was no reason to
think they would have bought from Land instead. But as to defendants who
formerly bought from Land, the theory that they would have continued to buy
from him in the absence of the mislabeling was a plausible theory of proximate
cause.  Crossroads never bought from
Land, though, and it wasn’t enough to allege that they were in negotiations at
one point.
The Pennsylvania unfair competition claims were preempted by
the FDCA, which has promulgated
 a standard of identity
for bottled water, including a definition of “spring water.” The allegation
that it was misleading to market Land’s water as “spring water” when the
Pennsylvania DEP permit identified the source as a “well water” site was
precisely the kind of claim prohibited by the FDCA.  The FDCA also impliedly preempts a state law
claim based on conduct that is wrongful only because it conflicts with the FDCA
or FDA regulations.  Land’s allegations
were, in effect, a prohibited attempt to enforce alleged violations of the FDCA
and FDA regulations.

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