variety in superiority claims can add up to disparagement

Deerpoint Group, Inc.
v. Agrigenix, LLC, 2019 WL 2513756, No. 18-CV-0536 AWI BAM (E.D. Cal. Jun. 18,
Deerpoint sued
Agrigenix for violating the Lanham Act and California’s UCL via false
advertising, violating California and federal trade secret law, and related
claims. Deerpoint allegedly provides chemical water treatment solutions for
agriculture irrigation, using custom-blended fertilizers and patented precision
feeding equipment.  Its former CEO
allegedly took confidential information, sued Deerpoint/filed an administrative
complaint with the California Department of Fair Housing and Employment, and
formed a competitor, Agrigenix.  Its
fertilizer blends were allegedly copied from Deerpoint and it allegedly
installed at least four devices that copy the feeding equipment. Agrigenix allegedly
told Deerpoint’s customers that it is “the same as Deerpoint with a twist,” and
four large clients of Deerpoint, representing $2.4 million in revenues, switched
to Agrigenix. The parties settled the ex-CEO’s case with an agreement including
a provision that acknowledged that his obligations to keep Deerpoint’s trade
secrets secret were still in force. 
Unsurprisingly given the posture, the trade secret claims were not
interference with prospective economic advantage: defendants argued that the requisite
independently wrongful act alleged, disparagement, wasn’t sufficient because the
alleged statements were puffery, opinions, too vague, or hyperbole and
invective from a competitor.
The challenged
statements: (1) Agrigenix is the same as Deerpoint with a twist; (2) Deerpoint
is failing and will lose all of its customers to Agrigenix; (3) Mahoney is not
obligated to maintain Deerpoint trade secrets; and (4) Agrigenix’s products are
20% better than Deerpoint’s while being 20% cheaper. Deerpoint argued that
these were necessarily claims that “Agrigenix had superior products when, in
reality, it only had copies of Deerpoint’s proprietary products.”  Viewing the allegations in the light most
favorable to Deerpoint, statement (2) could be disparaging. “While some courts
have held that statements about a company’s future financial stability are
non-actionable opinions, the statement alleged in the FAC is alleged in current
terms – Deerpoint is failing. Moreover, given [the ex-CEO’s] past connection
with and knowledge of Deerpoint’s operations, Deerpoint’s customers may have
been more likely to believe the statements were true ….” 
Perhaps more
surprisingly, (1) and (4) when read together could be disparaging.  By themselves, they were either opinion or puffery,
given the meaninglessness of “with a twist” and the uncertainty of what it
would mean to be “20% better.”  But read
together, they reasonably indicated superiority when in fact they were the
same.  [The problem that other courts
would find is that the nature of the superiority is still completely undefined.]
(3) was a statement
about the ex-CEO’s own obligations, and it didn’t disparage Deerpoint or indeed
say anything about Deerpoint.
The UCL claim
survived because it was based on the intentional interference claim, which is a
little backwards (why not just go for false advertising directly?) but ok.

from Blogger

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