scientific debates can ordinarily be resolved in false advertising cases

Pax Water Technologies, Inc. v. Medora Corp., 2019 WL
4390567, No. LA CV18-09143 JAK (AGRx) (C.D. Cal. Aug. 5, 2019)
The parties compete in the market for water treatment
technologies for municipalities, public water agencies and districts, and
private parties.  Using chlorine to
disinfect water causes a reaction with organic matter in the water, resulting the
formation of THMs [trihalomethanes], which is itself a public safety and health
risk. The parties compete to sell systems
to remove THMs from drinking water.
Pax challenged two Medora documents: a “THM Removal Systems
Comparison Table” and a White Paper, “Misrepresentations by PWT of the 2012
Camarillo, CA Potable Tank Mixing Study.” Camarillo conducted a head to head
text comparing Pax’s tripod vortex mixer with Medora’s mixer; a mixer is one
component of a THM removal system. After the
test was completed, Camarillo continued to use Pax’s tripod mixer, but
discontinued the use of Medora’s mixer, and Pax talked up the results.  Medora then wrote to Pax stating that Pax falsely
represented the results of the comparison and provided a competing
interpretation of the results. Pax disagreed.
The White Paper stated that “[a] truthful analysis would
conclude that” (i) Medora’s mixer outperformed Pax’s mixer; and (ii) Pax’s
mixer performed “so poorly that its mixing data would have been the same even
if the mixer had not been turned on during the study.” The White Paper also
includes “a summary of the study, a comparison of the data generated based on
use of the competing products, and an analysis of the results in support of
these conclusions.” Pax alleged that the analysis was based on false scientific
premises about what the chlorine concentration in the test tank should’ve been.  The White Paper listed the size and cost of the competing
products, as well as the method for installing them and claimed that “most
customers have figured out that the GS-12 is a much better value than the [Pax]
mixer” based on features including its price, design, installation,
performance, reliability, modeling, and customer data.  Pax alleged that Medora’s mixer cost $15,000,
not $7800 as stated in the White Paper, and that the White Paper falsely
claimed that the Pax mixer is “[n]ormally deployed with divers” and is “tied
down,” whereas the mechanical attachment of the device “is not recommended by
Plaintiffs, is not required to keep the tripod mixers from moving within the
tank, and is not common.”
As for the comparison table, it didn’t include Pax’s name
but Pax alleged that, “based on the products’ characteristics,” “[a]ny person
familiar with THM removal systems would recognize that” the products described
in the latter two columns of the table are both “manufactured and sold by
Plaintiffs, which are the sole source of” products of these types that met the
identified product standards.  It made
several allegedly false representations and comparisons.
Both the documents were on Medora’s website and were
allegedly provided to actual or potential customers, and their claims were allegedly
verbally repeated.
Medora argued that its claims were protected under ONY, Inc.
v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), as
“non-actionable scientific conclusions.” The court here pointed out that ONY
limited its holding to scientific conclusions that had been “presented in
publications directed to the relevant scientific community” through
“peer-reviewed academic journals.” Following Eastman Chemical Co. v.
Plastipure, Inc., 775 F.3d 230 (5th Cir. 2014), the court declined to
extend ONY to the use of “snippets” of a study that were included in
“statements made in commercial advertisements and directed at customers.” As Eastman
noted, “Advertisements do not become immune from Lanham Act scrutiny simply
because their claims are open to scientific or public debate. Otherwise, the
Lanham Act would hardly ever be enforceable — ‘many, if not most, products may
be tied to public concerns with the environment, energy, economic policy, or
individual health and safety.’ ”
In a nice formulation, the court here explained, “The scientific
nature of a conclusion does not mean that it is not actionable per se. Instead,
the question is whether a scientific conclusion was stated within a commercial
advertisement.” At that point, the fact/opinion distinction became dispositive,
and that is typically an issue not suited for resolution on a motion to
dismiss.  “To be sure, to prevail on
their claim, Plaintiffs may need to prove that the conclusions stated in the
White Paper are contrary to the ‘well accepted science of water chemistry.’ However,
such a determination can be made through the normal processes of civil
litigation.” Separately, factual statements about the parties’ products, e.g.,
cost and whether they needed to be tied down, aren’t like those in ONY. 
Commercial advertising or promotion: Obligatory note that Gordon
& Breach
probably doesn’t survive Lexmark untouched, but the key
prongs here are whether the claims were (1) commercial speech and (4) disseminated
sufficiently to the relevant purchasing public to constitute advertising or
promotion within that industry.
The complaint adequately alleged that White Paper was
commercial speech. Its language could reasonably support an inference that it
proposed a commercial transaction. Its introduction claimed that Medora’s product
“outperformed” Pax’s competing product during the head-to-head comparison; it
included information on the comparative price and features of the competing
products; it summarized its contents as showing that Pax’s communications improperly
discredited Medora’s product; and it stated that it was a response to Pax’s
“marketing documents.” It then encourages readers to conclude — as “most
customers” have — that Medora’s product “is a much better value” than Pax’s,
citing specific features and providing Medora’s logos, phone number and website
address. The complaint further alleged that the White Paper was in fact used to
persuade actual or potential customers to purchase Medora’s product, by posting
the White Paper on its website and by stating its contents and/or providing
copies of it when Medora’s agents and employees met “with actual or potential
customers of the parties’ products.”
This was plausibly advertising because it was “speech about
a product or service by a person who is offering that product or service at a
price, directed to persons who may want, and be willing to pay for, that
product or service.” Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002). It was
plausibly directed toward potential customers. Its title, “Misrepresentations
by [Plaintiffs] of the 2012 Camarillo, CA Potable Tank Mixing Study,” made it part
of the parties’ commercial dispute. It referred to two specific products, and Medora
had an economic motivation to persuade readers to buy its product instead of
Pax’s.
The parties disputed whether allegations of sufficient
dissemination to the relevant consumers had to meet the heightened pleading
standards of FRCP 9(b). Assuming without deciding that they did, it was enough
to plead that the White Paper had been accessible on Medora’s public website
since at least May 2018; that, through this posting, it “reached a significant
number of actual or potential customers of the parties’ products”; and that Medora
provided copies of the White Paper to actual or potential customers of the
parties’ products and/or has made the false and misleading statements and
claims to them that are contained in the White Paper. Given that the market was
allegedly specialized and limited, this was enough. “[I]nformation about the
particular employees of Defendant who disseminated the White Paper, and the names
of the potential customers to which it was provided, are ‘peculiarly within the
opposing party’s knowledge’ and therefore can be alleged based upon information
and belief.”
Medora then argued that there weren’t enough allegations of
harm from the comparison table, because it didn’t contain any “direct
reference” to Pax’s product. Even assuming that Pax needed to allege actual
injury, it was enough to allege that “Medora’s actions have caused harm and damage
to Plaintiffs and have resulted in a corresponding improper financial benefit
and gain to Medora,” given the allegations of a limited market for the products
and the importance of every single customer.

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