Advocacy organization lacked standing to litigate over foie gras claims

Voters for Animal Rights v. D’artagnan, Inc., 2021 WL
1138017, No. 19-CV-6158 (MKB) (E.D.N.Y. Mar. 25, 2021)

Plaintiff, a nonprofit dedicated to advancing the interests
of citizens who support animal protection, alleged that defendants violated sections
349 and 350 of the NYGBL by deceptively marketing their foie gras products as
originating from humanely treated ducks, which injured it by “(1) setting back
its organizational mission to reduce demand for foie gras and obtain the
passage of laws banning its sale, and (2) requiring it to spend money and
resources to counter Defendants’ misleading messages.” The court dismissed the
complaint; these injuries were not cognizable and indirect.

Plaintiff maintained that its efforts had been harmed
because “[r]esearch commissioned by the foie gras industry specifically shows
that consumers who support a ban on foie gras production may change their
views, to oppose such legislation, once they are exposed to misleading
pro-industry messaging.”

The NY Court of Appeals has denied recovery for a plaintiff’s
“derivative injuries,” that is, injuries that arise solely as a result of
injuries sustained by another party. This was the case here; plaintiff did not
suffer diversion of trade, which is “direct” injury by reason of deceived
consumers. [This is, as the Lexmark court recognized, playing with the
concept of directness; proximate cause really does better as an explanation
because it’s more honest about being a legal judgment and not some ontological
step-counting exercise.]

Plaintiff argued that it was directly injured when
defendants’ misleading ads decreased support for its mission, analogous to lost
sales, and that it was injured by being forced to expend additional resources
to counteract the effects of the advertising, as in opioid litigation, where
government entities have been held to have suffered relevant injury based on
the costs of addiction/overdose to their law enforcement/healthcare resources.

The court disagreed. The NY Court of Appeals has held that
an insurer could not sue a tobacco company that “misrepresented the dangers of
smoking and engaged in a campaign to encourage consumers to smoke” even though
the plaintiff insurer was required to bear the increased medical costs that
resulted, because the plaintiff insurer’s claims were “too remote” and
derivative of consumers’ injuries. The Court of Appeals found no legislative
history in support of the insurer’s theory, and it “warned against ‘the
potential for a tidal wave of litigation against businesses that was not
intended by the [l]egislature.’ ” So too with later claims by the State that
defendants had misrepresented internet purchases of cigarettes as tax-free and
New York consumers had bought them, depriving the state of tax revenue.

I have to admit, if the Court of Appeals is serious that
“[a]n injury is indirect or derivative when the loss arises solely as a result
of injuries sustained by another party,” then I don’t see how any competitor
can logically sue under these statutes, but I have no doubt that the magic word
“goodwill” will bring different results in practice. (Even disparagement only occurs
when a wrong has been done to the consumer—deceiving them about something; the
harm to the plaintiff’s goodwill is the changed mental state of the
consumer.) Indeed, the court distinguishes other cases as involving “direct
harms to a business,” e.g., via allegedly misleading claims to consumers that
the defendants provided independent/unbiased mattress reviews. What makes that “direct”?
Well, deceived consumers withheld trade from plaintiffs. [That sounds …
indirect.] But here, defendants weren’t targeting the plaintiff directly, but
merely affecting public opinion, “which in turn affects how Plaintiff allocates
resources to fulfill its organizational mission.” The legislative history
supported the court’s holding because it “suggest[ed] a balance between
allowing individual plaintiffs to seek relief while limiting the potential for
mass litigation.” [The legislature was dubious about class actions, which doesn’t
seem like the same thing as here and also is trumped by the Federal Rules of
Civil Procedure, if I recall correctly.]

Plaintiff’s allegedly unique situation—with empirical research
establishing the harm to its mission—didn’t change things, any more than the
state’s special position with respect to cigarette taxes did for it.

 

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