natural decay of nicotine complicates evaluation of literal falsity of nicotine content claims

Bidi Vapor, LLC v. Vaperz LLC, 2021 WL 2433642, No. 21 C
1430 (N.D. Ill. Jun. 15, 2021)

“The novel question of how the electronic cigarette industry
should approach labeling nicotine content in the face of nicotine degradation
is both significant and unsettled.” Thus, the plaintiff was not going to get a preliminary
injunction against its competitor for falsely advertising 6% nicotine content.

All nicotine degrades with time, so all e-cigarette products
contain different amounts of nicotine than reported. This undermined Bidi’s
literal falsity theory.

Bidi’s lab reports found that Vaperz’s stick, which
advertises 6% nicotine, had an average nicotine level between 3.06% to 3.43%.
It’s cheaper than Bidi’s stick, and this allegedly caused Bidi to lose
business. It brought state and federal false advertising claims.

In context of inevitable degradation, 6% was not shown to be
literally false. “Even though Bidi’s reply argues that a +/- 10% degradation is
the industry norm, the mere existence of some norm acknowledges the fact that
some degradation is inevitable and even expected.” A case that must inevitably
be about what is acceptable variation within the industry cannot be about
literal falsity. The court pointed out that the package never made any claims
about when the stick had 6% nicotine. “[A] linguistically competent person
could, when considering nicotine degradation, reach at least two conclusions
about what 6% means in this context. This inherent ambiguity means that
Vaperz’s statement is not indisputably or undeniably false.”

Comment: One annoying thing about Seventh Circuit precedents
is that they are often sloppily phrased even when they intuitively have the
result right. The court of appeals did not mean “linguistically” competent
despite what it said, and the court here isn’t applying linguistic analysis. It
is considering cultural competence. Indeed, immediately following this
statement, the court concludes: “Rather, this case presents a genuine dispute
about market norms in the e-cigarette industry and whether Vaperz has defied
those norms.”

Bidi tried to argue that the statement was literally false
because defendant’s stick contained less nicotine than the industry-accepted
+/- 10%. But there was little evidence that such a standard existed. [The court
probably goes overboard saying that a literal falsity theory could prevail if
all sides agree that 6% doesn’t mean 6%–if there really were an industry
standard that defendant violated, or if there were 0% nicotine from the start,
that seems literally false.]

Likewise, Bidi didn’t have a clearly enough defined or well
enough evidenced theory of misleadingness. Also, there was at least one lab
report finding that defendant’s stick had 5.38% nicotine, which was within the
10% tolerance proposed by Bidi.

Even if it showed falsity, Bidi didn’t show materiality. It
presented little evidence that rates of nicotine degradation are “actually
salient to consumers”— “especially when nicotine degradation appears to be an
industry-wide issue.” “Instead, it is distinctly possible that customers base
their purchasing decisions on factors like taste, convenience, or price.”

Finally, Bidi didn’t make a strong showing on causation,
just a bare assertion of a tradeoff in sales, and Bidi’s sales had also been
increasing, which weighed against showing likely success.

Because of all this, Bidi wasn’t entitled to the statutory
presumption of irreparable harm (of which the court did not seem very fond,
citing Winter despite its obsolescence in the Lanham Act context). And Vaperz
largely rebutted any presumption, by which the court seems to mean “made
arguments that Bidi didn’t do a good job providing evidence.” Lost profits
aren’t generally irreparable injury and a sales tradeoff would be “purely
financial, easily measured, and readily compensated.” Claims about “customer relationships,
goodwill, and reputation” were mere bare assertions. Market
dynamics—specifically the existence of other 6% products on the market, as well
as the inevitability of nicotine degradation for all participants—made
irreparability of harm hard to assess.

And the balance of harms didn’t favor Bidi, since a
preliminary injunction would essentially be a mandatory recall. The court was
also influenced “by the very strong likelihood that the Bidi Stick also does
not contain exactly 6% nicotine. … The available record evidence suggests that
the Bidi Stick could have as low as 5.47% nicotine.” This could constitute
unclean hands.

The court was also concerned that any injunction would
incentivize e-cigarette manufacturers to add more nicotine in the manufacturing
process, but the FDA usually worries more about products with too much nicotine
than too little. It’s much worse for a user to consume too much nicotine than
too little, and the current situation errs on the side of too little. Plus, the
FDA is actively regulating this market, and the court didn’t want to interfere.

The court did caution that discovery might reveal a very
different picture; this was just how it looked now.

from Blogger

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