even admissions and severe financial distress don’t justify TRO/asset freeze in false advertising case

SI03, Inc. v. Musclegen Research, Inc., 2021 WL 765293, No.
1:16-CV-274 RLW (E.D. Mo. Feb. 26, 2021)

The parties compete to sell protein powder to consumers. SI03
originally sued for false advertising and related claims, and Musclegen
counterclaimed similarly.

SI03 alleged that Musclegen markets its Genepro protein
powder product by falsely claiming it contains 30 grams of protein in a roughly
11.15 gram (1 tablespoon) serving, when Genepro actually has 10 or fewer grams
of protein per 11.15 gram (1 tablespoon) serving; and by claiming the protein
in Genepro is absorbed by the human body at a rate that is 300% higher than the
rate at which a human body absorbs “traditional whey.” It further alleged that Musclegen’s
marketing and packaging statement that it contains “medical grade” protein is
incorrect, false, and misleading, as no industry or FDA standard exists for
“medical grade” protein.

Musclegen initially said that its product had “three times
the protein absorption rate as traditional whey protein—meaning that consuming
one scoop of Genepro is the functional equivalent of consuming 30 grams of whey
protein,” as supported by a clinical trial. Then it sought to amend its answer
and admit many of the allegations when its founder and COO pled guilty to a
federal felony count of distributing unapproved new drugs with the intent to
defraud and mislead. As a result, Musclegen was “experiencing severe financial
distress” and sought to resolve the case. That was good cause to amend!
However, the court declined to grant a protective order to pause discovery.
There were still issues about willfulness, entitlement to damages/disgorgement
of profit, and exceptionality under the Lanham Act. Nor were declaratory
judgment claims necessarily moot.

The court also denied SI03’s motion for a TRO to prevent
sales of Genepro and to freeze Musclegen’s assets. “The evidentiary support it
offers for the TRO motions is fairly slim at this point and based in part on
speculation, and the Court finds the motions are premature. Plaintiff points to
Defendant’s refusal to participate in discovery, but this cannot serve as a
substitute for evidence to show Plaintiff’s likelihood of success.” Plus,
Lanham Act trademark infringement/counterfeiting cases about asset freezes
didn’t show that similar relief was appropriate in a Lanham Act false
advertising case. (I really don’t understand why courts make the TM/false advertising distinction
when they do as opposed to ignoring it when they don’t.)

SI03 also failed to show irreparable harm, because a
misrepresentation about the defendant’s own product didn’t justify a
presumption of harm. (The TMA changes this for irreparable harm, but we have
yet to discover whether this will affect courts’ decisions on whether the
elements of the underlying cause of action for false advertising have been
satisfied.)

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