advertising game device’s legality amidst gambling prosecutions could violate the Lanham Act

Posted on April 1, 2025 by rtushnet

TNT Amusements, Inc. v. Torch Electronics, LLC, 2025 WL
947506, No. 4:23-CV-330-JAR (E.D. Mo. Mar. 28, 2025)

The parties compete in the market for “retail amusement
devices.” TNT owns and leases out traditional arcade games and similar
amusement equipment (e.g., foosball and pool tables, dart boards, pinball
machines, juke boxes) to various retailers. Torch leases putatively “no-chance”
gaming machines. TNT alleged that Torch operates illegal slot machines and
touts them as legal. Here, the Lanham Act false advertising claim survives for
a jury, but the RICO claims are tossed out on summary judgment because they’re RICO
claims.

I’m going to try to strip down the extensive regulatory background, but
gambling is heavily regulated in Missouri. Relevant definitions include:

(4) “Gambling”, a person engages in
gambling when he or she stakes or risks something of value upon the outcome of
a contest of chance or a future contingent event not under his or her control
or influence, upon an agreement or understanding that he or she will receive
something of value in the event of a certain outcome. …

(11) “Slot machine”, a gambling
device that as a result of the insertion of a coin or other object operates,
either completely automatically or with the aid of some physical act by the
player, in such a manner that, depending upon elements of chance, it may eject
something of value. A device so constructed or readily adaptable or convertible
to such use is no less a slot machine because it is not in working order or
because some mechanical act of manipulation or repair is required to accomplish
its adaptation, conversion or workability. Nor is it any less a slot machine
because apart from its use or adaptability as such it may also sell or deliver
something of value on a basis other than chance.

Possession of a gambling device is a Class A misdemeanor.
Any building used for unlawful gambling is considered a public nuisance.

Torch’s game machines feature at least five game themes, and
each theme offers several play levels. “A game theme is a series of visual
images displayed to entertain the player, revealing a combination of winning or
losing symbols on each turn. A play level dictates the payment required to play
the next turn.”

picture of a “no chance” device

The record showed that the software for a Torch device has a
randomly selected starting point for each theme/play level combo. “From any
given starting point, for each turn of play, the software cycles through
pre-determined and finite sequential pools of 60,000 to 100,000 outcomes,
depending on the game theme,” like a counter (but not in numerical order)
ticking forward one at a time until it cycles back to the beginning. “There is
nothing a player can do to alter the payout amount of a turn before or after
the player inserts money.”

Torch devices only take bills, “so, if there is a balance of
$0.25 when a player decides to stop playing, there is no way to recover that
amount.” Each device has an optional “prize viewer” that allows the player to
preview the next payout amount, but only the next payout amount. “So, for
example, if a player selects the prize viewer and sees that the next payout
amount is $0 and she wants to obtain a better result, she must play through
that $0 turn and continue playing. She cannot skip ahead. If she wants to know
the payout of the second, third, or any future turn, she must pay for and play
through those additional turns.” Using the prize viewer doesn’t change the
odds, though “Torch devices are configured to enable the commercial operator to
adjust the settings to require a player to pay extra to use the prize viewer.” According
to a specialist with the Missouri Gaming Commission, absent the preview
feature, Torch machines “essentially play just like a slot machine.”

Torch advertises that the devices are not gambling machines.
Until September 2022, its website said:

Torch’s No Chance Game Machines are
legal. Torch’s No Chance Game Machines are an innovative non-gambling game
machine.

Why are No Chance Game Machines
different?

Under Missouri law, a “gambling
device” is defined as having three elements: consideration (money in), prize
(money out), and chance (unknown outcome).

Torch’s No Chance Games obviously
have the elements of “consideration” and “prize”, but have been carefully
designed to eliminate the element of “chance” (which Missouri law defines as
the material component of a gambling device). If the player does not like the
predetermined outcome, they can choose not to play. If they have a balance on
the machine, they can redeem their balance at any time.  

The “Prize Viewer” option on NCGs
eliminates chance.

In mid-September 2022, Torch revised its website to state
only this:

Torch’s No Chance Games are the
first of an entirely new entertainment concept; a game in which there is no
element of chance.

Importantly, the player may view
each and every outcome which may entitle them a prize before playing the game.
They may simply touch the “Prize Viewer” button on the game console and view
the result of the game before playing. As such, the player can decide if they
want to play the game or not based on the pre-determined outcome.

Each Torch device bears a disclaimer:

The Amusement Device to which this
disclaimer is attached provides each player of the device with information on
the specific outcome of each electronic amusement game offered thereon. The
information with respect to each such outcome is provided prior to such
player’s participation in any such game. Consequently, this amusement device is
designed to provide no contest and no chance in the games offered to its
players.

… In Missouri (as in most states),
in order to be considered “gambling,” an element of chance or a contest must be
present in the activity … As noted above, this amusement device is designed to
offer no contest of chance as the outcome is known by players before any
amusement game is initiated. Therefore, the activity offered by this device
clearly does not meet the definition of “gambling.” As a result, this amusement
device does not fit any definition of “gambling device” in the state of
Missouri and is not prohibited for use by you. …

Torch “no chance” ad

Its ad flyers make similar claims, as do its oral representations.
“As such, Defendants have not taken measures to prevent problem gamblers or
gambling addicts from playing Torch devices, nor have they taken measures to
prevent children from playing other than instructing customers not to allow it.”
Torch doesn’t have a gaming license.

At least 20 locations where defendants operate Torch devices
are current or previous customers of TNT. There have been as many as 15,000
Torch devices in Missouri. TNT’s customers have directed TNT to remove at least
19 machines from overlapping locations in order to make room for Torch devices.
The Torch games displaced TNT games because they made more money (and revenue
is split with retailers).

You will not be surprised to learn that the history of evading
gambling regulations is long:  

Over 100 years ago, in City of
Moberly v. Deskin, 155 S.W. 842 (Mo. App. 1913), a Missouri appellate court was
asked to determine whether a slot-machine-like gum dispenser was a gambling
device. The machine had a prize preview feature showing in advance what the
player would receive on the next play. The defendant argued that each turn was
a separate and independent business transaction and there was no chance
involved as the player knew in advance what he would receive for his nickel. The
court rejected this theory, finding the defendant’s position “unsound” because
the “contrivance” was clearly intended to “allure” the player into continuing
in the hope of a better outcome.

Deskin is still good law; Missouri legalized some gambling
in 1994 but made no change in its definitions that would abrogate its rule. The
parties, other operators, and officials have nonetheless debated the legality
of “no-chance” prize viewer games and proposed various legislative changes specifically
drafted to encompass machines with a preview feature, but nothing has happened
yet. In January 2017, Torch obtained a legal opinion from a Chicago law firm
concluding that “no chance” gaming devices were legal under Missouri law, and Torch
maintained this position in contacts with prosecutors. After Torch’s owner met
with the Phelps County prosecuting attorney, the latter informed local law
enforcement that he would not pursue prosecution involving Torch devices. But,
around the same time, local officials in Franklin County warned Torch that the
Missouri Gaming Commission deemed the devices illegal and the prosecutor would
“absolutely consider prosecution regardless of Phelps County opinion.” TNT also
secured an advisory opinion from the Missouri Gaming Commission in 2019 that the
devices were indeed gambling devices and slot machines notwithstanding the
prize viewer feature. Torch’s lawyer acknowledged the Commission’s position but
recommended that Torch maintain its public stance that that “MGC has nothing to
say about Torch’s games.” In 2023, defendants were denied a business license in
Branson based on the Gaming Commission’s position that Torch devices are
illegal, and a Platte County prosecutor successfully charged a business with a
class E felony for operating “no chance” prize viewer devices in local
convenience stores in 2019. Other attempted prosecutions were dismissed or are
ongoing, as are fights over seizures of Torch machines as illegal gambling
devices. “In their field investigations, Commission representatives observed
consumers playing Torch devices like slot machines without using the prize
viewers.”

Torch’s challenge to TNT’s standing went nowhere; the
parties were direct competitors and there was enough evidence for a jury to
conclude that there was a causal connection between Torch’s sales and TNT’s
claimed losses. TNT provided evidence of TNT machines that were replaced with
Torch devices and its witness also testified that many customers have asked her
if TNT offers products similar to Torch games. There were other possible
explanations why customers removed TNT devices, such as wanting newer equipment
or more profitable devices, but that was a fact question for the jury.

What about falsity? Torch made extensive claims that the
devices didn’t involve chance and weren’t gambling devices. Were these non-actionable
statements of opinion, or potentially falsifiable? Courts sometimes refuse to
consider statements about legality to be falsifiable in the absence of a “clear
and unambiguous statement” from the regulator. For example, Coastal Abstract
Service, Inc. v. First American Title Insurance. Co., 173 F.3d 725 (9th Cir.
1999), held that, “[a]bsent a clear and unambiguous ruling from a court or
agency of competent jurisdiction, statements by laypersons that purport to
interpret the meaning of a statute or regulation are opinion statements, and
not statements of fact.” The court thought the Eighth Circuit would agree, and
cited Dental Recycling N. Am., Inc. v. Stoma Ventures, LLC, No. 4:23 CV 670
CDP, 2023 WL 6389071 (E.D. Mo. Oct. 2, 2023) (allowing Lanham Act claim where a
defendant represented that its product was compliant with EPA regulations when
technically it was not; reasoning that “an opinion by a speaker who lacks a
good faith belief in the truth of the statement is actionable”).

Under these circumstances, the evidence was sufficient to go
to a jury. The representations on Torch’s website and devices were clearly
intended to be “reasonably interpreted as a statement of objective fact” and
not merely opinion. And the anti-gambling law requires only “an element of
chance.” “[I]t is now undisputed that Torch devices contain random entry points
at each play level in each game theme.” There could be as many as three million
potential outcomes, reflecting “a material degree of chance such that a jury
could find literally false Defendants’ unambiguous representation that ‘chance
has absolutely no role.’” The law even says “a slot machine is no less a slot
machine when it delivers something of value on a basis other than chance –
e.g., large sequential pools.” The court didn’t see a meaningful difference
between randomly reshuffling each time and “random-entry-point 100,000-outcome
pools yielding three million possibilities.” There was absolutely no reason for
the state to intend to regulate one technology and not the other. See Thole v.
Westfall, 682 S.W.2d 33, 37 (Mo. App. E.D. 1984) (“In the slot machine games,
the objects that appear on the screen are determined by the devices’ electronic
circuitry and the player has no control over which combination of objects will
appear. Thus, from the player’s point of view, winning is purely a matter of
luck, a matter of chance.”). [Exactly!]

In addition, the decidedly mixed and often unfavorable results
of Torch devices’ encounters with the law provided context to show “Torch’s
actual knowledge that its legal assurances were false, or at least patently
misleading.” Unlike cases where no clear guidance existed at the time of the
statements, “Defendants have been well aware since 2018 that the Missouri
Gaming Commission, state and local law enforcement, numerous county
prosecutors, and at least one state circuit court have deemed Torch devices
illegal under Missouri law.” The Platte County conviction, for example, was a
“clear and unambiguous ruling from a court … of competent jurisdiction” even
without appellate review, and the Gaming Commission’s 2019 opinion was “an
equally clear declaration by the competent agency. On this record, Defendants
cannot credibly claim that their unambiguous representations of legality –
asserted as unequivocal fact on the website and on each device – were mere lay
opinions lacking the benefit of clarity from a court or agency.”

Even without literal falsity, a jury could readily find
misleadingness/deceptiveness, “especially given that law enforcement officials
explicitly warned Defendants that their customers would be prosecuted for
operating the devices. Torch was so acutely aware of this real risk that it
offered to fund customers’ legal defense. This belies good faith and at least
creates a triable issue as to Defendants’ knowledge.”

from Blogger http://tushnet.blogspot.com/2025/04/advertising-game-devices-legality.html

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game over for allegations relating to misattributed/distorted consumer complaints

Posted on March 28, 2025 by rtushnet

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2025 WL 918411,
24cv1646(DLC) (S.D.N.Y. Mar. 26, 2025)

Previously,
the court partially granted Skillz’s motion to dismiss Papaya’s amended counterclaims;
Papaya sought leave to file further amended counterclaims, which the court denied.

The parties compete in the market
for mobile games that allow users to spend and win money (and in-game prizes). “Users
of Papaya’s games typically compete with between five and twenty opponents. …
The Skillz platform hosts games, each of which allows gameplay between only two
players, created by third-party developers.” Skillz allegedly “engaged in a
multipronged campaign to discredit Papaya in the eyes of the public and law
enforcement officials regarding Papaya’s use of robots or ‘bots.’”

The challenged conduct included an
alleged “false-front organization called 4 Fair Play” that “solicited
complaints from consumers about Papaya and other competitors of Skillz.” As
alleged:

Skillz forwarded
these complaints to state attorneys general. But before doing so, it added
stock language to the complaint, which said “I’m a resident of your state and I
would like to make you aware of a mobile game that is defrauding consumers like
me out of their hard-earned money. I strongly believe the following games use
AI or ‘bots’ to scam players by pretending that those are real players.” It
then listed the games selected on the complaint form. Skillz did not tell
complainants it was adding this language. Most complaints that 4 Fair Play
received did not mention bot use, but the stock language, which misleadingly
appeared to have been written by the complainant, was added to them anyway.
Skillz “spot checked” the complaints that it forwarded to law enforcement, but
it otherwise did not vet them to make sure they came from real people.

This Skillz-added material in the forwarded consumer complaints
was not alleged in the previous counterclaims.

The 4 Fair Play website also included short quotations purportedly
from consumers complaining about Papaya’s games. “These testimonials, each one
or two sentences long, were attributed to consumers identified only by initials
and state of origin … or by the game they had played.” Skillz itself allegedly
drafted some of those testimonials, and they had not come from real consumers. “Other
testimonials did come from real consumers but had been edited by Skillz.” The
fact that these weren’t real consumers or real quotes was added to the proposed
counterclaims.

[Gotta say, if we had a working FTC, this would be the kind
of thing that the FTC considers deceptive, though it might well leave the
parties to private remedies given their incentives to litigate and the lack of
direct sales from the website.]

Finally,

[p]ortraying itself as a “public
policy group conducting research,” 4 Fair Play contacted Skillz employees … and
offered recipients $300 for participating in interviews meant to “better
understand the mobile gaming industry.” An internal guide, which was edited by
Skillz executives, encouraged interviewers to ask questions about Papaya’s use
of bots. The involvement of Skillz and 4 Fair Play in this scheme was hidden.

Despite NDAs, two former Papaya employees participated in
interviews and “disclosed information about when and why bots are used and the
coding behind the bots, among other things.” Using this information, Skillz
publicly accused Papaya of using bots. It also sued Papaya for false
advertising about lack of bots. The proposed counterclaims added an unfair
competition claim based on these facts.

The existing surviving counterclaims relate to Papaya’s challenges
to Skillz’ advertising that its own platform did not use bots, matched players
evenly, and allowed customers to withdraw cash at any time.

The new allegations didn’t change the outcome for Papaya.
Misleadingly adding to consumer complaints before sending them to state law
enforcement doesn’t violate the Lanham Act because it’s not “commercial
advertising or promotion.” It also doesn’t violate NY GBL § 349 because it
doesn’t involve consumer-facing representations/consumer-oriented conduct.

That leaves defamation, but falsity requires pleading that
the alleged statement is not “substantially true,” meaning that it “could have
produced no worse an effect on the mind of a reader than the truth pertinent to
the allegation.” But Papaya didn’t allege that “the substantive content of this
stock language was false—just that it was misattributed.” Nor did it allege
that state authorities ever did anything with these communications or that they
became public. There was thus no allegation of harm, “reputational or
otherwise.” The statements couldn’t be per se actionable, which requires proof
that the statement “impugns the basic integrity or creditworthiness of a
business.” But, while “the integrity of Papaya’s business practices and its
deception of the public about its historic use of bots to compete with
customers in its games of ‘skill’ are at the heart of this case,” Papaya didn’t
deny such undisclosed historic use in the proposed amended complaint, and thus
wouldn’t be able to prove the falsity of the supposedly defamatory statement at
trial. Footnote: “In recent depositions, none of Papaya’s individual deposition
witnesses denied the historic use of bots, as they all asserted their Fifth
Amendment rights against self-incrimination rather than testifying to any
potentially disputed facts.” [Yikes!]

Misattribution of testimonials: Both Lanham Act and GBL
claims require materiality, and Papaya didn’t allege that the content of
the testimonials (accusing Papaya of using bots or being unfair generally) were
false, nor that numerous real consumers were not submitting complaints along
these lines. Even if the consumers “(barely) identified by the website –‘J.P.
from Florida,’ ‘Bingo Cash Player,’ and the like” didn’t write “the specific
words included in the displayed testimonials,” it was not plausible that the misattribution
was material and caused injury.  

[N]o reasonable jury could find
that anyone’s purchasing decisions would have been affected (or that consumers
would be affected in any other meaningful sense) by the fact that a real “J.P.
from Florida” did not say the words, “I have genuinely never played a game that
is so rigged in my life.” While parties generally “should be given the
opportunity to develop their evidence to demonstrate materiality,” the
pleadings must set forth some plausible basis for the defendant to ultimately
be held liable.

Finally, the interview scheme wasn’t actionable. “The
essence of an unfair competition claim under New York law is that the defendant
misappropriated the fruit of plaintiff’s labors and expenditures by obtaining
access to plaintiff’s business idea either through fraud or deception, or an
abuse of a fiduciary or confidential relationship.” Although Skillz allegedly used
deceptive means to obtain information about Papaya’s business, there were no
allegations that Skillz actually did anything with that information. Yes,
Skillz told reporters that Papaya was using bots in its games. But according to
the complaint itself, “Skillz was publicly accusing Papaya of using bots well
before the interviews took place anyway.” Given that context, “characterizing
the accusation that Papaya used bots as a trade secret is a stretch at best.” And
even if it was, this conduct wasn’t unfair competition.

 

 

from Blogger http://tushnet.blogspot.com/2025/03/game-over-for-allegations-relating-to.html

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honey producers have statutory standing to challenge Bayer’s claims to direct purchasers that herbicides were safe

Posted on March 26, 2025 by rtushnet

Coy’s Honey Farm, Inc. v. Bayer Corp., MDL
No.:1:18-md-02820-SNLJ, No. 1:21-CV-089-SNLJ, 2025 WL 901264 (E.D. Mo. Mar. 25,
2025)

Coy’s s a beekeeping and honey-producing operation. It
alleged that dicamba-based herbicide products, including those produced by
defendants, moved away from the targeted dicamba-tolerant plants and damaged
non-tolerant vegetation surrounding plaintiff’s beekeeping operation. This
allegedly resulted in reduced honey production and loss of bees. The court
allows Lanham Act false advertising claims (and others) to proceed. I think the
proximate cause question is interesting, but the other claims may have obscured
the specific proximate cause question with respect to false advertising, since
there was a material issue of fact on proximate causation of damage to the bees/honey.

The Lanham Act claim is based on defendants’ alleged false
representations that their dicamba products were safe for the type of use that
allegedly let them to volatize and spread to surrounding areas after being
applied to the intended target of soybean and cotton fields. Misled purchasers
then used the dicamba as directed, which “allegedly resulted in the destruction
of a great deal of plant habitat for the honeybees, and, in turn, caused the
bees to produce less honey. Thence, plaintiff profited less.” There was a fact
issue on whether that had happened.

But was there Lanham Act standing? Lexmark held that
a plaintiff must “allege an injury to a commercial interest in reputation or
sales proximately caused by the defendant’s misrepresentations.” That is, a
Lanham Act plaintiff must be a commercial actor suffering commercial injuries
instead of being a “consumer who is hoodwinked into purchasing a disappointing
product.” “Here, there is no question that plaintiff is a commercial actor, and
plaintiff has alleged a loss in sales due to defendants’ misrepresentations.”
The “due to” is doing a lot of work there—I’m open to the argument that the
honey producers are at least as distant from the false advertising as the
landlord of a business that suffers damage from false advertising. But
proximate cause is, of course, a legal rather than factual conclusion.

from Blogger http://tushnet.blogspot.com/2025/03/honey-producers-have-statutory-standing.html

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National Republican Senatorial Committee loses ROP/Lanham Act/UCL claims against alleged “Scam PAC”

Posted on March 20, 2025 by rtushnet

National Republican Senatorial Committee v. Red Senate, 2025
WL 819711, No. 8:24-cv-02301-JVS-KES (C.D. Cal. Jan. 14, 2025)

NRSC sued Red State, alleging that it was exploiting Senator
Rick Scott’s “name, image, and likeness without his consent to deceive and scam
potential donors…” Red State is a Super PAC, which may accept “unlimited
contributions” from nearly any domestic source “so long as it does not
coordinate its public communications with any federal candidate.” But NRSC
alleged that it was a scam, misleading donors “into believing that their
contributions will support a particular candidate or cause, when in reality the
Scam PAC plows that cash into endless fundraising that ultimately funds little
more than the salaries of its officers and its preferred vendors, who profit
handsomely.”

NRSC alleged that, according to FEC disclosures, Red Senate
raised over $2.6 million in the 2019-2020 election cycle and spent over $1.1
million in total disbursements during the cycle, including over $1 million in
operating expenses. The 2021-2022 election cycle had similar numbers, and, at
the time the complaint was filed, Red Senate had raised over $300,000 in the
current election cycle, and spent over $500,000, with approximately $450,000
going towards operating expenses. Thus, NRSC alleged, Red Senate merely
compensates vendors and keeps any leftover cash, harming the candidates “they
purport to be supporting” in the process.

Red Senate allegedly allocates the bulk of its spending to
Wavecrest or Google Ads. According to the Google Ads Transparency Center, Red
Senate has paid between $35,000 to $40,000 for Google ads mentioning Senator
Scott, which were shown between 70,000 to 80,000 times throughout the United
States. The advertisements specifically state: “Red Senate for Rick Scott –
Keep Florida Red in 2024,” and “Red Senate for Rick Scott – Take Back Our
Senate in 2024.” Red Senate also reported making independent expenditures in
the 2024 Florida Senate race; however, as of October 2, 2024, none of the
reported expenditures expressly advocated for Senator Scott or his opponent. Rather,
“the reported expenditures served to raise funds for Red Senate while using
Rick Scott’s name and likeness.”

Senator Scott allegedly assigned his rights to NRSC, and,
“as the only national party committee solely purposed to supporting Republican
senate candidates,” NRSC claims to have an independent interest in stopping
false advertising and false personification of Republican candidates. NRSC sued
for California statutory and common law right of publicity violations, Lanham
Act false advertising, and unfair competition under California’s UCL.

The court took judicial notice of the existence of
disclaimers on Red Senate’s website, though not their accuracy, and did the
same for the content of FEC reports filed by Red Senate. And it took judicial
notice of the “fact that there has been significant news media coverage of
Senator Rick Scott, his 2025 campaign for re-election to the United States
Senate, and his opponent Debbie Mucarsel-Powell.”

Initially, NRSC’s statement that Senator Scott’s assignment was
exclusive was sufficient to establish standing to assert his claims as an
initial matter. But did Scott have statutory Lanham Act standing? He needed to
allege an “injury to a commercial interest in reputation or sales.” NRSC argued
that the parties competed in “the political-fundraising marketplace,” meaning that
“potentially millions of dollars were diverted from his campaign.” But the
complaint didn’t so allege; its only allegations focused on the deception of
donors. But the court granted leave to amend. (Seems like “commercial
advertising or promotion” is going to be an insuperable barrier here.)

California’s UCL requires “the plaintiff to be the one ‘who
has suffered injury in fact and has lost money or property as a result of the
unfair competition.’ ” Consequently, “an injured [party’s] assignment of rights
cannot confer standing on an uninjured assignee.” NRSC’s allegation of its own
interest in stopping false advertising and false personification of Republican
candidates was not enough to satisfy this burden; again, there was leave to
amend.

As for the California claims, they were subject to
anti-SLAPP analysis. NRSC argued that its complaint “challenges Red Senate’s
deceptive conduct in fundraising—not the message it conveys in its ads,” so
that the lawsuit did not “arise from” any statements that Red Senate made “in
relation to political campaigns.” Instead, it arose from its post-speech
conduct—its spending allocation. (I thought political spending was speech.) The
court was unpersuaded by these arguments. “First, it is well settled that the
anti-SLAPP statute applies to conduct in furtherance of the right to free
speech, in addition to the protected speech itself. Second, even if the lawsuit
as a whole challenges Red Senate’s disbursement of funds, the right of
publicity claims specifically target Red Senate’s use of Senator Scott’s name
in Google ads.” The speech was itself allegedly wrongful, not merely evidence
of a wrongful act (fundraising misconduct). “[H]ad Red Senate never used
Senator Scott’s name in its Google advertisements, NRSC would have no right to
publicity claims.”

Thus, the burden shifted to NRSC to demonstrate a
probability of prevailing on the merits of its claims. For a common law cause
of action for commercial misappropriation, a plaintiff must prove: “(1) the
defendant’s use of the plaintiff’s identity; (2) the appropriation of
plaintiff’s name or likeness to defendant’s advantage, commercially or
otherwise; (3) lack of consent; and (4) resulting injury.” The statutory cause
of action requires commercial misappropriation.

Red Senate argued that its speech was related to a political
campaign, a matter of public interest, and that NRSC couldn’t prove that Scott’s
image was used “exclusively” for commercial gain. NRSC’s argument that Red
Senate’s speech was unprotected because it was fraudulent lacked sufficient
evidence. The exception for political speech isn’t limited to specific types of
political campaigns; nor does the “underlying purpose of one’s dissemination of
a political message” determine whether an exception applies. Motion to strike
granted, with leave to amend. (How could there be a successful amendment,
especially for the statutory cause of action?)

from Blogger http://tushnet.blogspot.com/2025/03/national-republican-senatorial.html

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Reading List: morality and trademarks in South Asia

Posted on March 19, 2025 by rtushnet

Zehra Jafri, One Sari, Three Different Ways
to Drape It: Trademarks, Religion, Language, and Morality in Post-Colonial
India, Pakistan, and Bangladesh, 40 UCLA Pacific Basin Law Journal 127 (2023)

 Abstract:

Pakistan, India, and Bangladesh
were all established on a sense of wanting to be a majority in a nation where
they were once “othered,” be it by the British, Hindu majority, or
Urdu-speaking majority. As a result, religious independence and mother-tongue/linguistic
independence are highly valued in these countries, and are the context by which
the morality of trademarks within the borders of these countries are assessed.
Notions of free speech traditions and political ideologies that also color
traditions are discussed, as they also run abreast trademark law. Although
these three countries once emerged from one land, they carry differences as
distinct and rich as the cultural and religious historical tensions that define
them. Each sought to create a space where their cultural and religious
identities were represented fairly. As thus, it is no surprise that religion is
such an important consideration that it was codified into each country’s
trademark law. 

This paper aims to illustrate what
each country deems as running afoul to notions of morality and religious
susceptibilities, and how that may have changed over time with politics and
other social factors. The factors that may have influenced these definitions is
assessed in depth by country, with homage to the political structures and free
speech traditions within which they are nested. A framework of what would and
what wouldn’t qualify as a registrable trademark under the morality bar is
posited through an analysis of government guidelines on registering trademarks,
case law, and a comparative analysis of certain marks that were treated one way
under one country’s standard but could be treated differently under different
standards from other countries.

 

Some interesting passages (footnotes omitted):

[U]nder Section 9(2)(c) [of Indian
trademark law], a mark is prohibited for registration as a trademark if it
contains or comprises of any matter likely to hurt the religious
susceptibilities of any class or section of the citizens of India. The Draft
Manual further explicitly acknowledges that it is a common trade practice in
India to use names and pictures of religious deities or symbols as trademarks. Accordingly
such use is not regarded per se as offending religious sentiments of any class
or section of public. However, such use in relation to certain goods may offend
the religious sentiments of the people. For example, the use of the names or
device of deities or religious heads on footwear will be considered distasteful
and will be open to objection. Similarly, use of Hindu Gods on beef or meat
products or use of names of Muslim saints on pork products would offend the
religious feeling of respective sections of the public and may attract
objection under this section. … The Draft Manual goes on to list illustrative
examples. The use of religious symbols (like OM) or names (e.g., Jesus) as
trademarks is likely to undermine/offend religious value and sentiments. Names
of gods or goddesses which are also used as personal names may be considered as
personal names for registration purpose, unless accompanied by the device of
such god or goddess.

 

… Not included in the explicit list
of unauthorized religious names in the trademark guidance are Islamic marks.
All of the explicitly prohibited religious deities and figures are Hindu, Jain,
and Sikh. By including only Hindu, Sikh, and Jain names in the official
guidance of prohibited marks, India may also project a certain vision of Indian
identity in line with the “pseudo-secularism” and Hindutva ideology espoused by
Modi and the BJP, which has its roots from the religious tension harbored from
the partition between India and Pakistan.

 

The author notes that marks containing “Allah” are, however,
apparently routinely refused.

from Blogger http://tushnet.blogspot.com/2025/03/reading-list-morality-and-trademarks-in.html

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asterisk alone makes front of package claims ambiguous

Posted on March 17, 2025 by rtushnet

Wong v. Iovate Health Sciences U.S.A. Inc., 2025 WL 821451, No.
2:24-cv-00901-DAD-CKD

(E.D. Cal. Mar. 14, 2025)

Is an asterisk on the front of a package a
get-out-of-jail-free card for false advertising? If the disclosure doesn’t
flatly contradict the claim, at least, maybe it is. (I would think that
evidence of what reasonable consumers thought they might learn from the
asterisk is quite relevant for that—if they didn’t realize they needed to
consult the qualification, then they could still be deceived—but that’s not
what this court holds, even though there are allegations that other marketplace
participants advertise differently and less deceptively.)

front and back panels from complaint

Wong bought “100% Mass Gainer,” a dietary supplement in the
form of a protein powder, which stated that the supplement provided 60 grams of
protein per serving. But, without adding milk, the supplement contained only 44
grams of protein per serving rather than 60 grams. The rest of the product line
also has fewer grams of protein in a serving than what is stated on the front
label of the packaging because they all require the consumer to add some
quantity of milk. “Other protein powders not produced by defendant have
packaging that prominently advertises the amount of protein contained within a
serving of the powder, but only include the protein content from the powder
itself.”

There’s a disclaimer that the protein content assumes the
addition of milk, “though those disclaimers and the associated asterisk symbols
appear in small font on the front of the packaging.” [NB: I think only the
asterisks appear on the front, according to the rest of the opinion and to the
images.] On the back, “the protein content is reduced below the advertised
amount appearing on the front of the packaging when the powders are mixed with
water instead.” Wong brought the usual
California statutory claims.

The court dismissed claims for injunctive relief, but not
equitable relief under the FAL and UCL. The court accepted the idea that the
pleading standard for seeking equitable relief is “minimal.” “[I]f a plaintiff
pleads that she lacks an adequate legal remedy, Sonner will rarely (if
ever) require more this early in the case.” Wong alleged that equitable relief
is more “prompt and certain and in other ways efficient” than an award of
damages, given that “equitable restitution can justify an award of greater
relief than damages and is governed by a different standard of proof that
allows the award of restitution even if a plaintiff cannot adduce evidence to
support an award of damages.” That was enough.

Still, a reasonable consumer would not have been deceived,
despite the large font size representation of the products’ protein content.
The asterisk itself made the protein claim “ambiguous” to a reasonable
consumer, which ambiguity could then be cleared up by reading the back label. “Even
before reading the back label, the presence of an asterisk alone puts a
consumer on notice that there are qualifications or caveats ….” This strikes me
as a license to cheat.

from Blogger http://tushnet.blogspot.com/2025/03/asterisk-alone-makes-front-of-package.html

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discovery rule applies to false “reference price” allegations at outlet stores

Posted on March 17, 2025 by rtushnet

Clark v. Eddie Bauer LLC, — F.Supp.3d —-, 2025 WL 814924,
No. 2:20-cv-01106-RAJ (W.D. Wash. Mar. 12, 2025)

A good choice for publication given that the opinion
addresses (and rejects) some arguments I haven’t seen before. Clark sued Eddie Bauer under
Oregon’s Unlawful Trade Practices Act for using purportedly false and
misleading tagged list prices, aka reference prices, on the garments sold at
Eddie Bauer’s outlet stores. A previous district court decision found the claim
time-barred, even though Eddie Bauer’s policy change of using the phrase
“comparable value” on its sales tags for garments as opposed to a reference
price based on the garment’s claimed fictitious full retail price violated the
UTPA, “as Eddie Bauer must provide the origin of any such reference price.” On
appeal, the Ninth Circuit certified a question to the Oregon Supreme Court:
whether a consumer suffers an ascertainable loss under the UTPA when the
consumer purchased a product that she would not have purchased at that price
but for a violation of the UTPA if the violation arises “from a representation
about the product’s price, comparative price, or price history, but not about
the character or quality of the product itself.” That court said yes, recognizing
Clark’s “purchase price theory,” holding that “when a person acts in response
to the deception by spending money that the person would not otherwise have
spent, the person has been injured to the extent of the purchase price as a
result of that deception.” Clark v. Eddie Bauer, LLC, 532 P.3d 880 (2023).

The Ninth Circuit subsequently accepted Clark’s standing and
ruled that she could seek injunctive relief against Eddie Bauer’s ongoing
falsely discounted prices, despite the new use of the term “comparable value.”
It also held that monetary damages for past harms was not an adequate legal
remedy for Clark’s future harm and granted Clark leave to amend her complaint
is appropriate so she can explain the circumstances associated with her
discovery of Eddie Bauer’s advertising scheme. The amended complaint described
Clark’s “unearthing of the advertising scheme in 2020 after finding the law
firm’s website describing Eddie Bauer’s unlawful practices.” (In a footnote,
the court declined Eddie Bauer’s invitation to impute counsel’s knowledge of
the scheme to Clark herself.)

The court agreed that, for purposes of a motion to dismiss,
Clark had pled that the discovery rule applied to toll her claim. Oregon’s UTPA
provides that a party must commence a lawsuit “within one year after the
discovery of the unlawful method, act, or practice.” The statute of limitations
begins to run when the plaintiff “knows or should have known of the allegedly
unlawful conduct.” And it is an objective standard: “how a reasonable person of
ordinary prudence would have acted in the same or a similar situation.”

In Oregon, a plaintiff must have had sufficient knowledge to
“excite attention and put a party upon his guard or call for an inquiry
notice.” In addition, “it must also appear that a reasonably diligent inquiry
would disclose the fraud.” “Application of the discovery rule presents a
factual question for determination by a jury unless the only conclusion that a
jury could reach is that the plaintiff knew or should have known the critical
facts at a specified time and did not file suit within the requisite time
thereafter.”

Eddie Bauer argued that Clark knew or should have known of
her case well over one year before she sued in July 2020 because “her
experience using the products that she bought … provided enough information
for her to conclude before July 2019 that she had been misled as to the value
of the items she purchased.” They also posit that when she bought the items,
she knew the reference prices, and she “apparently used the products
sufficiently to gauge their quality and value.”

The court found this to be nonsense: As Clark argued, “[t]he
only way for a person to know that Eddie Bauer’s advertised discounts were
false is for the person to know Eddie Bauer’s true historical selling prices
for the products he or she purchased.” “The Court struggles to find a
correlation between a consumer wearing an item of clothing and the same
consumer somehow knowing the item’s regular selling price or worth merely
because she wears it.” It is not the case that, “when a reasonable consumer
wears an item, she learns facts that trigger suspicion of a discrepancy between
a garment’s ticketed price and its regular selling price.”

Nor did it appear from the face of the complaint that Clark
had a duty to conduct an investigation. She had no obligation to uncover a
pricing scheme “by talking to her fellow consumers, to whom she has no
relation.” Nor did the court accept that she could simply have asked Eddie
Bauer for price information:

First, Plaintiff had no idea Eddie
Bauer was engaging in an unfair trade practice at the time. Second, there is no
evidence to show that its employees would know or have access to this
information. These two considerations also do not factor in the employee’s
state of mind, as an employee might be suspicious of such questions and feel
obligated to protect her employer.

A person sometimes cannot discover a false advertising
scheme “because, by design, its very nature is hidden and impossible for an
ordinary consumer to discover.”

What about the argument that “Comparable Value” in an outlet
context isn’t deceptive? It was plausibly reasonable for consumers to interpret
that to mean “Eddie Bauer’s price for the identical item.” “Under Oregon’s
UTPA, Eddie Bauer has an obligation to provide the origin of a reference price.
It has not done so.”

As for standing to seek injunctive relief, the Ninth Circuit
explained that Clark “will be harmed if, in the future, she is left to guess as
to whether Eddie Bauer is providing a legitimate sale or not, and whether
products are actually worth the amount that Eddie Bauer is representing.”

from Blogger http://tushnet.blogspot.com/2025/03/discovery-rule-applies-to-false.html

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false claims of buying and “rebranding” a festival lead to disclosure/correction remedies

Posted on March 14, 2025 by rtushnet

Nantucket Wine & Food Festival, LLC v. Gordon Companies,
Inc., — F.Supp.3d —-, No. 24-11640-LTS, 2024 WL 5442374 (D. Mass. Dec. 12,
2024)

Wild facts here.

Plaintiff NWF runs an annual, multi-day event on Nantucket
called the Nantucket Wine & Food Festival “The Festival has been held
annually—with the exception of a hiatus during the COVID-19 pandemic—since its
founding as the Nantucket Wine Festival in 1997.” Recently, it’s been held over
the course of five days encompassing the weekend in May between Mother’s Day
and Memorial Day. NWF solicits “Luminaries”—experts and high-level presenters—and
“Invitees”—other exhibitors, wineries, distributors, importers, and sponsors.
The remaining attendees are “Guests,” who either purchase tickets to the
various events or are invited by, for example, a sponsor. NWF works on the
Festival year-round, with ticket sales typically commencing in November. Nancy
Bean, with a partner, owns the rights to the Festival and is one of two
permanent staffers; she’s the majority owner.

David Gordon is the president and chief executive officer of
the Gordon Companies, a regional liquor-and-wine retail-and-distribution
business based in Waltham, Massachusetts. He approached Bean about potentially
investing in NWF in 2021. Discussions continued over two years, and Gordon
provided logistical, financial, and other assistance to Bean. “Principally,
Gordon furnished Bean with an attorney, defendant Todd Goldberg, who had
previously done work for the Gordon Companies, to help Bean buy out her
original partner,” a transaction completed in 2022, though a small percentage is
still owned by a third party. The Gordon Companies also extended to NWF a loan
of approximately $55,000, and Gordon gained access to financial and other
sensitive information relating to NWF.

NWF and the White Elephant resort agreed that White Elephant
would be the exclusive “Host Hotel” of the 2024 Festival, reserving to NWF the
exclusive rights to its name and logo. But, as the 2024 Festival approached,
Bean broke off negotiations for a Gordon Companies investment in NWF. Gordon
and Bean executed a release agreeing that NWF’s $55,000 debt to the Gordon
Companies would be paid off via sponsorship rights at the 2024 Festival. The Festival
occurred as planned, and Bean posted on NWF’s website a save-the-date for the
2025 Festival, marking the same weekend, May 14 to May 18, 2025, as well as a
similar Instagram post.

Then, mid-June, 2024, the Gordon Companies issued statements
announcing the Gordon Companies’ plans for the 2025 Nantucket Food and Wine
Experience. An email announcement sent to “a cultivated list of industry
professionals, including wine vendors, chefs and restaurant owners” stated, in
relevant part: “The Gordon Companies is thrilled to announce that we have
partnered with White Elephant Resorts to present the newly branded Nantucket
Food And Wine Experience. Under new guidance, this rebranded event will take
place on Nantucket from Wednesday, May 14th through Sunday, May 18, 2025. This
extraordinary celebration will offer a revitalized experience featuring the
world’s top vineyards, distilleries, and culinary minds.”

Another email went to the Gordon Companies’ customer list:
“The Gordon Companies Purchases Nantucket Food and Wine Experience.” It read in
relevant part: “The Gordon Companies have partnered with the iconic White
Elephant Resorts to present the newly branded Nantucket Food And Wine
Experience. Under this new partnership, one of the nation’s longest-running
food and wine events will take place on Nantucket from Wednesday, May 14th
through Sunday, May 18, 2025.”

The Gordon Companies also sent a press release to at least
fifteen media outlets, including the Boston Globe, Boston Common Magazine, Wine
Spectator, and Forbes: “The Gordon Companies Partner with The White Elephant to
Present a Newly Branded Nantucket Food & Wine Experience.” A subhead read:
“One of the nation’s longest running food and wine events returns to Nantucket
on May 14–18, 2025.” Relevant bits included:

The Gordon Companies … and White
Elephant Resorts are thrilled to announce their partnership for a newly branded
Nantucket Food & Wine Experience in 2025…. David Gordon, CEO of The
Gordon Companies, notes, “We are excited to introduce the newly rebranded
Nantucket Food & Wine Experience to the loyal guests who have enjoyed this
celebratory time on the island for many years.” … Khaled Hashem, President of
White Elephant Resorts, adds, “We are honored that our harborside hotel will
continue to serve as the official host for this dynamic partnership with The
Gordon Companies. We look forward to carrying on the tradition of providing
food and wine excellence for locals and visitors alike on beautiful Nantucket.”

A similar press release went to industry media outlets such
as BevNet/Nosh, Wine Industry Advisor, Kane’s Beverage News Daily, Beverage
Dynamics, and Wine Business: “Prominent New England Wine and Spirits Retailer
Purchases Nantucket Food & Wine Experience.” Its subhead was: “Gordon’s
Fine Wine Acquires Ownership Stake in One of the Nation’s Longest-Running Food
and Wine Events.” In relevant part, it said:

The Gordon Companies … have
acquired the ownership rights to the Nantucket Food & Wine Experience
(previously known as the Nantucket Wine & Food Festival), one of the
longest running food and wine events in the U.S. The rebranded event … will
take place on the island from Wednesday, May 14 through Sunday, May 18, 2025 ….
“This longstanding event is an important part of Nantucket’s rich history, not
to mention a significant annual driver of tourism and local pride,” says David
Gordon, CEO of The Gordon Companies. “We’re excited to introduce the newly
rebranded Nantucket Food & Wine Experience, and we’re especially honored to
be one of the only fine wine and spirits retailers in the country to own and
present a festival of this size and prominence.”

Both Gordon and White Elephant had issues with Bean—the former
believing that Bean would never bring him on as a co-owner as he’d hoped, the
latter because of Bean’s “organization and planning and time management.” Thus,
they’d planned a new event for a couple of months, including
nantucketfoodandwine.com. The person who sold them that domain name offered
Gordon a list of domains including the word “festival” or “fest,” but Gordon
replied, “[w]e need to use experience not festival (for now).”

After the four statements went out, Gordon quickly realized
that there was a bit of a problem, and emailed “[t]he subject of our email that
went out said Purchases Nantucket Food and Wine, if we can I’d like to stick
with ‘The Gordon Companies Partner with The White Elephant to Present a Newly
Branded Nantucket Food & Wine Experience.” Meanwhile, Bean’s contemporaneous
reaction was: “I am inundated with texts and calls—everyone thinks I sold NWF
to him for $$$$$$$.” NWF also received “frantic inquiries from Boston Common
Magazine regarding the sale and their astonishment of it given they had just
been with us on-site and were in the midst of writing all of our post-festival
acclaims and reviews and pieces.”

The next day, the Gordon Companies sent out a clarification
to its industry email (“Gordons has not purchased any festival. We have
partnered with the White Elephant in a multiyear deal to produce a new event.
In no way are we affiliated with any other event or festival on Nantucket.
Sorry for any confusion this may have caused.”) and contacted industry
publications to remove from the Industry Release the statement that the
Experience had been “previously known as the Nantucket Wine & Food
Festival.” But they didn’t send out corrective emails to the other recipients
of the statements. Even after Gordon’s instruction not to use the word “purchase,”
he responded to “[c]ongratulations to your purchase of the Nantucket Food and
Wine Festival” without a correction.

Amy Baxter, Licensing Administrator at the Nantucket Police
Department, met with Gordon and subsequently emailed a third party about “a
change in ownership and management of the Wine Fest.” She then emailed Gordon:
“[j]ust to confirm I should not be expecting Nancy to come at us to try and
secure that weekend since you have a contract with White Elephant correct? I
know that to be the case and I will be general in my answer but just
reconfirming.” She then told a reporter from a local newspaper, “I do not
anticipate competing festivals.”

Three days after the initial announcement, and two days
after first contact from NWF’s lawyer, the Gordon Companies sent a correction
to its customer list: “Gordon’s has not purchased, acquired, or rebranded the
previously existing Nantucket Food & Wine Festival which has been operated
by a still operating entity which is not affiliated with The Gordon Companies
in any way. The Nantucket Food and Wine Experience is also not affiliated with
the Nantucket Food & Wine Festival.” The Gordon parties succeeded in
getting several industry publications to remove the parenthetical stating that
the Experience was “previously known as the Nantucket Wine & Food Festival,”
but didn’t send corrections to the general media release.

“In response to questions from several chefs regarding
whether a sale had happened, Bean emailed all chefs who had participated in the
2024 Festival clarifying the situation and asking for their support.” She also
contacted sommeliers, wine importers, and other constituents. The Boston Globe,
the Newport Buzz, and the Nantucket Current all ran articles about the Festival
and the Experience with quotes by Bean. Nonetheless, Bean testified, “many
people remain under the impression that I either tried to sell the genuine
festival or will sell the genuine festival” because they “find it hard to
believe someone would lie so blatantly about purchasing a company unless there
had been some agreement that I reneged or that belatedly fell apart.”

The Nantucket Select Board received applications from both
sides for events during the same time and announced that tickets for these
events should not be sold until the applications had been evaluated; the
applications were pending as of the court’s decision.

Right before the PI hearing, plaintiffs dismissed White
Elephant from the case, and White Elephant agreed that it wouldn’t host an
event with the Gordon parties on the relevant weekend for the next two years. The
Gordon Parties represented that they were in the process of withdrawing the
permit applications they had filed to the Nantucket Select Board. So the Experience
wasn’t going to happen in 2025, at least not on Nantucket. Thus, plaintiffs
narrowed their request for preliminary relief, but still wanted defendants to be
enjoined from disparagement and to be required to make corrective disclosures
including a statement that their earlier statements were “false.” They also
wanted prominent links on defendants’ websites to NWF’s own site. The court
granted the corrective disclosure and website remedies, but not a general
prohibition against disparagement.

The court relied on Massachusetts General Laws Chapter 93A and
did not analyze the claims as Lanham Act false advertising. Chapter 93A grants
a private right of action to any business harmed by another business’s “unfair
methods of competition and unfair or deceptive acts or practices in the conduct
of any trade or commerce.”

The court found that defendants’ statements constituted
commercial disparagement, which requires proof that a defendant: (1) published
a false statement to a person other than the plaintiff; (2) “of and concerning”
the plaintiff’s products or services; (3) with knowledge of the statement’s
falsity or with reckless disregard of its truth or falsity; (4) where pecuniary
harm to the plaintiff’s interests was intended or foreseeable; and (5) such
publication resulted in special damages in the form of pecuniary loss.

The court found that at least three of the widely
disseminated messages were false, implying that that the Gordon Companies had
purchased and the long-running Festival and was “rebranding” it as the
Experience. (Although this probably counts as falsity by necessary implication,
relying on 93A avoids any need to nitpick about explicitly false v. implicitly
false claims under the Lanham Act, since state laws generally don’t have the
same doctrinal distinctions.) The statements were plainly of and concerning
plaintiffs, and they were made with knowledge/recklessness as to their falsity.

Harm intended or foreseeable: “Stating that a competitor no
longer operates independently could foreseeably cause that competitor to lose
business.” “[W]here a false statement has been ‘widely disseminated,’ and it
would be impossible to identify particular customers who chose not to purchase
a plaintiff’s goods or services,” a plaintiff can show special damages “by
circumstantial evidence showing that the loss [of the market] has in fact
occurred, and eliminating other causes.” That was also sufficiently shown with
evidence of confusion, including among the Nantucket town government, preventing
plaintiffs from selling tickets to the 2025 Festival starting in November, as
they normally would.

Plaintiffs also showed irreparable harm to their goodwill
and reputation. “By its very nature injury to goodwill and reputation is not
easily measured or fully compensable in damages. Accordingly, this kind of harm
is often held to be irreparable.”

The existing corrective efforts were inadequate: they “did
not admit or explain the falsity of the original statement.” Indeed, the court
found their language obfuscatory, with the potential to leave readers believing
that the NWF no longer existed: “Gordon’s has not purchased, acquired, or
rebranded the previously existing Nantucket Food & Wine Festival which has
been operated by a still operating entity which is not affiliated with The
Gordon Companies in any way.” Plus, “while the original Customer Email went out
as its own message, the corrections went out in small print above ads for the
Gordon Companies.”

Defendants argued that confusion had already dissipated due
to plaintiffs’ efforts.  “However, just
because some locals and insiders now know that the Gordon Parties did not
purchase the Festival, that does not mean that all confusion has dissipated.
Many Festival devotees may still find it difficult to trust Bean, as she has
avowed. Other, more casual participants may not be so plugged in and so may,
having seen one of the Gordon Parties’ statements, still believe the Festival
is no more.”

Still, plaintiffs couldn’t identify any actionable, false
statements made by the Gordon Parties after July 1. Thus, the court denied
their requires for an injunction against “false disparaging statements about
either of the Plaintiffs, the ownership of the Nantucket Wine & Food
Festival, or its operations.”

However, additional corrective disclosures, including prominent
placement on defendant’s nantucketfoodandwine.com website with links to
plaintiffs’ site, were justified. The disclosure is not the kind of thing you
want to have to send out:

Pursuant to an Order of the U.S.
District Court …, the Gordon Companies hereby discloses that, in June of this
year, the Gordon Companies sent out false press releases and emails stating
that Gordon Companies had acquired and rebranded the Nantucket Wine & Food
Festival under new management. There was never any acquisition, rebranding, or
new management of the Nantucket Wine & Food Festival. The Gordon Companies
is not planning any festival for May 2025. The long-running Nantucket Wine
& Food Festival continues to operate. As previously announced by the Nantucket
Wine & Food Festival, the annual tradition will continue May 14 – 18, 2025,
under the leadership of its longtime Executive Director Nancy Bean. For more
information, please visit https://ift.tt/DjRev2S.

Defendants had to post the disclosure in large bold font on
the home page of the website at nantucketfoodandwine.com and
foodandwinenantucket.com, with no other text or links on the page, but with the
reference to https://ift.tt/DjRev2S at the end of the disclosure
hyperlinked.

from Blogger http://tushnet.blogspot.com/2025/03/false-claims-of-buying-and-rebranding.html

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“natural” products can be produced in factories

Posted on March 13, 2025 by rtushnet

Karabas v. TC Heartland LLC, 2025 WL 777001, No. 24-CV-2722
(AMD) (VMS) (E.D.N.Y. Mar. 11, 2025)

Karabas alleged that Heartland deceptively marketed its
stevia-based sweetener as “100% Natural” when the sweetener’s two ingredients —
stevia leaf extract and erythritol — are synthetic because of the process
through which the defendant produced the ingredients, which were allegedly not
natural. The court granted the motion to dismiss.

There were no allegations that the chemicals used in
production were added to the product:

No reasonable consumer would
conclude that a product contains artificial ingredients merely because it is
produced “in industrial factories” using “synthetic processes.” Indeed, that is
the way most consumer goods are produced. “A reasonable consumer would not
think that a compound found in nature is artificial even if it is produced in a
different way than nature produces it, if the way it is produced is that it is
derived from a natural product and does not contain anything synthetic.”

Moreover, the package included a description of the process
by which the stevia was extracted — that the stevia leaves are steeped in
water, the “sweet parts of the leaf” are extracted, the extract is separated,
filtered, and purified, and the erythritol is fermented. That was sufficient to
clear up any ambiguities, given that the product was a “niche, specialty
product” whose purchasers “are undoubtedly more likely to exhibit a higher
standard of care.”

from Blogger http://tushnet.blogspot.com/2025/03/natural-products-can-be-produced-in.html

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court once again reduces false advertising statutory damages award to 10% of request on constitutional grounds

Posted on March 12, 2025 by rtushnet

Montera v. Premier Nutrition Corp., 2025 WL 751542, No.
16-cv-06980-RS (N.D. Cal. Mar. 10, 2025)

I just taught this case!—The court once
again, after remand,
reduces a statutory damages award based on NY consumer protection law from $83
million to $8.3 million on substantive due process grounds (funny how that
never works in copyright). (At least plaintiffs got their fees for the appeal.)

A jury found Premier liable to a class of New York
purchasers for deceptive advertisement of Joint Juice under GBL Sections 349
and 350, which impose statutory damages of $50 and $500, respectively, or
actual damages, whichever is greater. Wakefield v. ViSalus, Inc., 51 F.4th 1109
(9th Cir. 2022), subsequently held that statutory damages awards could be unconstutionally
excessive as a matter of substantive due process (gone for women! Here for
corporations!). The 9th Circuit told the district court to apply Wakefield
on remand.

Montera asked this time for $83,124,500, or $500 per
violation under GBL § 350, based on sales of 166,249 units of Joint Juice in
New York during the class period; the court determined instead that the award
should be reduced to $50 per unit sold—the amount available under GBL § 349
only.

Possibly a key factor here is that New York law provides
that statutory damages are not an available remedy in class actions under §§349-350,
but that rule doesn’t apply in federal court because the Supreme Court said
that the New York rule was procedural, not substantive. Actual damages for the
class—all that would be available in state court—would be $1.4 million.

Wakefield instructed courts to consider whether
“aggregation [of statutory damages] has resulted in extraordinarily large
awards wholly disproportionate to the goals of the statute” and whether the
award “greatly outmatch[es] any statutory compensation and deterrence goals.” The
case also pointed to the factors articulated in Six (6) Mexican Workers v Ariz.
Citrus Growers, 904 F.2d 1301 (9th Cir. 1990), for “further guidance” in
determining whether statutory damages are disproportionately punitive in the
aggregate: “1) the amount of award to each plaintiff, 2) the total award, 3)
the nature and persistence of the violations, 4) the extent of the defendant’s
culpability, 5) damage awards in similar cases, 6) the substantive or technical
nature of the violations, and 7) the circumstances of each case.”  The “public importance and deterrence goals” to
be considered are: “(i) the public interest; (ii) the opportunities for
committing the offense; and (iii) the need for securing uniform adherence to
the statute.” But, the court noted, “there is a dearth of appellate authority
on how to reduce aggregated statutory damages awards once a constitutional
issue is identified.”

Premier sought to get the court to reject any award of
statutory damages at all.

Wakefield began with the proposition that “[o]nly
very rarely will an aggregated statutory damages award … exceed constitutional
limitations where the per-violation amount does not.”

Although the statute’s language was clear, this was the
uncommon case where the constitution must limit damages “so severe and
oppressive’ as to no longer bear any reasonable or proportioned relationship to
the ‘offense.’ ”

Montera argued that the NY state provision that didn’t allow
statutory damages in class actions was irrelevant because it was merely
procedural and thus inapplicable in federal cases.  But the Ninth Circuit, in remanding, said that
“the relevant statutory goals for the district court to consider on remand
include the Legislature’s compensation and deterrence goals in enacting GBL §§
349 and 350—the statutes that authorized the statutory damages at issue.” “Therefore,
the New York legislature’s explicit concern about the punitive nature of
aggregated statutory damages does some work to differentiate this case” from
others. On the other hand, rejecting statutory damages entirely because of the
NY state rules would be an “end run” around the Supreme Court determination
that the rule was procedural.

So what are the relevant goals? The private right of action was
added when the legislature recognized “the limited ability of the New York
State Attorney General adequately to police false advertising and deceptive
trade practices.” The legislature authorized statutory damages to “encourage
private enforcement” and to “add a strong deterrent against deceptive business
practices,” and increased those amounts in 2007, because “[c]urrent limits
[were] too low to be effective.”

Thus, the statute’s legislative history and text indicated
that the goals were “to compensate injured consumers and deter future
wrongdoing.” The legislature also didn’t reject punitiveness, because there was
no damages range.  “Even a predominantly
punitive award is not necessarily constitutionally unsound.”

Nonetheless, “Premier persuasively argues Montera’s
requested award is disproportionate to the goals of the statute, particularly
in light of the conduct at issue. The $83 million requested by Montera is so
large as to become entirely untethered from the statutory goals.” It was far in
excess of compensation; what about deterrence and punitiveness? Premier argued
that actual damages and attorneys’ fees (nearly $7 million, plus $1 million in
costs) sufficed for deterrence.

And, on deterrence grounds, “while there are important
public interest concerns in protecting New York consumers, the opportunities
for committing this offense are not unlimited. In this matter, Premier has
ceased to sell Joint Juice.” Thus, “an $83 million award would be largely
punitive”—so punitive as to raise constitutional concerns.

In terms of the Six Mexican Workers factors, it was
hard to evaluate whether the award to each individual class member (over $1100)
was really out of bounds because there aren’t many comparable cases. Premier’s
culpability was “mixed”: it made the choice to continue marketing its product
as containing joint health benefits. “Despite the arrival of numerous studies
pointing to a lack of benefits from glucosamine and chondroitin in the dosage
at issue, Premier Nutrition continued to market its product not just to people
seeking joint health benefits, but more specifically to people seeking joint
pain and arthritis relief.” And Montera offered evidence that Premier “was
aware of the changing tide in the science yet continued its marketing.” The
violations here were “substantive, not merely technical.”

On the other hand, the harm to consumers was economic and
not physical. On the other other hand: “Class members based reasonable hopes on
Joint Juice’s promises. And while Premier may not have targeted people with
financial vulnerability, it did target people suffering from joint issues
seeking relief. Taken with Premier’s culpability, these economic and intangible
harms again lead to a mixed result on Premier’s overall reprehensibility.”

As noted above, there weren’t really comparable cases. So,
on balance, the Six Mexican Workers factors “support the conclusion
there is a due process issue with Montera’s $83 million requested award.”
(Which factors favored Premier?)

So, how to go about reducing the award? Measuring by actual
damages had no real justification:

Wakefield’s warning against
overstepping the role of the judiciary looms large at this stage. When a
legislature codifies minimum damages in statutory text, courts “are constrained
by a statute’s language and interpret statutes with awareness that [the
legislature] could have enacted limits as to damages, including in large class
action litigation, provided discretion to courts to award damages within a
given range, or limited liability in any number of ways.”

So, the court chose the clear minimum set by § 349 alone, or
$50 per violation. That “more closely hews to the compensatory, deterrence, and
punitive goals of the statutes.” It was compensatory, and enough to deter.  

 

from Blogger http://tushnet.blogspot.com/2025/03/court-once-again-reduces-false.html

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