pandemic education shutdowns allow unjust enrichment, not contract or false advertising claims

Posted on February 27, 2025 by rtushnet

Yodice v. Touro College & Univ. Sys., 2025 WL 579957,
No. 21cv2026 (DLC) (S.D.N.Y. Feb. 21, 2025)

Yodice sued Touro for reimbursement of tuition and fees he
paid during the Spring 2020 semester, when Touro’s campuses were closed due to
the COVID-19 pandemic. On remand, the court dismisses some of the claims. Touro
has nearly 20,000 students across the United States and three other countries.
The Touro system includes an online institution named Touro University
Worldwide (TUW), which offers undergraduate and graduate degree programs.

Yodice alleged that TCDM markets various aspects of the
on-campus student experience to the public. For example, its dental website says
that students begin in the “dental simulation laboratory” and then “treat
patients in our modern clinic.” The website also emphasizes the setting of
TCDM’s Hudson Valley campus, which “attracts talented students who prefer a
suburban lifestyle with easy access to the New York metropolitan area.” The
campus’s location, the website explains, “provides students with numerous
career, residency, clinical, and internship opportunities.” And various
opportunities to work with local institutions “offer a chance for students to
put their learning into practice, conduct research, or interact with patients
and professionals in preparation for their future careers.”

Obviously, that didn’t happen through 2020. “Yodice left
campus sometime in March. He did not have access to any of Touro’s facilities
for the rest of the semester, and he was unable to experience the in-person
academic, social, and professional interactions he would have had if not for
the pandemic. Touro did not refund the tuition or fees paid by Yodice and other
students who were unable to participate in in-person instruction or campus life
for much of the Spring 2020 semester.”

Yodice alleged breach of contract, unjust enrichment, and
consumer protection false advertising claims. The Second Circuit affirmed
dismissal of his contract/unjust enrichment claims based on fees he paid, but
reversed on tuition, concluding that the plaintiff “plausibly stated a claim
for breach of an implied contract to recover tuition.” It likewise remanded for
further consideration of the GBL false advertising claims.

The court here dismissed the contract and GBL claims, but
allowed unjust enrichment to proceed as to those who paid tuition for the
Spring 2020 semester at Yodice’s dental college.

Limiting the claim to that group: Yodice didn’t sufficiently
allege that the other Touro schools were similar: “The FAC itself emphasizes
the representations by specific Touro schools as to the quality of the
on-campus experiences they offered. The only characteristic that the dozens of
Touro schools around the world share is affiliation with the same corporate entity.
And Yodice provides no reason to think he has anything in common with most of
the class he seeks to represent except that they were, like him, students
during the pandemic.”

Yodice argued that Touro’s class standing arguments would be
properly handled in assessing the adequacy and commonality of the class
representative and class pursuant to Rule 23(a), but “the independent
requirement of class standing requires a connection between his claims and
those of the class he seeks to represent even at the motion to dismiss stage.”

Breach of contract: dismissed because performance was
impossible. “There is no dispute that holding in-person classes and other
functions, as Yodice alleges was promised, would have been illegal.”

But that did mean that Yodice could proceed with his unjust
enrichment claim seeking a prorated refund of the tuition he paid at the
beginning of the semester. “To recover under a theory of unjust enrichment
under New York law, a litigant must show that (1) the other party was enriched,
(2) at that party’s expense, and (3) that it is against equity and good
conscience to permit the other party to retain what is sought to be recovered.”
He stated a claim by alleging Touro

retained his tuition even after
providing a less valuable and less costly service than was expected when the
parties entered their relationship. The FAC alleges essentially that the
tuition was conferred under a mistake of fact — that is, that in-person
instruction would be possible. It plausibly alleges that Touro spent less money
operating TCDM remotely than it would have on a normal, open physical campus.
Whether equity and good conscience require a partial refund cannot be decided
at this stage, but Yodice has sufficiently alleged that they do.

Unjust enrichment may be available where one party’s duty to
perform is unenforceable due to impossibility. In Goldberg v. Pace Univ., 88
F.4th 204 (2d Cir. 2023), a similar unjust enrichment claim failed because an
enforceable force majeure provision in the contract limited the defendant’s
duties to provide in-person instruction. There, the plaintiff was attempting to
circumvent the terms of the parties’ contract by alleging unjust enrichment. But
here, the plaintiff has pled that Touro had a contractual duty to provide
in-person instruction, but its performance was excused by the doctrine of
impossibility. Fault is not necessary for “circumstances [to] create an
equitable obligation running from the defendant to the plaintiff.”

GBL: Usually, the GBL is broader than contract law. But
there was no false advertising here because no reasonable person would think
that Touro had promised to provide in-person instruction regardless of what
happened. “Yodice has not plausibly alleged that Touro’s representation of an
on-campus experience was deceptive, or that a reasonable consumer would have
understood it to mean that in-person instruction would continue even in a
pandemic.” In summary, “Sections 34 9 and 350 are far-reaching, but they do not
require businesses to append ‘unless impossible’ to the end of every
advertisement.” Nor could this be characterized as a materially deceptive
omission; there was no allegation that “Touro possessed some piece of material
information at the beginning of the Spring 2020 semester unknown to its
students that would have affected prospective students’ decision to attend the
university.”

from Blogger http://tushnet.blogspot.com/2025/02/pandemic-education-shutdowns-allow.html

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disgorging a CEO’s salary, then trebling the amount?

Posted on February 27, 2025 by rtushnet

Multiple Energy Technologies, LLC v. Casden, 2025 WL 579641,
№ 2:21-cv-01149-ODW (RAOx) (C.D. Cal. Feb. 21, 2025)

I just
posted about courts’ increasing openness to disgorgement. Here, the court
trebles an award in a way that seems definitionally disconnected to the amount
of defendant’s profits from false advertising—three times his total salary—in ways
that seem to me inconsistent with Dewberry. I wonder if a motion for
reconsideration is justified.

Plaintiff MET sued an individual, Casden, for false
advertising and tortious interference with contractual relations. MET developed
a patented bioceramic infrared material; Casden is the co-founder and CEO of
Hologenix, which made a competing product. MET sued Hologenix for false
advertising, and they settled in 2020. Casden negotiated and signed the
Settlement Agreement on behalf of Hologenix. The settlement involved agreed payments
and a permanent injunction against Hologenix barring it from “stat[ing] or
suggest[ing]” that the Food and Drug Administration (“FDA”) “approved” Celliant
or “made a ‘determination’ ” that Celliant promoted any benefits.

Afterwards, Casden made or approved statements about
Celliant that violated the stipulated permanent injunction. And, the day before
Hologenix was scheduled to pay $1,400,000 to MET pursuant to the Settlement
Agreement, Hologenix filed for Chapter 11 bankruptcy. As a result of the
bankruptcy proceedings, MET returned $100,000 it had received from Hologenix.
MET then sued Casden for Lanham Act and state law false advertising violations,
as well as tortious interference contractual relations. The court found that
Casden acted to advance his personal interests when he tortiously interfered
with the settlement agreement, thus foreclosing any agency immunity defense. The
jury returned an advisory verdict in MET’s favor on its tortious interference
cause of action with an award of $1 in nominal damages and a verdict in MET’s
favor on its Lanham Act false advertising cause of action, similarly awarding
$1 in nominal damages.

The court then awarded MET $2.5 million in damages on the
tortious interference claim, and found that, on the Lanham Act claim, MET was
entitled to disgorgement of Casden’s profits, treble damages, and attorneys’
fees. “[T]he jury viewed exhibits that reflect the statements Casden authorized
or made himself, and they heard testimony from Casden acknowledging his
discovery admissions that those statements were not true. This evidence is
sufficient such that a reasonable jury could find the statements literally
false.”

The court found that Casden’s salary could be disgorged as
profits, and that this award could be trebled, because it had the discretion to
award up to three times the “financial benefit [Casden] received because of the
[false] advertising.” I don’t think that’s true if there’s no uncertainty about
the amount of financial benefit received, because trebling the damages just
because the deception was willful is a penalty, which disgorgement under the
Lanham Act is not supposed to be.

The court determined that Casden’s annual salary of $300,000
since 2019 should be disgorged, because it was undisputed that the only product
Hologenix sold was Celliant. And “the deliberate and willful nature of Casden’s
conduct warranted trebling the award of Casden’s financial benefit.” The court
found that it was not awarding a “penalty” or “windfall.” “Rather, the trebled
amount is the amount the Court found to be ‘just, according to the
circumstances of the case.’” But if it’s only just because Casden is bad, how
is that not a penalty?

MET was also awarded nearly $600,000 in attorneys’ fees.

from Blogger http://tushnet.blogspot.com/2025/02/disgorging-ceos-salary-then-trebling.html

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FDA preclusion doesn’t work as often after Pom Wonderful (or Loper Bright?)

Posted on February 27, 2025 by rtushnet

Pacira BioSciences, Inc. v. Ventis Pharma, Inc., 2025 WL
576549, No. 2:24-cv-07554-MRA-RAO, (C.D. Cal. Jan. 17, 2025)

Pacira alleged that its competitor (here Ventis) violated
the Lanham Act by making claims about its drugs relating to (1) exemption from
FDA approval, (2) FDA approval, and (3) comparative superiority, safety, and
efficacy.

The FDA doesn’t require preapproval of drugs compounded by
registered “outsourcing facilities, aka the “503B exemption.” The exemption
requires that the “bulk drug substances” in the compounded drug must be on the
FDA’s Drug Shortage List or Clinical Need List.

Pacira makes EXPAREL, an FDA-approved injectable drug
product used to manage and reduce post-surgical pain whose active ingredient is
bupivacaine. Pacira allegedly uses a a proprietary multivesicular liposome (pMVL)
technology and created a new category of drugs known as the “Post-Surgical
Non-Opioid Regional Analgesia,” in which EXPAREL is the leading product.

Ventis makes, inter alia, Enduracaine and Endura-KT, which
consist of three bulk drug substances: (1) epinephrine, (2) tetracaine, and (3)
lidocaine. Enduracaine and Endura-KT have not been approved by the FDA. Below
the header “FDA Disclaimer,” Ventis’ website states that under the FDCA, human
drug products compounded by an outsourcing facility “are exempt from the
following three sections of the [FDCA] section 505 (21 U.S.C. 355).” In an
advertisement in Anesthesiology News, Ventis claimed that Endura-KT is
“produced following cGMP manufacturing guidelines under 503B outsourcing
standards overseen by the FDA.” However, none of the three component bulk drug
substances are on the CNL. Lidocaine and epinephrine are on the DSL, but not tetracaine,
and it is not approved for use as an injection.

Ventis also allegedly implied FDA approval, as in a white
paper on its website describing Endura-KT as an “off-label use version of
Enduracaine.” “Off-label use” is allegedly generally recognized as the use of
an FDA-approved product for an unapproved use. Ventis advertised in
Anesthesiology News that Endura-KT is “made from a combination of currently FDA
approved USP products.” But the FDA allegedly does not oversee production of
Endura-KT, and it has not approved the use of bulk drug substances as combined
in Endura-KT.

Ventis also advertised Enduracaine and Endura-KT as
comparable to, and replacements for, EXPAREL. It marketed Endura-KT as “safe
and acceptable for use,” advertised that Endura-KT provides an “EXTENDED
DURATION” of pain relief and that it is “Quick Onset – Long Lasting,” “Safe,”
for “Pediatric Use,” and “Cost Effective.” It advertised that Endura-KT is
“clinically significant over other commercially available products.” But Endura-KT
has allegedly not been reviewed, been approved, or undergone any clinical
trials to confirm its capabilities, efficacy, or safety.

Exemption-based statements: The court rejected defendant’s
preclusion argument under Pom Wonderful. Although the Ninth Circuit
previously did not allow Lanham Act claims that required significant
interpretation of the FDCA, the court here relied more heavily on the general
statements in Pom Wonderful (and it’s hard not to imagine that the
recent rejection of agency interpretive authority in Loper Bright is
having an effect here too). Pom Wonderful characterized the FDCA as
“designed primarily to protect the health and safety of the public at large” rather
than to prevent false advertising.  The
mere fact that “an agency enacted regulations that touch on similar subject
matter but do not purport to displace [a] remedy [under the Lanham Act] or even
implement the statute that is its source” cannot displace such a
“well-established federal remedy.” That is because “[a]n agency may not reorder
federal statutory rights without congressional authorization.” (Note that the
issue here is not just regulations “touching on” similar subject matter, but
actually defining that which is legal to produce and market.)

Anyway, as a result, “courts have adopted a general
presumption that Lanham Act claims pertaining to FDCA-regulated products are
permissible and, often, desirable.” The Ninth Circuit’s decision in PhotoMedex,
Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010), the court reasoned, did not
clearly survive, so it wasn’t necessarily enough for preclusion that “the claim
would require litigation of the alleged underlying FDCA violation in a
circumstance where the FDA has not itself concluded that there was such a
violation.” Regardless, even PhotoMedex said that it didn’t mean that
“the Lanham Act can never support private party claims involving FDA approval
or clearance of drugs or medical devices.” The Ninth Circuit said that, where
an affirmative statement of FDA approval was required to market a product, “a
Lanham Act claim could be pursued for injuries suffered by a competitor as a
result of a false assertion that approval had been granted.”

Defendant argued that FDA policy allows for the compounding
of tetracaine, and thus that allowing this claim to proceed would “clearly
interfere” with the FDA’s policy judgment in that regard. It pointed to the
FDA’s 2017 “Interim Policy on Compounding Using Bulk Drug Substances Under
Section 503(b) of the [FDCA].” As to categories of drugs nominated for
inclusion on the CNL, the FDA stated that “at this time [the] FDA does not
intend to take action against an outsourcing facility for compounding a drug
using a bulk drug substance that does not appear on the [CNL] and that is not
used to compound a drug that appears on the [DSL] at the time of compounding,
distribution, and dispensing,” provided certain conditions are met.

But that wasn’t enough. An FDA policy of non-enforcement was
not equivalent to a finding that the compounding was “exempt.” “Under the plain
terms of section 503B, the compounded bulk drug substance must appear on the
CNL or DSL to qualify for exemption.” Indeed, the interim guidance “would seem
to tacitly acknowledge that the compounding of a Category 1 substance does not
yet satisfy the requirements for 503B exemption, only that the agency does not
presently consider such conduct an enforcement priority.” And nonenforcement of
the FDCA wasn’t relevant, given that the plaintiff “seeks to enforce the Lanham
Act, not the FDCA or its regulations.” “If anything, the FDA’s non-enforcement
cautions against preclusion of Plaintiff’s Lanham Act claim,” given the FDA’s
limited resources. The court pointed to Pom Wonderful’s similar
discussion of FDA nonenforcement:

Because the FDA acknowledges that
it does not necessarily pursue enforcement measures regarding all objectionable
labels, if Lanham Act claims were to be precluded then commercial interests—and
indirectly the public at large—could be left with less effective protection in
the food and beverage labeling realm than in many other, less regulated
industries. It is unlikely that Congress intended the FDCA’s protection of
health and safety to result in less policing of misleading food and beverage
labels than in competitive markets for other products.

“This reasoning applies with added importance in the context
of drug marketing.”

Plus, an FDA interim policy may “touch on similar subject
matter” as a Lanham Act claim, but it “do[es] not purport to displace that
remedy[.]” Nor is it even an “agency regulation[ ] with the force of law that
purport[s] to bar other legal remedies.” The Interim Policy clearly states,
“FDA’s guidance documents do not establish legally enforceable
responsibilities. Instead, guidances describe the Agency’s current thinking on
a topic and should be viewed only as recommendations.” Thus, this is not “a
case where a lawsuit is undermining an agency judgment.”

As the First Circuit said in Azurity Pharmaceuticals, Inc.
v. Edge Pharma, LLC, 45 F.4th 479 (1st Cir. 2022), involving similar
statements, “the parties have identified no FDA regulation that governs the
statements that outsourcing facilities may make in advertising—let alone a
regulation that would risk subjecting [the defendant] to inconsistent
obligations ….” Here, “[i]n claiming 503B exemption specifically, Ventis is
representing that it complies with the statutory requirements. Even under PhotoMedex,
determining the falsity of such statements does not ‘require litigation of the
alleged underlying FDCA violation.’”

Was the statement non-actionable opinion?  The general rule is 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. Statements of
opinion are not generally actionable under the Lanham Act.” But that didn’t
make “exempt” a statement of opinion:

In advertising that its product is
exempt from FDA approval under section 503B, Defendant is not interpreting the
FDCA and related regulations. Given the unambiguous text of section 503B,
“there is no interpretation necessary to determine” the conditions for
establishing exemption under section 503B. Section 503B “plainly” provides that
the bulk drug substances in the compounded drug must appear on either the CNL
or DSL. By purportedly invoking 503B exemption, Defendant represents that it
has satisfied these criteria. Yet, as Azurity observed, “one of these
lists does not yet even exist, while there is no dispute that [Plaintiff] has
plausibly alleged that the other list does not include the bulk drug substance
in question.”

The FDA’s interim policy doesn’t purport to mean that section
503B “does not impose the condition that it plainly imposes with respect to the
use of ‘bulk drug substances.’ ” Anyway, the opinion versus fact distinction was
for a factfinder. (Both of these things can’t be true.)

Turning to allegedly approval-based statements, like “produced
following cGMP manufacturing guidelines under 503B outsourcing standards
overseen by the FDA,” “made from a combination of currently FDA approved USP
products,” and “off-label use version of Enduracaine,” defendant argued that
there was no false statement or implication of FDA approval.

Mylan Laboratories, Inc. v. Matkari, 7 F3d 1130 (4th Cir.
1993), rejected a theory that “the very act of placing a drug on the market,
with standard package inserts often used for FDA-approved drugs, somehow
implies (falsely) that the drug had been ‘properly approved by the FDA.’ ” Several
district courts have relied on Mylan to hold more broadly that “[f]alse
advertising claims based on allegations of implied governmental approval have
not been allowed, for ‘the law does not impute representations of government
approval … in the absence of explicit claims.’ ” Here, though, the court
found that plaintiff plausibly alleged that defendant’s description of
Endura-KT as an “off-label” use of Enduracaine falsely implied that Enduracaine
is FDA approved. It didn’t evaluate the other statements one way or another.

Comparison-based statements: Ventis allegedly falsely
advertised its products as “superior to liposomal bupivacaine products like
EXPAREL” and that its products are “equivalent or are otherwise substitutable.”
An infographic on the site purported to summarize the findings of two studies,
and stated in a footer that “[t]he preponderance of evidence fails to support
the routine use of liposomal over plain bupivacaine.”

Defendant argued that this was nonactionable scientific
opinion, under Pacira BioSciences, Inc. v. Am. Soc’y of Anesthesiologists,
Inc., 63 F.4th 240 (3d Cir. 2023), which held that the studies summarized in
the infographic were nonactionable opinion. But that conclusion didn’t insulate
the infographic. First, unconvincingly, the court said that the Third Circuit
was only dealing with trade libel, not Lanham Act claims. Second, the Third
Circuit relied the context in which the statements were made: “a peer-reviewed
journal for anesthesiology specialists.” But the infographic wasn’t an academic
article, and the footer statement wasn’t attributed to either study. In
publishing the infographic on its website, the defendant “los[t] the benefits
that scholarly articles and scientific debate typically enjoy.”

What about “EXTENDED DURATION,” “Quick Onset,” “Long
Lasting,” “Safe,” and “Cost Effective,” and “safe and acceptable for use”? Are
they fact or puffery? Finally, the defendant won an argument: these were
“generic adjectives without any specific, objectively verifiable measure.”

As to alleged comparative superiority/ “generic or
substitutable” statements, plaintiff didn’t specifically identify where and
when Ventis made those statements in advertising or promotion. A general
statement that “Medications can only be ordered by healthcare providers when it
is determined the product is clinically significant over other commercially
available product” wasn’t specific to either EXPAREL or Endura-KT, and thus
couldn’t form the basis of a claim.

from Blogger http://tushnet.blogspot.com/2025/02/fda-preclusion-doesnt-work-as-often.html

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Remedy creep: SCt seems to endorse more disgorgement

Posted on February 27, 2025 by rtushnet

Dewberry Group, Inc. v. Dewberry Engineers Inc., No. 23–900
(Feb. 26, 2025)

We’ve gone very fast from most lower courts saying that
willfulness was required for Lanham Act disgorgement/profits awards, to the
Court saying that it wasn’t required but was still a factor, to “maybe
disgorgement is standard.” I’d be happier with the common-law evolution if the
Court admitted it was engaged in common-law rule development. Also, it’s true
that the Court is writing in the context of willful infringement, but I doubt
plaintiffs’ lawyers will limit themselves to quoting it in that situation.

The first line of Justice Kagan’s opinion for the Court: “A
prevailing plaintiff in a trademark infringement suit is often entitled
to an award of the ‘defendant’s profits’” (emphasis added). In concurrence, Justice
Sotomayor similarly says: “Congress enacted the Lanham Act … to ensure ‘trademarks
[w]ould receive nationally the greatest protection that can be given them.’
Disgorgement awards play a leading role in that regime, and the text of
the Act forecloses any claim that Congress looked favorably on easy evasion” (emphasis
added).

Also of note—the Court declines to decide whether/when the
award of profits from one entity can be increased by profits from related entities
based on the Lanham Act language: “If the court shall find that the amount of
the recovery based on profits is either inadequate or excessive[,] the court
may in its discretion enter judgment for such sum as the court shall find to be
just, according to the circumstances.” I agree with the idea that this
adjustment can reflect the “defendant’s true financial gain.” That’s the only interpretation that can also implement the statutory command that the award is
not supposed to be a penalty. Nonetheless you often see courts adjusting
upwards for what are essentially penal reasons—punishing bad behavior.

from Blogger http://tushnet.blogspot.com/2025/02/remedy-creep-sct-seems-to-endorse-more.html

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distinguishing false establishment claims from lack of substantiation claims

Posted on February 21, 2025 by rtushnet

Kurin, Inc. v. ICU Medical, Inc., 2024 WL 5416672, No.
8:24-cv-00564-FWS-ADS (C.D. Cal. Nov. 8, 2024)

The parties compete in the market for medical devices aimed
at addressing blood culture contamination (BCC) in hospitals. BCC is both
medically and financially costly. Kurin makes the Kurin Lock, while defendants
make a series of syringes, collectively VI Syringes. Both allegedly operate
similarly, by passively sidelining the initial 0.15mL of blood, which can
contain contaminants from the patient’s own skin. However, defendants allegedly
overclaimed their advantages in violation of the Lanham Act and coordinate
state law.

First, the court found that early summary judgment was not
appropriate given the need for some discovery. Defendants cited their own
studies in support of their motion, and discovery was appropriate about those
studies, as well as other factual claims made by defendants.

The court found that many of the challenged statements were
insufficiently pled to be false advertising, though it granted leave to amend.

First, defendants claimed the VI Syringe “[i]mprov[es]
sample quality by removing over 99.9% of contaminates.” They allegedly refer to
a “Toxikon Clinical Lab Invitro Testing Diversion study” in support. It was not
enough to allege, “[o]n information and belief,” that the Toxikon Study does
not support the 99.9% Statement, because that was merely a lack of substantiation
claim that private parties are not allowed to make. Kurin alleged that
defendants’ “in-house study claims diversion of 94%, 97.2% and 98.6% of
contaminants,” making the 99.9% claim literally false, but the court found that
insufficient. Kurin needed to allege something like its own testing disproving
the claim.

FDA Clearance: Kurin alleged that defendants falsely and
misleadingly claimed that the FDA cleared their 99.9% Statement when its VI
Syringe brochure referred to “Vascular Integrity FDA 510(k) documentation on
file.” Kurin alleged that defendants falsely and misleadingly marketed the VI
Syringe as if it were another, pre-existing medical device, the Brannon
PortSyringe, so as to impute the latter’s Class II device FDA clearance to the
former, even though the Brannon PortSyringe was for a two-step approach to
collecting blood through a catheter for lab tests, not for blood cultures in
hospitals.

The court found that this claim was precluded by the FDCA.
It applied the 9th Circuit’s PhotoMedex rule, which is pre-Pom
Wonderful but probably consistent with it. A “central issue” in PhotoMedex
was whether the defendant could impute a 510(k) clearance from one device to
another and whether the 510K documentation was enough for the defendant to
claim the device was “FDA Approved.” “Under the 510(k) process, if the Class II
device is deemed “substantially equivalent” to a pre-existing device with prior
clearance, ‘it can be marketed without further regulatory analysis.’ ” Thus,
whether there was falsity here depended in part on what the FDA thinks, making
it inappropriate for a Lanham Act claim.

False claims that the VI Syringe was patented: Ok to be
brought under the Lanham Act since 35 U.S.C § 292’s prohibition on false
marking isn’t exclusive, but not sufficiently alleged for purposes of Rule
9(b).

Claims about the VI “Microbial Diversion study,” allegedly
performed in conditions that are inconsistent with routine blood culture
collection which violate industry protocols for conducting performance studies.
Thus, Kurin alleged, the study failed to account for four key points of
contamination, in violation of industry standards. This was a classic
establishment claim challenge, and sufficiently pled. (Note that, because
competitors can bring California state law claims and have the Lanham Act
standards applied to those claims in pari materia, a competitor-v-competitor
case is the one place where you routinely get Lanham Act concepts like explicit/implicit
falsity and establishment claims treated as features of state consumer
protection law.) Defendants argued that their study was fine, but the court expressed
“concern about evaluating the ‘persuasiveness’ of studies at the motion to
dismiss stage.” And a Lanham Act plaintiff can plead literal falsity of product
testing by “demonstrate[ing] that such tests ‘are not sufficiently reliable to
permit one to conclude with reasonable certainty that they established’ the
claim made.” Allegations that defendants’ study was not peer reviewed, did not
account for the industry-standard four points of contamination, and that the
sample size was too small to support their claims, sufficed to plead that the VI
Study was scientifically unreliable.

Likewise, advertising that the VI Syringes “Help Reduce Risk
of False Positives” by helping to reduce central line-associated bloodstream
Infection (CLABSI) via the VI Syringe’s design to “avoid breaks in the aseptic
technique required in multi-step line procedures that may contribute to CLABSI
rates” was sufficiently pled to be a false establishment claim, for similar
reasons. In the context of an establishment claim, falsity can be alleged by
alleging that the claim is “unsupported by clinical data, peer-reviewed data or
FDA clearance.” The establishment claim—tests prove—is itself falsifiable,
distinguishing this from a bare lack of substantiation claim.

Kurin also alleged that “Defendants mislead clinicians
payors, and others in the medical community” by claiming “that the VI Syringe
includes a field that is free from bacteria or otherwise free from
contamination.” The allegations here weren’t precise enough under Rule 9(b).

Finally, Kurin alleged that defendants’ claim that the VI
Syringes “Help Reduce Hemolysis” was deceptive. Defendants’ “hemolysis study” concluded
that the VI Syringe is “non-Hemolytic” based on ASTM F756 guidelines while
using a sample size of three samples. It was not enough to allege that this
sample size “is simply insufficient” to reach such a conclusion. “To prove that
an advertisement claim based on product testing is literally false, a plaintiff
must do more than show that the tests supporting the challenged claim are
unpersuasive.” That’s just lack of substantiation. (I think this should be
fixable—surely it’s possible to plead that scientists would not consider three
samples to constitute a reliable study, and this is exactly the kind of claim
that reasonable consumers would expect to be backed up with scientific evidence.)
But the court thought that Kurin “has not alleged potentially fundamental flaws
in the methodology, as it did for the VI Study.” (Why isn’t a sample size of
three a fundamental methodological flaw? Wouldn’t a sample size of one be a fundamental
methodological flaw? Now we’re in factual argument territory.)

from Blogger http://tushnet.blogspot.com/2025/02/distinguishing-false-establishment.html

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reminder: Harvard/Yale/Stanford Junior Faculty Forum, June 2-3, 2025 submissions due soon

Posted on February 17, 2025 by rtushnet

 Request for Submissions

Harvard/Stanford/Yale Junior Faculty Forum

June 2-3, 2025, Harvard Law School

Harvard, Stanford, and Yale Law Schools are soliciting submissions for the 2025 Harvard/Stanford/Yale Junior Faculty Forum, to be held at Harvard Law School on June 2-3, 2025. Twelve to twenty junior scholars (with one to seven years in teaching) will be chosen, through a double-blind selection process, to present their work at the Forum. A senior scholar will comment on each paper. The audience will include the participating junior faculty, senior faculty from the host institutions, and invited guests. The goal of the Forum is to promote in-depth discussion about particular papers and more general reflections on broader methodological issues, as well as to foster a stronger sense of community among American legal scholars, particularly by strengthening ties between new and veteran professors.

TOPICS: Each year the Forum invites submissions on selected topics in public and private law, legal theory, and law and humanities topics, alternating loosely between public law and humanities subjects in one year, and private law and dispute resolution in the next. For the upcoming 2025 meeting, the topics will cover these areas of the law:

Administrative Law

Antidiscrimination Law and Theory

Constitutional Law—theoretical foundations

Constitutional Law—historical foundations

Criminal Law

Critical Legal Studies

Environmental Law

Family Law

Jurisprudence and Philosophy

Law and Humanities

Legislation and Statutory Interpretation

Public International Law

Workplace Law and Social Welfare Policy

A jury of accomplished scholars will choose the papers to be presented. There is no publication commitment. Harvard Law School will pay presenters’ travel expenses, though international flights may be only partially reimbursed.

QUALIFICATIONS: Authors who teach law in the U.S. in a tenured or tenure-track position as of the submission deadline (February 28, 2025) and have not been teaching at either of those ranks for a total of more than seven years are eligible to submit their work. American citizens or permanent residents teaching abroad are also eligible provided that they have held a faculty position or the equivalent, including positions comparable to junior faculty positions in research institutions, for less than seven years and that they earned their last degree after 2015. We accept jointly authored submissions, but each of the coauthors must be individually eligible to participate in the Forum. Papers that will be published prior to the Forum are not eligible. There is no limit on the number of submissions by any individual author. Faculty from Harvard, Stanford, and Yale Law Schools are not eligible.

PAPER SUBMISSION PROCEDURE: Electronic submissions should be sent to Rebecca Tushnet at rtushnet@law.harvard.edu with the subject line “Junior Faculty Forum.” The deadline for submissions is February 28, 2025. Remove all references to the author(s) in the paper. Please include in the text of the email your name, the title of your paper, your contact email and address through June 2025, and under which topic your paper falls. Each paper may only be considered under one topic. Any questions about the submission procedure should be directed to Rebecca Tushnet.

FURTHER INFORMATION: Inquiries concerning the Forum should be sent to Christine Jolls (christine.jolls@yale.edu) or Yair Listokin (yair.listokin@yale.edu) at Yale Law School, Rebecca Tushnet (rtushnet@law.harvard.edu) at Harvard Law School, or Norman Spaulding (nspaulding@stanford.law.edu) at Stanford Law School.

Christine Jolls

Yair Listokin

Rebecca Tushnet

Norman Spaulding

from Blogger http://tushnet.blogspot.com/2025/02/reminder-harvardyalestanford-junior.html

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game spat expands beyond false advertising to TM and (c)

Posted on February 17, 2025 by rtushnet

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2025 WL 438387,
24cv1646(DLC) (S.D.N.Y. Feb. 7, 2025)

Previous
discussion. Skillz sued its competitor Papaya, alleging false advertising
under federal and state law. Papaya counterclaimed for the same causes of
action and added trademark and copyright infringement as well as defamation and
civil conspiracy claims. Here, the court partially granted Skillz’s motion to
dismiss the counterclaims, and severed Papaya’s trademark and copyright
counterclaims.

Papaya alleged: its multiplayer games allow users to deposit
money and earn real cash prizes, along with in-game currency. “In a game, users
typically compete with between five and twenty opponents for the highest score.
Using an algorithm, Papaya arranges games by matching users of similar skill,
as measured by each player’s performance in prior games.” Skillz operates a
competing mobile gaming platform that hosts games created by third-party
developers. “Skillz’s games involve only head-to-head gameplay, as opposed to
games involving more than two players.”

Skillz allegedly markets its games as being uniquely fair
and trustworthy with a badge indicating it is “Committed to Fair Play” and a
claim that it will “[m]atch [users] with real players of equal skill” in its
games. Skillz promotes its promise to “NEVER EVER employ bots” and “guarantee
that every match you engage in is a true reflection of your skill level.” A
2024 “letter to our community” stated that the company was “committed to
rooting out and eradicating cheaters, bad players, and bots,” and that its
games would include “No unfair bots, not ever.” The letter said that Skillz
used a “proprietary technology to ensure fair matching,” so that users could be
“sure the competition is real, and so are your chances of winning.”

However, Papaya alleged, Skillz used and allowed the use of
bots in its games, and it has unevenly matched players. Skillz “clarified that
it uses bots only in certain non-cash games and in games where two human
players compete asynchronously. In addition to permitting the use of bots on
its platform, former Skillz employees say that the company sometimes
manipulates the outcomes of games by unevenly matching players.”

Papaya alleged harms because some players’ experience with
Skillz’s games  allegedly leads them to
believe that all mobile gaming is rigged and stop using other games, like
Papaya’s. Players also allegedly confuse the two platforms and attribute the
unfairness of Skillz’s games to Papaya. “And if not for Skillz’s claims about
the fairness of its games, some players may have played Papaya’s games instead
of Skillz’s.” [This last theory seems like the only one where proximate cause
logic favors Papaya.]

Papaya also alleged that Skillz claims that they can
withdraw cash that they win on its platform “at any time.” “But some players
have complained online and in reviews of Skillz’s platform that they were
unable to withdraw money from their accounts when they attempted to do so. In
some cases, players were unable to access their winnings because their accounts
had been banned from the platform.”

Papaya alleged that Skillz smeared competitors “first, by
creating an organization that accuses Skillz’s competitors of using bots in its
games, and, second, by planting and disseminating an article that stated Papaya
had admitted to using bots in its games.” This allegedly tarnished Papaya’s
reputation and that of the mobile gaming industry generally.

The alleged “false front” website “Fair Play for Mobile
Games” allegedly “encouraged and facilitated visitors’ filing of complaints
about mobile gaming companies, other than Skillz and including Papaya, with
state attorneys general.” It had a homepage banner “showing a counter that
purported to display an increasing number of complaints filed with state law
enforcement about Papaya and two other companies. That counter did not display
an accurate number of complaints; in fact, each time a visitor arrived at the
website, it would display the same number. The number would appear to increase
every few seconds.” It also displayed a pie chart purporting to show the
relative number of complaints relating to various games offered by Papaya and
other companies, stating: “Bingo Cash and Solitaire Cash by Papaya Games have
received the highest complaints so far followed by Solitaire Cash from Avia
Games.” The figures allegedly didn’t reflect in real time any actual database
of complaints being continuously updated, and there were similar problems with
a map purporting to show the number of complaints submitted from each state. 

screenshot from alleged astroturf website

Papaya also alleged that Skillz had engaged in copyright and
trademark infringement by copying specific games.

Lanham Act and GBL § 349: The court found that Papaya stated
counterclaims as to claims arising from Skillz’s statements about its own
products, but not to the extent that Papaya alleged violations based on
Skillz’s claims about its competitors. That is, false advertising was
sufficiently pled as to statements that games on Skillz’s platforms did not use
bots, matched players evenly, and allowed users to withdraw funds at any time. The
complaint plausibly alleged that these were material claims, “evidenced in part
by customer reviews implying that Skillz’s users participated in its games
because they thought they would be fairly matched against a human.”

Applying Rule 8, Papaya adequately alleged that Skillz used
bots or unevenly matched players. It cited “Skillz documentation that refers to
the use of bots” and “language used internally at Skillz, which, construed in
the light most favorable to Papaya, could suggest that Skillz was manipulating
the outcomes of games by unevenly matching players.” Skillz argued that bot
usage in a narrow set of circumstances, such as in training games, was
immaterial to consumers. But that was a factual question, and it wasn’t clear
how limited the bot use allegedly was.

Withdraw cash at any time: Skillz argued that this wasn’t
false in context, including Skillz’s website having an article called “why does
it take 4-6 weeks to get my withdrawal.” While, “under certain circumstances,
the presence of a disclaimer or similar clarifying language may defeat a claim
of deception,” on a motion to dismiss the court would only consider a
disclaimer located near the challenged language and “so clear that no
reasonable addressee could believe the plaintiffs’ allegations of being misled.”
Here, Skillz allegedly made the challenged claims in video advertisements and
on another page of its website, not on the same page.

Statements about competitors: Papaya failed to sufficiently
allege falsity. The allegations “are essentially that the website’s graphics
caused consumers to be confused.” For example, the complaint counter allegedly “created
a false sense of specificity and legitimacy,” but that didn’t mean that it was
unambiguous or that it necessarily implied a constantly updated connection to a
live database. Likewise, the claims that other companies are “scams” or
“fraudulent” “do not necessarily and ambiguously imply a false message, because
those words are not susceptible to a single clear, widely agreed-upon
definition.”

Papaya failed to “plead sufficient facts to support a
finding that consumers were confused or misled,” as is necessary to challenge
“a statement that is not literally false.” The conclusory allegation that “a
reasonable consumer … would have been deceived” was insufficient. Papaya
argued that the 4FairPlay website involved Skillz’s hiding its involvement to
“give the impression” that 4FairPlay was unbiased, the “design” of the website
suggesting its impartiality, and the website’s omission of Skillz as an option
for the subject of complaints. “But these accusations do not identify ‘any
description of fact,’ or statement about a product or service.” (Really? The
question in a misleadingness case is what message consumers received, not
whether it was said in words; and omissions generally do count! This is at
least in tension with other cases finding that fake reviews/claims of
independence were plausibly deceptive, something the FTC surely thinks.)

Papaya also failed to plead defamation. To show falsity, a
defamation complaint “must plead facts that, if proven, would establish that
the defendant’s statements were not substantially true.” “A statement is
substantially true if the statement would not have a different effect on the
mind of the reader from that which the pleaded truth would have produced.” And
the counterclaim didn’t plead that the complaint counter, pie graph, and map
were not substantially true. There was, for example, no allegation that
multiple consumers had not complained about Papaya, or that the
complaints about Papaya were not increasing over time.

Even if the counter gave the false impression of being
connected to a live database, “the thrust of its presentation” was to urge
viewers to “join a growing list of complainants.” Other statements about
“fraudulent games” and “scams” were mere opinions. “Various other alleged
aspects of the website, such as the solicitation of complaints against Papaya
but not against Skillz, likewise are not factual statements.”

Papaya also alleged that Skillz defamed it by creating and
sharing an article whose headline stated that Papaya “Admits Bot Use.” This was
protected by New York’s fair and true report privilege. A statement is “a fair
and true report if it is substantially accurate, that is if, despite minor
inaccuracies, it does not produce a different effect on a reader than would a
report containing the precise truth.” The complaint indicated that the article
was about this litigation: a judicial proceeding. And the challenged headline
was “substantially true” inasmuch as, at a conference, Papaya’s counsel stated
that “at the pleading stage, we have not denied the use of bots” and that
Papaya’s games “as currently constituted do not use bots.” Papaya’s brief
stated: “Papaya does not represent that its games never include computerized
opponents” and “Papaya has not denied or refuted that it deployed bots.”

Even if the Bonus.com headline may
have been more accurate in saying that Papaya “has not denied or refuted that
it deployed bots,” defamation does law does not require maximal accuracy, and
Papaya does not plausibly allege that such a characterization would have a
different effect on readers than that of what the headline actually said.
Particularly in a headline — an especially “condensed report of events,” —
New York law does not require the level of precision that Papaya’s arguments
imply.

Trademark: Papaya plausibly alleged confusion with its logo
marks, but not with its word marks. Skillz argued that the word marks — “BINGO
CASH,” “21 CASH,” and “SOLITAIRE CASH” — lacked secondary meaning. It was
enough at this stage to allege “longstanding, continuous use of the names and
logos, which represent popular games that have been downloaded many times,” as
to the logo marks, but not as to the word marks.  

[For the copyright claims, there doesn’t seem to be a lot
there that isn’t scenes a faire for a game, but it might be important to look
at other games in the market.]

Game 1 logos

quick research suggests that “daub” is a standard term for a bingo function

logos for game 2

logos for game 3

The marks were descriptive, thus requiring secondary meaning
to protect.  The logo marks’
registrations on the Principal Register plus the other allegations were enough
at this stage. But Papaya’s supplemental trademark registration for the word
marks “disclaims use of any particular font style, size, or color in connection
with the words.” The counterclaim didn’t explain how the word marks are
presented to consumers or other facts “to support a claim that the word marks,
by themselves, have become identifiers of the source of the games.”

Papaya plausibly alleged confusion of the logos.

There is clearly substantial
similarity between the marks, as the logos use many of the same words, colors,
and symbols and position these components similarly with respect to each other.
The parties’ products are in close competition and are offered in essentially
the same market. And a factfinder could find that the similarities of the
logos, and Skillz’s likely knowledge of them as a close competitor, imply a
degree of bad faith.

Skillz also counterclaimed that Skillz infringed copyrighted
elements of Papaya’s game BINGO CASH. “The parties appear to agree that
elements common to bingo-style games are not protectible, but they disagree
about whether substantial similarity between other elements exists in the two
games.” Various elements supported a plausible claim:

Those elements include a similarly
colored and shaped “Bingo” button, similarly named and described bonus options
(“Wild Daub”, “Daub any number”), similar shapes and colors used for certain
bingo squares, and similarly colored and shaped icons similarly arranged above
the bingo board. A motion to dismiss is not the appropriate vehicle to
determine whether these elements are inherent parts of the unprotectible
concept of bingo, or that they “necessarily result” from choosing to create a
bingo game.

But severance was appropriate because copyright and
trademark were very different claims, with new counterclaim defendants, and
discovery here on false advertising had been ongoing.

from Blogger http://tushnet.blogspot.com/2025/02/game-spat-expands-beyond-false.html

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J&J’s talc subsidiary can bring trade libel but not Lanham Act claims against testifying experts

Posted on February 14, 2025 by rtushnet

LLT Management LLC v. Emory, No. 4:24-cv-75, 2025 WL 438100
(E.D. Va. Feb. 7, 2025)

The defendants “published an article in a scientific
journal, asserting that they had identified 75 people, additional to 33 in an
earlier study, who had malignant mesothelioma but no known exposure to asbestos
except through cosmetic talc.” LLT, J&J’s talc
subsidiary, alleged that the statement was false. It allegedly identified
six of the anonymous study subjects and alleged that the defendants, through
their expert witness work, knew those subjects had been exposed to asbestos
through other means. LLT alleged that defendants’ “real goal was to create a
body of scientific literature to appease the plaintiffs’ bar, who hired the
defendants as expert witnesses in tort cases against LLT.” After the defendants
published their article, sales of J&J’s talc-based baby powder allegedly
declined due to misinformation about the product’s safety—including in the
defendants’ article.

This lawsuit represents yet another disturbing development
in the “sue your critics” space and highlights the need for a federal
anti-SLAPP regime. Here, the court dismisses the fraud claim on statute of
limitations grounds and the Lanham Act claim because of a mismatch between the “commercial
advertising and promotion” alleged and the falsity alleged, but allows
injurious falsehood/product disparagement claims to proceed.

Trade libel: The court predicted that Virginia would
consider this an “injury to property” tort claim with a five-year limitations
period. LLT sued within that period, and was thus not barred by the statute of
limitations.

Fraud: Virginia has a two-year statute of limitations for
civil fraud claims. The court declined to give any weight to LLT’s conclusory
allegation that it “could not have known of the [defendants’] fraud until
recently.” LLT pled that it discovered the defendants’ fraud by “match[ing] …
the [a]rticle’s subjects to [ ] litigation plaintiff[s]” with “documented
alternative exposures to asbestos” that were known to the defendants because of
the defendants’ roles as expert witnesses in the subjects’ “underlying tort
cases.” Of those six subjects, five were plaintiffs in lawsuits against LLT. Thus,
there were no facts in the complaint giving rise “to a reasonable inference
that LLT required any additional information, outside of what it already
possessed because of its role in earlier litigation, in order to match the
alleged study subjects to the testimony of the expert witnesses in their
respective trials or to spot the non-talc asbestos exposures the experts
identified in each case. And if the matching process itself took years, LLT
should have said that, but it did not. Thus, it appears on the face of the
Complaint that the study subjects’ alleged non-talc asbestos exposures were
discoverable, given the exercise of due diligence, at the time the study was
published.”

What about defendants’ alleged concealment of the truth?
That allegation was not enough to make out a plausible claim that the
defendants’ concealment tolled the statute of limitations. Tolling requires
plausible allegations that “the defendant undertook an affirmative act designed
or intended … to obstruct the plaintiff’s right to file [the] action.” LLT
alleged: (1) “statements reaffirming the false statements in the [a]rticle,”;
(2) “refus[al] to disclose the identity of the 75 subjects of the [a]rticle,” for
example refusing to testify about their identities in depositions and stating
they didn’t retain documentation of those identities; and (3) “omit[ing] from
their publication that their statements regarding the lack of alternative
exposures were false and that they knew they were false.” That last wasn’t an
affirmative act. Even assuming that (1) and (2) could be affirmative acts, such
acts must actually “have the effect of debarring or deterring the plaintiff
from his action.” But defendants weren’t alleged to have ever changed their claims
that all 75 subjects were new, that none of the 75 study participants had known
non-talc asbestos exposure, or to have revealed the study subjects’ identities.
“But LLT was able to bring its fraud claim anyway. That makes it facially
implausible that the defendants’ repetition of the alleged falsehood or
nondisclosure of the study subjects’ names ‘had the effect’ of deterring filing
of the claim.”

False advertising: potential laches problems, though
defendants didn’t show prejudice (shouldn’t the burden be on LLT to plead
around it where laches is pled on the face of the complaint?). But that didn’t
matter because of the bigger problem requiring dismissal.

LLT plausibly alleged two categories of harm: (1) lost
“sales volume and profits,” and (2) costs incurred to “respond to, defend
against, and otherwise counteract the [defendants] false statements.”  Even though the article was distributed in a
publication “whose audience is doctors, not consumers,” LLT plausibly alleged
that the defendants’ intended and actual audience was the plaintiffs’ bar,
rather than the scientific community. While actions by the plaintiffs’ bar
allegedly contributed to consumer behavior, they were plausibly not
“independent” of the defendants’ conduct, and thus didn’t defeat traceability. Nor
did preexisting negative publicity for talc break the causal chain. “[T]he
Court cannot assume that negative publicity had already influenced 100% of
Johnson & Johnson’s customers before the article came out.” And LLT
plausibly pled increased litigation costs as a result, since some people might
have been motivated to sue by the article. Additionally, “[e]very time LLT has
to defend against an expert witness who relies on the defendants’ allegedly
false statements in litigation, it costs money LLT would not otherwise have to
spend. That too is a fairly traceable injury.” [I have to wonder about the
cognizability of that—seems like a collateral attack on the underlying tort litigation.
If the expert’s testimony is allowed despite LLT’s objections, should LLT be
allowed to sue over it?]

Likewise, the complaint plausibly alleged “a commercial
interest in reputation or sales.”  What
about proximate causation? Lexmark says that “a plaintiff suing under §
1125(a) ordinarily must show economic or reputational injury flowing directly
from the deception wrought by the defendant’s advertising.” “[T]hat occurs when
deception of consumers causes them to withhold trade from the plaintiff.” LLT
plausibly alleged that defendants led consumers to believe that “cosmetic talc
should be considered a probable cause of mesothelioma.” Although one prior
study came to the same conclusion as the defendants’ article, “it is at least
plausible that the earlier article was not an ‘independent’ case of consumer
decisionmaking regarding Johnson & Johnson’s products, since LLT alleges
the two publications were designed in concert, to create the impression that a ‘body
of literature’ supported the defendants’ claims.” And “the defendants’ article
did not merely cement the link to cancer in general—it purported to tie
cosmetic talc to “mesothelioma,” which the defendants admit had not been the
focus of earlier publicity around the dangers of Johnson & Johnson’s baby
powder.”

What about commercial advertising or promotion? The
complaint plausibly alleged that the defendants made their statements “in order
to influence their own customers—plaintiffs’ attorneys—to hire them to provide
expert opinions in tort litigation.” Here, the court stretches—it doesn’t go
through the caselaw on identifying commercial advertising or promotion, but
instead says that the “impli[cations]” of the article suffice to make it plausibly
advertising: “something like ‘we will testify that we have identified 75 more
people with mesothelioma who have no known asbestos exposure except to talc.’” That
seems to be in tension with most of the false advertising cases about
scientific studies as such, where for-profit companies subsidized studies that
would allegedly promote their own products. Still, the
court understood this as a limiting principle: the statements were only
actionable to the extent that they were about the defendants’ own litigation
services.

[This workaround has logical flaws of its own: “commercial
advertising and promotion” is not an element of statutory standing, as the
court assumes, but a separate requirement. If an advertiser, in the course of ordinary advertising for a noncompeting product, randomly falsely disparaged an innocent
unrelated product, I think Lexmark would allow that claim. The statutory
standing issue is whether the advertising proximately caused the harm, not
whether the harm came from the part of the message that most directly served
the advertiser’s interests. That’s one reason why we should police the
definition of “commercial advertising or promotion” and not treat scientific
articles as such in most cases.]

Anyway, doing it the court’s way: LLT had statutory standing
to bring its Lanham Act claim only if the defendants’ statements “are construed
to be about the defendants’ own litigation services.” But the complaint failed
to allege that those statements—that they’d testify for plaintiffs—were false.

Injurious falsehood/product disparagement/trade libel: under
New Jersey law, a plaintiff must allege (1) publication (2) with malice (3) of
a false statement of fact (4) about the plaintiff’s product or property (5)
that causes special damages. Publication and malice were adequately pled, the
latter by alleging that defendants were informed in litigation about individual
study subjects’ non-talc asbestos exposures or had access to the same
information LLT used to demonstrate the alleged falsity of the defendants’
statements.

The court found that the statements at issue were statements
of fact, not nonactionable opinion. They were clearly not figurative speech or
rhetorical hyperbole, like name-calling, “which cannot reasonably be understood
to be meant literally.” They were verifiable “because a factfinder can
determine, based on proof at trial, whether any of the 75 study subjects had
non-talc asbestos exposures that were ‘known’ to the defendants at the time
they published the article, and whether any of the 75 subjects were common to
the defendants’ study and the earlier study.” “While the Court takes seriously
the ‘risk [of] chilling the natural development of scientific research and
discourse’ that can arise from critiquing scientific opinions as though they
were verifiable facts, it also has a duty to make all reasonable inferences in
favor of the non-moving party at this stage of the litigation.” Thus, a jury “could
verify the statements by deciding whether the defendants subjectively knew
about non-talc asbestos exposures among the study subjects” and whether the
subjects of their study were “additional” to the subjects in the previous study.

Moreover, “statements are not protected solely because they
appear in a peer-reviewed journal.” “What matters is whether the facts are
adduced through a scientific method, or whether they exist independent of the
scientific process.” Defendants’ statements were plausibly construed as
assertions about their own knowledge of the study subjects’ medical histories. “Those
facts pre-existed the scientific process the article describes—in fact, they
were discovered through litigation, not through any scientific method.”

And this was a claim about LLT’s product even without
specific references to J&J, because LLT plausibly alleged that Johnson
& Johnson’s talc-based products were “the leading brands among a discrete
and limited number of cosmetic talc products in the market” and “maintained
well over a majority of the market share for talc powder products in the United
States.” Thus, “a consumer who learned of the defendants’ statements would
understand the defendants to be calling into question the safety of Johnson
& Johnson’s products.” The court expressed some interest in the argument
that the allegedly false statements were “about the study, not about the
talc-based products the study targets—that is, in saying they had 75 new
subjects with no known non-talc asbestos exposure, the defendants were merely
describing their data set, not commenting on the safety of any talc-based
product.” But “it is reasonable at this stage to construe the allegedly false
statements not as statements about the defendants’ method or assumptions, but
as conveying the thrust of the whole publication—which is squarely about the
safety of talc-based products like Johnson & Johnson’s.”

Special damages: The complaint didn’t identify specific
customers Johnson & Johnson lost as a result of the defendants’ statements.
But special damages are not extra-specific damages; they are simply “the loss
of something having economic or pecuniary value.” It was enough to plead “loss
of sales and customers” and “irreparable harm to its commercial reputation and
goodwill.” [Lots of courts disagree about this, but I haven’t dived into the
Virginia cases enough to see if Virginia is special.]

from Blogger http://tushnet.blogspot.com/2025/02/j-talc-subsidiary-can-bring-trade-libel.html

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LinkedIn connection supports right of publicity claim for otherwise generic word

Posted on February 14, 2025 by rtushnet

Joel E. Cape, PLC v. Cape Law PC, — F.Supp.3d —-, 2024
WL 4839370, NO. 5:24-CV-5104 (W.D. Ark. Nov. 20, 2024)

The right of publicity claim in this case seems to hang on a
LinkedIn connection. Joel Cape opened his law firm in 2013 under the trade name
“Law Firm of Joel E. Cape, PLC,” but shifted in 2016 to “Cape Law Firm, PLC.”

In mid-2022, “Cape Law PC” incorporated in Arizona and launched
an interactive online platform using the marks “CAPE” and “CAPE LAW.” “Despite
various marks and online statements claiming that CLP is a law firm, … it is [allegedly]
actually a legal referral service that matches customers in need of legal
services to attorneys that CLP contracts with.”

By January 2023,

Joel Cape began receiving phone
calls and emails at his firm from frustrated and confused customers who
believed they had hired him to be their attorney when, really, they had signed
up with CLP. … The most common complaints Joel Cape received from customers of
CLP were: (a) the customer’s credit card had been charged without
authorization; (b) the customer paid a fee and received no legal services; (c)
CLP failed to appear in court or provide correct dates for court appearances;
(d) the customer had a poor case outcome, such as dismissal; and (e) CLP failed
to communicate or update the customer.

Joel Cape pled that his firm received over 1,000 calls from
confused CLP customers, expressing frustration, seeking refunds, or attempting
to cancel the monthly payments. Also,

CLP customers have expressed their
dissatisfaction by posting google reviews intended for CLP on Plaintiff’s
business’s listing with comments such as “this is a scam do not give them your
credit card info,” “[t]hese people are not lawyers,” and “DO NOT hire them.”
Disgruntled customers have also filed complaints against Plaintiffs with the
Better Business Bureau, attributing CLP’s actions to Joel Cape and his law
firm.

Joel Cape pled non-consumer confusion too: “When CLP has
sent demand letters, some of the responses have been sent back to Joel Cape and
his firm. Additionally, corporate recruiters and employment agencies have
contacted Joel Cape when attempting to respond to CLP’s job postings.” Allegedly,
“[p]art of the problem is that CLP’s website makes it difficult to find the
name of an actual attorney that works for them. CLP does not provide accurate
contact information for its attorneys to its customers or recipients of demand
letters, leaving such parties to contact Joel Cape and his firm in error.”

CLP allegedly launched a Google advertising campaign using
the mark “CAPE LAW FIRM.” And its LinkedIn page lists Joel Cape as an employee—“a
mistaken association that CLP has failed to correct.”

The court found that Joel Cape successfully pled false
advertising, despite some problems with proximate causation: “for 12(b)(6)
purposes, the Court finds it plausible that the alleged reputational injury
flows directly from CLP’s alleged deception that caused consumers to withhold
trade from Joel Cape Entitities.”

Right of publicity: Cape seems like a generic word that
wouldn’t itself violate the right of publicity even if there were a successful
trademark/false advertising claim. Here, the LinkedIn page was key: “the Court
finds it is plausible that CLP associated its page with that of Joel Cape,
thereby using his ‘readily identifiable’ name and likeness for purposes of
advertising and soliciting business.” Although CLP argued that such
associations on Linkedln are within the individual’s control, not the
affiliated organization’s, and submitted outside evidence of Linkedln’s
functionality in support, that was not appropriate on a motion to dismiss. “The
Linkedln affiliation provides the identifying context that might otherwise be
lacking had CLP only used the generic word ‘cape,’ with no other connection to
Joel Cape.”

Finally, the court dismissed Joel Cape’s negligence claim.
The court declined to find that CLP owed a duty of care to the firm to not use its
mark in a confusingly similar manner for purposes of negligence law. “[T]his
Court does not see how § 1125(a)(1)(A) imposes a duty of care in the context of
negligence.”

from Blogger http://tushnet.blogspot.com/2025/02/linkedin-connection-supports-right-of.html

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gray market material differences must come from products/warranties, not supply chain alone

Posted on February 14, 2025 by rtushnet

Toyota Motor Sales, U.S.A., Inc. v. Allen Interchange LLC, 2025
WL 465815, No. 22-cv-1681 (KMM/JFD) (D. Minn. Feb. 11, 2025)

This discovery dispute says some interesting things about
gray market goods. “This lawsuit involves claims and counterclaims between
competitors selling Toyota parts to Toyota dealers in the United States.” Toyota
objected to Allen’s importation and sale of Toyota parts in the United States. “Most
parts in Toyota vehicles do not have aftermarket substitutes from independent
third parties.… Toyota allegedly sells parts in the U.S. at significantly
higher prices than the prices charged by other Toyota entities elsewhere in the
world.” Arbitrage thus occurs.

Allen maintained that the parts it sold bore the same part
numbers and were identical in design, function, and quality as Toyota parts
that are intended for sale in the U.S. market. Toyota claimed that the parts
have material differences from the “genuine” parts it sells, such as the
absence of a manufacturer-backed warranty, the shipping of the parts, and the
handling of “outdated” parts.

Toyota sought evidence about Allen’s supply chain and argued
that this was relevant to showing material differences in the parts. “[A]
material difference is a difference that a consumer would find relevant in
deciding to purchase one item over the other, and courts have established this
to be a low threshold.” The main alleged material differences were differences
in warranty coverage and differences in “supply chain and/or quality control
measures.”

The court accepted Allen’s argument that material
differences have to relate to the products themselves (which could include
warranty coverage). Toyota argued that if “Allen plans to argue that the Toyota
Branded Parts it sells are covered by some type of ‘Manufacturer Warranty’ as
advertised to the consuming public, Toyota is entitled to know what warranties,
if any, are offered by Allen’s suppliers.” “But the Court does not see how
Allen’s suppliers would have any documents relevant to whether Allen provides a
warranty to its customers.” The potential warranty sources were Allen, its
customers, or Toyota itself. “Suppliers merely divert the parts from an
authorized Toyota supply chain to Allen, and whether the warranty that Toyota
provides with its parts is valid is entirely up to Toyota and how the language
of its warranty addresses parts acquired through the gray market.” Thus, the
information Toyota sought about supplier warranties was irrelevant.

In addition, the court concluded, “supply chain differences
or differences in quality control measures in and of themselves” can’t be a
material difference:

Certainly, supply chain or quality
control differences could cause material differences between parts, but
material differences in the products must be observed in the products
themselves. The Court does not recognize the validity of a claim of material difference
that is premised solely upon differences in the processes by which parts are
made, supplied, checked for quality, etc., but without a resultant detectable
difference in the product itself. For the purposes of false advertising claims,
the issue that the parties must address is whether there are material
differences between the products, not why any such differences may exist. Any
material differences that result from differences in these processes can be
discovered by inspecting and testing the parts themselves.

In addition, the court declined to require Allen to produce
documents seeking “All communications to or from [Allen] mentioning, involving,
relating to, or otherwise concerning counterfeit automotive parts since January
1, 2016, to the present,” and “All documents Defendants reference or rely on in
determining whether or not the TOYOTA BRANDED PARTS sold by Defendants are or
are not counterfeit.” Toyota argued that these documents are relevant to
Allen’s counterclaim challenging the veracity of Toyota’s statements to dealers
that counterfeit parts are often intermingled with gray market parts. And it
argued that a 2018 email to a Toyota employee stating that counterfeit
headlamps were delivered to Allen from a company in Dubai provided further
support for its position.

Allen argued that counterfeiting wasn’t at issue in this
case (filed in 2022, after Toyota received the email). The court agreed. “The
logical chain from an email alleging that Allen once received a delivery of
counterfeit headlamps to relevance to this case about gray market parts is a
long one, in which Toyota’s argument skips multiple important links… That Allen
questions the veracity of Toyota’s intermingling statements does not create
sufficient relevance to open discovery in this case to counterfeit parts. All
Toyota has shown the Court is that Allen probably, once, took delivery of
counterfeit headlamps.”

from Blogger http://tushnet.blogspot.com/2025/02/gray-market-material-differences-must.html

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