Antitrust Law Daily Wrap Up, ADVERTISING—6thCir: YouTube Videos Did Not Violate Settlement Agreement , (Apr 4, 2013)

By Jody Coultas, J.D.

The U.S. Court of Appeals in Cincinnati held that a settlement agreement between dietary supplement manufacturers Cogent Solutions Group, LLC and Hyalogic, LLC was unambiguous and denied Cogent’s motion to enforce the agreement (Cogent Solutions Group, LLC v. Hyalogic, LLC, April 3, 2013, Tarnow, A.).

Cogent and Hyalogic manufacture dietary supplements that contain hyaluronic acid, or HA. Hyalogic distributed a chart comparing certain properties of its supplement to Cogent’s supplement that allegedly contained false and misleading representations, including that preservatives contained in Cogent’s supplement caused the HA to decay. Cogent filed suit alleging false advertising, unfair competition, deceptive trade practices, breach of contract, and fraud.

After the parties submitted a settlement agreement and stipulated order of dismissal, Cogent filed a motion to enforce the settlement agreement and motion arguing Hyalogic breached the agreement by uploading videos to YouTube that allegedly made false and misleading statements Cogent’s supplement. The video did not mention the supplement by name. A district court found that the agreement was unambiguous and that Hyalogic did not violate the agreement.

The court held that the settlement agreement section in which Cogent and Hyalogic agreed not to make false or misleading statements about the other's products was unambiguous. A contract is ambiguous if a reasonable person would find it susceptible to different interpretations. A statement that breaches the agreement would have to refer to the other party’s products. The statements in the YouTube videos concerned the preservatives in a number of products, including Cogent’s products, and could not be construed as statements specifically about Cogent’s products.

The section in which Hyalogic agreed not to claim that Cogent’s supplement contained preservatives that break down HA was not ambiguous, according to the court. The YouTube videos stated that "while others use preservatives and fillers that break down the HA in their product, Hyalogic does not use any preservatives or fillers in order to retain the integrity and effectiveness." Cogent argued that the section was ambiguous and that it also prohibited "implicit" references that can be understood to refer to Cogent’s product. The court found that the section prohibited Hyalogic from stating that Cogent’s supplement contained preservatives that break down HA, and declined to eliminate the specific mention of Cogent’s supplement in the language of the settlement agreement.

The case is No. 12-5493.

Attorneys: Trevor W. Wells (Miller Wells PLLC) for Cogent Solutions Group, LLC. Bart L. Greenwald (Frost Brown Todd LLC) for Hyalogic, LLC.

Companies: Cogent Solutions Group, LLC; Hyalogic, LLC

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