Antitrust Law Daily Wrap Up, ADVERTISING—C.D. Cal.: Enjoined blender company denied correction of characterization of false ad injunction, (Sep 11, 2014)

By Edward L. Puzzo, J.D.

After a blender company was preliminarily enjoined from making false statements about its competitor’s products on its packaging, and the prevailing party publicized that fact to retailers, the enjoined party was not entitled to a court-ordered notice to retailers correcting erroneous characterizations of the preliminary injunction allegedly made by the prevailing party, the federal district court in Los Angeles has ruled (Homeland Housewares, LLC v. Euro-Pro Operating LLC, September 10, 2014, Pregerson, D.).

Earlier decision. Plaintiffs Homeland and Nutribullet and defendant Euro-Pro sold competing home blender products, the “Nutribullet” and “Nutri Ninja” lines of blenders, respectively. Homeland and Nutribullet brought an action against Euro-Pro, alleging false advertising violations under Section 43(a) of the Lanham Act, based on a comparison chart Euro-Pro placed on the packaging of its “Nutri Ninja” blenders. In the comparison chart, entitled “Nutri Ninja vs. Nutribullet”, Euro-Pro stated that its “Nutri Ninja Pro” operated at 900 Watts, produced 21,000 RPMs, had ice crushing capability, pulse technology, sip & seal lids, and fit in cupholders, but that the competing “Nutribullet” had none of those features. Homeland and Nutribullet sought a preliminary injunction against Euro-Pro.

Homeland and Nutribullet produced three separate models of it blenders: “Nutribullet Classic,” “Nutribullet Sport” and “Nutribullet Pro.” The court found that Euro-Pro’s chart did not distinguish between the three Nutribullet models and therefore its chart stating that “Nutribullet” had none of the named features of the “Nutri Ninja Pro” was literally false. This, the court found, demonstrated a likelihood that Homeland and Nutribullet would succeed on the merits of their false advertising claim. The court further found that the chart amounted to an assertion that Homeland and Nutribullet made inferior products and lied about their products’ capabilities, statements that would tend to damage goodwill among their customers. In addition, Euro-Pro would not suffer undue hardship if an injunction were granted, as “there is no harm to a defendant from an injunction which prevents continuing dissemination of false statements.” Consequently, on August 22, 2014, the court granted the preliminary injunction. Euro-Pro was given 120 days to remove the 900 watts, 21,000 RPMs, and “sip & seal” statements from its “Nutri Ninja Pro” packaging, advertisements, and commercials.

After injunction. After the preliminary injunction was granted, plaintiffs sent a number of letters to retailers carrying defendant’s products, notifying the retailers that they were expected to comply with the injunction and that plaintiffs intended to bring contempt proceedings against violators. Subsequently, defendant Euro-Pro sought a court order which would require plaintiffs to stop publicizing the August 22, 2014 preliminary injunction they had been granted, and further sought a court-approved notice correcting erroneous characterizations of the preliminary injunction allegedly made by plaintiffs.

Representation of injunction. The court opined that the order sought by defendant might be appropriate if the plaintiffs’ letters misrepresented the content of the injunctive order. However, continued the court, the plaintiffs’ letters did not do so. A letter to Amazon.com, for instance, stated that the court had found that some of the claims on the packaging of the “Nutri Ninja Pro” were literally false and likely to deceive consumers. Such statements, taken in isolation, might create the impression that the court had made a final judgment on the merits of the case rather than making a limited factual finding for the sole purpose of determining whether to grant a preliminary injunction pending the outcome of litigation, the court noted. However, the plaintiffs’ letters also disclosed that they were from attorneys representing plaintiffs in a false advertising case, and correctly identified the injunction as preliminary. While the letters could have been clearer if they included terms such as “ongoing” or “pending,” the court opined, it was satisfied that counsel for the retailers adequately understood that final judgment had not been rendered. Thus, the court concluded, the plaintiffs did not misrepresent the language of the injunction itself.

Scope. Nevertheless, Euro-Pro argued that the scope of the injunction was misrepresented by statements advising retailers that those with notice of the injunction must also comply with the order. This was false, they argued, because the retailers were not parties to the litigation, nor were they non-parties “in active concert or participation with” the enjoined party.

The Ninth Circuit has not specifically addressed the question of whether retailers who sell a party’s enjoined product are in “active concert” with the party, the court explained. A court must make a fact-specific inquiry to consider the extent of the alleged “active concert or participation” of third parties with those named in the injunction in determining whether the injunction's prohibitions shall apply to those third parties. Because the inquiry is so fact-specific, and the law still relatively unsettled, the court continued, it could not say with certainty that plaintiffs misrepresented the scope of the injunction. But courts should not enjoin or constrain such letters where the plaintiffs’ legal theory is at least plausible, the court stated.

Unfair competition. The Lanham Act provides the remedy of injunctive relief to protect against unfair competition. To the extent that plaintiffs’ Lanham Act claim was likely meritorious, and therefore justified the extraordinary measure of preliminary injunctive relief in the first place, the court stated, it is clear that plaintiffs may aggressively assert the injunction’s protection in the marketplace in order not to be subject to unfair competition.

For these reasons, the court declined defendants’ request for a notice to retailers declaring plaintiffs’ characterization of the injunction as erroneous, because such a determination would be fact-intensive and more appropriately made in the course of a contempt hearing.

The case is Civil Action No. CV 14-03954 DDP (MANx).

Attorneys: Dylan C. Dang (Trojan Law Offices) for Homeland Housewares LLC, and NutriBullet, LLC. Kenneth L. Wilton (Seyfarth Shaw LLP) for Euro-Pro Operating LLC.

Companies: Homeland Housewares, LLC; Nutribullet, LLC; Euro-Pro Operating LLC

Cases: Advertising CaliforniaNews