Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Animal rights group has standing to bring California false advertising and unfair competition claims against foie gras producer, (Jun 27, 2013)

By Tobias J. Gillett, J.D., LL.M.

An animal rights advocacy group has standing to challenge a foie gras producer’s marketing under California’s unfair competition and false advertising laws, the federal district court in San Francisco has ruled (Animal Legal Defense Fund v. HVFG LLC, June 25, 2013, Alsup, W.). However, the court dismissed dependent claims for respondeat superior, conspiracy, and aiding and abetting.

The Animal Legal Defense Fund (ALDF) and Regal Vegan, Inc. filed suit, alleging that HVFG LLC, doing business as Hudson Valley Foie Gras, and four of its officer violated the Lanham Act and California’s unfair competition and false advertising laws by marketing their foie gras as “the humane choice” when its production process, in particular its force-feeding practices, were in fact inhumane. They also challenged a statement in an online video by a co-owner of HVFG that “it is very important that people understand ducks on this farm are not hurt and they are not in any kind of discomfort.”

Regal Vegan sells a bean spread called “Faux Gras” that it markets as an alternative to animal-based pates, and claimed that HVFG’s marketing reduced its sales by misleading consumers that would otherwise be more likely to buy Faux Gras if they knew how HVFG treated its ducks. ALDF expends resources on educating the public about foie gras production methods and lobbying the legal and business communities to combat them.

In an April 2013 order, the court denied the defendants’ motion to dismiss as to the plaintiffs’ Article III standing, and denied the motion to dismiss under Rule 12(b)(6) as to Regal Vegan, but found that ALDF “lacked standing to pursue a Lanham Act false advertising claim because it does not compete with Hudson Valley to sell anything, and so does not vie for the same dollars from the same consumer group.” In the present decision, the court addressed the defendants’ motion for partial judgment on the pleadings under Rule 12(c) on the grounds that (1) ALDF lacked statutory standing to bring a claim under the California false advertising and unfair competition laws, and (2) the conspiracy, respondeat superior, and aiding and abetting claims of both plaintiffs were not cognizable claims.

Standing. The court explained that California’s2004 Proposition 64 had narrowed the standing requirements under the false advertising and unfair competition laws to include only those plaintiffs “who have lost money or property by reason of the challenged practice.” The court noted that no federal or California appellate court had decided “whether a public advocacy firm such as ALDF can have standing under Proposition 64 to challenge a business practice inimical to its purpose and against which the firm expends its resources, thus reducing the money or property it would otherwise have for other projects.” However, a 2005 decision of the federal district court for the Central District of California had concluded that an advocacy organization could have standing “when it diverts resources in response to challenged unlawful activity.”

The court observed that the same logic might also require standing to be conferred on advocacy organizations diverting resources to challenge a proscribed business practice. The court noted that this “extension would effectively take us back to the ‘any person’ standing problem that Proposition 64 sought to cure.” However, the court observed, “if a competitor has standing by reason of money or property spent to combat a proscribed business practice, as a competitor surely does, then why should a public interest organization not have standing for the same reason?” Lacking any controlling precedent on the issue, the court chose to follow the previous district court decision, and granted standing to ALDF under both laws.

Dependent claims. However, the court dismissed the plaintiffs’ dependent claims for respondeat superior, conspiracy, and aiding and abetting. Although the plaintiffs might be able to rely on a respondeat superior theory as a basis of liability for the defendant co-owners of HVFG, respondeat superior was not an independent cause of action. The plaintiffs’ post-hearing brief had withdrawn their claims for conspiracy and aiding and abetting.

The case is No. C 12005809 WHA.

Attorneys: Nicole Alexandria Roth for Animal Legal Defense Fund. Michael Tenenbaum (The Tenenbaum Law Firm) for HVFG, LLC.

Companies: Animal Legal Defense Fund; Regal Vegan, Inc.; HVFG LLC

Cases: Advertising CaliforniaNews