Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ill.: Statements at industry conference could form basis for California false advertising claim, (Apr 8, 2015)

By Michael Menzhuber, J.D., LL.M.

Allegedly false statements by a competitor’s paid spokesperson at an industry conference about a company’s PVC pipe could form the basis for claims brought under the California False Advertising Law, according to the federal district court in Chicago. The company had standing to bring the claim because it alleged that it suffered injury as a result of the spokesperson’s statements (Underground Solutions, Inc. v. Palermo, April 7, 2015, Kennelly, M.)

Underground Solutions, Inc. is the sole supplier of Fusible PVC pipe in the United States. After having previously sued Dr. Palermo, a spokesperson for its competitor, for trade libel and violation of the Lanham Act, it added a claim for violation of the California False Advertising Law.

California’s False Advertising Law prohibits the dissemination of false or misleading statements in connection with advertising. In order to have standing to sue, a person must have suffered injury in fact and have lost money or property as a result of a violation of the law. The company alleged it suffered injury as a result of the spokesperson’s false statements because it was forced to spend time, effort, and funds to correspond and meet with potential clients to debunk the misleading statement that had been made.

Although the added claim did not actually plead this injury, the spokesperson was placed on notice of the alleged injury because the added claim expressly incorporated all prior allegations by reference.

The claim that the company failed to allege that it relied on the false advertising was dismissed by the court because, while California courts require consumers to allege reliance, it would be contrary to the legislature’s express intent to require a competitor to allege reliance. Furthermore, the court determined that there was no evidence that Proposition 64 was intended to preclude competitors from bringing false advertising claims.

The case is No. 13 C 8407

Attorneys: Christopher T. Sheean (Swanson, Martin & Bell LLP) for Underground Solutions, Inc. John David Fitzpatrick (Mandell Menkes LLC) for Eugene Palermo.

Companies: Underground Solutions, Inc.

Cases: Advertising CaliforniaNews