Antitrust Law Daily Wrap Up, ADVERTISING—NDCal: Maker of Non-Meat “Faux Gras” Had Standing to Challenge Foie Gras Producer’s Slogan “The Humane Choice”, (Apr 15, 2013)

By Peter Reap, J.D., LL.M.

Regal Vegan, Inc., a company that produces a non-meat, spreadable product called "Faux Gras," had Article III and Lanham Act standing to challenge manufacturer Hudson Valley Foie Gras, LLC, and four of its officers (collectively, "Hudson Valley"), with violating the Lanham Act and California’s unfair competition and false advertising laws by marketing their foie gras as "the humane choice," the federal district court in San Francisco has determined (Animal Legal Defense Fund v. HVFG LLC, April 12, 2013, Alsup, W.). Further, Hudson Valley’s assertion that Regal Vegan failed to state a Lanham Act claim because the challenged slogan was mere puffery was rejected.

However, Regal Vegan’s co-plaintiff the Animal Legal Defense Fund (ALDF) did not have standing to pursue a Lanham Act false advertising claim against Hudson Valley, the court decided. Thus, Hudson Valley’s motion to dismiss the suit was granted in part and denied in part.

Background. According to plaintiffs, Hudson Valley’s marketing of their foie gras as "the humane choice" misrepresents the truth because defendants’ foie gras is not produced humanely.

Foie gras, which can also be called pâté, is a delicacy produced from the livers of specially fattened ducks or geese (defendants raise ducks only). Hudson Valley’s foie gras sells for approximately $80 per pound.

The complaint asserts that several aspects of force-feeding ducks render it cruel and inhumane. Injuries and illness commonly result from the force-feeding itself, including ruptured esophagi, bone fractures, inhalation of food into the lungs, and bacterial infection. Then, because the ducks are forced to consume an unnaturally large quantity of food, their livers become greatly enlarged, resulting in hepatic lipidosis, which causes liver failure as well as seizures and nervous system impairment. Finally, the extremely swollen liver may lead to difficulty breathing, severe pain from the liver’s capsule stretching, and broken legs as a result of the excess body weight.

Regal Vegan produces a non-meat, spreadable product called "Faux Gras." Because it is produced without animal byproducts, it is "undoubtedly humane." Regal Vegan argues that its sales of Faux Gras are competitively harmed by Hudson Valley’s claim that its foie gras is humane. According to plaintiffs, Hudson Valley’s foie gras is not humanely produced, and if consumers knew this, they would be more likely to buy Faux Gras.

Plaintiff ALDF is a national nonprofit organization whose "main focus is the use of the legal system to assist courts and legislatures in preventing animal cruelty and advancing the protection of the interests of animals through the legal system."

Plaintiffs allege Hudson Valley’s marketing violates the Lanham Act, California’s Unfair Competition Law, and California’s False Advertising Law. Hudson Valley moves to dismiss on three grounds: (i) lack of Article III standing under Rule 12(b)(1); (ii) lack of Lanham Act standing under Rule 12(b)(6); and (iii) failure to state a Lanham Act claim.

Article III Standing

Courts examine three factors to determine whether plaintiffs have constitutional standing. First, the plaintiff must have suffered an "injury in fact." Second, there must be a causal connection between the injury and the conduct complained of. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Regal Vegan. Regal Vegan has presented surveys showing, among other things, that animal welfare is important to customers in choosing which food to buy; that customers stop buying foods they believe are produced in an unethical way; that customers will preferentially choose otherwise-identical "humane" products over those that are not humane. Regal Vegan also asserts that the facts show its product competes with foie gras, the court noted.

Regal Vegan alleged facts showing that it did and does intend its product to replace foie gras. Considering these facts as well as the consumer survey data the plaintiffs described, Regal Vegan alleged sufficient facts that it may be competing with Hudson Valley for the same pool of potential customers: those interested in purchasing humanely produced pâtés, the court determined.

Here, causation followed from accepting that Regal Vegan and Hudson Valley could produce a competing product. In the market for humanely produced pâtés, a statement by one competitor that its product is "humane," if in fact it were not, would plausibly disadvantage its humane competitor. Regal Vegan’s allegation therefore satisfied the causation prong, according to the court.

As to the third prong, Regal Vegan acknowledged that even were an injunction to issue here, other sources besides Hudson Valley might still claim foie gras production is humane. Nevertheless, Regal Vegan asserted that it would be able to compete more fairly in the market for humanely produced pâtés without Hudson Valley’s claims that its foie gras is humane. Some of Regal Vegan’s alleged injuries could be remedied by its requested relief, which sufficed to show redressability. Regal Vegan therefore had Article III standing to bring its claims, the court ruled.

ALDF. Having determined that one plaintiff, Regal Vegan, had Article III standing, it was not necessary to consider whether ALDF had Article III standing. Thus, the defendants’ motion to dismiss for lack of Article III standing was denied.

Lanham Act standing. Hudson Valley moved to dismiss on two grounds: (i) that neither plaintiff alleged a direct competitive injury sufficient to confer Lanham Act standing; and (ii) that plaintiffs have failed to state a Lanham Act claim upon which relief may be granted because "the humane choice" is an expression of opinion, not fact.

Hudson Valley argued that ALDF could not satisfy Lanham Act standing for one simple reason: it does not compete with Hudson Valley to sell anything. ALDF provided no authority for the proposition that an advocacy organization could be in competition with a business for Lanham Act purposes, the court noted.

ALDF did not have standing to pursue a Lanham Act false advertising claim, the court decided. No court has held that Lanham Act competitors may be other than business competitors. A theoretical educational competition for the "hearts and minds" of consumers is insufficient to give ALDF Lanham Act standing. Thus, the motion to dismiss ALDF’s Lanham Act claim was granted without leave to amend.

As to Royal Vegan, "[F]or standing pursuant to the ‘false advertising’ prong, … a plaintiff must show: (1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is ‘competitive,’ or harmful to the plaintiff’s ability to compete with the defendant." Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1037 (9th Cir. 2005). Hudson Valley argued that Regal Vegan is not a direct competitor and therefore cannot satisfy the "competitive injury" prong of the Jack Russell test. But proof of direct competition only allowed for a presumption of commercial injury; it was not a necessary condition to satisfy the Jack Russell test, the court commented.

Faux Gras is plausibly an indirect competitor to foie gras, according to the court. The market for which the parties compete could be a more specific one than just "food products": one more akin to plaintiffs’ asserted "spreadable pâtés for consumers interested in animal welfare"

As the Jack Russell test also required that the alleged commercial injury result from "a misrepresentation about a product," the plaintiffs had to show that "the humane choice" was a misrepresentation. Plaintiffs’ complaint alleged that "the humane choice" is a misrepresentation because the defendants’ ducks were raised inhumanely, and details were given from which a jury could well find the treatment is inhumane. Accepting this allegation as true for the purposes of the Rule 12(b)(6) motion, Regal Vegan alleged facts sufficient to provide Lanham Act standing, the court reasoned.

Lanham Act requirement of fact, not opinion. Hudson Valley argued that proving a Lanham Act false advertising claim requires that the challenged slogan consist of a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact. Hudson Valley characterized "the humane choice" as a statement of opinion—mere puffery—one no consumer would interpret as a statement of objective fact.

Although federal statutes construing the word "humane" were not applicable here, their guidance indicated: (i) that in some contexts, including the treatment of food animals, Congress has found that "humane" is susceptible of definition; and (ii) that a possible legal definition of "humane" could reference treatment that does not cause undue pain to an animal, the court noted.

A claim that its product is "the humane choice" could therefore constitute a statement that could either be proved false or reasonably interpreted as a statement of objective fact, according to the court. At this stage in the litigation, it sufficed that a slogan indicating a product is "humane" could therefore be subject to a false advertising claim. Thus, the defendants’ motion to dismiss Regal Vegan’s Lanham Act claim was denied.

Hudson Valley based its two motions to dismiss on Article III standing and the elements of the Lanham Act. It expressly chose not to address the plaintiffs’ California Unfair Competition Law claims. Thus, the court also declined to address those claims.

The case is No. C 12-05809 WHA.

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

Companies: Animal Legal Defense Fund; HVFG, LLC.; Hudson Valley Foie Gras, LLC; Regal Vegan, Inc.

Cases: Advertising CaliforniaNews