No IN THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Transcription

1 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 1 of 15 No IN THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT IN RE: GNC CORPORATION; TRIFLEX PRODUCTS MARKETING AND SALES PRACTICES LITIGATION (NO. II), YVONNE BROWN; SHAWN HOWARD, On Behalf of Themselves and All Others Similarly Situated; MICHAEL LERMA, On Behalf of Themselves and All Others Similarly Situated; JEREMY GAATZ, On Behalf of Themselves and All Others Similarly Situated; ROBERT TOBACK; ROBERT CALVERT; THOMAS FLOWERS; JOHN J. GROSS; JUSTIN M. GEORGE; LOUIS LASTRES, On Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants, v. GNC CORPORATION, a Delaware Corporation; GNC HOLDINGS, INC.; RITE AID CORPORATION, Defendants-Appellees. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND AT BALTIMORE BRIEF OF LAW PROFESSORS AS AMICI CURIAE IN SUPPORT OF PLAINTIFFS-APPELLANTS PETITION FOR REHEARING AND FOR REHEARING EN BANC, AND IN THE ALTERNATIVE, FOR MODIFICATION OF OPINION AND JUDGMENT Brian Wolfman th St., NW Washington, DC (301) Counsel for Amici Curiae Rebecca Tushnet Professor, Georgetown Law Georgetown Univ. Law Center 600 New Jersey Ave. NW Washington, DC (703)

2 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 2 of 15 TABLE OF CONTENTS INTEREST OF AMICI... 1 SUMMARY OF ARGUMENT... 1 ARGUMENT... 2 CONCLUSION... 8 APPENDIX A... A-1 i

3 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 3 of 15 Cases TABLE OF AUTHORITIES C.B. Fleet Co. v. SmithKline Beecham Consumer Healthcare, L.P., 131 F.3d 430 (4th Cir. 1997)... 2 Castrol v. Pennzoil Co,. 987 F.2d (3d Cir. 1993)... 3 City of Pomona v. SQM North America Corp., 750 F.3d 1036 (9th Cir. 2014)... 6 Clorox Co. Puerto Rico v. Proctor & Gamble Co., 228 F.3d 24 (1st Cir. 2000)... 5 Design Resources, Inc. v. Leather Indus., -- F.3d ----, 2015 WL (4th Cir. June 18, 2015)... 2, 3, 5 Diamond Triumph Auto Glass, Inc. v. Safelite Glass Corp., 441 F. Supp. 2d 695 (M.D. Pa. 2006)... 3 Eastman Chemical Co. v. Plastipure, Inc., 775 F.3d 230 (5th Cir. 2014)... 6 Gallagher v. Bayer AG, 2015 WL (N.D. Cal. Mar. 10, 2015)... 7 Hot Wax, Inc. v. S/S Car Care, 1999 WL (N.D. Ill. 1999)... 6 In re GNC Corp., -- F.3d --, 2015 WL (4th Cir. Jun. 19, 2015)...1, 5 Johnson & Johnson-Merck Consumer Pharmaceuticals Co. v. Procter & Gamble Co., 285 F.Supp.2d 389 (S.D.N.Y. 2003)... 7 Merck Eprova AG v. Gnosis S.p.A., 2012 WL (S.D.N.Y.)... 7 Merck Eprova AG v. ProThera, Inc., 2010 WL (S.D.N.Y. Oct. 10, 2010) 7 Nebraska v. Mayfield, 325 N.W.2d 162 (Neb. 1982)... 6 Schering-Plough Healthcare Products, Inc. v. Neutrogena Corp., 702 F. Supp. 2d 266 (D. Del. 2010)... 7 Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997)... 7 ii

4 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 4 of 15 United Indus. Corp. v. Clorox Co., 140 F.3d 1175 (8th Cir. 1998)... 2 Vector Prods., Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316 (11th Cir. 2005)... 4 Victor Stanley, Inc. v. Creative Pipe, Inc., No , 2011 WL (D. Md. Sept. 30, 2011)... 3 Statutes Lanham Act 43(a)...4, 6 iii

5 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 5 of 15 INTEREST OF AMICI Amici are academics with an interest in promoting truth in advertising, which protects consumers and promotes fair competition. Amici express no opinion on the ultimate merits of this case. 1 SUMMARY OF ARGUMENT The panel erred when it disregarded binding precedent in favor of a new rule that in order to state a false advertising claim on a theory that representations have been proven to be false, plaintiffs must allege that all reasonable experts in the field agree that the representations are false. In re GNC Corp., -- F.3d --, 2015 WL , at *7 (4th Cir. Jun. 19, 2015). Literal falsity is about how an advertisement is received by consumers. The adjectives literal, explicit, and implicit (and falsity by necessary implication ) describe consumer reaction to a message, which is either proved by evidence such as surveys or presumed as a matter of law. Falsity is an issue of fact relating to the underlying advertising message at issue. Plaintiffs should not need to plead what they do not need to prove at trial. 1 Academic affiliations are listed in Appendix A for identification purposes only. Amici hereby state that none of the parties to this case nor their counsel authored this brief in whole or in part; no party or any party s counsel contributed money intended to fund preparing or submitting the brief; and no one else other than Amici and their counsel contributed money that was intended to fund preparing or submitting this brief. All parties have consented to the filing of this brief. 1

6 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 6 of 15 Experts make mistakes. Reasonable and scientifically accepted methods may produce wrong results. Some experts may appear reliable on paper, but be discredited upon closer examination. For these reasons, a court should not dismiss a case before anyone evaluates the competing expert opinions or conducts discovery into the evidence supporting a false advertising claim. Fundamentally, if a reasonable expert is wrong in a particular case, the claim that the expert supports is false. This is not a matter that can appropriately be resolved on the pleadings. ARGUMENT As this Court has recognized, literal falsity in Lanham Act cases is about communication, and should be determined by a two-step process: (1) what unambiguous message does the ad convey, if any? (2) is that unambiguous message false? See, e.g., Design Resources, Inc. v. Leather Indus., -- F.3d ----, 2015 WL , at *7 (4th Cir. June 18, 2015); see also United Indus. Corp. v. Clorox Co., 140 F.3d 1175 (8th Cir. 1998) (ambiguity is the key divide between explicit and implicit falsity). This Court has repeatedly held that both inquiries involve questions of fact. C.B. Fleet Co. v. SmithKline Beecham Consumer Healthcare, L.P., 131 F.3d 430, 434 (4th Cir. 1997) ( Whether an advertisement is literally false is an issue of fact. ). To determine if an ad makes a false claim, a court must determine what message consumers will perceive and whether that message is false, not whether 2

7 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 7 of 15 the defendant has found an expert to hire. The very case that the panel cited here to define literal falsity, In re GNC Corp., 2015 WL , at *5, continues: Castrol presented affirmative evidence to prove the literal falsity of Pennzoil s claims and [the district judge] did not find Pennzoil s evidence to rebut Castrol s proof persuasive. The dissent asserts, however, that a defendant need only establish a reasonable basis to support its claims to render the advertisement literally true. We disagree. Rather, the test for literal falsity is simpler; if a defendant s claim is untrue, it must be deemed literally false. Castrol v. Pennzoil Co., 987 F.2d 939, 944 (3d Cir. 1993) (emphasis added). Design Resources also relies on Castrol in its definition of falsity by necessary implication. Design Resources, 2015 WL , at *7. Every other case to cite Castrol has likewise followed this simpler rule. See, e.g., Victor Stanley, Inc. v. Creative Pipe, Inc., No , 2011 WL , at *15 (D. Md. Sept. 30, 2011) ( If a defendant s claim is untrue, it may be deemed literally false. ); Diamond Triumph Auto Glass, Inc. v. Safelite Glass Corp., 441 F. Supp. 2d 695, 706 (M.D. Pa. 2006) ( Even if the advertiser has a reasonable basis to support the truth of the advertisement, it will be liable if the statement is untrue. ). The distinction between the quality of evidence supporting a claim and the way that the claim is communicated can be seen in contrasting two examples: First, based on the scientific consensus at the time, a doctor in 1910 would have said that stress and diet caused stomach ulcers, and that bacteria did not. As we now know, this is untrue: the bacterium H. pylori, not stress and diet, causes many stomach 3

8 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 8 of 15 ulcers. 2 The 1910 doctor s claim was not misleading. It was false. A statement can be false even though its speaker reasonably believes it to be true. 3 By contrast, misleading claims rely on inference to suggest a false conclusion from a statement that is true on its face. Suppose the claim at issue here were Vitamin B7 can remedy hair loss. All reasonable scientists would agree that this is true, because a vitamin B7 deficiency can lead to hair loss. But most hair loss does not come from vitamin deficiency. The claim Vitamin B7 can remedy hair loss is misleading on a product marketed to consumers in general, because of what it implies: that Vitamin B7 will treat hair loss in general. The difference between false and misleading claims does not turn on whether reasonable experts can disagree. There were several decades during which experts disagreed about ulcers, whereas in the Vitamin B7 example they do not disagree at all. Instead, a misleading statement induces reasonable consumers who accept that the statement is true to make inferential leaps to reach a false conclusion. 2 Helicobacter pylori and Peptic Ulcer Disease, last visited July 3, In some contexts, false implies that the speaker intended to make a false statement, but that has never been its meaning in the consumer protection context. See, e.g., Vector Prods., Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316, 1319 (11th Cir. 2005) ( It is well-settled that no proof of intent or willfulness is required to establish a violation of Lanham Act 43(a) for false advertising. ). 4

9 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 9 of 15 A claim will be false by necessary implication when reasonable consumers are so likely to draw a false inference that the audience would recognize the claim as readily as if it had been explicitly stated. Clorox Co. Puerto Rico v. Proctor & Gamble Co., 228 F.3d 24, 35 (1st Cir. 2000); see Design Resources, 2015 WL , at *6. Although this falsity by necessary implication has been recognized by this Court and every other circuit to consider it, the standard applied by the panel precludes this kind of falsity. Under the panel s new standard, it is impossible to connect the concept of scientific consensus with the concept of a claim that is necessarily implied to consumers and thus literally false and actionable without further evidence of consumer reaction. This problem highlights the conceptual error in the panel s opinion: The explicit/implicit falsity distinction goes to the manner in which a message is sent to consumers, and thus to whether further evidence of consumer reaction is required. Such evidence, collected via a survey, would not in any way assist a factfinder to evaluate the scientific evidence. Given that it is the requirement to present consumer perception evidence that divides explicit from implicit falsity, the panel s understanding of literal falsity is inappropriate. Under ordinary rules of proof, proven to be false, In re GNC, 2015 WL , at *7, does not mean that all reasonable experts in the field agree, id., and thus pleading such agreement cannot be an appropriate requirement to survive 5

10 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 10 of 15 a motion to dismiss. The issue is not whether the defendant s reliance on its evidence was reasonable, but whether a claim is, in fact, false. That there is some evidence supporting the defendant s statement does not make it true. Truth or falsity cannot be determined without giving the plaintiffs a chance to put forth their evidence. A factual dispute is best settled by a battle of the experts before the fact finder, not by judicial fiat. Where two credible experts disagree, it is the job of the fact finder, not the trial court, to determine which source is more credible and reliable. City of Pomona v. SQM North America Corp., 750 F.3d 1036, 1049 (9th Cir. 2014). This would be true even were the burden on plaintiffs higher than a preponderance of the evidence. See, e.g., Nebraska v. Mayfield, 325 N.W.2d 162, 164 (Neb. 1982) ( On this appeal the defendant apparently takes the position that where there is any disagreement between expert medical witnesses, the evidence cannot be said to be clear and convincing. We disagree. ). The Fifth Circuit has squarely held that taking one side in an ongoing scientific debate can be literally false when the ads are directed to the general public. See Eastman Chemical Co. v. Plastipure, Inc., 775 F.3d 230, (5th Cir. 2014); see also Hot Wax, Inc. v. S/S Car Care, 1999 WL (N.D. Ill. 1999) (upholding a verdict of literal falsity rejecting several experts testimony). Lanham Act plaintiffs need to allege, and ultimately prove, the underlying falsity of a challenged claim that is communicated to consumers, not that no 6

11 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 11 of 15 reasonable expert would rely on evidence supporting the claim that is communicated to consumers. See, e.g., Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1138 (9th Cir. 1997) (claim could proceed where defendant s scientific experts disputed plaintiff s allegations of literal falsity); Merck Eprova AG v. Gnosis S.p.A., 2012 WL (S.D.N.Y.) (rejecting expert testimony that found defendant s ad reasonably derived from existing conventions), aff d, 760 F.3d 247 (2d Cir. 2014); Schering-Plough Healthcare Products, Inc. v. Neutrogena Corp., 702 F. Supp. 2d 266, 279 (D. Del. 2010) (finding establishment claims literally false in face of contested evidence); Merck Eprova AG v. ProThera, Inc., 2010 WL , at *5 (S.D.N.Y. Oct. 10, 2010) (reasonable jury could accept plaintiff s expert s testimony rather than defendant s and find literal falsity); Johnson & Johnson-Merck Consumer Pharmaceuticals Co. v. Procter & Gamble Co., 285 F. Supp. 2d 389, 391 (S.D.N.Y. 2003) (finding literal falsity after rejecting defendant s vigorously advanced scientific evidence). Consumer protection cases brought under state law also regularly survive motions to dismiss by alleging falsity, not total scientific consensus. See, e.g., Gallagher v. Bayer AG, 2015 WL , at *8 (N.D. Cal. Mar. 10, 2015) ( As courts in California, New York, and Florida have held, where plaintiffs allege that manufacturers food or supplement claims are false and cite to scientific studies in support, those allegations are adequate to plead false and misleading conduct under 7

12 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 12 of 15 their consumer protection statutes. ) (citations omitted). The panel s novel holding to the contrary is not based in any sound principles of advertising law or logic. CONCLUSION For these reasons, Amici urge this Court to grant the petition for rehearing and reject a pleading standard that is inconsistent with the law s substantive requirements. Dated: July 13, 2015 Respectfully submitted, Brian Wolfman th St., NW Washington, DC (301) Counsel for Amici Curiae Rebecca Tushnet Professor, Georgetown Law Georgetown Univ. Law Center 600 New Jersey Ave. NW Washington, DC (703)

13 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 13 of 15 APPENDIX A Barton Beebe, John M. Desmarais Professor of Intellectual Property Law, NYU School of Law Stacey L. Dogan, Professor of Law, Boston University School of Law Deborah R. Gerhardt, Assistant Professor of Law, UNC School of Law Leah Chan Grinvald, Associate Professor of Law, Suffolk University Law School Michael Grynberg, Associate Professor of Law, DePaul College of Law Mark A. Lemley, William H. Neukom Professor, Stanford Law School Jessica Litman, John F. Nickoll Professor of Law and Professor of Information, University of Michigan Mark McKenna, Professor of Law, Notre Dame Law School Tyler T. Ochoa, Professor of Law, High Tech Law Institute, Santa Clara University School of Law Dee Pridgen, Carl M. Williams Professor of Law & Social Responsibility, University of Wyoming College of Law Zahr Said, Assistant Professor, University of Washington School of Law Jeremy Sheff, Professor of Law, Director, Intellectual Property Law Center, St. John s University School of Law Jessica Silbey, Professor of Law, Northeastern University School of Law Jeff Sovern, Professor of Law, St. John s University School of Law A-1

14 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 14 of 15 Rebecca Tushnet, Professor of Law, Georgetown Law Brian Wolfman, Edwin A. Heafey, Jr. Visiting Professor, Supreme Court Litigation Clinic, Stanford Law School A-2

15 Appeal: Doc: 45-1 Filed: 07/13/2015 Pg: 15 of 15 CERTIFICATE OF COMPLIANCE A petition for rehearing is limited to 15 pages. Fed. R. App. P. 40(b). The Federal Rules of Appellate Procedure do not contain a word limit for amicus briefs in support of a petition for rehearing. Generally, amicus briefs may not exceed onehalf the size of a principal brief. See Fed. R. App. P. 29(d). Applying the same onehalf ratio to this brief would result in a seven-and-one-half page limit. This brief meets that limit. Moreover, this brief contains only 1848 words according to Microsoft Word, the word processing program used to produce this brief. This brief is in a 14-point Times New Roman font. /s/ Brian Wolfman Brian Wolfman CERTIFICATE OF SERVICE I certify that on July 13, 2015, the foregoing document was served on all parties or their counsel through the CM/ECF system. July 13, 2015 /s/ Brian Wolfman Brian Wolfman