A federal court in California has issued orders allowing certain claims to proceed in Lanham Act litigation brought by sugar producers against trade associations and companies that make high-fructose corn syrup (HFCS). W. Sugar Coop. v. Archer-Daniels-Midland Co., No. 11-3473 (U.S. Dist. Ct., C.D. Cal., orders entered October 21, 2011). The plaintiffs allege that an advertising campaign the defendants launched in 2008 to tell the public that “HFCS is corn sugar,” “HFCS is natural,” and “sugar is sugar” contains false representations about HFCS “that constitute false advertising under the Lanham Act and a violation of the California Unfair Business Practices Act.”
The defendants filed a motion to dismiss contending that the plaintiffs had failed to state a claim on which relief can be granted. While the court agreed that the plaintiffs had failed to state a claim against individual trade association members, it found the pleadings sufficient to state a claim for false advertising against the trade association under the federal Lanham Act. The court allowed the plaintiffs to amend their complaint to more specifically plead an agency relationship between the trade association and individual member companies. If the plaintiffs are successful in pleading such a relationship in a second amended complaint, their Lanham Act claims against individual sugar companies could be allowed to proceed.
Among other matters, the court determined that the trade association’s statements about HFCS constituted “commercial speech” which is actionable under the Lanham Act. The court also refused to dismiss the complaint under the primary jurisdiction doctrine in light of the trade association’s pending citizen petition before the Food and Drug Administration (FDA) seeking approval of “corn sugar” as a name for HFCS on food labels. According to the court, “resolution of the Citizen Petition before the FDA would not resolve the issues raised by Plaintiffs’ suit.”
The trade association defendant also filed a motion to strike the plaintiffs’ state law claims, and the court agreed to do so under California’s “anti-SLAPP” statute, which forbids lawsuits “against a person arising from any act of that person in furtherance of the person’s right of petition or free speech . . . unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” The court found that the trade association was not subject to the “commercial activity” exception, which would allow a claim against it to proceed, because such organizations “do not themselves sell goods.” According to the court, “CRA [Corn Refiners Association], as a trade organization, is not in the business of selling or leasing any goods or services, and has not endorsed a particular brand.” Given the plaintiffs’ failure to adequately plead an agency relationship, the court held that it would not hold the trade association excepted on the ground that its member companies would be excepted under the law.
The court found the trade association’s conduct protected under the anti- SLAPP statute “because the conduct consists of written or oral statements made in a public forum in connection with an issue of public interest,” one of the areas covered by the law. The court further found that because the plaintiffs had not presented “any evidence to support their burden on the claims that CRA’s statements have influenced any purchasing decisions and that Plaintiffs have suffered an injury,” the plaintiffs failed to meet their burden of showing a probability of prevailing on their unfair business competition claim, which is required to defeat the motion to strike on anti-SLAPP grounds.