Jonah M. Knobler, Partner

This post originally appeared on Law360.

In Romag Fasteners Inc. v. Fossil Inc.,[1] the U.S. Supreme Court recently made it easier for Lanham Act plaintiffs to disgorge the ill-gotten profits of trademark infringers.

Naturally, the question arises: Since false advertising suits are also governed by the Lanham Act, does Romag apply to false advertising suits, too? The answer is likely yes — but there are important differences between the two types of suits that may make disgorgement awards more difficult for false advertising plaintiffs to obtain.

Grains of paradise (aframomum melegueta), are a peppery, citrusy spice indigenous to West Africa, related to ginger and cardamom.  The name purportedly derives from medieval merchants’ claims that the plant grew only in the Garden of Eden.  Common to West African cuisine, grains of paradise are also one of the botanicals sometimes used to give gin its characteristic flavor.

In Florida, however, an obscure 1868 law makes it a third-degree felony to “adulterate[] … any liquor” with certain specified substances, ranging from grains of paradise and capsicum (chili pepper) to potentially deadly opium and “sugar of lead.”  Fla. Stat. § 562.455.  Some have postulated that this law’s original intent was to prevent consumer deception, as the banned ingredients were once added to liquor to make it taste stronger (more alcoholic) than it actually was.  That same practice spurred an 1816 law of Parliament (56 Geo. III, ch. 58) making it illegal for brewers and dealers in beer to possess grains of paradise.  Unlike merrie olde England, however, the Sunshine State never got around to repealing its law.

Ninth Circuit Endorses RICO Claims For Prescription Pharmaceutical Promotion

The Racketeer Influenced and Corrupt Organizations Act (RICO) was meant to help take down the Mafia.  For years, however, plaintiffs have attempted to contort it into a federal false advertising regime for prescription pharmaceuticals, complete with treble damages and attorney’s fees.  The Ninth Circuit recently gave plaintiffs a boost in that effort, permitting RICO claims to proceed against pharmaceutical companies based on allegedly improper labeling and promotion of their prescription medications. 

Patterson partner and Misbranded contributor Jonah Knobler recently critiqued the Ninth Circuit’s decision—and pharmaceutical RICO suits generally—at Drug and Device Law.  Check out that post here.

Today, in its final orders list of the Term, the Supreme Court granted cert in Romag Fasteners, Inc. v. Fossil Inc. (No. 18-1233), to resolve a deep circuit split regarding Lanham Act remedies.  The specific question in Romag is “[w]hether … willful [wrongdoing] is a prerequisite for an award of [the defendant’s] profits.”  (All agree that an award of the plaintiff’s actual damages, as opposed to disgorgement of the defendant’s profits, is available irrespective of the defendant’s mens rea—but actual damages are often difficult to prove.)  Romag presents this question in the context of a trademark infringement claim, but the outcome should also control in federal false advertising cases, which are likewise governed by the Lanham Act.

Last month, the Second Circuit heard oral argument in what had seemed like the most consequential consumer class-action appeal in that court in years: three consolidated cases involving “flushable” hygienic wipes.  Both sides of the class-action bar were at the edge of their seat waiting for the Second Circuit’s guidance on several controversial issues of class-action law, including the appropriate standard for reviewing damages models at the class-certification stage.  Earlier this week, however, the Second Circuit essentially punted, sending the cases back to the district court for “further factual development.”  This is a frustrating result, but reading between the lines, class-action defendants may have reasons for cautious optimism.

Speak of the Devil and he doth appear. Today, it’s just a figure of speech.  In medieval England, by contrast, people meant it literally—as a warning that uttering the Prince of Darkness’s name would conjure his evil presence.  Maybe those Anglo-Saxons had a point.  A few weeks ago, we wrote a post about a remarkable string of defense victories in “slack-fill” cases—i.e., lawsuits complaining of too much empty space in product packaging.  In particular, we noted that “every slack-fill case to reach the class-certification stage ha[d] flunked Rule 23’s rigorous test for certification,” and we wondered aloud “how a slack-fill class could ever be certified.”  Well, speak of the Devil: just four days later, a California court certified a class in a slack-fill case for the first time ever.  We apologize for any causal role we may have had in this truly diabolical development.  The good news is that the decision may not stick—and even if it does, it’s likely to remain an outlier.

As astronomer Carl Sagan famously said, “absence of evidence is not evidence of absence.”  Plaintiffs have not gotten the message.  They often allege that a defendant’s marketing or labeling statements are false and misleading on the sole basis that there is purportedly no evidence (or insufficient evidence) proving their truth.  These so-called “lack of substantiation” claims are easy to plead because a plaintiff does not need to conduct an investigation to identify evidence that the challenged statement is false.  Rather, she alleges only an absence of supporting evidence for the statement—and generally, in a conclusory manner.

There is nothing inherently wrong with outreach to putative members of an uncertified class—whether by the named plaintiff’s counsel or by the defendant’s counsel.  As the ABA has recognized, “[b]oth plaintiffs’ counsel and defense counsel have legitimate need to reach out to potential class members regarding … information that may be relevant to whether or not a class should be certified.”  ABA Formal Op. 07-445 (2007); see also Austen v. Catterton Partners V, LP, 831 F. Supp. 2d 559, 567 (D. Conn. 2011) (“Both parties need to be able to communicate with putative class members … from the earliest stages of class litigation.”).  Thus, as the Supreme Court has unanimously held, restrictions on pre-certification communication with putative class members must be justified by a “clear record and specific findings” of actual “abuses.”  Gulf Oil v. Bernard, 452 U.S. 89, 101-04 (1981).  And even then, any limitations must be “carefully drawn … [to] limit[] speech as little as possible.”  Id.

In Comcast v. Behrend, 569 U.S. 27 (2013), the Supreme Court held that a plaintiff cannot obtain class certification with an inadequate damages model.  In the years since, courts have diverged over how much a plaintiff must do to satisfy this requirement.  Often, plaintiffs seek class certification with nothing more than a skeletal proposal to develop and perform an analysis at some future point, using information they do not—and might never—possess.  While some courts have found such adumbrative “models” sufficient at the class certification stage, the better decisions require more.  As Comcast recognizes, Rule 23 “does not set forth a mere pleading standard.”  Rather, a plaintiff “must affirmatively demonstrate” through “evidentiary proof” that damages are measurable on a class-wide basis through a common methodology.  Faithful application of that principle obligates plaintiffs and their experts to offer a detailed methodology that is tailored to the facts of the case, and to show that any data that the model requires in fact exists and can be obtained.

This is an exciting time for manufacturers on guard against compelled disclosures in their product labeling or advertising.  Late last June, the Supreme Court decided  National Institute of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018) (“NIFLA”), an abortion case with potentially far-reaching effects on the law of compelled commercial speech more generally.  However, as lower courts begin to interpret and apply NIFLA in the context of product disclosures, major uncertainties remain.