Fourth Circuit Addresses Commercial Speech Issue

In 2017, the Fourth Circuit Court of Appeals considered a decision by Judge James Cacheris of the Eastern District of Virginia that is an important addition to the jurisprudence of Lanham Act claims.  The case, Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc. 2017 WL 3601506 dealt with the requirements to state a claim for a violation of the Lanham Act.

According to the Complaint, Humane Farm Animal Care (“Humane”) is a non-profit organization that certifies certain egg producers for humane treatment of their laying hens.

Handsome Farm Animal Care (“Handsome”) is an egg producer that Humane does not certify.

 

In 2016, Humane sent an email to thirty-six grocery retailers, including some of the largest grocery chains in the nation.  The email alleged that Handsome either did not certify or lacked up to date certifications to support its representations that its eggs are organic and pasture raised.  The email also included the following language.  “I hope you will reconsider changing suppliers."

As a result, Handsome lost existing and potential customers and ultimately  brought a false advertising claim against Humane.  Contrary to the email’s statements, Handsome’s organic certifications were up to date.  The District court issued a preliminary injunction prohibiting Humane from circulating the emails and directed Humane to publish a retraction email.  Humane appealed to the Fourth Circuit to lift the preliminary injunction.

The question before the court was whether the email was commercial speech.  Notably, neither the Supreme Court nor the Fourth Circuit define “commercial advertising or promotion.” The court cited an opinion out of the Southern District of New York in Gordon and Breach Sci. publishers v. Am. Inst.of Physics, 859 F. Supp. 1521, (S.D.N.Y.) which was the leading opinion on the issue.  While most circuits have adopted the Gordon & Breach  factors, the Fourth Circuit had not done so and in particular the second part of the test, that the plaintiff must be “a defendant in commercial competition with the plaintiff.”  That notwithstanding, the Fourth Circuit analyzed the issue and agreed that the evidence should show a competitive relationship, particularly with regard to standing. As it noted, “a competitive relationship, therefore, is necessary inasmuch as it gate-keeps who may appropriately bring suit. This is especially true for realizing Congress’s intent that the Lanham Act ‘protect persons engaged in [interstate] commerce against unfair competition.”

Among the arguments addressed was (1) where a non-profit organization has a direct economic stake in the provision and structures its message in the hopes of realizing an economic gain rather than merely informing the public, may it reasonably be viewed as economically motivated; (2) whether the Humane email promoted a good; (3) whether Humane’s email was focused on the provision of a service rather than on the advocacy of its ideology; (4) whether the message of Humane’s email was focused on economic and legal concerns; and (5) whether Humane’s email appealed to the grocery stores (recipients) economic and commercial motivations, and was directed at offering a service – the reliability of its certification – rather than an idea. The court resolved all of these issues in Handsome’s favor.

  

At the end, the court found that the email was commercial advertising or promotion and upheld the preliminary injunction, including the requirement that Humane issue a retraction email.

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