FORT LAUDERDALE BUSINESS LITIGATION: CLAIMS OF FALSE ADVERTISING UNDER THE LANHAM ACT

Claims of false advertising are often asserted under the federal Lanham Act. In Tobinick v. Novella, 848 F.3d 935 (11th Cir. 2017), the United States Court of Appeals for the Eleventh Circuit explained that “[t]he Lanham Act prescribes liability for false advertising to ‘commercial advertising or promotion.'” To evaluate whether a claim can be asserted under the Lanham Act, courts first assess whether the particular advertising/promotion constitutes the kind of “commercial advertising or promotion” addressed by the Lanham Act. The Tobinick decision explained that commercial advertising or promotion includes “(1) commercial speech; (2) by a defendant who is in commercial competition with plaintiff; (3) for the purpose of influencing consumers to buy defendant’s goods or services[;]” and (4) “the representations…must be disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Federal courts initially require plaintiffs to prove they have “standing” under the Lanham Act. The United States Supreme Court’s precedent in Lexmart Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), established a two-part inquiry, requiring courts to determine (1) whether a plaintiff’s interests “fall within the zone of interests protected by the law invoked” and (2) whether the injuries suffered by plaintiff were “proximately cause by violations of the statute.” The Supreme Court explained the scope of the “zone of interests as follows: “[T]o come within the zone of interests in suit for false advertising under § 1125(a), a plaintiff must allege an injury to a commercial interest in reputation or sales. A consumer who is hoodwinked into purchasing a disappointing product may well have an injury-in-fact cognizable under Article III, but he cannot invoke the protection of the Lanham Act–a conclusion reached by every Circuit to consider the question…Even a business misled by a supplier into purchasing inferior product is, like consumers generally, not under the Act’s aegis.” Following the Lexmart decision, one federal district court found there was standing, holding in pertinent part, “Diamond’s central allegation is that TET solicited Diamond customers with deceptive advertisements and then induced them to breach their contracts with Diamond, thereby alleging an injury to its commercial interest in sales and bringing Diamond’s claim within the zone of interests protected by the Lanham Act.

Once Lanham Act standing is established, the plaintiff must prove five elements: (1) the advertisements of the opposing party were false or misleading; (2) the advertisements deceived, or had the capacity to deceive, consumers; (3) the deception had a material effect on purchasing decisions; (4) the misrepresented product or service affects interstate commerce; and (5) the movant has been–or is likely to be–injured as a result of the false advertising. Federal courts will often scrutinize the allegedly false and misleading statements made in the sales efforts to determine the extent to which those statement were disseminated to potential customers. For example, in Wyndham Vacation Ownership v. Sussman, No. 6:18-cv-2171-GAP-DCI, 2021 U.S. Dist. LEXIS 208752 (M.D. Fla. Sept. 27, 2021), the federal district court stated that, “[t]he question here is whether Wyndham has supplied any evidence that TET routinely told Wyndham’s timeshare owners to stop making timeshare payments in the [oral sales presentation]s.” The court added that “Wyndham must show that the OSPs directly caused its owners to stop making payments and Wyndham cannot do this if it cannot prove that the OSPs contained the alleged false statements.”

Once a violation is established, the Lanham Act provides that a business litigation plaintiff is entitled, “subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15 U.S.C. § 1117(a). Disgorgement of profits “is appropriate where: (1) the defendant’s conduct was willful and deliberate, (2) the defendant was unjustly enriched, or (3) it is necessary to deter future conduct.” Optimum Techs., Inc. v. Home Depot U.S.A., Inc., 217 F.App’x 899 (11th Cir. 2007). In deciding whether a plaintiff is entitled to both actual and disgorgement damages, courts have considered whether awarding both would amount to an impermissible double recovery. For example, in Choice Hotels Int’l, Inc. v. Key Hotels of Atmore II, 2017 U.S. Dist. LEXIS 222711 (S.D. Ala. Aug. 18, 2017), the court stated that: “One such circumstance when a plaintiff may not be due both an infringing defendant’s profits and any damages suffered is when awarding both amounts to double recovery.”

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.