False Advertising By Ad Agencies: No Easy Dismissals

by Akerman LLP - Marks, Works & Secrets
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On April 20, 2015, in Nestle Purina Petcare Company v. The Blue Buffalo Company, Ltd., the Eastern District of Missouri denied a motion to dismiss claims for false and misleading advertising brought against the advertising agencies that developed and executed the subject ad campaign.  In May 2014, Plaintiff Nestle Purina PetCare Co. (“Purina”) filed a lawsuit alleging that Blue Buffalo Company Ltd. (“Blue Buffalo”) had engaged in false and misleading advertising because its dog food products, which are advertised as being “grain free” and containing “no chicken by-product,” actually contain those ingredients. After filing the complaint, Purina issued press releases about the lawsuit and launched a website, www.petfoodhonesty.com (the “Honesty website”), where it openly criticized Blue Buffalo for its alleged false advertising.

Thereafter, Blue Buffalo filed its own action against Purina and John Doe Advertising Agencies 1-10, alleging that Purina had engaged in false advertising and defamed Blue Buffalo through the various public statements made after Purina filed its complaint. (Those same claims were made by Blue Buffalo as counterclaims in Purina’s lawsuit and the Blue Buffalo Action was then consolidated with the Purina action). Blue Buffalo later amended its claims to specifically name Blue State Digital and PRCG/Haggerty LLC as defendants (the “Advertising Defendants”). Blue Buffalo alleged that the Advertising Defendants created and designed the Honesty website, developed the content for advertisements on Purina’s social media outlets, arranged for social media posts relating to the Honesty website to be directed to the social media pages of pet food consumers on Facebook and Twitter, and arranged for links to the Honesty website to appear when users searched for Blue Buffalo products.

The Advertising Defendants moved to dismiss the claims against them on the grounds that, inter alia: (1) Blue Buffalo failed to allege that the Advertising Defendants, as opposed to Purina, made the allegedly false or misleading statement; (2) under the Lanham Act, advertising agencies are only liable if they were active participants in the preparation of the advertisements and knew or had reason to know the advertisements were false or deceptive; and (3) Blue Buffalo failed to meet the heightened pleading requirements of Fed. R. Civ. P. (“Rule”) 9(b).

The court denied the motion to dismiss. Citing to Lexmark Int’l v. Static Control Components, Inc., 134 S.Ct. 1377, 1392 (2014), the court first noted that liability under the Lanham Act is not limited to direct competitors and extends to individuals who work with competitors to produce false advertisements.

Second, the court rejected the argument that the Lanham Act imposes a scienter or “knowing” requirement. Although an older version of the Lanham Act included a “knowing” element, Congress amended the Act in 1988 to specifically remove that element.

Finally, the court rejected the contention that Rule 9(b) applied to Blue Buffalo’s claims. The court acknowledged that there is a split of authority over whether Rule 9(b) applies to Lanham Act claims that are grounded in fraud but, citing to governing caselaw from the Eighth Circuit, held that Rule 9(b) did not apply to Blue Buffalo’s claims because proof of fraud was not a prerequisite to establishing liability. Although the complaint contained allegations of fraud against the Advertising Defendants, successful resolution of the Lanham Act claims did not depend on those allegations. Further, even if Rule 9(b) did apply, the court found that Blue Buffalo had satisfied the heightened pleading requirement by citing to several specific ads, quoting language from those ads, and noting the dates on which those ads ran.

Purina serves as a reminder to advertising agencies that they can face liability if a client’s ad campaign contains false and misleading statements. Fact checking should be on the agency’s checklist, as well as the client’s. Moreover, litigation is a cost of doing business for agencies involved in comparative advertising for their clients.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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