Supreme Court Opens Courthouse Doors to More Federal False Advertising Claims
The federal false advertising statute, 15 U.S.C. § 1125(a)(1)(B), provides a remedy for some commercial misstatements and half-truths. Specifically, the statute provides,
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any . . . false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
On its face, this statute is quite broad, which has led courts to attempt to limit its reach by imposing statutory interpretation standing requirements that, as a practical matter, tended to filter out those who might sue under the statute. In the Ninth Circuit, for example, only a competitor alleging that the accused misstatement caused a competitive injury has been deemed to have statutory standing to assert a federal deceptive advertising claim.
This all changed with the Supreme Court’s March 25, 2014, decision in Lexmark International v. Static Control Components. There, the Court held that statutory interpretation standing requires two — and only two — things. First, the plaintiff’s interests must fall within the zone of interests protected by the statute, i.e., the plaintiff “must allege an injury to a commercial interest in reputation or sales.” Second, the plaintiff’s alleged injury must be proximately caused by the statutory violation, i.e., there must be an “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising . . . [which] occurs when deception of consumers causes them to withhold trade from the plaintiff.”
On these bases, the Court held Lexmark, which sells laser printers and cartridges, subject to suit by Static Control, which sells components for remanufacturing Lexmark cartridges, where Static Control alleged that Lexmark falsely advertised to cartridge remanufacturers that it was illegal to use Static Control’s products to refurbish cartridges. Given that Static Control and Lexmark are not direct competitors, Lexmark accordingly represents a broadening in standing to sue under the federal false advertising statute.