By Brian Craig, J.D.
Local retail stores that sell male enhancement drugs, without independently advertising the products, cannot held liable under the Lanham Act for false advertising.
In a false advertising suit brought by a manufacturer of male-enhancement products under the Lanham Act, the federal district court in San Diego has granted summary judgment to six retail store defendants. The court held that the retail stores that sell another company’s product, without independently advertising that product, cannot be held liable under the Lanham Act for any false statements on the product’s packaging. In granting summary judgment in favor of the defendant retail stores, the court also concluded that the manufacturer of male-enhancement products failed to show how sales from the defendant retail stores proximately caused any harm (In re Outlaw Laboratory, LP Litigation, December 3, 2019, Curiel, G.).
A Texas-based manufacturer of male-enhancement products, Outlaw Laboratory, LP, manufactures products called "TriSteel" and "TriSteel 8 hour." After sending demand letters, the manufacturer of male-enhancement products brought suit against proprietors of gas stations, liquor stores, and corner stores alleging that the retail stores sell sexual enhancement pills containing hidden prescription drugs in violation of the Lanham Act. Independent testing that shows at least five such products—Blue Fusion, Premier Zen Platinum 5000, King Kung 8000, Black Stallion 9000, and Rhino 25 Titanium 8000—contain hidden prescription drugs. The complaint alleged that the retail stores marketed the products as "all natural" and other violations for false advertising under the Lanham Act. The FDA has issued multiple notices warning that some of the products contain hidden drugs. The manufacturer of male-enhancement products initiated two separate lawsuits, which the court then consolidated but with independent discovery schedules. Six defendant retail stores in the first suit filed a motion for summary judgment.
Lanham Act liability. The court first concluded that the defendant retail stores cannot be found liable under the Lanham Act. Under the Lanham Act, direct liability arises from a false statement of fact by the defendant in a commercial advertisement about its own or another’s product. In the same way that an internet platform is not responsible for the veracity of vendors’ advertisements, a retail or wholesale store cannot be found liable for false information appearing on the packages of the products that they sell. Rather, for the store to be liable, it must actively misrepresent the products or make a false or misleading representation.
In the present case, court found that the retail stores are not directly liable under the Lanham Act, even if they were aware that the products’ packaging contained false advertising. The retail stores had no role in formulating the challenged products and had no role in drafting the language on the packaging. There was no evidence that any of the retail stores marketed or advertised the challenged products beyond stocking them on their shelves. The retail stores did not use any online advertisements to sell the products. No facts demonstrated that the retail stores independently advertised the products in their stores to consumers. The court held that the FDA notices about the product’s dangers are irrelevant in that they do not show how the retail stories falsely advertised or misrepresented the products. Because the retail stores did misrepresent the qualities of their own goods or another person’s goods, they cannot be held directly liable under the Lanham Act.
Causation. The court also held that the manufacturer of male-enhancement products failed to show how sales from the defendant retail stores proximately caused any harm. To establish proximate cause under the Lanham Act, a plaintiff ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising. Plaintiffs must establish a sufficiently close connection between the plaintiff’s harm and the conduct the statute prohibits.
Here, no evidence suggests that the defendant retail stores created the products, designed their packages, or independently advertised the products. Nothing in the record quantified the loss of sales or identifies specific customers who diverted their purchases. Consequently, the court found it difficult to see how merely placing products on display and selling them qualifies as conduct that caused injuries to the manufacturer. The injury must still be traceable to some conduct by the defendant which violates the Lanham Act. Thus, because the defendant retail stores have not misrepresented the qualities of another person’s goods in commerce, they cannot have proximately caused the injuries.
Accordingly, the granted summary judgment in favor of the six defendant retail stores in the first suit in the consolidated action. Discovery in the second case will continue.
The case is No. 3:18-cv-840-GPC-BGS.
Attorneys: Michael Ryan Dufour (Dufour Law, PC) and Sean Reagan (Leyh Payne & Mallia, PLLC) for Outlaw Laboratory, LP. Mark Poe (Gaw Poe LLP) for Roma Mikha, Inc. d/b/a Bobar.
Companies: Outlaw Laboratory, LP; Roma Mikha, Inc. d/b/a Bobar
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