Competitors can’t dismiss false advertising claim

Where two companies that manufacture and sell wood protection products moved to dismiss a third competitor’s suit claiming they engaged in false advertising, their motion was denied because the complaint pleaded that a false representation was made in interstate commerce, causing likely consumer deception and resulting damages.

Background

ISK Biocides Inc., Pallet Machinery Group Inc., or PMG, and J&G Manufacturing LLC manufacture and sell wood protection products. ISK, a competitor of defendants PMG and J&G, accuses the defendants of making false representations about WoodLock Bio-Shield Mold Inhibitor, the defendants’ line of wood protection products. ISK specifically alleges that the defendants have misrepresented the safety, environmental impact and regulatory status of WoodLock Bio-Shield products in violation of the Lanham Act, the Virginia Consumer Protection Act, or VCPA, and Virginia common law. The defendants move to dismiss ISK’s complaint

False advertising

From the allegations, the court infers that J&G made a false representation in the safety data sheet, or SDS, by stating that handlers of WoodLock Bio-Shield I need not wear any protective equipment. The court also finds that by referring customers from the public Facebook page to the SDS, J&G made this misrepresentation about WoodLock Bio-Shield I in a commercial advertisement.

The misrepresentation likely deceived a substantial number of consumers and influenced their purchasing decisions. Further, by making this misrepresentation on a public Facebook page, J&G placed this false statement in interstate commerce. Finally, the complaint alleges the misrepresentation damaged ISK. Customers continued purchasing WoodLock Bio­Shield I, in part, because of the assurance that its handlers need not wear personal protective equipment. These consumers, therefore, do not seek wood protection products from other suppliers like ISK.

As for ISK’s false advertising claim against PMG, ISK cites an advertisement that PMG plausibly placed in an industry magazine stating that “WoodLock Bio-Shield Mold Inhibitor is safe for employees and machinery.” Reasonable inferences lead the court to find that handlers of WoodLock Bio-Shield I should wear protective gear. Thus, PMG’s representation, without any caveat about the need for protective gear, is plausibly false or misleading.

ISK also brings a contributory false advertising claim against the defendants. Although the Fourth Circuit has not recognized such a claim, this court agrees with the Eleventh Circuit’s conclusion: the Lanham Act creates liability for contributory false advertising.

ISK alleges that J&G “contributed” to PMG’s conduct – placing the ad in the industry magazine – “by knowingly inducing or causing the conduct.” Put differently, PMG endorsed the safety of WoodLock Bio-Shield products in its advertisement based, in part, on J&G’s assurance that those handling WoodLock Bio-Shield I need not wear personal protective equipment. For these reasons, ISK’s contributory false advertising claim survives against J&G.

ISK also adequately alleges a contributory false advertising claims against PMG. ISK adequately alleges that “a third party” (J&G) “in fact directly engaged in false advertising that injured” ISK. PMG “materially participat[ed]” in this conduct by distributing the SDS that J&G created “during advertising and sales” of WoodLock Bio-Shield I.

False association

ISK cites a post on PMG’s public Facebook page in which PMG said that WoodLock Bio-Shield “is a proven EPA registered product.” According to ISK, “WoodLock Bio-Shield is not registered with [the] EPA.” As a result, this post may deceive “[c]onsumers . . . into believing that WoodLock Bio­Shield has been authorized” by the EPA. Further, this misrepresentation damages ISK’s business. Thus, ISK’s false association claim survives against PMG.

As for ISK’s false association claim against J&G, the court also attributes this Facebook post to J&G. As a result, the analysis above applies equally to J&G, and ISK’s false association claim against J&G remains.

VCPA

The VCPA was passed “to promote fair and ethical standards of dealings between suppliers and the consuming public.” But allowing a competitor to sue under the VCPA does not promote fair and ethical standards of dealing between suppliers and the consuming public. ISK, therefore, lacks standing to sue the defendants under the VCPA.

Common law

Virginia law “does not recognize false advertising as a form of common law unfair competition.” Nevertheless, ISK urges the court to “follow[] the precedent in other states” and “recognize the viability” of false advertising as violative of common law unfair competition. This court, however, declines to expand Virginia law and will dismiss this claim.

Defendants’ motion to dismiss granted in part, denied in part.

ISK Biocides Inc. v. Pallet Machinery Group Inc., Case No. 3:21-cv-386, Jan. 12, 2022. EDVA at Richmond (Gibney). VLW 022-3-012. 19 pp.