ARGUMENT
I. ADAM’S APPLE SHOULD BE GRANTED PRUDENTIAL STANDING UNDER
THE LANHAM ACT.
A. The Lanham Act Provides Private Parties with the Opportunity to Redress Injuries
Suffered as a Result of False Advertising.
Respondent’s characterization of the Lanham Act as primarily “a defense against
trademark infringement” (Resp’t Br. 36) fails to account for Congress’s intent to provide
a broad remedy to parties injured by false advertising. See S. Rep. No. 100-515, at 40
(1988), as reprinted in 1988 U.S.C.C.A.N. 5577, 5603. Respondent argues that even
though Section 43(a) expressly authorizes “any person who believes that he or she is or is
likely to be damaged” by false advertising to bring a claim, Congress “never intended the
Act to be so broadly construed.” (Resp’t Br. 8) In enacting the false advertising
provision, Congress made an explicit choice to use broad language, and Respondent
offers no explanation as to why that choice should not be honored. This Court has
cautioned that when statutory language is clear, Congress should not be judged to have
intended something different. See, e.g., Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S.
479, 495 n.13 (1985) (“Given the plain words of the statute, we cannot agree with the
court below that Congress could have had no inkling of [its] implications. Congress’
inklings are best determined by the statutory language that it chooses . . . .”).
This Court should reject Respondent’s attempt to read the private right of action
out of the Lanham Act. Respondent asserts that the Lanham Act did not create a private
enforcement mechanism and is therefore distinguishable from other remedial statutes.
(Resp’t Br. 8 n.3) (“The limited scope of the Lanham Act differs from other remedial
statutes, such as the Clayton Act, in which Congress created a private enforcement
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mechanism.”). This Court has explicitly recognized that the Lanham Act provides private
parties with a means of seeking a remedy. Coll. Sav. Bank v. Fla. Prepaid Postsecondary
Educ. Expense Bd., 527 U.S. 666, 670 (1999) (“Section 43(a) of the Lanham Act
. . . created a private right of action against ‘[a]ny person’ who uses false descriptions or
makes false representations in commerce.” (quoting 15 U.S.C. § 1125(a))).
B. The Protections of the Lanham Act are Not Limited to Direct Competitors or to
Parties Specifically Targeted by a Defendant.
This Court has never previously restricted standing under the Lanham Act to
those parties whose injury is inflicted by a direct competitor. Respondent’s understanding
of both the “competitive injury test” and the “multi-factor test” (Resp’t Br. 10, 11) rests
upon a narrow construction of competitive injury as only those commercial harms where
both parties occupy the same “supply-chain roles in the market.” (Resp’t Br. 14) This
Court has consistently declined to adopt such a narrow definition. See, e.g., Falls City
Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 436 (1983) (concluding that a brewer
inflicted a “competitive injury” on a wholesale beer distributor); FTC v. Sun Oil Co., 371
U.S. 505, 510 (1963) (citing with approval a Commission finding that a producer-refiner
of oil caused “actual competitive injury” to gasoline retailers).
A number of circuits upon which Respondent relies have explicitly rejected
Respondent’s contention that the Lanham Act’s protections are categorically limited to
direct competitors. The Third Circuit in Conte considered a restriction of the statute’s
false advertising terms to direct competitors, but rejected it. Conte Bros. Auto., Inc. v.
Quaker State-Slick 50, Inc., 165 F.3d 221, 231 (3d Cir. 1998) (“[P]arties who are not in
direct competition (because they are ‘doing business on different economic levels’)
nevertheless may have standing to sue . . . .” (internal citations omitted)). The Second
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Circuit, in Ortho Pharmaceutical Corp., explicitly stated that to bring a Lanham Act false
advertising claim, a plaintiff “need not demonstrate that it is in direct competition with
the defendant.” Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994).
Finally, the Seventh Circuit has adopted the proposition that “[a] party need not be in
direct competition with a defendant to challenge a defendant’s practices under the Act.”
Dovenmuehle v. Gilldorn Mortg. Midwest Corp., 871 F.2d 697, 700 (7th Cir. 1989).
Respondent’s attempt to limit prudential standing to parties specifically targeted
by a defendant’s false advertising (Resp’t Br. 16–17) is unfounded. This Court has made
clear that standing to contest anticompetitive acts is not limited to specifically targeted
entities. See Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters,
459 U.S. 519, 537 n.37 (1983) (“[W]e rejected the contention that, because there was no
specific intent to harm the plaintiff, her injury was thereby rendered remote.”); Blue
Shield of Va. v. McCready, 457 U.S. 465, 479 (1982) (“[T]he remedy cannot reasonably
be restricted to those competitors whom the conspirators hoped to eliminate from the
market.”).
C. No Articulable Statutory Policy Requires this Court to Deny Adam’s Apple
Prudential Standing.
Congress intended the Lanham Act to provide a remedy to parties, like Adam’s
Apple, which suffered commercial losses or diversions of goodwill as a result of
anticompetitive actions taken by another market participant. See S. Rep. No. 79-1333, at
2 (1946), as reprinted in 1946 U.S.C.C.A.N. 1274, 1275. Recognizing a presumption of
prudential standing under such a statute helps to ensure that injured parties have access to
a judicial forum in which to seek redress. This Court should, therefore, deny prudential
standing only where there is an “articulable consideration of statutory policy” that merits
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denial in the particular case. McCready, 457 U.S. at 473. No such consideration is present
here.
1. The Injury Suffered by Adam’s Apple is of the Nature Intended to be
Remedied Under the Lanham Act.
Adam’s Apple is the only party capable of raising a claim for its lost profits.
Congress intended to provide remedies to private parties injured by anticompetitive
behavior. See 15 U.S.C. § 1127 (2000). Given this remedial purpose, Respondent’s
argument that Soleil would be better situated to vindicate the public interest (Resp’t Br.
18–19) is misplaced. Such a conception of prudential standing would deny relief to every
party injured by false or misleading representations save one—the party judicially
designated “to perform the office of a private attorney general.” (Resp’t Br. 18–19)
Respondent suggests that Soleil, not Adam’s Apple, is better suited to bring a claim
against Aphrodite (Resp’t Br. 18–19), but Soleil could not bring a claim that could
compensate Adam’s Apple for its own injury. See Allen v. Wright, 468 U.S. 737, 751
(1984) (affirming “the general prohibition on a litigant’s raising another person’s legal
rights”).
Circuit courts have granted standing to parties with more attenuated relationships
to their respective markets than Adam’s Apple’s relationship to the cosmetics market.
Respondent attempts to distinguish Camel Hair and PPX Enterprises, two cases in which
courts granted standing to parties with relatively remote relationships to the products at
issue, on the grounds that they presented a “potential for industry-wide harm.” (Resp’t
Br. 17–18) The court in Camel Hair recognized that when counterfeit goods are
introduced into a market, consumer confidence may ultimately decline. Camel Hair and
Cashmere Inst. of Am., Inc. v. Assoc. Dry Goods Corp., 799 F.2d 6, 15 (1st Cir. 1986)
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(“[A] lasting but not readily measurable injury can be inflicted on a product’s reputation
by the circulation of counterfeit and, in this case, inferior products.”). The court
ultimately granted standing and injunctive relief based not on this industry-wide harm but
rather on the inevitable losses that would be suffered by the plaintiff’s members. See id.
at 12, 15. In the instant case, that Adam’s Apple did not specifically allege a market-wide
reduction in cruelty-free cosmetics sales does not place Adam’s Apple in a substantially
different position than the plaintiffs in Camel Hair.
2. The Damages Claimed by Adam’s Apple are Neither Speculative Nor
Duplicative.
That other factors potentially contributed to Adam’s Apple’s loss of sales does
not, as Respondent suggests, warrant a denial of standing on the grounds that the claimed
damages are speculative. The claimed damages in this case are no different than in any
other private action stemming from anticompetitive behavior. See Paul Heald, Money
Damages and Corrective Advertising: An Economic Analysis, 55 U. Chi. L. Rev. 629,
629 (1988). As the district court recognized, Adam’s Apple is prepared to present
evidence at trial to demonstrate the amount of loss directly attributable to Aphrodite’s
anticompetitive behavior. (J.A.19–20) Denying standing where there is no indication that
establishing the claim for damages would require “massive evidence” or “complicated
theories” would undermine Congress’s intent to regulate anticompetitive behavior and
remediate commercial losses. See McCready, 457 U.S. at 475 n.11.
In asserting that Adam’s Apple should not be granted standing because it could
have avoided the claimed damages by stocking Aphrodite’s products (Resp’t Br. 19 &
n.5), Respondent fails to address any of the arguments put forth in Petitioner’s Brief at
20–21. Considering the avoidance of damages has no basis in this Court’s precedent and
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would place an extraordinary burden on plaintiffs. See Assoc. Gen., 459 U.S. at 544–45.
Denying standing to plaintiffs who refuse to stock the product about which misleading
statements were made rewards the defendant’s anticompetitive behavior and undermines
the plaintiff’s legal right to enter into exclusive distributorship agreements. 54 Am. Jur.
2d Monopolies, Restraints on Trade, Unfair Trade Prac. § 127 (2006).
Respondent’s argument that granting Adam’s Apple standing would lead to a
flood of duplicative litigation (Resp’t Br. 20) ignores the courts’ ability to make
individualized assessments of prudential standing. Permitting Adam’s Apple to raise a
claim for commercial losses potentially valued at more than $100 million does not, as
Respondent suggests, automatically confer standing to “every corner grocer in America”
(Resp’t Br. 20). Courts typically deny standing to avoid duplicative damages only in
cases involving “passed-on” overcharges, e.g., Illinois Brick Co. v. Illinois, 431 U.S. 720,
736–37 (1977), or in extreme circumstances where the plaintiff’s claim could be raised
by an almost unlimited number of potential plaintiffs. See Joint Stock Soc’y v. UDV N.
Am., Inc., 266 F.3d 164, 181 (3d Cir. 2001); Procter & Gamble Co. v. Amway Corp., 242
F.3d 539, 564 (5th Cir. 2001). The instant case falls into neither category.
3. Respondent’s Proposed Alternative Avenues of Relief are Inappropriate
Substitutes for Adam’s Apple’s Ability to Bring a Claim Under the Lanham
Act.
Although Respondent suggests that “this Court will serve the purposes of the
Lanham Act and prudential standing by steering potential ‘private attorney generals’
toward more appropriate avenues of relief” (Resp’t Br. 21), both of its alternative
remedies are unsatisfactory. Respondent offers no explanation as to why a suit “for fraud
under state laws” would not present the very same problems that Respondent alleges
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would occur if Adam’s Apple were granted prudential standing under federal law.
(Resp’t Br. 20–21) Additionally, allowing the Federal Trade Commission or the Food and
Drug Administration to “vindicate the public interest in Adam’s Apple’s place” (Resp’t
Br. 20) is wholly unsuitable. See Sandoz Pharms. Corp. v. Richardson-Vicks, Inc., 902
F.2d 222, 230 (3d Cir. 1990) (“A competitor in a Lanham Act suit does not act as a
vicarious avenger of the public’s right to be protected against false advertising. Instead,
the statute provides a private remedy to a commercial plaintiff who meets the burden of
proving that its commercial interests have been harmed by a competitor’s false
advertising.” (internal citations and marks omitted)). Denying standing to Adam’s Apple
because administrative agencies could potentially take action against Aphrodite would
frustrate the Lanham Act’s remedial purpose.
II. APHRODITE’S REPRESENTATIONS OF FACT ABOUT ITS BUSINESS
OPERATIONS SHOULD BE IDENTIFIED AS COMMERCIAL SPEECH.
A. Commercial Speech Must Be Defined in a Way That Protects Consumers from
Misleading Information, Regardless of the Opportunity for Debate or Reflection.
Although the First Amendment generally permits parties to speak freely, this
Court has long recognized that because false or misleading commercial messages can
poison the clean, free flow of information in the marketplace, inaccurate commercial
speech can be restricted. E.g., Va. State Bd. of Pharm. v. Va. Citizens Consumer Council,
Inc., 425 U.S. 748, 771–72 (1976). As Respondent concedes, it is important for this Court
to provide clear guidance about the characteristics that define commercial speech,
because such guidance helps to “isolate[] the category of speech most likely to produce a
commercial harm.” (Resp’t Br. 23) This Court should continue to define commercial
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speech in a way that is consistent with the purpose for regulating such speech—to prevent
potentially misleading speech from deceiving consumers.
Respondent’s contention that speech is only commercial if it “affords little
opportunity for debate or counter-speech” (Resp’t Br. 23) contravenes this Court’s
commercial speech jurisprudence. Respondent supports its position with a single quote
from Justice Stevens’s concurrence in Rubin. (Resp’t Br. 26) (“[B]ecause commercial
speech often occurs in the place of sale, consumers may respond to the falsehood before
there is time for more speech and considered reflection to minimize the risks of being
misled.” (quoting Rubin v. Coors Brewing Co., 514 U.S. 476, 496 (1995) (Stevens, J.,
concurring))) When viewed in context, however, it is clear that Justice Stevens did not
consider the reception of speech at the point of sale to be the determinative factor for
designating speech as commercial. See Rubin, 514 U.S. at 496 (Stevens, J., concurring)
(listing multiple justifications for regulating commercial speech).
Furthermore, Bolger, which supplies the test Respondent champions, is
irreconcilable with Respondent’s “debate or counter-speech” conception of commercial
speech, (Resp’t Br. 23, 25–26). In Bolger, this Court determined that informational
pamphlets sent through the mail by a prophylactics manufacturer constituted commercial
speech. Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 67–68 (1983). Material sent
via post is received by consumers long before any commercial transaction occurs, and a
pamphlet entitled “Plain Talk About Venereal Disease,” sent unsolicited to consumers’
homes, certainly invites “public scrutiny and response” (Resp’t Br. 23). Yet, if this Court
accepts Respondent’s assertion that speech that is “highly susceptible to scrutiny and
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counter-speech” is not commercial speech (Resp’t Br. 29), then it necessarily follows that
the Bolger standard incorrectly identified noncommercial speech as commercial.
B. Identifying Aphrodite’s Representations as Commercial Speech Using the
Proposed Test Would Help Protect Consumers from Misleading Information.
The proposed test identifies representations with a high potential to mislead
consumers as commercial speech. Consumers are likely to credit and rely upon
representations that meet the proposed test—statements (1) made by a commercial
speaker, (2) to an intended audience of potential customers, and (3) containing factual
representations about its business operations or products. Cf. Virginia Bd., 425 U.S. at
770 (recognizing that “information is not in itself harmful, [and] people will perceive
their own best interests if only they are well enough informed”). Properly characterizing
representations that fall under the proposed test as commercial speech would allow the
state to regulate such factual representations for their accuracy, thereby effectuating the
main rationale underpinning the commercial speech doctrine: “insuring that the stream of
commercial information flow[s] cleanly as well as freely.” Id. at 771–72.
Aphrodite’s representation that “Aphrodite adopted a Code of Conduct in which
we pledge to cease all testing of our cosmetics on animals—a pledge we have kept”
(J.A.13) satisfies all three prongs of the proposed test, and thus is properly designated as
commercial speech. Respondent does not refute the correctness of this application and
does not deny that this statement by Aphrodite, taken alone, constitutes commercial
speech. Some allegations in Adam’s Apple’s complaint may refer to noncommercial
speech, but this does not foreclose recovery for allegations of false or misleading
commercial speech. See Fed. R. Civ. P. 8(e) (“When two or more statements are made in
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the alternative and one of them if made independently would be sufficient, the pleading is
not made insufficient by the insufficiency of one or more of the alternative statements.”).
Relying exclusively upon the three factors announced in Bolger would risk
immunizing from regulation large amounts of speech with the potential to inflict
commercial harm. Respondent claims that Aphrodite’s speech falls outside the three
Bolger factors and that the speech is thus noncommercial. (Resp’t Br. 28–29) Such a
characterization, however, implies that these factors are necessary characteristics of
commercial speech. This contradicts the express language of Bolger, which states that its
factors are not necessary. 463 U.S. at 68 n.14 (“Nor do we mean to suggest that each of
the characteristics present in this case must necessarily be present in order for speech to
be commercial.”). If the three Bolger factors are treated as necessary, then the definition
of commercial speech becomes too narrow to effectively prevent false or misleading
representations from reaching the marketplace. For example, a false assertion of
professional qualifications would not qualify as commercial speech under Respondent’s
application of Bolger unless it appeared in a traditional advertising format. Cf. Ibanez v.
Fla. Dep’t of Bus. and Prof’l Regulation, 512 U.S. 136, 142 (1994) (accepting stipulation
that “CPA” on business cards and letterhead constituted commercial speech). Regardless
of format, such assertions, if false or misleading, threaten to harm consumers.
C. The Commercial Speech Contained within Aphrodite’s Public Statements is Not
Inextricably Intertwined with Surrounding Noncommercial Speech.
Respondent’s argument that any commercial representations made by Aphrodite
in its public statements were inextricably intertwined with surrounding noncommercial
speech (Resp’t Br. 32–33) is contrary to applicable precedent. Respondent relies heavily
upon Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781
10
(1988), yet Riley is squarely distinguishable from the instant case. As this Court made
clear in Fox, the two types of speech in Riley were inextricably intertwined because state
law required that the speaker’s noncommercial speech include a commercial message.
Bd. of Trs. of SUNY v. Fox, 492 U.S. 469, 474 (1989). No analogous law or regulation
exists in the instant case. Under Fox, nothing more is necessary to find that speech is not
inextricably intertwined. See id.
Respondent attempts to distinguish Fox and subsequent circuit cases by arguing
that the facts of those cases “support a suspicion that the non-commercial element had
been added solely for the purpose of immunizing the speech.” (Resp’t Br. 33) Nothing in
this Court’s jurisprudence suggests that such a “suspicion” is relevant as to whether the
particular statements are inextricably intertwined. In Fox, for example, this Court did not
inquire as to why a housewares salesperson included a home economics presentation with
her sales pitch. 492 U.S. at 473–74. Moreover, even if one were to assume that the
motives were relevant, Respondent offered no support for its assertion that the speakers’
motives in the cases it attempts to distinguish were unlike Aphrodite’s. The
noncommercial messages in both Fox and the instant case may be logically related to the
accompanying commercial representations, but they are not inextricably intertwined.
D. Identifying Specific Representations of Aphrodite’s as Commercial Speech Poses
Little Risk of Chill or Increased Litigation.
Respondent contends that “An Expansive Test for Commercial Speech Would
Have a Chilling Effect on Valuable Speech” (Resp’t Br. 29), but explains neither why
Adam’s Apple’s test is expansive nor how it would chill speech. Respondent
characterizes the test, without explanation, as “expansive” and “broad.” (Resp’t Br. 4)
The three prongs of the proposed test, however, each narrow the inquiry’s scope such that
11
commercial speakers have significant freedom to engage in noncommercial speech.
Furthermore, Respondent fails to cite a single case in which speech considered to be
noncommercial by a court would be designated as commercial under the proposed test.
The proposed test would not lead to the uncertainty Respondent fears would chill
speech. Respondent echoes Justice Breyer’s concern that “Uncertainty about how a court
will view . . . statements, can easily chill a speaker’s efforts to engage in public
debate . . . .” (Resp’t Br. 31–32) (citing Nike, Inc. v. Kasky, 539 U.S. 654, 680 (2003))
(Breyer, J., dissenting from denial of certiorari). It is undoubtedly true that if a speaker is
uncertain as to whether it will face liability for its speech, it may exercise some caution
before speaking. Adopting the proposed test, however, would not increase a speaker’s
uncertainty beyond what exists under today’s jurisprudence. Rather, the proposed test
focuses the inquiry on representations of fact regarding the speaker’s business operations
or products—a clearly defined category.
Respondent also contends that designating Aphrodite’s speech as commercial
would allow a business to use litigation to divert a rival’s resources. (Resp’t Br. 34–35)
Respondent does not explain, however, how any particular conception of commercial
speech, including Adam’s Apple’s, would effect this evil. (Resp’t Br. 34–35) Respondent
argues that the Act provides “Adam’s Apple a significant financial incentive to address in
the courtroom what ought to be addressed through economic competition alone.” (Resp’t
Br. 36) This suggests that if a business believes it has been injured by a rival’s false or
misleading commercial representations, it should have no legal remedy but must instead
attempt to combat the false speech in the market. Such a position has no basis in
precedent and is antithetical to Section 43(a) of the Lanham Act, which expressly
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contemplates a civil remedy for damages arising from false or misleading commercial
speech. 15 U.S.C. § 1125(a) (2000). This Court should decline Respondent’s invitation to
define commercial speech in such a way that Section 43(a) of the Lanham Act is rendered
inoperative.
CONCLUSION
For the foregoing reasons and those in the Petitioner’s Brief, the judgment of the
Ames Circuit should be reversed.
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Respectfully submitted,
ADAM’S APPLE MARKETS, INC.
By its counsel,
______________________
Jim Farnsworth
______________________
Erika N. L. Harold
______________________
Kimberly E. Olvey
______________________
Schuyler Schouten
______________________
James A. Wawrzyniak, Jr.
______________________
Cassandra H. Welch
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