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Media Alerts - Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc. -- Fourth Circuit
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September 29, 2017
  Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc. -- Fourth Circuit
Don't Put All Your Eggs in One Basket: Court Affirms Humane Farm Animal Care's Email was False Advertising

Areas of Law: Constitutional Law - First Amendment - Lanham Act - False Advertising

Issue Presented: Whether the District Court for the Eastern District of Virginia erred in finding that Humane Farm Animal Care's email regarding Handsome Brook Farm's business certifications was false advertising as defined under the Lanham Act, thereby entitling Handsome Brook Farm to injunctive relief.

Brief Summary: In an unpublished opinion, the United States Court of Appeals for the Fourth Circuit upheld the issuance of a preliminary injunction and order compelling a retraction email from the Appellant in this case. The court determined that the United States District Court for the Eastern District of Virginia did not abuse its discretion or commit clear error when it decided that an email sent by the Appellant was prohibited by the Lanham Act, 15 U.S.C. §1125(a)(1)(B). This section forbids untrue or deceptive statements "in commercial advertising or promotion" which improperly represent another's product.

Extended Summary: Handsome Brook Farm, LLC, is an egg producer that distributes its products in grocery stores in the United States. Humane Farm Animal Care, Inc. (HFAC) is a 501(c)(3) non-profit that offers certifications for egg producers that meet HFAC's standards for humane treatment of laying hens. As a non-profit, HFAC receives a portion of the sales (plus other fees) from products with its "Certified Humane" label. Having the HFAC label on a product may make it more appealing to consumers who value animal welfare in food production.
In April 2016, the employee of another egg producer contacted HFAC, saying he knew people at a facility that packed Handsome Brook eggs. The employee further reported that the eggs "were not pasture raised, but were being packed in cartons with pasture raised labeling." Unrelated to the claims made by the employee, HFAC audited the facility one month later. The HFAC auditor filed a report saying Handsome Brook's certifications were expired.

On May 20, 2016, the Executive Director of HFAC, Adele Douglass, sent an email to thirty-six large retailers, including Costco, Harris Teeter, Kroger, Publix, Safeway, Target, and Whole Foods. These businesses either had a partnership with HFAC or were considering carrying Handsome Brook eggs. The email said that HFAC was prompted by a whistleblower complaint to inspect a facility that packed HFAC "Certified Humane" eggs, in addition to Handsome Brook eggs. The email continued that the "Pasture Raised" statement on Handsome Brook cartons could not be validated, and that none of the eggs being packed at the time of the inspection were pasture raised nor were they "American Humane Certified." The email also reported that Handsome Brook's organic certification was not up-to-date. The email closed by urging the stores to "reconsider changing suppliers."

Before sending the email, HFAC did not contact Handsome Brook's certifiers or make attempts to confirm the truth of the audit report. Because of the email, stores pulled Handsome Brook's eggs, temporarily or indefinitely, and a proposed retail partner delayed its introduction of the product.

Handsome Brook initiated suit, claiming the email was false advertising under the Lanham Act. With its complaint, it included current organic certifications from the three egg producers it worked with, in addition to affidavits from the American Humane Association confirming that Handsome Brook and its affiliated producers had passed timely audits. The District Court initially provided Handsome Brook with a temporary restraining order, but later granted a preliminary injunction as well, and required HFAC to publish a retraction email.

The Fourth Circuit reviewed the granting of the preliminary injunction for abuse of discretion. A preliminary injunction is properly granted if (1) the plaintiff will likely succeed on the merits, (2) the plaintiff will likely suffer irreparable harm if the preliminary injunction is denied, (3) the balance of equities favors granting a preliminary injunction, and (4) the public interest counsels in favor of granting the preliminary injunction. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

The court first considered language in the Lanham Act, 15 U.S.C. §1125(a)(1)(B), which forbids untrue or deceptive statements "in commercial advertising or promotion" that improperly represent another's product. Because the Lanham Act does not provide a definition for "commercial advertising or promotion," the court turned to a test out of the Southern District of New York. In that test, commercial advertising or promotion is defined as (1) commercial speech (2) by a defendant in commercial competition with the plaintiff (3) for the purpose of influencing consumers to buy goods or services, and the representations (4) must be sufficiently disseminated to the relevant purchasing public to constitute advertising or promotion within that industry. Gordon & Breach Sci. Publishers v. Am. Inst. Of Physics, 859 F. Supp. 1521, 1536 (S.D.N.Y. 1994). The Fourth Circuit adopted a modified version of this test that excludes the second factor.

Commercial speech receives less protection under the First Amendment. The court found that HFAC was primarily motivated by commercial interests when it sent its email. This conclusion was based on the fact that the recipients of the email were grocers that could sell HFAC-certified products. Additionally, the email mentioned HFAC's certification, comparing it to others in a way that presented it as superior.
The court further found that Handsome Brook suffered irreparable harm and would continue to if its injunction was denied. Handsome Brook's allegations, found to be true by the district court, were that two grocers had stopped selling Handsome Brook Eggs and one had postponed a rollout of the product. Additionally, the contents of the email had been shared outside of the recipients, and one individual heard it being discussed at a trade show.

In coming to its conclusion, the court rejected HFAC's defenses of truth, unconstitutional prior restraint on speech, and improperly compelled speech. The email could not be considered true where, among other things, HFAC did not conduct its audit based on the "whistleblower" report. Additionally, as the court noted, prior restraints are constitutionally permissible to stop false and misleading commercial speech. Finally, the State has an interest in protecting consumers from false and misleading speech. Thus, where the nature of the speech in this case is commercial, the compulsion is allowable.

To read the full opinion, click here.

Panel: Judges Gregory, Duncan, and Diaz.

Argument Date: 05/11/2017

Date of Issued Opinion: 08/22/2017

Docket Number: 16-1813

Decided: Affirmed by unpublished opinion.

Case Alert Author: Hannah Catt, Univ. of Maryland Carey School of Law

Counsel: Lana Marie Manitta, RICH ROSENTHAL BRINCEFIELD MANITTA DZUBIN & KROEGER, LLP, Alexandria, Virginia, for Appellant. Sanjay Satish Karnik, AMIN TALATI UPADHYE, LLP, Chicago, Illinois, for Appellee. ON BRIEF: Ryan M. Kaiser, AMIN TALATI UPADHYE, LLP, Chicago, Illinois, for Appellee.

Author of Opinion: Chief Judge Gregory

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 09/29/2017 02:45 PM     4th Circuit  

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