Handsome Brook Farm, LLC. v. Humane Farm Animal Care, Inc.
700 F. App'x 251
| 4th Cir. | 2017Background
- HFAC, a 501(c)(3) that certifies humane egg producers, emailed 36 retailers that Handsome Brook Farm’s eggs lacked verifiable “pasture raised” and current organic/American Humane certifications and urged retailers to reconsider the supplier.
- HFAC’s email referenced a traceability inspection purportedly based on a whistleblower complaint and touted HFAC’s auditing process as more reliable.
- Handsome Brook presented evidence that its organic and American Humane certifications were current and that HFAC’s audit was not conducted on the basis of the whistleblower complaint.
- After the email, some retailers removed or delayed carrying Handsome Brook’s eggs; Handsome Brook sued under the Lanham Act for false advertising.
- The district court granted a preliminary injunction prohibiting HFAC from circulating the email and ordered HFAC to send a retraction; HFAC appealed.
- The Fourth Circuit affirmed, holding the email constituted commercial advertising or promotion, likely contained false/misleading statements, and that injunction relief (including a retraction) was appropriate.
Issues
| Issue | Plaintiff's Argument (Handsome Brook) | Defendant's Argument (HFAC) | Held |
|---|---|---|---|
| Whether the email is "commercial advertising or promotion" under the Lanham Act | Email was commercial: targeted retailers, economically motivated, promoted HFAC-certified eggs, and was sufficiently disseminated | HFAC is a non-profit engaged in advocacy; the email was informational/noncommercial speech about public interest practices | Held: Email is commercial advertising/promotion (adopting Gordon & Breach factors except competition); mixed noncommercial speech did not make it noncommercial because not "inextricably intertwined" |
| Whether the "whistleblower"/audit statement was false or misleading | Statement was false or misleading because HFAC did not conduct the inspection based on the whistleblower complaint and misrepresented verifiability of Handsome Brook’s certifications | HFAC contended a whistleblower (an industry employee) prompted inquiry and recipients would reasonably so understand it | Held: Likely false/misleading—HFAC’s audit was routine (not based on the complaint), so the email’s representation was misleading |
| Whether Handsome Brook showed irreparable harm justifying preliminary relief | Loss of retail accounts, delayed launches, reputational harm, continuing circulation of the email make monetary relief inadequate and irreparable harm likely | HFAC argued monetary damages could compensate and injunction is prior restraint on speech | Held: Irreparable harm likely (loss of customers/goodwill and difficulty of full recovery) supporting injunction |
| Whether injunction (ban + compelled retraction) violates First Amendment | Injunction and retraction are permissible because they prevent misleading commercial speech and are reasonably related to preventing consumer deception | HFAC argued injunction is an unconstitutional prior restraint and compelled speech | Held: Constitutional—false or misleading commercial speech may be enjoined and corrective disclosure is permissible (Zauderer rational-basis standard) |
Key Cases Cited
- Pashby v. Delia, 709 F.3d 307 (4th Cir. 2013) (standard of review for preliminary injunctions and factual/legal review rules)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) (four-part preliminary injunction test)
- Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60 (1983) (factors identifying commercial speech)
- Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748 (1976) (commercial speech receives lesser First Amendment protection)
- Gordon & Breach Sci. Publishers v. Am. Inst. of Physics, 859 F. Supp. 1521 (S.D.N.Y. 1994) (multi-factor test for "advertising or promotion")
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) (limiting Lanham Act standing analysis and role of competition)
- Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) (compelled disclosures for commercial speech reviewed for reasonable relation to preventing deception)
- Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir. 2002) (false advertising elements and public interest in preventing misleading ads)
- Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980) (commercial-speech doctrine acknowledging regulation of misleading commercial messages)