Ariix, LLC v. Nutrisearch CorporationAriix, LLC v. Nutrisearch Corporation
OPINION
Appeal from the United States District Court for the Southern District of California
Larry A. Burns, Chief District Judge, Presiding
Opinion by Judge Lee;
Dissent by Judge Collins
* The Honorable Gregory A. Presnell, United States District Judge for the Middle District of Florida, sitting by designation.
ARIIX V. NUTRISEARCH
SUMMARY**
Lanham Act
The panel reversed the district court‘s dismissal of a false advertising claim under the Lanham Act and remanded for further proceedings.
Addressing whether the First Amendment shields a publisher of supposedly independent product reviews if it has secretly rigged the ratings in favor of one company in exchange for compensation, the panel held that this speech qualifies as commercial speech. Accordingly, a non-favored company may potentially sue the publisher for misrepresentation under the Lanham Act, which prohibits any person from misrepresenting her or another person‘s goods or services in “commercial advertising or promotion.”
Addressing whether the defendant made misrepresentations in advertising or promotion, the panel concluded that the plaintiff plausibly alleged that the defendant‘s publication was commercial speech, was sufficiently disseminated, and contained actionable statements of fact. The panel left for the district court to decide, on remand, whether defendant‘s publication was “for the purpose of influencing consumers to buy defendant‘s goods or services.”
Dissenting, Judge Collins wrote that the plaintiff failed to plead sufficient facts to show that it had an actionable claim for false advertising under the Lanham Act. He wrote that, in his view, it was unnecessary to reach the question whether the defendant‘s publication amounted to commercial speech for First-Amendment purposes because the Lanham Act applies only to a subset of commercial speech, and defendant‘s publication did not fall within the statute‘s textual limitations.
** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
COUNSEL
Aaron R. Gott (argued), Jarod M. Bona, David C. Codell, and Luke Hasskamp, Bona Law PC, La Jolla, California, for Plaintiff-Appellant.
Erik A. Christiansen (argued) and Alan S. Mouritsen, Parsons Behle & Latimer, Salt Lake City, Utah, for Defendants-Appellees.
OPINION
LEE, Circuit Judge:
This case addresses whether the First Amendment shields a publisher of supposedly independent product reviews if it has secretly rigged the ratings to favor one company in exchange for compensation. We rule that this speech qualifies as commercial speech only, and that a non-favored company may potentially sue the publisher for misrepresentation under the Lanham Act. We reverse the district court‘s dismissal of the complaint, and remand for further proceedings.
FACTUAL BACKGROUND
I. NutriSearch publishes a widely used nutritional supplement guide.
NutriSearch Corporation regularly self-publishes the NutriSearch Comparative Guide to Nutritional Supplements (the “Guide“), a book that compares and reviews nutritional supplements sold in the direct marketing industry. Written by Lyle MacWilliam, the Guide has become a trusted name among sales representatives in the direct marketing supplement industry.
The Guide has two types of ratings. First, it comparatively rates supplement products using a five-star rating system based on 18 criteria. Second, companies whose products receive five stars can obtain another certification from NutriSearch. These certifications are called NutriSearch Medals of Achievement. To obtain a medal certification, a company must verify compliance with the FDA‘s pharmaceutical good manufacturing practices (“GMP“) and obtain certification from an approved laboratory that its label claims are true. The complaint alleges that the medal certifications are “described as a binary determination: either a company obtains [GMP] certification and laboratory verification of the label claims, or it does not.” In the sixth edition of the Guide, Usana Health Science, Inc. was the only company that obtained the highest ranking, the platinum medal.
NutriSearch portrays itself as an independent company that presents only objective data and scientific analyses to the public. For example, NutriSearch claims on its website that it relies on scientific criteria to mathematically calculate the ratings. Further, MacWilliam, the author of the Guide and the former CEO of NutriSearch,
This guide is intended to assist in sorting through the maze of nutritional supplements available in the marketplace today. It is not a product endorsement and does not make any health claim. It simply documents recent findings in the scientific literature.
This guide was not commissioned by any public sector or private sector interest, or by any company whose products may be represented herein. The research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide. (emphasis added).
NutriSearch removed the second paragraph from the sixth edition of the Guide, which was published months after Ariix filed this lawsuit.
II. Ariix alleges that NutriSearch rigged its ratings to favor Usana under a hidden financial arrangement.
NutriSearch‘s claims of neutrality are false, according to Ariix, LLC, a nutritional supplement company that competes fiercely with Usana.1 Despite assertions of being a neutral third-party reviewer, NutriSearch allegedly has a secret — and mutually lucrative — relationship with Usana.
MacWilliam — who worked as a Usana sales representative and served on its scientific advisory board — at first conceived the Guide to boost sales of Usana products, according to Ariix. MacWilliam remained a Usana sales representative and advisory board member until another company exposed this affiliation. When this happened, MacWilliam allegedly told former Usana executives, “I should not be on the board or a representative anymore because it looks like I‘m biased. I am going to create more of a third-party appearance, but I‘d like you to use me for speaking and support me.” Usana agreed to this arrangement in exchange for the number one rating in the Guide. Usana also encourages its sales representatives to buy the Guide and to refer to it in marketing pitches to customers.
Now, Usana annually pays hundreds of thousands of dollars in speaking and promotion fees to NutriSearch and MacWilliam in exchange for being rated the top supplement company in the Guide. Usana‘s payments to MacWilliam allegedly account for more than 90% of his income.
The complaint alleges additional examples of NutriSearch and MacWilliam colluding with Usana to tweak the Guide‘s ratings criteria to benefit Usana. NutriSearch promotes certain scientific claims to dovetail with Usana‘s marketing campaign, or emphasizes certain ingredients that Usana has added to its products to ensure that Usana attains the top ranking in the Guide.
In 2008, Usana withdrew its support for NutriSearch after other companies obtained a medal certification in the Guide. That caused NutriSearch‘s sales and MacWilliam‘s speaking engagements to drop. A Usana executive suggested that Usana would recommence providing fees and speaking engagements if Usana obtained a number one ranking in some way.
III. NutriSearch improperly thwarts Ariix from obtaining the top rating.
Ariix considers itself Usana‘s fiercest competitor in both sales and recruitment of independent sales representatives. Because of this rivalry, Ariix asserts that NutriSearch has improperly thwarted Ariix from obtaining the top medal certification in the Guide.
Ariix first applied for a medal certification in 2014. The application was denied because NutriSearch decided to stop accepting reports and certifications from ISO-17025-certified laboratories.2 Even though prior medal recipients used ISO-17205-certified labs, NutriSearch applied this new restriction only on a future basis, exempting the previous recipients (including Usana) from the new requirement.
In response, Ariix sought to obtain a new analysis of its formulation by using new protocols and procedures that followed NutriSearch‘s new guidelines. When Ariix submitted its new results, NutriSearch stated that “we can insert your NutriSearch GOLD Medal of Achievement into future printings of the existing guide once current stock has been depleted.” NutriSearch released a new edition of the Guide, the sixth edition, but it did not include Ariix‘s medal certification. NutriSearch then stopped responding to Ariix‘s inquiries.
Ariix also alleges that Usana in 2011 misappropriated Ariix‘s confidential information and draft marketing materials about its debut product and gave them to NutriSearch with the instruction “to run a new printing for the express purpose of thwarting Ariix‘s entry to the market.” At first, NutriSearch rated this product 3.5 stars, but after public criticism and incontrovertible evidence of quality, NutriSearch revised the rating to 5 stars.
Finally, Ariix points to its failed attempts to engage MacWilliam as a speaker. Ariix offered MacWilliam an opportunity to speak at one of Ariix‘s conventions, but in September 2014, MacWilliam declined, explaining he was not taking any more speaking engagements. MacWilliam, however, continued to take speaking engagements with Usana. When confronted with this apparent favoritism, MacWilliam admitted that “[t]hey [Usana] will cut me off the second I do this [speak for Ariix].”
PROCEDURAL HISTORY
Ariix filed a complaint in district court against NutriSearch and MacWilliam, alleging a false advertising claim under Section 43(a) of the Lanham Act. See
The district court granted the defendants’ motion to dismiss the complaint. The district court interpreted the complaint as based on two sets of alleged misrepresentations: (1) NutriSearch misrepresented Ariix and its products as not being top quality and not worthy of a medal certification, and (2) NutriSearch
Ariix filed an amended complaint. The amended complaint had more allegations about the relationship among NutriSearch, MacWilliam, and Usana as well as more details on the type of statements used to market the Guide. Again, the defendants moved to dismiss for failure to state a claim.
The district court granted the motion and dismissed the action with prejudice. The court noted that it incorporated much of the earlier order and affirmed its conclusion that the Guide as a whole and any statements in the Guide are not commercial advertising within the scope of the Lanham Act. It also rejected the argument that the relationship between the defendants and Usana made it plausible that the Guide was commercial advertising. The court found that none of the asserted statements, including statements about the ratings’ methodology and the failure to award the medal certification, were actionable.
Ariix then timely filed its notice of appeal to this court.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under
DISCUSSION
The district court made two main determinations about Ariix‘s false advertising claim: The Guide is not commercial advertisement under the Lanham Act and it lacks statements that are actionable.3
I. Ariix has plausibly alleged that NutriSearch engaged in commercial speech, but we remand for the district court to consider the “purpose of influencing” element under the Lanham Act.
The Lanham Act prohibits any person from misrepresenting her or another
The parties focus mainly on the first element: whether NutriSearch‘s Guide qualifies as “commercial speech.” If it is not commercial speech, then the Lanham Act claim must fail, as the Guide would receive robust protection under the First Amendment. But if the Guide is commercial speech, our First Amendment jurisprudence allows more restrictions, including permitting a potential cause of action under the Lanham Act. See Central Hudson, 447 U.S. at 562-63 (explaining that commercial speech receives lesser protection than other types of speech). We address each of the four elements below.
A. Whether the Guide constitutes commercial speech.
We first address whether Ariix‘s complaint plausibly alleges that the Guide is commercial speech. See Coastal Abstract, 173 F.3d at 735. We disagree with the district court‘s conclusion that the Guide is not commercial speech because the complaint plausibly alleges that the Guide is essentially a sham marketing ploy intended to boost Usana products.
Commercial speech is “usually defined as speech that does no more than propose a commercial transaction.” United States v. United Foods, Inc., 533 U.S. 405, 409 (2001). Courts view “this definition [as] just a starting point,” however, and instead try to give effect to “a ‘common-sense distinction’ between commercial speech and other varieties of speech.” Jordan v. Jewel Food Stores, Inc., 743 F.3d 509, 516 (7th Cir. 2014) (quoting Ohralik v. Ohio State Bar Ass‘n, 436 U.S. 447, 455-56 (1978)). Indeed, “[o]ur commercial speech analysis is fact-driven, due to the inherent difficulty of drawing bright lines that will clearly cabin commercial speech in a distinct category.” First Resort, Inc. v. Herrera, 860 F.3d 1263, 1272 (9th Cir. 2017) (internal quotation marks omitted).
On its face, the Guide purportedly describes the science of nutritional supplements and provides ratings for various nutritional supplement products.4 Based on this general
description alone, the Guide does not appear to propose a commercial transaction. But speech that does not propose a commercial transaction on its face can still be commercial speech. See Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66-68 (1983) (finding that informational pamphlets that “cannot be characterized merely as proposals to engage in commercial transactions” were still commercial speech).
Because of the difficulty of drawing clear lines between commercial and non-commercial speech, the Supreme Court in Bolger outlined three factors to consider. “Where the facts present a close question,
Applying those Bolger factors, we face a close question.
First, neither side materially disputes that the Guide is not in the traditional form of an advertisement — for example, there is no price or availability information listed. But this fact alone does not tell us much, especially given today‘s sophisticated and subtle marketing campaigns. For example, companies now pay so-called “influencers” to issue posts on social media touting their products or services.5 While such social media posts may not have the indicia of a traditional advertisement, there can be little doubt that these paid posts are in fact advertisements. See Federal Trade Commission, FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship (Apr. 19, 2017), https://www.ftc.gov/news-events/press-releases/2017/04/ftc-staff-reminds-influencers-brands-clearly-disclose (“After reviewing numerous Instagram posts by celebrities, athletes, and other influencers, Federal Trade Commission staff recently sent out more than 90 letters reminding influencers and marketers that influencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.“).
Second, neither side materially disputes that the Guide refers to specific products.6 But this element does not shed much light, either. A publication that is not in a traditional advertising format but that still refers to a specific product can either be commercial speech — or fully protected speech. Compare United States v. Wenger, 427 F.3d 840, 847-48 (10th Cir. 2005) (finding that a newsletter
concerning investment advice is commercial speech even though it “is concededly not a traditionally structured advertisement“) with Commodity Trend Serv., Inc. v. Commodity Futures Trading Comm‘n, 149 F.3d 679, 686 (7th Cir. 1998) (citing cases that show that product reviews are generally not commercial speech).
The third Bolger factor — whether the speaker had an economic motivation — requires a more thorough explanation. This factor asks whether the speaker acted primarily out of economic motivation, not simply whether the speaker had any economic motivation. See Procter & Gamble Co. v. Amway, 242 F.3d 539, 552-53 (5th Cir. 2001), abrogated on other grounds by Lexmark Int‘l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (“The
Indeed, not all types of economic motivation support commercial speech. A simple profit motive to sell copies of a publication or to obtain an incidental economic benefit, without more, does not make something commercial speech. Otherwise, virtually any newspaper, magazine, or book for sale could be considered a commercial publication. See, e.g., Bolger, 463 U.S. at 67 (“Finally, the fact that Youngs has an economic motivation for mailing the pamphlets would clearly be insufficient by itself to turn the materials into commercial speech.“); Dex Media, 696 F.3d at 960 (finding that the financial benefit obtained from publishing yellow pages directories could not characterize the publication as commercial); Gordon & Breach Sci. Publishers S.A. v. Am. Inst. of Physics, 859 F. Supp. 1521, 1541 (S.D.N.Y. 1994) (“The fact that AIP and APS stood to benefit from publishing Barschall‘s results — even that they intended to benefit — is insufficient by itself to turn the articles into commercial speech.“).
At the same time, however, economic motivation is not limited simply to the expectation of a direct commercial transaction with consumers. Courts have found commercial speech even when it involves indirect benefits, such as benefits to employee compensation (First Resort, 860 F.3d at 1273), improvements to a brand‘s image (Jordan, 743 F.3d at 519-20), general exposure of a product (Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1017 (3d Cir. 2008)), and protection of licensees’ interests (Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc., 193 F. Supp. 3d 556, 568-69 (E.D. Va. 2016)). Importantly, the type of economic motivation is not the focus; rather, the crux is on whether the speaker had an adequate economic motivation so that the economic benefit was the primary purpose for speaking.7
With the above in mind, we find that Ariix has plausibly alleged that NutriSearch and MacWilliam published the Guide mainly with the economic goal of furthering their own self-interests beyond simply benefiting from sales of the publication. Specifically, Ariix has alleged enough to make it plausible that NutriSearch and MacWilliam published the Guide mainly to reap the financial benefits of a hidden marketing arrangement with Usana rather than to inform consumers about nutritional supplements. For example:
- To begin with, MacWilliam, who worked for Usana, concocted the Guide to ratchet up sales for Usana products, according to the complaint.
- Ariix alleges a specific conversation in which Usana agreed to pay MacWilliam‘s speaking fees if NutriSearch gave Usana the “number one
rating.” Since then, MacWilliam and NutriSearch allegedly receive hundreds of thousands of dollars annually in speaking and other fees from Usana. - Ariix also alleges an incident in which Usana threatened to pull its support for NutriSearch when other companies obtained a medal certification making them appear equal to Usana. In response, NutriSearch created a new “Editor‘s Choice” award to give to Usana, the only company to receive this award. MacWilliam then used this award as a reason to persuade Usana to pay him for a “summer-long vacation” in which he promoted Usana.
We do not, however, rely only on the allegations of payments. Many of Ariix‘s allegations raise significant doubts about whether the Guide is an objective compilation of product reviews and suggest that the Guide is instead a sham marketing scheme intended to benefit Usana.
First, the disclaimer included in the first five editions of the Guide stated that the book is “the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide.” That disclosure statement is false, at least according to the allegations in the complaint. Indeed, the Guide‘s genesis was as a marketing tool to sell Usana products.8 Today, Usana even uses MacWilliam as part of its image advertising; the complaint includes an image of MacWilliam that states that “I have full confidence that USANA will once again stand out as an industry leader and will continue to receive an elite standing in the new Comparative Guide.” That NutriSearch and MacWilliam chose such a strongly worded yet false disclaimer — disclaiming any association with all manufacturers in the Guide despite having obvious ties to Usana — raises
substantial questions about the Guide‘s true purpose, if the allegations in the complaint are true.
Ariix also alleges collusion about how the Guide‘s criteria are chosen. MacWilliam and NutriSearch allegedly re-wrote the fifth edition of the Guide to promote vitamin D and iodine content because it would coincide with Usana‘s new product formulations and marketing claims. In addition, the defendants allegedly coordinated with Usana to have the sixth edition focus on “cell-signaling” to match Usana‘s new marketing campaign focused on cell-signaling. Finally, the complaint alleges that the defendants reworked the Guide‘s medal certifications to award Usana the highest medal certification (the Platinum Medal of Achievement), something no other company earned.
To be clear, our decision today is a narrow one that is tied specifically to the troubling allegations in this case: they plausibly suggest that the Guide is more like a sophisticated marketing sham rather than a product review guide. Today, consumers face waves of advertisements amid a sea of product choices. To navigate the seemingly unending stream of advertisements, consumers often depend on independent reviews for candid and accurate assessments. But when someone falsely claims to be independent, rigs the ratings in exchange for compensation, and then profits from that perceived objectivity,
We are guided by a common-sense distinction between protected speech and commercial speech — in this case, legitimate product reviews versus paid product promotion — in determining whether the Guide is commercial speech. Cf. Wenger, 427 F.3d at 848 (“While disinterested investment advice will still qualify for full First Amendment protection, paid publicists’ speech is grounded in commercial transactions of the kind that the state has traditionally regulated.“). Simply put, paid promotion is commercial speech.
Though NutriSearch urges us to rule that biased and inaccurate reviews are fully protected speech, Ariix does not allege that the Guide is simply biased or inaccurate. A mere failure to disclose bias or financial interest would not necessarily make speech commercial. Here, though, we face allegations that the defendants conceived the Guide to juice sales of Usana products, actively misled the public about their supposed independence, and fiddled with their own ratings criteria to boost a favored company that lavishes them with hundreds of thousands of dollars in compensation. Put another way, it is more paid promotion than product review, according to the complaint. It is not controversial to conclude that “liability can arise under the Lanham Act if websites purporting to offer reviews are in reality stealth operations intended to disparage a competitor‘s product while posing as a neutral third party.” GOLO, LLC v. HighYa, LLC, 310 F. Supp. 3d 499, 505 (E.D. Pa. 2018). In short, taking the allegations in Ariix‘s complaint as true at the pleading stage, we hold that Ariix plausibly alleged that the Guide amounts to commercial speech.
But that does not end our inquiry. Commercial speech can lose its commercial character when it is “inextricably intertwined” with fully protected speech. Dex Media, 696 F.3d at 958. If “[n]o law of man or of nature makes it impossible” to present the noncommercial aspects of the speech without the commercial aspects, then the noncommercial speech is not inextricably intertwined with the commercial speech. Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 474-75 (1989) (finding that the home economics elements of Tupperware sales presentations were not inextricably intertwined with the sales pitches done in campus dormitories).
The Guide does include what appears to be fully protected speech: It has an “informational” part that describes the benefits and science of nutritional supplements. But the commercial parts of the Guide — specifically, the allegedly rigged ratings of nutritional supplements — are not so connected to this informational section to lose their commercial character. On the contrary, they seem easily separable. The Guide is described as consisting of two individual sections: an informational section and a ratings section. Nothing prevents NutriSearch from publishing the informational section as a separate publication from its ratings. Indeed, the Guide does not gain full First Amendment protection simply because it includes a distinct summary of scientific ideas as a prelude to its supposed product reviews. See Central Hudson, 447 U.S. at 562 n.5
B. Whether NutriSearch is in commercial competition with Ariix.
The next element is whether the defendant is in commercial competition with the plaintiff. Coastal Abstract, 173 F.3d at 735. The district court, though noting that this element “is likely in need of revision,” did not reach this question, and the parties agreed that Lexmark Int‘l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) likely abrogated this element. NutriSearch has waived any argument on this ground, given that it “agree[d] that a plaintiff is no longer required to show that a misrepresentation was made by a commercial competitor to sue under
C. Whether the Guide was intended to influence consumers to buy the defendants’ goods.
The third element is whether the advertisement or publication was issued “for the purpose of influencing consumers to buy defendant‘s goods or services.” Coastal Abstract, 173 F.3d at 735 (emphasis added).
Here, though, the alleged advertising (the Guide) is intended to help Usana‘s goods, not NutriSearch‘s product. The district court did not rule on this issue, and the parties have not briefed this issue before this court. We thus remand for the district court to consider this question in the first instance.10
The last element is whether the publication was sufficiently disseminated to the relevant purchasing public. Coastal Abstract, 173 F.3d at 735. To be “sufficiently disseminated,” the actions must be “part of an organized campaign to penetrate the relevant market,” which typically involves “widespread dissemination within the relevant industry.” Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 57 (2d Cir. 2002). See also Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1054 (9th Cir. 2008) (concluding that allegedly false statements were sufficiently disseminated because they were made in promotional literature distributed to thousands of sales accounts).
The Guide plausibly fits this standard, given that Ariix alleges that the “professional edition [of the Guide] is specifically designed for and marketed to tens of thousands of Usana sales representatives, who are told that referring prospective customers to the guide is one of the most effective ways to sell Usana products.”11
II. Ariix has plausibly alleged that the Guide contains misrepresentations.
For NutriSearch and MacWilliam to be liable for false advertising under the Lanham Act, the Guide must include false or misleading representations of fact, not simply statements of opinion. See Coastal Abstract, 173 F.3d at 730. An actionable statement is “a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact.” Id. at 731. See also Newcal Indus., 513 F.3d at 1053 (“Thus, a statement that is quantifiable, that makes a claim as to the ‘specific or absolute characteristics of a product,’ may be an actionable statement of fact.“). We have explained that “a false advertising claim may be based on implied statements” as long as those statements are specific and deceptive. Prager Univ. v. Google LLC, 951 F.3d 991, 1000 (9th Cir. 2020). Statements of opinion and puffery, however, are not actionable. See Newcal, 513 F.3d at 1053.
The comparative five-star ratings in the Guide are not actionable. They are simply statements of opinion about the relative quality of various nutritional supplement products. Ariix insists that these “star” ratings are factual because the Guide purports to rely on scientific and objective criteria. But there is an inherently subjective element in deciding which scientific and objective criteria to consider. For example, publications that rank colleges or law schools purportedly rely on objective criteria (e.g., acceptance rates, test scores, class size, endowment), but selecting those criteria involves subjective decision-making. Ariix also points to statements made by MacWilliam asserting that he “didn‘t want to put our particular bias into it” or that the Guide relies on a “higher standard of evidence.” But such unquantifiable assertions are “classic, non-actionable opinions or puffery.” Prager Univ., 951 F.3d at 1000 (finding that lofty but vague statements that appeal to free speech and open dialogue are not actionable).
Ariix is on more fertile ground when it refers to the disclaimer of independence
In addition, the failure to award Ariix a medal certification presents specific and measurable statements about Ariix. Ariix describes the medal certification as “a binary determination” based on two falsifiable criteria: compliance with the FDA‘s pharmaceutical good manufacturing practices and certification of product labels’ claims from an approved laboratory. By not awarding Ariix a medal certification — despite Ariix being eligible for such an award — the Guide falsely implies to consumers that Ariix did not comply with the FDA‘s GMPs or that it did not obtain the appropriate laboratory certification.12 This is false, at least based on the allegations in the complaint. Apparently, NutriSearch itself admitted that Ariix achieved certification pending final laboratory reports and even offered to “insert your NutriSearch GOLD Medal of Achievement into future printings of the existing guide.” Indeed, the complaint alleges that Ariix was the only qualified applicant to have followed NutriSearch‘s new application guidelines, yet it still did not receive the certification. These implications are specific, measurable, and capable of being falsified, so they are actionable statements for a false advertising claim under
CONCLUSION
We find that Ariix‘s allegations are enough to overcome the defendants’ challenges. Ariix plausibly alleges that the Guide is commercial speech, is sufficiently disseminated, and contains actionable statements of fact. We make no decision, however, about whether Ariix meets the Lanham Act‘s third element of the definition of “commercial advertising or promotion” — i.e., whether the Guide was “for the purpose of influencing consumers to buy defendant‘s goods or services” — and leave this issue for the district court to decide in the first instance. We reverse and remand to the district court for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
COLLINS, Circuit Judge, dissenting:
In my view, Plaintiff-Appellant Ariix, LLC, a manufacturer of nutritional supplements, has failed to plead sufficient facts to show that it has an actionable claim for false advertising under
The operative complaint in this case asserts a single cause of action for false advertising in violation of
[a]ny person who, on or in connection with any goods or services, . . . uses in commerce any . . . false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person‘s goods, services, or commercial activities.
Id. (emphasis added). To succeed on such a claim, Ariix thus must plead and prove, inter alia, that Defendants made the challenged false or misleading representations “in commercial advertising or promotion.” Id. The theory of Ariix‘s complaint is that, due to MacWilliam‘s and NutriSearch‘s financial relationships with Usana, the Guide, or at least portions of it, should be deemed to be “commercial advertising or promotion” of Usana‘s products within the meaning of
The majority concludes that, under Bolger v. Youngs Drug Products Corp., 463 U.S. 60 (1983), “Ariix plausibly alleged that the Guide amounts to commercial speech” for First-Amendment purposes, and it reverses the district court‘s contrary conclusion and remands for further proceedings. See Maj. Opin. at 14-16, 21-22, 27. In my view, it is unnecessary to reach this broader (and troubling) constitutional question, because the Lanham Act applies only to a subset of commercial speech, and the Guide does not fall within the statute‘s textual limitations.
A
As the wording of the Act confirms, the “commercial advertising or promotion” covered by
As the majority notes, see Maj. Opin. at 22-23, Defendants expressly concede — correctly, in my view — that the first of these three limitations did not survive the Supreme Court‘s decision in Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). Although it is true that Lexmark specifically declined to decide whether the communications at issue in that case constituted “commercial advertising or promotion,” id. at 123 n.1, the Court unanimously and explicitly rejected lower-court rulings — including from this court — that had limited standing to sue for false advertising under
Nothing in Lexmark, however, undermines Gordon & Breach‘s sufficient-dissemination requirement, which properly recognizes that “commercial advertising” typically refers to speech that is generally distributed to persons in the relevant market. See Advertising, Black‘s Law Dictionary (11th ed. 2019) (“The action of drawing the public‘s attention to something to promote its sale.” (emphasis added)). I agree with the majority that, as to the Guide, this requirement was adequately pleaded in Ariix‘s complaint. See Maj. Opin. at 24.
That leaves only Gordon & Breach‘s requirement that the commercial advertising be “for the purpose of influencing consumers to buy defendant‘s goods or services.” 859 F. Supp. at 1536 (emphasis added); see Coastal Abstract, 173 F.3d at 735. That limitation also flows from the statutory language and remains valid after Lexmark. By referring to representations that a “person” makes “in commercial advertising
But in stating that the Lanham Act only reaches advertisements for one‘s own goods and services, Gordon & Breach and Coastal Abstract did not thereby strictly limit the statute‘s reach just to advertising by manufacturers and distributors themselves. Thus, for example, when an entity acts as an agent of a manufacturer in making a product review, then that entity acts on behalf of the manufacturer and is in that sense advertising its own product. “[P]aid publicists’ speech” about their payor‘s products is commercial speech. United States v. Wenger, 427 F.3d 840, 848 (10th Cir. 2005); see also Maj. Opin. at 20 (“[P]aid promotion is commercial speech.“). In addition, there may be other endorsers who have such a direct financial stake in specific sales of a product — such as a cut of each sale — that it may likewise be fair to say that they are thereby advertising their own product. See, e.g., Handsome Brook, 700 F. App‘x at 253, 260-61 (nonprofit organization that certified egg producers as “humane” and that received 5 cents for every 30 dozen eggs sold by certified producers was engaged in commercial advertising by promoting such certified-producer sales).
Each of these scenarios is consistent with Gordon & Breach‘s common-sense rule that, as used in the Lanham Act, “commercial advertising” connotes speech endorsing the speaker‘s products.
While this speaker‘s-product limitation on the scope of
In light of these considerations, I am unwilling to overlook the fact that the Lanham Act applies only to commercial advertising about the speaker‘s products. Moreover, even though the district court and the parties have not directly addressed this limitation, they have done so indirectly. The overwhelming focus of both the ruling below and the briefing in this court has been on the strength of various connections between Defendants and Usana and whether those connections are sufficient to render the speech in question “commercial speech” for First Amendment purposes. Given the very substantial overlap between that constitutional “commercial speech” issue and the statutory “speaker‘s product” issue, I see no reason not to resolve the parties’ arguments through their proper statutory lens. And the doctrine of constitutional avoidance — which Defendants have specifically invoked in this court — confirms that we should not disregard any relevant statutory limitation that, by either eliminating or narrowing the constitutional question we must consider, would lessen any constitutional concerns. Cf. Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 347 (1936) (Brandeis, J. concurring).
I therefore would not address the broader constitutional questions that the majority decides. Instead, in my view, the more limited question before us is whether Ariix has alleged sufficient facts to show that the Guide, or a subset of it, is commercial speech that influences the target audience to purchase goods that are, in some viable sense, those of Defendants. Ariix has failed to do so.
B
The operative complaint alleges that the Guide, or at least portions of it, constitute “promotional material that is bought and paid for by Usana” and “coordinated in advance of publication.” This allegation sounds superficially promising, because it seems to suggest that Defendants may have acted on Usana‘s behalf or at its direction by secretly making, in exchange for compensation, specific changes requested by Usana in its own or competitors’ product reviews in the Guide. For the reasons explained earlier, I would agree that, if Defendants covertly acted subject to Usana‘s advance direction and control in preparing the content of the Guide, then Defendants could in that sense be said to be promoting their own products by promoting Usana‘s products. See supra at 32-33. But Ariix‘s complaint contains no allegations that would support the view that Defendants are Usana‘s agents or that Defendants altered or placed specific content in the Guide‘s reviews at Usana‘s direction. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Instead, the complaint‘s factual allegations establish, at most, that Defendants produced biased reviews in the craven hope that Usana would then act in ways that were economically favorable to Defendants. That is not enough.
The complaint alleges, for example, that when Usana was rated “number one” in the Guide, Usana was willing to pay MacWilliam as a speaker to promote its products, and it also encouraged its sales representatives to purchase the Guide. This resulted in “hundreds of thousands of dollars per year” of economic benefit to Defendants. But when Usana shared the top category with other additional companies in 2008, Usana ceased encouraging sales of the book and declined to give MacWilliam speaking engagements. When
These allegations establish that Usana liked favorable reviews and that Usana promoted the Guide and its author when the reviews were distinctly superlative and did not do so when they were not. That does not raise a plausible inference that Defendants, in the Guide, were thereby reviewing their own products. That Defendants wrote obsequious reviews in the hope that Usana would be pleased and buy more Guides or give MacWilliam speaking engagements does not make them Usana‘s agents in writing those reviews. Nor does it establish that they acted on Usana‘s behalf or subject to its control in doing so. To be sure, MacWilliam acted as Usana‘s agent when he did paid speaking tours expressly promoting Usana‘s products, but the complaint does not rest on the theory that this open hawking of Usana‘s products by MacWilliam violated the Lanham Act, and the majority does not endorse any such theory here. Rather, the complaint‘s theory is that Defendants violated the Act by writing a biased Guide that favored Usana without disclosing Defendants’ financial ties to Usana. But the complaint fails to allege facts showing that, in writing the content of the Guide, Defendants had an agreement with Usana that would suffice to make Defendants into Usana‘s “paid publicists.”
The closest that the complaint comes on this score is its allegation that, when MacWilliam learned at one point that another company was going to beat Usana with a “perfect score,” he went to Usana and explained that either Usana needed to change its formulas or he needed to change his criteria. But the complaint is conspicuously devoid of any non-conclusory allegations about how Usana responded. It instead alleges, in the very next sentence, that “MacWilliam and NutriSearch have since taken extraordinary steps to ensure that Usana maintains its preeminent status” (emphasis added). The omission is particularly notable, because the district court‘s order dismissing the previous version of the complaint had emphasized Ariix‘s failure to plead facts that would tend to exclude the possibility that Usana simply responded in a lawful and self-interested manner to Defendants’ alleged sycophancy. Lacking such factual allegations, the operative amended complaint lapses into conclusory rhetoric, claiming that Defendants “collude[d]” with Usana and have a “symbiotic relationship that is profitable” for all of them. But the complaint does not contain any well-pleaded factual allegations supporting an inference that Defendants acted as Usana‘s paid publicists in writing favorable reviews of Usana‘s products.
Nor does the complaint allege any other viable alternative theory for concluding that Usana‘s products are in any relevant sense Defendants’ products. Ariix does not allege, for example, that Defendants had any kind of ”direct financial interest in sales” of Usana products, Facenda v. NFL Films, Inc., 542 F.3d 1007, 1017 (3d Cir. 2008) (emphasis added), such as a small cut of each sale, Handsome Brook, 700 F. App‘x at 259-61. More broadly, nothing in
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Because Ariix‘s complaint fails to allege sufficient facts to raise a plausible inference that Defendants were advertising their own products when they rated supplements in the Guide, Ariix has failed to state a claim for false advertising under the Lanham Act with respect to the Guide or its reviews.
II
In light of the conclusions set forth above, I do not reach any of the other issues addressed by the majority. Because the district court already allowed an amendment to add additional factual allegations addressing the relationship between Usana and Defendants, I agree with the district court‘s conclusion that further amendment would be futile. I therefore would affirm the district court‘s judgment dismissing the complaint with prejudice. I respectfully dissent.