Thursday, August 23, 2012

Lanham Act False Advertising Claims Stated Against “Corn Sugar” Producers

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Producers of table sugar from cane beets stated Lanham Act false advertising claims by alleging that member companies of the Corn Refiners Association (CRA) made advertising claims that high fructose corn syrup (HFCS) is “natural” and should be referred to as “corn sugar,” as well as claims that HFCS is nutritionally and metabolically equivalent to other sugars, the federal district court in Los Angeles ruled has ruled.
The CRA member companies argued that the complaint failed to set forth individual and particular allegations against each of the member companies. Allegations as to the use of spokespersons to disseminate the advertising theme that HFCS is no different than sugar, and the use of the phrase “corn sugar” in documents and communications directed toward customers and investors, were sufficient to inform member companies Cargill, Tate & Lyle, Archer-Daniels-Midland, and Corn Products of their allegedly fraudulent conduct, the court determined.

The table sugar producers pleaded facts that supported their allegation that the CRA was the agent of the member companies such that the association’s conduct should be imputed to them under a vicarious liability theory, according to the court. The complaint described the CRA board of directors membership by listing the names and titles of the officers from each member company, as well as the number of hours the officers spent working on CRA business and the advertising campaign.

Decisions to launch and fund the multimillion dollar advertising campaign allegedly were subject to the approval of the member companies. The member companies allegedly provided the overwhelming majority of regular membership dues to the CRA. Funding allegedly totalled approximately $13 million for the false advertising campaign, during the years of 2008, 2009, 2010, and 2011.

Principal-Agent Relationship; Joint-Tortfeasor Theory

The table sugar producers argued that a principal-agent relationship existed between the CRA and the member companies based on the allegations involving the member companies’ “collective right,” “power to control,” and “domination” of the CRA. The table sugar producers also pleaded facts that would support a joint-tortfeasor theory of liability by alleging that the association, at the direction of and in concert with several of its member companies, crafted a publicity campaign to revitalize and rebrand HFCS.

The table sugar producers failed to state a claim against Roquette America by alleging only that a senior executive was a member of the CRA’s board of directors.

The July 31, 2012, decision in Western Sugar Cooperative v. Archer-Daniels-Midland Co., Case 2:11-cv-03473, will appear at CCH Advertising Law Guide ¶ 64,775 and (CCH) 2012-2 Trade Cases ¶78,019.

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