Wednesday, December 05, 2012

Grass Seed Sellers Could Not Enjoin Each Other’s Allegedly False Ads

This posting was written by E. Darius Sturmer, Editor of CCH Business Franchise Guide.

Competing sellers of grass seed and plant food products—Scotts and Pennington—were not entitled to preliminary injunctive relief against each other’s allegedly false advertising, the federal district court in Richmond, Virginia has held (The Scotts Co., LLC v. Pennington Seed, Inc., November 30, 2012, Gibney, J.).

Neither could show that it was likely to prevail on the merits of its claims, that it suffered irreparable harm, that the balance of equities tipped in its favor, or that injunction would serve the public interest, the court decided. The companies’ cross-motions for preliminary injunctions were denied, as were Pennington’s motions to strike supplemental filings submitted by Scotts.

The present dispute between the competitors arose in early March, when Scotts filed suit against Pennington over its claim that Pennington’s Smart Seed grass seed products contain “twice the seed” as Scotts’ Turf Builder products. By the end of the month, the court had dismissed Scotts’ Lanham Act and state law false advertising claims, as well as its common law unfair competition claims, finding that the advertising claims at issue were covered under the terms of a confidential settlement agreement previously entered into by the parties. That settlement agreement mandated that the parties attempt alternative dispute resolution before such an action could be filed. The parties completed this procedure in April without success, and Scotts again pursued an injunction against Pennington’s advertising.

In the interim, however, Pennington had fired back with its own lawsuit, asserting false advertising under federal and state law, common law unfair competition, and violation of the Georgia Uniform Deceptive Trade Practices Act stemming from Scotts’ descriptions of Pennington’s “1 Step Complete” combination grass seed products as “a bunch of ground-up paper” and Scotts’ superiority claims with respect to its own EZ Seed products.

“Twice the Seed” Claims

Scotts was unable to show a likelihood of success on its Lanham Act suit based on Pennington’s “twice the seed” claims, the court found. Whether Pennington’s ads were literally false was debatable. While Pennington’s products did not contain twice the number of seeds as Scotts’ grass seed products, the claim was literally true on a weight basis, which Pennington attested was the industry standard to measure seed count. A consumer survey produced by Scotts, however, suggested that, even if literally true, the ads misled potential purchasers.

On the other hand, Pennington established that the equitable doctrine of laches could apply to prevent Scotts from obtaining relief, given that Scotts had waited until Pennington’s promotional materials had been public for over a year before challenging them.

Scotts also failed to make a necessary showing of irreparable harm, the court added. As most consumers purchase their products at the beginning of the brief spring grass seed season, the need for urgency had already been removed. There was “no reason that a full trial on the merits [could not] be had prior to the time the parties’ claims could again become crucial,” the court said.

Considering the balance of the equities, the court observed from the parties’ “tit-for-tat” litigation strategy that each party’s hands appeared “slightly soiled, which weigh[ed] against injunctive relief.”

Finally, the court stated, while the public interest was “undoubtedly served by a marketplace fee of consumer confusion as to the nature, quality, and characteristics of companies’ products,” Scotts had not made a clear showing that Pennington’s claims were “likely to substantially cause consumer confusion such that the public interest factor decidedly tips in Scotts’ favor.”

1 Step Complete vs. EZ Seed

The likelihood of success on the merits of Pennington’s claims against Scotts was similarly uncertain, the court determined. Pennington failed to show that Scotts’ “bunch of ground-up paper” claim was literally false, in light of undisputed evidence that the mulch component in 1-Step Complete contained paper. Further, it could hardly be argued that a reasonable consumer seeking to buy a grass seed product would understand Scotts’ claim to convey the message that Pennington’s 1 Step Complete was comprised entirely of a bunch of ground-up paper. Consumer survey evidence did not support Pennington’s argument that Scotts’ advertising deceived consumers into believing that 1 Step Complete was made entirely of a bunch of ground-up paper.

As to Scotts’ superiority claims, preliminary assessment of product testing conducted by a Scotts research specialist led the court to conclude that the testing reasonably supported Scotts’ germination and seedling establishment claims.

Because Pennington failed to show that Scotts’ claims were false, misleading, and thus likely to harm Pennington’s sales, reputation, or goodwill, it could not establish that it would suffer irreparable harm from their continuation, the court held. Likewise, Pennington’s failure to show false or misleading claims, or resultant competitive harm, precluded a finding that the balance of equities or public interest tipped in its favor.

The case is Civil Action No. 3:12-CV-168.

Cassandra Carol Collins (Hunton & Williams LLP) for Scotts Company LLC. Charles Bennett Molster, III (Winston & Strawn LLP) for Pennington Seed, Inc.

No comments: