A federal judge in the Northern District of California recently dismissed a false advertising case brought by two non-profit groups, finding that their own testimony sunk their claims.
The two plaintiffs, the Center for Food Safety and Friends of the Earth, sued Sanderson Farms Inc. (“Sanderson”), alleging that Sanderson’s advertisements of its chicken as “100 percent natural” was misleading in violation of California’s Unfair Competition Law (“UCL”) and False Advertising Law (“FAL”). The organizations alleged that reasonable consumers would interpret the statement “100 percent natural” to mean that the chicken was raised without any antibiotics ever, whereas Sanderson’s chicken products are raised with antibiotics, but such antibiotics have cleared prior to sale. In December 2018, the judge denied Sanderson’s motion to dismiss, finding that the organizations had adequately alleged violations of the UCL and FAL. The case then proceeded into discovery.
On July 31, 2019, however, the judge granted Sanderson’s new motion to dismiss, holding that the organizations lacked standing to bring the case. Friends of the Earth, et al. v. Sanderson Farms, Inc., No. 3:17-cv-03592-RS (N.D. Cal. July 31, 2019) (ECF 221). While the organizations alleged in their complaint that they had diverted resources to combat Sanderson’s allegedly misleading advertising, the evidence produced in discovery revealed that to be false. The judge found that the activities the organizations undertook were related to antibiotic use generally, and were not in reaction to Sanderson’s advertising. “Perhaps most damaging,” the judge found, were the organizations’ own depositions, in which they admitted “they did not divert resources because of Sanderson’s advertising” and stated that “they would have undertaken the same advocacy activities—including advocating against the use of antibiotics in animal agriculture and discouraging consumers from purchasing meat raised with routine antibiotics—even if Sanderson had never aired the challenged advertisements,” and that “they would have encouraged Sanderson’s customers to avoid Sanderson and other products that used routine antibiotics regardless of the existence of the advertising.” Id. at 5-6. In other words, the organizations’ real issue was with Sanderson’s practices, not its advertising. But, as the judge found, “This is a false advertising case, and Plaintiffs must establish that their alleged injury is traceable to the challenged ads at issue.” Id. at 6. Because the organizations fatally undercut their own claim that any “injury” they had was caused by Sanderson’s advertising, the judge dismissed their case.
This case is a good reminder of two points for companies who might find themselves on the defense side of a federal case brought by an advocacy group—
First, for a plaintiff to have a successful case, not only must they have a substantive claim (here, alleged violation of false advertising statutes), but they also must have a valid theory of standing. In federal court, to have standing a plaintiff must have an injury that is caused by the action of the defendant and redressable by a favorable ruling. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992). For cases involving individual plaintiffs, standing theories can often be straightforward (e.g., “I sustained a physical injury when the defendant ran the red light and hit me” or “I spent money on this product that was falsely advertised that I wouldn’t have spent if it was truthfully advertised”). When organizations decide to become plaintiffs, they often have to use other standing theories. Some common theories: informational injury standing (a statute requires that the organization be provided certain information that was withheld). See, e.g., Federal Election Commission v. Akins, 524 U.S. 11 (1998)); organizational injury standing (defendant’s conduct frustrates the organization’s mission and caused it to divert resources away from programmatic activities towards combatting the defendant’s conduct). See, e.g., La Asociacion de Trabajadores de Lake Forest v. City of Lake Forest, 624 F.3d 1083 (9th Cir. 2010)); and associational standing (at least one of the organization’s members has standing to sue in their own right; the interests at stake are germane to the organization’s purpose, and neither the claim asserted nor the relief requested requires the participation of individual members). See, e.g., Friends of the Earth v. Laidlaw Envtl. Servs., (TOC), Inc., 528 U.S. 167 (2000).
It is important for defendants to think not just about how to defend themselves on the substance/merits of the claims in a lawsuit, but also to think about whether the person/entity bringing the lawsuit actually has the right to do so. If the plaintiff does not have standing, the case should be dismissed regardless of the strength of the underlying claim. In the Sanderson case, the judge previously found that the plaintiff organizations had adequately alleged their substantive UCL and FAL claims, but ultimately dismissed the entire case because the organizations could not establish the organizational injury standing they pled—they could not show that they had diverted organizational resources as a result of the alleged false advertising.
Second, a defendant can raise a plaintiff’s lack of standing at any point in the case. Defendants often want to bring such a challenge in a motion to dismiss at the beginning of a case before expending resources on discovery. However, on a motion to dismiss, the judge is required to assume that the allegations in the complaint are true. For example, if an organizational plaintiff alleges that it diverted funds from one of its activities to combatting a defendant’s false advertising, the judge must assume that is true, making it difficult for a defendant to succeed in getting a well-pleaded case dismissed for lack of standing at the motion to dismiss stage. However, defendants should take heart that if forced to go into discovery on the merits, they should take the opportunity to get discovery on the plaintiff’s standing theory. The deposition testimony given by the plaintiffs in the Sanderson case is ultimately what led to their demise and the dismissal of the case. Defendants should remember that even if they fail at getting a case dismissed for lack of standing early in the case, that they should try, try again. The burden to prove standing is on the plaintiffs throughout a case, and the bar for what they must demonstrate gets raised at each stage. Adequately alleging standing is not the same thing as proving it. Sometimes, as in the Sanderson case, discovery can reveal that it is a plaintiff’s standing theory (not the defendant’s advertising) that is false.
