When does a “grossly exaggerated claim” by a business become so misleading that it can result in a lawsuit?

Harrison Research Laboratories, Inc., v. HCRAmerica, LLC 2010 WL 5343197 (D.N.J.) concerned the issue of whether a grossly exaggerated claim can be so misleading that it can be the subject of a lawsuit.

The case was filed in the Federal District Court for the District of New Jersey. It began with Harrison Research Laboratories (“HRL”) suing HCRAmerica and another party for trademark infringement.

HCRAmerica countersued HRL alleging that HRL had made false statements on its website and in its brochure.  Specifically, HCRAmerica claimed that HRL’s statement that HRL passed “numerous FDA audits” was false and misleading and rose to the level of a false representation under the Lanham Act § 43(a).  HCRAmerica based its claim that the statement was false on the fact that HRL had been subject to only a few audits (not numerous audits), one of which was conducted by the Environmental Protection Agency (“EPA”) and resulted in criminal convictions.  HCRAmerica’s position was that it was misleading to state that a company was beyond reproach because it had been the subject of numerous audits, when in fact, there were only a few audits and, in any event, the President of HRL and the company itself were criminally convicted as a result of the audits.

Section 43(a) of the Lanham Act provides that a false representation occurs when:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or 

(B) 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,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

Under the Lanham Act, a false representation can occur if a company makes a statement that misleads or confuses consumers or makes an inaccurate statement. 

HCRAmerica claimed that HRL’s statement was both false and misleading.  First, HCRAmerica claimed that HRL’s statement was false, because HRL had not been subject to numerous audits.  Second, HCRAmerica claimed that HRL’s statement could cause confusion among consumers because it omitted information about the result of the EPA’s audit and criminal convictions.

The court allowed the case to proceed finding, “it cannot be said at this early stage in the litigation that the conviction and EPA audit ‘have no possible relation’ to Defendants’ false representation, deceptive and unlawful practice and unfair competition claim.” Harrison Research Laboratories, Inc., v. HCRAmerica, LLC 2010 WL 5343197 *4 (D.N.J.).

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