Opinion ID: 75900
Heading Depth: 2
Heading Rank: 2

Heading: The Exclusive Deal Letter

Text: 13 1-800 sent the Exclusive Deal letter to 1-800 customers who requested J&J contacts that were out of stock at the time of the customer's order. The letter explains 1-800's inability to fill the order, stating that J&J has cut off our supply of some of their products, including yours, in order to force you to buy them from an eye doctor instead of from us. R1-33, Ex. F. 7 During the preliminary injunction hearing, 1-800 stated that despite the fact that J&J had cut off its supply, 1-800 is still able to fill over 99% of customer orders for J&J products. R2-71. The district court found that 1-800's fill rate contradicted 1-800's statement about J&J's distribution policy, and declared false advertising: 1-800 has made false statements in its advertising by simultaneously stating that it cannot supply J&J lenses to its customers and also stating that it fills nearly all its orders for J&J lenses. R1-38-6. 14 As mentioned previously, the fact that the district court did not require evidence of consumer confusion leads us to the conclusion that the district court found 1-800's statements to be literally false. See Am. Council, 185 F.3d at 614. Review of the facts, however, reveals that both of 1-800's statements are true: (1) J&J had cut off 1-800's supply, and (2) 1-800 was able to fill over 99% of customer orders for J&J. 8 1-800 was able to maintain a stock of J&J products by purchasing the lenses through alternative channels. After 1-800 revealed the presence of a gray market, the gap between two superficially contradictory statements is bridged. Thus, 1-800's statement that J&J cut off its supply of lenses is not false due to a contradiction. 15 In addition, the district court found that the Exclusive Deal letter was literally false because J&J contracted with eye care practitioners rather than with eye doctors as stated in 1-800's advertising material. R1-58-1-2. According to the district court, the category of eye care practitioner is broader than the category eye doctor. Id. at 2. Although there is a strong argument that 1-800's advertisement is better construed as underinclusive, rather than as literally false, we need not reach that conclusion. Instead, we reverse based on the district court's application of the law. 16 To succeed on a claim of false advertising, the plaintiff must establish that the defendant's deception is likely to influence the purchasing decision. Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 311 (1st Cir.2002) (internal quotations omitted). A plaintiff may establish this materiality requirement by proving that the defendants misrepresented an inherent quality or characteristic of the product. Nat'l Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 855 (2d Cir. 1997) (internal quotations omitted). The materiality requirement is based on the premise that not all deceptions affect consumer decisions. In Motorola, for example, the Second Circuit concluded that Motorola's advertisement that its SportsTrax device provided sports information direct from each arena was literally false, but irrelevant to consumer decisions. Id. Consumers were interested in the fact that statistics were updated quickly, and did not make purchasing decisions based on whether data was collected firsthand or though broadcasts. Id. J&J's argument fails because J&J did not prove that 1-800's use of the term eye doctor was material to consumer decisions. 17 The plaintiff must establish materiality even when a the court finds that the defendant's advertisement is literally false. Cashmere & Camel Hair, 284 F.3d at 312 n. 10; S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir.2001). The district court appears to have conflated the element of consumer deception with the element of materiality. R1-38-6 ([T]he Court now turns to whether or not the deception was material. While J&J has the ultimate responsibility for proving that the deception did in fact affect consumers' purchasing decisions ... J&J ... only need show that the statements had the tendency to deceive consumers.). Such conflation is not without precedent; it appears that the Fifth Circuit blurred the boundary between the two elements in its recent Pizza Hut decision. See Pizza Hut, 227 F.3d at 497. 9 To the extent that the Fifth Circuit decision marks a circuit split, we stand with the First and Second Circuits, concluding that the plaintiff must establish materiality even when a defendant's advertisement has been found literally false. 18 We note that 1-800 sent the Exclusive Deal letter along with the Focus Dailies pamphlet. The letter was sent to explain 1-800's inability to fill a customer's order, and the pamphlet was sent to provide the customer with an alternative. Beyond this link, our analysis of the Exclusive Deal letter is not informed by the Focus Dailies pamphlet.