Court Opinion

ID: 2967944
Source: CourtListenerOpinion
Date Created: 2015-09-22 03:49:36.727876+00
Date Added: 2024-06-11T11:43:16.114601
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT

MADE IN THE USA FOUNDATION, the          
class of all consumers in the State
of Maryland who have purchased
frozen Phillips Maryland Style Crab
Cakes or have dined at Phillips
Seafood Restaurants during the past
three years,                                     No. 03-1752
                  Plaintiff-Appellant,
                  v.
PHILLIPS FOODS, INC.; PHILLIPS
SEAFOOD GRILL, INCORPORATED,
              Defendants-Appellees.
                                         
            Appeal from the United States District Court
             for the District of Maryland, at Baltimore.
             Benson Everett Legg, Chief District Judge.
                           (CA-02-1290-L)
                       Argued: January 22, 2004
                       Decided: April 19, 2004
        Before WILKINS, Chief Judge, and WIDENER and
                  MICHAEL, Circuit Judges.

Affirmed by published opinion. Judge Michael wrote the opinion, in
which Chief Judge Wilkins and Judge Widener joined.

                             COUNSEL
ARGUED: Joel David Joseph, JOSEPH & ASSOCIATES, Bethesda,
Maryland, for Appellant. Joseph Paul Esposito, AKIN, GUMP,
2          MADE IN THE USA FOUNDATION v. PHILLIPS FOODS
STRAUSS, HAUER & FELD, L.L.P., Washington, D.C., for Appel-
lees. ON BRIEF: Michael L. Converse, AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P., Washington, D.C., for Appellees.

                              OPINION

MICHAEL, Circuit Judge:

   After concluding that consumers lack standing to sue under the
Lanham Act, 15 U.S.C. § 1051 et seq., the district court dismissed a
consumer group’s claim alleging false advertisement in violation of
the Act. We affirm.

                                   I.

   Made in the USA Foundation (or "the Foundation") filed its com-
plaint against Phillips Foods, Inc. in the District of Maryland, on
April 15, 2002. In our de novo review of the district court’s decision
to dismiss the Foundation’s Lanham Act claim for lack of standing,
we "accept as true all material [factual] allegations of the complaint,"
and we "construe [it] in favor of the complaining party." Warth v.
Seldin, 422 U.S. 490, 501 (1975). The facts are straightforward and
brief. Made in the USA Foundation is a nonprofit consumer organiza-
tion with headquarters in Montgomery County, Maryland. The Foun-
dation has 60,000 members who buy, to the extent possible, products
that are made in the United States. Defendant Phillips Foods, Inc., a
Maryland corporation, makes packaged crab cakes that it sells whole-
sale to grocery stores and other retail establishments. In the three-year
period before the Foundation sued, it and its members bought pack-
ages of Phillips Foods’ crab cakes that were labeled "Made in the
USA." These crab cakes, however, were made with 90 percent Asian
crabmeat.

   In its first claim, brought under the Lanham Act, the Foundation
alleges that Phillips Foods mislabeled its crab cake packages by
falsely designating the country of origin, in violation of 15 U.S.C.
§ 1125. The Foundation asserts that it and its members were harmed
by this misrepresentation because they bought Phillips Foods’ crab
            MADE IN THE USA FOUNDATION v. PHILLIPS FOODS                 3
cakes "believing them to be Made in the USA when they were actu-
ally imported from Thailand and other nations." J.A. 9a. The Founda-
tion also asserts two state law claims, accusing Phillips Foods of
intentional misrepresentation and deceptive trade practices.

   Phillips Foods filed a motion to dismiss on the ground that con-
sumers do not have standing to sue under the Lanham Act. The dis-
trict court agreed, stating that "the Lanham Act is [only] intended to
provide a private remedy to a commercial plaintiff whose commercial
interests are being harmed." J.A. 14a. Noting that Made in the USA
Foundation "does not dispute that it is suing as a consumer," J.A. 14a,
the court dismissed the Foundation’s federal claim. Thereafter, the
court dismissed the two state law claims, declining to exercise supple-
mental jurisdiction. See 28 U.S.C. § 1367(c). The Foundation appeals
the dismissal of the federal (Lanham Act) claim.

                                    II.

   Made in the USA Foundation brought this action "as a consumer
and as a representative of consumers." Appellant’s Brief at 8. The
Foundation argues that broad wording in § 43(a) of the Lanham Act
confers standing on consumers who are damaged by false commercial
advertising. The pertinent language is this: "Any person who . . . uses
in commerce . . . any false designation of origin . . . which . . . in com-
mercial advertising or promotion misrepresents the . . . geographic
origin of his or her or another person’s goods . . . shall be liable in
a civil action by any person who believes that he or she is . . . dam-
aged by such act." 15 U.S.C. § 1125(a) (emphasis added). According
to the Foundation, the words "civil action by any person" make it a
proper plaintiff to sue Phillips Foods for falsely advertising that its
crabmeat product is made in the United States. There is another rele-
vant provision, however. Section 45 of the Lanham Act states that
"[t]he intent of [the Act] is . . . to protect persons engaged in [congres-
sionally regulated] commerce against unfair competition." Id. § 1127.

   At least half of the circuits hold (and none of the others disagree)
that the second of these Lanham Act provisions, § 45, or 15 U.S.C.
§ 1127, bars a consumer from suing under the Act. The Second Cir-
cuit, in Colligan v. Activities Club of New York, 442 F.2d 686 (2d Cir.
1971), was the first to decide this. According to the Second Circuit,
4           MADE IN THE USA FOUNDATION v. PHILLIPS FOODS
§ 45 identifies those "‘engaged in . . . commerce’" as "the class of
persons to be protected by the Act." Id. at 691 (quoting 15 U.S.C.
§ 1127). The decision thus concludes:

     Congress’ purpose in enacting § 43(a) was to create a spe-
     cial and limited unfair competition remedy, virtually without
     regard for the interests of consumers generally and almost
     certainly without any consideration of consumer rights of
     action in particular. The Act’s purpose, as defined in § 45,
     is exclusively to protect the interests of a purely commercial
     class against unscrupulous commercial conduct.

Id. at 692 (footnotes omitted). Other circuits have followed the Sec-
ond in denying Lanham Act standing to consumers. See Proctor &
Gamble Co. v. Amway Corp., 242 F.3d 539, 561 (5th Cir. 2001) (Sec-
tion 45 of the Lanham Act "makes clear that the focus of the statute
is on anti-competitive conduct in a commercial context," and the Act
"limit[s] standing to a narrow class of potential plaintiffs possessing
[competitive or commercial] interests" harmed by the targeted con-
duct) (quoting Conte Bros. Automotive, Inc. v. Quaker-State Slick 50,
Inc., 165 F.3d 221, 229 (3d Cir. 1998)); Stanfield v. Osborne Indus.,
52 F.3d 867, 873 (10th Cir. 1995) ("to have standing for a false adver-
tising claim [under the Lanham Act], the plaintiff must be a competi-
tor of the defendant and allege a competitive injury"); Serbin v.
Ziebart Int’l Corp., Inc., 11 F.3d 1163, 1179 (3d Cir. 1993) (when
Congress passed the Lanham Act, it "did not contemplate that federal
courts should entertain claims brought by consumers"); Dovenmuehle
v. Gilldorn Mortgage Midwest Corp., 871 F.2d 697, 700 (7th Cir.
1989) (same); Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995)
(same).

   We have found one case, Camel Hair and Cashmere Institute of
America, Inc. v. Associated Dry Goods Corp., 799 F.2d 6 (1st Cir.
1986), that at first glance looks favorable to the Foundation. It is of
no help in the end, however. In Camel Hair a trade group of cashmere
garment producers filed a Lanham Act case alleging that a coat manu-
facturer was misrepresenting the cashmere content of one of its prod-
uct lines. In discussing standing, the First Circuit said: "the plaintiff
[must have] a reasonable interest in being protected [against false
advertising]. . . . [I]t is [not enough] for the plaintiff merely to estab-
           MADE IN THE USA FOUNDATION v. PHILLIPS FOODS               5
lish a falsehood in the defendant’s advertising or marketing; the plain-
tiff must also show a link or nexus between itself and the alleged
falsehood." Id. at 11-12. The court concluded that the trade group had
standing: "[although] none of the [group’s] members compete with
the defendant . . . their position as manufacturers and vendors of fab-
ric and clothing containing cashmere gives them a strong interest in
preserving cashmere’s reputation as a high quality fibre." Id. at 12.
The First Circuit’s Camel Hair decision does not say that consumers
are barred from suing under the Lanham Act; that was not necessary,
however, because the cashmere garment producers were not a con-
sumer group. The underlying message of the decision is that a Lan-
ham Act plaintiff must be suing to protect a commercial interest.

   Camel Hair would make this a more difficult case if Made in the
USA Foundation was a trade group of crabmeat producers. But it is
not; it is simply a consumer group that has failed to "premise [its]
claims upon any contention that [it has] been damaged or [is] likely
to be damaged in any commercial activity." Dovenmuehle, 871 F.2d
at 700. At most, Camel Hair reveals that there might be some mar-
ginal differences in the circuits about what qualifies as a commercial
or competitive interest for standing purposes under the Lanham Act.
Compare Berni v. Int’l Gourmet Restaurants of America, Inc., 838
F.2d 642, 648 (2d Cir. 1988) ("Although a [Lanham Act] plaintiff
need not be a direct competitor . . . standing to bring a . . . claim
requires the potential for commercial or competitive injury.") with
Stanfield, 52 F.3d at 873 ("[Lanham Act] plaintiff must be a competi-
tor of the defendant and allege a competitive injury"). In any event,
the several circuits that have dealt with the question are uniform in
their categorical denial of Lanham Act standing to consumers. See
Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 n.5 (5th Cir.
1996) ("we have found no case which suggests that ‘consumers’ as
such have standing under § 43(a)").

   This is the first time we have been presented with the consumer
standing issue. However, in an earlier case involving commercial par-
ties, we noted in passing that the Lanham Act is "a private remedy
[for a] commercial plaintiff who meets the burden of proving that its
commercial interests have been harmed by a competitor’s false adver-
tising." Mylan Laboratories, Inc. v. Maktari, 7 F.3d 1130, 1139 (4th
Cir. 1993) (quoting Sandoz Pharmaceuticals Corp. v. Richardson-
6          MADE IN THE USA FOUNDATION v. PHILLIPS FOODS
Vicks, Inc., 902 F.2d 222, 230 (3d Cir. 1990)). Our statement in
Mylan Laboratories is consistent with the basic approach of other cir-
cuits that requires the Lanham Act plaintiff to be engaged in commer-
cial activity. We endorse that approach today and hold that a
consumer does not have standing under the Lanham Act to sue for
false advertising. Because Made in the USA Foundation sues as a
consumer and as a representative of consumers, we affirm the district
court’s order dismissing, for lack of standing, the Foundation’s Lan-
ham Act claim.

                                                         AFFIRMED