June 2013 Issue
N. Am. Olive Oil Ass’n v. Kangadis Food, Inc.,
2013 WL 1777774 (S.D.N.Y. Apr. 25, 2013)
Plaintiff North American Olive Oil Association (“NAOOA”) brought false-advertising claims, among others, against defendant Kangadis Food, Inc. (“Kangadis”), alleging that Kangadis’s use of the descriptor “100% Pure Olive Oil” for oil containing Pomace, an industrially processed oil produced from olive pits, skins, and pulp, was false and deceptive marketing. Following the grant to NAOOA of a preliminary injunction preventing Kangadis from selling as “100% Pure Olive Oil” any product containing Pomace and from selling any Pomace-containing product without expressly labeling it as such, Kangadis changed its products to not contain any Pomace but to be 100% refined olive oil. NAOOA subsequently went back to ask the court to preliminary enjoin Kangadis from selling its 100% refined olive oil as “100% Pure Olive Oil,” relying upon a number of state, federal, and industry labeling standards distinguishing among “olive oil” or “pure olive oil“ on one hand, which must contain some virgin olive oil, and “refined olive oil” on the other hand, which can be without any virgin olive oil. NAOOA also sought an affirmative injunction requiring Kangadis to inform potential consumers that earlier produced tins of “100% Pure Olive Oil” contained Pomace.
“Olive oil” comes from olives that are harvested, quickly carried to a mill, washed, crushed, and spun to separate out extraneous solids and excess water, an entirely mechanical process not involving heat or chemicals, resulting in “virgin olive oil.” If virgin olive oil undergoes refining to remove impurities, it is no longer called “virgin,” but remains “olive oil.” By contrast, Pomace, also known as olive-Pomace oil, is made from the residue skins, pits, and pulp left over after olive oil has been mechanically extracted from the flesh of the olives. This residue is dried, heated, and treated with industrial solvents to produce Pomace.
The court found that NAOOA demonstrated the required irreparable harm, as the misleading labeling by Kangadis of its cheaper refined olive oil would likely come at the expense of NAOOA members selling more expensive virgin olive oil. The court found that Kangadis’s misleading labeling provided an unfair competitive advantage as well as risking further damage to the industry and competitors if consumers lose faith in olive oil products in general.
The court also held, however, that NAOOA had not made the required showing of likelihood of success on the merits to justify the requested injunction. While the federal, New York, and industry labeling standards were violated because each required a product that is a blend of refined olive oil and virgin olive oil to be identified as “olive oil,” the court also found that such standards violations were either legally nonbinding or unenforceable. NAOOA’s claim for false advertising and deceptive business practices required a showing that the advertising was either false on its face or likely to mislead or confuse consumers.
Where advertising is not literally false, a plaintiff must demonstrate by extrinsic evidence that the advertisement is misleading. Whereas unambiguous messages can be literally false, language susceptible to more than one reasonable interpretation can never be literally false. Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 158 (2d Cir. 2007). The court found that a reasonable consumer could understand the phrase “100% Pure Olive Oil” to refer to a product that contains oil derived from the flesh and fruit of the olive tree. Because NAOOA did not present any evidence that an ordinary consumer, unfamiliar with the industry lingo, would interpret the terms in the same manner as industry insiders, regulators, and industry standards, NAOOA did not demonstrate a likelihood of success on the merits.
The court found NAOOA also failed to satisfy the second prong of the preliminary injunction standard, namely, that the balance of hardships tips decidedly in its favor. Finding that while some competitive harm to the NAOOA members was likely, such a ruling would require Kangadis to immediately change either its label or its product, involving considerable expense and risking its consumer relationships and goodwill. Weighing the possibility of harm versus the certainty of harm, the court concluded that the balance of hardship did not tip decisively in NAOOA’s favor.
With respect to the claim relating to products containing Pomace, the court found NAOOA would be irreparably harmed if potential consumers were not notified about this fact, that it was likely to succeed on the merits based on the literal falsity of advertising a product including Pomace as “100% Pure Olive Oil,” and that the balance of hardship favored an injunction for this claim, as Kangadis would suffer only modest costs for creating and distributing stickers while NAOOA—and potentially the industry at large—would suffer irreparable lost sales and diminished goodwill.
The decision is useful in defining the distinct evidentiary requirements for the two types of false-advertising claims. Whereas in cases of literal falsity, there is no requirement to demonstrate the impact on the buying public, such evidence is required where the relevant language or graphic is susceptible to more than one reasonable interpretation.