Vital Farms, Inc. v. Handsome Brook Farm, Llc et alMOTION to Dismiss for Failure to State a ClaimN.D.N.Y.March 7, 2017UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK VITAL FARMS, INC., Plaintiff and Counterclaim Defendant, v. HANDSOME BROOK FARM, LLC, HANDSOME BROOK FARM GROUP 2 LLC, and DOE CORPORATION Nos. 1-10, Defendants and Counterclaim Plaintiff. Civil Action No.: 3:16-cv-01421-GTS-DEP Hon. David E. Peebles NOTICE OF PLAINTIFF/ COUNTERCLAIM DEFENDANT’S MOTION TO DISMISS THE COUNTERCLAIMS, OR IN THE ALTERNATIVE, MOTION TO STRIKE AND/OR FOR A MORE DEFINITE STATEMENT PLEASE TAKE NOTICE that, upon the accompanying memorandum in support, the undersigned will move on April 12, 2017 at 9:30 a.m. before the Honorable David E. Peebles, Magistrate Judge of the United States District Court for the Northern District of New York, at the United States District Courthouse, located at 100 South Clinton Street, Syracuse, NY 13261, for an order to dismiss the counterclaim complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Dated: March 7, 2017 Brooklyn, New York Kim E. Richman RICHMAN LAW GROUP 81 Prospect Street Brooklyn, New York 11201 Telephone: (212) 687-8291 Facsimile: (212) 687-8292 krichman@richmanlawgroup.com Counsel for Plaintiff/Counterclaim Defendant Case 3:16-cv-01421-GTS-DEP Document 22 Filed 03/07/17 Page 1 of 1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK VITAL FARMS, INC., Plaintiff and Counterclaim Defendant, v. HANDSOME BROOK FARM, LLC, HANDSOME BROOK FARM GROUP 2 LLC, and DOE CORPORATION Nos. 1-10, Defendants and Counterclaim Plaintiff. Civil Action No.: 3:16-cv-01421-GTS-DEP Hon. David E. Peebles PLAINTIFF/COUNTERCLAIM DEFENDANT’S MOTION TO DISMISS THE COUNTERCLAIMS, OR IN THE ALTERNATIVE, MOTION TO STRIKE AND/OR FOR A MORE DEFINITE STATEMENT Kim E. Richman THE RICHMAN LAW GROUP 81 Prospect Street Brooklyn, NY 11201 Telephone: (212) 687-8291 Facsimile: (212) 687-8292 krichman@richmanlawgroup.com James J. Pizzirusso Jeannine M. Kenney HAUSFELD LLP 1700 K Street, NW, Suite 650 Washington, DC 20006 Telephone: (202) 540-7200 Facsimile: (202) 540-7201 jpizziruzzo@hausfeld.com jkenney@hausfeld.com Counsel for Plaintiff/Counterclaim Defendant Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 1 of 29 TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................1 FACTS............................................................................................................................................ 2 LEGAL STANDARDS ...................................................................................................................4 ARGUMENT ...................................................................................................................................6 I. THE COUNTERCLAIM FOR FALSE OR MISLEADING ADVERTISING IN VIOLATION OF 15 U.S.C. § 1125(A) SHOULD BE DISMISSED, OR A MORE DEFINITE STATEMENT SHOULD BE ORDERED……………………………………6 A. The Counterclaim Complaint Fails to Allege Sufficient Facts for Vital Farms Even to Know What Statements Are Alleged to Be False ...........................7 B. Several of the Alleged “Misrepresentations” Are Not Capable of Objective Verification ..............................................................................................................9 C. The Most Specific Allegation in Fact Refers to a Contractual Right Between Vital Farms and a Third Party………………………………………………………….10 D. The “Harassment” Allegation Is Unsupported, Falls Within Litigation Privilege, and Should Be Struck from the Counterclaim…………………………………...12 II. THE COUNTERCLAIM FOR DECEPTIVE TRADE PRACTICES IN VIOLATION OF NY GBL § 349 SHOULD BE DISMISSED FOR THE SAME REASONS AS THE LANHAM ACT CLAIM, AND FOR THE ADDITIONAL REASON THAT THE ALLEGED “DAMAGES” WOULD BENEFIT HANDSOME BROOK……………….15 III. THE CLAIM FOR INFRINGEMENT OF A REGISTERED TRADEMARK IN VIOLATION OF 15 U.S.C. § 1114 FAILS TO ALLEGE ANY SPECIFIC USE OF A TRADEMARK, AND FAILS TO ALLEGE FACTS TO UNDERLIE ANY OTHER VIOLATION……………………………………………………………………………..17 IV. THE COUNTERCLAIM COMPLAINT FAILS TO ALLEGE THE ELEMENTS OF A CLAIM FOR BUSINESS DEFAMATION……………………………………………..19 CONCLUSION…………………………………………………………………………………..24 Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 2 of 29 1 Introduction On November 30, 2016, Plaintiff/Counterclaim Defendant Vital Farms, Inc. (“Vital Farms”), a purveyor of pasture-raised eggs, filed its Complaint (“Compl.,” Dkt. #1) against Defendants/Counterclaim Plaintiffs Handsome Brook Farm, LLC (“Handsome Brook”) et al. That Complaint alleges, plainly and with supporting detail, that Handsome Brook has violated the Lanham Act and New York GBL § 349 by labeling all of its eggs as “Pasture Raised” (and organic) although, in fact, (1) not all farmers within Handsome Brook’s supply network have met industry standards for pasture-raised eggs (Compl. ¶¶ 31-35), and (2) when demand for its product exceeded supply available from its own supply network, Handsome Brook purchased eggs from other suppliers without regard for whether they were pasture-raised (id. ¶¶ 36, 47). Handsome Brook’s Counterclaim Complaint (“Countercl. Compl.,” Dkt. #9), the subject of this Motion, can best be described as, “If you say I’m doing something bad, I’m going to say that you’re doing something worse.” Virtually without any supporting detail (not even enough to respond to the buckshot allegations), Handsome Brook claims that Vital Farms has disseminated “false and misleading statements,” that Vital Farms has harmed Handsome Brook with consumer-oriented conduct, that Vital Farms has engaged in trademark use of the words “TASTE THE DIFFERENCE®,” and that Vital Farms has committed commercial defamation. The problem with Handsome Brook’s attempt to mirror-image (and then some) Vital Farms’ well-pleaded Lanham Act Complaint is that, without substantive underlying facts, Handsome Brook resorts to kitchen-sink allegations of every form of misconduct, regardless of plausibility. In one instance, Handsome Brook complains that Vital Farms “inflates the price of pasture[-]raised eggs” and “caus[es] consumers to pay significantly more than necessary” for pasture-raised eggs-which, if true, would only benefit Handsome Brook as a seller of Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 3 of 29 2 purportedly pasture-raised eggs. In another instance, Handsome Brook accuses Vital Farms of misusing a trademark “in connection with dietary supplements”-although Vital Farms does not even market dietary supplements. In another instance, Handsome Brook complains about Vital Farms’ use of the “Certified Humane” symbol on its packaging-when use of that symbol is governed by an agreement between Vital Farms and the certifying company, and Handsome Brook (as a non-party) has no standing to challenge its fulfillment. Handsome Brook’s Counterclaim Complaint is a jumble of vague and sometimes nonsensical allegations designed to strike back at Vital Farms for pointing out Handsome Brook’s own unlawful conduct. Because the allegations do not add up to actionable claims, Vital Farms asks the Court to dismiss the Counterclaim Complaint. In the alternative, Vital Farms asks the Court to order Handsome Brook to provide a more definite statement of its Claims, and/or to strike immaterial, impertinent, or scandalous matter from the Counterclaim Complaint. Facts Vital Farms commenced this action against Handsome Brook by filing its Complaint on November 30, 2016. The Complaint states two causes of action, violation of the Lanham Act (false advertising) and violation of New York GBL § 349. (Compl. ¶¶ 1, 10, 63-81.) Vital Farms alleges that Handsome Brook has included the words “Pasture Raised” and “organic,” prominently, on all its egg cartons, when in fact not all the eggs contained therein meet those industry standards. (Id. ¶¶ 4, 44-46, 48, 49.) To wit, the Complaint alleges that Handsome Brook built a supply network of farmers including some who do not “Pasture Raise” their hens, and that when demand exceeded supply, Handsome Brook purchased eggs from other suppliers without regard for whether those eggs were “Pasture Raised” but nonetheless packaged and sold them to consumers as such. (Id. ¶¶ 29-35.) By taking these actions, Handsome Brook was able to sell its eggs for considerably less than the cost of exclusively pasture-raised organic eggs. (Id. ¶¶ 55, 57, Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 4 of 29 3 59.) Handsome Brook responds with a Counterclaim Complaint alleging myriad misdeeds by Vital Farms, the basics of which are these: Vital Farms uses the “Certified Humane” symbol without fulfilling its agreement with the third-party certifier, Humane Farm Animal Care, Inc. (“HFAC”) (id. ¶¶ 5, 8-9, 36-37, 47-48); Vital Farms “portrays itself as an ‘ethical’ company” when its “true priority is the maximization of market share and profit” (id. ¶¶ 6-7, 9; see also id. ¶¶ 21-22, 25); Vital Farms slaughters flocks of hens “if the production and sale of [their] eggs [is] no longer profitable to Vital Farms” (id. ¶ 27), when instead it should allow Handsome Brook, a competitor, to take over Vital Farms’ relationships with farmers (see id. ¶¶ 30-31, 33); Vital Farms makes “other false and/or misleading representations in marketing and promotion of its pasture[-]raised eggs,” i.e., statements about whether its hens choose to go outside during high heat, and about the level of supplemental feed its hens eat along with foraging (id. ¶¶ 50-53); Handsome Brook has trademarked the words “taste the difference” but Vital Farms uses those words “in the promotion and sale of its eggs” and purchases the term as “paid AdWords with online search engines” (id. ¶¶ 56-62); and Vital Farms “has repeatedly attempted to defame Handsome Brook” (id. ¶ 64) by forwarding an email it received from third-party HFAC about Handsome Brook’s practices (id. ¶ 67); by making comments about whether Handsome Brook keeps birds inside all winter or purchases eggs on the “spot” market (id. ¶ 69-70); and by making comments about litigation in which a nonprofit organization sued Handsome Brook in Washington, D.C. (id. ¶ 70). The Counterclaim Complaint does not identify the parties to whom these comments were made, or exactly what was said. Nor does it point to any particular standard of care that Vital Farms is alleged to have violated, other than its contractual right to use the “Certified Humane” trademark. Nevertheless, the Counterclaim Complaint purports to state four claims: (I) violation of the Lanham Act (false advertising); (II) violation of N.Y. GBL § 349; (III) trademark infringement; and (IV) business defamation. (Countercl. Compl. ¶¶ 74-110.) Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 5 of 29 4 Legal Standards Rule 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2),1 a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” See Jean v. Barber, No. 9:09-cv-430, 2010 WL 144396, at *2 (N.D.N.Y. Jan. 11, 2010). A pleading is insufficient if it offers mere “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s] devoid of further factual enhancement.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007) (internal quotation marks omitted)). In order to survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Jean, 2010 WL 144396, at *2 (citing Iqbal, 556 U.S. at 678 (citation omitted)). A claim satisfies this “facial plausibility” standard when it “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” See Lepre v. New York State Ins. Fund, No. 1:13-cv-0926, 2014 WL 4093658, at *4 (N.D.N.Y. Aug. 18, 2014) (quoting Iqbal, 556 U.S. at 678 (citation omitted)). Rule 12(e). Federal Rule of Civil Procedure 12(e) provides, in relevant part: “A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.” The Court may grant a motion for a more definite statement when “the complaint does not comply 1 Most likely, the heightened pleading standard of Rule 9(b) applies here, as Handsome Brook alleges that Vital Farms’ “conduct was undertaken willfully and with the intention of causing confusion, mistake, or deception.” (Countercl. Compl. ¶ 88). See, e.g., Volunteer Firemen’s Ins. Servs., Inc. v. McNeil & Co., 221 F.R.D. 388, 393 (W.D.N.Y. 2004) (holding that heightened pleading standard applied where Lanham Act counterclaimant’s “theory is essentially that plaintiff ‘brazenly, willfully and wantonly’ misrepresented the nature of the parties’ products in order to defraud potential customers”). As set forth herein, it is not necessary to decide the question, because the allegations of the Counterclaim Complaint fail even under Rule 8(a)(2). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 6 of 29 5 with the requirement under Rule 8 of a ‘short and plain statement’ of the claim.” Gialto v. Bush, No. 5:06-cv-1316, 2007 WL 1200138, at **1, 3 (N.D.N.Y. Apr. 20, 2007) (noting that “the court would generally allow an amendment or would grant defendant’s motion for a more definite statement” but dismissing complaint because amendment “would be futile”); see also Martinez v. O’Connell, No. 9:06-CV-0887, 2007 WL 189335, at *2 (N.D.N.Y. Jan. 22, 2007) (granting motion for more definite statement where pleading failed to set forth facts in support of each ground in plaintiff’s petition). A motion for a more definite statement “must contain a statement of the defects of which the party complains and of the details desired.” Gialto, 2007 WL 1200138, at *1 (citing Fed. R. Civ. P. 12(e)). Rule 12(f). “The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “When a complaint does not comply with the requirement that it be short and plain, the court has the power, on its own initiative or in response to a motion by the defendant, to strike any portions that are redundant or immaterial, or to dismiss the complaint.” Salahuddin v. Cuomo, 861 F.2d 40, 42 (2d Cir. 1988) (internal citation omitted). “When considering a Rule 12(f) motion, the standard applied is the ‘mirror image’ of the standard applied to a Rule 12(b)(6) motion.” Ruggles v. Wellpoint, Inc., 253 F.R.D. 61, 65 (N.D.N.Y. 2008) (quoting Sony Fin. Svcs., LLC v. Multi Video Group, Ltd., No. 03 Civ. 1730, 2003 WL 22928602, at *8 (S.D.N.Y. Dec. 12, 2003)). A motion to strike may be granted if “it is clear that the allegation in question can have no possible bearing on the subject matter of the litigation.” Cohen v. Elephant Wireless, Inc., No. 03 Civ. 4058, 2004 WL 1872421, at *2 (S.D.N.Y. Aug. 19, 2004). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 7 of 29 6 Argument I. The Counterclaim for False or Misleading Advertising in Violation of 15 U.S.C. § 1125(a) Should Be Dismissed, or a More Definite Statement Should Be Ordered. To state a claim for false advertising under the Lanham Act, Handsome Brook must allege facts plausibly establishing “that the challenged message is (1) either literally or impliedly false, (2) material, (3) placed in interstate commerce, and (4) the cause of actual or likely injury to the plaintiff.” Church & Dwight Co. v. SPD Swiss Precision Diagnostics, GmBH, 843 F.3d 48, 65 (2d Cir. 2016). Handsome Brook alleges (Countercl. Compl. ¶ 84) that Vital Farms made and distributed in interstate commerce advertising that contains the following seven statements: “statements about whether its eggs are pasture raised (according to its own definition of that term)”; “statements about . . . whether its eggs meet the Certified Humane® standards for pasture raised eggs and may be accurately labeled as such”; “statements about . . . whether its pasture raised laying hens receive ‘a third’ to ‘up to 50%’ of their nutrition from foraging”; “statements about . . . whether the hens that lay its eggs are ‘ethically’ and ‘humanely’ raised and cared for”; “misrepresent[ations of] the supposed quality control and/or traceability audit procedures it purports to undertake in the production of its eggs”; “misrepresent[ations of] the supposed ‘independent’ nature of its relationship with its third party certifier, HFAC”; and “false and misleading statements of fact regarding the ‘organic’ nature of some of its eggs.” (Countercl. Compl. ¶¶ 75-77, 79.) The problems with Handsome Brook’s Lanham Act count are myriad. First, the Counterclaim Complaint provides insufficient detail as to what messages are being challenged, where the alleged statements were made, and who saw them. Second, several of the alleged “misrepresentations” are non-specific statements that are not capable of objective verification Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 8 of 29 7 and therefore cannot form the basis of a false advertising claim. Third, the most specific allegation-whether Vital Farms eggs may be accurately labeled as “Certified Humane®”-appears to refer to the contractual right granted to Vital Farms by Humane Farm Animal Care, an entity not party to this lawsuit. Fourth, the baseless allegation that “Vital Farms’ counsel [have] brought this and other litigation (and threatened litigation) for the improper purpose of harassment” violates a duly executed contract, falls within litigation privilege, and is not a proper counterclaim subject. A. The Counterclaim Complaint Fails to Allege Sufficient Facts for Vital Farms Even to Know What Statements Are Alleged to Be False. A misrepresentation-based claim must provide sufficient detail for the accused party to know the nature of the claim and make a response. In the Second Circuit, “a simple allegation that defendants behaved ‘unlawfully,’ unsupported by any factual detail, is precisely the type of legal conclusion that a court is not bound to accept as true on a motion to dismiss . . . .” Drimal v. Tai, 786 F.3d 219, 224 (2d Cir. 2015). As to five of the seven alleged misrepresentations enumerated in Counterclaim Count I, Vital Farms has no way of knowing what exactly it is alleged to have said, or where, or to whom: Handsome Brook complains of “false and misleading statements of fact regarding the ‘organic’ nature of some of [Vital Farms’] eggs.” (Countercl. Compl. ¶ 79.) Handsome Brook never explains what the particular “statements . . . regarding the ‘organic’ nature” actually are, or where they are made. Astonishingly, Handsome Brook alleges “on information and belief” that Vital Farms has “made and distributed in interstate commerce and in this District” these statements-making clear that Handsome Brook itself has not seen the alleged “false and misleading statements” that are allegedly so present in the marketplace as to harm Handsome Brook. (Id.)2 Handsome Brook complains of “statements about whether [Vital Farms’] eggs are pasture raised (according to its own definition of that term)” (id. ¶ 75), but nowhere does the Counterclaim Complaint explain exactly what Handsome Brook believes Vital Farms’ “own definition of that term” to be (see id. ¶ 40) or allege facts plausibly 2 By contrast, for example, Vital Farms challenges the words “Pasture Raised” and “organic” as they appear on every Handsome Brook label at issue. (Compl. ¶¶ 66, 67.) Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 9 of 29 8 suggesting that Vital Farms has made any misrepresentations with respect to that definition.3 Handsome Brook complains of statements regarding “the supposed quality control and/or traceability audit procedures it purports to undertake in the production of its eggs.” (Id. ¶ 76.) The only additional detail as to statements about “auditing” is an allegation that Vital Farms’ “advertising” (in what form? where?) represents that its egg farms are “regularly audited” by HFAC. (Id. ¶ 42.) Handsome Brook complains that “Vital Farms also misrepresents the supposed ‘independent’ nature of its relationship with its third[-]party certifier, HFAC.” (Id. ¶ 77.) The word “independent” appears nowhere else in the Counterclaim Complaint, so that purported representation is entirely unclear. Handsome Brook complains of “statements about . . . whether [Vital Farms’] pasture raised laying hens receive ‘a third’ to ‘up to 50%’ of their nutrition from foraging.” (Id. ¶ 75.) The only guidance as to where these terms are alleged to appear is in Counterclaim Complaint ¶ 50, which refers to representations being made “in the marketing and promotion of” Vital Farms’ eggs. It is thus not clear whether Handsome Brook claims the statements were made orally, via the Internet, in a printed brochure, in an annual statement, or anyplace else. Handsome Brook goes on to allege, summarily, that these statements “are material to the purchasing decisions of retailers who re-sell, and consumers who purchase” Vital Farms eggs (id. ¶ 54)4-but Vital Farms has no way of knowing how, or where, consumers saw these alleged representations. In short, Handsome Brook’s Lanham Act Counterclaim should be dismissed with respect to these five purported misrepresentations because the allegations are too vague even to identify the statements at issue, much less to establish the elements of the claim. See Twombly, 550 U.S. at 555; Drimal, 786 F.3d at 224. In the alternative, Handsome Brook should be ordered to provide a more definite statement regarding the context of these alleged “advertising” or “marketing and promotion” claims. See, e.g., LivePerson, Inc. v. 24/7 Customer, Inc., 83 F. 3 In fact, Vital Farms, as noted in its Complaint, adheres to the industry standard of 108 square feet of pasture per bird (rotated) and year-round access to pasture, which is also what consumers expect of pasture-raised eggs. (Compl. ¶¶ 16-21, 52, 66.) It is not clear from the Counterclaim complaint whether this industry standard is the “own definition” to which Handsome Brook refers, or why an industry standard would be called Vital Farms’ “own” definition. 4 Also according to the Counterclaim Complaint, this alleged representation “is used as a selling feature of Vital Farms’ pasture raised eggs because Vital Farms claims the pasture raised hen’s pasture diet is part of what makes their eggs superior to conventional eggs.” (Id. ¶ 52.) Handsome Brook does not indicate the source of that claim, either. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 10 of 29 9 Supp.3d 501, 518 (S.D.N.Y. 2015) (ordering more definite statement regarding “context” of false advertising claims, in order to assess materiality of representations). Cf. Powell v. Marine Midland Bank, 162 F.R.D. 15, 16 (N.D.N.Y. 1995) (finding dismissal was warranted where complaint was “so ambiguous and vague that its true substance, if any, is well disguised” (internal quotation marks omitted)).5 B. Several of the Alleged “Misrepresentations” Are Not Capable of Objective Verification. Two of the seven statements about which Handsome Brook complains cannot be proven or disproven-in other words, legally, they cannot be false. Specifically, Handsome Brook complains that Vital Farms has made “statements about . . . whether the hens that lay its eggs are ‘ethically’ and ‘humanely’ raised and cared for,” and “misrepresent[ations of] the supposed ‘independent’ nature of its relationship with its third party certifier, HFAC.” (Countercl. Compl. ¶¶ 75, 77.6) Handsome Brook, however, has not alleged facts establishing the meaning of “ethical” or “humane” to consumers or in the egg industry. Nor does Handsome Brook explain what “independent” means, or how it could be proven. That is not surprising because subjective, non-factual terms like “ethical,” “humane,” or “independent” cannot be the basis of a false advertising claim. Instead, product descriptions “expressed in broad, vague, and commendatory language,” Chobani, LLC v. Dannon Co., Inc., 157 F. Supp. 3d 190, 202 (N.D.N.Y. 2016)-such as “ethical” and “independent”-are puffery, which “is not actionable under the Lanham Act because it ‘cannot be proven either true or false’.” Verizon Directories Corp. v. Yellow Book 5 Although motions for a definite statement are “generally disfavored,” they may be granted where “the complaint is so unintelligible that the defendant does not know what claims to prepare a defense against, and not for a lack of specificity.” Peek & Cloppenburg KG v. Revue, LLC, No. 11 Civ. 5967, 2012 WL 4470556, at *6 (S.D.N.Y. Sept. 19, 2012). 6 The broad assertions of which Handsome Brook complains contrast with the very specific assertions at issue in Vital Farms’ Complaint, i.e., that every Handsome Brook egg was labeled “Pasture-Raised” and “organic,” which are provable industry standards. (Compl. ¶¶ 19-21, 66.) Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 11 of 29 10 United States, Inc., 309 F. Supp. 2d 401, 405 (E.D.N.Y. 2004) (quoting Lipton v. Nature Co., 71 F.3d 464, 474 (2d Cir. 1995) (citation omitted)).7 A company’s “announcement of its intent to behave ethically falls entirely outside the purview of a Lanham Act false-advertising claim.” Intermountain Stroke Ctr. v. Intermountain Health Care, Inc., 638 Fed.Appx. 778, 794 (10th Cir. 2016).8 C. The Most Specific Allegation in Fact Refers to a Contractual Right Between Vital Farms and a Third Party. The final alleged misrepresentation enumerated in Counterclaim Count I-i.e., “statements about . . . whether its eggs meet the Certified Humane® standards for pasture raised 7 See also, e.g., XYZ Two Way Radio Serv. v. Uber Techs., Inc., No. 15-cv-3015, 2016 WL 5854224, at *3 (E.D.N.Y. Oct. 6, 2016)) (citing City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014) (in Securities Act case, noting, “It is well-established that general statements about reputation, integrity, and compliance with ethical norms are inactionable ‘puffery’”)); Leonard v. Abbott Labs., Inc., No. 10-CV-4676, 2012 WL 764199, at *23 (E.D.N.Y. March 5, 2012) (“[T]he Court finds that the statement that Abbott is ‘dedicated to the highest standards of manufacturing and marketing-and to complying with all applicable laws and regulations in the countries where [they] do business’ is not actionable,” contrasted with “the allegation that the ‘product packaging describes Similac as being a formula approved and used most by hospitals, because it is safe for the consumption by infants’” which “plausibly supports a claim based on affirmative misrepresentations under the consumer protection statutes”). 8 This contrasts with Animal Legal Defense Fund v. HVFG, LLC, 939 F.Supp.2d 992 (N.D. Cal. Apr. 12, 2013), a case brought after California banned the force-feeding of birds to produce foie gras but continued allowing out-of-state manufacturers to import their products. See HVFG, 939 F.Supp.2d at 996. Defendant Hudson Valley Foie Gras sold foie gras in California that it marketed as “the humane choice,” despite force-feeding ducklings to death or near death. See id. at 995-96. Regal Vegan, a competitor selling a plant-based “faux gras” product, sued Hudson Valley for false advertising, arguing that “California has essentially declared foie gras production as per se inhumane, following from the fact that California banned as cruel the force-feeding of ducks and geese, and there is no other commercially viable method to produce fatty livers.” Id. at 998. The California court therefore found that Hudson Valley calling its product “the humane choice” as compared to Regal Vegan’s product could be actionable. See id. at 1009 (citing Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999)). (The Hudson Valley case was dismissed four months later without further information publicly available.) Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 12 of 29 11 eggs and may be accurately labeled as such”9-challenges Vital Farms’ right to use the “Certified Humane” logo on its eggs. The Counterclaim Complaint explicitly recognizes that the right to use the Certified Humane logo is granted by a contract between Humane Farm Animal Care and Vital Farms: “The Certified Humane® standards for pasture raised eggs were created and adopted by Humane Farm Animal Care, Inc. (a non-profit, third party standards-setting organization) (hereafter, ‘HFAC’). HFAC makes money by collecting a licensing royalty when companies such as Vital Farms use the Certified Humane® certification on their products.” (Countercl. Compl. ¶¶ 36-37.) The Counterclaim Complaint further recognizes that Vital Farms’ right to use the Certified Humane logo rests upon HFAC’s determination that Vital Farms has met the relevant standards: Central to HFAC’s Certified Humane® program is the farm audit. As to any farm that produces Certified Humane® pasture raised eggs, HFAC touts that “there has been a traceability audit to ensure every egg that goes into the carton [of pasture raised eggs] comes from the Certified Humane® pasture farms.” According to HFAC, “[e]very farm with [the Certified Humane®] seal is audited by an inspector who must have a master’s degree or a doctorate in animal science and be an expert on the species he or she inspects.” (Id. ¶ 41.) As the Counterclaim Complaint specifically recognizes, if HFAC determines that Vital Farms has met HFAC’s requirements, then Vital Farms has a right, by contract, to use the Certified Humane logo.10 If Handsome Brook wishes to allege that HFAC does not enforce its 9 Related to the use of the Certified Humane logo are also the purported “misrepresent[ations of] the supposed quality control and/or traceability audit procedures it purports to undertake in the production of its eggs” (Countercl. Compl. ¶ 76) and “misrepresent[ations of] the supposed ‘independent’ nature of its relationship with its third party certifier, HFAC” (id. ¶ 77). These also appear to address Vital Farms’ relationship with HFAC. 10 It bears mentioning that, in its own Complaint, Vital Farms does not challenge Handsome Brook’s right to use the “American Humane” logo on its products, because it recognizes that use of the logo rests upon a private contractual agreement between Handsome Brook and the American Humane Association. (Compl. ¶¶ 45-46, 54.) Instead, Vital Farms observes that the private contractual agreement between those parties does not give Handsome Brook the right to misrepresent, separately, that its eggs are exclusively “Pasture Raised.” (Id. ¶¶ 4, 59, 60.) Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 13 of 29 12 own standards, and this somehow damages Handsome Brook, it might have a claim against HFAC, but it has no basis to claim misrepresentation by a company contractually permitted to use that logo. Cf. Agence France Presse v. Morel, 769 F.Supp.2d 295, 307 (S.D.N.Y. 2011) (holding that Lanham Act claim could not be premised on false advertising of relationship between defendant and third party) (relying on Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), and progeny). D. The “Harassment” Allegation Is Unsupported, Falls Within Litigation Privilege, and Should Be Struck from the Counterclaim. Finally, Handsome Brook alleges upon information and belief that “Vital Farms is acting in concert with one or more third parties in an effort to use litigation as an improper means for eliminating competition,” and “Vital Farms’ counsel [have] brought this and other litigation (and threatened litigation) for the improper purpose of harassment.” (Id. ¶ 88.) Based on this allegation, Handsome Brook seeks injunctive relief pursuant to § 1116, damages pursuant to § 1117, and costs of action pursuant to § 1117.11 “Section 35(a) of the Lanham Act provides a narrow exception to the American Rule that each party must bear its own attorneys’ fees. Under the statute, a court may award attorneys’ fees in ‘exceptional cases’.” Farberware Licensing Co. LLC v. Meyer Mktg. Co., No. 09 Civ. 2570, 2009 WL 5173787, at *1 (S.D.N.Y. Dec. 30, 2009) (citing, inter alia, 15 U.S.C. § 1117(a); Patsy’s Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 221 (2d Cir. 2003)). “Under the law of this Circuit, ‘[a]n action is brought in bad faith when the claim is entirely without color and has been asserted wantonly, for purposes of harassment or delay, or for other improper reasons.’” 11 Counsel for Vital Farms, the Richman Law Group, contend that the “threatened litigation” allegation, in a publicly filed document, violates duly executed confidentiality agreements between the Richman Law Group, on the one hand, and Amin, Talati & Upadhye, LLC, on the other hand. The respective counsel have been negotiating the parameters of those agreements. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 14 of 29 13 Hirschfeld v. Board of Elections in City of New York, 984 F.2d 35, 40 (2d Cir. 1992) (citing Browning Debenture Holders’ Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir.1977)). First, it cannot seriously be suggested that Vital Farms’ action is “entirely without color” or “asserted wantonly.” Vital Farms has asserted a claim based on concrete facts-namely, that Handsome Brook is labeling its eggs “Pasture Raised” when farmers within its own network have failed to meet pasture-raising standards, and when Handsome Brook has supplemented its network by purchasing eggs from other suppliers, regardless of whether those eggs came from pasture-raised hens. (E.g., Compl. ¶¶ 56-58, 65-66.) Handsome Brook has not moved to dismiss the well-pleaded Complaint based on failure to state a claim, and in the Counterclaim Complaint provides no detail other than its own unsubstantiated allegation that Vital Farms is trying to “use litigation as an improper means.” That alone renders its request for costs entirely improper. See, e.g., Gamla Enterps. North America, Inc. v. Lunor-Brillen Design U. Vertriebs GMBH, No. 98 Civ. 992, 2000 WL 193120, at **4-5 (S.D.N.Y. Feb. 17, 2000); Hermes Int’l v. Lederer de Paris Fifth Ave., Inc., 50 F. Supp. 2d 212, 226 (S.D.N.Y. 1999). Second, a request for costs is entirely premature when the party requesting costs has not prevailed on the underlying substance of the case, and it is not properly brought within pleading a counterclaim. In Jones Apparel Group v. Piccone, No. 94 Civ. 0754, 1994 WL 260767, at *2 (S.D.N.Y. June 8, 1994), the court dismissed a “counterclaim” for costs of defending a suit, holding, “According to Rules 54(d) and 59(e), . . . [cost] applications such as the one contained in Counterclaim I are properly made by motion.”12 12 The Jones Apparel case differs insofar as that counterclaim plaintiff failed to bring an actual substantive Lanham Act claim in its own right, and brought only a counterclaim premised on costs of defense. The court, however, held that the distinction made no difference and indicated that its decision was not limited by the lack of substantive underlying counterclaim. See Jones Apparel, 1994 WL 260767, at *4. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 15 of 29 14 Third, Vital Farms is unaware of any precedent suggesting that a law firm’s representation, or shared representation, of two different parties in similar lawsuits against a single defendant could possibly create a basis for sanctions. In Farberware, 2009 WL 5173787, the defendant pointed to, inter alia, the fact that plaintiff (not plaintiff’s counsel, or some subset thereof) had previously brought similar lawsuits: “Meyer argues that FLC’s alleged bad faith is illustrated by the facts that (1) FLC had previously filed a virtually identical complaint against another licensee and succeeded in using that litigation to extract extra-contractual benefits from the licensee . . . .” Id. at *2. The court did not find this, or any of defendant’s other arguments, sufficient to show bad faith.13 Here, one of Vital Farms’ counsel, before being retained by Vital Farms, represented a nonprofit organization against Handsome Brook, under the District of Columbia’s consumer-protection statute, arising from the same conduct by Handsome Brook. That is not improper. * * * None of the seven statements alleged to underlie Counterclaim Count I actually supports a claim for false and misleading advertising under 15 U.S.C. § 1125(a), as summarized here: Alleged Misrepresentation Reason(s) for Failure “whether its eggs are pasture raised (according to its own definition of that term)” vague; fails to identify an allegedly false or misleading statement or to explain what Vital Farms “own definition” is 13 For an example of the level of conduct that could warrant an award of costs, see Einhorn Yaffee Prescott Architecture & Engineering, P.C. v. Turpin, No. 94-CV-830, 1995 U.S. Dist. LEXIS 20546 (N.D.N.Y. May 12, 1995), wherein the defendants successfully moved for sanctions in a Lanham Act action where the single plaintiff, without any explanation, commenced multiple lawsuits against the same defendants in multiple forums, and there was “nothing to indicate even a cursory investigation into the underlying basis for the Lanham Act claim”; the plaintiff’s attorney had “contacted clients of defendants after [] information was revealed in discovery to notify them of the pending lawsuit and infer the impending demise of defendant company”; and plaintiff’s attorney had “provided materials from this litigation to individuals within the Hudson City School District in an effort to discredit defendants and possibly endanger RAP’s contract with the school district.” Id. at *17. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 16 of 29 15 “whether its eggs meet the Certified Humane® standards for pasture raised eggs and may be accurately labeled as such” matter of contract between Vital Farms and HFAC; does not challenge HFAC’s actions under the contract “whether its pasture raised laying hens receive ‘a third’ to ‘up to 50%’ of their nutrition from foraging” vague; unclear where the alleged representation was made, and who saw it “whether the hens that lay its eggs are ‘ethically’ and ‘humanely’ raised and cared for” not capable of objective proof, and therefore cannot be false “the supposed quality control and/or traceability audit procedures it purports to undertake in the production of its eggs” vague; unclear what the alleged representation is, where it was made, or how it was false; also part of third-party contract issue “the supposed ‘independent’ nature of its relationship with its third party certifier, HFAC” vague; unclear what the alleged representation is, where it was made, or how it was false; also part of third-party contract issue “statements of fact regarding the ‘organic’ nature of some of its eggs” vague; not clear what the representations are, and Handsome Brook admits to not knowing where, or if, they appeared Therefore, Vital Farms requests dismissal of Counterclaim Count I for failure to state a claim upon which relief may be granted. II. The Counterclaim for Deceptive Trade Practices in Violation of NY GBL § 349 Should Be Dismissed for the Same Reasons as the Lanham Act Claim, and for the Additional Reason That the Alleged “Damages” Would Benefit Handsome Brook. The elements of a claim for deceptive trade practices in violation of NY GBL § 349 are (1) a consumer-oriented act or practice that (2) was misleading in a material way and (3) caused injury to the plaintiff as a result of the deception. See Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20 (N.Y. 1995).14 The consumer-oriented conduct that Handsome Brook alleges is “Vital Farms’ practice of falsely and deceptively advertising its eggs and its company,” which “is misleading in a material respect.” (Countercl. 14 Although the challenged conduct itself must be consumer-oriented, the action may be brought by a competitor, so long as the competitor is harmed. See, e.g., Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995); Spirit Locker, Inc. v. EVO Direct, LLC, 696 F.Supp.2d 296, 302 (E.D.N.Y. 2010). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 17 of 29 16 Compl. ¶ 91.) According to Handsome Brook, this advertising “injured Handsome Brook by usurping business that otherwise would have belonged to Handsome Brook.” (Id. ¶ 95.) Also according to Handsome Brook, Vital Farms’ conduct “artificially inflates the price of pasture[-] raised eggs,” “caus[es] consumers to pay significantly more than necessary,” and “inevitably raises (or maintains already high) prices for Vital Farms’ products.” (Id. ¶ 94.) This claim suffers from two fundamental defects. First, the Counterclaim provides no additional detail regarding the alleged false and deceptive advertising-no particular words, no locations, no consumer exposure, nothing. Apparently, the same representations alleged to underlie Count I are also intended to underlie Count II. Those representations fail for all the reasons set forth supra. See, e.g., M&T Mortg. Corp. v. White, 736 F.Supp.2d 538, 570 (E.D.N.Y. 2010) (noting that Section 349 claim needs at least to identify specific advertisements at issue and to provide brief explanation of how they might mislead reasonable consumer). In the event that the Court does not dismiss Count II in toto, Vital Farms requests, pursuant to Rule 12(e), that the Court order Handsome Brook to provide a more definite statement of the claim, including at least identification of the specific advertisements about which Handsome Brook complains, and a brief explanation of why the advertisements are materially deceptive to an objective consumer. See, e.g., Pelman v. McDonald’s Corp., 396 F.Supp.2d 439, 445-46 (S.D.N.Y. 2005) (“[P]laintiffs need not provide information as to how each advertisement injured each plaintiff. Plaintiffs must, however, outline the injuries that were suffered by each plaintiff ‘by reason of’ defendant’s alleged deceptive nutritional scheme.”). Second, the two facets of the alleged injury are wholly incompatible and suggest that Handsome Brook in fact benefitted from the alleged false advertising. If, as the Counterclaim Complaint avers, Vital Farms “artificially inflates the price of pasture[-]raised eggs” and Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 18 of 29 17 “caus[es] consumers to pay significantly more than necessary” (Countercl. Compl. ¶ 94), then Handsome Brook, as a seller of eggs labeled as “Pasture Raised” is the equal beneficiary of such conduct. Indeed, instead of being injured, Handsome Brook has received a windfall, if the allegations of the Counterclaim Complaint are taken at face value. Moreover, as to the alternative assertion that Vital Farms has “usurp[ed] business that otherwise would have belonged to Handsome Brook” (id. ¶ 95), that makes no sense if Vital Farms’ conduct also “inevitably raises (or maintains already high) prices for Vital Farms’ products,” (id. ¶ 94). It defies logic to suggest that a company raising, or maintaining artificially high, prices for its products “usurps” business from a competitor offering purportedly the same product at a lower price. III. The Claim for Infringement of a Registered Trademark in Violation of 15 U.S.C. § 1114 Fails to Allege Any Specific Use of a Trademark, and Fails to Allege Facts to Underlie Any Other Violation. According to the Counterclaim Complaint, (1) Handsome Brook owns a registration for the trademark TASTE THE DIFFERENCE!® for use on and in connection with “eggs” (Countercl. Compl. ¶ 97), (2) Vital Farms purchases search-engine Key Words and AdWords that contain HANDSOME BROOK FARMS and TASTE THE DIFFERENCE!® and uses them to promote links to Vital Farms’ own website (id. ¶ 99), and (3) Vital Farms “uses the TASTE THE DIFFERENCE!® mark throughout its website and on various social media platforms in a manner designed to increase Vital Farms’ website visibility in search engines [sic] for Handsome Brook’s products” (id. ¶ 100). This claim suffers two infirmities. First, like so much of the Counterclaim Complaint, it is completely devoid of specificity. The use of the words “taste the difference” is most likely subject to a fair-use defense: “Fair use is a defense to liability under the Lanham Act even if a defendant’s conduct would otherwise constitute infringement of another’s trademark. Section 33(b)(4) of the Lanham Act defines fair use as [‘]a use, otherwise than as a mark, of . . . a term or Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 19 of 29 18 device which is descriptive of and used fairly and in good faith only to describe the goods or services of [a] party . . . .’” Cosmetically Sealed Indus., Inc. v. Chesebrough-Pond’s USA Co., 125 F.3d 28, 30 (2d Cir. 1997) (citing 15 U.S.C. § 1115(b)(4) (1994)). Vital Farms, however, has no way of knowing whether to mount such a defense, because Handsome Brook has not pointed to even a single specific use of the term. The Counterclaim Complaint refers cryptically to the words “throughout [Vital Farms’] website and on various social media platforms” and to “Vital Farms’ use of the TASTE THE DIFFERENCE!® mark in connection with dietary supplements.” (Countercl. Compl. ¶¶ 100-01.) Vital Farms neither markets nor trades in dietary supplements, and is not aware of any use of those words, in a trademark sense, in its advertising for the products it does market, namely, eggs. Because it is not clear at all what Handsome Brook means with these allegations, the claim should be dismissed,15 or Handsome Brook should be ordered to provide some minimum level of specificity. See supra, Section I.A & authorities cited therein. Second, as to the portion of Handsome Brook’s claim based on alleged “purchase [of] Key Words and AdWords . . . which contain the HANDSOME BROOK FARMS and TASTE THE DIFFERENCE!® marks” (Countercl. Compl. ¶ 99), the Counterclaim Complaint makes no allegation that Handsome Brook actually owns a trademark registration for the words 15 Cf. NYSA Series Trust v. ESPSCO Syracuse, LLC, No. 5:14-CV-1089, 2015 WL 457691, at *4 (N.D.N.Y. Feb. 3, 2015) (dismissing investors’ fraud and misrepresentation claims because they failed to put forth any factual allegations plausibly linking defendant to the alleged misrepresentations or omissions in offering materials and made only conclusory allegations); Ritani, LLC v. Aghjayan, 970 F.Supp.2d 232, 261 (S.D.N.Y. 2013) (dismissing claim for tortious interference with business relationship because plaintiff failed to allege that any customers chose not to buy from it or cancelled any order); Laskowski v. Liberty Mut. Fire Ins. Co., No. 5:11-cv-340, 2011 WL 4965454, at *2-3 (N.D.N.Y. Oct. 19, 2011) (finding that plaintiffs’ “factually- devoid[,] conclusory statements,” which were substantiated only by plaintiffs’ personal experiences, were insufficient to state claim for deceptive practices under N.Y. Gen. Bus. Law § 349); Jean, 2010 WL 144396, at *3 (granting motion to dismiss where complaint failed to allege any facts plausibly suggesting defendant was personally involved in alleged constitutional violation). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 20 of 29 19 “Handsome Brook Farms.” Thus, Handsome Brook has failed to allege an essential element of an infringement claim under 15 U.S.C. § 1114. See Gruner + Jahr USA Pub. v. Meredith Corp., 991 F.2d 1072, 1075 (2d Cir. 1993) (“Under § 1114 of the Lanham Act, plaintiff in a trademark infringement action must show that defendant (1) without consent, (2) used in commerce, (3) a reproduction, copy or colorable imitation of plaintiff’s registered mark, as part of the sale or distribution of goods or services, and (4) that such a use is likely to cause confusion.” (emphasis added)). As to the alleged purchase of Key Words or AdWords of the trademarked words “TASTE THE DIFFERENCE!®,” the Counterclaim Complaint provides no support-and to the best of Vital Farms’ knowledge, no support exists for the claim. Nor does the Counterclaim Complaint provide a “specific disclaimer that additional investigation is necessary.” O’Brien v. Alexander, 101 F.3d 1479, 1489 (2d Cir. 1996). Federal Rule of Civil Procedure 11(b)(3) requires a minimal foundation before pleading.16 Vital Farms therefore requests that the Court dismiss any portion of Counterclaim Count III without objectively reasonable basis, or in the alternative, that the Court order Handsome Brook to amend Count III to state the facts underlying the claim. IV. The Counterclaim Complaint Fails to Allege the Elements of a Claim for Business Defamation. Under New York law, the plaintiff must establish four elements in order to prevail on a 16 Federal Rule of Civil Procedure 11(b)(3) provides: By presenting to the court a pleading, . . . an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances[,] . . . the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery. Vital Farms is not seeking sanctions pursuant to Rule 11(c), but asks that the claim be stricken if in fact no reasonable investigation was undertaken before alleging that Vital Farms purchased Key Words and AdWords containing the TASTE THE DIFFERENCE!® trademark. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 21 of 29 20 defamation claim: (1) a false and defamatory statement of fact; (2) regarding the plaintiff; (3) published to a third party by the defendant; and (4) resulting in injury to the plaintiff. See, e.g., Weldy v. Piedmont Airlines, Inc., 985 F.2d 57, 61 (2d Cir. 1993). “The complaint in an action for slander is required to state in haec verba the particular defamatory words claimed to have been uttered by defendants. This requirement is strictly enforced and the exact words must be set forth.” Gardner v. Alexander Rent-A-Car, Inc., 28 A.D.2d 667, 667 (1st Dep’t 1967) (emphasis added); see also C.P.L.R. § 3016(a) (“In an action for libel or slander, the particular words complained of shall be set forth in the complaint.”). Dismissal is warranted where the pleading “[f]ail[s] to state the particular person or persons to whom the allegedly slanderous or libelous comments were made as well as the time and manner in which the publications were made.” Hawkins v. City of New York, 99-cv-11704, 2005 WL 1861855, at *18 (S.D.N.Y. Aug. 4, 2005) (collecting cases); see also General Sec., Inc. v. APX Alarm Sec. Solutions, Inc., 647 F.Supp.2d 207 (N.D.N.Y 2009) (quoting N.Y.C.P.L.R. 3016(a)); Kramer v. Skyhorse Pub., Inc., 45 Misc.3d 315, 317 (N.Y. Sup. Ct. 2014) (“[C.P.L.R. § 3016(a)] was enacted to ensure that defendants are adequately notified of the alleged defamatory statement and to discourage actions intended solely to harass.”) (citing Pappalardo v. Westchester Rockland Newspapers, 101 A.D.2d 830, 831 (2d Dep’t 1984), aff’d, 64 N.Y.2d 862 (N.Y. 1985)). This is Handsome Brook’s counterclaim for business defamation, as pleaded in the Counterclaim Complaint: Vital Farms has engaged in a campaign of publishing false and disparaging statements about Handsome Brook and its business activities. These statements include false accusations to HFAC concerning Handsome Brook’s labeling, malicious propagation of an email containing false information about Handsome Brook’s business to egg retailers, false statements concerning the treatment of Handsome Brook’s laying-hens, false statements concerning Handsome Brook’s purchasing activity (specifically that Handsome Brook purchases eggs on the ‘spot’ market), and dissemination of misinformation concerning another litigation Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 22 of 29 21 matter involving Handsome Brook (some of which, upon information and belief, occurred before that litigation was even filed). (Countercl. Compl. ¶ 106.) “Handsome Brook has been injured by the foregoing statements by a loss of goodwill as well as a usurping of business that otherwise would have belonged to Handsome Brook.” (Id. ¶ 110.) For at least three reasons, this claim fails. First, despite its sweeping language of “a campaign of publishing,” Handsome Brook fails to allege any third party to whom the alleged statements were made, other than “false accusations to HFAC concerning Handsome Brook’s labeling.”17 As to the alleged “accusations” to HFAC, the Counterclaim Complaint fails to allege any particular statement of fact that purportedly was made. These shortcomings alone doom the claim for defamation. See Hawkins, 2005 WL 1861855, at *18 (citation omitted) (“The failure to identify both the individuals to whom the statement allegedly was made and the content of that statement is fatally defective to his attempt to state a libel or slander cause of action.”); Horowitz v. Aetna Life Ins., 148 A.D.2d 584, 586 (2d Dep’t 1989) (“[T]he allegations of the complaint sounding in slander failed to state a cause of action because the alleged statements were not pleaded with the specificity required by CPLR 3016(a) and the plaintiff’s papers failed to name or otherwise identify the persons who heard the statements.”). Second, as to “malicious propagation of an email containing false information about Handsome Brook’s business,” passing a statement made by a third party-without some additional, malicious affirmation of its veracity-does not constitute defamation.18 In New York, 17 The allegation regarding “malicious propagation of an email . . . to egg retailers” (Countercl. Compl. ¶ 106) fails to name any particular egg retailer and additionally fails for the reason enumerated below, namely, that Vital Farms did not originate the allegedly false statement. 18 Though the Counterclaim Complaint lacks detail, this allegation appears to refer to an email sent by the director of Humane Farm Animal Care to various retail outlets, alleging deficiencies in Handsome Brook’s products as marketed. That email subsequently became the subject of Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 23 of 29 22 a private figure complaining of defamation regarding a matter of public concern may recover only upon establishing that the defendant acted “in a grossly irresponsible manner without due consideration for the standards of information gathering and dissemination ordinarily followed by responsible parties.” Weiner v. Doubleday & Co., Inc., 74 N.Y.2d 586, 591 (N.Y. 1989) (quoting Chapadeau v. Utica Observer-Dispatch, 38 N.Y.2d 196, 199 (N.Y. 1975) (internal quotes omitted)); see also Lopez v. Univision Commun., Inc., 45 F.Supp.2d 348, 360 (S.D.N.Y. 1999). “‘[G]ross negligence’ means that the defendant is so extremely careless that it is equivalent to recklessness[.]” Lopez, 45 F.Supp.2d at 362 (quoting Veals v. Consolidated Edison Co., 114 Misc.2d 626, 628 (Civ. Ct. Kings Co. 1982)). Courts applying New York law have uniformly applied the gross negligence standard of Chapadeau to cases involving non-media defendants. See Konikoff v. Prudential Ins. Co. of Am., 234 F.3d 92, 94, 101, 106 (2d Cir. 2000) (collecting cases and holding that it was not “grossly irresponsible” as a matter of law for defendant to disseminate to shareholders and public a report, prepared by independent counsel, that contained defamatory statements about plaintiff’s appraisal of certain properties). Even in cases involving non-media defendants, courts applying New York have broadly defined “the scope of what is ‘arguably in the sphere of public concern’.” Konikoff, 234 F.3d at 102 n.9 (collecting cases); see also, e.g., Mott v. Anheuser- Busch, Inc., 910 F.Supp. 868, 874 (N.D.N.Y. 1995) (alleged water pollution by defendant); Post v. Regan, 677 F.Supp. 203, 208 (S.D.N.Y. 1988) (unauthorized transactions conducted by defendant insurance brokerage); Luisi v. JWT Group, Inc., 14 Media L. Rep. (BNA) 1732 (Sup. Ct. N.Y. County 1987) (allegedly improper accounting practices by defendant’s employee), aff’d federal Lanham Act litigation between Handsome Brook and HFAC. See Handsome Brook Farm, LLC v. Humane Animal Farm Care, No. 1:16-cv-592 (E.D. Va. May 27, 2016). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 24 of 29 23 w/o opinion, 138 A.D.2d 987 (1st Dep’t 1988), appeal denied, 72 N.Y.2d 803 (N.Y. 1988).19 As a matter of law, the mere forwarding of an email prepared by a third party cannot constitute “gross negligence.” Third, as to alleged “dissemination of misinformation concerning another litigation matter involving Handsome Brook,” it is not clear whether Handsome Brook refers to litigation in which it sued HFAC (see supra IV. n.20), or to litigation in which the nonprofit Organic Consumers Association sued Handsome Brook (see supra I.D.). Without such identification, Vital Farms cannot be expected to respond to the allegation.20 More importantly, statements made in the course of litigation enjoy absolute privilege. See Front, Inc. v. Khalil, 24 N.Y.3d 713, 718 (N.Y. 2015). “[T]o allow such statements to be a basis for a defamation action ‘would be an impediment to justice, because it would hamper the search for truth and prevent making inquiries with that freedom and boldness which the welfare of society requires’.” Id. (quoting Youmans v. Smith, 47 N.E. 265, 267 (N.Y. 1897)). Thus, Section 74 of the New York Civil Rights Law provides, in relevant part, that “[a] civil action cannot be maintained against any person, firm or corporation, for the publication of a fair and true report of any judicial proceedings . . . .” N.Y. Civ. Rights L. § 74. The privilege is not limited to statements made in court. See Lipin v. Hunt, No. 14-cv-1081, 2015 WL 1344406, at *8 (S.D.N.Y. Mar. 20, 2015) (quoting Kelly v. Albarino, 485 F.3d 664, 666 (2d Cir. 2007) (per curiam)) (“[T]his is the 19 The court in Luisi noted that the allegedly defamatory statements “were made solely in reliance on the outside investigators’ report and that the report was prepared with due care and thoroughness.” 14 Media L. Rep. at 1734. 20 See Grynberg v. Alexander’s Inc., 133 A.D.2d 667 (2d Dep’t 1987) (affirming dismissal where “the complaint failed to allege the particular words complained of or to provide the time, place and manner of the purported defamatory statement”); Wang v. Wong, No. 5593/2014, 2014 WL 6780610, at *2 (N.Y. Sup. Ct. Nov. 29, 2014) (“Paraphrasing and other descriptions or summaries of the alleged defamatory words, without stating the words themselves, have been held insufficient to satisfy the particularity requirement of CPLR 3016(a).”). Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 25 of 29 24 broadest of possible privileges and any matter which, by any possibility, under any circumstances, at any stage of the proceeding, may be or may become material or pertinent is protected by an absolute privilege even though such matter may be ineffectual as a defense.”). For the privilege to apply, substantial truth is all that is required; absolute accuracy is not required. O’Connor v Field, 266 A.D. 121 (1st Dep’t 1943); see also Holy Spirit Assn. for Unification of World Christianity v. New York Times Co., 49 N.Y.2d 63, 67 (N.Y. 1979) (“For a report to be characterized as ‘fair and true’ within the meaning of the statute, thus immunizing its publisher from a civil suit sounding in libel, it is enough that the substance of the article be substantially accurate.”). The totality of Handsome Brook’s allegation in this regard is that Vital Farms “disseminat[ed] misinformation concerning another litigation matter involving Handsome Brook (some of which, upon information and belief, occurred before that litigation was even filed).” Absent some indication of what was said, and to whom, there is no possibility that Handsome Brook can overcome the hurdle of privilege relating to speaking about litigation matters. * * * Accordingly, Counterclaim Count IV, for business defamation, should be dismissed for failure to plead the requisite elements. In the alternative, the references to “malicious propagation of an email” and discussion of “another litigation” should be struck from the Counterclaim Complaint. Conclusion Counterclaim Count I, for false or misleading advertising in violation of 15 U.S.C. § 1125(a) (Lanham Act), fails because it provides insufficient detail as to where the alleged statements were made and who saw them, because some of the alleged “misrepresentations” are so vague as to make a definite response impossible, because several of the alleged Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 26 of 29 25 “misrepresentations” are not capable of objective verification, and because the most specific allegation in fact refers to a contractual right between Vital Farms and a third party (which Handsome Brook has no claim to enforce). The request for costs appended to this Lanham Act claim is procedurally improper at this stage. Counterclaim Count II, for violation of New York GBL § 349, fails because it rests upon the same deficient allegations of “false and deceptive advertising” as Count I, and because it sets forth a theory of injury that, if correct, indicates that Handsome Brook in fact received a windfall in its ability to charge higher prices for purportedly pasture-raised eggs. Counterclaim Count III, for trademark violation, fails because it is completely devoid of specificity as to the alleged trademark use of the words “TASTE THE DIFFERENCE!®.” Counterclaim Count IV, for business defamation, fails because it fails to allege to whom the purported statements were made, because forwarding an email prepared by a third-party certifying agency does not meet the standard of “gross negligence,” and because statements regarding litigation enjoy an absolute privilege. Accordingly, and based upon all the foregoing authority, Plaintiff/Counterclaim Defendant Vital Farms respectfully requests dismissal of the Counterclaim Complaint pursuant to Rule 12(b)(6), or in the alternative, an order pursuant to Rule 12(e) ordering Handsome Brook to provide a more definite statement and pursuant to Rule 12(f) striking immaterial, impertinent, or scandalous matter from the Counterclaim Complaint. Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 27 of 29 26 Respectfully submitted, THE RICHMAN LAW GROUP By: ___________________________________ Kim E. Richman krichman@richmanlawgroup.com 81 Prospect Street Brooklyn, NY 11201 Telephone: (212) 687-8291 Facsimile: (212) 687-8292 James J. Pizzirusso jpizziruzzo@hausfeld.com Jeannine M. Kenney jkenney@hausfeld.com HAUSFELD LLP 1700 K Street, NW, Suite 650 Washington, DC 20006 Telephone: (202) 540-7200 Facsimile: (202) 540-7201 Counsel for Plaintiff/Counterclaim Defendant Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 28 of 29 CERTIFICATE OF SERVICE The undersigned hereby certifies on this 7th day of March 2017 that all counsel of record who are deemed to have consented to electronic service are being served with a copy of the forgoing document, Plaintiff/Counterclaim Defendant’s Motion to Dismiss the Counterclaims, or in the Alternative, Motion to Strike and/or for A More Definite Statement, via the Court’s CM/ECF system. Dated: Brooklyn, New York March 7, 2017 THE RICHMAN LAW GROUP By: ___________________________________ Kim E. Richman krichman@richmanlawgroup.com 81 Prospect Street Brooklyn, NY 11201 Telephone: (212) 687-8291 Facsimile: (212) 687-8292 Case 3:16-cv-01421-GTS-DEP Document 22-1 Filed 03/07/17 Page 29 of 29
