May 19, 2019

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False Ad Claims Fail to Crystalize as New Jersey Federal Court Dismisses Amended Complaint against Sharp Electronics with Prejudice

Dismissals of class action complaints with prejudice are not as common as dismissals with leave to replead, but a recent decision in the District of New Jersey illustrates the circumstances under which a dismissal with prejudice is appropriate.

Plaintiffs filed a putative class action against Sharp Electronics alleging that Sharp falsely and misleadingly marketed its line of flat screen televisions as light emitting diode (“LED”) TVs without disclosing that its references to LED referred to the television’s LED light source technology for liquid crystal displays (“LCD”) rather than to a more advanced LED display technology. The plaintiffs claimed they relied on misleading statements to this effect on Sharp’s television cartons. Dismissing the plaintiffs’ original complaint, Judge William Martini observed that Sharp had stated on the television cartons that the product inside the carton was both an “LED TV” and a “Liquid Crystal Television.” The court found that the plaintiffs therefore did not adequately allege that a reasonable consumer could be deceived by Sharp’s marketing statements, and dismissed their original complaint without prejudice.

In their amended complaint, plaintiffs channeled new allegations that they purchased Sharp televisions because Sharp made marketing assertions on the Internet and at point-of-sale that the television was an LED TV. The court dismissed the amended complaint as well, this time with prejudice. First, the court held that the plaintiffs failed to meet the heightened pleading standard of Rule 9(b) because they failed to provide the court with the “who, what, when, where and how” of the alleged consumer fraud. Second, the court held that the plaintiffs again failed to adequately allege that a reasonable consumer could be deceived by Sharp’s marketing because the plaintiffs merely alleged misrepresentations “on the internet,” and the court determined that Sharp’s website contained a crystal clear disclosure in the “tech specs” section of its webpage that Sharp’s LED TVs were, in fact, displayed on LCD panels. These disclosures, like the disclosures on the TV cartons raised in the original complaint, again defeated plaintiffs’ claims that a reasonable consumer would be deceived.

The court assumed that plaintiffs’ counsel was well aware of the requirements of Rule 9(b), and given that plaintiffs failed to supplement the pleadings when given the chance to do so, the court surmised that plaintiffs would have no additional particulars to plead if given another opportunity to amend. Accordingly, the court dismissed the amended complaint with prejudice.

Dismissal with leave to file a third complaint (and on occasion even more) are not unheard of, and it will be interesting to see whether more courts follow Judge Martini’s lead and hold that, where a plaintiff twice fails to state a claim under the pleading standard of 9(b), the claim should be dismissed with prejudice on the ground that plaintiff would have nothing more to add in yet another amended complaint. Watch this space for further developments.

Lyuba Shamailova is co-author of this article. 

© 2019 Proskauer Rose LLP.

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About this Author

Lawrence I Weinstein, False Advertising and Trademark Copywright Law, Proskauer
Partner

Larry Weinstein is a Partner in Proskauer's Litigation Department. He is co-head of the firm’s Intellectual Property Litigation Group, and also co-head of the firm’s False Advertising & Trademark Practice. Larry is both a distinguished trial lawyer and counselor, whose practice covers a broad spectrum of intellectual property law, including Lanham Act false advertising and trademark cases, consumer class action cases, NAD and FTC proceedings, and trade secret and copyright litigations, as well as sports, art and other complex commercial cases.

212-969-3240
Daniel Werb, Proskauer Rose, litigation attorney
Associate

Daniel Werb is an associate in the Litigation Department.

Prior to joining Proskauer, Dan was a judicial intern for the Honorable Eric N. Vitaliano of the U.S. District Court for the Eastern District of New York. At Columbia Law School, he served as an Articles Editor of the Columbia Journal of Law & the Arts and was an extern at Volunteer Lawyers for the Arts.

212-969-3273