Damages questions preclude certifying a Lanham Act false advertising plaintiff class

Ciccio v. SmileDirectClub, LLC, 2024 WL 559235, No. 3:19-cv-00845 (M.D. Tenn. Feb. 12, 2024)

The court denied certification to a proposed class of dentists/orthodontists over SDC’s allegedly false advertising for its plastic aligners/teledentistry services, based on difficulties identifying harm/causation.

Under Lexmark, “a plaintiff suing under [the false advertising provision of the Lanham Act] ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising,” which is usually accomplished by showing that the defendant’s “deception of consumers cause[d] them to withhold trade from the plaintiff.” “Each individual member of the putative class, therefore, would need to establish an actual effect on consumers resulting in injury—not to the broad community of dentists and orthodontists—but specifically to him/her and his/her practice.” This they could not do.

“Consumer motivations are complex, and a court cannot simply ‘assume[ ] ... that every [purchase] during the relevant time period was the result of [the defendant’s] allegedly false statements.’” The consumers here were many, “with different needs and preferences.” Even if falsity/misleadingness of the ads was a common issue, that wasn’t enough. “[T]he question of whether, and to what extent, any given plaintiff was actually injured by one or more of the statements will depend on plaintiff-specific contextual factors. Drawing a coherent, factually supported line from a single misleading statement in a company’s advertisement to an actual economic injury by a competitor is inherently difficult to do, and, insofar as it would be possible at all for the kinds of statements at issue in this case, it would be particularly difficult to do on a class-wide basis.” Thus, causation/harm would predominate.

A presumption of harm from false comparative advertising wouldn’t help, because this wasn’t a case in which “the plaintiff’s product was specifically targeted.” And anyway, a presumption would just help established “minimally sufficient injury—not the extent of the injury or how it was distributed among class members.” Even accepting plaintiffs’ expert opinions on damages and even assuming disgorgement as a remedy, there’d be no way to figure out how harm was distributed. The court accepted criticisms of one survey, including, interestingly, that it didn’t give respondents the option of saying that they’d stop pursuing teeth-straightening treatment altogether, even though many SDC customers might have done just that if SDC weren’t an option.

Nor did a damage report adjusting for “[p]otential differences in the prices for” the relevant services “in different parts of the country and in urban versus rural areas” suffice because individual dental and orthodontic practices “are likely to differ in other ways that would be just as relevant—if not more relevant—to whether and to what extent any given practice was likely to be affected by SmileDirect’s allegedly improper marketing. For example, some practices may serve a wealthier patient population than others in the same geographic area, and one cannot assume that SmileDirect’s pitch—which focused significantly on costs—would affect each practice’s potential patients in the same way. Similarly, different patient populations might have different media diets, resulting in different levels of exposure to the challenged SmileDirect statements.”

Although absolute precision isn’t required, there’s “a point at which approximation eclipses the truth so fully that the numbers produced cannot serve the purpose they were intended to serve.” Lost profits would also be impossible to calculate classwide because profit margins can vary so much.

Nor was an injunction-only class appropriate when money damages are so central to the case.