A lawsuit between Procter & Gamble (“P&G”) and Hello Products (“Hello”) – a toothpaste start up that promotes its products as “naturally friendly” – settled last week with the entry of a stipulated injunction, but Hello might still have reason to smile. Days before the settlement, the Southern District of New York rejected P&G’s motion to amend their complaint to include Hello’s “naturally friendly” tagline, which features prominently on Hello’s current advertising.
P&G’s original complaint – filed in January 2014 – alleged that Hello engaged in false advertising in violation of Section 43(a) of the Lanham Act, and deceptive acts and practices and false advertising in violation of N.Y. Gen. Bus. Law Sections 349 and 350, by advertising its toothpaste as “99% Natural” despite being “extensively and chemically processed.” Over one year later, P&G sought leave to amend its complaint in order also to challenge Hello’s use of the phrase “naturally friendly.”
In the meantime, Hello had already drastically reconfigured its advertising to remove the “99% Natural” claim from its products. Early in the case, the court issued a preliminary injunction barring Hello from “selling or shipping” inventory bearing a “99% Natural” label. Determined to see the glass half full, Hello turned the setback into publicity, as it gave away 100,000 unsellable toothpaste products on the streets of Manhattan. The company founder was even in high enough spirits to taunt his adversaries: “Thanks P&G. They’re accelerating and amplifying our marketing efforts.”
It is unlikely that Hello would feel so fortunate (or cocky) if it had to scrap its packaging a second time around, but fortunately for the startup, the court limited the damage. It denied P&G’s motion to amend, holding that P&G had acted with undue delay in bringing its claims against the new “naturally friendly” tagline. According to the court, P&G knew as early as March 2014 that Hello was referring to its toothpaste as “naturally friendly” on its website and on retailers’ shelves and should have stepped in sooner.
Explaining its delay in seeking leave to amend, P&G attempted to argue that an amendment was not warranted until it learned during depositions in January and February 2015 that “Hello intended to convey the same false and misleading uniquely natural messaging through the ‘naturally friendly’ claim that it had done through its discontinued ’99 percent natural’ claim.” But the court rejected this argument out of hand, questioning the relevance of Hello’s motives and noting, in any event, that P&G could have probed Hello’s motives at the time Hello began to change its advertising.
The court also emphasized that the proposed amendment would require significant and new discovery. According to the court, the substantial delay and expense that this would engender was sufficiently prejudicial to Hello to warrant denial of P&G’s motion. P&G argued against this conclusion by asserting that Hello’s “naturally friendly” claim was within the scope of the initial complaint and that Hello had known this since early in the litigation, but this argument back-fired – the court held that if the “naturally friendly” claim was within the scope of the initial complaint, then there was no need for an amendment.
Soon after the court shot down the proposed amendment, the parties settled and stipulated to an injunction: Hello will not claim that its toothpaste is “99% Natural,” will discontinue use of the phrase “chemistry, not chemicals” and will disclose that its product contains fluoride. While the people of New York may be disappointed that there will not be another bonanza toothpaste giveaway, we imagine that Hello will be glad to say goodbye to this lawsuit.
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