Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc.

193 F. Supp. 3d 556, 2016 WL 3348431, 2016 U.S. Dist. LEXIS 78643
CourtDistrict Court, E.D. Virginia
DecidedJune 15, 2016
Docket1:16-cv-592 (JCC/MSN)
StatusPublished
Cited by14 cases

This text of 193 F. Supp. 3d 556 (Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc., 193 F. Supp. 3d 556, 2016 WL 3348431, 2016 U.S. Dist. LEXIS 78643 (E.D. Va. 2016).

Opinion

MEMORANDUM OPINION

James C. Cacheris, UNITED STATES DISTRICT COURT JUDGE

■ This matter is before the- Court on Plaintiff Handsome Brook Farm, LLC’s motion for a preliminary injunction regarding an- email sent by Defendant Humane Farm Animal Care, Inc. that allegedly- is a commercial advertisement or promotion containing false information in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) and Virginia common law. For the foregoing reasons, the Court will .grant in part the motion.

I. Background

This ease involves the market for ethically sourced eggs. What it means to be “ethically sourced” is a matter of contention, and at least five organizations have developed standards within the marketplace. (See Def.’s Ex. B [Dkt. 23-2] (listing standards).) Three of those standards are relevant to this proceeding. First, the United States Department of Agriculture (“USDA”) maintains the National Organic Program, which is administered by regional organizations. Egg producers certified under the USDA standard may market their eggs as. “Certified Organic.” (Bab-cock Deck [Dkt. 24-1] ¶5.) Second, the American Humane Association (“AMA”) maintains a standard for pasture-raised eggs. Eggs certified under this standard may be marketed as “American Humane Certified™” or “Pasture. Raised.” (Bab-cock Deck ¶ 7.) Defendant Humane Farm Animal Care, Inc. (“HFAC”) maintains a third standard. Eggs certified under Defendant’s standard may be marketed as “Certified Humane®.” (Douglass Deck [Dkt. 23-1] ¶ 2.) Plaintiff Handsome Brook Farm, LLC (“Handsome Brook”) is a producer of eggs marketed with the USDA organic and AHA pasture-raised and humane labels. Plaintiff does not use Defendant’s “Certified Humane®” label. Some additional details about the parties will prove useful.

Deféndant HFAC is a non-profit organization headquartered in Herndon, Virginia. (Douglass Deck ¶ 1.) HFAC describes its mission as “improv[ing] the lives of farm animals by creating humane standards for farm animals and certifying the animals [sic] humane treatment.” (Ph’s Ex. H [Dkt. 24-10] at l;1 Douglass Deck ¶ 1.) HFAC believes that-the most effective way to accomplish that mission “is to utilize a certification process that audits producers, distributors, and retailers and informs the customer (by the presence of a-certification seal appearing on packaging) which products meet HFAC’s standards.” (Douglass Deck ¶ 2.) To become certified to use the Certified Humane® logo, an egg farmer, producer, or processor must pay an initial application, fee between $75 and $300 dollars. (See Ph’s Ex. Q [Dkt. 25-2] at 7.) After receiving the application, HFAC will send an inspector or auditor, to the farm or production facility. The producer must pay between $600 and $700 a day for the inspection, but those costs may be split between multiple farms that are in close proximity. (Pb’s Ex. Q at 7.) If the producer passes inspection, it may enter into a non-exclusive licensing agreement to place the Certified Humane® logo on its eggs. (See PL’s Ex. Q (containing a copy of the licensing agreement); Douglass Deck ¶ 3.) The licensing agreement is good for one year and the same application and inspection fees must be paid annually to renew the agreement. (Pb’s Ex. Q at 7.) If a [563]*563producer enters into a licensing agreement with HFAC, it .also must pay $.05 per case of thirty dozen eggs that the licensee sells under the Certified Humane® logo. (PL’s Ex. Q at 8.) HFAC also receives grants and donor contributions. (Douglass ¶ 1.)

The significance of the certification fees has caused some dispute and is. worth exploring in more detail. On June 9, 2016, HFAC’s Executive Director Douglass submitted an affidavit under penalty of perjury stating that “HFAC makes no money from the sale of eggs.” (Douglass Deck ¶ 4 (emphasis in original).) She also stated that the certification fee “is not dependent on sales volume, and does not even come close to covering HFAC’s internal administrative costs,” (Id. ¶8 (emphasis in original).) In response to those statements, Plaintiff submitted a copy of an HFAC licensing agreement, .including HFAC’s fee schedule. (See PL’s Exs. Q, R.) That agreement makes clear that HFAC does receive a fee based on the quantity of eggs its licensees sell under the Certified Humane® logo, in addition to the annual application and inspection fees. Plaintiff also submitted an email, in which HFAC’s Certification Program Coordinator states that “the fees are paid each month based on the number of eggs you sell during that month as Certified Humane®.” (PL’s Ex. R at 2;)

After Plaintiff presented those exhibits, Defendant’s Executive Director Douglass submitted a corrective affidavit conceding that she made an inaccurate statement when she said “HFAC makes no money from the sale of eggs.” (Second Douglas Decl. [Dkt. 26-1] ¶ 1(c).) Douglass, explained that HFAC does receive “five cents per thirty dozen eggs, based on the quantity of certified product sold, for the use of the Certified Humane® logo on product packaging.” (Id.) HFAC sends monthly “reminders” to its licensees about their fee obligations, but holds licensees to the “honor system” to calculate the fees owed and to remit the monthly payments. (Id.) Douglass explained that “[b]ecause the fee was for the use of the logo, and due to our current collection practices, I truly did not consider the Certification Fee as revenue ‘from the sale of eggs’ when I provided my prior Declaration.” (Id.)

Across all product lines,2 HFAC’s single largest source of revenue in 2013 and 2014 was the licensing fees paid based on the quantity of product sold with the HFAC logo. (See PL’s Exs. H, I (containing tax documents).) According to tax filings, HFAC had revenue of $739,562 in 2014, of which $367,121 came from licensing fees. (PL’s Ex. I [Dkt. 24-11] at 2, 11.) Donations accounted for $210,099, and the remaining revenue came from application and inspection fees paid by licensees. (PL’s Ex. I. at 2.) Revenues "for 2013 were comparable, with total revenue of $691,375, licensing fees contributing $280,785, donations making up $237,947, and the remainder coming from application and inspection fees licensees pay. (PL’s Ex. H [Dkt. 24-10] at 2,10.)

Plaintiff Handsome Brook is a farmer and producer of ethically sourced eggs, but not of eggs bearing the Defendant’s Certified Humane® logo. Handsome Brook is based out of New York, but receives eggs from farmers in many states and sells those eggs to retailers nationwide under the Handsome Brook Farm label. Some of Handsome Brook’s eggs are packaged in Illinois at a facility called Phil’s Fresh Eggs. Most relevant to this proceeding, Phil’s Fresh Eggs packages eggs from three farms into Handsome Brook cartons. (See PL’s Ex. D [Dkt. 24-6].) The three farmers are Ruben Stoltzfus of Pennsylvania, John Byler of New York, and Ernest [564]*564Girod of New York. (See Pl.’s Ex. B.) Each of the three farmers is currently certified under the USDA’s “Certified Organic” program. (See Pl.’s Ex. D.) Additionally, each of the three farms is certified through the AHA’s “American Humane Certified” program under the umbrella of Handsome Brook Farm. (PL’s Ex. B; PL’s Exs. N, 0, P [Dkts. 24-16, 24-17, 24-18]; Cardmody Decl. [Dkt. 24-2] ¶ 4-5.) Handsome Brook is also certified under both programs. (See PL's Exs. C, E ,[Dkts.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
193 F. Supp. 3d 556, 2016 WL 3348431, 2016 U.S. Dist. LEXIS 78643, Counsel Stack Legal Research, https://law.counselstack.com/opinion/handsome-brook-farm-llc-v-humane-farm-animal-care-inc-vaed-2016.