Opposition Brief — Phoenix of Broward, Inc. v. McDonald's Corp. (No. 07-659)

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No. 07-659 " _SUPREME COURT Et

Hn the Supreme Court of the Anited States

PHOENIX OF BROWARD, INC., PETITIONER

MCDONALD’S CORPORATION, RESPONDENT

On Petition For A Writ Of Certiorari

To The United States Court of Appeals

For The Eleventh Circuit

BRIEF IN OPPOSITION

GENE C. SCHAERR LINDA T. COBERLY

GEOFFREY P. EATON Counsel of Record

Winston & Strawn LLP GEORGE C. LOMBARDI

1700 K Street, N. W. DAVID J. DOYLE

Washington, D.C. 20006 Winston & Strawn LLP

(262) 282-5000 35 West Wacker Drive

Chicago, Illinois 60601

(312) 558-5600

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D.C. 20002

QUESTION PRESENTED

Whether, in a suit involving a claim for false

advertising under section 43(a) of the Lanham Act,

the Eleventh Circuit correctly determined that an

allegation that the plaintiff was the defendant's

“direct competitor” was not per se sufficient to confer

prudential standing and that—given the attenuated

and speculative injury alleged and the potential for

duplicative damages under the particular facts of the

case—the plaintiff should be denied prudential

standing to press a claim.

TABLE OF CONTENTS

Page

SUR PMNE RUPEY BPE UIE EIN LEGLD .........cccccercesccoccseccssccccscecosers i

Beeteee OP AUTHORITIES ..........cscscsrerescssrssesenseresers iv

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STATEMENT OF THE CASE ...00000.........cccsseeeseceesseeees ]

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REASONS FOR DENYING THE PETITION............. 7

I. There is no conflict among the circuits

with regard to the Question Presented................. 9

A. The Conte Brothers analysis is

gamering an emerging consensus

I NI NNN oo... ca ceccccceseesveccesovesceceesess 10

B. No circuit holds that a plaintiff's

status as a direct competitor alleging

competitive injury is categorically

sufficient to confer prudential

standing no matter how speculative

or attenuated the claimed injury is............... 13

C. Phoenix’s contention that the Third

Circuit itself intended the Conte

Brothers analysis to apply only to

non-competitors is belied by the

unequivocal language of Conte

Brothers and the cases that followed

Neen eT en accascensevvcccevcecscssesense 17

Il. The Eleventh Circuit’s treatment of

prudential standing is entirely consistent

with the purposes underlying the

Lanham Act and advances the principles

CE WUE ERIN ois dics cccscineicceevsssccesccverss 20

III. The unusual facts of this case would

make it a poor vehicle for resolving any

issues related to prudential standing for

RE I aiccsiiceccsnssckedascatiandonebecsdals 23

CCG RIT cciisncensctscisrintviiteseaiiuniscecmpbidatadoieidagiddanaiins 28

TABLE OF AUTHORITIES

Page(s)

Cases

Alphamed Pharm. Corp. v. Arriva Pharm. Corp.,

391 F. Supp. 2d. 1148 (S.D. Fla. 2005)

American Assoc. of Orthodontists v. Yellow

Book USA, Inc.,

434 F.3d 1100 (8th Cir. 2006)

Associated Gen. Contractors of California v.

California State Council of Carpenters,

459 U.S. 519 (1983)

Barrusv. Sylvania, 55 F.3d 468 (9th Cir. 1995)

Bell Atlanticv. Twombly, 127 S.Ct. 575 (2006)

Bennett v. Spear, 520 U.S. 154 (1997)

Conte Bros. Automotive, Inc. v. Quaker State-

Slick 50, Inc., 165 F.3d 221 (3d Cir. 1998)... passim

Dovenmuehle v. Gilldorn Mortgage Midwest

Corp., 871 F.2d 697 (7th Cir. 1989)

GlaxoSmithKline Consumer Healthcare, L.P.

v. Merix Pharm. Corp., 197 Fed App’x 120

(3d Cir. 2006)

Holmes v. SIPC, 503 U.S. 258 (1992)

Hutchinson v. Pfeil,

211 F.3d 515 (10th Cir. 2000)

ITC Ltd. v. Punchgini, Inc.,

482 F.3d 135 (2d Cir.), cert. denied, 128 S.

6 Ti IR RRS i of Re ae Ae RE 16

Jack Russell Terrier Network of N. Cal. v. Am.

Kennel Club, 407 F.3d 1027 (9th Cir. 2005)........ 14

Johnny Blastotf, Inc. v. Los Angeles Rams |

Football Co., 188 F.3d 427 (7th Cir. 1999)........... 15

Joint Stock Soc’yv. UDV N. Am., Inc.,

266 F.3d 164 (3d Cir. 2001) ...0.0.0.... ce. 10, 17, 21

KIS, S_A. v. Foto Fantasy, Inc.,

240 F. Supp. 2d 608 (N.D. Tex. 2002) .......000........ 12

L.S. Heath & Sons, Inc.v. AT&T Info. Sys.,

OF Bie BE CF Oe Ce, BODE vsccscncssccnssconcestecicncecsonss 15

Logan v. Burgers Ozark Country Cured Hams,

Inc., 263 F.3d 447 (th Cir. 2001) .................. 12, 21

Novartis Consumer Health, Inc. v.

Johnson & Johnson-Merck Consumer

Pharm. Co., 290 F.3d 578 (3d Cir. 2002) ............. 18

Ortho Pharm. Corp. v. Cosprophar, Inc.,

BE FB GOO AG Civ. TOGO osc cvcsccccccscesecsscccsens 16, 19

Pernod Ricard USA LLC v. Bacardi USA,

505 F. Supp. 2d 245 (D. Del. 2007) .......... 2 47,21

Procter & Gamble Co. v. Amway Corp.,

242 F.3d 539 (5th Cir. 2001)................ 10, 12, 22-23

Sandoz Pharm. Corp. v. Richardson: Vicks, Inc.,

902 F.2d 222 (8d Cir. 1990)... secerererrrererertee 19 ae

Societe Des Hotels Meridien v. La Salle Hotel

Operating P’ship,

380 F.3d 126 (2d Cir. 2004)

Stanfieldv. Osborne Indus.,

52 F.3d 867 (10th Cir. 1995)

Telecom Int] Am., Ltd. v. AT&T,

280 F.3d 175 (2d Cir. 2001)

_ Thorn v. Reliance Van Co.,

736 F.2d 929 (3d Cir. 1984)

Waits v. Frito-Lay, .

978 F.2d 1093 (9th Cir. 1993)

Warner-Lambert Co. v. BreathAssure, Inc.,

204 F.3d 87 (3d Cir. 2000)

Wellness Publishing v. Barefoot,

128 Fed. App’x 266 (3d Cir. 2005)

Wellness Publishing v. Barefoot,

No. 02-3773 (JAP), 2008 WL 108889

(D. N.J., Jan. 9, 2008)

Statutes

Lanham Act, 15 U.S.C. § 1125(a@)

Miscellaneous

4 McCarthy on Trademarks and Unfair

Competition § 7:32 (4th ed. 1996)

Restatement (3d) of Unfair Competition (1995) 11

INTRODUCTION

This case does not merit this Court’s review. The

Eleventh Circuit's decision employs a flexble,

multifactor test to assess prudential standing in light

of the particular facts before the court. This test was

first adopted for Lanham Act cases in Conte Brothers

Automotive, Inc. v. Quaker State-Slick 50, Inc., 165

F.3d 221 (3d Cir. 1998) (Alito, J.), based on authority

from this Court in the antitrust context, and its

appropriateness has not been questioned by any court

since. To the extent that there is any remaining

. tension in the case law, it concerns only whether

“direct competitor” status is necessary for a plaintiff

to have prudential standing to press a claim under

the Lanham Act. No court of appeals has held that

“direct competitor” status is categorically sufficient to

confer such standing, regardless of the other

circumstances in the case—here, for example, the

attenuated and speculative nature of the alleged

damages and the significant risk of duplicative

recovery. In short, this case does not implicate any

conflict of authority, either among the circuits or with

this Court’s cases. The petition should be denied.

STATEMENT OF THE CASE

A. Background

The circumstances giving rise to this case are

unique in the history of Lanham Act litigation. The

case’s origins lie in a criminal conspiracy to which

McDonald’s and its customers tell victim. As the

district court below acknowledged, there appears

never to have been any other case “where a company

brought a Lanham Act claim against a competitor

_whose advertising became false or misleading due to ss

the fe/onious conduct of third parties.” Pet. App. 42a

(emphases in original).

In the late 1980s, McDonald’s introduced various

prize promotions, including its popular “Monopoly”

game, in which customers were given the opportunity

to win food and cash prizes by collecting game pieces

. patterned after the popular board game. Participants

could win up to $1 million by obtaining “instant win”

pieces or by grouping pieces to form “monopolies.”

The promotional games were operated under contract

by a third-party vendor, Simon Marketing, which was

entrusted with the sole responsibility to “seed” the

games by randomly placing winning game pieces into

the stream of commerce.

In 2000, the Department of Justice informed

McDonald’s for the first time that it was conducting

an investigation into the promotional games.

Ultimately, on August 21, 2001, the FBI announced

that it had arrested Simon Marketing’s director of

security, Jerry Jacobson, and several other people, all

of whom were charged with conspiring to compromise

McDonald’s games through the theft and fraudulent

redemption of winning high-value game pieces.

Immediately after the FBI’s announcement, a

variety of consumer class actions were filed against

McDonald’s, alleging claims for consumer fraud,

negligence, unjust enrichment, and a host of related

torts. Less than a year later, McDonald’s settled

these cases by, among other things, agreeing to

implement a $15 mullion instant giveaway that

provided class members and the general public with

an opportunity to win fifteen $1 million prizes. This

giveaway—coupled with another $10 million in prizes

"°“ that “MeDonald’s’ voluntarily awarded immediately ‘J

after the FBI's announcement—resulted in

McDonald’s providing its customers with an

opportunity to win a total of $25 million. This

exceeded the dollar value of the game pieces that

Jacobson and his co-conspirators had diverted from

customers through their criminal conduct.

The Jacobson conspiracy was a disaster for

McDonald’s. In addition to the $25 million in

additional giveaways, the company suffered massive

damage to its reputation and goodwill—damage that,

because it-is rooted in the loss of the public’s trust,

will require significant time and effort to regain.

B. Proceedings Below

Nearly five years after the FBI announced the

arrest of Jacobson and his co-conspirators, and nearly

four years after McDonald’s settled all the consumer

class action lawsuits arising from the conspiracy,

Phoenix of Broward—a Florida company owning a

single Burger King franchise in Fort Lauderdale—

brought this putative class action lawsuit under the

false advertising provision of the Lanham Act, 15

U.S.C. § 1125(a). The suit alleged that “McDonald’s

explicitly and implicitly represented to the public

that players stood a fair and equal opportunity to win

certain grand prizes * * * when in fact the

promotional games had been fixed by a criminal ring

who embezzled the high-value game pieces . and

prevented the public from winning such prizes.” The

result of these “misrepresentations,” the complaint

alleged, was to “divert business away” from Phoenix

and force it to incur costs to combat that diversion.

McDonald’s moved to dismiss the lawsuit,

- - assertiig, among ‘other things; that -Phoenix Jacked -

prudential standing to press its false advertising

claim. The district court granted the motion. It

noted that “(t]he Eleventh Circuit has not addressed

what test the court should use in determining

whether a plaintiff has prudential standing to bring a

Lanham Act false advertising claim.” Pet. App. 43a.

It then examined the approaches used in other

circuits before concluding that the correct analysis

was set forth by the Third Circuit in Conte Brothers

Automotive, Inc. v. Quaker State-Slick 50, Inc., 165

F.3d 221 (3d Cir. 1998). Pet. App. 44a. The Conte

Brothers court—seeking to provide decisional clarity

for prudential standing in the context of the Lanham

Act—had adopted the prudential standing test for

antitrust claims articulated by this Court in

Associated General Contractors of California v.

California State Council of Carpenters, 459 U.S. 519

(1983), which employs a five-factor analysis to assess

the fundamental question underlying the concept of

prudential standing, namely, whether the claimant is

the “proper plaintiff’ to bring the claim. /d at 544.

The five factors include “(1) the nature of the

plaintiffs alleged injury, (2) the directness or

indirectness of the asserted injury, (3) the proximity

or remoteness of the party to the alleged injurious

conduct, (4) the speculativeness of the damages

claim, and (5) the risk of duplicative damages or

complexity in apportioning damages.” Pet. App. 44a

(citing Conte Bros., 165 F.3d at 563).

Noting its “doubts that Congress [in the Lanham

Act] sought to redress advertising rendered false by

the criminal conduct of third parties,” Pet. App. 45a,

and its conclusion that “the injury to Phoenix’s

commercial interests caused by the advertisements

“can hardly be described as typical; id at 46a, the ©

district court conducted a careful analysis of the five

Conte Brothers factors. It concluded that Phoenix

lacked standing to pursue its Lanham Act claim:

Given the existence of more directly injured

parties, the tenuousness and_ sheer

speculativeness of Phoenix’s damages claim,

and the possibility of multiple duplicative

recoveries, the court concludes that Phoenix

does not have prudential standing to bring a

§ 43(a) false advertising claim against

McDonald's.

Id. at 50a.

The Eleventh Circuit affirmed. It first undertook

to determine whether the prudential standing

doctrine applied to limit the scope of Lanham Act

standing at al]. Noting that “Congress is presumed to

incorporate background prudential standing

limitations unless the statute expressly negates such

principles,” the court of appeals joined both of the

other circuits to address this question in concluding

that “Congress did not intend to abrogate prudential

standing limitations when it enacted the Lanham

Act.” Pet. App. 9a-11a.

Having concluded that prudential standing

principles may operate to restrict the scope of

Lanham Act standing, the court went on to consider

what approach it should employ in determining the

availability of prudential standing for a claim under

the Lanham Act. “After surveying the caselaw,” the

court elected to “join the Third and Fifth Circuits and

adopt the test for prudential standing articulated in

Conte Bros.” Id. at 12a. In so doing, it rejected

..-Phoenix’s.. proposed . “categorical”. test,. which would... --

have conferred standing upon every plaintiff that

claimed to be a direct competitor alleging a

competitive injury. Jd. at 14a. Such a categorical

rule, the court suggested, would not comport with the

purposes of the Lanham Act or the Conte Brothers

analysis, which “is designed to determine whether

the injury alleged is the type of injury that the

Lanham Act was designed to redress—harm to the

plaintiffs ‘ability to compete’ in the marketplace and

erosion of the plaintiffs. ‘good will and reputation’

that has been directly and proximately caused by the

defendant’s false advertising.” Jd. at 20a (quoting

Conte Bros., 165 F.3d at 234-36).

The Eleventh Circuit then undertook a careful

analysis of the facts of this case in light of the Conte

Brothers factors, ultimately concluding that the court

had correctly denied prudential standing. The court

of appeals based its decision on “the attenuated link

between the alleged injury and McDonald’s alleged

misrepresentations, the speculative nature of the

claimed damages, the potential complexity in

apportioning damages, and the significant risk of

duplicative damages.” Pet. App. 32a.

Specifically, the court noted that the fraud by

Jacobson and his cohorts rendered only some

representations false—namely, the representations

that customers had a fair and equal chance of

winning one of the “rare ‘high-value” prizes. After

all, the odds of winning millions of lower or mid-value

prizes, including free food and other awards, were not

affected by the conspiracy. Thus, Phoenix’s claim

would have required proof that McDonald’s

representations relating to the “rare, ‘high-value”

prizes—as opposed to the other prizes that customers

were far more likely to win—lured customers away ==

from Phoenix’s restaurant. According to the Eleventh

Circuit, this was simply too tenuous and attenuated,

and the damages resulting from such an injury would

have been speculative at best. Jd. at 24a-25a, 28a.

Further, the Eleventh Circuit noted that if Phoenix

were afforded standing in the case, then every

potential competitor of McDonald’s in the nation

would also be entitled to standing, presenting a

serious risk of duplicative damages. /d. at 30a-32a.

The totality of these factors indicated that

although Phoenix alleged itself to be a “direct

competitor” alleging a “competitive injury,” it did not

have prudential standing to bring a Lanham Act

claim against McDonald’s for any advertising

rendered false by the Jacobson conspiracy. /d. at

32a-33a. This petition followed.

REASONS FOR DENYING THE PETITION

The petition fails to satisfy any of this Court's

usual criteria for certiorari. The circuit conflict

asserted in the petition is illusory, constructed from

dicta and a misinterpretation of the cases. Moreover,

to the extent that any tension exists in the cases, it is

not implicated here. No court has held that an

allegation of direct competitor status is, by itself,

categorically sufficient to support prudential standing

regardless of the other facts and circumstances in the

case. Thus there is no decision in conflict with the

Eleventh Circuit's decision here, which denied

standing to a direct competitor because of the

attenuated and speculative nature of the alleged

claim of injury, among other things.

To be sure, some circuits have, in the past

articulated a relatively rigid and categorical approach

to prudential standing under the Lanham Act—

holding that a plaintiff that is zot in direct

competition with the defendant may not establish

prudential standing, regardless of the other facts.

The emergence of the Conte Brothers analysis

represents a move away from that more rigid

approach, such that courts will now consider a

variety of facts and circumstances in deciding

whether any plaintiff—even one zot in direct

competition with the defendant—has standing to sue

under the Lanham Act. As Conte Brothers itself

explained, “standing under the Lanham Act does not

turn on the label placed on the relationship between

the parties.” 165 F.3d at 235.

At the same time, no circuit has held

categorically that a plaintiff who is a “direct

competitor” a/ways has prudential standing to assert

a claim under the Lanham Act no matter how

attenuated or speculative the alleged competitive

injury is. And of the jurisdictions that have had

occasion to apply the Conte Brothers five-factor test,

not one of them has held that the test is limited to

cases involving non-competitors, as Phoenix contends

it should be. It is not surprising, then, that the

petition provides no plausible reason to conclude that

any other court of appeals would have decided this

case differently under its own case law—the sine qua

non of a “square” conflict warranting this Court’s

attention.

Although Phoenix contends that denying

standing to direct competitors who have alleged a

distinct competitive injury would “underminel[]” the

objectives of the Lanham Act (Pet. 27), the Conte

Brothers test employed by the Eleventh Circuit and

others will aot likely deny standing to direct

competitors in the typical case. As Phoenix itself

recognized below, “any direct competitor [should]

readily satisfy the elements of the [Conte Brothers |

test.” Reply Br. on Appeal at 2. Thus the real

question is not whether applying the Conte Brothers

test in direct competitor cases is systematically

inconsistent with the purposes of the Lanham Act—

and it plainly is not—but rather whether the

Eleventh Circuit’s application of the Conte Brothers

analysis was correct based on the facts of this

particular case.

This is not a typical case. The false advertising

claim here—which arose in highly unusual

circumstances involving criminal wrongdoing by

third parties—was asserted against McDonald’s

Corporation by an individual Burger King franchisee

with a particularly attenuated and speculative claim

of injury. The claim by this franchisee (and by the

other franchisees it hoped to represent) rested on the

notion that it lost customers because of alleged

misrepresentations about whether consumers would

have a fair and equal chance of winning the rarest

few of the many prizes offered in a McDonald’s

promotional game. Further, the attenuated claim of

injury asserted here was no different than those that

could have been asserted by any other restaurant or —

group of restaurants that McDonald’s customers

might also patronize.

Whether the courts below properly denied

Phoenix prudential standing under __ these

circumstances is a fact-bound question that does not

merit this Court’s review. The petition should be

denied.

I. There is no conflict among the circuits with

regard to the Question Presented.

Phoenix devotes the bulk of its petition to a

purported circuit conflict between “categorical”

jurisdictions, which award standing to direct

competitors based on a mere allegation of

“competitive injury,” and “flexible” jurisdictions,

which permit consideration of other facts as well, as

part of a more holistic inquiry into the

appropriateness of prudential standing. The conflict

is illusory. There are no truly “categorical”

jurisdictions in this sense, and the “flexible”

jurisdictions do not align as Phoenix describes them.

The petition thus has no basis for asserting an

“intolerable” circuit conflict or, indeed, any

continuing circuit conflict at all.

A. The Conte Brothers analysis is garnering an

emerging consensus among the circuits.

There cannot be any serious doubt about the

appropriateness of the standing analysis that then-

Judge Alito and the Conte Brothers court drew from

this Courts decision in Associated General

Contractors of California v. California State Council

of Carpenters, 459 U.S. 519 (1983). And if there were

any such doubt, that doubt would be dispelled by the

broad acceptance of Conte Brothers by every court

that has considered it thus far. Conte Brothers has

been on the books for nearly 10 years, and its

application of this Court’s flexible, multifactor

standing analysis in the Lanham Act context has

never been questioned by another court, much less

rejected. The Third, Fifth, and Eleventh Circuits all

have adopted the Conte Brothers analysis to

determine prudential standing for false advertising

claims. Joint Stock Soc’y v. UDV N. Am., Inc., 266

F.3d 164, 180 (3d Cir. 2001); Procter & Gamble Co. v.

Amway Corp., 242 F.3d 539 (5th Cir. 2001).1 The

Conte Brothers approach has been endorsed by both

the Restatement (3d) of Unfair Competition, § 3, cmt

f (1995) and the leading scholarly authority on

competition law. See 4 McCarthy on Trademarks and

Unfair Competition § 7:32 n.1 (4th ed. 1996) (“In the

author's opinion, some limit on the § 43(a) standing of

persons remote from the directly impacted party

should be applied by analogy to antitrust law, such as

use of the criteria listed in Associated General

Contractors * * *.”).

Phoenix does not challenge Conte Brothers head-

on but instead complains that it is or should be

limited to cases where the plaintiff is not in direct

competition with the defendant. In other words,

Phoenix contends that as long as the plaintiff alleges

that it falls within the category of “direct

competitors,” any allegation of competitive injury will

necessarily suffice to demonstrate prudential

standing.

The cases do not support that view. To date, only

two of the courts of appeals—the Fifth and the

Eleventh, in the decision below—have had the

opportunity to apply Conte Brothers in a case

involving parties who claimed to be direct

competitors. Those courts have reached the same

conclusion: the multifactor analysis outlined in

| The Eighth Circuii aiso has considered the Conte Brothers

test but has not yet had occasion to decide whether to adopt it

for all Lanham Act standing inquiries. See American Assoc. af

Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100, 1104

(8th Cir. 2006) (declining to determine appropriate test for

Lanham Act standing where plaintiff could not satisfy any

possible test).

Conte Brothers applies equally in all cases—as it was

designed to—regardless of the “label” attached to the

parties. Conte Bros., 165 F.3d at 235; see also Pet.

App. 20a; Procter & Gamble Co. v. Amway Corp., 242

F.3d 539, 562 (5th Cir. 2001); Logan v. Burgers Ozark

Country Cured Hams, Inc., 263 F.3d 447, 461 (5th

Cir. 2001).2. This is not surprising. As the Conte

Brothers court explained, its aim in importing this

analysis into the Lanham Act context was to

“providel] appropriate flexibility in application to

address factually disparate scenarios that may arise

in the future, while at the same time supplying a

principled means for addressing standing” under

§43(a). 165 F.3d at 236.

As discussed further below, there simply is no

contrary authority. No court of appeals has held that

direct competitor status is, by itself, sufficient to

confer prudential standing. No court of appeals has

attached “categorical” significance to the plaintiff's

status as a direct competitor and refused to look

beyond its bare allegation of injury when prudential

standing was at issue. And Phoenix’s attempt to

draw such a categorical distinction from Conte:

Brothers itself also fails. In short, there is no conflict

of law for this Court to resolve.

District courts from all the circuits that have adopted Conte

Brothers also have applied it in cases involving direct

competitors. See, e.g, Pernod Ricard USA LLC v. Bacardi USA,

505 F. Supp. 2d 245, 252 (D. Del. 2007); KIS, SA. v. Foto

Fantasy, Inc., 240 F. Supp. 2d 608, 610-11, 616 (N.D. Tex. 2002);

Alphamed Pharm. Corp. v. Arriva Pharm. Corp., 391 F. Supp.

2d. 1148 (S.D. Fla. 2005).

B. No circuit holds that a plaintiffs status as a

direct competitor alleging competitive injury

is categorically sufficient to confer prudential

standing no matter how speculative or

attenuated the claimed injury is.

Phoenix’s argument for a circuit conflict is based

on dicta and a logical fallacy. It begins with cases

holding that szoncompetitors necessarily Jack

standing—an issue on which there may be some

tension among the circuits, but which is not

presented here. Then it suggests that, in those cases,

competitor status is the sole criterion for standing.

As long as the plaintiff is a direct competitor of the

defendant, any allegation of competitive injury will be

enough to confer prudential standing and to entitle

the plaintiff to proceed with its claim, regardless of

the nature of that injury or any other facts or

circumstances.

This is a non sequitur. Even if a competitive

relationship is necessary for prudential standing, it

does not follow that such a relationship is always

sufficient for prudential standing. And the petition

identifies no case in which any court of appeals has

held that a plaintiffs allegation that it is a direct

competitor alleging a competitive injury is per se

sufficient to confer prudential standing, even in the

face of arguments that the alleged injury is simply

too attenuated.

The petition characterizes five circuits as having

embraced the purported “categorical” position: the

Ninth, Seventh, Tenth, Second, and Third. But the

cases do not support that characterization. Of the

sixteen court of appeals cases cited in the petition to

support the proposition that a direct competitor

alleging competitive injury categorically has Lanham

Act standing, only one actually involved both a direct

competitor and a finding of prudential standing, and

even in that case the court did not confer such

standing “categorically,” based upon an allegation of

injury of the kind at issue here. It is true, of course,

that some of those cases contain language suggesting

the existence of a “categorical” rule. under which

being “a competitor of the defendant and allegling] a

competitive injury” is the central criterion for

prudential standing. Stanfield vy. Osborne Indus., 52

F.3d 867, 873 (10th Cir. 1995); see also Telecom Int7

Am., Ltd. v. AT&T, 280 F.3d 175, 197 (2d Cir. 2001)

(quoting Stanfield). But not one of them reaches the

very different conclusion for which Phoenix cites

them: that direct competitor status is categorically

sufficient to confer standing, no matter how

attenuated the injury.

For example, of the three Ninth Circuit cases

Phoenix cites, only one upheld the plaintiffs

standing—and in that case, the plaintiff was a non-

competitor. Waits v. Frito-Lay, 978 F.2d 1093, 1109

(9th Cir. 1993), cited in Pet. 17-18. The Waits court’s

general statement that “claims of false

representations in advertising are actionable * * *

when brought by competitors of the wrongdoer” was

dicta and, in any event, was a statement not about

prudential standing but about the existence of a

cause of action for false advertising under Section

43(a). Ibid. Waits does not purport to set out a

general rule about the sufficiency of competitor status

to confer prudential standing. In Jack Russell

Terrier Network of N. Cal. v. American Kennel Club,

407 F.3d 1027 (9th Cir. 2005), by contrast, the court

concluded that the plaintiffs lacked standing where

they conceded that they did not compete with the

defendants. And in Barrus v. Sylvania, 55 F.3d 468,

470 (9th Cir. 1995), the Ninth Circuit refused to find

standing for consumers who had failed to allege

either “commercial injury [or] competitive injury.”

Similarly, all the Seventh Circuit cases cited by

Phoenix deny prudential standing, and none can

reasonably be read to support Phoenix’s claim that

direct competitor status is sufficient to confer

prudential standing for Lanham Act claims. See Pet.

17. In L.S. Heath & Sons, Inc. v. AT&T Information

Systems, 9 F.3d 561 (7th Cir. 1993), the court denied

prudential standing because the parties were not

competitors. In Johnny Blastoff Inc. v. Los Angeles

Rams Football Co., 188 F.3d 427 (7th Cir. 1999), the

court denied standing because the plaintiff could

show no injury at all, never mind “competitive

injury.” And the court in Dovenmuehle v. Gilldorn

Mortgage Midwest Corp., 871 F.2d 697, 699 (7th Cir.

1989), denied standing on the ground that the

plaintiff lacked any ownership interest in the trade

name that allegedly was misused. In fact, the

Dovenmuehie passage cited in the petition strtes only

that “/t/ypically, plaintiffs suing under [the Lanham

Act] are business competitors * * *.” Pet. 17. While

this is undeniably true, it is not helpful in

determining whether a// business competitors would

necessarily have prudential standing.

The Tenth Circuit, too, rejected prudential

standing in both cases cited by Phoenix. See Pet. 17.

In Stanfield v. Osborne Industries, 52 F.3d 867 (10th

Cir. 1995), the court denied prudential standing to a

plaintiff whose relationship with the defendant was

contractual and non-competitive. In Hutchinson v.

Pfeil, 211 F.3d 515 (10th Cir. 2000), the court denied

standing because the alleged injury—which involved

only the “potential for harmful competition” in the

future—was deemed too speculative to support either

Article III or prudential standing. Jd at 520

(emphasis added).

Finally, of the four Second Circuit cases cited by

Phoenix in support of its claim that the Second

Circuit is a “categorical” jurisdiction, all but one

rejected prudential standing. J7C Ltd. v. Punchgini,

Inc., 482 F.3d 135 (2d Cir.), cert. denied, 128 S. Ct.

288 (2007); Telecom Int] Am., Ltd. v. AT&T, 280 F.3d

175, 197 (2d Cir. 2001); Ortho Pharm. Corp. v.

Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994); see

Pet. 17-18 & n.6. And in the remaining case, the

court based its finding of prudential standing, not on.

the fact that the plaintiff was a “direct competitor

alleging competitive injury,” but rather on the fact

that the allegedly false advertising drew a direct

comparison between the plaintiffs and defendant’s

products. Societe Des Hotels Meridien v. La Salle

Hotel Operating P’ship, 380 F.3d 126, 130 (2d Cir.

2004). Thus the court’s resolution rested as much on

the nature of the injury—an injury markedly

different from the one here—as it did on the

competitor status of the plaintiff.

In short, none of the cases cited by Phoenix is

actually in conflict with the Eleventh Circuit’s

decision here. No circuit has held that a party’s

status as a direct competitor is sufficient to support

prudential standing no matter how attenuated the

alleged competitive injury is.

C. Phoenix’s contention that the Third Circuit

itself intended the Conte Brothers analysis

to apply only to non-competitors is belied by

the unequivocal language of Conte Brothers

and the cases that followed it.

Phoenix also attempts to draw support for the

supposed conflict of authority from the Third Circuit

itself, arguing that Conte Brothers was designed as a

test specifically “for non-competitors” (Pet. 21), on the

theory that direct competitors would categorically

have standing. This ignores the express language of

then-Judge Alito’s opinion in Conte Brothers, which

takes care to explain that the case would have come

out the same way even if the parties did compete at

the same level of the marketplace. 165 F.3d at 235.

As the court’s opinion explained, “lulnder the

reasoning we adopt today, standing under the

Lanham Act does not turn on the label placed on the

relationship between the parties.” Jbid. (emphasis

added).

The insignificance of the “label” attached to the

parties’ relationship was confirmed by the Third

Circuit in Joint Stock Society v. UDV North America,

Inc., 266 F.3d 164 (3d Cir. 2001). In that case, then-

Judge Alito emphasized “the premise implicit in the

** * Conte Brothers test that a direct competitor will

usually have a stronger commercial interest than a

non-competitor.” Jd at 183 n.10 (emphasis added).

This language confirms that plaintiffs in different

competitive (or non-competitive) relationships with

the defendant should be subjected to the same five-

factor test articulated in Conte Brothers. See Pernod

Ricard USA LLC v. Bacardi USA, 505 F. Supp. 2d

245, 252 (D. Del. 2008) (applying Conte Brothers test

in determining that direct competitor had Lanham

Act standing).

In addition, while the Third Circuit has not yet

expressly applied Conte Brothers in a_ direct

competitor case, it has never limited its Conte

Brothers decision or been faced with (and declined)

an opportunity to apply it in any direct competitor

case where prudential standing was at issue. The

petition cites Novartis Consumer Health, Inc. v.

Johnson & Johnson-Merck Consumer Pharmaceutical

Co., 290 F.3d 578 (3d Cir. 2002), as a case presenting

such an “opportunity” (Pet. 23), but that case did not

involve Lanham Act prudential standing at all.

Rather, Novartis examined the standard for

determining whether a Lanham Act plaintiff could

demonstrate the irreparable harm necessary to

justify a preliminary injunction. Indeed, the Third

Circuit expressly held that the irreparable harm

standard was not identical to the prudential standing

standard. 290 F.3d at 595. Similarly, in both

GlaxoSmithKline Consumer Healthcare, L.P. v.

Merix Pharmaceutical Corp., 197 Fed App’x 120 (3d

Cir. 2006), and Wellness Publishing v. Barefoot, 128

Fed. App’x 266 (3d Cir. 2005)—also cited as evidence

of the Third Circuit’s unwillingness to apply Conte

Brothers in direct competitor cases—the defendant

did not challenge prudential standing before the

Third Circuit. It goes without saying that a

> In a later proceeding in Barefoot involving the same parties,

prudential standing was challenged—and the district court

applied the Conte Brothers analysis, concluding that the direct

competitor plaintiff had standing. Wellness Publishing v.

Barefoot, No. 02-3773 (JAP), 2008 WL 108889, *13 (D. N.J., Jan.

9, 2008).

litigant’s decision not to challenge prudential

standing has no bearing on how the court would have

analyzed such a challenge if one had been raised.

Phoenix’s resort to Third Circuit cases from

before Conte Brothers is unpersuasive. As with the

cases from other circuits discussed above, these cases

do not support the proposition that as long as the

plaintiff and defendant are direct competitors, any

allegation of competitive injury is sufficient to confer

prudential standing. The case of Thorn v. Reliance

Van Co., 736 F.2d 929, 931 (3d Cir. 1984) holds only

that a szon-competitor may have Lanham Act

standing in appropriate circumstances. And Sandoz

Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902

F.2d 222, 230 (3d Cir. 1990), does not address

standing at all.‘

Given the broad acceptance of the Conte Brothers

analysis among the courts that have considered it—

and the fact that no court ever has limited Conte

Brothers or refused to apply it in a direct competitor

case—there is no reason to believe that the analysis

for direct competitor standing is _ particularly

controversial or that it will be any more controversial

The case of Warner-Lambert Co. v. BreathAssure, Inc., 204

F.3d 87 (3d Cir. 2000), cited in Pet. 19 n.7, is not a standing case

either. The passage Phoenix quotes actually describes a Second

Circuit case that does not itself support Phoenix’s position. See

id. (discussing Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d

690, 694 (2d Cir. 1995) @oting that a Lanham Act plaintiff

“need not demonstrate that it is in direct competition with the

defendant” to have standing, and that “loln the whole, we have

tended to require a more substantial showing where the

plaintiffs products are not obviously in competition with

defendant's products, or the defendant's advertisements do not

draw direct comparisons between the two’)).

in the future than it has been in the past. Again,

every court to consider a true dispute about

prudential standing in the context of direct

competitor claims has concluded that the Conte

Brothers multifactor analysis should apply, rather

than any per se or categorical rule. There is no need

for this Court to weigh in on the issue.

Il. The Eleventh Circuit's treatment of prudential

standing is entirely consistent with the purposes

underlying the Lanham Act and advances the

principles of prudential standing.

On its merits, the Eleventh Circuit’s approach to

prudential standing is in no way inconsistent with

the purposes of the Lanham Act, as Phoenix

contends. Pet. 27 (“[djenying standing to direct

competitors undermines” the purposes of the Lanham

Act”). In practice, the Conte Brothers analysis

employed below will result in the denial of standing

to a direct competitor only in cases involving claims

that bear a tangential relationship at best to the

values embodied in the Lanham Act. Moreover,

Phoenix’s contrary view would have the effect of

entirely eliminating prudential standing

considerations from Lanham Act cases involving

direct competitors—a result for which there is no

reason or authority.

1. Contrary to Phoenix’s contention, the Conte

Brothers analysis applied by the courts below does

not, and does not purport to, “denyl |] standing to

direct competitors’—at least in any but the most

unusual circumstances. Indeed, Phoenix itself

argued below that “(t]he Conte Bros. test * * * has

little utility when applied to direct competitors

alleging competitive harml,] because such plaintiffs

invariably satisfy its requirements.” Opening Br. on

Appeal at 9 (emphasis added). As then-Judge Alito

pointed out in Joint Stock Society, the flexible Conte

Brothers test includes “the premise * * * that a direct

competitor will usually have a stronger commercial

interest than a non-competitor,” and thus will

typically survive a Lanham Act standing challenge.

266 F.3d at 183 n.10 (emphasis added).

The cases confirm that genuinely “prototypical”

plaintiffs who are the direct competitors of the

defendants will be found to have prudential standing

under the Conte Brothers test—and that only those

with marginal, highly attenuated Lanham Act claims

will not. For example, in Logan v. Burgers Ozark

Country Cured Hams, Inc., 263 F.3d 447, 461 (5th

Cir. 2001), the Fifth Circuit applied Conte Brothers

in a direct-competitor case and held that where the

defendant’s “literally false advertising about its own

goods influenced its customers to buy its products

instead of Logan’s product,” and where the plaintiff

was the only person who could bring a Lanham Act

false advertising claim against the defendant, the

plaintiff had standing to bring the claim. Similarly,

in Pernod Ricard USA LLC v. Bacardi USA, 505 F.

Supp. 2d. 245, 252 (D. Del. 2007), the district court

employed the Conte Brothers test in concluding that

the plaintiff had standing to bring a Lanham Act

claim where the parties were direct competitors and

the defendant allegedly made false representations

about its own product that harmed the plaintiffs

reputation, goodwill, and ability to compete in the

marketplace.

As noted above, only one court of appeals (other

than the court below) ever has determined that a

direct competitor’s claim was so attenuated that it

failed to meet the Conte Brothers standing analysis.

That lone case was Procter & Gamble Co. v. Amway

Corp., in which the Fifth Circuit denied standing to

plaintiff Procter & Gamble in a Lanham Act suit

based upon “fraudulent misrepresentations’—

specifically, false and inflammatory accusations that

Procter & Gamble had links to Satanic cults—made

to potential employees to convince them to work for

and buy from Amway, “resulting ultimately in lower

sales of some of P&G’s products.” 242 F.3d at 563.

Phoenix itself conceded to the court below that

Procter & Gamble was a “bizarre case” involving a

“non-traditional injury.” Opening Br. on Appeal at 16.

Thus by Phoenix’s own admission, the only court of

appeals case ever to deny a competitor standing

under the Conte Brothers analysis—other than this

one—was strange and aberrational. Accordingly,

there can be no serious concern that the Eleventh

Circuit's approach will erode the fundamental

protections the Lanham Act offers to competitors in

‘the marketplace.

2. Further, Phoenix’s proposed standing rule is

overbroad and would effectively eliminate prudential

standing as a requirement for an entire class of

plaintiffs in suits under the Lanham Act. The

categorical rule advocated by Petitioner would confer

standing on a// direct. competitor plaintiffs alleging

competitive injury in a// circumstances, without

consideration of factors like the remoteness of the

alleged injury, the potential for duplicative damages,

the existence of other potential plaintiffs who have

been mere directly harmed, and so on—in short,

without consideration of the principles of prudential

standing at all. What Phoenix is claiming, in effect,

s that any prudential limitation on Lanham Act

standing for direct competitors somehow contravenes

the purposes of the statute.

Neither the cases nor the statute itself supports

that view. It is possible, of course, for Congress to

eliminate prudential limitations on standing if it so

desires. See Bennett v. Spear, 520 U.S. 154, 162

(1997). But as the Eleventh Circuit explained,

“Congress is presumed to incorporate background

prudential standing principles [in legislation] unless

the statute expressly negates such principles.” Pet.

App. 9a°10a. Every court to consider this issue,

including the court below, has concluded that

Congress did not abrogate prudential standing

principles in the Lanham Act. See ibid; Procter &

Gamble, 242 F.3d at 562. Although Phoenix has not

challenged that conclusion in this forum, the upshot

of its argument here is that a § 43 claim—by its

terms available to “any person who believes that he

or she is or is likely to be damaged” by false

advertising—must be given its maximum Article III

scope, unlimited by the considerations of “judicial

governance” that make prudential standing a

fundamental component of federal jurisprudence.

There is simply no justification, either in the

jurisprudence of this Court or in the legislative

history of the Lanham Act, for limiting the usual

scope and limitations of prudential standing in this

context.

Ill. The unusual facts of this case would make it a

poor vehicle for resolving any issues related to

prudential standing for Lanham Act claims.

As shown above, there is no circuit conflict on the

question presented—and certainly not a “deep” or

“intolerable” one—and there is no ment to Phoenix’s

Leas

Pte

claim that applying a flexible, fact-based analysis in

determining whether a direct competitor has

prudential standing somehow violates the purposes of

the Lanham Act. Even if there were some arguable

conflict in the cases, however, the anomalous

circumstances from which this case arose make it an

inappropriate vehicle for resolving the true scope of

prudential standing for Lanham Act claims.

1. Most fundamentally, the issue of whether the

parties are genuinely “direct competitors” was not

litigated below, and McDonald’s does not contest it

here. But in light of Phoenix’s attempt to imbue

“direct competitor” status with categorical legal

significance, the Court would do well to wait to

resolve the issue presented in this petition until it

has the opportunity to review a case in which the

parties’ “direct competitor” status is both well defined

and, on the facts of the case, inarguable.

In fact, this case cleanly illustrates the emptiness

of a “categorical” approach that turns the words

“direct competitor” into a shibboleth for Lanham Act

standing. “Direct competitor” status is, in the words

of the Conte Brothers court, merely a “label” that

tells us little or nothing about the appropriateness of

prudential standing in a particular case.5 Put simply,

there are different degrees of “directness.” 165 F.3d

at 233. The competitive relationship in this case is

far from typical in Lanham Act cases. Phoenix

operates a single Burger King restaurant in Fort

Lauderdale, Florida. McDonald’s is an international

corporation with annual revenues approaching $22

> Cf. Bell Atlantic v. Twombly, 127 S.Ct. 575 (2006) (bare

allegation of conduct described as “parallel” is not sufficient to

state a claim for restraint of trade under the antitrust laws).

billion. McDonald’s does not own or operate any

restaurants in Fort Lauderdale, Florida, although its

franchisees do operate several such restaurants in

the area. Those franchisees pay McDonald’s rent,

fees, and royalties based upon a percentage of their

monthly sales. Thus it is the franchisees who would

benefit most directly from any customers lured away

from Phoenix’s restaurant.

In short, this particular plaintiff operates at a

different level of the marketplace than the entity it

chose to sue. McDonald’s Corporation “competes”

with Phoenix in the same sense that it competes with

each of the 7,171 Burger King restaurants, 6,673

Wendy’s restaurants, and tens Gf not hundreds) of

thousands of other national and independent quick-

service restaurants in the United States. The

operative question, though, is whether the

relationship between McDonald’s and Phoenix is the

kind of relationship that should trigger a finding of

prudential standing, giving Phoenix (and the tens of

thousands of similarly situated plaintiffs) the ability

to bring a claim under the Lanham Act. That is a

question that the facile use of the term “direct

competitor” does not answer.

To illustrate this point more vividly, consider the

striking similarities between the competitive

relationship in this case and the competitive

relationship in Conte Brothers. In both cases, the

parties were engaged in business in the same

industry, but at different economic levels—the

plaintiffs at the “retail” level, selling products directly

6 Although McDonald’s does own and operate approximately

15% of its restaurants nationwide, all the McDonald's locations

in Fort Lauderdale are operated by McDonald's franchisees.

to consumers, and the defendants at the “wholesale”

level, selling products to retailers and other

middlemen. In both cases, the “wholesaler”

defendant was accused of disseminating false

advertising that increased sales of its own product

(which it did not sell directly to consumers) at the

expense of other wholesalers’ products that were sold

by the plaintiff retailers. Conte Bros., 165 F.3d at

224. Economically, the competitive relationships at

issue in the two cases were very similar. But in

Conte Brothers, the Third Circuit concluded—based

in part upon the plaintiffs concession—that the

parties were not “direct competitors.” Jd. at 235. In

this case, the court reached the opposite conclusion,

observing generally that “Burger King is one of

McDonald’s direct competitors in the fast food

industry.” Pet. App. 22a n.6. These different labels

attached to similar facts highlight the dangers of a

categorical approach: it simply does not provide a

principled way to identify which Lanham Act claims

merit standing and is likely to lead to inconsistent

results.

At a minimum, though, if the Court were

otherwise inclined to consider whether to require a

categorical approach to prudential standing for

“direct competitors,” the Court would be well served

to wait for a case in which the competitive status of

the parties is more direct than it is here—or at least

where the parties’ competitive status has been

explored in a more complete record.

2. The atypical nature of the “false advertising”

claim and alleged injury at issue here also makes this

case a poor vehicle for considering the question

presented. As noted above, the false advertising

claim in this case is highly unusual—if not unique in

the history of Lanham Act litigation: The district

court explained that it was “unable to locate any case

where a company brought a Lanham Act claim

against a competitor whose advertising became false

or misleading due to the felonious conduct of third

parties.” Pet. App. 42a (emphasis in original). The

core purpose of the Lanham Act is to make

advertisers liable for “anticompetitive conduct.” No

such conduct occurred here: indeed, the Department

of Justice publicly declared that McDonald’s was a

“victim” of the same criminal conspiracy that

allegedly rendered the advertising at issue “false.”

Further, in light of the unusual facts of this case,

the alleged injury here was indeed extremely

attenuated. As the courts below recognized, Phoenix

would be required to prove that its particular

franchise lost customers because of representations

that McDonald’s customers had a fair and equal

chance of winning certain rare and specific high-

value prizes—rather than because of the customers’

personal preference for McDonald’s, differences in

quality or convenience, McDonald's other advertising,

or the customers’ interest in winning the more

common, lower and mid-value prizes that were

unaffected by the third-party conspiracy. This is a

heavy burden for Phoenix to bear, and it may make it

difficult for Phoenix to prove that it suffered any

injury at all. Cf. Holmes v. SIPC, 503 U.S. 258, 270-

74 (1992) (finding no standing to sue under the

Ciayton Act in part because of a lack of proximate

cause, in that if certain plaintiffs were allowed to sue,

the court would first need to determine the extent to

which their losses were the result of the alleged

conspiracy or other factors, including potentially their

own poor business practices). The Eleventh Circuit

properly concluded that this theory was insufficiently

direct, concrete, and distinct—even at the pleading

stage—to support a finding of prudential standing.

Even apart from the merits of the Eleventh

Circuit's decision, Phoenix’s unusual theory of

causation and injury makes this case far from typical.

For this reason as well, this case would be a poor

vehicle for this Court’s consideration of the question

presented in Phoenix’s petition.

CONCLUSION

This Court’s intervention is not required here.

The Eleventh Circuit’s decision does not present any

unresolved issue of law, and the petition does not

demonstrate any conflict of authority among the

circuits or with any decision of this Court. The

petition should be denied.

Respectfully submitted.