WASHINGTON – A federal appeals court ruled that a Bethesda-based consumer group cannot sue Phillips Foods Inc. for advertising its crab cakes as being made in the United States, when most of the crabmeat was imported from Asia.
A panel of the 4th U.S. Circuit Court of Appeals said in a published opinion Monday that the Made in the USA Foundation cannot sue under the Lanham Act, because the federal rule only protects businesses that have been hurt by a competitor’s false advertising.
“It’s clearly a violation of law,” said Joel Joseph, who argued the case for the foundation. “It’s just an outrage that they’re getting away with this.”
The foundation maintains that the Lanham Act’s broad language — “any person who . . . uses in commerce . . . any false designation of origin . . . shall be liable in a civil action by any person who believes that he or she is . . . damaged by such act” — applies to consumers.
But the appellate court disagreed, citing a provision of the act that specifies “any person” as “persons engaged in congressionally regulated commerce against unfair competition” — in other words businesspeople. In doing so, it upheld a 2002 district court ruling that rejected the case on the same grounds.
Joseph pointed out that consumers by definition are engaged in commerce and that they deserve to know the truth about what they are buying.
But the court said those are insufficient grounds for filing under the act, pointing to a 1986 ruling by the 1st Circuit that said “a Lanham Act plaintiff must be suing to protect a commercial interest.”
Joseph also said that the foundation’s interests were harmed when its members bought crab cakes under the false impression that they were supporting American products.
“The package said that Shirley Phillips’ recipe has remained unchanged. Well, she didn’t make it with Asian crabs. She made it with Maryland crabs . . . that’s a lie,” he said.
A spokeswoman said Tuesday that Ocean City-based Phillips, the 12th-largest group of seafood restaurants in the country, would not comment on the case.
But the company’s Web site does offer a disclaimer: “Rising food costs and the deterioration of the crab population in the Chesapeake Bay led Steve (Phillips) to Southeast Asia. After months of research there, he discovered a crab that was almost identical to the Chesapeake blue crab.”
Joseph said the company’s packaged products have no such disclaimers, however, tricking customers into believing that they are buying American.
“Reasonable consumers would think that this is Chesapeake Bay crab and it’s not,” Joseph said.
The appeals court said that at least half of the circuits in the country have issued similar rulings in Lanham Act cases, and none have disagreed. But Joseph said the Made in the USA Foundation would continue to press its case for the Lanham Act, and will appeal to the Supreme Court.
-30- CNS 04-20-04