Wednesday, May 6, 2020

Does the COVID Crisis Warrant Ex Parte Relief to Address Price Gouging under Trademark Theories?

Yes, with some reluctance.

3M, the well-known manufacturer of n95 masks, has filed a number of lawsuits throughout the country asserting trademark claims against defendants who are offering to sell to the government and others "3M" masks at extremely elevated prices.  3M asserts claims for trademark infringement, false advertising, dilution, among others.  Part of the harm 3M argues is that, aside from the defendants not being authorized to sell 3M products, 3M does not want to be associated with allegations of price gouging during this crisis.

To that end, 3M sought a temporary restraining order against such a seller in the Middle District.  After noting that hundreds of millions of dollars that 3M has invested in advertising its products under the 3M brand, the Court granted the ex parte relief:
Based on the evidence discussed above, Plaintiff has established a likelihood of success on the merits. Also based on those filings, it is clear that irreparable injury will be suffered if Plaintiff’s goodwill is injured due to Defendant’s price gouging and sale of either fraudulent PPE that is either below industry quality standards or that does not exist. Further, the Court places specific importance on the fact that if these fraudulent masks are sold, the public––likely healthcare workers––may be given PPE that is faulty, and therefore, expose them to COVID-19 and put their lives at risk. That potential harm obviously constitutes irreparable harm to 3M’s goodwill, but especially to the public. And, keeping that possibility from occurring, at least until the Court has the opportunity to further address these issues, outweighs any potential harm to Defendant and is certainly serving the public interest. 
The Court did note some hesitation with handling this ex parte:
The Court notes that it does have certain misgivings about whether Plaintiff met its burden regarding the propriety of ex parte relief here. The TRO’s argument regarding ex parte relief constitutes only one paragraph and contains no explanation as to why notice and a hearing would be impractical. M.D. Fla. R. 4.05(b)(2) (noting that to obtain such emergency, ex parte relief, Plaintiff must explain why notice and a hearing would be “impractical if not impossible.”). However, in light of the COVID-19 global pandemic and the harm that could occur should fraudulent masks be introduced by Defendant into the public, the Court finds that a TRO is necessary here. Accordingly, while the Court concludes that a TRO in this case is permissible, the Court will set an expedited schedule regarding service and the preliminary injunction hearing to ensure sufficient ability for Defendant to be heard on the matter. 
The Court then immediately enjoined the defendant's accused activities, required a $10,000 bond, and set an evidentiary hearing for tomorrow, May 7, 2020.

Defendant has appeared and asked that the hearing be delayed a week, and asked that it be conducted by Zoom.  The Court agreed to delay the hearing, but given that it will be an evidentiary hearing, is requiring in person attendance.

3M Company v. Geftico, LLC, Case No. 6:20-CV-648-ORl-41GJK (M.D. Fla. April 30, 2020) (J. Mendoza)