United States: Supreme Court Decision Alert - March 25, 2014

Today (March 25, 2014) the Supreme Court issued two decisions, described below, of interest to the business community.

  • Lanham Act—Standing to Bring False-Advertising Claim
  • Federal Insurance Contributions Act—Tax Consequences of Severance Payments Upon Involuntary Termination

Lanham Act—Standing to Bring False-Advertising Claim

Lexmark International, Inc. v. Static Control Components, Inc., No. 12-873 (previously discussed in the June 3, 2013, Docket Report)

The Lanham Act creates a federal private cause of action for "any person who believes that he or she is or is likely to be damaged" by false advertising or unfair competition. 15 U.S.C. § 1125(a)(1)(B). Today (March 25, 2014), in Lexmark International, Inc. v. Static Control Components, Inc., No. 12-873, the Supreme Court held that, to bring a claim under the Lanham Act, a party must allege that (1) injury to a commercial interest in sales or business reputation (2) proximately caused by the defendant's prohibited conduct. In doing so, the Court largely replaced familiar principles of "prudential" standing with a statute-centered analysis of the right to sue under a particular federal statute.

Static Control produces a replacement microchip that allows Lexmark's competitors to refurbish used laser-printer toner cartridges for use in Lexmark's printers. Lexmark sued Static Control, alleging that its microchip infringed on Lexmark's rights under the Copyright Act. Static Control countersued under the Lanham Act, alleging that Lexmark falsely told both toner-cartridge refurbishers (i.e., Lexmark's competitors) and the consumers who buy the cartridges that the use of Static Control's microchip was illegal. The district court concluded that Static Control lacked "prudential standing" to pursue its Lanham Act claims, applying the five-factor test for antitrust standing set forth in Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983). The Sixth Circuit vacated and remanded, instructing the district court to apply the Second Circuit's "reasonable interest" test for standing under the Lanham Act.

In a unanimous opinion written by Justice Scalia, the Supreme Court affirmed the Sixth Circuit's judgment but established a different analysis that intentionally avoided using the term "standing" outside the context of Article III. See slip op. 9 n.4. Clarifying the scope and application of prior precedent, the Court held that the question before it was not one of "prudential standing" but whether Static Control had a cause of action under § 1125(a) "apply[ing] traditional principles of statutory interpretation." Slip op. 9. Under those principles, a plaintiff must allege an injury that comes within the zone of interests protected by the statute and was proximately caused by the alleged statutory violation. Slip. op. 10, 13. The Court identified the interests protected by the Lanham Act as lost sales and damage to business reputation. Slip op. 12–13. It also determined that a party like Static Control can demonstrate proximate causation—even if it is not a direct competitor of the defendant—if the defendant's prohibited conduct will have a direct effect on the party's sales or business reputation. Slip op. 14–15, 20–21. The Court rejected the "reasonable interest" test adopted by the Second and Sixth Circuits; the five-factor test applied by the Third, Fifth, Eighth, and Eleventh Circuits; and the categorical approach employed by the Seventh, Ninth, and Tenth Circuits (which had allowed only actual competitors to sue). Slip. op. 15–18.

Today's (March 25, 2014) decision is of interest to the business community because it dispels confusion over who may bring a false-advertising action under the Lanham Act, expanding the pool of potential plaintiffs in some circuits and contracting it in others. The Court's reasoning may also clarify standing challenges under other federal statutes by discouraging recourse to "prudential" considerations and instead focusing the analysis on the statutory language creating the cause of action and the question of proximate causation.

Federal Insurance Contributions Act—Tax Consequences of Severance Payments Upon Involuntary Termination

United States v. Quality Stores, Inc., No. 12-1408 (previously discussed in the October 1, 2013, Docket Report)

The Federal Insurance Contributions Act (FICA) imposes taxes on both employers and employees to fund Social Security and Medicare benefits. The taxes are levied on "wages." 26 U.S.C. §§ 3101(a) and (b), 3111(a) and (b). With certain exceptions, "wages" are defined as "all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash." Id. § 3121(a).

In United States v. Quality Stores, Inc., No. 12-1408, the Supreme Court held in an 8-0 opinion issued today (March 25, 2014) that severance payments are "wages" for purposes of FICA. The definitional question arose because the withholding provisions of the Internal Revenue Code, which define "wages" in a fashion quite similar to FICA, contain a provision instructing that severance payments are to be treated "as if" they are wages. 26 U.S.C. § 3402(o)(1)(A). Furthermore, the heading of § 3402(o) refers to payments "other than wages." The Sixth Circuit agreed with respondent that § 3402(o) suggests that severance payments are not "wages" for withholding purposes, and therefore they are not "wages" under FICA's nearly identical definition.

In reversing, the Supreme Court held that, "as a matter of plain meaning, severance payments made to terminated employees" "are 'remuneration for employment,'" just "like many other benefits employers offer to employees above and beyond salary payments," and therefore are wages. Slip op. 4–5. The Court observed that this interpretation is supported by the fact that FICA at one point contained an explicit exception for severance payments, but that this exception had been repealed.

The Court rejected the Sixth Circuit's conclusion that § 3402(o) brought severance payments outside the definition of "wages." First, the Court concluded that severance payments fit within the definition of wages for withholding purposes just as they do for FICA, and that "§ 3402(o)'s command that all severance payments be treated 'as if' they were wages ... is in all respects consistent with the proposition that at least some severance payments are wages." Slip op. 8. The Court then explained that Congress's choice of language in § 3402(o) was the result of the special context in which "supplemental unemployment compensation benefits" arose in the area of organized labor, and had nothing to do with any desire on Congress's part to treat severance payments differently from other remuneration.


Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.