In a lively suit between competing "bed-in-a-box" mattress companies, Casper Sleep, Inc. brought false advertising and deceptive acts and practices claims over Nectar Brand's operation of the "SleepAuthority" website which claimed to be dedicated to helping people improve their sleeping habits.
Instead of providing independent suggestions, Casper argued that Nectar was misleading consumers and influencing them to purchase Nectar-branded mattresses through the use of undisclosed paid affiliate reviews, social media posts, and websites and false or misleading statements, including misleading comparisons to Casper products, manipulated customer reviews, and false statements touting Nectar mattresses. In addition, Casper alleged that Nectar's financing program is deceptive as fees and details are either not disclosed or obfuscated, and the discounts portrayed online are falsely advertised as products are never sold at their purported 'regular' prices.
In response, Nectar Brands brought counterclaims alleging that Casper had itself engaged in deceptive and unfair conduct to increase its sales at Nectar's expense by using its "financial influence" and threat of litigation over three mattress review sites. Casper entered into settlement agreements with two of the sites and provided a loan to a subsidiary of the third. Nectar argued this financial influence ultimately led to the sites "radically" changing their reviews of Casper mattresses. Nectar also alleged that Casper manipulated product reviews on Google and Amazon to create the false impression that Casper mattresses had received stronger reviews, citing five-star ratings with no comments and an independent user-review website's "detection of unnatural reviews." Both parties filed motions to dismiss.
First addressing Nectar's SleepAuthority website, the court rejected Casper's argument that SleepAuthority's statements–such as "everyone can't stop talking about" Nectar mattresses and the "What mattress style are you?" quiz that unsurprisingly recommended Nectar mattresses–were actionable under the Lanham Act. Casper argued that the disclosure on SleepAuthority's "about" page was insufficient as it appeared in an obscure location and not in connection with the deceptive content. But, by Casper's own admission, the website did include a disclosure about the site's ownership, and all social media posts linked back to the website. These features, were, the court determined, sufficient to avoid Lanham Act false advertising claim.
The court next addressed whether Casper had suffered an injury as a result of Nectar's promotional pricing and financing program. The court determined that Casper did not plausibly allege that it suffered injury as a result of Nectar's promotional pricing or that it lost sales to Nectar as a result of the advertising surrounding its financing program. The court granted Nectar's motion to dismiss.
Turning to Casper's motion to dismiss Nectar's counterclaims, the court determined that Nectar failed to plausibly allege that Casper's financial influence over any of the sites resulted in the sites offering misleading reviews of Casper's mattresses. It restated that favorable reviews are not actionable misrepresentations because they are mere opinion, and any connection or financial relationship between the third-party sites and Casper was disclosed. Finally, the court determined that Nectar's allegations that Casper had manipulated Amazon and Google reviews were "mere 'naked assertion[s]' devoid of 'further factual enforcement'" and could not survive a motion to dismiss.
While the court granted each party leave to amend certain allegations, the court did not grant Casper leave to amend as to its allegations against SleepAuthority as it held that Casper could not overcome the website's ownership disclosure. As a result, Casper recently filed its Third Amended Complaint focusing instead on the alleged false and misleading statements, lack of disclosures regarding compensation to affiliate reviewers and mattress review sites, and misrepresentation of the number and quality of customer reviews on NectarSleep.com and other owned websites. One thing's for sure: neither party will sleep easy for a while.
The case is Casper Sleep, Inc. v. Nectar Brand LLC, 2020 U.S. Dist. LEXIS 174740 (S.D.N.Y. Sep. 23, 2020).
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