Casper Sleep Inc. v. Nectar Brand LLC

Background

Casper Sleep, Inc. and the defendants competed in the online mattress industry. Casper asserted false-advertising claims under Section 43(a) of the federal Lanham Act and deceptive-practices and false-advertising claims under Sections 349 and 350 of the New York General Business Law. Casper’s claims concerned, among other things, the defendants’ SleepAuthority website, promotional pricing, and financing program. The defendants asserted counterclaims under the Lanham Act and California’s False Advertising Law and Unfair Competition Law, alleging that Casper influenced mattress-review websites and manipulated Google and Amazon reviews.

The defendants moved to dismiss the portions of Casper’s claims based on the SleepAuthority website, promotional pricing, and financing program. Casper moved to dismiss the defendants’ counterclaims.

Rulings on Casper’s Claims

The court held that the statements about the defendants’ mattresses on the SleepAuthority website were opinions, not actionable misrepresentations. The court also found that the website’s disclosure that it was owned by an entity operating Nectar and DreamCloud was sufficient to address Casper’s theory that consumers were misled into believing the website was independent. The court therefore concluded that Casper’s allegations concerning SleepAuthority were not actionable under either the Lanham Act or New York law.

As to promotional pricing, Casper alleged that the defendants advertised recurring discounts as limited-time sales and listed prices at which the mattresses were not actually sold. The court held that Casper had not alleged facts showing that consumers who would otherwise have bought Casper mattresses instead bought the defendants’ mattresses because they believed the defendants’ prices were available only temporarily. The court dismissed the Lanham Act and New York claims to the extent they were based on promotional pricing.

As to the financing program, Casper alleged that the defendants failed to disclose fees and the possible annual percentage rate, and misrepresented the length of the mattress trial period. The court held that Casper had not alleged non-conclusory facts making it plausible that Casper lost sales because of those statements. The court noted that the market had dozens of competitors and that the defendants had not directly compared their financing program with Casper’s. The court granted the motion to dismiss the claims to the extent they were based on the financing program.

Rulings on the Counterclaims

The defendants alleged that Casper influenced reviews on Sleepopolis, MattressClarity, and SlumberSage after Casper provided a loan to JAKK Media, which acquired Sleepopolis. The court held that favorable reviews were opinions rather than actionable misrepresentations. It also found that the Sleepopolis website disclosed Casper’s financial relationship with JAKK Media and its role in the acquisition. The court concluded that the defendants had not plausibly alleged misleading reviews resulting from Casper’s alleged influence concerning SlumberSage and MattressClarity. The court granted Casper’s motion to dismiss the counterclaims based on website manipulation.

The defendants also alleged that Casper manipulated Google and Amazon reviews. The court held that Google reviews without comments did not plausibly show that Casper or its agents created fake reviews. The deletion of favorable Amazon reviews by a third-party website or Amazon likewise did not show that Casper or its agents had posted those reviews. Because the counterclaims did not explain how Casper allegedly manipulated the reviews, the court found the allegations too speculative to state a claim and granted Casper’s motion to dismiss those counterclaims.

Leave to Amend and Disposition

The court granted the defendants leave to amend their counterclaims concerning Google and Amazon reviews. It also allowed amendment concerning SlumberSage if the defendants could allege specific facts showing that SlumberSage’s reviews became more favorable after Casper’s loan to JAKK Media. The court denied amendment concerning Sleepopolis because Casper’s role was disclosed and concerning MattressClarity because the cited review was unfavorable to Casper.

The court granted Casper leave to amend its promotional-pricing and financing allegations, but only if Casper could plead additional facts showing that it suffered harm from those programs. The court did not allow amendment of the SleepAuthority allegations. In the conclusion, Judge Paul G. Gardephe stated that the defendants’ motion to dismiss the specified portions of Casper’s claims was granted and that Casper’s motion to dismiss the defendants’ counterclaims was granted.