Friday, September 25, 2009

Using a false name to get customers isn't false advertising?

Metropolitan Life Ins. Co. v. O’M & Associates LLC, 2009 WL 3015210 (N.D. Ill.)

From 1985 to 2005, Michael O’Malley was the managing director of the MetLife agency in Downers Grove, Illinois. In 1998, MetLife changed the name of the agency to O’Malley & Associates, though never registered this as a mark. In 2005, MetLife replaced O’Malley and then changed the agency’s name to Preferred Planning Group, instructing employees to stop using the former name, discard all former stationery, etc. There was no intent to resume use.

After that, O’Malley accepted an offer from MetLife’s competitor Guardian to set up a new insurance agency, which used the name O’Malley & Associates and the same logo incorporating the name that the MetLife agency previously used. Defendant O’M then hired 21 former MetLife agents, a handful of whom retained client files and information. Moreover, O’M had the USPS change the business address for O’Malley & Associates from the MetLife address to the O’M/Guardian address, and transferred the phone number. Relying in part on client lists from MetLife, O’M’s agents sent an announcement that O’Malley & Associates was “pleased to announce we [are] moving our offices to a larger location....” and some agents sent another letter that “I am moving my Downers Grove office and expanding the services available to you,” including forms to make the transition “seamless,” asking clients to “sign where indicated and return as soon as possible to insure uninterrupted service on your accounts.”

MetLife sued. The court rejected its trademark claim because of clear evidence of intent to abandon. MetLife argued that the residual goodwill in the mark, plus O’M’s bad faith exploitation of the mark, entitled it to relief, but the caselaw didn’t support this. In the 7th Circuit, only when an abandoned mark is confusingly similar to a newly adopted mark will a competitor be unable to pick up the abandoned mark.

MetLife then relied on a false advertising claim, which the court also, more surprisingly, rejected. The court held that “letters sent to customers” don’t fall under §43(a)(1)(B) because they’re not “commercial advertising or promotion.” Okay, setting aside that this is a wacky rule stated that broadly (what about messages designed to get current clients to re-up their about-to-expire contracts when the client is thinking of switching?), it’s nonsensical to apply that rule here for the basic reason that the targets weren’t O’M’s customers. They were, true enough, somebody’s customers—MetLife’s! By this logic, only advertising to people who aren’t currently in the market for the good or service is covered by §43(a)(1)(B).

Yet there are Seventh Circuit cases saying that “[a]dvertising is a form of promotion to anonymous recipients, as distinguished from face-to-face communication.” These letters weren’t either of those poles, of course (and it’s bizarre to exclude face-to-face communication from “advertising or promotion,” especially given that the latter word is in there to expand the category of communications covered). But another district court has held that “direct communications, whether in person or by letter” are not advertising or promotion, and this court agreed. The logic escapes me.

But not the court, which reasoned that the letters weren’t directed to anonymous recipients (so, if the advertiser buys a list of targets and sends messages to them instead of “current resident,” no Lanham Act coverage?), and the second letter contained a form that was “highly individualized”—containing the name and social security number of the recipient. That seems to me to make the false representation here—that the new insurance agency is the heir of the old one—more persuasive and material, not to make it not “advertising or promotion.” So, though these acts may have been “deceitful business practices,” they weren’t within the Lanham Act.

Because of a possible limitations period problem and the pendency of the litigation for over three years, including significant discovery, the court retained jurisdiction over MetLife’s remaining state-law claims.

1 comment:

  1. I may change my name to Met Life and trump both sides.

    When customers are numb to the constant name changes, take over, and consolidation, it hard for any company to expect loyalty. Did O'Malley s "seal" O'Malley's clients, Met Life's clients, or Preferred's clients? From the client's point of view, it doesn't matter and that's the real lesson here.