Wednesday, November 03, 2010

Is it just me, or do the parties sound like Dilbert characters?

Cboss, Inc. v. Zerbonia, 2010 WL 3835092 (N.D. Ohio)

Cboss, which creates software for businesses and government agencies, sued Ralph Zerbonia and Universe Central Corp. for false advertising. In 1996, Cboss contracted with UCC to hire Zerbonia as general manager of Cboss. Ten years later, Cboss terminated the contract. During Zerbonia's tenure, Ohio hired Cboss to create a software program for online administration of licensing and regulation of charitable gaming and professional fund-raisers, "COIN" (Charitable Organization Information Network).

Tennessee wanted a similar program in 2007 and issued a Request for Proposals. Cboss, The James Group, and another firm ultimately responded (Cboss was at first the only bidder, but its price was too high and Tennessee tried again). Zerbonia worked with The James Group on its proposal, and it won the contract.

Cboss alleged that the defendants made false statements in The James Group’s proposal to Tennessee and on UCC’s website, touting Zerbonia as the technical leader who made COIN what it is (calling him the world’s leading expert on charity regulatory software systems, stating that he’d “built” two of them, stating that he was the system architect and project manager for COIN, and so on). Cboss alleged that in fact Zerbonia was not the technical leader and did not supply the technical know-how to design, program, and produce COIN, and thus that these statements were literally false.

The court interpreted this as a question of what it meant to “design,” “author,” “create,” “build,” and “architect” a system. (Which would seem to make it a Dastar case under many, wrong, interpretations of Dastar.) Because Cboss argued only literal falsity, the question was whether the statements were ambiguous. The court concluded that they were. In context, Tennessee was looking for an entirely new software system, whose size and nature precluded is creation by one person. Thus, The James Group’s proposal included the names of many individuals who’d be involved, and identified a “technical lead” who was distinct from Zerbonia, who’d provide “[o]verall project coordination.” And so on. “At worst, the statement [that Zerbonia was the “author” of COIN] is ambiguous or at best it is true but misleading.” These claims could refer to Zerbonia’s technical skills, or his managerial skills. Without evidence of actual consumer deception, there was no Lanham Act violation.

There were a couple of exceptions: the website claimed that Ohio contracted with Zerbonia to develop COIN. This was literally false, and the court granted declaratory relief with respect to that statement. Likewise, the statement that Zerbonia was the System Architect and Project Manager for COIN was unambiguous and verifiable. Though Zerbonia was the general manager of Cboss, he did not hold those titles during his tenure. This was literally false.

However, a comparison of the COIN and Tennessee projects was not literally false. Cboss argued that defendants falsely compared the cost and time to produce each system as if they were functional equivalents. But the website stated why defendants believed that the Tennessee project’s cost was lower and time to completion was shorter: COIN was built from scratch into multiple stand-alone modules, while the Tennessee was customized and modified for an integrated system, using an existing system. The comparison did not clearly portray the projects as functionally equivalent; a reasonable interpretation would be that the systems perform similar functions but were built using different methods. This was ambiguous or at most misleading.

The court also noted that the intended audience was a sophisticated group of professionals who presumably understood the issues involved, which reinforced its conclusion that the statements were ambiguous or true but misleading. With no evidence of consumer confusion, there was no disputed issue of material fact.

Finally, the statement that Zerbonia "may well be the world's leading expert ...," was opinion, not fact, and thus not actionable.


  1. Anonymous10:48 AM

    A response to an RFP is public enough to be considered advertising?

  2. The Lanham Act covers "advertising or promotion," and in a small enough market a bid might well be enough to qualify.