This older case just showed up in my Westclip.
UPS ran an ad featuring an actor drawing on a whiteboard, saying:
Alright. If you're looking for a shipping company who really understands today's economy, you'd want one that's helped customers through twenty recessions, has over 400,000 employees worldwide, over a hundred years' experience, and was just ranked the most reliable. Well that would be UPS. Because this economy is showing us something. It's time to rely on the experience of UPS. Looks like somebody has a lot of empty boxes.A one-second super appears with “just ranked the most reliable,” stating, "According to Morgan Stanley Parcel Returns Survey, November, 2008." This referred to a Morgan Stanley Research report evaluating freight transportation industry stocks for investment purposes. It ranked UPS Air first and UPS Ground second in “Service Reliability, with FedEx Air ranked third and FedEx Ground fourth. (UPS allegedly repeated the most reliable claim in letters sent to the parties’ customers.)
FedEx objected that the survey wasn’t a reliable basis on which to make the claim, but UPS continued to run the ad. While it was running the ad, Morgan Stanley published its April 2009 survey, now ranking FedEx Air first, UPS Ground second, UPS Air third, and FedEx Ground fourth. FedEx sent a C&D informing UPS of the new survey, but UPS continued to air the ad and show it on the UPS website.
After UPS was served with the false advertising complaint, it stopped airing the ad, which led the district judge to deny a TRO.
FedEx challenged the ad as making an improperly grounded establishment claim. The November 2008 survey was allegedly not sufficiently reliable in that (1) the margin of error was such that a claim of superior reliability could not be supported; (2) the sample size was insufficient; (3) the participants in the survey were not sufficiently screened or representative of the relevant parcel shipping market; (4) the survey questions and responses were too narrow to support the overly broad superior reliability claim; and (5) the structure and execution of the survey did not meet the minimum levels required by survey methodology to provide the necessary substantiation.
FedEx further argued that prior to the April 2009 survey’s release, the claim was literally false in that (1) UPS was not “just” ranked the most reliable, because several months had passed between the time the survey was conducted and when the commercial aired; and (2) UPS was not ranked the most reliable, because the survey asked participants to rate each individual delivery service provider on its service reliability on a scale of one to ten--not rank them in order of reliability. Separately, FedEx argued literal falsity and falsity by necessary implication because once the April 2009 survey was released ranking FedEx Air first for "Service Reliability," UPS could no longer claim that it was "just ranked the most reliable." Alternatively, FedEx alleged misleadingness, both initially and after April 2009.
To prove an establishment claim literally false, the plaintiff must prove that the tests referred to were not sufficiently reliable to conclude with reasonable certainty that they established the proposition for which they were cited.
UPS argued that the claim wasn’t an establishment claim because it simply reported a true fact about what the Morgan Stanley survey said. It contended that the Lanham Act doesn’t preclude a competitor from accurately informing the public of independent research results, and that if FedEx stated a claim then "every time a community newspaper publishes a poll identifying the best restaurant, the best bar, or the best slice of pizza, the winning establishment would have to first verify the newspaper's methodology before accurately reporting the results."
The court noted that the few courts that have addressed false advertising claims involving reports of studies or surveys have uniformly treated them as establishment claims. The court didn’t see why a distinction should be made between studies commissioned by the defendant and those performed by independent, third-party organizations. UPS also cited Suzuki Motor Corp. v. Consumers Union of U.S., 330 F.3d 1110 (9th Cir.2003) for the proposition that "[t]he public is attuned to such statements and accords them appropriate weight as a part of the advertising at issue." As the court pointed out, Suzuki was a defamation case, and thus the question there was whether a reasonable jury could find, by clear and convincing evidence, that the plaintiff had shown the defendant published disparaging statements with actual malice.
This wasn’t objective “reporting.” “A defendant cannot attempt to attract consumers by using a favorable (but unreliable) test in an advertisement, and then try to avoid Lanham Act liability by asserting that it was merely ‘reporting’ the results of the test.” While speech by noncompetitors is held to different standards and not subject to the Lanham Act, subsequent promotional uses of that speech by competitors are different. It’s not that the independent review is covered by the Lanham Act, but that the competitor’s use of the review is commercial speech covered by the Lanham Act. Gordon & Breach Science Publishers v. Am. Inst. of Physics, 859 F.Supp. 1521 (S.D.N.Y.1994)
FedEx’s allegations of falsity based on insufficient reliability stated a claim for literal falsity.
Even reliable tests can be falsely advertised, if the advertiser uses them to make claims not supported by the test results. The court, however, found that “just ranked” was not actionable prior to April 2009. “Just” is literally true or at most ambiguous. The ad identified the survey by its date. Even if the one-second super was too small to read, “just” is still ambiguous. Weirdly, and wrongly, the court also said that the November 2008 survey never purported to establish the proposition that it had “just” ranked the providers, and therefore FedEx couldn’t claim that the survey didn’t establish the proposition for which it was cited. This is backwards! The survey also didn’t purport to rank the value of the providers, which is why it would have been literally false to cite the survey to support the proposition that UPS was the better value. One whole strand of establishment claims is about reliable tests that don’t happen to support the claim the advertiser makes about them, though they’re reliable sources of other claims! But given the other rationales, this one bizarro sentence doesn’t have much impact.
FedEx’s literal falsity claim based on the use of the word “rank” also failed, “because even if the survey questionnaires asked participants to rate the providers based on service reliability, the November 2008 survey unequivocally purported to rank the providers, thus making the claim literally true.” The methodology may be challenged, but Morgan Stanley plainly did rank the parties.
What about after April 2009? FedEx argued that the ad’s use of “just” made the literally/necessarily implied claim that these were the most recent results. The court, however, concluded that FedEx still failed to state a claim because the claim was literally true or at most ambiguous, even after the April 2009 survey. The ad continued to cite the November 2008 survey, and “just” could reasonably be understood to convey different messages, “including, for example, that UPS was ranked most reliable most recently, that UPS was ranked most reliable sometime in the recent past, or that UPS was ranked most reliable in November of 2008.” This was only possibly misleading. Comment: this is an example of the fetishism of false v. misleading. Is there anyone in the world who thinks that a survey asking about this would produce anything other than overwhelming agreement that “just” means “there’s no more recent survey by the same people finding to the contrary”? Context matters, among other things to clarify ambiguity, and relevant context includes “there’s a more recent survey with different results.” This really would have been a good case for falsity by necessary implication.
Separately, FedEx alleged misleadingness: that the claim deceived consumers into believing that UPS was ranked higher than FedEx in service and reliability and had statistically better on time performance or reliability than FedEx, and that the claim deceived consumers about the rankings post-April 2009. UPS argued that FedEx merely recited the elements of a cause of action, but FedEx isn’t required to set forth evidence of actual confusion at the pleading stage. Allegations of actual consumer confusion and deception sufficed.