Wednesday, February 18, 2015

Allegations of fake independent reviews state false advertising claim

Swiss America Trading Corp. v. Regal Assets, LLC, 2015 WL 631569, No. CV 14–04960 (C.D. Cal. Feb. 13, 2015)
Swiss competes with Regal to sell precious metals.  The parties promote themselves online and rely on internet reviews and recommendations.  Swiss alleged that Regal’s affiliate marketing program/Regal’s own controlled websites included “ostensibly independent consumer reviews” that disparaged Swiss; made false statements, including completely fabricated reviewer identities and credentials; and recommended Regal over Swiss.
Regal moved to dismiss, arguing that the complaint failed to satisfy Rule 9(b).  The court didn’t need to decide whether Rule 9(b) or 8 applied, because the complaint sufficed either way.  It was enough to allege that (1) Regal’s websites falsely represented that they were independent of Regal, then criticized Swiss and recommended Regal; (2) the sites used false information to make reviews seem trustworthy, including fabricated reviewer identities and backgrounds, such as that of “Mark C. Turner”; and (3) Regal made false, disparaging statements about Swiss, including claims that Swiss has been accused of baiting and switching, “steering” customers away from worthwhile investments, and irrationally emphasizing coins over bullion.  That was enough to provide Regal with sufficient notice.
Nor were the alleged misrepresentations mere puffery. “Regal’s sites are alleged to falsely represent that they are independently operated, to put forth the fabricated opinions of purportedly knowledgeable professionals in the field who, in reality, do not exist, and to accuse Swiss of specific misdeeds such as baiting and switching. These statements are not vague, exaggerated, or subjective, and are precisely the type of representations upon which consumers might rely.”
The trade libel claims survived as well.  Regal argued that Swiss failed to plead special damages, but it was enough to plead that Swiss depended on word of mouth, particularly online reviews.  Swiss alleged that it lost market share to Regal and suffered continuing irreparable harm to reputation and goodwill, and that was enough.
The intentional interference with prospective economic advantage claim, however, was inadequately pled: Swiss failed to identify an economic relationship with any specific third party, or a probability that such a relationship would yield an economic benefit.  Dismissed with leave to amend.

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