Friday, May 12, 2017

a true story of a false advertising claim based on a "true story"

Incarcerated Entertainment, LLC v. Warner Bros. Pictures, No. 16-cv-1302 (M.D. Fla. May 10, 2017)

Plaintiff alleged that it owned the rights to the life story of Efraim Diveroli and sued Warner for false advertising and unfair competition, based on Warner’s promotion of the movie War Dogs as the “true story” of Diveroli’s path to becoming an international arms dealer. At 18, Diveroli allegedly started a small business specializing in arms,  ammunition trading, and bidding on U.S. Government defense contracts, and was awarded a $298 million contract to support the United States’ war effort in Afghanistan. At  age 22, Diveroli was indicted by a federal grand jury in Miami for his company’s violation of arms embargos and ultimately accepted a four-year plea deal. Guy Lawson wrote an article in Rolling Stone, The Stoner Arms Dealers: How Two American Kids Became Big-Time Weapons Traders, featuring accounts by both Diveroli and one of his employees Packouz. Lawson optioned the movie rights for the article to Warner and later expanded the article into a book, Arms and the Dudes.  (Well played!) Diveroli marketed his own manuscript, Once a Gun Runner, and his business partner contacted a number of producers and studios, including Warner, which declined to pursue a consulting arrangement with Diveroli but retained Packouz as a consultant and enlisted Guy Lawson as a producer.

The complaint alleged that Warner grossed more than $85 million by promoting War Dogs as Diveroli’s “true story” when it was not the true story, shutting the plaintiff out of the marketplace because consumers would purchase a ticket to War Dogs instead of buying Diveroli’s memoir, Once a Gun Runner.  Star Jonah Hill, for example, claimed of the movie that “it’s all true,” while another promoter told interviewers “these are real people,” and another explained that “we certainly tried to follow what happened as closely as possible I think. If you know the story at all, we pretty much stick to the facts as much as we can.”

The court, perhaps surprisingly, found that the challenged statements were “commercial speech.”  The statements were used for promotional purposes, referring to a specific product, and with an alleged economic motivation: Warner knew that representing the story as “true” would induce consumers to see the movie. The court rejected Warner’s argument that the promotions were “intertwined” with non-commercial speech, including political and artistic commentary, and were protected because they related to a movie, which is a protected expressive work.  But movies “are also sold in the commercial marketplace like other more utilitarian products, making the danger of consumer deception a legitimate concern that warrants some government regulation.” Rogers v. Grimaldi.

The intertwining theory couldn’t be resolved on a motion to dismiss.  Rogers typically applies only to titles or other expressive works, not to ads, e.g., Facenda (a “making of” documentary about a  videogame whose aim was to promote another creative work).  The challenged movie trailers, social media posts, and interviews could be subject to Facenda treatment.

Warner argues that “based on a true story” couldn’t be actionable because it conveys that the movie “is obviously fictionalized in part.” There was no such clear-cut rule; the entire trailer in context included a realistic news report by Wolf Blitzer, a well-known CNN anchor, and the entire ad has to be considered.  As for interviews with principals, the question whether they, in their full context, falsely or misleadingly portrayed War Dogs as a true story called for a fact-intensive inquiry that couldn’t be done on a motion to dismiss. 

The complaint also plausibly alleged that statements by Larson and Packouz were made as agents of Warner. Lawson was a producer of the movie, and Packouz was retained as a consultant and had a cameo in the movie.  An agency relationship with Warner could be plausibly inferred.  Warner argued that their statements were opinion or puffery.  Lawson stated on his Facebook page that War Dogs was “amazingly close to the real truth of the story” and that War Dogs was inspired by his own book. A reasonable person could infer that Lawson knew the true story and his characterization of War Dogs “fairly implie[d] a factual basis.” Likewise, because Packouz identified himself as the subject of the movie, his statement that “this is exactly how it happened” at least arguably implied a factual basis.

Warner argued that plaintiff didn’t properly allege deception, but no factual evidence of consumer deception is required at the pleading stage. As to materiality, plaintiff alleged sufficient facts to support an inference that the truthfulness of War Dogs was an “inherent quality or characteristic,” alleging that consumers are drawn to true stories and that a test screening for War Dogs revealed that one of the main things people liked was that it was based on a real story. Plus, because plaintiff wasn’t alleging that scenes from the movie itself  were false or misleading, the accuracy of the movie wasn’t relevant to the issue of materiality.  (Hunh?)

Warner finally challenged standing under Lexmark.  Plaintiff alleged that it was a direct victim of Warner’s advertising because War Dogs diverted book sales from it. Thus, the plaintiff plausibly alleged that its injuries “flowed directly” from Warner’s advertising.

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