Monday, June 04, 2018

Industry magazine publisher can be sued under Lanham Act due to allegations of financial interest in competing businesses

NY Machinery Inc. v. Korean Cleaners Monthly, No. 17-cv-12269, 2018 WL 2455926 (D.N.J. May 31, 2018)

Plaintiff Lee is the President of NY Machinery (NYM), which sells washing machines and dry-cleaning products, and also owns Kleaners LLC, a magazine publication for the Korean dry-cleaning industry. Defendant Chung owns defendant TKCM, a monthly trade publication that also targets the Korean dry-cleaning industry.

NYM previously advertised in TKCM, but stopped and formed Kleaners to advertise NYM’s products in his own industry magazine. TKCM, in retaliation, allegedly began a “malicious defamatory campaign” against NYM to damage their businesses and simultaneously boost their competitors’ businesses, some of which Defendant Chung allegedly has an ownership interest in. In an August 2017 issue of TKCM, NYM was allegedly referred to as “crooks” and a “fraud” in an article, and on the magazine’s cover.  This allegedly hurt plaintiffs’ goodwill, leading customers to cancel orders of NYM products or refuse to deal with NYM, and harming Kleaners’ subscription and ad sales. 

TKCM argued that its statements weren’t commercial advertising or promotion for Lanham Act purposes. The court used the Lexmark-modified Gordon & Breach test, noting that plaintiffs pled commercial competition by alleging that Chung has an ownership interest in some of NYM’s competitors, and that TKCM is a competitor of Kleaners. Although it doesn’t appear that the challenged speech was in a conventional ad, alleging that defendants falsely criticized plaintiffs’ goods and services in order to promote NYM’s competitors for defendants’ benefit was enough to allege commercial speech made in commercial advertising or promotion. New Jersey statutory unfair competition claims likewise survived, as did tortious interference and defamation per se claims.

The actual malice standard did not apply; protection for “matters of public concern” applies “to businesses that are of such inherent public concern[,]” and not to “businesses like ... the cleaning of clothes, and numerous other local businesses that involve everyday products or services.” TKCM’s articles concerning plaintiffs’ dry-cleaning and magazine publishing businesses didn’t involve matters of public concern. Anyway, plaintiffs sufficiently pled malice by alleging knowing dissemination of falsehood. This also adequately pled a false light claim.  Trade libel claims were dismissed for failure to plead special damages with the requisite particularity. Plaintiffs said they were willing to provide specific names under a confidentiality agreement, but they’d have to amend the complaint to do so.

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