Thursday, February 01, 2007

Tragic irony or poetic justice?

Klayman v. Judicial Watch, Inc., 2007 WL 140978 (D.D.C.)

Larry Klayman is the founder of Judicial Watch, a nonprofit known for its litigiousness, mainly against various government officials. He and a Judicial Watch donor, Louise Benson, sued Judicial Watch after Klayman left the organization, alleging fraudulent misrepresentation, breach of contract, unjust enrichment, violation of the Lanham Act, violation of Florida’s statutory right of publicity, and defamation.

Benson’s claims centered on a $50,000 pledge she’d made to support Judicial Watch’s purchase of its building, $15,000 of which she’d actually donated before things broke down. She was promised some naming recognition in the building for the pledge, but allegedly the post-Klayman Judicial Watch abandoned plans to buy the building even as it continued to solicit donations by pretending that it still intended to do so. Though the court held that Benson had adequately pled the elements of fraudulent misrepresentation, breach of contract, and unjust enrichment, those claims only covered the $15,000 she’d already donated and thus did not meet the federal jurisdictional minimum. Because her claims were not related to the same nucleus of operative fact as Klayman’s federal claim, the court dismissed them.

Klayman did somewhat better. His allegations: In 2003, he decided to leave Judicial Watch to run for Senate in Florida. Thus, he executed a detailed severance agreement with Judicial Watch. Before he left, he discovered that, contrary to earlier claims, his potential successor Fitton didn’t have a college degree. As a condition of stepping down, Klayman insisted and Fitton agreed that Judicial Watch would hire a qualified person to head the organization. Instead, Fitton maintained control. Moreover, Fitton has been a poor steward of the organization and refused to pay Klayman amounts due under the severance agreement. Thus, Klayman sought recission – to be returned to the Chairmanship of Judicial Watch – as well as damages and specific performance. The court refused to dismiss his recission claim at this stage, though acknowledged that it might be a bit awkward to reinstate him.

Klayman also alleged that, more than a month after he stepped down, Judicial Watch sent a fund-raising letter that falsely represented that Klayman was still Chairman and General Counsel of Judicial Watch, and used Klayman's name and image without permission. Confused donors relied on Klayman’s supposed connection to the organization in making donations. This conduct is the foundation of Klayman’s Lanham Act and right of publicity claims. Though Klayman alleged both false designation of origin under §43(a)(1)(A) and false advertising under §43(a)(1)(B), the court pointed out that his allegations really were false designation of origin claims and analyzed them only on that basis.

Klayman sufficiently stated a claim for false endorsement: he alleged that he was a celebrity within the nonprofit/legal community, that Judicial Watch deliberately used his name and image to confuse donors as to his continuing affiliation with Judicial Watch, and that Judicial Watch’s actions succeeded in confusing donors and getting contributions out of them. The court reserved decision, however, on whether Klayman would ultimately have to prove that he has an economic interest in his name and likeness in order to prove that he has protectable rights under §43(a). This is rarely an issue that comes up in Lanham Act celebrity cases, because most celebrities do have monetizable personas. Whether Klayman could make any money through endorsements remains to be seen.

Florida’s right of publicity statute bars commercial or advertising use of a person’s name or likeness without express written or oral consent. The court refused to dismiss Klayman’s claim, but noted that it would require Klayman to explain why he should be allowed to use Florida law when the mailing came from DC, he’s suing in DC, and his allegations of injury in Florida are “sparse at best.”

Finally, Klayman alleged defamation based on three sets of false and misleading statements. First, in its 2003 and 2004 Form 990 tax returns, Judicial Watch allegedly made false and misleading statements that Klayman owed Judicial Watch money. The returns were published on Judicial Watch’s website. Second, after Klayman filed his initial complaint in this case, Judicial Watch allegedly told its employees that Klayman had sued because he owed Judicial Watch a significant sum of money, even though Judicial Watch knew that “Klayman did not, individually, owe Judicial Watch any money.” (I wonder what that “individually” means there.) Third, Judicial Watch allegedly made similar statements that were published in a number of media outlets, including The Washington Post, The Washington Times, World, and

For the first category of statements, the court found Judicial Watch absolutely privileged. The common law provides that a person who’s required by law to publish something defamatory is absolutely privileged to do so. As a §501(c)(3) nonprofit, Judicial Watch is required to make its tax returns publicly available, and the IRS specifically provides that this may be done by posting the returns on a website. Klayman argued that Judicial Watch could have complied with the law by making the returns available on a more limited basis, but the court reasoned that it is the requirement of publication, rather than the scope of distribution, that triggers the absolute privilege. The other two sets of statements, however, were not absolutely privileged and were sufficiently specific to survive a motion to dismiss.

Separately, Klayman alleged defamation based on Judicial Watch’s alleged alteration of favorable press quotations originally made about Klayman so that they referred to Judicial Watch instead, and posting of the altered quotations on its website. The court wasn’t entirely sure what claims the altered quotation allegations were supposed to support, but settled on defamation based on the structure of Klayman’s complaint and briefing – Klayman argued that the alterations were defamatory because they harmed Klayman’s reputation as an effective advocate and litigator. The court pointed out that the altered statements couldn’t be defamatory because as altered they weren’t “of and concerning” Klayman. Perhaps Klayman could have alleged reverse passing off, but that seems difficult – reverse passing off of what? Even if Dastar didn’t exist, appropriating someone’s good review is not the same thing as appropriating that person’s services. Can there even be reverse passing off of services? Arguably, attributing someone else’s favorable review to yourself is false advertising (and perhaps Klayman is really a competitor, or potential competitor, in the market for conservative public interest donations). Even there, though, the altered quotations were apparently paraphrases of statements various publications had made about Klayman’s activities while he was running Judicial Watch, in which case Judicial Watch is just as entitled to the favorable press as Klayman, so there’s nothing materially false about the advertising.

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