Sunday, September 28, 2008

Standing and advertising/promotion in a SLAPP suit

Nemet Chevrolet, Ltd. v., Inc., 564 F. Supp. 2d 544 (E.D. Va. 2008)

Consumers posted negative reviews of Nemet on defendant’s website. Nemet sued for defamation, tortious interference, and Lanham Act violations. Eric Goldman gave a good summary. The CDA proved an insurmountable barrier to the claims.

As Goldman noted, the court mushed together trademark and false advertising considerations in evaluating the apparently confused Lanham Act claims. Treating Nemet as mainly making false advertising arguments, it held that there was no standing, as the parties didn’t compete. But, in the alternative (which, under the circumstances, must mean: if Nemet was actually making a trademark claim; the court seemed to think that Nemet wasn’t really trying to do so), it held that the complaint should still be dismissed because the parties’ goods are unrelated as a matter of law and there could be no sales diversion.

Goldman thinks this is in tension with the main line of trademark cases, which wouldn’t accept this argument on a motion to dismiss, but it’s so clearly the correct result that we should embrace it. Factfinding won’t make a SLAPP suit like this any more credible as a trademark claim. To the extent that some courts have found that a false endorsement claim must be allowed to proceed merely because plaintiffs allege that consumers might believe that a website requires permission from a trademark owner to talk about the trademark owner, those cases are rotten at the core; if a claim can only succeed if the plaintiff proves such a belief on consumers’ part, then it should be dismissed at the pleading stage.

There is an interesting false advertising issue lurking here: Nemet apparently argued that the website name,, misled consumers into thinking that the site had some official governmental connection. In that, this case has some resemblance to the case. Unfortunately for Nemet, its focus on how this name “divert[ed]” consumers only highlighted the standing problem, because it didn’t divert consumers from Nemet.

In an extra ruling that coincided with the standing determination, the court further found that the domain name didn’t count as “commercial advertising and promotion” because it wasn’t commercial speech by a defendant in commercial competition with Nemet. Thus, the court held, even if Nemet had standing, its claim would fail.

The court’s belt-and-suspenders approach highlights the way in which “advertising and promotion” caselaw has developed in illogical isolation from the surge in standing caselaw. In assessing whether something counts as “advertising and promotion,” direct competition has always been a requirement—both necessary and sufficient to satisfy one part of the standard four-prong test. One could easily argue that whether a defendant competes with a plaintiff has nothing to do with whether a particular statement is “advertising” or “promotion.” Indeed, the standard test leads to the facially illogical result that statements are advertising with respect to some people (competitors) but not with respect to others (noncompetitors).

The notable point is that “advertising and promotion” caselaw was, before recent cases like Phoenix of Broward, the primary way in which standing questions were navigated in false advertising law. Given the standing revolution now going on in Lanham Act caselaw, it’s time to rationalize the doctrine and either remove direct competition from the test for whether something is “advertising” (the logically superior alternative) or at a minimum use the same definition of acceptable standing for both, such that a plaintiff with “standing” would also satisfy the “competition” prong of the advertising and promotion test.

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