Friday, December 12, 2008

Now spit: Dental appeal fails

American Association of Orthodontists v. Yellow Book USA, Inc., --- S.W.3d ----, 2008 WL 5145441 (Mo. App. E.D.)

Yellow Book listed general dentists as orthodontists in its directories, and AAO, an orthodontists’ trade group, sued, alleging that the listings lacked statutorily required disclaimers that general dentists lack specialized training and certification as orthodontists. AAO had previously sued in federal court under the Lanham Act, but lost on standing grounds as well as failure to state a claim. Am. Ass'n of Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100 (8th Cir. 2006). The state court of appeals affirmed a verdict for Yellow Book.

Regulatory background: The Missouri Dental Board can suspend or revoke a dentist’s license if s/he engages in false, misleading or deceptive advertising. The regulations define this to include announcing or advertising recognized specialty practices, unless the announcement includes a specific disclaimer of each dentist not licensed as a specialist in Missouri.

AAO sued for state-law unfair competition, arguing that Yellow Book’s inclusion of general dentists in listings for “Orthodontists” without the disclaimer was false and misleading. After an unsuccessful attempt to remove, Yellow Book moved to dismiss on various grounds, including a First Amendment defense. Unfortunately, the trial court didn’t explain why it granted Yellow Book’s motion to dismiss.

The court of appeals found that the complaint didn’t state a claim. Yellow Book argued that there was no private right of action to enforce the dental regulations. AAO responded that it was not seeking to enforce the dental regulations, but rather to stop unfair competition. Thus, the court focused on whether AAO stated a claim for unfair competition.

The court agreed that deception was at the core of common-law unfair competition, but noted that case law generally focused on the use of a trade name or other (?) confidential information. Here, the complaint was based on “the use of a general term describing a particular type of service provided by dentists.” AAO argued that if use of the term deceived consumers, then unfair competition would be shown.

The dental regulations ban the types of ads at issue here, but commit enforcement to the Dental Board. The AAO argued that the legislature’s determination of what constitutes false advertising can be the foundation of an unfair competition claim. (I would add that the regulations can also shape public understanding: if the public believes that people calling themselves orthodontists have special training because ad regulations mean that only people with special training can call themselves orthodontists, then breaking the regulation is likely to deceive people relying on background norms, not because of the law itself but because of the effects of the law on expectations.)

However, the court of appeals determined that the directory listings aren’t misleading to the consuming public. (Nice to be able to know that by reading the pleadings and without consulting evidence, I must say.) A general dentist may legally provide orthodontic services regardless of whether s/he has specialized training. Though advertising a service that one is unable to provide (whether through reasons of inability or legal prohibition) is misleading, advertising a service that one may legally provide is fine.

This seems to me to miss the point of the claim, which seems properly framed as one that the public expects people calling themselves orthodontists to have special training, not simply to be able to perform the basic underlying services. If, as the court said, “[d]eception is the true test of unfair competition,” why don’t we look at the evidence of what consumers expect?

The court further held that the directory listings did not constitute unfair competition because they did not conflict with public policy, despite the dental regulations. Yellow Book wasn’t within the class of persons regulated by the dental laws.

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