Friday, June 26, 2009

Out-of-date mailing not false

Klayman v. Judicial Watch, Inc., 2009 WL 1797867 (D.D.C.)

Teeny bit of background here. Klayman founded and then split with Judicial Watch. After a lot of motion practice, the court granted summary judgment against Klayman on a number of the resulting claims.

Klayman brought Lanham Act claims based on a fundraising letter Judicial Watch sent more than a month after Klayman stepped down, alleging that it falsely represented that Klayman was still Chairman and General Counsel, and that it used Klayman’s name and image without permission.

However, Klayman was Chairman and General Counsel at the time the letter was written and he himself authorized and approved the letter. The evidence showed that this was a monthly newsletter, preparations for which usually begin 4-6 weeks before mailing. Before he resigned, Klayman participated in developing and publishing the newsletter, and he also signed the cover letter sent to supporters. Because Judicial Watch doesn’t print or mail its own newsletter, the monthly letters had to be approved to go to its outside vendor by the third week of the preceding month. Thus, Klayman, following his usual practice, edited the October 2003 letter at issue and accompanying cover letter in the first week of September—all this while he knew he was engaged in severance negotiations. When Klayman left, the newsletter had already been sent out to be mailed. All other planned mailings bearing his signature—60,000 pieces of mail—were stopped, at a cost of $30,000.

The court noted some uncertainty about the legal basis for false endorsement, though many courts have treated it as a §43(a)(1)(A) claim. To win such a claim, a celebrity must demonstrate that he or she didn’t endorse the goods or services at issue. Here, Klayman did authorize the use of his name and identity. The endorsement wasn’t false. (The FTC requires that endorsements be up-to-date, but the evidence here is that it was up-to-date.)

Klayman also asserted a §43(a)(1)(B) claim. Here, Klayman couldn’t show falsity because the statements were true at the time they were made. The court wouldn’t hold Judicial Watch liable “for making a statement that, although true at the time made, subsequently became inaccurate due to a change of circumstances.” (Of course, in a continuing ad campaign, this wouldn’t be enough: if a competitor revised its formula, negating comparative test results being used in advertising, the comparative campaign might have to be pulled. But here, where there was only one instance of the claim being made, strict liability does not mean inevitable liability; it’s a little like the volition requirement some courts added to copyright infringement before the DMCA largely obviated that question for ISPs. Note also that a deceived consumer in a similar situation of changed circumstances might, depending on the law of the jurisdiction, have a claim for recission/restitution.)

The court indicated that Klayman would lose anyway, because he couldn’t show injury from the mailing and thus couldn’t maintain a claim for damages.

The court dismissed Klayman’s allegations that Judicial Watch made defamatory statements to its employees for lack of proof that such statements actually occurred. The remaining claim concerned statements to the media that Klayman owed Judicial Watch over a quarter of a million dollars, and that his lawsuit was a tactical maneuver. Klayman is a public figure; thus he’d need to show both falsity and actual malice.

The monetary figure was, Judicial Watch argued, based on Klayman’s severance agreement and Judicial Watch’s audited financial statements. It incorporated amounts that Klayman owed individually and on behalf of his law firm, Klayman & Associates, P.C., for which he’d agreed to indemnify Judicial Watch, as well as attorney’s fees. The statements were, therefore, neither false nor malicious, because Judicial Watch had reason to believe in their truth.

However, the question of debt under the severance agreement was still disputed in the lawsuit, so the court was unable to determine its truth. And yet actual malice exercised its protective function: Klayman didn’t have sufficient evidence that would allow a reasonable jury to find that Judicial Watch knew or entertained serious doubts about the untruth of the monetary figure.

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