Staying Lanham Act case for NAD not expedient

Expedia, Inc. v. Priceline.com Inc., No. 2:09-cv-00712-RSL (W.D. Wash. Nov. 23, 2009)

Expedia sued Priceline over allegedly misleading ads. It had previously filed a complaint with NAD, but NAD’s procedures meant that the filing of a lawsuit triggered the closing of the investigation, even though the investigation was complete and NAD “believed it would be beneficial to share with the parties the analysis it would have conducted had procedural considerations not required an administrative closing.” This analysis would apparently have been generally favorable to Priceline, and NAD suggested that it would reformat its statement as a decision on the merits if the court “remand[ed]” the matter to NAD or otherwise declined to reach the merits.

Contrary to a couple of SDNY cases (NAD’s home court, as it were), the court declined to stay the case in favor of a NAD resolution. A stay would require some advantage in efficiency or fairness for the alternative procedure. Priceline argued that a NAD decision could simplify the case and/or promote settlement, and that remand to NAD would prevent “procedural gamesmanship” of the sort in which Expedia engaged here. The court disagreed. The court and the parties already have the benefit of NAD’s expert view, which it offered (albeit not in decisional form) when it administratively closed the investigation. And it wasn’t clear that a final NAD decision would be admissible anyway. “Nor is it this Court’s role to safeguard the relevance and effectiveness of an industry’s self-regulatory body. If NAD’s rules allow a challenger to ‘opt out’ of the NAD process by filing a duplicative court action, the obvious remedy would be to amend the rules if the industry agrees that this is not an optimal use of the parties’ or the organization’s time and resources.”

Further, the court refused to dismiss the Lanham Act and common law false advertising claims, because they were sufficiently well-pleaded at this stage. Expedia alleged that Priceline’s ads mislead consumers into believing that they can save 50% on any hotel reservation made through Priceline when in fact those savings are available, if at all, only with the “name your own price” service. Priceline argued that a requested ban on comparative advertising was inappropriate under the Lanham Act, but even if such relief was unavailable that didn’t require dismissal of the complaint. Further, Priceline contended that the Lanham Act claim failed as a matter of law because there is no affirmative duty to disclose; the absence of a statement isn’t a false representation. But, of course, what one actually puts in the ad can be false or misleading if not appropriately qualified/accompanied by disclosures, depending on the claims at issue. Expedia alleged that the ads at issue blurred the distinction between Priceline’s fixed-price and blind-bidding services, creating a false impression that Expedia’s fixed-price services were more expensive than Priceline’s. Though it’s not clear that Expedia can ultimately prevail on its demand for disclosure of the differences between Priceline’s fixed-price and “name your own price” services, or that the alleged comparative inference can reasonably be drawn from the ads, that’s not the standard on a motion to dismiss. The complaint alleged that Priceline’s ads falsely claim that consumers can save 50% by using Priceline’s fixed-price service compared to Expedia’s. That stated a cause of action.