Thursday, August 26, 2010

Home might be a castle, but not an identity

Robinson v. HSBC Bank USA, 2010 WL 3155833 (N.D. Cal.)

HSBC ran a full-page, double-sided print advertisement in the San Francisco Chronicle which prominently features a photograph of the "street-facing side" of plaintiffs' house, a picturesque Victorian home in the Haight with a distinctive bright yellow and green exterior. On the first page of the Ad, there is a photograph showing the second and third stories of two Victorian homes. Tagged onto the photograph are the words "A Mortgage To Match Your Ambitions. Wherever The World Takes You." On the back of the ad, HSBC advertised its "Premier Mortgage," giving details of the offer and HSBC's contact information. The ad "identifies the precise longitudinal plane on which" plaintiffs' property is situated. The back of the ad contained another, smaller, cropped picture of the top floor and roof-line of three houses, including plaintiffs' property. Plaintiffs alleged that the mortgage on the property was paid off long ago, and that they are not and never have been HSBC customers.

After the ad ran, the Robinsons began to get inquiries from neighbors, realtors, and tenants who live in the property about their financial condition and their willingness to sell. They alleged that HSBC’s conduct was highly offensive because it falsely implied that they had an HSBC mortgage and endorse/approve of HSBC’s products or services, which is particularly galling in the current economy because of the financial harms inflicted by adjustable-rate loans like those advertised in the ad.

The court first ruled that plaintiffs’ claims weren’t preempted by the Copyright Act. Though the Act specifically addresses photographs of architecture taken from public places, it does so to exempt them from coverage. Because plaintiffs couldn’t have asserted an infringement claim with respect to pictures of their property taken from a public place, the interests they sought to protect didn’t fall within the subject matter of the Copyright Act, and the rights asserted weren’t equivalent to copyright. Many courts have held that statutory and common-law misappropriation of likeness claims are not preempted. (As usual, defendants argued express preemption when conflict preemption would have been a better conceptual fit, though here I think conflict preemption is also a loser.)

Plaintiffs lost as to the substance of their claims, however. They failed to state a claim for misappropriation. They couldn’t state a statutory cause of action, since the California statute only covers “name, voice, signature, photograph, or likeness.” The likeness of the property doesn’t count. They also couldn’t state a common-law cause of action, which required a bit more in the way of fancy footwork. Plaintiffs alleged that they were easily identifiable by the notoriety of the property (a unique building with distinctive molding and fixtures). They relied on Motschenbacher, which upheld a misappropriation by a race car driver whose distinctive car (slightly modified) appeared in an ad. In Midler, the Ninth Circuit restated the holding as follows: "California will recognize an injury from 'an appropriation of the attributes of one's identity.' ... It was irrelevant that Motschenbacher could not be identified in the ad. The ad suggested that it was he. The ad did so by emphasizing signs or symbols associated with him."

The court here held that the allegations didn’t rise to the level of those in Motschenbacher or Midler. In each case, the court found that the car/voice was “immediately recognizable.” “Plaintiffs' allegation that their house is so recognizable that after the Ad ran they received inquiries from friends and strangers regarding their financial solvency and intentions with respect to the house because they were known as the owners of the home by neighbors and realtors, does not mean that plaintiffs' identities were appropriated by HSBC.” Okay … but why? Well, says the court, the property isn’t part of their identity. They didn’t construct or design it. Instead, plaintiffs are simply the owner/occupants of a very distinctive building.

Questions: Does the designer/builder have a misappropriation claim? For that matter, did Midler design her voice? I don’t recall courts relying on the idea that Motschenbacher designed his car; and Kozinski’s White dissent pointed out that Vanna White didn’t design her costumes, jewelry, and setting. I understand the impulse, but this is why misappropriation is such a bad cause of action: lacking any internal constraints, courts just invent new ones when they think they should. Anyway, how come the court gets to tell plaintiffs what’s part of their identity? In a footnote, the court agreed that if plaintiffs sold and moved out of the property, the property would still retain its notoriety but would no longer be identified with them, whereas if Motschenbacher sold his car it would still be part of his identity. So it’s not really identity, it’s public reputation, I guess. Here, the house has a greater public reputation than the plaintiffs, so they can’t win.

Likewise, plaintiffs failed to state a claim for trade libel, which is an intentional disparagement of the quality of property which results in pecuniary damage to plaintiff. HSBC argued that there was no falsity because there was no direct statement about the property or plaintiffs’ financial situation. Plaintiffs argued that the ad was "a malicious implication" that they were financially insolvent or "are in need of a mortgage because their ambitions are disproportionate to their assets." And the ad was false because HSBC knew, or should have known, that "Plaintiffs do not hold or need an HSBC mortgage on the [ ] Property and that they have never done business with HSBC." The court found that, on the facts alleged, the ad didn’t create a false and disparaging implication of fact. Among other things, an allegation that someone has a mortgage, even an ARM, isn’t defamatory or disparaging. The ad wasn’t a “for sale” ad, an ad for foreclosure bargains, or anything like that. “The Ad is not susceptible to the meaning suggested by plaintiffs, i.e., that they are financially insolvent or their ambitions are disproportionate to their assets.”

Likewise, plaintiffs failed to plead special damages, as required for trade libel (as opposed to defamation). Contempt, ridicule, and pity, along with doubt about their financial solvency, don’t suffice to show pecuniary harm. Nor does the cost of legal representation, since counting that would make special damages automatic.

The court then ruled that there is no stand-alone action for unjust enrichment in California, absent some other cause of action.

Nor did the CLRA help, because this case didn’t involve any consumer transaction to which plaintiffs were a party. The California False Advertising Law claims failed too. “Plaintiffs do not argue that there is anything false or misleading about the text or services being offered by HSBC in the Ad. Instead, plaintiffs' complaint is that they were disparaged by the juxtaposition of the text of the Ad with the photos of their Property, but that is not a false advertising claim.” Without the other causes of action, there was nothing unlawful under the UCL, and without falsity, there was nothing fraudulent. Plaintiffs’ only hope was that the ad was “unfair.”

But plaintiffs only had standing if they’d lost money or property as a result of HSBC’s conduct. And the complaint did not allege this, other than that they’d spent money on the lawsuit, which doesn’t count. Ridicule and questions about solvency aren’t lost money or property. Moreover, the court doubted that plaintiffs would be entitled to any remedy, since the UCL only allows restitution. Since plaintiffs aren’t HSBC customers, there are no funds to return to them; they can’t seek disgorgement of ill-gotten gains through the UCL. And injunctive relief was unlikely to be necessary, “as the Court doubts HSBC is going to use another picture of plaintiffs' Property in a future ad.” (Though it apparently has every right to do so.)

Moreover, even if there were standing, the court seriously doubted that the challenged practice was “unfair” within the meaning of the UCL. There are two approaches to unfairness: (1) the plaintiff has to show that consumer harm outweighs utility; (2) the plaintiff has to show that the practice violates public policy as declared by “specific constitutional, statutory or regulatory provisions.” Plaintiffs didn’t sufficiently allege unfairness, only that the ad allowed HSBC “to gain an unfair competitive advantage over law-abiding financial institutions and banks.” But they didn’t explain how using photographs of properties taken in public for non-defamatory advertisements, even without the permission of the property owners, harms consumers or confers an unfair benefit on HSBC.


Pamela Chestek said...

Brochure posted here:

RT said...

Thanks for the link!

tim maguire said...

Fascinating case--it's clear HSBC did something wrong, but what, exactly?

Was a free-riding claim attempted--I'm thinking HSBC benefited from the use of something they didn't own without the permission of the owner (which should be self-proving in the sense that they chose this house for their ads over many many other houses.)

RT said...

I have to disagree that HSBC did something wrong. The owners of the house don't own the view of the house; I can think of no incentive- or morality-based theory that entitles them to control the view of the house, even with respect to commercial uses; and there are lots of reasons we wouldn't want to give owners of property control over pictures of that property.