Wednesday, May 25, 2011

Boykin Anchor Co. v. AT&T Corp., 2011 WL 1930629 (E.D.N.C.)

Boykin sued in state court for unfair and deceptive trade practices, gross negligence, negligence, and libel. Defendants removed, and plaintiff added a Lanham Act false advertising claim and some more defendants.

Boykin makes seismic anchors for the telecom industry. As you might expect, they anchor equipment to concrete floors. Boykin’s anchors have been used since 1996 and approved for use by AT&T since 2002. Boykin’s sole competitor for AT&T-related business is Hilti, Inc.; Boykin alleges that Hilti’s anchors are inferior but cost more.

Defendant Wong is an employee of AT&T Services and “an industry insider whose advice has an impact on what products are used by telecommunications companies.” He developed a personal relationship with Hilti, and wrote an email stating that there were "concerns over product performance based on testing conducted years ago" over Boykin anchors, and recommended in internet postings that Boykin’s anchors shouldn’t be used because of “performance questions.” He also stated that consumers should only use Hilti anchors “per most recent AT&T requirements." However, there were no performance questions regarding Boykin anchors, nor was there any AT&T requirement to use Hilti anchors. Boykin alleged that distributors stopped buying Boykin anchors.

Some of Wong’s statements were inside the statute of limitations for libel, and so that claim survived for another day with respect to those more recent statements.

The Lanham Act claim foundered because it wasn’t made in a commercial advertisement. Using the Gordon & Breach Science Publishers v. American Institute of Physics, 859 F.Supp. 1521 (S.D.N.Y.1994), test, a commercial ad is (1) commercial speech; (2) by a defendant who is in commercial competition with plaintiff; (3) for the purpose of influencing consumers to buy defendant's goods or services (4) which is disseminated sufficiently to the relevant purchasing public. Boykin argued that the court shouldn’t require commercial competition between the parties. Though there was no binding circuit precedent, other circuits’ decisions weighed strongly in favor of adopting the four-part test, and the court did so. (The dominant Gordon & Breach test is another reason the Conte Bros./Phoenix of Broward standing case law is so misguided.) The competition requirement was particularly consistent with the Fourth Circuit’s statement that the Lanham Act is for plaintiffs whose “commercial interests have been harmed by a competitor's false advertising." Made in the USA Found, v. Phillips Foods, Inc., 365 F.3d 278, 281 (4th Cir. 2004).

The Lanham Act claims failed. Wong’s statement wasn’t commercial speech, because it wasn’t speech that did no more than propose a commercial transaction, nor was it speech related solely to the economic interests of speaker and audience. Also, neither AT&T Services nor Wong was in commercial competition with Boykin. AT&T Services is a consumer of Boykin’s products, or an interested third party, and Wong was just an “employee attempting to influence the decisions of his employer and others in the industry to use a specific product.” There was no indication that Wong's internet postings were designed to influence consumers to buy products or services provided by Wong or AT&T Services.

Boykin argued that Wong counted as a direct competitor because of his personal relationship with Hilti employees. The court disagreed, because that didn’t make him an agent of Hilti’s.

Boykin also alleged that defendants acted negligently by making false statements about Boykin anchors, and then failing to retract these statements once notified of their falsity. The court held that these claims properly sounded in defamation, not negligence or gross negligence. There was no case law suggesting that an individual has a duty to avoid making false statements about others separate and distinct from defamation. “Courts have traditionally been very cognizant of the distinctions between defamation on the one hand and negligence on the other, and have resisted efforts by plaintiffs to recast an action sounding in the former into one sounding in the latter.”

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