Translation: counterclaims are out of luck

Language Line Services, Inc. v. Language Services Associates, LLC, 2011 WL 5024281 (N.D. Cal.)

The parties compete to provide interpretation services (from what I can tell, this means interpretation when non-English speakers call emergency and other lines). Language Line sued LSA for misappropriation of trade secrets and conversion, among other things, alleging that defendants stole Language Line's confidential customer list and accompanying pricing information and misused it to get customers. LSA counterclaimed against Language Line and brought in Brian Lucas, alleging false advertising under the Lanham Act and various state law claims, including that Language Line and Lucas conspired to misappropriate trade secrets from LSA and used those trade secrets to obtain a wrongful injunction that prohibits LSA from contacting prospective customers. LSA alleged that the larger Language Line couldn’t compete with smaller, nimbler competitors like LSA, and that when LSA rejected a purchase offer, the CEO of Language Line told LSA’s CEO that her rejection did not matter because Language Line "has a strong legal department and will prevail in growing its business through legal actions."

LSA continued that Lucas, originally an employee of Language Line, “infiltrated LSA as a salesperson, stole LSA's trade secrets and attempted to blackmail LSA's executives with confidential information and trade secrets.” He was then fired from LSA and rehired by Language Line. Language Line allegedly misused confidential information obtained from Lucas to secure an overbroad preliminary injunction restricting LSA from doing significant business, and then defamed LSA “by falsely informing various customers of LSA that its business model is ‘risky,’ that it is going ‘bankrupt’ and that its employment practices are ‘illegal.’” Language Line’s outside general counsel allegedly published articles on behalf of Language Line asserting that it is the only company in the language interpretation industry that pays its employees legally.

Language Line filed an anti-SLAPP motion against the counterclaims, which was granted in part and denied in part. An anti-SLAPP motion requires the defendant to show that the acts underlying the plaintiff's claims were protected speech activity, as defined by the anti-SLAPP statute. If it succeeds, the burden shifts to the plaintiff to show a reasonable probability of prevailing through a showing facts sufficient to win if the plaintiff’s evidence is credited.

Language Line argued that the counterclaims for misappropriation of trade secrets and conversion should be stricken under the anti-SLAPP law, because they were based on Language Line’s use of information to obtain an injunction. LSA rejoined that the counterclaims were based on misappropriation of two kinds of information, one of which did not arise out of protected activity. The anti-SLAPP law covers communicative litigation activity, which included the allegations here that Language Line stole information, including a confidential customer list, and used it to obtain an injunction. (I am … perplexed by this reasoning. The problem alleged isn’t the use to obtain an injunction; that’s just harm. The problem is the alleged theft. Is that really communicative activity covered by the anti-SLAPP law?)

Anyway, LSA had to show a probability of prevailing on the merits, and it didn’t submit sufficient evidence to do so.

Language Line also moved to strike the trade libel and defamation counterclaims based on a blog post written by Language Line’s counsel. LSA said that these claims involved commercial speech and were thus excluded from the anti-SLAPP law.

The counterclaims were based on a blog post by Language Line’s outside general counsel (I note that Language Line’s name appears right after his name on the post), a statement from Language Line to Farmers Insurance Group that LSA is "going out of business," and two letters delivered by Language Line to employees of LSA. If the first is protected conduct, then the counterclaims as a whole would be subject to the anti-SLAPP statute.

And the blog post was protected. It was written by an attorney for Language Line, published in an online legal news publication, and offers a general discussion of legal issues in the language interpretation industry as a whole. The commercial speech exclusion only applies to speakers who are themselves in the business of selling goods or services, and doesn’t apply to speakers acting on behalf of someone in the business thereof, like the attorney here. (The limited nature of the commercial speech exclusion should mean that the publisher of an ad can’t be liable and can use the anti-SLAPP law, but I find it hard to believe that the anti-SLAPP statute meant to upend the law of agency entirely. Without more reasoning on agency, I don’t have any idea how far the court thinks this distinction extends. What if the CEO, who as an individual isn’t directly engaged in sales, said the allegedly false things? What if it was an in-house attorney, further insulated from direct consequences of the company's financial performance?)

Anyway, the anti-SLAPP statute applied, and LSA couldn’t prevail on the merits because the blog post was protected opinion which couldn’t give rise to liability. (The court doesn’t mention the other two claims here, but I infer that LSA also didn’t submit sufficient admissible evidence on them.)

Language Line couldn’t get the Lanham Act counterclaims stricken because causes of action arising under federal law aren’t subject to the anti-SLAPP statute.

Language Line also argued that the tortious interference with employment relations/breach of contract claims should be stricken because the underlying conduct was that Lucas gave a copy of the customer list to Language Line in order to obtain an injunction. LSA responded that the counterclaims didn’t involve any petition to the courts, but because LSA alleged that the fraudulently acquired materials were used to secure an injunction, they did fall under the anti-SLAPP statute. Again, LSA failed to submit evidence showing a probability of success on the merits.

The same thing happened with the conspiracy counterclaims, and with the counterclaims for wrongful injunction (who knew that was a thing?), intentional interference with prospective economic advantage and tortious interference with customer contracts.

Language Line was entitled to its attorneys’ fees for its successful anti-SLAPP motion.

In light of these rulings, the court considered only Language Line’s motion to dismiss the Lanham Act claims. These were based on (1) the blog post by Language Line's outside counsel, stating that Language Line is the only interpretive company of which he is aware that does not classify employees as independent contractors; (2) a statement on Language Line's website that it has "taken the lead on [sic] 'setting standards and best practices for interpreter training and quality'"; (3) a statement on Language Line's website that Language Line offers "on-site, face to face interpreters"; and (4) a statement on Language Line's website that customers have benefitted for over 28 years from Language Line's "over-the-phone, over-video or on-site interpretation services."

The court questioned whether the attorney’s statements on a legal blog could be attributed to his client, but Language Line didn’t raise the issue. The allegedly false statement was that “with only one exception of which I am aware, that being Language Line Services, interpretation companies have decided that it is more important for them not to pay employee benefits and taxes than to provide the training management, supervision, quality control, and scheduling critical to ensuring effective interpretation.” LSA argued that this falsely implied that Language Line is "the only company in the language interpretation industry that does not misclassify its employees or use independent contractors." It further alleged falsity in that LSA did not misclassify its employees. The court found this was a statement of legal opinion and thus not actionable under the Lanham Act. The statement did contain the implication LSA took from it, and thus might be actionable as to a company that neither used independent contractors nor misclassified permanent employees, but LSA didn’t dispute that it uses independent contractors. “While the article goes on to offer non-favorable assessments of the risk to clients of working with companies who either use true independent contractors or who misclassify permanent employees, this risk assessment cannot be characterized as anything other than opinion.” Thus, LSA couldn’t properly allege falsity.

The statement that Language Line has “taken the lead” was nonactionable puffery. It’s neither quantifiable nor verifiable about any specific aspect of Language Line’s services.

Language Line argued that the remaining statements were literally true. LSA rejoined that they were misleading in context and thus actionable. “However, although a misleading statement may be actionable under the Lanham Act, courts have held that if a statement is purely factual and unambiguous, then that statement cannot be proven to be misleading through the use of consumer surveys. See Mead Johnson & Co. v. Abbott Labs., 201 F.3d 883, 886 (7th Cir.2000); Am. Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387, 393-94 (8th Cir.2004)….Thus, where a statement is alleged to be misleading only in that it is possible that consumers could interpret it to mean something other than what it does, that statement is not actionable under the Lanham Act.” (Sigh. And we know “what it means” before taking evidence how, exactly?)

LSA alleged that Language Line’s claim to offer “on-site, face to face interpreters” was false because it didn’t offer those in any area except California, and did not do so until this year. Likewise, the website statement that "[f]or over 28 years, [clients] have benefited from using [Language Line's] over-the-phone, over-video or on-site interpretation services" was allegedly false because Language Line has not offered all three services for 28 years, and in fact, Language Line did not have on-site interpretation services until 2011.

Sadly, the court found that these statements were unambiguously factually true, “and are not actionable based on the mere possibility that consumers might interpret them to mean something other that what they plainly state.” Since Language Line offers some on-site interpretive services and at least one of the three services for 28 years, there was no plausible Lanham Act claim.

I think the court is not quite clear on what “ambiguous” means. If you have to qualify the truthfulness of the claim with “in some areas” and “at least one of the services,” then the claim is at least ambiguous. If I said “I’ve taught copyright, trademark, advertising law and property for ten years,” I’d be a liar. I’ve taught some of those things for ten years, but not the others. Compare, e.g., the FTC's Green Guides on recyclability, compostability, etc.: the FTC is pretty clear that if your product is in theory compostable, but only at specialized facilities that are rare in the US, you should not be marking it with the term "compostable" alone, and your disclosure ought to be pretty specific.

Basically, Mead Johnson is finally starting to infect the water in other circuits, making Lanham Act claims unpredictable even for plaintiffs who can produce evidence that a substantial number of consumers receive a misleading message from a claim. This case seems like a mess for a variety of reasons, but the court allocating full interpretive wisdom of how consumers react to itself is not helping.