Odd facts, bad law?

Another case about the folly of an incompletely specified agreement between an advertiser and its website maintainer.

Sam's Riverside, Inc. v. Intercon Solutions, Inc., 790 F.Supp. 2d 965 (S.D. Iowa)

Sam’s Riverside sells heavy duty truck parts and air cleaners. Bryan Hainline is a Sam’s employee.

Intercon, a web marketing business that doesn’t sell or repair trucks or air cleaners, is owned by Howard Gossage and Brian Brundage. ARSCO, owned by Gossage, sells truck parts mainly to rebuilders, but it doesn’t sell trucks, repair trucks, or keep trucks on-site.

In 2001, Brundage and Hainline agreed that Intercon would develop and maintain several websites to help Sam’s. Brundage registered www.samstrucks.com, www.samsaircleaners.com, and www.samstruck.com, and created websites for them. The sites, for reasons passing understanding, contained Sam’s contact information, but didn’t link directly to Sam’s existing website, samsriverside.com. Instead, they had an email link using an address managed by Intercon. Emails were supposed to be sent to Sam’s, but on two occasions between 2001-2004 they were sent to ARSCO instead.

In 2004, Hainline terminated the relationship, though there was a dispute about what the parties said about future use of the domain names and websites. Brundage claimed that Hainline told him that Intercon could keep the sites, and Hainline testified that he told Brundage to shut them down. At that point, Brundage told Intercon’s staff to remove references to Sam’s (whether this actually occurred was disputed), but continued to use the sites to obtain leads, some of which were forwarded to ARSCO, and this may have resulted in some sales. In fall 2008, Sam’s discovered that the sites were still in use. Sam’s sent a C&D, after which Brundage shut down the sites. Unwilling to take this as a victory, Sam’s sued.

Sam’s claimed that, prior to 2001, it established protectable rights in “Sam’s Riverside.” The court noted a dispute over the admissibility of Internet Archive evidence, but determined that Sam’s failed to show that it had protectable rights in the phrase “Sam’s Riverside,” standing alone, prior to the commencement of the alleged infringement. (This seems a bit hinky, given that the “standing alone” part apparently refers to descriptive terms usually used along with the Sam’s name, which I wouldn’t think made a difference to the acquisition of secondary meaning.) There went the §43(a)(1)(A) claim.

Sam’s also brought a false advertising claim. The websites at issue emphasized that Sam’s was a truck dealer with a huge selection of trucks, and Sam’s argued that, after it terminated its relationship with Intercon, Intercon left the claims on the websites just the same. Thus, Sam’s argued, defendants made literally false claims that they dealt in/sold trucks and had trucks onsite.

For some reason, this is the rare recent Lanham Act false advertising case that doesn’t talk about standing.

Sam’s argued that it was entitled to a presumption of consumer deception from literal falsity. The court disagreed. (Another weirdness, albeit based on EFCO Corp. v. Symons Corp., 219 F.3d 734 (8th Cir. 2000), a case holding that it was not error to refuse to instruct a jury to presume deception from literal falsity. The whole point of the literal/implicit falsity divide is whether the plaintiff also has to show that consumers are fooled. Why, if there’s no presumption of deception for literally false claims, does the doctrine divide false from misleading claims? EFCO actually said that "when an advertisement is literally false (as opposed to implicitly deceptive), the plaintiff need not prove that any of its consumers were actually persuaded by the advertising," but the court here said that EFCO was talking about presuming that plaintiff’s damages were causally related to defendant’s misconduct, not the separate element of whether consumers were deceived. Hunh? Also EFCO was different, the court said, because it involved comparative advertising.) The court also expressed doubt that the claims remained on the website after 2004 and that they were literally false, in that the court doubted that a reasonable consumer would perceive the statements to be claims about defendants’ goods or services.

Sam’s argued that it had showed actual deception, but it relied on a single email to defendants looking for a particular Sam’s truck. The court found no evidence that the email was causally related to the allegedly false statements. Anyway, one consumer wasn’t enough.

Also, even if Sam’s had shown a genuine issue on consumer deception, it would have failed on materiality. Brundage explained in deposition that he added the challenged statements to the website on Sam’s behalf (to help it sell), but Brundage wasn’t an expert on marketing or otherwise qualified to opine on the issue of consumer perception. There was no other relevant evidence of materiality.

Sam’s also claimed “per se palming off” based on Intercon’s use of a photo of certain air cleaners on one of the websites at issue and on a separate website. Sam’s alleged that the photo depicts an air cleaner made exclusively for Sam’s, and thus Intercon falsely claimed to be able to sell that air cleaner. However, Sam’s didn’t argue that Intercon actually sells air cleaners, or any goods at all. Instead, Sam’s argued that Intercon forwarded sales leads from that site to Sam’s direct competitor Fleet. But diverting sales leads isn’t the same as selling goods under false pretenses. (It isn’t? What happened to bait and switch? This case just seems to have gone off on weird tangents.) More importantly, Sam’s didn’t show that Fleet ever actually sold air cleaners to any customers who came to Fleet via the websites, let alone that Fleet claimed to sell the exclusive air cleaners. And Sam’s didn’t show that Fleet was in an agency relationship with Intercon.