Nonprofit's former chapter has false advertising, not TM, claims against parent

Alzheimer’s Disease Resource Center, Inc. v. Alzheimer’s Disease and Related Disorders Association, Inc. 981 F. Supp. 2d 153 (E.D.N.Y. 2013)

Plaintiff ADRC is the former Long Island chapter of defendant Association, dedicated to fighting Alzheimer’s.  In 1998, the parties entered into a “Statement of Relationship” (SOR) contemplating that they could part ways and providing that the distribution of chapter assets would be subject to binding arbitration in case of disagreement.  ADRC alleged that, over time, the Association breached the SOR by, among other things, permitting the Association’s NYC chapter to fundraise on Long Island.  They disaffiliated in 2012, and ADRC demanded arbitration, seeking to retain funds previously raised for the Association. 

ADRC sued the Association for unfairly competing with ADRC by sending out 15 mass mailings under the name “Alzheimer’s Association—Long Island Chapter” (ADRC’s former operating name) and for breaching an agreement between the parties by using donor information it previously obtained from the ADRC prior to the disaffiliation.  ADRC alleged that the Association lacked any presence on Long Island when the letters were sent, and that the Association forged the signature of ADRC’s leader in those mailings. Multiple donors allegedly mailed checks to the Association based on the mistaken belief that the donations were going to ADRC.

Lanham Act claim: the court dismissed the §43(a)(1)(A) aspect of the claim because ADRC conceded that it had no valid trademark in the name “Alzheimer’s Association—Long Island Chapter” or a related expression.  However, §43(a)(1)(B) was still available.  (This strikes me as an excellent use of channeling principles.  It's true that the name is part of the confusion, but ADRC abandoned the name.)  The court found that ADRC plausibly alleged that the use of confusing addresses, coupled with the inclusion of ADRC’s leader’s name on the mailings, had the capacity to deceive a substantial portion of the intended audience about the recipient of their donations.  ADRC alleged the identity of one such donor who was actually deceived.  The Association argued that ADRC failed to allege materiality, but the identified donor indicated that she “felt deceived” by the mailings.  Facts regarding the identity of other donors were peculiarly within the knowledge of the Association, meriting discovery.

The NY GBL §349 claim: ADRC successfully pled a claim for deceptive acts and practices. “Donors are the consuming public for charitable fundraising activities and are deceived, when a check intended for one charity is cashed by another.” There was a public interest in knowing who was receiving charitable donations.  Punitive damages could be available on this claim, though not on the others.

There was no common law unfair competition claim, because there was no protectable mark at issue, nor was there misuse of a trade secret in using publicly available information like a name or ADRC’s address. “In the Court’s view, the name of an organization’s executive and address does not neatly fit within the categories typically associated with a common law claim for unfair competition.” A conversion claim failed because there was no specific identifiable fund to which ADRC was entitled. And tortious interference with prospective economic advantage failed because there was no sufficiently alleged “business injury,” as required.  ADRC alleged injury in the form of lost donations, but didn’t particularize the damage to its relationships with its donors.  And there was no fraud because ADRC didn’t reasonably rely on any misrepresentations; allegations of third party reliance were insufficient under New York law.  The court also dismissed claims for breach of contract based on the Association’s continued use of donor information after disaffiliation.  The Association’s contractual obligations under the SOR ceased after disaffiliation, and what counted as assets—including donor information—was expressly reserved for arbitration.  Likewise, even if the donor lists constituted a trade secret, ADRC failed to allege that the information was used “in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means,” or in such a way as to constitute common law unfair competition.

An unjust enrichment claim, however, survived (based on the donations).