Dastar-ing about architecture: 7th Circuit reverses dismissal of credit claim

M. Arthur Gensler Jr. & Associates, Inc. v. Strabala, No. 12-2256 (7th Cir. Aug. 21, 2014)

Previous coverage, wherein I was not enthusiastic about the district court decision finding that there couldn’t be a §43(a) claim based on an allegedly false claim to have designed a building.  Here, the Seventh Circuit reverses in an opinion by Judge Easterbrook, but I’m not sure it gives us a better view of Dastar, because it avoids the head of liability the Supreme Court told everyone to use in such cases (that no one uses), §43(a)(1)(B) false advertising.  The real issue I see in this case is Rule 9(b): is the application of Rule 9(b) to §43(a)(1)(A) claims supposed to be standard now?  Most courts don’t do that, and it would be useful to be clear about the answer to this question.

Strabala left Gensler, where he’d been a Design Director, to open his own architectural firm, 2Define Architecture.  He stated (either on the firm’s website or on his personal Flickr or both) that he’d designed five projects for which Gensler is the architect of record: Shanghai Tower, Hess Tower, Three Eldridge Place, the Houston Ballet Center for Dance, and the headquarters of Tesoro Corporation.  Gensler alleged that this was reverse passing off, and the district court dismissed the complaint on the ground that Strabala didn’t claim to have provided the physical origin of the structures (Dastar).

The court of appeals characterized the district court’s opinion as limiting §43(a) to false designations of goods’ origin (which I think is an odd characterization), and thus as holding that Gensler couldn’t invoke the Lanham Act because its claim concerned services.  This, Judge Easterbrook said, misread Dastar, which didn’t read “services” out of the Lanham Act.  Nor did Dastar hold that false designation of origin is the only way to violate §43(a); if it had done so, Pom Wonderful would have come out the other way.  (The weirdest thing about this statement about Pom is its complete failure to acknowledge §43(a)(1)(B), or the words (nature, qualities, characteristics) that are important in providing Pom’s claim but aren’t included in §43(a)(1)(A).)

In Dastar, the court of appeals continued, Fox didn’t contend that Dastar falsely identified itself as the videos’ creator “or made any other false claim.”  (Actually, yes, that is exactly what Fox contended; the Supreme Court just determined that what Dastar said couldn’t count as false.)  Here, by contrast, Gensler did assert there’d been a false claim of origin.  (As did Fox.)  But the claim here was for false designation of origin of services, not of goods.  (This doesn’t seem to deal with Dastar’s definition of “origin” as physical origin—which for services would mean the physical provision of the services.)  Gensler’s allegation was that Strabala falsely claimed to have been the creator of intellectual property: the building designs.  “Architects’ success in winning clients depends on what they have accomplished; Gensler has a strong interest in defending its reputation for creativity and preventing a false claim that someone else did the design work.”  (True.  But also true of authors of other creative works, and the Court explicitly said that the materiality of authorship to audiences didn’t matter in Dastar because the statute didn’t cover this conduct in §43(a)(1)(A).)

So, the court of appeals concluded, “Gensler contends that Strabala made a ‘false or misleading representation of fact’ (his role in designing the five buildings) that is ‘likely to … deceive as to the … connection[] or association of such person [Strabala] with another person [Gensler]’ and to deceive clients about the ‘origin’ of the designs. Nothing in Dastar forecloses such a claim.”  (Except for Dastar’s holding about what “origin” means.  I don’t see why you can’t replace “role in designing” with “putting its name on the cassettes” and get [Dastar] and [Fox] exactly here.  I think this failure of understanding might have something to do with the Seventh Circuit’s extremely confused understanding of what it means for something to be implicitly false.) 

There was no copyright claim implicated here—Strabala didn’t make any copies of plans in which Gensler claimed copyright.  “A false claim of authorship, without the making of copies (or some other act covered by 17 U.S.C. §106), is outside the scope of copyright law. Gensler’s only plausible federal claim rests on §43(a).”  (We are in complete agreement here!)

Now, the court of appeals continued, the question was whether Gensler had a tenable claim:

It charges Strabala with a form of fraud, so we would expect its complaint to allege with particularity the nature of the grievance—what Strabala said and why it is false. See Fed. R. Civ. P. 9(b). Yet the complaint contains only a few quotations and does little to explain what part of each is false. For example, it quotes this from Strabala’s Flickr site: “Shanghai Tower was designed by American architect Marshall Strabala.” But it does not say why the statement that he “designed” the building is false.

For all that this case thinks it’s about Dastar, this is the most significant part of the holding.  Because the court is writing about §43(a)(1)(A), the reference to Rule 9(b) is in fact extremely unusual, as most courts refuse to require trademark plaintiffs to plead with particularity.  (They’re more willing to require it of false advertising plaintiffs, even though there’s no warrant in the statutory language for the difference; the problem is that most courts don’t even seem to realize that there is any question, whether they’re applying Rule 8 or Rule 9(b), and don’t cite contrary cases.)

Back to the specifics: the court of appeals could think of three ways in which an architect’s claim to have designed a building could be false: (1) the architect didn’t work on the project at all; (2) the architect worked on the project but overstated his/her role (designed the details, but not basic appearance or attributes); or (3) the architect “worked on the project and contributed some or even all important features, but the project was so complex that no one person bore full responsibility.”  (Pause for obligatory acknowledgement that §43(a)(1)(B) jurisprudence has many cases dealing with similar questions as matters of puffery and materiality.)  Gensler’s complaint didn’t allege (1) or (2), but apparently relied on (3): “that big buildings are team jobs that no one designs.”  The complaint alleged, for example, that the Shanghai Tower team included approximately 100 people, and Strabala was only one of many members, making Gensler and not Strabala the source of the architectural and design services at issue.

The court of appeals wasn’t impressed.  “It is as if Warner Bros. wanted Michael Curtiz, who directed Casablanca, to keep silent about his role because the film could not have succeeded without Humphrey Bogart’s and Ingrid Bergman’s acting, Max Steiner’s music, Arthur Edeson’s cinematography, Murray Burnett’s and Joan Alison’s play, Julius and Philip Epstein’s screenplay, and the contributions of a hundred others—or at least to append to any claim of directorship something along the lines of ‘many persons in addition to directors bear credit for a film’s success or blame for its failure.’”  The court of appeals thought Gensler sought to make the auteur approach “legally impermissible” in architecture.

But if Gensler was really contending that “big projects require big teams, … where’s the falsity?”  Maybe if Strabala designed houses for unsophisticated clients, there might be a problem, though Gensler would have trouble proving damages.  But the parties’ websites and the complaint indicated that both parties specialized in large products with sophisticated clients. “People who pay millions for substantial projects (Shanghai Tower will cost more than $4 billion by the time it is finished in 2015) know full well that it takes an architectural team to design and execute the plans. They also know that teams have leaders—and Gensler has not alleged that Strabala said anything false by implying that he was the (or a) leader of the teams on these five projects.”  (I suppose it’s futile to say anything about appellate factfinding in the Seventh or Ninth Circuits particularly; Twiqbal at least provides some cover for this kind of plausibility determination, as the court will suggest below.)

Indeed, if sophisticated clients wouldn’t be misled, then Gensler is not just wrong but in the wrong: attempting to conceal the fact that a designer of big projects has flown the coop.  “[I]f Gensler wins this case other architects who leave will be required to keep mum about their accomplishments—and then it will be Gensler, not the departing architect, that is in a position to make a misleading presentation to a future client.”  If no real person designs a building, then Gensler never loses from the departure of talented designers.  The lawsuit could also be understood “as an effort to impair competition by imposing costs on a departing architect, even though setting up a new firm does not violate any contract (and the old employer does not allege a theft of trade secrets).”  But competition by “people who leave large firms to set up small rivals” is good for consumers.  (Given what the Seventh Circuit has said about awarding attorneys’ fees to defendants in cases brought for anticompetitive reasons, this commentary should make Gensler quite nervous.) 

As a result, the court of appeals was tempted to affirm the district court on alternate grounds, but Strabala hadn’t argued Rule 9(b) or Twiqbal.  “Nor does Gensler’s complaint rule out the possibility that it competes with Strabala to build some smaller projects with less sophisticated clients.”  The possibility that a tenable legal theory might fail on the facts was for the parties to argue at the district court in the first instance.