Friday, June 12, 2015

Native American Arts lacks standing to sue under IACA

Native American Arts, Inc. v. Peter Stone Co., 2015 WL 3561439, -- F. Supp. 3d --, No. 08 C 3908 (N.D. Ill. June 9, 2015) (magistrate judge)
NAA sued Stone under the Indian Arts and Crafts Act (IACA), which forbids selling merchandise “in a manner that falsely suggests it is Indian produced, an Indian product, or the product of a particular Indian or Indian tribe or Indian arts and crafts organization.” The Act authorizes suit by an aggrieved Indian, Indian tribe, or Indian arts and crafts organization, seeking $5000 in estimated damages and (initially) over $14 million in statutory damages, based on the Stone’s allegedly unlawful gross sales of $26,000 in goods over a two year period. The judge found that NAA lacked Article III standing.
NAA is owned by Matthew and Mary Mullen, enrolled members of the Ho–Chunk Nation. NAA sells Indian craft items and has a store in Tinley Park, Illinois, and also sells using, which mainly features Navajo products. NAA has been in business for nearly 20 years, and Mr. Mullen testified to $1.25 million in revenue from the sale of Native American arts and crafts, though there was no evidence submitted that NAA maintained web presence.  Its gross receipts, using Mr. Mullen’s testimony, were less than $70,000 a year and its profits couldn’t be too great, probably not over $30,000 per year, so that its statutory damages demand (raised to $36 million) represented over two centuries of gross revenues, or 500 years of profits.
Stone sold jewelry designed by Wendy Whiteman, which she called the “Wolfwalker” Collection. Stone advertised these items on its website as “Authentic Native American Jewelry,” “Native American Jewelry,” “Native American Designs,” or “Genuine Indian Handmade.” It wasn’t clear whether Wendy Whiteman qualified as an Indian—a member of an Indian Tribe or certified as an Indian artisan by an Indian Tribe—under the IACA. At her deposition, Whiteman claimed that her “spiritual roots are Native American.” The court thought that didn’t mean she wasn’t an “Indian”; apparently the deposition never asked her more.  She wasn’t an enrolled member of a tribe, but IACA doesn’t require “enrollment.”  Whiteman told Stone that she could provide “an authentic or a line of Native American jewelry created by a Native American.”  In four years of sales, Stone sold nearly $28,000 of Wolfwalker jewelry, less than 3/10 of one percent of Stone’s sales, which were nearly $10 million, mainly for Celtic and New Age designs.
Stone was a wholesaler; less than 2% of its sales were to end users.  It had little or no presence in Illinois; less than 4% of its customers were in Illinois. Though Stone had a website, the internet accounted for less than 1% of its sales during the relevant period.  Mullen claimed that two Stone customers were NAA’s competitors: Buffalo Gal Home Gallery in Frankfort, Illinois, and Sanctuary Traders in Tinley Park. But there was no evidence that any of Stone’s sales to these two businesses were of Wolfwalker items.
At this point, the court commented that NAA was a frequent filer, filing at least 125 IACA cases, most of which “seem to be short-lived and dismissed pursuant to settlement.” “In the context of one of these cases, the Tribal Court of the Ho–Chunk Nation commented that NAA was ‘mainly concerned with monetary gains,’ was ‘utilizing the [IACA] without any research,’ and that ‘dollar amounts of $1,000 per day and $2,000,000 [were] preposterous and frivolous.’” But then, “there is nothing inherently wrong with a zealous private attorney general.” And given the total lack of enforcement in the first 60 years of the statute’s existence, “if any statute ever needed a boost in terms of enforcement, it’s the IACA.” That’s why Congress amended the law in 2000 to allow Indian Arts and Crafts Organizations to sue.  Still, “NAA is not an actual attorney general, and it still must prove it has Article III standing to sue.”
NAA met the first hurdle of being an Indian Arts and Crafts Organization under the IACA. Marketing Indian arts and crafts need not be the primary purpose of an Indian Arts and Crafts Organization for it to qualify as such under the Act, “consistent with the text and purpose of the Act, which are to promote … commercialism and economic development.”
However, Article III standing requires an “injury in fact” fairly traceable to the challenged action of the defendant and redressable by a favorable decision. This the NAA could not prove.  It alleged, but did not provide evidence for, lost goodwill due to consumer mistrust, diminution in value of genuine designations of Native American origin, and misappropriation of its investment in genuine Native American products.  Mr. Mullen had “nothing more than a belief that companies like Stone hurt Indian arts and crafts organizations like NAA.” He had no evidence of lost sales, only the “common sense” hypothesis that Stone diverted sales from companies like NAA.  But diverting sales from a company “like” NAA was insufficient.  Mr. Mullen couldn’t say whether NAA lost any sales. Nor could Mr. Mullen show that Stone’s activity forced NAA to lower its prices. He said that the need to lower prices to compete with non-authentic goods was “an ongoing problem for many, many years....” But Stone’s activities “were not ongoing for many, many years.”
NAA argued that it had standing because Congress enacted a statute making it a violation to pass off non-authentic Indian arts and crafts as authentic: the invasion of legal rights creates standing.  “But the ‘injury in fact’ test requires more than an injury to a cognizable interest. It requires that the party seeking review be himself among the injured.” On this record, NAA wasn’t.  A fair housing tester who’s denied housing has been denied a right, whether she wanted to exercise it or not, by conduct easily traceable to the discriminatory entity.  NAA, by contrast, had no evidence it suffered any injury traceable to Stone.  Though nominal damages or intangible economic injury can confer Article III standing, “there still must be a concrete, personal injury in fact that is fairly traceable to the defendant.” 
NAA argued that it suffered reputational injury, citing Lexmark. But Lexmark held that “a plaintiff suing under § 1125(a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” NAA hadn’t shown that: there was no evidence of any withheld trade. Stone had only two customers that NAA even claimed as competitors, and there was no evidence that they ever had any Wolfwalker products, even though NAA could easily have found out in discovery whether there had been such sales. Nor had NAA shown any evidence of a “Lanham Act-style reputational injury.”
If the court accepted NAA’s theory of standing, “some 6 million people and entities would have standing to sue Stone—resulting in the very multiplicity of suits that the injury-in-fact requirement seeks to prevent.”

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