Monday, February 01, 2016

Speech about a concluded, one-off auction isn't advertising or promotion

Reese v. Pook & Pook, LLC., 2016 WL 337022, No. 14-5715 (E.D. Pa. Jan. 27, 2016)
The Reeses collected antique toys, and filed for bankruptcy, at which point they were required to sell some of their collection. Defendant Pook & Pook, LLC was approved by the Bankruptcy Court as the auctioneer to sell the collection.  The Reeses alleged that the sale was conducted in a flawed and corrupt manner, so that it raised only $560,000, far less than it should have raised.  In particular, they alleged that “the staging of the sale was deliberately flawed to diminish the value of the toys: toys were presented in piles with no effort to match parts into complete toys, parts of various two– and three-part toys were not matched, allowing, for example, the front end of one horse-drawn toy to go in one box lot with the back end placed in a different lot.” Thus, online and phone bidders couldn’t know the contents.  Defendant Jay Lowe, however, allegedly knew where the mismatched parts were, bid accordingly, and put them back together for resale at a significant markup. Lowe allegedly previously disparaged their collection at the James Julia Auctions in Maine, where he worked on commission.  Moreover, the P&P catalogue of the Reese sale allegedly promoted fake antiques called “newtiques,” created by Lowe using original parts from antique toys and placing them on new toys, further disparaging the quality of toys in the Reese collection. P&P also allegedly sent an employee to the Reninger Antique Mall to criticize the collection as “junk.”
Defendant Lita Solis-Cohen, the senior editor of the Maine Antique Digest (MAD), wrote “Pook’s First Toy Auction.” Allegedly relying on information from Lowe, the article said that:
Everyone in the toy world seemed to know the major consignor was Carter Reese, a longtime collector who bought toys that he loved before collectors got hung up on condition. It didn’t matter to him if the toy had replaced figures, was repainted, or if much of the paint was missing. If the toy had charm and was cheap, he bought it.
It continued that “‘[t]he consensus was that many of the toys that Pook offered brought all they were worth...’ because, in the words of Jay Lowe, ‘condition is king.”’
The court dismissed the Lanham Act claims against MAD because its speech wasn’t “commercial advertising or promotion.”  Rather than (correctly) saying that MAD’s speech wasn’t commercial speech, the court ignored/was not directed to Lexmark and held that the parties had to be in competition, an element of the older “commercial advertising or promotion” that courts have generally acknowledged didn’t survive Lexmark.  More persuasively, the court noted that the article was published after the auction, and thus it was implausible that any alleged falsity could have damaged the Reeses by affecting the value of the collection.  The same reasoning defeated the common law unfair competition claim.
As for commercial disparagement and injurious falsehood, plaintiffs failed to plausibly plead actual malice or any actual pecuniary loss arising from the publication of the article. Regardless of whether the plaintiffs were public figures, the two torts clearly required actual malice.  (This is something that is less important today because of the constitutionalization of defamation, but here it clearly matters.)  They couldn’t plausibly plead disparagement and actual malice as a matter of law; the article was, if anything, critical only of P&P and its inexperience, concluding that its inclusion of too many lots in the auction may have resulted in “quite a few rarities sold under the money.”
The only references to the Reeses were that Carter bought toys “that he loved” rather than for their condition (i.e., investment potential) and that “if the toy had charm and was cheap he bought it.” The only reference to the quality of their collection is the quote from Lowe describing the sale as a “good test of the middle market” (as opposed, one would assume, to the high end of the collectible toy market).
There were no facts pled suggesting that a reasonable publisher would have been on notice of these statements’ falsity or that MAD acted with reckless disregard for truth.  This also doomed the plaintiffs’ false light claims; in addition, the content of the article wouldn’t be highly offensive to reasonable people in the Reeses’ position.
The Reeses also sued Lowe,who argued that his speech to MAD recounting the events of the auction after it occurred couldn’t be commercial advertising or promotion; the court agreed (though I would caution that his speech might plausibly be commercial under some circumstances even if it wasn’t commercial with respect to the entities that reported it).  Perhaps especially relevant was that his comments went to the quality of the toys sold, not the quality of toys remaining in the Reeses’ collection or the quality of his own inventory of toys.  Related claims also failed.

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