Thursday, October 04, 2018

it's not defamatory to conflate 2 legally distinct entities when unity is what they wanted consumers to perceive

RainSoft v. MacFarland, No. 15-432 WES, 2018 WL 4696737 (D.R.I. Sept. 30, 2018)

MacFarland runs, where he blogs about companies who provide consumer products and services. He and his wife “sat through an in-home demonstration of RainSoft’s water-treatment products.” The demo was  conducted by Oster, an employee of Basement Technologies (a local RainSoft dealer) who used a script that was written by RainSoft that didn’t mention Basement Technologies; the Basement Technologies/RainSoft agreement was intended to foreground RainSoft’s brand name and reputation.

MacFarland’s first RainSoft post, “Is Home Depot’s Water Test from RainSoft a Scam?” the post mixed narration – “The salesman was super nice, and very friendly with our dog.” – and critique. McFarland called the in-home presentation a “magic show”: the demo ostensibly showed RainSoft’s products purifying McFarland’s tap water, but McFarland wondered if the bottles used in the demo might have been doctored—“I’m not saying they were, but it’s possible.” He also accused RainSoft of making “false promises,” using “high-pressure sales tactics,” and other “slightly deceptive practices.”  The putatively “false promises” included that RainSoft’s filtration system would save him $20,000 in appliance-replacement costs over 20 years – this MacFarland “highly doubt[ed].”  The “high-pressure sales tactics” included offering five years of free soap if MacFarland purchased a RainSoft system on the spot. Because it did not include the cost of labor, MacFarland also found RainSoft’s lifetime warranty deceptive. His first post concluded that the products weren’t worth their price: “I don’t want to say that the RainSoft EC4 product doesn’t work.... From what I’m reading though, the quality is closer to midlevel, but it is really high-priced ....” He ended by asking his readers for more feedback on water purification systems, including any RainSoft experiences. Despite his skepticism, MacFarland and his wife – who MacFarland “recognized ... was impressed by the product” – gave Oster a $100 check to keep the free-soap option open.

His second post, “RainSoft Scam? (Part 2),” recounted a conversation he had had with a “RainSoft representative” in which he haggled $1,000 off the price Oster quoted him.  He told the story of a trip he made to Lowes where a “representative in plumbing was shocked” that Home Depot, where he learned of RainSoft, would “only connect [MacFarland] to this shady RainSoft company,” rather than show him “a range of filtration systems from various manufacturers.” The post again mentioned Oster’s “magic tricks” and “bad logic,” before answering the scam question by saying he was “leaning towards yes, but you are free to make your own decisions.”

His third post, “Yep. RainSoft Scammed Me Out of $100,” reported that Oster cashed the $100 check that had held open the free-soap option, contrary to MacFarland’s expectations. He warned, “if you suspect a company to be a scammer, don’t even give them an inch, they’ll take a mile.” He later added an update to the top of this post: “RainSoft’s parent company, Aquion, saw this and ... sent me a $100 check to make it right.”

Finally, “How to Get Clean, Purified Water (at [t]he Best Price)” “recounted a spat MacFarland had, in the comments section of one of his other RainSoft posts, with someone he suspected was, though who denied being, a RainSoft dealer. MacFarland called that glowing review a “comment scam.” The post reiterated MacFarland’s previous complaints about RainSoft and added another about the vagueness of RainSoft’s guarantee that if a customer finds a better-performing product, the customer keeps the RainSoft system gratis. (“There’s no real fine print[,] ... and the terms are ambiguous ....”).) MacFarland then summoned “a little common sense” to piece together a “formidable water purification system” – hyperlinking to other companies’ products – “[t]hat’s less than 1/6th the cost of what RainSoft was going to charge.”  “I’m not a water purification expert,” MacFarland wrote, “but I know basic problem solving, scientific process, and consumer scams ....”

MacFarland also reiterated in comments his position that “RainSoft salesmen” were “selling fear” via “scammy sales tactics” and “magic shows.”

After RainSoft sued, MacFarland posted “What is a Scam Anyway?” stating that when he uses the word ‘scam’ he does not necessarily mean to connote illegal activity, but instead, more colloquially, a “confidence trick.” MacFarland’s reluctance to make legal claims stems, he said, from the fact that he does not “possess a 100% understanding of all laws.” Discovery revealed that he wrote this post to “cover [his] ass,” which is to say, to circumvent MacFarland’s understanding of Illinois precedent (the original location of the case) that treated the word ‘scam’ as “libel per se.”  Viewed in the light most favorable to RainSoft, the evidence showed that MacFarland always knew that Basement Technologies and RainSoft were distinct entities. He thought RainSoft had “a point” when it attempted to educate him on the finer points of its relationship with Basement Technologies, but that its argument was “most[ly] … bullshit.”

The court found that MacFarland’s negative statements could be divided into two categories: nonactionable epithets (“scam,” “shady,” “magic tricks,” “bad logic,” etc.) and “more-sober assessments” (“false promises,” “high-pressure sales tactics,” and “slightly deceptive practices,” as well as the implication that Oster worked for RainSoft, not Basement Technologies). The first category was protected by the First Amendment as “imaginative expression” or “rhetorical hyperbole.”  “Any reader of his RainSoft posts would reasonably understand these as metaphor.” Though MacFarland’s post on the meaning of “scam” had no legal import, it accurately described some of the word’s many meanings. First Circuit precedent establishes that “the assertion ‘X is a scam’ is incapable of being proven true or false.”

Category two was protected by “other First Amendment overlays: the concept of false ideas, issues of public concern, and substantial truths.” In particular, “[a]n opinion whose factual basis is expressed and (substantially) true is protected speech.” Minor inaccuracies about an issue of public concern are fine if the gist or sting is true. Here, MacFarland’s opinions about “false promises,” “high-pressure sales tactics,” and “slightly deceptive practices” were all accompanied by their factual bases. RainSoft didn’t materially challenge MacFarland’s account of Oster’s presentation, and thus failed to create a disputed factual issue on material falsity. Without challenges to the factual account, “the law acts a bulwark against liability for the opinions MacFarland draws from these facts, no matter how unwarranted.”

As for the Basement Technologies/RainSoft distinction, the court still found substantial truth. A statement is substantially true unless “it would have a different effect on the mind of the reader from that which the pleaded truth would have produced.” Just as the difference between being a member, rather than a mere friend, of the white supremacist Aryan Brotherhood was immaterial to a reasonable member of the law-abiding contemporary community, Bustos v. A & E Television Networks, 646 F.3d 762 (10th Cir. 2011) (even though this distinction was life-threatening to the wrongly portrayed Hispanic inmate involved), the difference between Basement Technologies and RainSoft was also immaterial.  “Basement Technologies was under contract to sell only RainSoft products, and to ‘protect,’ ‘embrace,’ and ‘promote’ the RainSoft brand ‘in every customer facing opportunity” to ensure that someday ‘every person in the world [would] recognize the RainSoft® trademark.’ … Basement Technologies was basically a de facto arm of RainSoft.” The legal differences were “just too fine to have piqued public concern.”

False advertising: This wasn’t commercial advertising or promotion. MacFarland sold ad space (and there was no evidence that his alleged misrepresentations deceived those customers), and gained revenue from affiliate links, but his own “product” was free advice, which hadn’t been shown to be commercial speech. Running ads and receiving promotional kickbacks isn’t enough to turn content into commercial speech.  The affiliate links “were clearly incidental to his objective of providing consumers information.” Overstating the matter (at least as to commercial speech), the court concluded that “[t]he First Amendment … protects us while we freely discuss how we should live and love, how to wage war and keep peace, how best to govern ourselves. And equally, or almost, how to filter tap water on a budget.”

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