Monday, March 18, 2019

occasional door-to-door false claims covered by state, but not federal, false advertising law

Vivint, Inc. v. Northstar Alarm Services, LLC, a Utah limited liability company, 2019 WL 1098986, No. 16-cv-00106-JNP-EJF (D. Utah Mar. 8, 2019)

The parties compete in the market for electronic home automation and security systems. They market themselves in various ways, but a majority of sales come from door-to-door or direct-to-home sales.. Vivint presented evidence of 216 individual Vivint customers who experienced deceptive sales practices by NorthStar representatives between 2012 and 2015.  It sued for deceptive trade practices in violation of the Utah Truth in Advertising Act; violation of the Lanham Act; unfair competition; and intentional interference with customer contracts.

Interpreting the Utah Truth in Advertising Act, which lists a number of banned deceptive practices, the court found that “advertising” was not a threshold requirement of each banned practice. Rather, if the listed item didn’t include “advertising,” then it was banned even if it occurred in door-to-door solicitation and not “advertising.” A previous federal district court had disagreed because the UTAA’s purpose statement “effectively imposes an overarching requirement that otherwise actionable conduct constitute advertising.” In the absence of a state court ruling, the court here reexamined the issue and determined that “the plain language of the statute does not limit the covered conduct to advertising.” The purpose statement says:

The purpose of this chapter is to prevent deceptive, misleading, and false advertising practices and forms in Utah. This chapter is to be construed to accomplish that purpose and not to prohibit any particular form of advertising so long as it is truthful and not otherwise misleading or deceptive.

There’s also a definition of “advertisement” that excludes “any oral, in person, representation made by a sales representative to a prospective purchaser.” But in Utah, “a statement of purpose is generally ‘not a substantive part of the statute’ ” and “cannot override the clear terms of the law.” The substantive part of the law listed twenty-odd “deceptive trade practices,” some of which included the words “advertisement” or “advertising” and others didn’t. The definition of “advertising” applied only where the term was used to define the deceptive trade practice at issue. “If the Utah Legislature had intended that limitation to apply to the entire statute, it would have been listed not in the definitions section, but in the section … titled ‘Exemptions.’”  Here, the alleged violations didn’t require “advertising,” e.g., causing confusion “as to the source, sponsorship, approval, or certification of goods or services”; representing “that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or qualities that they do not have”; and “disparag[ing] the goods, services, or business of another by false or misleading representation of fact.”

However, the Lanham Act claim failed for want of sufficient “commercial advertising or promotion.”  False statements made by NorthStar’s door-to-door sales representatives to 216 Vivint customers were not “disseminated sufficiently to the relevant purchasing public” to constitute commercial advertising or promotion.  “[T]here must be some statistical analysis of the number of alleged incidents in comparison to the relevant market, “and given the millions of pitches, NorthStar argued that this was only 43 customers per year, “less than 0.5%” of NorthStar’s total door-to-door sales in any given year and a small percentage of Vivint’s customers (as the relevant market). Vivint argued that this was just the falsity it had identified and that there was other falsity that it hadn’t caught, but the court found that speculative.  If there was a script or other direction to sales reps encouraging them to make the allegedly false statements, it seems to me that Vivint’s argument ought to work, but this was a motion for summary judgment and Vivint apparently hadn’t developed evidence about that.

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