Wednesday, September 18, 2019

calling NBC's lawyers: gold company can claim #1 rank by Today Show, can't make additional misrepresentations

Express Gold Cash, Inc. v. Beyond 79, LLC, 2019 WL 4394567, No. 18-cv-00837 EAW (W.D.N.Y. Sept. 13, 2019)

The parties are two of the top competitors in the market for nationwide mail-in precious metals purchases. When a customer mails in items, they receive an offer; if the offer is declined, the items are returned free. “In 2010, the Today Show, a nationally televised morning show on the NBC network, aired a segment in which it ‘claimed to have compared the prices offered by ten different mail-in precious metals dealers by mailing a single item of gold to each one,’ and further claimed that it received the highest offer from Defendant, which ‘offered 90% of market value.’”

“Beginning in 2011 and continuing into the present,” defendant “published variations of an advertisement that it is ‘ranked [or rated] #1 on [or by] NBC’s Today Show.” This was allegedly misleading because it (1) concealed the date of the segment, (2) conveyed a false impression that Defendant is currently and actually “ranked #1” by Today, (3) falsely indicated Today and NBC’s current or former endorsement, (4) and falsely suggested that Today really evaluated the services overall rather than a single sale of gold.  [This last is a classic "false establishment claim" argument.]

Defendant’s website also used “the sound of three tones that are reasonably identical to the famous three tones used by NBC to identify its broadcasting service.” [It seems to me that contact with someone at NBC legal might be at least as effective as suing directly; I can’t imagine NBC loves these ads.] Separately, Express Gold alleged that “Defendant’s website displays stock photographs allegedly depicting its ‘latest payouts’ to customers,” and that these “stock photographs are false and misleading because they grossly exaggerate the kind, quality and quantity of recently purchased items[.]” The stock photographs in question have captions stating that “photos are illustrative and depict items of similar kind, quality and quantity to actual items purchased.”

Express Gold brought NY state and federal false advertising claims and claims for unjust enrichment.

Laches: The Second Circuit has held that for claims alleging unfair competition or false advertising under the Lanham Act, the analogous statute of limitations is New York State’s six-year statute of limitations for fraud. Laches couldn’t be resolved at the motion to dismiss stage; not only might the continuing wrong doctrine apply, it wasn’t clear when Express Gold knew of defendant’s conduct, and it wasn’t clear from the complaint that defendant suffered prejudice from the delay.

The Second Circuit has cautioned courts not to “permit overextension of the Lanham Act to intrude on First Amendment values,” ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490, 496 (2d Cir. 2013) (quotation omitted), and “generally a false advertising claim will not lie where the defendant has done nothing more than accurately present a study’s conclusions, even if those conclusions are flawed.”  That’s not a Cornerstone quote, but the court’s phrasing of the case.  But Cornerstone is about reprints of studies, disseminated to doctors expert in the field capable of seeing the study’s weaknesses for themselves, not a situation in which an advertiser incorporates a third party’s non-scientific study into its advertising to the general public.  Rather than recognizing this limit, the court noted that it was possible to have liability if the defendant misstated and misrepresented the Today Show’s methodology and findings, which is also true but not the same thing (if the Today Show used an unreliable methodology, it couldn’t be liable for doing so, but the defendant shouldn’t be able to launder a bad study in its own advertising).

Anyway, based on Cornerstone, use of the statement “ranked #1 by NBC’s Today Show,” or variants thereof, wasn’t literally false, and also wasn’t a misrepresentation of the Today Show’s conclusions. Nor was it false to use the present tense even though the segment was eight years old. Board-Tech Elec. Co. v. Eaton Corp., 737 F. App’x 556 (2d Cir. 2018), affirmed a district court decision dismissing a Lanham Act false advertising claim in a similar arguably-stale-but-not-replaced-by-a-more-current-finding situation.  

Nor was the use of “ranked #1” and the accompanying use of NBC’s name and logo misleading.  This was an appropriate conclusion on a motion to dismiss because misleadingness was conclusorily pleaded: “[u]pon information and belief, based on online customer reviews, Defendant has lured consumers into sending their items by publishing the Today Segment and the Deceptive Advertising.” There was no detail about the “online customer reviews” or how they supported the misleadingness allegation; “information and belief” was only appropriate for facts particularly within the defendant’s possession and control, or where the belief is based on facts making an inference of culpability plausible.  Comment: can you imagine a court rejecting NBC’s false endorsement claim as implausible, even without anything about customer reviews?

However, there were some things beyond “ranked #1,” such as falsification of the Today Show’s broadcast date—a printout from its website stated a 2015 date; screenshots of a video description posted by defendant on YouTube allegedly falsely stating that the Today Show “investigated dozens of Cash for Gold companies” (it tested 10); and letters to customers stating that the Today Show “found that Sell Your Gold offered the highest payout of any competitor.” These statements were both false/plausibly false and plausibly material. “The Court cannot say, as a matter of law, that a reasonable consumer would not be influenced by the claim that Defendant offered the highest price of any competitor, or of ‘dozens’ of competitors. Similarly, a reasonable consumer could find it material whether Defendant had been found to offer the highest payouts in 2010 or 2015, because a reasonable consumer could conclude that a more recent ranking is more likely to be representative of the current status of Defendant’s services.”  These claims were neither mere opinion nor so exaggerated as to be unreliable.

Claims based on the “latest payout” photos failed. Express Gold didn’t allege any facts about “the actual kind, quality, or quantity of items that have recently been purchased by Defendant, and therefore provides no basis to conclude that the ‘latest payouts’ stock photographs are either literally false or likely to mislead consumers. Plaintiff cannot state a false advertising claim by picking a statement from Defendant’s website and alleging, with no factual support, that it is untrue.”

The same things happened to the NY GBL and unfair competition claims; unjust enrichment failed because the complaint didn’t plausibly allege that defendant was unjustly enriched by money taken from Express Gold. Specifically, it failed to allege any facts from which a fact-finder could conclude that, but for defendant’s deceptive conduct, consumers would have done business with Express Gold rather than with someone else.

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