Friday, November 22, 2019

false advertising claims against competing media nonprofit can continue under broad theory of commercial speech

Tang v. Guo, 2019 WL 6169940, No. 17 Civ. 9031 (JFK) (S.D.N.Y. Nov. 20, 2019)

The previous complaint was dismissed for failure to sufficiently allege commercial speech; the court now finds it sufficiently alleged because the media defendant had a “donate” button and competes with the media plaintiff; query whether under this reasoning Fox could sue the Washington Post under the Lanham Act.

Plaintiffs alleged that defendant Kwok runs charitable organizations and a media platform that are designed to compete with Tang and his wife’s own nonprofit organizations and online, independent media outlet. Kwok allegedly made, and continues to make, numerous false and defamatory statements about plaintiffs “to garner attention for and ultimately drive donors away from Plaintiffs’ organizations to Kwok’s competing organizations.”

The court, unfortunately, set forth the post-Lexmark “commercial advertising or promotion” test, then commented that “[m]any courts have adopted a fourth requirement: a purportedly false statement must be made ‘by a defendant who is in commercial competition with plaintiff.’”  This has the historical sequence backwards; most courts to consider the issue have recognized that Lexmark’s logic eliminated the competition requirement. This error may be consequential here.

The prior complaint “failed to allege how Kwok had an economic motivation or intended to profit by attempting to gain viewers on his media platform at the expense of viewers on Plaintiffs’ platform.” The amended complaint, however, alleged a sufficient economic motivation for Kwok’s speech because Kwok allegedly added “DONATE” buttons to the video infomercials promoting his media outlets and fundraising organizations. In addition, the amended complaint alleged “that Kwok and the other named defendants intended to increase viewership on the Media Defendants’ platforms to encourage viewers to donate to the Rule of Law Defendants that compete with Plaintiffs’ own nonprofit organizations.” 

In addition, there were new allegations that the defendants violated the Lanham Act by misleading the public regarding the purported use of donated money, failing to disclose that (1) the donations are not tax-deductible and (2) the funds will be used for non-charitable lobbying efforts, to support the for-profit Media Defendants, and to fund Kwok’s application for asylum in the United States. And the complaint plausibly alleged that the parties compete for fundraising dollars, that Kwok’s false statements were made for the purpose of influencing viewers to donate to his charitable organizations instead of Plaintiffs’, and that the statements were sufficiently disseminated to the relevant purchasing public by being posted to public forums such as YouTube and Twitter.  That was enough.

I am dubious.  The commercial speech status of fundraising speech is itself hotly contested, though the defendants’ nonprofit allegedly seeking donations that aren’t deductible is a complicating factor. Still, if defendants are seeking donations based on their speech and not inducing consumers to buy some separate product or service, I don’t see why Tang couldn’t also sue the Washington Post for Lanham Act false advertising for similar reporting (given Lexmark), since the Washington Post also seeks readers to fund its reporting. It seems to me that this ought to be a defamation case.

The state law unfair competition claim survived for the same reasons. Tortious interference failed because the complaint didn’t allege specific facts about contracts with other donors breached because of defendants’ actions.

Defamation against Kwok: Kwok allegedly defamed plaintiffs by claiming they tried to lie to and “swindle” donors, steal money from donors, and use donated money for their own personal and illicit expenses. Kwok argued that these were opinions, and that Tang was a public figure. At the pleading stage, defamation of a public figure with at least reckless indifference to the truth was plausibly alleged. “Kwok’s assertions that Plaintiffs are secret agents of the Chinese government, rapists, or thieves, are statements that may be proven false and, thus, they are not mere statements of opinion.”

IIED: “IIED claims should not be entertained where the conduct complained of falls entirely within the scope of a tort claim such as defamation.” The claim failed because the conduct alleged wasn’t sufficiently “extreme and outrageous” for New York’s high standard. “Here, the gravamen of the SAC is a commercial dispute between competing high-profile public advocates and the use of false and defamatory statements by one advocate to obtain an unfair advantage over his competitor. This ‘cannot be said to shock the conscience of humankind.’” And it was duplicative of the defamation claim.

Harassment: Kwok allegedly engaged in a course of conduct that served no legitimate purpose and which alarmed and seriously annoyed plaintiffs in violation of N.Y. Penal Code § 240.26. New York law “recognizes an implied private right of action for criminal harassment in violation of the Penal Law.” So it was allowed. (But has to be subject to the same limits as defamation in this situation where the speech is all public, right?)

False light: not actionable in NY. Plaintiffs argued that they were California residents and the harm was suffered in California, but that wasn’t enough where the false light claim was wholly duplicative of their New York harassment and defamation claims.

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