Monday, January 20, 2020

Call for Papers: Yale/Stanford/Harvard Junior Faculty Forum

2020 Junior Faculty Forum

Hosted by Stanford, Harvard, and Yale Law Schools
Request for Submissions

Stanford, Yale, and Harvard Law Schools announce the 21st session of the Junior Faculty Forum to be held at Stanford Law School on June 1-2, 2020 and seek submissions for its meeting.

The Forum’s objective is to encourage the work of scholars recently appointed to a tenure- track position by providing experience in the pursuit of scholarship and the nature of the scholarly exchange. Meetings are held each year, rotating at Stanford, Yale, and Harvard.

Twelve to twenty scholars (with one to seven years in teaching) will be chosen on a blind basis from among those submitting papers to present. One or more senior scholars, not necessarily from Stanford, Yale, or Harvard, will comment on each paper. The audience will include the participating junior faculty, faculty from the host institutions, and invited guests. The goal is discourse both on the merits of particular papers and on appropriate methodologies for doing work in that genre. We hope that comment and discussion will communicate what counts as good work among successful senior scholars and will also challenge and improve the standards that now obtain. The Forum also hopes to increase the sense of community among American legal scholars generally, particularly among new and veteran professors.

TOPICS: Each year the Forum invites submissions on selected legal topics. For the upcoming 2020 meeting, the topics will cover the following areas of the law:

Administrative Law
Constitutional Lawtheoretical foundations Constitutional Lawhistorical foundations Criminal Law
Critical Legal Studies Environmental Law 
Family Law
Jurisprudence and Philosophy 
Law and Humanities
Legislation and Statutory Interpretation 
Public International Law
Race/Gender Studies/Antidiscrimination Workplace Law and Social Welfare Policy


A jury of accomplished scholars, again not necessarily from Yale, Stanford or Harvard, with expertise in the particular topic will choose the papers to be presented. There is no publication commitment. Stanford, Yale, or Harvard will pay presenters’ and commentators’ travel expenses, though international flights may be only partially reimbursed.

QUALIFICATIONS: Authors who teach law in the U.S. in a tenured or tenure-track position and have not been teaching at either of those ranks for a total of more than seven years are eligible to submit their work. American citizens or permanent residents teaching abroad are also eligible provided that they have held a faculty position or the equivalent, including positions comparable to junior faculty positions in research institutions, for less than seven years and that they earned their last degree after 2010. We accept jointly authored submissions, but each of the coauthors must be individually eligible to participate in the Forum. Papers that will be published prior to Forum are not eligible. There is no limit on the number of submissions by any individual author. Faculty from Stanford, Yale, and Harvard Law Schools are not eligible.

PAPER SUBMISSION PROCEDURE: Electronic submissions should be uploaded via our online Submission Form. The deadline for submissions is Friday, February 14, 2020. Please remove all references to the author(s) in the paper. Each paper may only be considered under one topic. Any questions about the submission procedure should be directed both to Professor Norman Spaulding (nspaulding@law.stanford.edu) and the forum conference coordinator, Stephanie Basso (jff@law.stanford.edu)

FURTHER INFORMATION: Inquiries concerning the Forum should be sent to Norman Spaulding (nspaulding@law.stanford.edu) at Stanford Law School, Christine Jolls (christine.jolls@yale.edu) or Yair Listokin (yair.listokin@yale.edu) at Yale Law  School, or Matthew Stephenson (mstephen@law.harvard.edu) or Rebecca Tushnet (rtushnet@law.harvard.edu) at Harvard Law School.

Wednesday, January 15, 2020

post-complaint changes prevent finding of irreparable harm

Pegasystems, Inc. v. Appian Corp., 2020 WL 137301, No. 19-11461-PBS (D. Mass. Jan. 13, 2020)

Following on its denial of a motion to dismiss, the court denied a motion for preliminary injunction in this false advertising case. Because the alleged falsity depended on a supposedly independent review being paid for and on overstating the number of responses to the survey, the motion had to be evaluated “in light of the post-complaint changes Appian has made to the challenged statements.” Specifically, Appian removed the phrase “Through approximately 500 responses” and added language regarding the Report’s sample size. Appian also added text on both pages of its website reading, “While all projects are different, we encourage you to read the report and assess what relevance [the surveyed] businesses’ experiences may have for your business” and acknowledged that “Appian commissioned BPM.com” to conduct the survey contained in the Report. A “Preface from Appian” was inserted as the first page of the Report disclosing Appian’s commission.

Although the delightfully named Pegasystems alleged that other parts of the report were false or misleading, including flaws in methodology, the court didn’t find likely success on those other allegations. Appian admitted that it “reviewed and provided input on drafts” of the Report, but denied that the results were manipulated to favor Appian. Factual issues remained to be resolved.

Because of the post-report changes, Pegasystems couldn’t show continuing harm from the initial misrepresentations of independence and sample size.

No irreparable harm/likely success, no injunction.

Tuesday, January 14, 2020

labeling grandfathered drug in standard format doesn't misrepresent it as FDA-approved


Belcher Pharms., LLC v. Hospira, Inc., -- F. Supp. 3d --, No. 8:17-cv-2353-T-30AAS, 2020 WL 102744 (M.D. Fla. Jan. 7, 2020)

“Epinephrine—a drug that is a medical necessity—has been in short supply on and off for nearly a decade.” Hospira has made epinephrine since before 1938, so Hospira is “arguably” grandfathered under the FDCA and has never received FDA approval.  Regardless, “the FDA asked Hospira to ramp up manufacturing to manage the epinephrine shortage in 2010, which Hospira did.”   

Belcher launched an FDA-approved epinephrine ampule (it does not sell a prefilled syringe, as Hospira does), in 2015. By early 2017, there was no longer a shortage of epinephrine ampules, so the FDA asked Hospira to discontinue its unapproved ampule, but to continue manufacturing its still-scarce prefilled epinephrine syringe. Hospira complied, and Belcher saw an increase in the sales of its epinephrine ampule.  After this, the FDA asked Hospira about extending the expiration dates of the prefilled syringe, and the FDA then told healthcare providers that the expiration dates were extended by 9 months past the earlier 21-month expiration date.  

Becker sued Hospira for false advertising and for common law unfair competition, for allegedly marketing its epinephrine products—both the ampule and prefilled syringe—as FDA-approved.  The court granted Hospira, “which did everything the FDA requested to manage a severe shortage of a medically necessary drug,” summary judgment.    After the FDA told Hospira to discontinue its epinephrine ampules, the FDA asked Hospira about extending the expiration dates of its prefilled syringe. Hospira sent the FDA its shelf-life analysis, and shortly thereafter the FDA told healthcare providers that the expiration dates for Hospira’s prefilled syringe were extended for 9 months past their 21-month expiration date. Hospira’s ampules had a 24-month expiration date, while Belcher’s ampule had an expiration date of 12 months, which the FDA later extended to 17 months.   Belcher alleged the following as false advertising:  

1. Hospira’s product labels, which include as indications for use that the epinephrine products (a) can treat cardiac arrest, (b) can be administered intravenously, and (c) can prolong the effects of anesthesia; 2. Hospira’s misleading advertisements as to its epinephrine products’ shelf life on its packaging; and 3. Hospira’s comparison of its epinephrine products to [FDA-approved] Adrenalin, which conveyed the message that its products were generic Adrenalin.

The court found that placing the products on the market with indications for use and shelf life on product labels and packaging, in standard format for FDA-approved drugs, could not, in itself, be a misleading claim of FDA approval. It was too great a stretch to argue that presence on the market in this was a representation of FDA approval.   

That left the comparison claim: Hospira compared its products to FDA-approved Adrenalin, thus allegedly implying that it was a FDA-approved generic.

First, internal Pfizer emails and an email response to a drug distributor who inquired if Hospira was marketing the generic version of Adrenalin were not “commercial advertising or promotion.”   An Injectables Product Availability Report on its website did qualify, but couldn’t be shown to be material. Even if the court assumed it was misleading, that didn’t connect up to Belcher’s evidence that consumers believed Hospira’s epinephrine products were a generic version of Adrenalin approved by the FDA. “Belcher has not shown that a single consumer ever viewed the Injectables Product Availability Report or was misled by it. Without evidence that a consumer viewed the Injectables Product Availability Report, Belcher cannot show that the misleading statements had a material effect on purchasing decisions.”   

Reading list: Pam Samuelson on legal writing



From the archives: Excellent short piece on legal writing, for students and other legal writers of all kinds.  In itself, interesting to see how a groundbreaking female academic framed things in 1984, including the advice not to use “she” as the generic third person singular pronoun; it was “too cute.”

confusion is not irreparable harm in false advertising case


AMETEK CTS US, Inc. v. Advanced Test Equipment Corp., No.19-cv-02348-H-AHG, 2020 WL 133888 (S.D. Cal. Jan. 13, 2020)

The parties operate in the market for “sophisticated electronic instruments in the automotive, telecommunications, energy, aerospace, power, research, medical and industrial markets.” AMETEK sells directly to consumers and also distributes its products through commercial partners, while defendant ATEC has been a distributor of AMETEK’s products. In late 2019, AMETEK informed ATEC that it would have to “decline the opportunity for non-warranty service requests on behalf of ATEC going forward.” “Defendant responded negatively to this development.” ATEC issued a press release titled “AMETEK CTS No Longer Calibrating or Repairing Equipment After The Warranty Expires,” disseminated through its website, social media, and email. AMETEK began to receive inquiries about this from various customers and distributors. Although ATEC offered to publish a retraction prepared by AMETEK, AMETEK instead sued and sought a TRO, which the court here denied. ATEC represented to the Court that “the press release with the allegedly false statements at issue in the complaint had been taken down from ATEC’s website and that ATEC would not disseminate similar statements” during the course of this litigation.

The court held that AMETEK failed to show both irreparable harm and likely success on the merits. “Although loss of goodwill may constitute irreparable injury, the loss must be based on factual allegations and not be purely speculative.” Here, the evidence offered by AMETEK showed, “at most, that some consumers were confused by ATEC’s press release. However, the Ninth Circuit has explained that customer confusion is not the same thing as irreparable harm.” None of the customers stated that they now had a negative impression of AMETEK or that they’d refuse to deal with it in the future—these weren’t like “numerous and persistent complaints from would-be customers” or actual product complaints as a result of the disputed conduct.  Likewise, a VP’s declaration asserting that “AMETEK’s reputation in the marketplace has been harmed by ATEC’s false statements” and that “AMETEK expects to lose future sales” as result of ATEC’s conduct was too conclusory.

Success on the merits: AMETEK argued that ATEC’s statements about the scope of AMETEK’s post-service warranty were literally false, because “AMETEK CTS No Longer Calibrating Or Repairing Equipment After The Warranty Expires” indicated that it was no longer calibrating or repairing equipment after the warranty for any purchaser. The body of the press release said that “AMETEK CTS has notified [ATEC] that they would no longer be supporting their products after the warranty period has expired.” In fact, AMETEK argued, it was still supporting these product lines after warranty as long as the relevant machines were not purchased by ATEC. ATEC argued that its contested statements were true in the context of the entire press release.  The court found numerous disputed issues of fact precluding a finding of likely success—both parties’ arguments were reasonable. The argument that the subject line was misleading was “not without merit,” but ATEC’s reference to the context of the full release was “also compelling.”

However, the case was not moot simply because ATEC removed the offending statements from public view. ATEC made no argument that its behavior “could not reasonably be expected to recur.”

Amicus brief in Booking.com

Joined by a number of able trademark scholars, I filed this amicus brief in Booking.com in support of neither party, arguing that (1) genericness standards need to take into account the risks of overassertion/overprotection, and (2) unfair competition doctrine provides relief for deceptive uses of even generic terms, but does not allow a ban on the use of such terms--the remedies have to focus on proper additional labeling.  EFF and AIPLA also filed amicus briefs, available here.

One note about the AIPLA brief (in support of neither party), which contends:

... gTLD composite marks should nevertheless be limited to the applicant’s use of the specific terms in combination. For example, the PTO should require the owner of “TOYS.COM” (if it has acquired distinctiveness and is otherwise protectable) to disclaim any right to use “TOYS” or “.COM” apart from the proposed mark as shown. This would potentially allow the trademark owner to argue that a competitor using “TOYZ.COM” is likely to confuse, but should not preclude the use of the generic term “toys” with another gTLD (e.g., “TOYS.BIZ”).  
The first two sentences make sense if TOYS.COM is to be allowed at all, but I have no idea how they expect to get to the last one without committing judges to casual empiricism, which would help preserve competition but which is in deep tension with the idea of the multifactor confusion test as an empirical inquiry. Even if TOYS.COM is supposed to be limited to the combination, it would almost certainly survive a motion to dismiss if they sued either TOYZ.COM or TOYS.BIZ, because the degree of mark similarity is only one factor in the confusion test and both hypotheticals diverge in some respects from TOYS.COM.  Implicitly, AIPLA wants the Court to think that there's some rule that the gTLD is more useful to distinguish between businesses than the spelling of the second-level domain name, at least for second-level domains that are generic on their own (as both TOYS and TOYZ would be).  There is currently no such rule; ACPA cases and UDRP precedent are both decidedly to the contrary (at least for things that are distinctive and not generic terms). See, e.g., Omega S.A. v. Omega Eng'g, Inc., 228 F. Supp. 2d 112, 126 n. 36 (D. Conn. 2002) (“When evaluating whether a domain name is confusingly similar to a trademark, a district court disregards the top-level domain name (e.g. ‘.com’, ‘.org’, ‘.net’ etc.).”). And if your survey expert couldn't get confusion results for TOYS.BIZ at least as extensive as those for TOYZ.COM, you have the wrong survey expert.

Underneath, perhaps, is an intuition about what we talk about in our brief: unfair competition as distinct from trademark as a basis for avoiding consumer deception. If TOYS.BIZ is definitely to be allowed, it is because "toys" is generic on its own, and therefore no amount of consumer confusion should justify TOYS.COM being the only provider allowed to use "TOYS" on its own as a second-level domain name.  But why that is different from TOYZ.COM is a mystery to me--for both, the appropriate answer is to use unfair competition to prevent either registrant from taking other actions that confuse consumers, like imitating the layout of TOYS.COM or otherwise failing to label itself.

A side note for any practitioner readers: I will often seriously consider filing an amicus in a case that raises an interesting legal issue, assuming I can make it work with my schedule. Please feel free to reach out if you think you have a case that would benefit from amicus attention--though of course I can't promise I'll be on your side!

Thursday, January 09, 2020

Reading list: disclosures as compelled commercial speech


Reading list: Aaron Stenz, Note: The Controversial Demise of Zauderer: Revitalizing Zauderer Post-NIFLA, 104 Minn. L. Rev. 553 (2019).

The First Amendment broadly stands for the idea that government attempts to curtail the right of the American people to both speak and not speak should be viewed with the utmost skepticism. In the context of compelled commercial speech, however, that scrutiny is lessened. Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (Zauderer) established that where the government attempts to compel commercial speakers to make disclosures of purely factual and uncontroversial information about products or services, courts will consider such regulations more deferentially. Zauderer recognized that commercial speakers have a minimally protected interest in notdisclosing such information, while the government has a vital interest in protecting consumers against deceptive practices.

Zauderer has been interpreted in a myriad of ways, with courts diverging on when Zauderer deference should be applied, culminating in the Supreme Court’s 2018 decision in National Institute of Family and Life Advocates v. Becerra (NIFLA). The NIFLA majority reasoned that Zauderer deference was not applicable to a California disclosure requirement in part because the underlying topic—abortion—was controversial.

This Note argues that the use of the “purely factual and uncontroversial” standard as a threshold requirement for Zauderer deference to be applied has always been problematic, but that NIFLA is the straw that broke the camel’s back, mandating a fundamental reconsideration of Zauderer deference. The “purely factual and uncontroversial” standard has become the mutated product of an inconsistent body of law, and, following NIFLA, is both prone to judicial bias and is fundamentally divorced from the consumer protection interests. This Note concludes that, in order to remedy these fatal flaws, Zauderer’s “unjustified or unduly burdensome” standard should replace the “purely factual and uncontroversial” standard for the application of Zauderer deference.

Comprehensive and thoughtful. Kudos to the author.




Monday, January 06, 2020

Malwarebytes: same result, new puzzles on remand for 230 immunity


Enigma Software Group USA, LLC v. Malwarebytes, Inc., --- F.3d ----, 2019 WL 7373959, No. 17-17351 (9th Cir. Dec. 31, 2019)

New opinion, same result; no rehearing en banc. Because the parties are competitors, §230 does not provide Malwarebytes with immunity for blocking Enigma’s software. As the dissent notes, one may search in vain for this limit in the wording of the statute itself, but there you go. The immunity for blocking content that is “otherwise objectionable” “does not include software that the provider finds objectionable for anticompetitive reasons.”  The majority, however, did remove broad language from the initial opinion saying that blocking couldn’t be based on the identity of the person providing the content.

Since this is now the result in the 9th Circuit, on remand the court will have to face some questions that are not unlike those that have come up in cases about copyright misuse and the meaning of “unfair” business practices under California law: what exactly does “anticompetitive animus” mean here?  Does it require something that is like an antitrust violation?  If so, if Malwarebytes lacks market power, then can it behave in an “anticompetitive” manner or with “anticompetitive” motivations at all?  Separately: Does it have to have malice to be liable?  What if it’s wrong about whether Enigma programs were unwanted by consumers, but reasonably so?  Or suppose Malwarebytes concluded, via motivated reasoning, that Enigma programs were indeed unwanted—is self-serving sincerity enough?  What is the objective standard against which unwantedness should be judged?  It does seem that, according to the standard announced, §230 will still preempt/preclude claims that have internal validity as long as Malwarebytes did not have “anticompetitive animus.”

The majority heavily emphasizes what it considers to be the special circumstance that the parties are allegedly direct competitors. E.g.,

Congress said it gave providers discretion to identify objectionable content in large part to protect competition, not suppress it. In other words, Congress wanted to encourage the development of filtration technologies, not to enable software developers to drive each other out of business….  Users would not reasonably anticipate providers blocking valuable online content in order to stifle competition. Immunizing anticompetitive blocking would, therefore, be contrary to another of the statute’s express policies: “removing disincentives for the utilization of blocking and filtering technologies.”

Spam, malware, and adware could still be “otherwise objectionable.” But “if a provider’s basis for objecting to and seeking to block materials is because those materials benefit a competitor, the objection would not fall within any category listed in the statute and the immunity would not apply.”  Malwarebytes argued that its reasons were legitimate (Enigma’s programs use “deceptive tactics” to scare users into downloading them to prevent infections), but that’s a matter that can’t be resolved on the pleadings. [Suppose a factfinder concludes the parties don't actually compete: does 230 immunity reappear?]

Separately, the court reaffirms that §230’s exception for IP doesn’t include Lanham Act false advertising, which seems right to me (though that creates an interesting potential for situations like Belmora where §43(a)(1)(A) covers nontrademarks).  Unlike Eric Goldman, I’m actually pretty open to the basic false advertising claim that labeling Enigma’s programs could be false advertising despite §230.  The Lanham Act’s requirements may pose substantive barriers to the claim (e.g., is the reporting at issue “commercial advertising or promotion”? (maybe?) Is “potentially unwanted” falsifiable? (seems unlikely, though maybe implication could save the claim)).  And, again, if the §230 objectionability standard is not strict liability, then Malwarebytes might escape liability even if it was in fact false or misleading to label Enigma’s programs “potentially unwanted.”

Relatedly, the allegation that gets Enigma past §230 is likely to prove a mismatch with the underlying theories of liability.  In general, nonfactual disparagement—negative puffery—is not actionable, even if motivated by an evil heart, whether under the Lanham Act or state law.  I wonder if Malwarebytes wouldn’t end up doing better focusing on falsifiability/specificity of the message, though of course the extent to which the determination is subjective also feeds into the question of whether it had the requisite state of mind under the court's view of §230.


another timeshare exit company can be sued under state law, but not Lanham Act


Orange Lake Country Club, Inc. v. Reed Hein & Assoc., LLC, 2019 WL 7423517, No: 6:17-cv-1542-Orl-78DCI (M.D. Fla. Oct. 4, 2019)

Another timeshare case, this one kicking out Lanham Act claims but not FDUTPA deceptive practices claims on proximate cause. Defendant TET

allegedly puts out false and misleading advertisements, leading owners to believe that it can relieve them of their timeshares. Those owners then contact TET, which induces them to, inter alia, stop paying on their timeshare contracts and hire TET. Once hired, TET outsources the owners’ cases to “vendor attorneys” like Defendant Mitchell Reed Sussman (“Sussman”), who allegedly engage in fruitless “negotiation” with timeshare companies before employing one of his three deceptive and unlawful methods to “exit” owners from their timeshare contracts. As a result, Plaintiffs claim that the owners who contractually agreed to pay them have defaulted on their obligations, causing harm to Plaintiffs.

The advertising allegedly “create[s] the impression that TET can legally and permanently get owners out of the timeshare contracts for any reason.” It used to claim a “100% success rate,” eventually changed to “highest success rate in the industry.” It also “guarantee[d]” exit, and advertised a “100% money back guarantee,” which deposition testimony indicated was not true. The ads described TET’s process as finding illegal tactics in the underlying timeshare sale and using them to get an exit. Dave Ramsey also served as a paid endorser. Sales reps allegedly advised owners to cease all communication with their timeshare developers, and (at least until 2016 and allegedly later) advised owners to stop making payments under their timeshare agreements. 

Over 95% of TET’s cases went to outside vendors. When accounts went to attorneys, TET allegedly prohibited account coordinators from disclosing the attorney’s contact information to the client, and the attorneys were prohibited from communicating directly with TET clients. [This can’t be ok under Florida’s ethical rules for lawyers, can it? But then again given what Florida lawyers did with foreclosures, why would anyone have noticed?]  TET allegedly requires account coordinators to report that the case is proceeding according to a predetermined timeline, even if untrue, to deceive customers into thinking things are going well.

Defendant Sussman, a vendor attorney, allegedly also treated these cases the same regardless of circumstance, accusing developers of fraud and instructing them not to contact the owners. When a developer thus sends billing statements to Sussman, he throws them away. Sussman employs allegedly ineffective methods to exit the timeshare; Orange Lake rejects his cancellation methods, but Sussman continues to use them and tells owners they’re no longer “responsible for future fees in connection” with the timeshares, leaving them in foreclosure without their knowledge.  “In 2014, TET’s general counsel vocally opposed Sussman’s methods, but Sussman ran amok until April 2016, when TET supposedly terminated its relationship with him. Even then, TET still had approximately 6,000 open files with Sussman, 700 of which remained open as of September 2018.”

One Orange Lake owner hired TET, which told her to stop payment. The rep assured her that TET had an attorney that would “fix” any issues that arose from cessation. She discovered who was working on her case and left a voicemail, but only got a brief letter claiming he was representing her; all he did was send a C&D to Orange Lake. Ultimately, Orange Lake “voluntarily” accepted a deed in lieu of foreclosure [ed. note: which actually sounds like a relatively good result, but the anxiety and possible credit damage have to be factored in, though the court’s summary doesn’t make clear whether she could have instead afforded to pay forever].  The client demanded a refund from TET, while TET refused and claimed that it helped, even though a month after her release, TET claimed to still be working on an “exit” and claimed Orange Lake was delaying the process.

Other Orange Lake owners who started out current on payments and became delinquent due to TET’s instructions paid late fees to Orange Lake and also paid TET for ineffective services; one hired a different attorney who communicated with Orange Lake, at which point Orange Lake accepted a deed in lieu of foreclosure. TET allegedly took credit for that exit and denied her a refund. Other Orange Lake owners also had frustrating relationships with TET, though interestingly Orange Lake did release some of them (allegedly outside the TET connection). In one case, TET allegedly abandoned clients when they received a foreclosure notice (they ended up with a deed in lieu of foreclosure).

Lanham Act: The damages suffered by Orange Lake—nonpayment of fees—were not proximately caused by the ads. Orange Lake did not allege that its reputation was affected by the ads. The ads accused “Plaintiffs and all timeshare companies generally [the ads don’t seem to have named Orange Lake, so that’s a stretch] of engaging in deceitful, manipulative, or otherwise imprudent behavior,” and Orange Lake’s expert testified that TET’s website “reflect negatively on the timeshare industry and make Website viewers less likely to purchase a timeshare.” This could create a question of fact on reputational harm, but Orange Lake’s complaint didn’t rely on reputational harm, but only on loss of sales.  Because none of the advertisements directed owners to cease paying timeshare obligations, Orange Lake couldn’t show proximate cause. The but-for causation—if not for the ads, clients wouldn’t have hired TET and been instructed not to pay—was too remote. Summary judgment for defendants.

Tortious interference did survive; although predisposition to breach is a defense and the owners wanted to exit their relationships, there was evidence that at least some owners were not predisposed to do so via breach (stopping payment of fees).

FDUTPA: Requires “(1) a deceptive act or unfair trade practice; (2) causation; and (3) actual damages.” Orange Lake argued that TET violated FDUTPA by (1) soliciting Orange Lake owners through false and misleading advertising; and (2) fraudulently inducing Orange Lake owners into retaining TET based on TET’s advertised 100 percent guarantees of exiting timeshares when TET cannot actually fulfill the guarantee.  TET argued that some of its statements were accurate, and others mere opinion/puffery. A reasonable jury could find some of the statements false or misleading. “For example, the evidence reflects that TET’s ‘100% money back guarantee’ is riddled with non-apparent conditions and not honored in many cases. TET tacitly admits this by stating that it has procured exists for half of its 28,000 customers but issued only 800 refunds.” There was also evidence from deposed clients that they were deceived. “TET’s failure to deliver on its advertised promises is sufficient evidence of consumer deception to create a genuine issue of material fact.”

Thursday, January 02, 2020

"most experienced" is puffery, but misrepresenting degree of responsibility for projects could be false


Cypress Advisors, Inc. v. Davis, 2019 WL 7290948, No. 17-cv-01219-MSK-KLM (D. Colo. Aug. 28, 2019)

Cypress provides financial advice to clients in the franchise restaurant industry. Defendant Kent Davis used to work there, but he left and started a competing business, C2.  I’ll focus on the false advertising claims.

First, the allegedly false statements were on C2’s website, but the parties didn’t produce a copy of the website itself, which limited the court’s analysis.

C2’s claim that it was “the most experienced and multi-skilled industry advisory firm” was allegedly false because C2 had only been operating a short time and has had few clients in that time, while Cypress has been operating since 1991 and has had “hundreds of engagements.” However, “most experienced” is puffery—it might be defined by different customers in different ways, including by counting the experience of principals.  Except at the margins—the extreme case where the only employee had been in the business for only a few months and the competitor has been around for decades—this was a matter of opinion. This was not a marginal case, because Davis, and other C2 employees, had many years of experience in the field, making distinctions “more nebulous” and opinion-based. C2 also claimed that when Davis joined Cypress, it was a “fledgling” investment bank; this was allegedly false because Cypress had been operating for 10 years already. For the same reasons, “fledgling” lacked sufficient factuality to be falsifiable.

C2 also allegedly misrepresented Davis’s level of involvement with Wendy’s and TGI Friday’s refranchising projects, claiming that he “secure[d] and manage[d] a 340-unit refranchising initiative ... followed by a 540-unit follow-up refranchising project” with Wendy’s and “originated and managed the TGI Friday’s refranchising project.” He did work on these projects while at Cypress, but the parties disputed the nature and extent of Mr. Davis’ work. Whether he was responsible for “originat[ing],” “manag[ing]” or “secur[ing]” them could be sufficiently factual in nature as to proven true or false. [In the Seventh Circuit, a reverse passing off claim might also work.]

C2 also allegedly misrepresented “Representative Transactions” in the form of 44 “deal tombstones” (icons denoting individual deals) that suggested that C2 had been involved with the listed deals. C2, as an entity, was not involved in any of those deals, but Davis was, albeit as an employee of Cypress at the time. So, would a reasonable consumer believe that C2 was involved, or that its principals did? Neither side offered consumer perception evidence, so the court determined that a factfinder should resolve the issue at trial (implicitly holding that the representation could be literally false). Relatedly, a specific testimonial/tombstone for one particular transaction, as to which the endorser allegedly denied having made the endorsement, could also go to trial.

Other alleged misrepresentations weren’t enough: C2 represented that one person was a “partner” and that two others were members of the “team.”  Cypress argued that the first was only an independent contractor and that, of the “team” members, one was a provider of occasional services to C2 and who agreed to be listed as a member of the “team” to make it “look like the company had a little more depth to it”; and the other was an independent contractor. “The Court finds that terms like ‘team’ and ‘partner’ as used in this respect have no particular meaning, other than to convey some degree of business association and agreement to work together,” and that much was true.

Injury: C2 argued that there was no evidence of injury. Cypress’s damages expert opined that “the cost of a robust corrective advertising campaign ... as a result of the Defendants’ alleged false advertising and false statements would range from $75,000 to $150,000 according to an analysis performed by [the expert’s] public relations consulting practice.” That created a triable issue of fact.  [Not every court would agree without evidence of injury resulting in a need to correctively advertise.]

Cypress also argued that two statements were libelous: the “fledgling” statement and claiming credit for Wendy’s/TGIF. The latter didn’t defame Cypress; at most it might defame Cypress’s principal, who isn’t a party. For purposes of defamation law, “fledgling” was not defamatory; it commonly means “young, new, or inexperienced” or “a person or organization that is immature, inexperienced, or underdeveloped,” but that’s “a necessarily subjective statement of opinion.”  Anyway, even if it had factuality, it was about 2000 Cypress, and the coutt couldn’t see how that would harm 2019 Cypress.