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.

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