Tuesday, March 10, 2020

commercial advertising & promotion post-Lexmark: 10th Circuit preserves old test

Strauss v. Angie’s List, Inc., --- F.3d ----, 2020 WL 1126523, No. 19-3025 (10th Cir. Mar. 9, 2020)

Lexmark, most courts have recognized, changed prong 2 of the standard Gordon & Breach test for “commercial advertising or promotion.” Unfortunately, the Tenth Circuit casts unwarranted doubt on that change, potentially rendering meaningless Lexmark’s rejection of a direct competition requirement, despite the fact that the textualist arguments behind Lexmark apply equally to the meaning of “commercial advertising or promotion” as to the specific requirement of direct competition. And it wasn’t even necessary to affirm the dismissal of these claims!

Strauss sued Angie’s list for Lanham Act violations (all that’s at issue on appeal). During the relevant period, Strauss owned a tree trimming/removal business, Classic Tree Care. Angie’s List is a consumer ratings forum “on which fee-paying members can view and share reviews of local businesses.” Strauss alleged that “the membership agreement between Angie’s List and its members leads members to believe that businesses are ranked by Angie’s List according to unedited consumer commentaries and endorsements when, in reality, the order in which businesses are ranked is actually based on the amount of advertising the business buys from Angie’s List.” Over about ten years, Strauss paid $200,000 to Angie’s List “in an effort to appear higher” in search results. But Strauss alleged he failed to appear in search results for a three-month period and then was “buried” in search-result listings even though he had numerous favorable reviews and a high rating from consumers.

The only non time-barred claims were based on three statements Angie’s List made in 2016. Straus alleged that Angie’s List stated that his business (1) had no consumer ratings or reviews; (2) had not met the criteria set by Angie’s List for inclusion on its website; and (3) had no local offers to extend to consumers.  

The Tenth Circuit adopted Gordon & Breach’s four-part test for commercial advertising or promotion in its own P&G case: “(1) commercial speech; (2) by a defendant who is in commercial competition with plaintiff; (3) for the purpose of influencing consumers to buy defendant’s goods or services ... [and] (4) must be disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.” The district court concluded Strauss’s complaint failed to plausibly allege that the 2016 statements were made for the purpose of influencing consumers to buy Angie’s List’s goods or services.

Strauss argued that Lexmark abrogated P&G. I think he’s right that it altered prong (2), but not prong (3), which the district court found was part of his problem. The Tenth Circuit noted that Lexmark has a footnote expressing no opinion on the commercial advertising or promotion issue and found that P&G remains the law of the circuit. Of course, the reason the statements in Lexmark might still not have been commercial advertising or promotion was that they were made to Lexmark’s competitors, which is still a problem under prong (3)—it’s not super plausible that they were designed to directly generate sales of Lexmark’s products, though they could have decreased the supply of competing products indirectly. Given the rationale of Lexmark, the Gordon & Breach test should really be: “(1) commercial speech; (2) by a defendant whose relationship to the plaintiff puts the plaintiff within the statute’s zone of interests [or, to use Scalia’s disfavored but useful summary term, ‘as to which the plaintiff has standing’]; (3) for the purpose of influencing consumers to buy defendant’s goods or services ... [and] (4) must be disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.”

Anyway, P&G remains the law of the circuit—the court doesn’t clarify whether it thinks prong (2)’s commercial competition requirement remains unaltered.  I strongly believe that it doesn’t, and this case doesn’t really hold otherwise, but it sure can and will be cited that way, especially given the footnote that two other circuits post-Lexmark have adopted only prongs (1), (3), and (4) but that P&G still binds 10th Circuit panels.

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