Lack of competitive injury dooms false advertising claim against unauthorized image use by strip club

Geiger v. Creative Impact Inc., No. CV-18-01443-PHX-JAT, 2020 WL 4583625 (D. Ariz. Aug. 10, 2020)

The court rejects a motion to reconsider its ruling rejecting Lanham Act false advertising claims based the unauthorized use of plaintiffs’ images by a strip club. Plaintiffs alleged that the unauthorized use falsely implied that they were strippers at the strip club or that they were otherwise affiliated with or promoted the strip club. They argued that the court erred by, effectively, holding that the claims couldn’t proceed because plaintiffs weren’t in the strip club business, in defiance of Lexmark.

“There is no doubt that the Supreme Court expressly rejected any requirement that a plaintiff show direct competition to prevail on a false advertising claim.” However, summary judgment for defendant on this claim was still appropriate because plaintiffs couldn’t show competitive injury. The parties don’t vie for the same dollars from the same consumers, and plaintiffs didn’t offer any evidence that showed that their ability to compete with anyone in the marketplace was harmed/that defendant’s alleged deception caused consumers to withhold trade from them. [It’s a bit unclear whether the court (wrongly) treated vying for the same dollars from the same consumers as a predicate; at times it seems to treat that as a requirement, instead of as a common way that competitive harm can be shown, though the latter view resolves the tension it sees between Lexmark’s holding and prior Ninth Circuit references to “competitive” harm.] Lexmark held that “a plaintiff suing under § 1125(a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Plaintiffs didn’t establish the existence of an issue of material fact on competitive injury or proximate cause.

The court elaborated a bit: Although direct competition isn’t required, market overlap is still relevant; it was important that the parties in Lexmark were both in the printer-related-products market because on the facts pleaded, a lost sale for plaintiff was likely to mean a sale for defendant. Here, with no evidence of competition for consumers between plaintiffs and defendant, and no other evidence of damage to plaintiffs’ ability to compete in the marketplace (such as evidence of damaged reputation or lost modeling jobs or other business opportunities), there was no cognizable competitive injury. Plaintiffs argued that their evidence that strippers at defendant’s strip club are concerned about being publicly associated with a strip club was evidence of harm, but that created only “metaphysical doubt,” not a genuine factual dispute, even with a damages expert estimating the “embarrassment factor” for each of the models to calculate how much they would have charged for use of their images. The expert didn’t tie those calculations to “any concrete effect on their business reputations.”

The court also cites a case I missed: Adweek LLC v. Carnyx Grp. Ltd., No. 1:18-CV-09923-GHW, 2019 WL 8405297 (S.D.N.Y. June 3, 2019) (dismissing false advertising claim based on false representation that plaintiff endorsed defendants’ business—despite allegations that false representation gave defendants’ services an increased “salable character” as a result of false representation and caused damage to plaintiff’s brand—as there were no allegations that any deception had an effect on plaintiff’s consumers).

Even if plaintiffs had shown injury to a commercial interest in sales or business reputation, they failed to raise a material factual issue over whether such injury “flow[s] directly from the deception wrought by the defendant’s advertising” such that the “deception of consumers causes them to withhold trade from” plaintiffs. That plaintiffs license their images for a living and that they were concerned about embarrassment/reputational damage from being associated with a strip club were not enough to create a triable issue on whether they lost trade from consumers. (Notably, this is the kind of argument that courts routinely think creates a triable issue on trademark harm.)