Does the Lanham Act cover a campaign to get a particular job?

Healthcare Integrity, LLC v. Rehoboth McKinley Christian Health Care Servs., Inc., 2021 WL 4129248, Civ. No. 20-750 KG/LF (D.N.M. Sept. 9, 2021)

Plaintiffs, a healthcare management company and its individual owner  alleged that a group of medical providers at RMCHCS secured their ouster as management company/Chief Executive Officer of RMCHCS through a campaign of false and misleading information. Defendant CMO Wangler was allegedly motivated by a desire to replace the individual plaintiff, Conejo, as CEO and secure a lucrative management agreement for her own company.

Plaintiffs sought to amend the complaint to add, inter alia, a Lanham Act false advertising claim, which the court held was not futile.

Footnote: Commercial advertising or promotion isn’t necessarily straightforward. The court didn’t undertake any analysis of this element at this stage.

The proposed amended complaint would allege that Wangler “in connection with a professional service (i.e., managing a hospital system) made false or misleading statements of fact regarding the hospital management services Plaintiffs provided that, in fact, caused damage to Plaintiffs.” She allegedly “embarked on a campaign to disparage the value and quality of the management services Mr. Conejo and HCI were providing to RMCHCS” because she “knew that Mr. Conejo was well-liked and respected” and that she would “need to create a negative impression of Mr. Conejo ... if she were to be successful in ousting Mr. Conejo” and HCI so that she could “secure the CEO position for herself under a management contract with her LLC[.]” She allegedly “complain[ed] publicly about how Mr. Conejo had cancelled contracts with agency nurses and proposed employee pay cuts and insist[ed] that his mismanagement and desire to turn a profit was endangering patient lives and safety”; made statements to the media suggesting that the entire RMCHCS medical staff had voted “no confidence” in Conejo where, in fact, the majority of physicians and nurses had not signed the No Confidence Declaration; accused Conejo of creating patient safety risks and engaging in retaliatory suspensions; and made the foregoing statements despite knowing that they were false or misleading.

Wangler also allegedly (1) disseminated the allegedly false or misleading statements to the relevant purchaser of the services: the RMCHCS Board, which had the authority to engage—and/or terminate—the services of a hospital administrator of its choosing; (2) utilized multiple methods of communication, including interviews with news media, email, Zoom videoconferencing, and letters, to disseminate false or misleading statements about the services Plaintiffs were providing; and (3) “made an express sales pitch for the CEO contract” in a letter she submitted to the Board in May 2020. Taking all this as true, the court couldn’t say that amending the complaint would be futile.

Comment: The key move prefigured here is whether a specific potential employer is the relevant audience for an individual’s services. Is this an organized campaign to penetrate the relevant market? We can only know once we understand the relevant market, and the answer might be different for an ordinary company that could in theory provide services to many different hospitals versus a very specific employment situation—or it could simply be that soliciting a particular employer, no matter how desireable to that would-be CEO, is not enough to be commercial advertising or promotion, since the relevant skills are likely transferable in ways that, say, supplies for Ford engines are not. That is, previous cases recognizing solicitations to a single buyer as “commercial advertising or promotion” for Lanham Act purposes have all, as far as I know, been about customized products that can only realistically be sold to the specific buyer, like Ford or Coca-Cola. However, it’s notable that the producers in those cases chose to customize their products—there was a broader market out there; they just wanted to participate in a very specific market. So at what point in time do we assess the relevant market, and can the specificity of human factors be part of that?