individualized smear campaign wasn't plausibly commercial advertising or promotion

Meredith Lodging LLC v. Vacasa LLC, No. 6:21-cv-326-MC, 2021 WL 2546273 (D. Or. Jun. 21, 2021)

The parties compete to manage vacation rental properties located in Oregon. Meredith alleged that Vacasa “has embarked on a smear campaign surgically targeted at [Plaintiff’s] homeowner customers, designed to unfairly snuff out that competition.” The court found that the alleged statements weren’t “commercial advertising” covered by the Lanham Act.

Allegations: With the goal of increasing its market share, Vacasa “sent out promotional mailers to homeowners with properties located in the same geographic areas where [Plaintiff] manages vacation rental properties.” It “began a campaign to systematically contact and try to poach business from Homeowners under exclusive contract with [Plaintiff]. In many instances, [Defendant’s] representatives have made false or misleading statements about [Plaintiff] to these Homeowners.”

The question was whether the alleged misrepresentations were “sufficiently disseminated.” Ordinarily, “the actions must be ‘part of an organized campaign to penetrate the relevant market,’ which typically involves ‘widespread dissemination within the relevant industry.’ ”

Each alleged falsehood came in the form of a phone call from an employee or representative of Vacasa to an individual under contract with Meredith to manage their vacation rental property. The purpose of each call was to convince the individual to switch companies. There were five alleged examples of false statements in calls to owners: (1) rep stated there were “reviews on VRBO for [Plaintiff] stating that there is a lack of cleanliness,” that Plaintiff “had no manager for negative reviews,” and claimed Defendant “could manage the property better”; (2) rep stated that Vacasa “had heard a lot of complaints about [Plaintiff] and its housekeeping teams”; (3) rep said that homeowners had switched over a “lack of cleanliness,” but rep couldn’t corrpoborate this; (4) rep said that Vacasa “had been talking to a lot of unhappy [Plaintiff] customers”; (5) rep led owner to believe “during the first minutes of the call that he was associated with [Plaintiff] (even though he was not) before trying to persuade her to leave [Plaintiff] and switch management of the” home to Vacasa.

Putting aside whether all these statements were falsifiable, five calls to potential customers, even coming during a short period of time, wouldn’t typically qualify as the “widespread dissemination within the relevant industry” seen in false advertising claims. Although Vacasa allegedly had an actual widespread promotional campaign in the relevant market, Meredith didn’t allege that those advertisements contained any false or deceptive representations.

True, “depending on the relative market at issue, communications made to only one prospective customer may qualify as sufficient dissemination under the right circumstances.” But the complaint didn’t allege that the market for managing vacation rental properties was so limited that communications reaching just five consumers was sufficient. It alleged only that “there are a finite and relatively low number of homes suitable for short term vacation rental management in the relevant geographic areas.”  This wasn’t specific and factual enough. The market for hamburgers is also “finite,” but “a handful of phone calls from Ronald McDonald himself to potential burger buyers falsely touting the health benefits of Big Macs would not support a claim for false advertising under the Lanham Act.” And the complaint also alleged that the relevant market was big enough to justify both an Oregon Coast headquarters and a Central Oregon headquarters, as well as “local offices and locally-based staff and support teams in Bella Beach, Waldport, Depoe Bay, Neskowin, Pacific City, Manzanita, Seaside, and Sunriver.” Further, the complaint alleged that the market is large enough that Meredith has “multiple managers to manage negative reviews.” “That Plaintiff requires multiple managers to respond to negative reviews in a market with a ‘relatively low number of homes’ appears to confirm that either (1) the market is larger than argued by Plaintiff or (2) Plaintiff has bigger problems than Defendant’s allegedly misleading phone calls.” [Yikes.]

If Meredith did replead, the court would consider expedited, targeted discovery about falsity, but signalled further skepticism by commenting that “even the Ritz Carlton has guests unhappy with the accommodations” while suggesting that it would be willing to find falsity if, when Vacasa made the statements, it lacked knowledge that some of Meredith’s customers switched to Vacasa over housekeeping concerns. Footnote: The court also questioned whether it could take judicial notice “of the fact that there are dozens of reviews online predating the allegedly false statements that take issue with the cleanliness of properties managed by Plaintiff.” How would you do that without considering their truth? The court seems to think that went to reputation for cleanliness: “This is not to say Plaintiff necessarily has a reputation for uncleanliness. Only that in the vacation rental industry, a company essentially arguing that it had no reports of uncleanliness appears to be patently unreasonable. This is akin to a restaurant, no matter how esteemed, arguing it had never served one customer who walked away unsatisfied.”