10th circuit won't presume false advertising harm just from direct competition

American Society of Home Inspectors, Inc. v. International Ass’n of Certified Home Inspectors, --- F.4th ----, 2022 WL 2125492, No. 21-1087 (10th Cir. Jun. 14, 2022)

Discussion of opinion below, which had more clownish behavior; the issue on appeal is narrower.

The parties are two competing national associations of home inspectors: the International Association of Certified Home Inspectors (InterNACHI) and the American Society of Home Inspectors (ASHI). They offer memberships to home inspectors, who typically inspect homes prior to home sales; they are currently the only two national bodies of this type.  

From 2015 to 2020, ASHI featured the following slogan on its website below its organizational logo: “American Society of Home Inspectors. Educated. Tested. Verified. Certified.” 

InterNACHI argued that ASHI’s tagline constituted Lanham Act false advertising because it portrays ASHI’s entire membership as being educated, tested, verified, and certified, even though its membership includes so-called “novice” inspectors who have yet to complete training or become certified. The court of appeals affirmed the grant of summary judgment against the claim on grounds of lack of harm.

ASHI offers a “Find-an-Inspector” tool on its website, which allows prospective home buyers to search for an inspector. “Users can view the criteria for ASHI’s membership levels by clicking on the membership status next to the name of an inspector in the search results. Even though some ASHI associate home inspectors are novices and have never received training or conducted a home inspection, ASHI advertises all its members as home inspectors through its Find-an-Inspector search engine.”

InterNACHI’s arguments for harm were: (1) a survey showing that 15.2%, net, of respondents thought all home inspectors advertised on ASHI’s website possessed the qualities described in the tagline; (2) a substantial increase in ASHI’s associate membership after ASHI posted the slogan on its website; and (3) a declaration by InterNACHI’s founder stating that ASHI’s slogan is harmful to InterNACHI. This was not enough to show “an injury to a commercial interest in reputation or sales.”

The survey: “While the survey results might be helpful in determining whether consumers have been deceived by ASHI’s tagline, the results do not shed any light on whether home inspectors are more likely to join ASHI instead of InterNACHI due to ASHI’s tagline.” But InterNACHI didn’t show that its revenue, membership, or website traffic declined after ASHI began using the tagline, nor did it identify “a single home inspector who chose to join ASHI rather than InterNACHI due to ASHI’s tagline or willingness to hold uncertified inspectors out to the public as fully qualified.”

What about ASHI’s substantial increase in associate membership following implementation of the tagline? Home inspectors are free to join both ASHI and InterNACHI; the court of appeals declined to infer harm to InterNACHI from benefit to ASHI. Also, there were alternate causes: around the same time, ASHI also started offering reduced and free memberships to students, and issued memberships to former members of another association that shut down in 2016. There was no evidence that InterNACHI’s own membership levels were affected by ASHI’s tagline, and some evidence that it didn’t matter to aspiring inspectors.

Nor did the declaration of InterNACHI’s founder help, because he didn’t “explain why the slogan is harmful to InterNACHI, nor does he offer any factual support for his claim that the slogan injured InterNACHI.”

The court wanted to be clear that the problem was not quantum of damages, which wasn’t required at the summary judgment stage. “The problem is that instead of putting forth any evidence demonstrating that it was injured by ASHI’s tagline, InterNACHI relies solely on speculation and conjecture to establish harm.” This doomed claims for damages and for injunctive relief, since that also requires “a likelihood of harm.”

The court of appeals declined to presume harm just because the parties were each other’s sole competitor in the national home inspector market. [The district court also thought that the untrained associates who joined ASHI might not have been welcome at InterNACHI, but the record didn’t support that conclusion.] Any presumption of harm can’t just be from direct competition; it would have to come from something like disparagement or other circumstances that were “likely” cause injury. “While we may presume harm in certain cases—such as those where a business compares its product to that of its direct competitor or disparages its direct competitor’s product in an advertisement—we will not apply the presumption of harm based solely on the fact that the plaintiff and defendant are in competition with each other.”

But wasn’t InterNACHI alleging sole competition? Not successfully, since “home inspectors are free to join both associations. Inspectors may also join one of the many state-specific home inspector associations,” and historically dual membership in some association or other was common.