Wednesday, June 22, 2022

warranties aren't advertising b/c it's not plausible that anyone reads them before purchase

Plateau Casualty Ins. Co. v. Securranty, Inc., 2022 WL 2205263, -- F. Supp. 3d --, No. 2:22-cv-00007 (M.D. Tenn. Jun. 22, 2022)

Held: A warranty is not “commercial advertising or promotion” under the Lanham Act.

Plaintiffs terminated an agreement to insure Securranty Inc.’s warranties for products like laptops and cell phones, but Securranty allegedly continued to represent that its warranties were still insured by them. Plaintiffs sued for breach of contract under Tennessee common law and false advertising in violation of the Lanham Act. (OK, I’m not a big false endorsement fan, but … isn’t this false endorsement? Insert your own insurance-related pun.)

Securranty’s protection plan allegedly continued to state that its obligations under the plan “are guaranteed under a reimbursement insurance policy issued by Plateau Insurance Company” located in Crossville, Tennessee; that the plan in Florida “is directly issued by the insurer ... Plateau Insurance Company”; and that the plan in Washington is “backed by the full faith and credit” of Plateau.

Securranty argued both that there was no misrepresentation in “commercial advertising or promotion” and that plaintiffs failed to allege the loss of any customers as a result of Securranty’s alleged deception, an argument the court didn’t reach but mentioned should plaintiffs amend their complaint. (Is injury required for a §43(a)(1)(A) claim? Shouldn’t it be?)

The Sixth Circuit “define[d] ‘commercial advertising or promotion’ as: (1) commercial speech; (2) for the purpose of influencing customers to buy the defendant’s goods or services; (3) that is disseminated either widely enough to the relevant purchasing public to constitute advertising or promotion within that industry or to a substantial portion of the plaintiff’s or defendant’s existing customer or client base.”

The court found no case holding that “warranty policies fall outside the scope of the Lanham Act as a matter of law.” But several decisions hold that a product insert that a consumer finds only after opening an item cannot be “commercial advertising or promotion” for Lanham Act purposes. So too with user manuals provided to the customer upon purchase of a product are not commercial advertising under the Lanham Act, even if the manuals were available at trade shows “because they were not made available to the general purchasing public or in sufficient quantities to constitute an advertisement.” [There are a handful of cases saying that product inserts/catalogs delivered with the product are commercial advertising/promotion because they are invitations to keep buying more from the same company, which I think make sense.]

The court inferred, based on Securranty’s argument and the “silence” of the complaint, that “the purchaser of a laptop or cell phone is unaware of the language in the warranty until after the purchase has been made.” This probably does pass muster under Twiqbal common sense, but it is a particularly good illustration of the way that “consent” to terms in an adhesion contract is a pure legal fiction. It is so fictional that parties other than the bound consumer don’t have to pretend that it’s true!

“The Terms and Conditions reference the past by thanking the customer for his or her purchase and speaks in terms of individuals who have ‘purchased the protection plan.’ More tellingly, the Complaint contains no allegations that purchasers are given a copy of the Terms and Conditions beforehand.” Even if the terms were also on Securranty’s website, it wasn’t plausible that website warranty terms constituted misrepresentation for “the purpose of influencing the purchasing decisions of the consuming public,” and that “the contested representations [were] part of an organized campaign to penetrate the relevant market intended to influence potential customers to purchase its product.” Also, plaintiffs didn’t allege proximate causation therefrom.

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