Monday, May 22, 2023

Second Circuit signals some minimal flexibility on Polaroid analysis in another strip club false endorsement case

Souza v. Exotic Island Enters., Inc., 2023 WL 3556053, No. 21-2149-cv, --- F.4th ---- (2d Cir. May 19, 2023)

Whereas the timeshare false advertising cases might be making law largely applicable to other timeshare cases, what’s going on in the strip club advertising cases might have somewhat broader implications. (Both sets feature lots of cases against lots of defendants; the strip club cases seem to be more geographically dispersed, which may also contribute.)

Appellants, current and former professional models, appealed their summary judgment loss on a variety of claims arising from the use of their images in social media posts promoting a “gentlemen’s club” operated by EIE. The court of appeals affirmed, including on the district court’s decision not to exercise supplemental jurisdiction over remaining state claims.  

The basic undisputed allegation was that EIE, through a third-party vendor, used plaintiffs’ images without their permission in social media posts promoting its club.

The district court concluded that plaintiffs’ false endorsement claims were foreclosed by Electra v. 59 Murray Enters., Inc., 987 F.3d 233 (2d Cir. 2021); their false advertising claims were founded upon injury that either fell outside the zone of interests protected by the Lanham Act, or that was unsubstantiated by the record; and the bulk of their state-law right of publicity claims were barred by New York’s one-year statute of limitations for such claims.

In substantially identical declarations, plaintiffs testified that because they “rely on [their] professional reputation[s] to book modeling and advertising jobs,” their reputations are “critical” to the opportunities they are offered, and they therefore “have spent considerable time and energy” protecting and policing their images and reputations, and carefully negotiating their modeling fees based on “informed assessment[s]” of any given job’s effect on their brands. Plaintiffs had “varying levels of success and visibility in their modeling careers.” Several had appeared in magazines, advertising campaigns, television episodes, and films. Some were former Playboy Playmates. Their highest yearly modeling earnings range from around $18,300 to around $107,000. Their social media footprints range from several thousand to a few million followers. They had “fleeting” links to New York, and most no longer work as full-time models.

From 2014-2018, the posts at issue used revealing photos of the plaintiffs against ad copy linked thematically to the visual, e.g., a picture of one plaintiff “in an apparent school uniform that included a short plaid skirt, captioned: ‘Friday Oct 17th SEXY SCHOOL GIRL PARTY! No Cover For Ladies That Wear A Sexy School Girl Skirt[.] All Our Dancers Will Be Wearing Short Plaid Skirts!’” 

In response to interrogatories, plaintiffs couldn’t identify specific jobs or work lost as a result of the posts. Instead, they responded that “prospective clients have no duty to disclose to the model their reasoning for why the model was denied an endorsement opportunity. It is also a widely known fact that on the outset of creating a highly coveted endorsement deal, clients and/or their advertising agencies will conduct due diligence of models in advance of contacting a model to discuss an endorsement opportunity.” Thus, they argued, they couldn’t know their losses.

Is likely confusion an issue of fact or one of law? “[A]lthough our stance may have wobbled over the years, recent cases have solidified our view that, ‘[i]nsofar as the determination of whether one of the Polaroid factors favors one party or another involves a legal judgment – which it often does – we must review that determination de novo.’” Thus, the overall standard of review is de novo: whether confusion is likely is a matter of law.

False endorsement assesses the Polaroid factors. Here, the district court correctly held that strength of the mark favored defendants. Recognizability is the bottom line for strength of a mark. As previously held, “misappropriation of a completely anonymous face could not form the basis for a false endorsement claim.” Although inherent distinctiveness is also relevant to strength generally, there was no argument that plaintiffs’ marks were inherently distinctive. And the court noted that inherent distinctiveness as a concept was “more awkward to apply when it effectively interrogates how much one human being does, or does not, physically resemble another…. The usual criteria for inherent distinctiveness … have little application here.”

For false endorsement, the “mark” in question “is the identity of the purported endorser herself.” But

an endorser’s face and body fall nowhere on the familiar spectrum from “arbitrary” to “generic”; their identity inherently is their mark. And where any face or figure regarded as “attractive,” will do, notwithstanding the anonymity of the actual person whose face or figure is depicted (and the negligible endorsement value derived from that actual person’s connection to the product being sold), the unauthorized use of that person’s image may invade rights granted by other statutes or common law sources, but creates no risk of consumer confusion as conceived under the Lanham Act.

Some limits on the Polaroid spectrum! The other way to say it is that indicia of identity are descriptive, but this works too. Anyway, “recognizability thus serves the purposes of trademark law in the false endorsement context.”

The district court correctly evaluated the relevant evidence of recognizability. It didn’t abuse its discretion in excluding plaintiffs’ proffered expert testimony as unreliable, and there was next to nothing left without that. A district court “should only exclude [expert] evidence if the flaw is large enough that the expert lacks good grounds for his or her conclusions.” The proffered expert’s survey of 812 respondents “who had patronized ... a ‘Bikini Bar/Gentlemen’s Club/Strip Club’ in the past two years,” wasn’t reliable because of methodological problems: The study lacked a control group; had an “overly inclusive” approach to recognition; and failed to show respondents several plaintiffs’ full faces “(which, the court noted, somehow did not appear to have meaningfully affected respondents’ professed ability to recognize the Plaintiffs who were pictured).” The overly inclusive bit was because recognizability is about whether consumers would actually assume sponsorship or approval and not just mere appearance in an ad; finding an image “vaguely familiar” or having “in some manner” seen the plaintiff before taking the survey wasn’t helpful in answering that question.

The remaining evidence was insufficient:

This consisted of (1) vague and conclusory (and identical) written testimony from Plaintiffs that each had “achieved celebrity status and fame” and that “[o]n any given day, regardless of where I’m at, I am recognized by complete strangers and my fans who follow me on social media,” and (2) evidence of Plaintiffs’ relatively modest modeling income, professional prominence, and social media footprints, which the district court determined (in a finding Plaintiffs do not contest on appeal) to be, at best, comparable to evidence the Electra panel had deemed insufficient to establish a strong mark.

After excluding more of the expert’s testimony, actual confusion also favored defendants. That testimony claimed that: (1) 62% of respondents agreed with the statement that “[a]ll the women shown in these ads have some affiliation, connection or association with those clubs in whose ad they appear”; (2) 75% agreed that “[a]ll of the women in these ads have agreed to sponsor, endorse or promote the club represented in these ads”; and (3) 76% agreed that “[a]ll of the women in the ads approve of the use of their image in those Club advertisements in which they appear.”

But this part of the survey required respondents to give their impressions of all the images, rather than differentiating among different images and/or plaintiffs, and the survey neither provided respondents with a “don’t know” option nor instructed them “not to guess.” This wasn’t abuse of discretion (even though other district judges might have done otherwise).

Without that, there was no “meaningful” evidence of actual confusion. At deposition, one of defendants’ witnesses was asked if the fact that one of the posts at issue included the phrase “our girls” would cause a “reasonable customer” to believe “well, they’re saying our girls; this is one of the girls who is going to be there.” He responded: “That’s up to them. I’m not – some may, some may not. It’s the individual’s discretion if they choose to believe what they see.” This was his own subjective perception of the post’s effect on consumers; it “may be probative of his state of mind, but nothing about [his] speculative answer to a speculative question establishes that any actual consumer was actually confused.”

In addition, even if consumers were “hoodwinked” as described, “thus giving rise to a plausible deceptive trade practices claim,” that’s not false endorsement:

A generic misconception that the anonymous, unrecognized models in the posts are in fact the same models who work at [the club] inflicts the same injury on a consumer irrespective of any goodwill those models have cultivated in their own “marks,” because that misconception does not rely upon such goodwill in the first place…. In other words, the misconception goes to the nature of the product itself, not the mistaken belief that someone whose imprimatur the consumer values has vouched for that product.

The district court also correctly held that bad faith weighed in defendants’ favor. As in Electra, they used third-party contractors to create the ads and publish them, and there was no evidence that they ever asked those contractors to use a photo of a specific person.

The district court’s factor balancing was also correct; it focused on three of the eight factors, discussed above, and then assumed without deciding that the remaining ones favored plaintiffs. Although that approach is “discouraged” in this circuit, and to avoid a costly remand district courts should go through all the factors, it was ok here.

Comment: I’m not really sure how to evaluate this argument—if it’s often a matter of law, that suggests remand wouldn’t be necessary in many cases, and if the district court errs in the factors it does analyze, that seems like it would often make remand necessary anyway, but the larger problem is, I think, that not all the factors are always relevant. Like “quality,” for example, which the Second Circuit refuses to go en banc to get rid of (and, by the way, its rule that you have to march through all the factors was a later panel rejecting an earlier panel; shouldn’t they have had to go en banc to do that?) Technically, one could now argue that the nominative fair use factors should be considered in every Second Circuit case, at least where raised by the defendant, but that seems useless and perhaps misdirective where it’s the other factors that are really more relevant.

Anyway, the court concluded, vacatur was not inevitable even when a district court “neglects to account” for all eight factors. Though it’s “risky,” in “rare cases … the weight of binding precedent may obviate the need for a complete Polaroid analysis.” This was such a case, given Electra. “We cannot fault a district court for its reasonable adherence to recent, directly-on-point, binding precedent constructed upon substantially indistinguishable facts.” And plaintiffs didn’t present any reasons to suggest that the other factors weighed more strongly in their favor than they did in Electra.

Plaintiffs argued that, if more factors favored them than disfavored, they should have won, but the balancing isn’t a counting exercise (which, not for nothing, is why the “gotta count them all” analysis is not great).

False advertising: Lexmark was consistent with prior circuit precedent that a viable false advertising claim requires the plaintiff to have been “injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products.” Likewise, Lexmark supported the circuit rule that, although such injury may be “presumed” from a direct competitor’s “false comparative advertising claim,” in all other cases, a plaintiff must present some affirmative “indication of actual injury and causation.” Lexmark didn’t foreclose courts from granting a presumption of injury to direct competitors while requiring others to present evidence of injury and causation. There was no evidence of direct competition, nor was there evidence of injury and causation.

Plaintiffs claimed that they might have lost out on work due to the “reputational hit” from being linked with a strip club, and that they were deprived of licensing revenue for their images. The first type of injury could satisfy Lexmark; there just wasn’t any evidence that it happened. Even if they couldn’t get direct evidence because people don’t explain why they don’t hire you, there were other things they could have done: There was nothing in the record that anyone who might conceivably have hired them ever saw the posts in question; there was no temporal evidence correlating downturns in their careers with the appearance of the posts; there was no expert testimony of “the effect of this kind of R-rated association on a typical model’s career – much less on these particular models’ careers.”

The second type of injury, lost licensing revenue, didn’t fall within the Lexmark zone of interests test. It wasn’t “reputational” injury, and it didn’t flow from the deception wrought by the ads.  

Finally, the district court correctly found most of the right of publicity claims time-barred. Recent changes to the NY right of publicity didn’t change the limitations period.

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