court borrows limitations period from consumer protection law for Lanham Act claim

Cannella v. Brennan, No. 2:12-CV-1247 (E.D. Pa. Aug. 5, 2014)
Plaintiffs First Senior Financial Group, Phillip Cannella, and Joann Small sued “Watchdog,” an anonymous blogger, and Doe defendants, ultimately identifying Krista Brennan as Watchdog and the Doe defendants as Granite Financial Solutions (a competitor of First Senior) and its employee Harry McWilliams.  First Senior is an insurance agency, and Cannella and Small are its employees.  Plaintiffs alleged that Brennan created and to disseminate false and misleading statements about plaintiffs and their services.  They sued for false advertising under the Lanham Act, tortious interference, civil conspiracy, and unfair competition.
The court rejected defendants’ arguments that the Lanham Act claims were barred by the applicable statute of limitations.  The Lanham Act has no limitations period itself, but subjects claims to principles of equity.  For limitations purposes, this means looking to the analogous state law.  Here, the court rejected the argument that the one-year limitations period for defamation applied. Rather, the six-year “catch all” statute of limitations under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), was most analogous to Lanham Act violations.  The UTPCPL governs unfair competition and deceptive business practices, including disparaging another’s goods and services.  Given that the parties were competitors, that the harm alleged was not just reputational but economic, and that the defamation allegedly occurred in commercial speech, this was the appropriate analogy.
On the merits, plaintiffs sufficiently pled the elements of a false advertising claim.  They identified four specific statements:
(a)        “They take every shortcut in financial planning they can certainly, why wouldn’t they take shortcuts for cosmetic vain purposes too? Speaks to character … or lack thereof.”
(b)        “These are the days Cannella is most dangerous. His game is fear peddling. He motivates people to buy from him through creating and fostering fear.”
(c)        “999am [sic] is willingly embracing a known criminal as an advertiser who continues to abuse elderly victims.”
(d)       “I wouldn’t put it past old Slippery Phil, Captain Crash Proof if he showed the agents one app and filed another to get them off of the application and so he KNOWS he doesn’t to pay them.”
Defendants alleged that these statements were opinion, not factual claims.  The court found that at least some were explicitly factual and verifiable, such as the claims that plaintiffs took “shortcuts” in the financial planning business and that Cannella was a “known criminal” who “abuse[s] elderly victims.”  (That statement didn’t specifically use Cannella’s name, but since it was posted on a website with the URL, context made it plausible that this was a reference to him.)  Comment: I wonder whether there really are industry standards against which one could identify “shortcuts.”  Also, sometimes statements about criminality are taken to be mere hyperbole, especially online/anonymous statements—but that may be better left for a jury, or at least summary judgment.
The court then said that even assuming these statements were ambiguous and not literally false, plaintiffs met their burden by pleading consumer deception.  They pled that prospective customers cancelled appointments and existing clients terminated contracts as a result of defendants’ statements.  That was enough to plead misleadingness.  (This goes to an issue not often discussed—sometimes the fact/opinion line may be a factual question rather than one of law.  If reasonable consumers could take away a specific factual claim or a general opinion from a statement, then showing that they took away a specific (false) factual claim should justify liability.  But what if they took away a general negative opinion and nonetheless relied on it, because consumers do not behave completely like rational automatons?  Is harm enough to show falsifiability, or does harm sometimes just mean nonredressable, opinion-based harm?)
Turning to “commercial advertising or promotion”: the test for commercial speech looks to whether the speech is an ad, whether it refers to a specific product or service, and whether the speaker has an economic motivation for the speech.  Content is the most significant factor, and statements “related solely to the economic interests of the speaker and its audience” are indications of “commercial speech.”  Plaintiffs sufficiently pled that the defendants, their commercial competitors, used the website to damage plaintiffs’ reputation and in turn attract clients.  That sufficed. 
Nor was the website too sporadic or isolated to count as advertising or promotion; it allegedly contained over one hundred statements about plaintiffs.  The court also noted allegations that “[t]he website was accessible world-wide and was the first result to appear in a Google search for ‘Phil Cannella,’ ‘Joann Small,’ or ‘First Senior.’” Comment: Not that I think this should make a difference, but note the misunderstanding of how Google search results are varyingly presented to individuals—we don’t know that it’s the first result to appear when other people search.  If plaintiffs had been investigating the site before, it would probably come up higher for them than for people newly curious about plaintiffs. FWIW, it’s not the first result for “Phil Cannella” when I search, but Ripoff Report is; it’s not on the first page for “Joann Small,” nor “First Senior,” which for me brings up mostly entirely unrelated entities.
Plaintiffs alleged that at least 30-50 customers cited the website as a reason to cancel their business relationships with Plaintiffs. Defendants argued that there was no allegation that the four identified statements were the cause of that loss, but the court found it to be a reasonable inference at this stage that they were at least a partial cause.
Tortious interference: defendants argued that plaintiffs shouldn’t be able to circumvent the one-year defamation limitations period by recharacterizing their allegations as stating a claim for tortious interference when it was essentially defamation.  But when the gravamen of a claim was injury to economic interests or when the alleged non-defamation-related facts sufficiently supported a tortious interference claim, that reasoning didn’t apply.  The former rationale applied here and justified using the two-year limitations period for tortious interference.
However, plaintiffs failed to plead sufficient facts to support tortious interference with existing contractual relationships: they didn’t identify the people with whom they had contractual relations. While they did identify two insurance carriers allegedly contacted by defendants, they didn’t allege that the carriers did in fact terminate their business relationships.  References to “existing clients” or “various vendors” were insufficient to identify specific contracts.
By contrast, plaintiffs did sufficiently plead tortious interference with prospective contractual relations, which by definition are more difficult to identify precisely and thus require less specificity.  More than a “mere hope” of a future contract is required—instead, a plaintiff needs an objectively reasonable probability that a contract would come into existence, based on the parties’ then-current dealings.  Pleading that 30-50 potential customers cancelled follow-up appointments or decided not to do business with plaintiffs based on the website was sufficient to be more than a mere hope. These pleadings indicated that “potential customers were interested in Plaintiffs’ products or services, scheduled second appointments, and then cancelled these appointments in view of the contents that Defendants had posted on their website.”  (Given my personal experience with insurance pitches, I hope that factfinding includes inquiry into what plaintiffs counted as a showing of interest by a consumer.)
As a result of the holdings above, civil conspiracy and unfair competition claims also survived.

This entry was posted in commercial speech, consumer protection,, tortious interference. Bookmark the permalink.

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