Native American Arts lacks standing to sue under IACA

Native American Arts, Inc. v. Peter Stone Co., 2015 WL
3561439, — F. Supp. 3d –, No. 08 C 3908 (N.D. Ill. June 9, 2015) (magistrate
judge)
 
NAA sued Stone under the Indian Arts and Crafts Act (IACA),
which forbids selling merchandise “in a manner that falsely suggests it is
Indian produced, an Indian product, or the product of a particular Indian or
Indian tribe or Indian arts and crafts organization.” The Act authorizes suit
by an aggrieved Indian, Indian tribe, or Indian arts and crafts organization,
seeking $5000 in estimated damages and (initially) over $14 million in
statutory damages, based on the Stone’s allegedly unlawful gross sales of
$26,000 in goods over a two year period. The judge found that NAA lacked
Article III standing.
 
NAA is owned by Matthew and Mary Mullen, enrolled members of
the Ho–Chunk Nation. NAA sells Indian craft items and has a store in Tinley
Park, Illinois, and also sells using catchyourdreams.com, which mainly features
Navajo products. NAA has been in business for nearly 20 years, and Mr. Mullen
testified to $1.25 million in revenue from the sale of Native American arts and
crafts, though there was no evidence submitted that NAA maintained web
presence.  Its gross receipts, using Mr.
Mullen’s testimony, were less than $70,000 a year and its profits couldn’t be
too great, probably not over $30,000 per year, so that its statutory damages
demand (raised to $36 million) represented over two centuries of gross
revenues, or 500 years of profits.
 
Stone sold jewelry designed by Wendy Whiteman, which she
called the “Wolfwalker” Collection. Stone advertised these items on its website
as “Authentic Native American Jewelry,” “Native American Jewelry,” “Native
American Designs,” or “Genuine Indian Handmade.” It wasn’t clear whether Wendy Whiteman
qualified as an Indian—a member of an Indian Tribe or certified as an Indian
artisan by an Indian Tribe—under the IACA. At her deposition, Whiteman claimed
that her “spiritual roots are Native American.” The court thought that didn’t
mean she wasn’t an “Indian”; apparently the deposition never asked her more.  She wasn’t an enrolled member of a tribe, but
IACA doesn’t require “enrollment.” 
Whiteman told Stone that she could provide “an authentic or a line of
Native American jewelry created by a Native American.”  In four years of sales, Stone sold nearly
$28,000 of Wolfwalker jewelry, less than 3/10 of one percent of Stone’s sales,
which were nearly $10 million, mainly for Celtic and New Age designs.
 
Stone was a wholesaler; less than 2% of its sales were to
end users.  It had little or no presence
in Illinois; less than 4% of its customers were in Illinois. Though Stone had a
website, the internet accounted for
less than 1% of its sales during the relevant period.  Mullen claimed that two Stone customers were
NAA’s competitors: Buffalo Gal Home Gallery in Frankfort, Illinois, and
Sanctuary Traders in Tinley Park. But there was no evidence that any of Stone’s
sales to these two businesses were of Wolfwalker items.
 
At this point, the court commented that NAA was a frequent
filer, filing at least 125 IACA cases, most of which “seem to be short-lived
and dismissed pursuant to settlement.” “In the context of one of these cases,
the Tribal Court of the Ho–Chunk Nation commented that NAA was ‘mainly
concerned with monetary gains,’ was ‘utilizing the [IACA] without any
research,’ and that ‘dollar amounts of $1,000 per day and $2,000,000 [were]
preposterous and frivolous.’” But then, “there is nothing inherently wrong with
a zealous private attorney general.” And given the total lack of enforcement in
the first 60 years of the statute’s existence, “if any statute ever needed a
boost in terms of enforcement, it’s the IACA.” That’s why Congress amended the
law in 2000 to allow Indian Arts and Crafts Organizations to sue.  Still, “NAA is not an actual attorney
general, and it still must prove it has Article III standing to sue.”
 
NAA met the first hurdle of being an Indian Arts and Crafts
Organization under the IACA. Marketing Indian arts and crafts need not be the
primary purpose of an Indian Arts and Crafts Organization for it to qualify as
such under the Act, “consistent with the text and purpose of the Act, which are
to promote … commercialism and economic development.”
 
However, Article III standing requires an “injury in fact”
fairly traceable to the challenged action of the defendant and redressable by a
favorable decision. This the NAA could not prove.  It alleged, but did not provide evidence for,
lost goodwill due to consumer mistrust, diminution in value of genuine
designations of Native American origin, and misappropriation of its investment
in genuine Native American products.  Mr.
Mullen had “nothing more than a belief that companies like Stone hurt Indian
arts and crafts organizations like NAA.” He had no evidence of lost sales, only
the “common sense” hypothesis that Stone diverted sales from companies like
NAA.  But diverting sales from a company
“like” NAA was insufficient.  Mr. Mullen
couldn’t say whether NAA lost any sales. Nor could Mr. Mullen show that Stone’s
activity forced NAA to lower its prices. He said that the need to lower prices
to compete with non-authentic goods was “an ongoing problem for many, many
years….” But Stone’s activities “were not ongoing for many, many years.”
 
NAA argued that it had standing because Congress enacted a
statute making it a violation to pass off non-authentic Indian arts and crafts
as authentic: the invasion of legal rights creates standing.  “But the ‘injury in fact’ test requires more
than an injury to a cognizable interest. It requires that the party seeking
review be himself among the injured.” On this record, NAA wasn’t.  A fair housing tester who’s denied housing
has been denied a right, whether she wanted to exercise it or not, by conduct
easily traceable to the discriminatory entity. 
NAA, by contrast, had no evidence it suffered any injury traceable to
Stone.  Though nominal damages or intangible
economic injury can confer Article III standing, “there still must be a
concrete, personal injury in fact that is fairly traceable to the defendant.” 
 
NAA argued that it suffered reputational injury, citing Lexmark. But Lexmark held that “a plaintiff suing under § 1125(a) ordinarily
must show economic or reputational injury flowing directly from the deception
wrought by the defendant’s advertising; and that that occurs when deception of
consumers causes them to withhold trade from the plaintiff.” NAA hadn’t shown
that: there was no evidence of any withheld trade. Stone had only two customers
that NAA even claimed as competitors, and there was no evidence that they ever
had any Wolfwalker products, even though NAA could easily have found out in
discovery whether there had been such sales. Nor had NAA shown any evidence of a
“Lanham Act-style reputational injury.”
 
If the court accepted NAA’s theory of standing, “some 6
million people and entities would have standing to sue Stone—resulting in the
very multiplicity of suits that the injury-in-fact requirement seeks to prevent.”
 

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