competition no longer required for Lanham Act “commercial advertising or promotion”

Healthnow New York Inc. v. Catholic Health System, Inc., 2015
WL 5673123, No. 14–CV–986S (W.D.N.Y. Sept. 25, 2015)
Healthnow, aka Blue Cross and Blue Shield of Western New
York (BCBS), sued Catholic Health for violations of the Lanham Act and NY’s
GBL, as well as for defamation.  Ads in
church bulletins said:
[BCBS] has recently introduced a
new Medicare Advantage product, Senior Blue HMO Select that replaces its
existing Senior Blue HMP–POS 650 plan. This product specifically excludes all
Catholic Health facilities including all hospitals, labs, diagnostic imaging,
rehabilitation centers, home care, and all other sites-services. [BCBS] may not
have adequately communicated this exclusion to its members. Please note that
several other Medicare Advantage plans are available that include access to
Catholic Health.
Catholic Health also ran an ad in the Buffalo News during
BCBS’s open enrollment period, which stated in large type “[BCBS] Senior Blue
HMO Select customers will no longer have access to Catholic Health facilities.”
Smaller text included: “While emergency services will still be covered, this
new plan completely eliminates your ability to choose Catholic Health
facilities for services like surgical procedures, home care, rehabilitation,
and other non-emergent care needs. Receiving such services at a Catholic Health
facility will not be covered under this plan.”
BCBS alleged that these statements were false and misled
consumers into believing that BCBS didn’t provide coverage for other facilities
not within the Catholic Health System network but, by virtue of their name
(“Mount Saint Mary’s Hospital” or “Brothers of Mercy”), may be perceived to be
a “Catholic” health facility. Letters from Catholic Health’s CEO to current
employees and Catholic Health System retirees were to similar effect, as was an
op-ed he published during the open enrollment period.
Catholic Health argued that its statements weren’t
commercial advertising or promotion under the Gordon & Breach test. 
The Second Circuit never adopted the prong requiring
competition between the parties, and Lexmark
means it never will.  Catholic Health also
argued that its statements were not made “for the purpose of influencing
consumers to buy defendant’s goods or services,” another element of Gordon & Breach. However, the
challenged statements allegedly directly affected BCBS’s sales and reputation,
which was cognizable under §43(a).  (That
doesn’t really address the question of whether Catholic Health’s speech was
noncommercial or commercial—noncommercial speech can cause harm to business
goodwill.)  Further citations: Educational
Impact, Inc. v. Danielson No. 14–937(FLW)(LHG), 2015 WL 381332, *13 (D.N.J.
Jan. 28, 2015) (recognizing that Lexmark repudiated the ‘direct-competitor test’
enunciated in Gordon & Breach ); Tobinick v. Novella, No. 9:14–cv–80781,
2015 WL 1191267, *5 n. 10 (S.D. Fla. Mar.16, 2015) (same).
As for falsity and misleadingness, BCBS alleged that the
statements were false because Senior Blue HMO Select provides coverage for
emergency care treatment, as well as treatment by primary care physicians, at
all Catholic Health facilities.  In an
article on which Catholic Health relied, a BCBS spokesperson is quoted as
saying that that Senior Blue HMO Select would cover medical care at all major
medical facilities in Western New York with one exception: “Buffalo General,
Roswell, ECMC, and Gates Vascular Institute, among others, but it does not
include the Catholic Health System. So they are specifically excluded? On that
option only. We have 6 other options that offer a full network.”  Catholic Health also relied on plan materials
distributed by BCBS.  None of these were
incorporated into the complaint, so the court converted the motion to dismiss
into a motion for summary judgment and invited further briefing.  The court cautioned: “even if the short
statements in the BCBS publicity materials are found to inaccurately reflect
the true scope of Senior Blue HMO Select, it is unclear how BCBS can press a
viable claim for false or misleading advertising against Catholic Health for
using the same language BCBS used in its own materials. Instead, pursuing false
advertising or deceptive act claims based on statements repeated from BCBS’s
own promotional materials, particularly materials directed at medical providers
such as Catholic Health, is arguably frivolous.”
As for defamation, the claim was actually for product
disparagement, because the challenged statements were about the scope of BCBS
services, not about whether BCBS was “anti-Catholic” as BCBS tried to
argue.  BCBS was therefore required to
plead and prove special damages, setting forth “an itemized account of her
losses; round figures or a general allegation of a dollar amount as special
damages will not suffice.” This it did not do.

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