NY law offers more than 43(a) when it comes to allegedly misleading omissions

Casper Sleep, Inc. v. Mitcham, — F.Supp.3d —-, 2016 WL
4574388, 16 Civ. 3224 (S.D.N.Y. Sept. 1, 2016
Casper sells mattresses over the internet, while Mitcham and
Mattress Nerd LLC operate a website that reviews mattresses. Casper sued under
§ 43(a) of the Lanham Act and § 349 of the New York General Business Law,
alleging that Mitcham misleadingly implied that his reviews were unbiased, when
in fact he collects sales commissions through affiliate marketing relationships
with many of Casper’s competitors but not (any more) from Casper’s. The court
allowed some of the claims to continue.
The FTC Guides Concerning Use of Endorsements and
Testimonials in Advertising say that, “[w]hen there exists a connection between
the endorser and the seller of the advertised product that might materially
affect the weight or credibility of the endorsement (i.e., the connection is
not reasonably expected by the audience), such connection must be fully
disclosed.”  Mitcham includes a general
“Affiliate Disclaimer” that appears on each page of his website:
On my site, I will often recommend
products and link to other websites.
In many of those cases, I get paid
a small commission if you end up purchasing anything through those links.
Unlike a mattress salesman in a store, I don’t just get paid commission from
one brand or one retailer; I’m an affiliate for many different companies, so I
can help find you great deals no matter where they are.
I have not been paid to write any
of these articles and all of these opinions are completely my own. I also do
not accept paid advertising placement on my site.
My only compensation is when I help
match a reader to the right product, and that reader makes the purchase through
a link on my site. In this way, I can act as a brand-agnostic and
retailer-agnostic salesman.
Disclaimers at the bottom of his mattress reviews “generally
state that Mitcham is an affiliate of the relevant mattress company or
companies and that Mitcham receives a ‘small commission’ if readers purchase a mattress
through one of his affiliate links.” Nonetheless, Casper alleged, Mitcham
misled consumers into thinking that his reviews were unbiased.  His “About the Mattress Nerd” page, for
example, says in part, “it’s difficult to find an unbiased source. Many
mattress guides out there are written by the companies trying to sell you their
particular mattress…. I’ve switched teams to be on the side of the customer.”
Mitcham argued that Casper lacked “prudential standing,” but
Lexmark says that phrase is a no-no.  More specifically, Mitcham argued that Casper
was really alleging a violation of the FTCA, but that failed too.  “[C]ourts have held that a ‘plaintiff may and
should rely on FTC guidelines as a basis for asserting false advertising under
the Lanham Act.’”  However, the Lanham
Act mostly failed because §43(a) doesn’t impose an affirmative duty of
disclossure, and many of the challenged statements weren’t false or plausibly
Casper alleged that the affiliate disclaimer “affirmatively
implies that Mitcham is an affiliate of virtually all the mattress companies
whose products he reviews and therefore that his reviews remain unbiased
despite these connections.” But “virtually all” isn’t “all,” and saying that he
was an affiliate for many different companies was perfectly accurate, and it
was implausible that readers would infer that Mitcham was entirely unbiased
from his “admission of pecuniary interest in some but not all mattress brands.”
Casper’s allegation that Mitcham’s commission was “meaningful” and not “small”
was too vague and conclusory to support a claim.
As for claims of “brand-agnosticism” and
“retailer-agnosticism,” those statements were “too subjective and opinion-laden”
to support a Lanham Act claim.  So too
for statements on the “about” page about the difficulty of finding an unbiased
source/Mitcham’s alleged switching of teams to be on consumers’ side.  The nebulous claim that the combination of
statements was misleading was “insufficiently tied to an actionable ‘description’
or ‘representation of fact.” [I wonder what a consumer survey might have shown
about whether consumers perceived the disclaimers and understood them as the
court interprets them.]
However, there was a Lanham Act claim for direct suggestions
that Mitcham had an affiliate relationship with Casper. For example,
MattressNerd.com contains a three-way comparison of Casper, Tuft and Needle,
and Saatva mattresses. Casper alleged that, although Mitcham’s comparison
originally named Casper the winner of this face-off, Mitcham updated the post
after Casper terminated their affiliate relationship with Mitcham to recommend
another affiliated company, Leesa, even though the comparison falsely stated
that he was an affiliate for all the companies mentioned.  This was, as alleged, a literal falsehood.
Mitcham’s review of the Casper mattress also contained
affiliate links to various of Casper’s competitors’ products, along with
Amazon.com links to Casper and Tuft and Needle.  But the disclaimer just referred to “affiliate
links.” The court considered this a closer case, but still “plausibly
materially misleads consumers by directly suggesting that Mitcham has the same
pecuniary interest in pushing sales of Casper that he does in pushing sales of
each of the other mattress companies mentioned in the review.”
Mitcham argued that he didn’t compete directly with Casper,
but Lexmark foreclosed such an
argument.  “[T]here is no requirement
that false-advertising claims under the Lanham Act be limited to the typical
fact pattern.”  Mitcham also argued that
Casper’s alleged injuries weren’t proximately caused by his allegedly
inadequate disclosures.  But given that
the reviews recommended competing mattresses over Casper’s, it was perfectly
plausible that the alleged “deception … cause[d] [consumers] to withhold
trade from the plaintiff.”  
The court distinguished Wall & Assocs., Inc. v. Better
Bus. Bureau of Cent. Va., Inc., 2016 WL 3087055 (E.D. Va. May 31, 2016), which
found that alleged injuries weren’t proximately caused by the BBB’s description
of itself as relying on a “national, uniform, and unbiased standard.”  Instead, the injuries proximately came from
the bad rating the BBB gave the plaintiff. 
But the court here only allowed claims to proceed based on specific
claims about an affiliate relationship with Casper; BBB didn’t involve allegations of false or misleading statements
about the plaintiff.  Also, proximate
causation failed in BBB in part
because the lack of sufficient overlap between the parties’ customers; here,
“[t]he overlap between plaintiff’s and defendants’ prospective customers in
this case is much tighter and arguably 1:1.”
As for the § 349 GBL claims, they ban “[d]eceptive acts or
practices in the conduct of any business, trade or commerce or in the
furnishing of any service in [New York].”  This requires “(1) consumer-oriented conduct
that is (2) materially misleading and that (3) plaintiff suffered injury as a
result of the allegedly deceptive act or practice.” In addition, a plaintiff
must plausibly plead that the challenged “acts or practices have a broader
impact on consumers at large.”
The court rejected Mitcham’s argument that the alleged
“injury must include some potential danger to the public health or safety” and
that, as a commercial actor, Casper needed to allege conduct that has
“significant ramifications for the public at large.” Casper rejoined that §349
covered “those acts or practices which undermine a consumer’s ability to
evaluate his or her market options and to make a free and intelligent choice.”
Courts have said different things about §349, but the court
here pointed out that the narrowing courts were federal district courts, while
the NY state courts—which actually have the interpretive authority here—have
insisted that §349 is broad. The New York Court of Appeals (and the Second
Circuit) have repeatedly held that the “[t]he ‘consumer-oriented’ requirement
may be satisfied by showing that the conduct at issue ‘potentially affect[s]
similarly situated consumers.’”   

Mitcham’s website was clearly geared towards consumers and
the allegedly deceptive content could affect any number of similarly situated
consumers.  Thus, the conduct was “consumer-oriented.”  Also, though the §43(a) claim failed, that
didn’t make Mitcham’s disclosures adequate for §349 purposes.  Section 349 is “substantially modelled on the
Federal Trade Commission Act,” and arguably did require better disclosures,
following the FTC’s “clear and conspicuous” guidance.

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