calling NBC’s lawyers: gold company can claim #1 rank by Today Show, can’t make additional misrepresentations

Express Gold Cash, Inc. v. Beyond 79, LLC, 2019 WL 4394567,
No. 18-cv-00837 EAW (W.D.N.Y. Sept. 13, 2019)
The parties are two of the top competitors in the market for
nationwide mail-in precious metals purchases. When a customer mails in items, they receive an offer; if
the offer is declined, the items are returned free. “In 2010, the Today Show, a
nationally televised morning show on the NBC network, aired a segment in which
it ‘claimed to have compared the prices offered by ten different mail-in
precious metals dealers by mailing a single item of gold to each one,’ and
further claimed that it received the highest offer from Defendant, which ‘offered
90% of market value.’”
“Beginning in 2011 and continuing into the present,” defendant
“published variations of an advertisement that it is ‘ranked [or rated] #1 on
[or by] NBC’s Today Show.” This was allegedly misleading because it (1)
concealed the date of the segment, (2) conveyed a false impression that
Defendant is currently and actually “ranked #1” by Today, (3) falsely indicated
Today and NBC’s current or former endorsement, (4) and falsely suggested that
Today really evaluated the services overall rather than a single sale of gold.  [This last is a classic “false establishment claim” argument.]
Defendant’s website also used “the sound of three tones that
are reasonably identical to the famous three tones used by NBC to identify its
broadcasting service.” [It seems to me that contact with someone at NBC legal
might be at least as effective as suing directly; I can’t imagine NBC loves
these ads.] Separately, Express Gold alleged that “Defendant’s website displays
stock photographs allegedly depicting its ‘latest payouts’ to customers,” and
that these “stock photographs are false and misleading because they grossly
exaggerate the kind, quality and quantity of recently purchased items[.]” The
stock photographs in question have captions stating that “photos are
illustrative and depict items of similar kind, quality and quantity to actual
items purchased.”
Express Gold brought NY state and federal false advertising
claims and claims for unjust enrichment.
Laches: The Second Circuit has held that for claims alleging
unfair competition or false advertising under the Lanham Act, the analogous
statute of limitations is New York State’s six-year statute of limitations for
fraud. Laches couldn’t be resolved at the motion to dismiss stage; not only
might the continuing wrong doctrine apply, it wasn’t clear when Express Gold knew
of defendant’s conduct, and it wasn’t clear from the complaint that defendant
suffered prejudice from the delay.
The Second Circuit has cautioned courts not to “permit
overextension of the Lanham Act to intrude on First Amendment values,” ONY,
Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490, 496 (2d Cir. 2013)
(quotation omitted), and “generally a false advertising claim will not lie
where the defendant has done nothing more than accurately present a study’s
conclusions, even if those conclusions are flawed.”  That’s not a Cornerstone quote, but
the court’s phrasing of the case.  But Cornerstone
is about reprints of studies, disseminated to doctors expert in the field
capable of seeing the study’s weaknesses for themselves, not a situation in
which an advertiser incorporates a third party’s non-scientific study into its
advertising to the general public. 
Rather than recognizing this limit, the court noted that it was possible
to have liability if the defendant misstated and misrepresented the Today
Show’s methodology and findings, which is also true but not the same thing (if
the Today Show used an unreliable methodology, it couldn’t be liable for doing
so, but the defendant shouldn’t be able to launder a bad study in its own
advertising).
Anyway, based on Cornerstone, use of the statement
“ranked #1 by NBC’s Today Show,” or variants thereof, wasn’t literally false,
and also wasn’t a misrepresentation of the Today Show’s conclusions. Nor was it
false to use the present tense even though the segment was eight years old.
Board-Tech Elec. Co. v. Eaton Corp., 737 F. App’x 556 (2d Cir. 2018), affirmed
a district court decision dismissing a Lanham Act false advertising claim in a
similar arguably-stale-but-not-replaced-by-a-more-current-finding situation.  
Nor was the use of “ranked #1” and the accompanying use of
NBC’s name and logo misleading.  This was
an appropriate conclusion on a motion to dismiss because misleadingness was
conclusorily pleaded: “[u]pon information and belief, based on online customer
reviews, Defendant has lured consumers into sending their items by publishing
the Today Segment and the Deceptive Advertising.” There was no detail about the
“online customer reviews” or how they supported the misleadingness allegation; “information
and belief” was only appropriate for facts particularly within the defendant’s
possession and control, or where the belief is based on facts making an inference
of culpability plausible.  Comment: can
you imagine a court rejecting NBC’s false endorsement claim as implausible,
even without anything about customer reviews?
However, there were some things beyond “ranked #1,” such as
falsification of the Today Show’s broadcast date—a printout from its website
stated a 2015 date; screenshots of a video description posted by defendant on
YouTube allegedly falsely stating that the Today Show “investigated dozens of
Cash for Gold companies” (it tested 10); and letters to customers stating that
the Today Show “found that Sell Your Gold offered the highest payout of any
competitor.” These statements were both false/plausibly false and plausibly
material. “The Court cannot say, as a matter of law, that a reasonable consumer
would not be influenced by the claim that Defendant offered the highest price
of any competitor, or of ‘dozens’ of competitors. Similarly, a reasonable
consumer could find it material whether Defendant had been found to offer the
highest payouts in 2010 or 2015, because a reasonable consumer could conclude
that a more recent ranking is more likely to be representative of the current
status of Defendant’s services.”  These
claims were neither mere opinion nor so exaggerated as to be unreliable.
Claims based on the “latest payout” photos failed. Express
Gold didn’t allege any facts about “the actual kind, quality, or quantity of
items that have recently been purchased by Defendant, and therefore provides no
basis to conclude that the ‘latest payouts’ stock photographs are either
literally false or likely to mislead consumers. Plaintiff cannot state a false
advertising claim by picking a statement from Defendant’s website and alleging,
with no factual support, that it is untrue.”
The same things happened to the NY GBL and unfair
competition claims; unjust enrichment failed because the complaint didn’t
plausibly allege that defendant was unjustly enriched by money taken from
Express Gold. Specifically, it failed to allege any facts from which a
fact-finder could conclude that, but for defendant’s deceptive conduct,
consumers would have done business with Express Gold rather than with someone
else.

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