false advertising claims against competing media nonprofit can continue under broad theory of commercial speech

Tang v. Guo, 2019 WL 6169940, No. 17 Civ. 9031 (JFK)
(S.D.N.Y. Nov. 20, 2019)
The previous complaint was dismissed
for failure to sufficiently allege commercial speech
; the court now finds
it sufficiently alleged because the media defendant had a “donate” button and
competes with the media plaintiff; query whether under this reasoning Fox could
sue the Washington Post under the Lanham Act.
Plaintiffs alleged that defendant Kwok runs charitable
organizations and a media platform that are designed to compete with Tang and
his wife’s own nonprofit organizations and online, independent media outlet.
Kwok allegedly made, and continues to make, numerous false and defamatory
statements about plaintiffs “to garner attention for and ultimately drive
donors away from Plaintiffs’ organizations to Kwok’s competing organizations.”
The court, unfortunately, set forth the post-Lexmark
“commercial advertising or promotion” test, then commented that “[m]any courts
have adopted a fourth requirement: a purportedly false statement must be made
‘by a defendant who is in commercial competition with plaintiff.’”  This has the historical sequence backwards;
most courts to consider the issue have recognized that Lexmark’s logic
eliminated the competition requirement. This error may be consequential here.
The prior complaint “failed to allege how Kwok had an
economic motivation or intended to profit by attempting to gain viewers on his
media platform at the expense of viewers on Plaintiffs’ platform.” The amended
complaint, however, alleged a sufficient economic motivation for Kwok’s speech
because Kwok allegedly added “DONATE” buttons to the video infomercials
promoting his media outlets and fundraising organizations. In addition, the
amended complaint alleged “that Kwok and the other named defendants intended to
increase viewership on the Media Defendants’ platforms to encourage viewers to
donate to the Rule of Law Defendants that compete with Plaintiffs’ own
nonprofit organizations.” 
In addition, there were new allegations that the defendants
violated the Lanham Act by misleading the public regarding the purported use of
donated money, failing to disclose that (1) the donations are not
tax-deductible and (2) the funds will be used for non-charitable lobbying
efforts, to support the for-profit Media Defendants, and to fund Kwok’s
application for asylum in the United States. And the complaint plausibly
alleged that the parties compete for fundraising dollars, that Kwok’s false
statements were made for the purpose of influencing viewers to donate to his
charitable organizations instead of Plaintiffs’, and that the statements were
sufficiently disseminated to the relevant purchasing public by being posted to
public forums such as YouTube and Twitter. 
That was enough.
I am dubious.  The commercial
speech status of fundraising speech is itself hotly contested, though the
defendants’ nonprofit allegedly seeking donations that aren’t deductible is a
complicating factor. Still, if defendants are seeking donations based on their
speech and not inducing consumers to buy some separate product or service, I
don’t see why Tang couldn’t also sue the Washington Post for Lanham Act false
advertising for similar reporting (given Lexmark), since the Washington
Post also seeks readers to fund its reporting. It seems to me that this ought
to be a defamation case.
The state law unfair competition claim survived for the same
reasons. Tortious interference failed because the complaint didn’t allege
specific facts about contracts with other donors breached because of
defendants’ actions.
Defamation against Kwok: Kwok allegedly defamed plaintiffs
by claiming they tried to lie to and “swindle” donors, steal money from donors,
and use donated money for their own personal and illicit expenses. Kwok argued
that these were opinions, and that Tang was a public figure. At the pleading
stage, defamation of a public figure with at least reckless indifference to the
truth was plausibly alleged. “Kwok’s assertions that Plaintiffs are secret
agents of the Chinese government, rapists, or thieves, are statements that may
be proven false and, thus, they are not mere statements of opinion.”
IIED: “IIED claims should not be entertained where the
conduct complained of falls entirely within the scope of a tort claim such as defamation.”
The claim failed because the conduct alleged wasn’t sufficiently “extreme and
outrageous” for New York’s high standard. “Here, the gravamen of the SAC is a
commercial dispute between competing high-profile public advocates and the use
of false and defamatory statements by one advocate to obtain an unfair
advantage over his competitor. This ‘cannot be said to shock the conscience of
humankind.’” And it was duplicative of the defamation claim.
Harassment: Kwok allegedly engaged in a course of conduct
that served no legitimate purpose and which alarmed and seriously annoyed plaintiffs
in violation of N.Y. Penal Code § 240.26. New York law “recognizes an implied
private right of action for criminal harassment in violation of the Penal Law.”
So it was allowed. (But has to be subject to the same limits as defamation in
this situation where the speech is all public, right?)
False light: not actionable in NY. Plaintiffs argued that
they were California residents and the harm was suffered in California, but
that wasn’t enough where the false light claim was wholly duplicative of their New
York harassment and defamation claims.

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