Expedia’s unavailability claims sometimes literally false, maybe misleading; materiality is contested for trial

Buckeye Tree Lodge v. Expedia, Inc., 2020 WL 5372246, No. 16-cv-04721-VC
(N.D. Cal. Sept. 9, 2020)

The court denies cross motions for summary judgment on whether
Expedia violated the Lanham Act by suggesting that plaintiffs’ hotels could in
theory be booked on Expedia’s site but lacked available rooms (except as to
allegedly misleading phone numbers) and whether the plaintiffs are entitled to
a permanent injunction. Expedia also failed to decertify the plaintiff class,
but did get a clarification in the class definition.

There were genuine disputes of fact over whether (1) Expedia’s
unavailability messages and Google ads were misleading; and (2) any deception
was material to consumers’ purchasing decisions. “[A] small number of Expedia’s
unavailability messages—most noticeably, ‘We are sold out’—are literally false
when used to describe availability at hotels for which Expedia never had any
beds to sell.” Also literally false: “Sorry, the [Hotel name] is not available
for your travel dates. You may choose alternatives dates OR select from the
properties below.”; and “Fully booked! We’re sold out for your travel dates on
our site.”

Most of the other unavailability messages weren’t literally
false but nonetheless could be misleading, e.g., “Your dates are popular! Rooms
are unavailable for your trip dates on Expedia. Try new dates to check
availability.” “This message seems intuitively to imply that rooms are
unavailable because of the particular dates selected, rather than because
Expedia is entirely incapable of booking rooms at that hotel.” “Many of the
other messages are similar, e.g.: ‘This property has no availability for your
travel dates on [Expedia, Travelocity, or Orbitz]’; ‘[Hotel name] has no
availability for your travel dates on Hotels.com.’” Indeed, I think it would
have been reasonable to at least the first false by necessary implication;
similarly, the attribution of “no availability” to the hotel, instead of
to the website, in some of these other statements is pretty significant. The court thought other messages
might be less likely to mislead, such as 
“Wait a minute. There is no availability for this hotel on Hotels.com.
Please amend your search.” The court found some “quite unlikely to have been
misleading, e.g. ‘Sorry, we aren’t taking reservations for this property on our
site.’” [Once again, there’s a huge gap between what courts find plausible in
trademark cases and what they find plausible in false advertising cases.] Overall,
Expedia “raises fair concerns about the reliability and probative value of the
plaintiffs’ survey evidence, and the question of whether these phrases were
misleading cannot be answered at summary judgment.” [Seems like plaintiffs
would be entitled to an instruction about falsity for the literally false
statements, but it looks like this will be a bench trial.]

There was also a genuine dispute over materiality: Expedia
presented evidence “suggesting that the messages were not material in the
actual context of how consumers make travel decisions,” conflicting with
plaintiffs’ evidence.

Expedia did win summary judgment for claims related to “Expedia’s
allegedly misleading display of telephone numbers,” because plaintiffs offered
“no actual evidence that the phone number displays were false, misleading, or
material to consumers’ purchasing decisions.” That seems like a shame, because
it sounds like evidence could have been developed: proximate to the hotel name,
Expedia apparently put up a phone number that went instead to Expedia and
offered reservations to other hotels. An internal Expedia document “acknowledging
that the placement of phone numbers on the sites often confuses consumers” was
in the class certification record, but plaintiffs didn’t introduce it on
summary judgment or even cite it, and anyway that showed misleadingness rather
than materiality. [If properly used, the bait and switch character would itself
be the materiality: if consumers dialed the number because they thought they’d
reach the hotel in the listing, that belief affected their decision to act;
having been diverted to the Expedia line, many consumers might not search
further. That’s the classic reason bait and switch is actionable.]

Mootness: “The named plaintiffs have standing to seek
injunctive relief because the alleged Lanham Act violations were ongoing at the
time the complaint was filed (or at the time the additional plaintiffs
intervened).” And “voluntary cessation of allegedly unlawful conduct ordinarily
does not suffice to moot a case” and Expedia “bears the formidable burden of
showing that it is absolutely clear the allegedly wrongful behavior could not
reasonably be expected to recur.”

This it did not do, despite arguing that it had “resolved
any errors” causing class member hotels to appear on its websites and has
implemented “proactive measures” to prevent these “errors” from reoccurring. References
to “investigations” conducted by its “Health and Safety team” and to
contractual obligations it imposes on the bed banks it works with were “too
vague and conclusory to meet the high burden of showing mootness.” It portrayed
other measures, such as preventing Expedia from bidding on Google ads for
hotels that do not have availability for a certain period of time, as business
decisions, “while failing to show that there is anything to keep it from reversing
these decisions if business considerations change. Indeed, Expedia’s repeated
assertions about the dynamic and complicated nature of the online travel
industry suggest that business considerations in fact frequently do change, and
undercut its arguments that the changes are permanent or will prevent any
future misrepresentations from occurring.”

There was a genuine question whether class members were
likely to be harmed in the future absent an injunction “that either bars
Expedia from making misleading statements about hotels it is incapable of
booking or requires Expedia to institute reforms designed to minimize the
chances of such statements inadvertently appearing,” and whether these harms
were irreparable.

Clarification: The class consisting of “hotels that do not
have booking agreements with Expedia and are not capable of being booked
through Expedia, but appear on Expedia’s websites” includes “hotels that
appeared on Expedia’s websites when they were not capable of being booked
through Expedia at some point during the class period, regardless of whether
they previously had booking agreements with Expedia or later entered into
agreements with Expedia that gave Expedia booking capabilities.” Also, it
includes “hotels about whom Expedia will make similar statements in the future
despite being incapable of booking rooms at those hotels.”

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