fake “independent” review sites support claims against underlying advertiser & website operator

Beyond 79, LLC v. Express
Gold Cash, Inc., 2020 WL 7352545, No. 19-cv-06181 EAW (W.D.N.Y. Dec. 15, 2020)

Previous discussion. Beyond 79, which buys precious metal etc.
online under names including SellYourGold.com, sued a bunch of defendants for
false advertising and related claims; some of the defendants allegedly ran
“review” websites with undisclosed connections to competitors.

EGC and JSG allegedly “have a practice of setting up purportedly independent
websites for the dual purposes of falsely establishing their own credibility
and legitimacy and directing consumers who visit those websites to their own
sites.” EGC allegedly retained the services of defendants Londes and Osidius to
make these sites.

For example, one
site allegedly held itself out as an independent review site, but “[r]ather
than post actual consumer reviews,” it posted “highly suspect negative reviews
about SellYourGold.com,” along with “false and misleading information about
SellYourGold.com that cast it in a negative light and false and misleading
information about EGC and JSG that cast them in a positive light,”  including specific claims about plaintiff’s
length in business, BBB rating, and insurance coverage. It “displayed a ‘star
rating’ for each company it listed,” which it allegedly falsely claimed was
based on reviews by actual customers. It also allegedly removed positive customer reviews
about SellYourGold.com. When Beyond 79 sent a C&D to Londes, it shortly
thereafter “received a similar letter from counsel to EGC alleging Lanham Act
violations.”  EGC allegedly purchased
Google AdWords for terms similar to ‘sell your gold’ on Google which read
‘SellYourGold Reviews & Scams – Consumer Reviews: 1.2/5 Stars’ and used a
URL of ‘www.toponlinegoldbuyers.com/SellYourGold/Scams.’ ”

Similarly, another
site “purported to be a review site started by a disgruntled jewelry industry
professional who was disappointed by his interaction with online gold buyers.” But
this person allegedly doesn’t exist and “his” photo was a stock photo. The html
allegedly contained hidden links to EGC but no other companies, and referred to
“Google Code for ExpressCashGold.com Remarketing List” Top10CashForGold.com allegedly
made “false claims and statements about EGC without revealing any connection to
EGC,” such as claims that EGC’s “price is…always the best on the net” and ranking
EGC as its top online gold buyer and JSG as second. 

Two other sites
“purport to be…independent aggregators of local storefront precious metal
buyers.” But they allegedly “display[ ] EGC banner advertisings, include[ ]
reference to EGC in all search results for local stores, and even include[ ]
EGC’s phone number as a resource to obtain more information on the price of
gold….” All search results “include text recommending that customers sell
online, and list[ ] EGC as the only online gold buyer,” claim that EGC “has
been ranked as a top online gold buyer in several independently executed tests,”
and “highly recommend [that consumers] talk to [EGC] before selling [their]
gold jewelry elsewhere.”

 Since “at least September 2014,” EGC displayed
graphics and text on its website claiming that it is “Independently Ranked # 1,”
expressly identified as being based on reviews from two of these sites.

The court refused to
dismiss some of the claims against Londes and Osidius; the allegations against
them were specific enough to identify their particular roles. The court
analogized to cases allowing Lanham Act claims against advertising and PR
agencies; those cases have uniformly “held that advertising agencies may be
liable under the Lanham Act.” Londes and Osidius, like the advertising agencies
at issue in those cases, allegedly “knowingly participated in the creation,
development, and propagation of the false advertising campaign,” and could
accordingly be held liable as joint tortfeasors.

Lanham Act: The
alleged falsehoods weren’t puffery. The complaint sufficiently alleged that defendants
falsely represented the websites at issue as independent review sites when they
were in actuality associated with EGC. Said very simply: “In other words, it is
not the statement that EGC is ‘the best online precious metal buyer’—which is
the kind of the statement that has been found to be puffery—that is alleged to
be false; it is the representation that this conclusion was reached in an
independent manner. … [T]he alleged deception is not the high ratings given to
EGC and JSG, but instead the false representation that those ratings were
derived independently or from real customer reviews, when in actuality they
were formulated and published by EGC itself, acting through Londes and Osidius.”

As for injury, at
this stage, the allegation that the deceptive websites created and maintained
by Londes and Osidius diverted customers who otherwise would have used the plaintiff’s
services was sufficient.

GBL §§349-350
claims, however, failed because there were no plausible allegations of consumer
harm; mere consumer deception wasn’t enough under these provisions. The
plaintiff didn’t allege, for example, that consumers who chose defendants got
less for their gold than they would have gotten selling to plaintiff. A FDUTPA
claim failed for the same reason, though Florida doesn’t limit claims to

Unfair competition:
Plaintiff clarified that it was seeking damages for product disparagement,
which requires special damages; these were not sufficiently pled. Plaintiff
claimed damage “in an amount to be determined at trial not less than $6
million.” But the New York Court of Appeals has long made it clear that “round
figures, with no attempt at itemization,” are insufficient to allege special

Unjust enrichment:
Not plausible because plaintiff didn’t identify any benefit they received at
its expense; the fact that they were compensated for their work wasn’t enough.

Statute of
limitations arguments were premature because the Lanham Act has no statute of
limitations, only a presumption of laches after the coordinate state statute
has run. Here that’s 6 years; but, “[b]ecause laches is an affirmative defense,
a defendant asserting laches bears the ultimate burden of persuasion, even
where a presumption of laches may apply.” Since the defendants didn’t argue
that the complaint on its face established laches, the court wasn’t going to
dismiss it on that ground.

Other defendants got
rid of the same claims as were kicked out above; the complaint also didn’t
plausibly allege JSG’s participation in the deception. There were no details
about its role. “Significantly, EGC alone is alleged to have retained Londes
and Osidius, and the websites at issue are alleged only to have made minor
references to JSG” (such as ranking it second and containing ads for JSG).

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