Opinion ID: 763256
Heading Depth: 2
Heading Rank: 1

Heading: Actionability of Statements Under the Lanham Act and State Defamation Law

Text: 11 Liability under the relevant provision of the Lanham Act requires, among other things, a false or misleading representation of fact. 15 U.S.C. § 1125(a)(1)(emphasis added). Similarly, California defamation law requires that the offending statement expressly or impliedly assert a fact that is susceptible to being proved false, and must be able reasonably to be interpreted as stating actual facts. Weller v. American Broadcasting Companies, 232 Cal.App.3d 991, 1001, 283 Cal.Rptr. 644, 650 (1991). Two of the three statements upon which the jury's verdict was based do not meet these requirements as a matter of law. 12 Too Small  13 The statement that Coastal was too small to handle Shearson's business, along with the implication or statement that First American was large enough to handle that business, was exactly the kind of puffery that does not qualify as a statement of fact capable of being proved false. See Cook, Perkiss & Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 245 (9th Cir.1990) (puffery, which a court may determine as a matter of law, is not actionable under Lanham Act). In Cook, we affirmed the district court's determination that the defendant's statement implying better service and lower rates than the competition was puffery because a reasonable consumer would not interpret the statement as a reliably factual claim. Id. at 246. We cited with approval the reasoning in Smith-Victor Corp. v. Sylvania Elect. Products, Inc., 242 F.Supp. 302 (N.D.Ill.1965). 14 In Smith-Victor, an advertiser's statement that its lamps were far brighter than any lamp ever before offered for home movies was ruled puffery. However, when the advertiser quantified numerically the alleged superior brightness with statements such as 35,000 candle power and 10-hour life, the court found a potential Lanham Act claim. 15 Cook, 911 F.2d at 246 (quoting Smith-Victor, 242 F.Supp. at 308-09); see also Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir.1997). 16 In the present case, the defendants' assertion that Coastal was too small to handle Shearson's business was vague and subjective. It was not a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact. As a matter of law, it could not give rise to liability under either the Lanham Act or the California law of defamation. 3 17 Not licensed in California  18 California's Financial Code provides that [i]t shall be unlawful for any person to engage in business as an escrow agent within this State except by means of a corporation duly organized for that purpose licensed by the commissioner as an escrow agent. Cal. Fin.Code § 17200 (West 1982). First American stated Coastal had no such license, and stated or clearly implied that § 17200 required Coastal to have one for its activities in connection with refinancing California property. The parties continue to dispute whether Coastal's activities fell within § 17200. 4 We need not resolve that question, however. Absent a clear and unambiguous ruling from a court or agency of competent jurisdiction, statements by laypersons that purport to interpret the meaning of a statute or regulation are opinion statements, and not statements of fact. See Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484, 488-89 (D.C.Cir.1996); Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 230-32 (3d Cir.1990). Statements of opinion are not generally actionable under the Lanham Act. See 15 U.S.C. § 1125(a) (1998); Groden v. Random House, Inc., 61 F.3d 1045, 1051 (2d Cir.1995). In Dial A Car, for example, the alleged misrepresentation by two taxicab companies was that they were properly licensed to provide on-call service to corporate account customers. Dial A Car, 82 F.3d at 488. The D.C. Circuit upheld the district court's dismissal of that claim on the ground that the representations were not provably false because the D.C. Taxicab Commission had not yet interpreted the controlling municipal regulation. Id. at 488-89. Similarly, in Sandoz Pharmaceuticals the Third Circuit determined that the Lanham Act did not apply to a plaintiff's claim that a competitor had mislabeled an ingredient in its cough syrup because the controlling FDA regulations were unclear. Sandoz, 902 F.2d at 230-31. In the present case, the correct application of § 17200 was not knowable to the parties at the time that First American made the licensure statement. Thus, even if a California court ultimately concludes that § 17200 does not require that a company in Coastal's position obtain an escrow license, the licensure statement as a matter of law could not give rise to a Lanham Act claim. 19 It also could not support a state-law defamation claim. An opinion that does not convey a false factual implication is not defamatory under California law. Kahn v. Bower, 232 Cal.App.3d 1599, 1607, 284 Cal.Rptr. 244, 248 (1991). Thus the statement that Coastal was operating illegally without a California license might present a triable claim if in fact Coastal had a California license. There is no dispute, however, that Coastal had no California license (and was not affiliated with a California licensee) at the time First American made the statement. The only claim of falsity concerns the statement or suggestion that California's statute applied to the activities of Coastal, which was (and apparently still is) a matter of opinion. As a matter of law, the statement that Coastal was operating without the necessary license in California did not constitute defamation. 5 20 Not paying its bills  21 The statement that Coastal was not paying its bills (perhaps with the narrower implication that it was not paying in timely fashion), is quite a different matter. That statement is clearly one of fact, able to be proven true or false. Neither Hollenbeck nor First American contend otherwise. The statement is therefore actionable under the Lanham Act and the California law of defamation. 22