Opinion ID: 780232
Heading Depth: 2
Heading Rank: 2

Heading: Motion for Summary Judgment on the Lanham Act Claim

Text: 9 After the close of discovery, Fendi moved for summary judgment on Fashion Boutique's Lanham Act claim. Following certain pre-trial evidentiary rulings, the district court granted defendants' motion. See Fashion Boutique I, 942 F.Supp. at 217. 10 In challenging the district court's grant of partial summary judgment, Fashion Boutique relies primarily on reported conversations between Fendi personnel and nine undercover investigators hired to pose as shoppers and on declarations by forty Fashion Boutique customers. In none of the proffered interactions did employees at the Fifth Avenue store initiate conversations about Fashion Boutique. They commented on Fashion Boutique only after the customers mentioned plaintiff. For example, several customers who reported their conversations with Fendi employees went to the Fifth Avenue store seeking to repair or exchange products or were wearing Fendi products as they shopped at that store. After the customer informed Fendi personnel that the item had been bought at Fashion Boutique, the employee reacted by making critical comments about the quality of Fashion Boutique's merchandise and, on several occasions, refused to exchange or repair the product. 11 (1) Incidents Prior to the Close of Fashion Boutique 12 Prior to Fashion Boutique's demise, Fendi personnel told a total of eleven customers that Fashion Boutique carried an inferior, department store line of products or that Fashion Boutique sold fake or bogus merchandise. During four visits to Fendi's Fifth Avenue store, undercover investigators were told that Fashion Boutique's merchandise was of inferior quality. Five shoppers and several undercover investigators related incidents in which Fendi employees described Fashion Boutique's goods as a different line from that sold at the Fifth Avenue store. In addition, Fendi employees made critical comments about the customer service at Fashion Boutique to six investigators and one customer. 13 Sixteen Fashion Boutique customers reported having heard rumors that Fashion Boutique sold fake Fendi merchandise [d]uring the period 1990-1991. One shopper heard similar rumors but could not remember when she heard them. 14 (2) Statements Made After the Close of Fashion Boutique 15 Eight customers identified statements made after Fashion Boutique's demise in July 1991. Fendi employees told four of them that Fashion Boutique sold a different line of products, three others that Fashion Boutique sold inferior or fake Fendi goods, and one other that Fashion Boutique closed because it caused trouble or was too costly to maintain. In addition, a Fendi employee told one investigator that the owners of Fashion Boutique were filing for bankruptcy. 16 (3) Caroline Clarke Deposition 17 As evidence of the alleged policy of disparagement, plaintiff presented the deposition of Caroline Clarke, a former employee of Fendi USA. Although Clarke's superiors never explicitly told her of a policy to disparage Fashion Boutique, she learned from speaking to managers and salespersons at Fendi Stores that salespersons followed a practice of disparaging the customer service at Fashion Boutique. 18 (4) The District Court's Decisions 19 After carefully reviewing the evidence, Judge Cedarbaum determined that most of the evidence submitted by Fashion Boutique failed to support the Lanham Act claim. Specifically, the district court found that (1) the statements suggesting that Fashion Boutique sold a different line were not disparaging because different does not impugn the quality of the product; (2) the declarations by customers alleging to have heard rumors that Fashion Boutique sold fake items was inadmissable hearsay and thus could not be considered on a motion for summary judgment; and (3) disparaging remarks made after Fashion Boutique closed were not actionable under the Lanham Act and, because plaintiff and defendants were no longer competitors, were not relevant. See id. at 215. 20 Judge Cedarbaum concluded that the remaining evidence was insufficient to withstand a motion for summary judgment because it did not fall within the meaning of commercial advertising or promotion as set forth in the Lanham Act. The district court held that the Lanham Act is violated when the defendants proactively pursue customer contacts and disparage the plaintiff's goods or services. See id. at 215-16 (listing cases). Because each disparaging comment was made only after the customer initiated a discussion about Fashion Boutique, the district court concluded that the communications were reactive and not proactive. See id. at 216. 21 Moreover, relying on the four-part test announced in Gordon & Breach Sci. Publishers S.A. v. Am. Inst. of Physics, 859 F.Supp. 1521, 1535-36 (S.D.N.Y.1994) ( Gordon & Breach I ), the district court held that to constitute commercial advertising or promotion the statements must be sufficiently disseminated to the relevant purchasing public. See Fashion Boutique I, 942 F.Supp. at 216. The district court concluded that plaintiff had failed to prove sufficient dissemination because it presented only a dozen admissible comments within a purchasing public universe consisting of thousands of customers. 22