Antitrust Law Daily Wrap Up, ADVERTISING—6th Cir.: Dismissal of burglarized store’s claims against ADT for misrepresenting services upheld, (Feb 5, 2014)

By Jody Coultas, J.D.

A jewelry and collectibles store that was burglarized after installation of a security system could not state Michigan false advertising claims against ADT Security Services, Inc. for allegedly misrepresenting its services, the U.S. Court of Appeals in Cincinnati has held (Ram International, Inc. v. ADT Security Services, Inc., February 4, 2014, Cole, R.). The court also dismissed Ram’s negligence, gross negligence, and fraud claims.

Ram International, Inc. had entered into an agreement with ADT for security services for its store in exchange for a one-time fee and an annual service fee. When Ram was broken into, ADT did not inform it of the burglary, nor did ADT itself respond. ADT’s documents recorded the presence of alarm signals and/or communication failures—indications of a break-in—on the night of the burglary. Ram alleged that ADT falsely advertised the reliability and operation of its alarm system.

Ram’s only allegation of fraud pleaded with the necessary specificity pertained to ADT’s allegedly fraudulent statements that ADT was able to comply with UL standards, according to the court. ADT’s representations concerning UL compliance were alleged false, ADT allegedly knew they were false and intended to induce reliance, and Ram relied on the statements to its detriment. The other allegations stated the general content of ADT’s alleged representations, but failed to allege the particular time or place that they were made.

A district court properly dismissed Ram’s false advertising claim, according to the court. To prevail on a Michigan false advertising claim, the plaintiff’s reliance on the deceptive representations must have been reasonable. Reliance on an allegedly fraudulent representation is not reasonable if the representation is expressly contradicted in a valid merger clause contained in a contract between the parties, unless the plaintiff can make out a claim of fraud in the inducement or fraud pertaining to the merger clause itself.

Some of the alleged representations made by ADT—that it offers “Rapid Alarm response” and that their system was reliable and never failed—were vague and aspirational. However, its advertising that it would “be there for its clients '24 hours a day, 7 days a week’” and offered “24 hour monitoring by ADT trained professionals” was not mere puffery. However, Ram was unable to state a false advertising claim because of the merger clause in the parties’ agreement. The merger clause explicitly stated that “Customer is not relying on any advice or advertisement of ADT.”

The case is No. 12-2023.

Attorneys: Mark Granzotto for Ram International, Inc. Charles C. Eblen (Shook, Hardy & Bacon) for ADT Security Services, Inc.

Companies: Ram International, Inc.; ADT Security Services, Inc.

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