Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Broker may be liable for disseminating false information about insurance company, (Jan 29, 2014)

By Jody Coultas, J.D.

Insurance broker Boynton & Boynton, Inc. was denied dismissal of Lanham Act false advertising claims filed by New Jersey Physicians United Reciprocal Exchange (NJ PURE), alleging direct false or misleading representations about the financial health of NJ PURE, the federal district court in Trenton has held (New Jersey Physicians United Reciprocal Exchange v. Boynton & Boynton, Inc., January 28, 2014, Wolfson, F.).

NJ PURE is a New Jersey not-for-profit reciprocal inter-insurance exchange that sells malpractice insurance to physicians and other potential policyholders. Boynton & Boynton solicits, advertises, and obtains clients for competitors of NJ PURE in the medical malpractice liability insurance market. Boynton allegedly libeled and slandered NJ PURE in oral and email exchanges with two prospective clients of NJ PURE and engaged in unfair competitive practices by issuing “Marketplace Updates” to prospective clients offering misleading or false comparisons of NJ PURE’s financials with those of for-profit competitors served by Boynton.

The Lanham Act prohibits false or misleading statements in commercial advertising or promotion about the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities. Commercial advertising or promotion is: (1) commercial speech; (2) by a defendant who is in commercial competition with plaintiff; (3) for the purpose of influencing consumers to buy defendant’s goods or services. The representations must be disseminated sufficiently to the relevant purchasing public to constitute “advertising” or “promotion” within that industry.

Advertising or promotion. NJ PURE’s allegations were covered by the Lanham Act, according to the court. Boynton allegedly made direct false or misleading representations that NJ PURE’s financial health was inferior to that of its competitors. NJ PURE argued that the emails were not were not “advertising or promotion” under the Lanham Act. A plaintiff must at least identify some medium or means through which the defendant disseminated information to a particular class of consumers. The allegations included a much larger scheme of libelous and slanderous statements disseminated by email and other media. NJ PURE was not required to introduce supporting evidence to make it probable that Boynton’s allegedly defamatory emails were disseminated widely enough to constitute “commercial advertising or promotion,” but rather must simply allege “enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.”

Literal falsity. NJ PURE stated a claim for literal falsity, according to the court. Boynton allegedly drafted and distributed false or misleading “comparative advertisements” in the form of “Marketplace Updates” to potential clients. To state a Lanham Act claim for false advertising, the plaintiff must show that the advertisement must be literally false or literally true but misleading to the consumer. Boynton argued that the claims should be dismissed because no prospective clients were actually misled. A literally false message may be either explicit or conveyed by necessary implication when, considering the advertisement in its entirety, the audience would recognize the claim as readily as if it had been explicitly stated. NJ PURE pleaded that the “Marketplace Updates” conveyed the false message that NJ PURE was not a financially sound insurer. The Third Circuit’s Lanham Act jurisprudence recognizes just such a claim. Therefore, Boynton’s motion for dismissal was denied.

The case is No. 12-05610 (FLW) (TJB).

Attorneys: Christopher Michael Placitella (Cohen, Placitella & Roth, PC) for New Jersey Physicians United Reciprocal Exchange. Christina L. Capobianco (Fineman Krekstein & Harris P.C.) for Boynton & Boynton, Inc.

Companies: New Jersey Physicians United Reciprocal Exchange; Boynton & Boynton, Inc.

Cases: Antitrust Advertising NewJerseyNews