Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Mich.: Former employees’ website might misrepresent association of former employer, (Feb 19, 2014)

By Jody Coultas, J.D.

Former employees of Global Fleet Sales, LLC were denied dismissal of Lanham Act false advertising and false association claims by the federal district court in Detroit (Global Fleet Sales, LLC v. Delunas, February 18, 2014, Duggan, P.). However, the court declined to issue an injunction against the former employees.

Global Fleet and three affiliated companies (the RMA Group) that took advantage of business opportunities in the Islamic Republic of Afghanistan in the wake of the NATO campaign against the Taliban alleged that former employees breached various contracts and misrepresented their affiliation with Global Fleet and the other companies. One former employee was hired to serve as a Country Manager for the RMA Group, while the other was listed as a corporate officer and shareholder of record of companies registered by the RMA group in Afghanistan. Global Fleet filed Lanham Act, Computer Fraud and Abuse Act, and other claims against the former employees.

Standing. The RMA Group had standing to assert the Lanham Act claims, according to the court. The former Country Manager continued to operate a website that implied his continued affiliation with the RMA Group despite his termination two years earlier. In a motion to dismiss, the former Country Manager argued that the RMA Plaintiffs lacked standing because the RMA Group was not an actual entity and could not be a party to this action, and the complaint failed to identify any of the legal entities included within the RMA Group. However, the complaint clearly identified the various entities that made up the RMA Group. Thus, the RMA Group satisfied the burden of demonstrating a cognizable interest in business reputation and business opportunities was likely to be damaged by the website.

False association. The allegations were sufficient to allow the court to infer that consumers would be confused as to the former employees’ association with the RMA Group. The Lanham Act prohibits misleading representations that are likely to cause confusion about the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. The website at issue falsely represented that the former Country Manager was still affiliated with the RMA Group and could still conduct business on behalf of the RMA Group.

False advertising. The RMA Group also sufficiently stated Lanham Act false advertising claims against the former employees. The former employees argued that the RMA Group failed to state a false advertising claim because there were no allegations of false or misleading statements on the website relating to the “nature, characteristics, qualities or geographic origin” of any party’s products or services. However, the website contained references and hyperlinks to the RMA Group. Advertising the services, contracts, and customer relationships of another as one’s own to deceive customers into believing that work was actually performed by the RMA Group plaintiffs constituted a false or misleading statement of fact concerning the services and commercial activities advertised. The false and misleading statements traded upon the goodwill and established reputation of the RMA Group.

CFAA claim. The court held that the RMA Group failed to state a Computer Fraud and Abuse Act claim. In order to state a Computer Fraud and Abuse Act claim, the RMA Group needed to show that the former Country Manager intentionally accessed a protected computer without authorization. Any claim that the former Country Manager accessed a protected computer that the RMA Group did not own or control access was implausible and defied logic.

Injunctive relief. Because the RMA Group was unlikely to succeed on the merits if its claim, the court declined to issue preliminary injunctive relief. The RMA Group argued that they were likely to succeed in establishing that continued operation of the website violated the Lanham Act because the website resulted in actual customer confusion. Although the court determined that the Lanham Act complaint was sufficient, the court did not believe that the RMA Group demonstrated a strong likelihood of success on the merits given the number of important factual discrepancies between the parties’ positions regarding the ownership of the RMA Group’s Afghan entities. Also, the RMA Group’s delay in moving for a preliminary injunction precluded a finding of irreparable harm.

Additional claims. The court dismissed, for the most part, the RMA Group’s breach of contract claim, tortious interference with contract, and tortious interference with prospective business advantage claims.

The case is No. 12-15471.

Attorneys: Brian J. Kapatkin (Foley & Lardner LLP) for Global Fleet Sales, LLC. Erin M. Pawlowski (Dickinson Wright) for Leonard James Delunas.

Companies: Global Fleet Sales, LLC

Cases: Advertising MichiganNews