Antitrust Law Daily Wrap Up, ADVERTISING—E.D.N.Y.: Non-profit states unfair competition claim against former affiliate, (Nov 11, 2013)

By Jody Coultas, J.D.

Lanham Act false advertising and New York deceptive trade practices claims brought by Alzheimer’s Disease Resource Center (ADRC) will proceed against Alzheimer’s Disease and Related Disorders Association (the Association), according to the federal district court in Central Islip, New York (Alzheimer’s Disease Resource Center, Inc. v. Alzheimer’s Disease and Related Disorders Association, November 8, 2013, Spatt, A.). The court denied a motion to dismiss the false advertising and deceptive trade practices claims, but granted a motion to dismiss a related complaint alleging breach of contract, misappropriation of trade secrets, and unfair competition.

After the Association and ADRC disaffiliated from each other, the ADRC alleged that the Association unfairly competed by sending out 15 mass mailings under the name “Alzheimer’s Association - Long Island Chapter.”

Lanham Act. To state a claim for false advertising under the Lanham Act, ADRC was required to show that the Association made a false or misleading statement; the false or misleading statement actually deceived or had the capacity to deceive a substantial portion of the intended audience; the deception was material; the Association placed the false or misleading statement in interstate commerce; and an injury resulting from the misrepresentation.

The ADRC stated a Lanham Act false advertising claim against the Association, according to the court. The ADRC alleged that the Association violated the Lanham Act by implying to the marketplace that the Association and the former Long Island Chapter were one and the same. The Association placed the mailings in interstate commerce, and the mailings had the capacity to deceive a substantial portion of the intended donors into believing that they were donating to the former chapter. There was evidence of actual consumer deception. The diversion of donations to the Association that were meant for the ADRC was an injury resulting from the misrepresentations.

The court also found that the ADRC should be allowed to engage in discovery to determine other donors who responded to the Association’s mass mailings and were similarly confused and deceived into making donations.

New York General Business Law claim. To state a claim under the General Business Law §349, a plaintiff must allege: (1) the alleged act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result.

The ADRC stated a claim for deceptive acts and practices, according to the court. There was evidence that the Association’s trade practices were misleading in a material way and that the ADRC was injured as a result. The court noted that donors are the consuming public for charitable fundraising activities and are deceived when a check intended for one charity is cashed by another.

Common law unfair competition. The court dismissed the ADRC’s common law claim for unfair competition. An unfair competition claim may be predicated on the alleged bad faith misappropriation of a commercial advantage belonging to another by exploitation of proprietary information or trade secrets. The ADRC had not trademarked the name “Alzheimer’s Association - Long Island Chapter,” and the use of that name or publicly available mailing information did not qualify as a “trade secret.” The name of an organization’s executive and address also do not fit within the categories typically associated with a common law unfair competition claim.

The cases are Nos. 13-CV-3288 (ADS)(ARL) and 13-CV-4244(ADS)(ARL).

Attorneys: William J. Manning (Morris Duffy Alonso & Faley) for Alzheimer’s Disease Resource Center, Inc. Jeffrey Baltruzak (McDermott Will & Emery LLP) for Alzheimer’s Disease and Related Disorders Association.

Companies: Alzheimer’s Disease Resource Center, Inc.; Alzheimer’s Disease and Related Disorders Association

Cases: Advertising StateUnfairTradePractices NewYorkNews