Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Pa.: ‘Watchdog’ blogger, insurance agency may be liable for websites’ disparagement of competing agency, (Aug 7, 2014)

By Jody Coultas, J.D.

Insurance agency First Senior Financial Group, LLC stated a Section 43(a) Lanham Act claim against a competitor and Internet blogger that posted allegedly false and misleading statements on websites concerning First Senior’s services and employees, the federal district court in Philadelphia has held (Cannella v. Brennan, August 5, 2014, Joyner, J.).

First Senior alleged that the blogger created websites to disseminate false and misleading statements about First Senior, its employees, and their services. An employee of competitor Granite Financial Solutions, LLC allegedly conspired with the blogger to launch and maintain the websites.

To assert a Section 43(a) claim, First Senior was required to show false or misleading statements; actual deception or at least a tendency to deceive a substantial portion of the intended audience; the materiality of the deception; goods traveling in interstate commerce; and a likelihood of injury.

The statute of limitations did not bar Frist Senior’s Section 43(a) Lanham Act claims, according to the court. Because Section 43(a) does not contain an express limitations period, the court looked to the analogous state law. As the Pennsylvania Unfair Trade Practices and Consumer Protection Law is the most analogous, that statute’s six-year statute of limitations applied. The defendants’ argument that the case at hand was more analogous to a defamation claim, requiring the application of a one-year statute of limitations, was rejected by the court. Section 43(a) provides a kind of commercial defamation action, while defamation claims focus on libelous injuries. Here, First Senior alleged that the website statements were disseminated over the Internet and caused economic harm, not merely an injury to reputation. Therefore, First Senior properly brought a Section 43(a) claim, to which a six-year statute of limitations applied.

First Senior pleaded both actual consumer deception and false and misleading statements on the part of the defendants, according to the court. Statements that First Senior was taking “shortcuts” and that a First Senior employee was a “known criminal,” who abused the elderly, were capable of being verified. Even if the statements at issue were ambiguous, First Senior sufficiently alleged consumer deception. The statements were made to dissuade potential customers and business contacts from engaging in business with First Senior, and caused prospective customers to cancel appointments and existing clients to terminate contracts.

The Section 43(a) claims met the interstate commerce requirement, according to the court. Allegedly false or misleading statement accessible through the Internet and might have an impact on parties outside the state, the interstate commerce requirement is met.

Statements made on the website were commercial advertising for the purposes of Section 43(a), according to the court. A message is commercial advertising if it is commercial speech disseminated to the purchasing public made by a party in commercial competition with another to influence customers to buy one party's goods or services over the others. First Senior sufficiently alleged that the website was created to damage its reputation and attract business away from First Senior. The parties were competitors in the insurance market, and the statements were disseminated to the public through the website with the intent of encouraging customers to business with Granite Financial rather than First Senior.

First Senior’s damages claim was supported by the evidence, according to the court. The allegedly false and misleading statements were posted on the Internet, disparaged First Senior’s business, and caused existing and potential customers to terminate their relationship with First Senior. First Senior alleged it lost between $20 to $30 million dollars in revenue because of the website.

The case is No. 2:12-CV-1247.

Attorneys: Craig E. Ziegler (Montgomery, Mc Cracken, Walker & Rhoads) for Phillip Cannella and First Senior Financial Group, LLC. Jonathan Z. Cohen (Post & Schell, PC) for Krista C. Brennan. Speros John Kokonos (Kokonos & Economides) for Granite Financial Solutions, LLC.

Companies: First Senior Financial Group, LLC; Granite Financial Solutions, LLC

Cases: Advertising PennsylvaniaNews