Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Purchasers of online poster business fail to state false advertising claims, (Aug 18, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by an online retailer of text-based posters in relation to the sale of its business, the defendant purchasers failed to state false advertising claims in a third-party complaint for the retailer’s alleged false or misleading statements in the advertisement of the sale of the business, the federal district court in San Francisco has decided (NovelPoster v. Javitch Canfield Group, LLC, August 14, 2014, Orrick, W.).

Matt Grinberg and Alex Yancher own NovelPoster, an online retailer that designs, sells, and distributes text-based poster products. In 2013, Grinberg and Yancher sought to sell NovelPoster and contacted Mark Javitch, founder of The Javitch Group, and Daniel Canfield, an independent contractor for Javitch Group. Yancher sent an email to Canfield with a link to the listing for NovelPoster, which provided sales price, total 2012 sales, inventory, cash flow, EBITDA, and sales expectations for 2013. After several meetings, the parties agreed in a series of emails to transition the business over time and allow Javitch Group to operate most aspects of NovelPoster’s business in return for revenue payments. After a dispute arose regarding the reach of the defendants’ control over NovelPoster, Grinberg and Yancher attempted to terminate the relationship.

After the defendants refused to return control of NovelPoster to Grinberg and Yancher, NovelPoster filed suit against Canfield, Javitch, and the Javitch Group, asserting violations of California’s Unfair Competition Law (UCL), among other claims. The defendants filed a breach of contract counterclaim and a third-party complaint, alleging violations of California’s False Advertising Law (FAL), among other causes of action. The plaintiffs moved for dismissal of the third-party complaint.

The court found that the defendants failed to state a claim under the FAL. The FAL prohibits any unfair, deceptive, untrue, or misleading advertising that has the capacity to deceive or confuse the public. The defendants alleged that the plaintiffs attempted to sell NovelPoster through eight different website, using statements regarding financial indicators and sales figures that they knew or should have known were illegal. In this case, the defendants did not identify any statements that were allegedly false or misleading. The sole statement identified by the defendants was nothing but a belief by Yancher about future prospects—a belief the defendants indicate that Yancher indeed held. Since the defendants did not allege how that statement or any other statement was false or misleading, their FAL cause of action failed.

The case is No. 13-cv-05186-WHO.

Attorneys: David Nied (Ad Astra Law Group, LLP) for NovelPoster. Carlton John Willey (Willey & Bentaleb LLP) for Daniel Canfield.

Companies: NovelPoster; The Javitch Group LLC

Cases: Advertising CaliforniaNews