Antitrust Law Daily Wrap Up, ADVERTISING—S.D.N.Y.: Lanham Act, RICO claims against dating websites dumped, (Oct 31, 2014)

By Greg Hammond, J.D.

A modeling company failed to state sufficient false advertising and racketeering claims against the owners of various online dating websites, including Match.com, Chemistry.com, and OkCupid.com. Finding that the Lanham Act claims failed as a matter of law, and the Racketeer Influenced and Corrupt Organizations Act (RICO) claim did not even pass the "laugh test," the federal district court in New York City dismissed the modeling company’s third amended complaint (Avalos v. IAC/InteractiveCorp., October 30, 2014, Furman, J.).

Background. IAC/InteractiveCorp. owns approximately 150 subsidiary companies, including Match.com LLC, People Media, LLC, and Humor Rainbow, Inc., which operate a number of online dating websites. Meltech Inc., a design and modeling company that owns the rights to photographs of model Melissa Harrington, filed suit against IAC, Match.com, People Media, and Humor Rainbow, claiming that the companies violated the Lanham and RICO Acts by using and publishing photographs of Harrington in fraudulent profiles posted on defendants’ websites. The defendants moved to dismiss.

False advertising. To state a valid false advertising claim under the Lanham Act, Meltech was required to plead an injury to a commercial interest in sales or business reputation proximately caused by the defendants’ misrepresentations. However, the court determined that Meltech failed to adequately plead any harm to its commercial interests proximately caused by the defendants’ alleged misrepresentations. Specifically, the court found that Meltech failed to provide any factual support to its conclusory allegation of harm—that Match.com’s false designation that Harrington was and is a member of its websites caused consumer confusion for thousands or millions of consumers, resulting in the devaluation of Meltech’s intellectual property, and costing millions of dollars in revenue. Further, Meltech failed to allege a plausible causal connection between that harm and the defendants’ actions.

Racketeering. Meltech was also required to establish but-for causation and proximate causation in order to state a claim for relief under RICO sections 1962(c) or (d). However, Meltech’s "proximate-cause argument does not pass the laugh test, let alone the plausibility test," the court stated. Specifically, it was determined that the modeling company alleged—at most—that the defendants approved and failed to appropriately screen out fraudulent profiles submitted by third parties, and that those profiles caused harm to Meltech’s commercial interests. This was insufficient to establish proximate cause for the purposes of a civil RICO action, the court stated.

The case number is 13-CV-8351 (JMF).

Attorneys: Attorneys: Evan Spencer for Meltech Inc. Daniel L. Brown (Sheppard, Mullin, Richter & Hampton, LLP) for IAC/Interactivecorp, Match.com LLC, People Media, LLC, and Humor Rainbow, Inc.

Companies: IAC/InteractiveCorp.; Meltech Inc.; Match. Com LLC; People Media, LLC; Humor Rainbow, Inc.

Cases: Advertising RICO NewYorkNews