Antitrust Law Daily Wrap Up, ADVERTISING—S.D.W. Va.: Skin care clinic competitor may be liable for fictitious Facebook page, (Feb 27, 2014)

By Jody Coultas, J.D.

Imagine Medispa, LLC failed to state a Lanham Act false advertising claim against competitor Transformations, Inc., but did adequately support its Lanham Act false endorsement claim, the federal district court in Charleston, West Virginia has held (Imagine Medispa, LLC v. Transformations, Inc., February 26, 2014, Copenhaver, J.). The court also denied Imagine Medispa’s request for injunctive relief.

The companies compete in the medical weight-loss and skin care industry. Imagine Medispa alleged that Transformations knowingly published false advertisements, set up fictitious Facebook pages and Craigslist advertisements for Imagine Medispa, contacted Imagine employees in an effort to learn trade secrets or other confidential information, and falsely told Imagine’s clients and potential clients that Imagine used unlicensed doctors and had to change its name due to issues with the authorities. Specifically, Transformations’ direct marketing mailer claimed that Transformations was “West Virginia’s Lowest Price Weight Loss & Skin Care Clinic” and had the “Lowest Prices in WV!”

Imagine Medispa requested an order enjoining Transformations from use of any Internet-based advertising or communications related in any way to their business or Imagine Medispa’s business, while Transformations requested dismissal of the case.

Preliminary injunction. Imagine Medispa was not entitled to injunctive relief because it was not likely to succeed on the merits of the claim or to suffer irreparable harm in the absence of preliminary relief, according to the court. An incorporator and officer of Transformations swore that neither he, nor any employee or agent acting on behalf of Transformations, created the fictitious Facebook pages or the Craigslist advertisement. Imagine Medispa failed to submit any evidence that Transformations created the fictitious advertisements or social media websites, or that Imagine Medispa suffered a loss of clients or revenue as a result of Transformation’s business practices. None of Imagine Medispa’s clients that “liked” the Transformation Facebook page stopped using Imagine Medispa’s services. Also, the Facebook pages were not active.

Motion to dismiss. The Lanham Act prohibits the use of a “false or misleading description of fact, or false or misleading representation of fact, which … in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” A “false endorsement” claim under the Lanham Act arises where a plaintiff’s identity is connected with a product or service in a way that is likely to mislead consumers into thinking that the plaintiff approves of or sponsors the product or service.

The court held that Imagine Medispa failed to state Lanham Act false advertising claims against Transformations based on the vague statements made in the advertisements. Imagine Medispa alleged that the advertisements at issue were literally false, distributed in interstate commerce and received by thousands of people, likely to influence purchasing decisions, and likely cause lost sales and a lessening of the good will. Transformations countered that the challenged statements were non-actionable puffery. The advertisements did not refer to any specific services or products, and did not directly compare Transformation to Imagine Medispa or any other competitor. The statements were broad, vague exaggerations or boasts on which no reasonable consumer would rely.

Imagine Medispa stated a false endorsement claim, according to the court. Transformations allegedly created a fictitious Facebook profile in the name of Imagine’s owner and used it to falsely suggest that the owner “liked” Transformations. It was plausible that the fictitious profile misled Imagine clients and potential customers into thinking that the owner was no longer affiliated with Imagine, and that he instead endorsed Transformations’ services.

The motion to dismiss was granted as to the allegation that Transformations contacted Imagine Medispa employees in an effort to learn trade secret, but denied as to the allegation that Transformations told Imagine Medispa’s clients and potential clients that Imagine used unlicensed doctors. Imagine Medispa’s claim for unreasonable publicity was dismissed, while the claims for intrusion upon seclusion, appropriation, and false light were allowed to move forward. The defamation claims were also dismissed in part.

The case is No. 2:13-26923.

Attorneys: Scott H. Kaminski (Balgo & Kaminski) for Imagine Medispa, LLC. Callie E. Waers (Shuman McCuskey & Slicer) for Transformations, Inc.

Companies: Imagine Medispa, LLC; Transformations, Inc.

Cases: Advertising WestVirginiaNews