Liberty Counsel, Inc. v. Guidestar USA, Inc. ( 2018 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 18-1157
LIBERTY COUNSEL, INC.,
Plaintiff - Appellant,
v.
GUIDESTAR USA, INC.,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern District of Virginia, at
Newport News. Raymond A. Jackson, District Judge. (4:17-cv-00071-RAJ-DEM)
Submitted: August 30, 2018 Decided: September 11, 2018
Before WILKINSON and HARRIS, Circuit Judges, and TRAXLER, Senior Circuit
Judge.
Affirmed by unpublished per curiam opinion.
Mathew D. Staver, Horatio G. Mihet, Roger K. Gannam, Daniel J. Schmid, LIBERTY
COUNSEL, Orlando, Florida, for Appellant. Sona Rewari, HUNTON ANDREWS
KURTH LLP, Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Liberty Counsel, Inc., (“Liberty”) appeals the district court’s order granting
GuideStar USA, Inc.’s (“GuideStar”) motion to dismiss Liberty’s complaint for failure to
state a claim. Liberty asserted a violation of the Lanham Act, 15 U.S.C. § 1125 (2012),
as well as Virginia state law claims of defamation and interference with business
expectancy. For the reasons that follow, we affirm.
We review a district court’s dismissal under Fed. R. Civ. P. 12(b)(6) de novo,
“assuming as true the complaint’s factual allegations and construing all reasonable
inferences in favor of the plaintiff.” Semenova v. Md. Transit Admin., 845 F.3d 564, 567
(4th Cir. 2017) (internal quotation marks omitted). To survive a motion to dismiss, a
complaint must contain sufficient facts to state a claim that is plausible on its face. Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
According to the complaint, GuideStar is a nonprofit organization that maintains
an extensive online directory of profiles on other nonprofits, including Liberty, an
organization dedicated to advancing Christian causes. After the Southern Poverty Law
Center (“SPLC”) designated Liberty as a hate group, GuideStar added a banner to
Liberty’s online profile stating that Liberty “was flagged as a hate group by the Southern
Poverty Law Center.” Liberty disputed SPLC’s characterization and brought the instant
action against GuideStar, seeking damages and an injunction against GuideStar’s
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republication of the hate group banner. The district court dismissed Liberty’s Lanham
Act claim on the basis that the banner did not constitute commercial speech. 1
The Lanham Act prohibits the use of false or misleading representations of fact,
“in commercial advertising or promotion,” that misrepresent the quality “of another
person’s goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B). Guiding
the district court’s decision was its analysis of the term “commercial advertising or
promotion.” However, the Lanham Act contains no definition of “commercial
advertising or promotion,” and neither the Supreme Court nor this Court has interpreted
this phrase, in a published opinion. See Handsome Brook Farm, LLC v. Humane Farm
Animal Care, Inc., 700 F. App’x 251, 256 (4th Cir. 2017). Because we conclude that the
complaint failed to allege that GuideStar’s banner was either false or misleading, we need
not assess the propriety of the district court’s analysis.
“For liability to arise under the false advertising provisions of the Lanham Act, the
contested statement or representation must be either false on its face or, although literally
true, likely to mislead and to confuse consumers given the merchandising context.” PBM
Products, LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir. 2011) (internal
quotation marks omitted). “[I]f a plaintiff’s theory of recovery is premised upon a claim
of implied falsehood, a plaintiff must demonstrate, by extrinsic evidence, that the
1
The district court declined to exercise supplemental jurisdiction over, and
dismissed without prejudice, Liberty’s state law claims.
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challenged advertisements tend to mislead or confuse consumers.” Id. (brackets and
internal quotation marks omitted).
By repeatedly acknowledging SPLC’s designation of Liberty as a hate group, the
complaint made clear that GuideStar’s banner was literally true—that is, that SPLC had,
in fact, labeled Liberty a hate group. Liberty’s complaint maintained that the banner was
misleading, however, and had actually deceived Liberty’s donors and potential donors.
But a complaint must state facts demonstrating that the defendant’s liability is plausible,
not merely possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Thus, “[w]here a
complaint pleads facts that are merely consistent with a defendant’s liability, it stops
short of the line between possibility and plausibility of entitlement to relief.” Id. (internal
quotation marks omitted). Here, other than identifying a broad swath of people whom the
banner allegedly deceived, Liberty baldly alleged customer confusion without providing
“further factual enhancement.” Id. (internal quotation marks omitted). We therefore find
the allegations in the complaint insufficient to state a violation of the Lanham Act. 2
Accordingly, we affirm the district court’s judgment on the ground that Liberty
failed to adequately plead that GuideStar’s banner was false or misleading. See
McMahan v. Int’l Ass’n of Bridge, Structural & Ornamental Iron Workers, 964 F.2d
1462, 1467 (4th Cir. 1992) (“We of course have the power to affirm a judgment for any
reason appearing on the record, notwithstanding that the reason was not addressed
2
Liberty does not dispute the dismissal of its state law claims.
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below.”). 3 We dispense with oral argument because the facts and legal contentions are
adequately presented in the materials before this court and argument would not aid the
decisional process.
AFFIRMED
3
Because Liberty never sought leave to amend its complaint, we reject the
argument that the district court abused its discretion by not granting Liberty permission to
amend. See Drager v. PLIVA USA, Inc., 741 F.3d 470, 474 (4th Cir. 2014) (“Regardless
of the merits of the desired amendment, a district court does not abuse its discretion by
declining to grant a motion that was never properly made.” (internal quotation marks
omitted)).
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