Design Resources, Incorporated v. Leather Industries of America

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1990
DESIGN RESOURCES, INC.,
Plaintiff - Appellant,
v.
LEATHER INDUSTRIES OF AMERICA; DR. NICHOLAS J. CORY; ASHLEY
FURNITURE INDUSTRIES, INC.; TODD WANEK,
Defendants - Appellees.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. William L. Osteen,
Jr., Chief District Judge. (1:10-cv-00157-WO-LPA)
Argued: May 13, 2015 Decided: June 18, 2015
Before NIEMEYER, DUNCAN and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Duncan wrote the opinion,
in which Judge Niemeyer and Judge Thacker joined.
ARGUED: John Raymond Neeleman, LANE POWELL, PC, Seattle,
Washington, for Appellant. William Andrew Copenhaver, WOMBLE
CARLYLE SANDRIDGE & RICE, LLP, Winston-Salem, North Carolina;
Richard Dominick Milone, Jr., KELLEY DRYE & WARREN LLP,
Washington, D.C., for Appellees. ON BRIEF: Kristin Beneski,
LANE POWELL, PC, Seattle, Washington, for Appellant. Cameron
Argetsinger, KELLEY DRYE & WARREN LLP, Washington, D.C., for
Appellees Leather Industries of America and Dr. Nicholas J.
Cory; Brent F. Powell, WOMBLE CARLYLE SANDRIDGE & RICE, LLP,
Winston-Salem, North Carolina, for Appellees Ashley Furniture
Industries, Inc. and Todd Wanek.
DUNCAN, Circuit Judge:
Plaintiff-Appellant Design Resources, Inc. (“DRI”), appeals
the district court’s entry of summary judgment in favor of
Defendants-Appellees Leather Industries of America (“LIA”) and
Ashley Furniture Industries, Inc. (“Ashley”), on DRI’s false
advertising claim under the Lanham Act, 15 U.S.C. § 1125(a).
DRI alleged that an advertisement placed in a trade magazine by
Ashley (the “Ashley Ad”), as well as two statements by Dr.
Nicholas Cory, director of LIA’s research laboratory, which ran
in articles in the same publication, were false and misleading.
The district court granted summary judgment to LIA and Ashley,
concluding that DRI had not presented sufficient evidence to
establish a Lanham Act claim. For the reasons that follow, we
affirm.
I.
A.
Appellee Ashley is the fifth largest furniture manufacturer
in the United States. J.A. 116. In addition to manufacturing
furniture, Ashley operates and licenses retail locations that
bear its name, and it sells its furniture to other retailers,
such as Costco and Walmart. J.A. 986-88. Appellee LIA is a
leather industry trade association, which owns the Leather
2
Research Laboratory (the “Laboratory”). 1 Dr. Nicholas Cory is a
leather chemist and the director of the Laboratory. He and his
lab provide labeling advice to companies who market leather and
leather-look products, as well as testing services to determine
such products’ leather content for purposes of federally
mandated disclosure to consumers.
Appellant DRI develops furniture coverings and sells its
products to furniture manufacturers. In late 2006, DRI
developed a “synthetic leather-look furniture covering product,
which it initially called ‘Veneto’” and later renamed as
“NextLeather®.” Appellant’s Br. at 8. NextLeather® is
“composed of 61% polyurethane, 22% poly/cotton, and 17%
leather.” Id. “[I]t has a polyurethane face on a fabric core
and is backed with a thin layer of leather fibers adhered (i.e.,
bonded) to its base or underside.” Id. The use of leather
fibers as backing, as opposed to “single-piece leather ‘splits’
. . . , represented an improvement in the ability of a leather-
look product to mimic real leather . . . because it made the
material more pliable and allowed it to drape more fluidly over
1
There was a factual dispute below concerning LIA’s
ownership of the Laboratory. The district court did “not find
that factual dispute material” to its decision and therefore
“reache[d] its legal conclusion without resolving [the] issue.”
J.A. 1760 n.2. Because we affirm the district court’s grant of
summary judgment to LIA, this factual question is not relevant
to our analysis either, and therefore need not detain us.
3
a furniture frame.” Appellant’s Br. at 8.
In December 2006 and January 2007, DRI requested labeling
advice and composition testing of its NextLeather® product from
Dr. Cory at LIA’s laboratory. Dr. Cory advised that the product
could “ABSOLUTELY NOT!” be characterized or marketed as leather.
J.A. 261. He cited the Federal Trade Commission’s Guides for
Select Leather and Imitation Leather Products (“FTC Guides”),
which specify that products containing ground or shredded
leather, rather than comprising “wholly the hide of an animal[,]
should not be represented, directly or by implication, as being
leather.” J.A. 261 (quoting 16 C.F.R. § 24.2(f) 2). Instead, Dr.
Cory suggested, DRI could label NextLeather® as “[n]ot leather,”
“[r]econstituted leather,” or “[b]onded leather.” J.A. 261.
In early 2007, DRI began marketing NextLeather® as “bonded
leather,” disclosing the product’s composition on a label in
compliance with the FTC Guides. DRI viewed its product as
innovative and believed that “NextLeather® was the first and
only such product marketed as ‘bonded leather.’” J.A. 1289-90.
In preparation for the Spring High Point Market in North
2
Dr. Cory referred to the FTC Guides in place in 2006,
which remained in effect throughout the underlying litigation.
In 2007, the FTC sought public comment on whether to revise the
Guides, 72 Fed. Reg. 28,906, 28,907 (May 23, 2007) (to be
codified at 16 C.F.R. pt. 24), but in 2008, decided to retain
them unchanged, 73 Fed. Reg. 34,626, 34,630 (June 18, 2008) (to
be codified at 16 C.F.R. pt. 24).
4
Carolina--an important, annual furniture industry event--DRI
sold samples of NextLeather® to 25 leading furniture
manufacturers. Those manufacturers would then debut furniture
products made with NextLeather® at the Spring High Point Market,
from March 26 to April 1, 2007.
In the weeks leading up to and following the Spring High
Point Market, Ashley placed a series of full-page ads
in Furniture Today, a widely read trade magazine. According to
DRI, one of the ads--which ran in the March 12, March 31, and
April 30, 2007 issues--contained false statements about DRI and
NextLeather®. In relevant part, the text of the ad read as
follows: “Is It REALLY LEATHER? . . . Some upholstery suppliers
are using leather scraps that are mis-represented as leather
. . . . Know What You Are Buying[.] REMEMBER . . . The
Overseas Manufacturer Has NO Liability In The U.S.A. You Do!”
J.A. 274, 281, 283 (third ellipsis in original).
On July 2, 2007, Furniture Today published an article
written by Joan Gunin and entitled, “Chemist fears confusion
over imitators may hurt category.” J.A. 86. This article (the
“Gunin Article”) quoted Dr. Cory as saying the following: “To
call [leather alternatives such as bonded leather] ‘leather’ is
outright deception, outright fraud. . . . It’s not
leather. . . . It’s a synthetic that has leather fibers glued to
the underside.” J.A. 86 (second ellipsis in original).
5
A week later, on July 9, 2007, Furniture Today published an
article written by Susan Andrews and entitled, “For consumers’
sake, let’s not call it ‘bonded leather.’” J.A. 108. This
article (the “Andrews Article”) referred to “[n]ew composite
fabrics now called ‘bonded leather,’” which “have a surface
layer of vinyl or polyurethane, a center layer of fabric, and a
backing that contains some leather fibers . . . glued onto the
fabric for a look that is similar to the back of a leather
hide.” J.A. 108. The article’s author advocated against using
the term “bonded leather” to refer to these products by arguing
that the term is “bound to confuse consumers, who are likely to
hear only the word ‘leather.’” J.A. 108. The article then
quoted Dr. Cory as saying that calling these products bonded
leather “is deceptive because it does not represent its true
nature. It’s a vinyl, or a polyurethane laminate or a
composite, but it’s not leather. If you tar and feather
someone, does that make them a chicken?” J.A. 108.
B.
In February 2010, DRI filed suit against Ashley, Todd Wanek
(Ashley’s president and CEO), LIA, and Dr. Cory. It asserted
false advertising claims under the Lanham Act, 15 U.S.C.
§ 1125(a), as well as various violations of North Carolina and
6
Washington law. 3 In September 2012, the district court granted
Wanek’s and Dr. Cory’s motions to dismiss for lack of personal
jurisdiction. J.A. 161. While these two individuals are listed
as Appellees in this case, DRI does not seek review of the
district court’s September 2012 order. See Appellant’s Br. at
26.
DRI made the following arguments before the district court.
Regarding the Ashley Ad’s statement--that “[s]ome upholstery
suppliers are using leather scraps that are mis-represented as
leather”--DRI asserted that “[a]ll informed readers” of the
Ashley Ad knew that the ad was “referring to DRI and its
NextLeather® bonded leather” because DRI was the only company
selling the kind of product described. J.A. 47. It argued that
the ad was false because DRI was not marketing its product as
leather, but rather as “bonded leather.” J.A. 47.
With respect to the Gunin Article, DRI characterized the
statement by the LIA Laboratory director, Dr. Cory--that calling
bonded leather “leather” is deceptive--as “explicitly accus[ing]
3
Specifically, DRI alleged violations of the North Carolina
Unfair and Deceptive Trade Practices Act and the Washington
Consumer Protection Act, as well as several claims under both
North Carolina and Washington law: tortious interference with
business relations, civil conspiracy, negligence and fraudulent
concealment, negligent misrepresentation, breach of contract,
breach of the duty of good faith and fair dealing, and punitive
damages. J.A. 55-63.
7
DRI of . . . selling a counterfeit product.” J.A. 50. DRI
maintained that “there could be no doubt” that “Dr. Cory’s
defamatory statements were referring to DRI and NextLeather®,”
J.A. 50, and that the statement was false because DRI was
selling NextLeather® as bonded leather, rather than as leather.
DRI also contended that Dr. Cory’s statement in the Andrews
Article--that the term “bonded leather” is deceptive as applied
to some products--was false because the FTC Guides allowed, and
Dr. Cory had advised, DRI to label the product as “bonded
leather.”
Finally, DRI argued that the defendants’ statements damaged
DRI’s “actual and potential customer relationships.” J.A. 55.
It pointed to a decline in sales of NextLeather® to furniture
manufacturers following publication of the ad and articles, and
it asserted that it was “forced to spend substantial sums to
address [the] resulting damage.” J.A. 55.
DRI moved for partial summary judgment, and Ashley and LIA
cross-moved for summary judgment. The district court granted
Ashley’s and LIA’s motions for summary judgment in August 2014.
Relevant here, the district court determined that DRI failed to
present sufficient evidence to establish that the Ashley Ad, the
Gunin Article, or the Andrews Article were false or misleading. 4
4
The district court also rejected DRI’s arguments in
(continued)
8
Regarding the Ashley Ad, the district court held that DRI
failed to establish that the ad was false on either of the
grounds DRI presented. As an initial matter, DRI failed to show
that the contested statement--that “[s]ome upholstery suppliers
are using leather scraps that are mis-represented as leather”--
conveyed the message that DRI was selling NextLeather® as
leather. See J.A. 1779–84. The court reasoned that “a reader
of Ashley’s ad would have had to make at least two sizeable
inferences” in order to glean this message from the ad. J.A.
1780. Because the ad does not use the term “bonded leather,”
“the reader would first have to ascertain that the ad references
bonded leather, as opposed to . . . any other similarly produced
products.” J.A. 1780-81. Second, the reader would “have to
infer that the ad was referring solely to DRI’s NextLeather®.”
J.A. 1782. DRI also failed to establish its alternative theory
of liability with respect to the ad--that the ad was false
because it misled consumers--because it did not show that “a
single consumer was misled” by the ad. J.A. 1784.
Turning to the Gunin and Andrews Articles, the court held
that neither article contained a false statement of fact. As to
Dr. Cory’s statement in the Gunin Article--that referring to
support of its state law claims, granting summary judgment to
the defendants on all of them. See J.A. 1792-1807.
9
bonded leather as “leather” would be “outright fraud”—-the court
pointed out that this statement was true because bonded leather
contains only scraps or shavings of leather, rather than whole
hide. Additionally, DRI offered no “evidence linking the quote
in the Gunin article with a single customer’s refusal to
purchase NextLeather® or general customer confusion about Dr.
Cory’s statements.” J.A. 1774. As for the Andrews Article, the
court held that Dr. Cory--in stating that using the term “bonded
leather” is “deceptive”--was “giving his opinion on how a
customer would perceive the term bonded leather” because he “did
not claim to know the law, did not reference the law, and did
not maintain that using such term would result in legal
liability.” J.A. 1777. DRI timely appealed.
II.
We review de novo the district court’s grant of summary
judgment, “viewing the facts and drawing all reasonable
inferences therefrom in the light most favorable to” the
nonmoving party. PBM Products, LLC v. Mead Johnson & Co., 639
F.3d 111, 119 (4th Cir. 2011). Summary judgment is proper only
if there is no genuine issue of material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). “[I]t is ultimately the nonmovant’s burden to
persuade us that there is indeed a dispute of material fact. It
10
must provide more than a scintilla of evidence--and not merely
conclusory allegations or speculation--upon which a jury could
properly find in its favor.” CoreTel Va., LLC v. Verizon Va.,
LLC, 752 F.3d 364, 370 (4th Cir. 2014) (citation omitted).
III.
On appeal, DRI argues that the district court erred in
granting summary judgment to Ashley and LIA because DRI’s
evidence with respect to the Ashley Ad, the Gunin Article, and
the Andrews Article was sufficient to establish false
advertising claims under the Lanham Act, 15 U.S.C. § 1125(a). 5
In the discussion that follows, we begin with a brief overview
of the governing legal framework, and then consider each of the
purportedly false statements in turn.
A.
A plaintiff asserting a false advertising claim under the
Lanham Act must establish that:
(1) the defendant made a false or misleading
description of fact or representation of fact in a
commercial advertisement about his own or another’s
product; (2) the misrepresentation is material, in
that it is likely to influence the purchasing
5
DRI also argues on appeal that the district court erred in
granting summary judgment to Ashley and LIA on its claim under
the North Carolina Unfair and Deceptive Trade Practices Act. We
have considered DRI’s arguments with respect to this claim and
find them to be without merit.
11
decision; (3) the misrepresentation actually deceives
or has the tendency to deceive a substantial segment
of its audience; (4) the defendant placed the false or
misleading statement in interstate commerce; and (5)
the plaintiff has been or is likely to be injured as a
result of the misrepresentation, either by direct
diversion of sales or by a lessening of goodwill
associated with its products.
PBM Products, 639 F.3d at 120 (emphasis added) (quoting Scotts
Co. v. United Indus. Corp., 315 F.3d 264, 272 (4th Cir. 2002)).
Because the plaintiff must establish all five elements of the
claim, failure to establish any one element is fatal to the
claim. The parties here focus their arguments on the first
element--whether the defendants made false or misleading
assertions of fact. Because we find that DRI failed to
substantiate this element with respect to any of the contested
statements, we limit our analysis accordingly.
For false advertising liability to arise, the contested
statement must be false, and it must be a representation of
fact. Regarding falsity, the statement “must be either false on
its face or, although literally true, likely to mislead and to
confuse consumers given the merchandising context.” Id.
(quoting C.B. Fleet Co. v. SmithKline Beecham Consumer
Healthcare, L.P., 131 F.3d 430, 434 (4th Cir. 1997)). Thus, the
plaintiff can show falsity in either of these two ways. First,
a statement that is false on its face--or literally false--“may
be either explicit or conveyed by necessary implication when,
12
considering the advertisement in its entirety, the audience
would recognize the claim as readily as if it had been
explicitly stated.” Id. (quoting Scotts, 315 F.3d at 274). “In
analyzing whether an advertisement . . . is literally false,”
courts must “determine, first, the unambiguous claims made by
the advertisement . . . , and second, whether those claims are
false.” Scotts, 315 F.3d at 274 (quoting Novartis Consumer
Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290
F.3d 578, 586 (3d Cir. 2002)).
Second, the plaintiff can show that, although a statement
may be true on its face and not false by necessary implication--
it is otherwise false by implication because it would likely
mislead consumers of the product the statement concerns. The
plaintiff must support a theory of implied falsehood with
evidence that the advertisement “tend[s] to mislead or confuse
[such] consumers.” Id. at 273 (quoting Johnson & Johnson Merck
Consumer Pharm. Co. v. Smithkline Beecham Corp., 960 F.2d 294,
297 (2d Cir. 1992)) (internal quotation mark omitted). Such
evidence of consumer confusion must “account for the . . .
allegations in the case”--or, show that the statement misled
consumers in the way the plaintiff claims it did; otherwise, it
“fail[s] to provide the required evidence of [implied]
falsity.” PBM Products, 639 F.3d at 122.
13
In addition to being false, the statement must be a
representation of fact, or, a “specific and measurable claim,
capable of being proved false or of being reasonably interpreted
as a statement of objective fact.” Pizza Hut, Inc. v. Papa
John’s Int’l, Inc., 227 F.3d 489, 496 (5th Cir. 2000)
(quoting Coastal Abstract Serv., Inc. v. First Am. Title Ins.
Co., 173 F.3d 725, 731 (9th Cir. 1999)) (internal quotation
marks omitted). By contrast, statements “of general opinion
[are] not actionable under [§ 1125].” Id. To be a
representation of fact, the statement must “admit[] of being
adjudged true or false in a way that . . . admits of empirical
verification.” Id. (quoting Presidio Enters. v. Warner Bros.
Distrib. Corp., 784 F.2d 674, 679 (5th Cir. 1986)) (internal
quotation mark omitted). With this framework in mind, we
discuss each purportedly false advertisement in turn.
B.
1.
We agree with the district court that DRI failed to
substantiate a claim that the Ashley Ad is either literally
false or impliedly false. Beginning with literal falsity, DRI
argues on appeal that the ad’s statement--that “[s]ome
upholstery suppliers are using leather scraps that are mis-
represented as leather,” e.g., J.A. 274--was literally false by
necessary implication. It argues that “[s]ome upholstery
14
suppliers” refers to suppliers of bonded leather generally and
to DRI--as supplying NextLeather®--specifically, and that the
ad’s audience would have recognized these references “as readily
as if [they] had been explicitly stated.” PBM Products, 639
F.3d at 120 (quoting Scotts, 315 F.3d at 274). In particular,
DRI argues that the ad’s reference to NextLeather® is
unmistakable when viewed in the broader context in which
consumers would have understood it. DRI then contends that,
having necessarily implied a reference to bonded leather and
DRI’s NextLeather®, the ad communicates the false messages that
bonded leather was being marketed as leather and that DRI was
marketing NextLeather® as leather.
We find DRI’s literal falsity argument confounding. At
bottom, DRI asserts that, even though the ad refers only to
products marketed as leather, it unmistakably refers to
products not marketed as leather, but as bonded leather or
NextLeather®. In order to arrive at this conclusion, one has to
follow DRI’s winding inquiry far outside the face of the ad,
which the concept of literal falsity by necessary implication
does not allow us to do. And, one has to be willing to accept
that the ad means the opposite of what it says, an
interpretation we find insupportable.
In evaluating claims asserting literal falsity by necessary
implication, courts have emphasized the limits of this theory of
15
liability, holding that not “all messages implied by an
advertisement will support a finding of literal
falsity.” Clorox Co. P.R. v. Proctor & Gamble Commercial Co.,
228 F.3d 24, 35 (1st Cir. 2000). “The greater the degree to
which a message relies upon the viewer or consumer to integrate
its components and draw the apparent conclusion, . . . the less
likely it is that a finding of literal falsity will be
supported.” Id. (quoting United Indus. Corp. v. Clorox Co., 140
F.3d 1175, 1181 (8th Cir. 1998)). And “[c]ommercial claims that
are implicit, attenuated, or merely suggestive usually cannot
fairly be characterized as literally false.” Id. In other
words, a false advertising claim cannot rely on the consumer to
draw inferences that an ad only hints at or merely suggests.
A false advertising claim can, however, depend on the
consumer to draw conclusions that are logically necessary from
an ad’s statements. In Castrol Inc. v. Pennzoil Co., a Pennzoil
advertisement made two claims--first, that motor oil viscosity
breakdown leads to engine failure, and second, that Pennzoil’s
product “outperforms any leading motor oil against viscosity
breakdown.” 987 F.2d 939, 947 (3rd Cir. 1993). Though the
advertisement did not “specifically mention its competitors,”
the court determined that the advertisement “left the consumer
with the obvious conclusion that Pennzoil is superior to the
other leading brands in protection against engine problems,” and
16
thus “Pennzoil did, by implication, compare its effectiveness
against engine wear to that of its competitors.” Id. at 946.
Put differently, a claim of literal falsity by necessary
implication could stand where the contested conclusion
necessarily flowed from the ad’s statements.
Although DRI acknowledges that the Ashley Ad “d[id] not
specifically use the words ‘bonded leather,’” it argues that the
ad nevertheless necessarily implied a false message regarding
bonded leather and NextLeather® because “it is indisputable
. . . that the market understood [the Ashley Ad as targeting
bonded leather].” Appellant’s Br. at 31. DRI urges that
consumers would have understood this implication given the
broader market context of the Ashley Ad, pointing to the
following evidence in support: (1) another Furniture Today
article, published on March 30, 2007--between the first and
second publications of the Ashley Ad--noting that “Ashley is
urging buyers to ‘be aware’ of bonded leather,” Appellant’s Br.
at 31; J.A. 1678; (2) a survey by Ashley’s expert witness
showing that viewers of the ad understood it to refer to bonded
leather, Appellant’s Br. at 32; (3) email exchanges between
Ashley and Dr. Cory suggesting that Ashley sought to disparage
bonded leather, id. at 32; J.A. 321, 332; and (4) testimony by
DRI’s owner and president and by a furniture manufacturer to the
effect that “DRI was the only company offering a product like
17
NextLeather® and marketing it as ‘bonded leather,’” Appellant’s
Br. at 32; see also J.A. 1289-90; 1496-1500.
In making this argument, DRI asks us to reach entirely
outside the face of the ad and into the context surrounding the
ad’s publication to uncover a false message it argues is
necessarily implied. Far from making the argument that the ad’s
statements logically require the conclusion that the ad concerns
bonded leather, DRI, or NextLeather®, DRI instead relies on the
consumer to scrape together that conclusion from reading other
articles from the publication and having knowledge that only DRI
was marketing a product like the one described in the ad. This
expectation is made all the more unreasonable given the fact
that the Ashley Ad mentions neither DRI nor its NextLeather®
product, and instead, directly refers to a category that would
exclude bonded leather and NextLeather®--products marketed with
the unqualified term “leather.” Thus, DRI stretches the concept
of literal falsity beyond its bounds in urging us to conclude
that the ad means the opposite of what it says. In so doing,
DRI fails to establish that the Ashley Ad is literally false.
Turning to implied falsity, DRI argues that, even if the
Ashley Ad is not false on its face or by necessary implication,
it is otherwise false by implication because it misled consumers
about its NextLeather® product. For support, DRI again points
to the survey conducted by Ashley’s expert witness, maintaining
18
that it shows that consumers understood the ad to be about
bonded leather, which, “at the time was synonymous with
NextLeather®.” Appellant’s Br. at 40.
But to “provide the required evidence of [implied]
falsity”--that the contested statement confused consumers--the
proffered evidence must “account for the . . . allegations in
the case,” PBM Products, 639 F.3d at 122--here, that the Ashley
Ad confused consumers about NextLeather®. DRI fails to make
this required showing. The survey made no mention of DRI or
NextLeather®. Rather, it asked consumers who had attended the
Spring High Point Market between 2004 and 2013 what message they
thought the ad conveyed and to which specific suppliers they
thought the ad referred. The survey results showed that “zero
respondents gave an answer that could be interpreted as a belief
that DRI or NextLeather were specifically mentioned as[,] . . .
[or] implied or suggested to be[,] the supplier of the
upholstery material described” in the ad. J.A. 424. Thus,
because DRI’s claim depends on consumer confusion about
NextLeather®, and the survey on which DRI relies demonstrates no
confusion about DRI or its product, DRI fails to substantiate a
theory of implied falsity in the Ashley Ad.
2.
We also agree with the district court that DRI failed to
provide sufficient support for a false advertising claim with
19
respect to Dr. Cory’s statement in the Gunin Article. DRI
argues that Dr. Cory’s statement--that “[t]o call [alternative
leather products such as bonded leather] ‘leather’ is outright
deception, outright fraud,” J.A. 86--is literally false by
necessary implication. DRI contends that the statement must be
understood as “referring specifically to NextLeather®” because,
in the same article, Dr. Cory described the characteristics of
bonded leather, and that description “applies to NextLeather®.”
Appellant’s Br. at 45. Thus, DRI maintains, “any reasonable
juror would conclude that [Dr.] Cory was calling DRI’s use of
the term ‘bonded leather’--not ‘leather’--‘deceptive and
fraudulent.’” Id.
However, the statement that calling bonded leather products
“leather” is deceptive unambiguously communicates the message
that using the unqualified term “leather” for products that are
not leather is misleading. Nothing on the face of this
statement suggests that the use of the term “bonded leather”--by
DRI or anyone else--is misleading. And DRI acknowledges that
its NextLeather® product is not leather as that term is
understood in the furniture upholstery industry, but is instead
a “synthetic leather-look furniture covering product.”
Appellant’s Br. at 8. Therefore, we agree with the district
court that Dr. Cory’s statement cannot qualify as false or
misleading because it is true, and accordingly conclude that DRI
20
has failed to support its false advertising claim with respect
to the Gunin Article.
3.
Finally, we agree with the district court that DRI failed
to provide sufficient evidence to demonstrate that Dr. Cory’s
statement in the Andrews Article was a false or misleading
representation of fact. As discussed above, this article
advocated against use of the term “bonded leather” as “bound to
confuse consumers,” and it quoted Dr. Cory as saying that the
term “is deceptive because it does not represent [the] true
nature” of the products it is used to describe. J.A. 108.
Instead, such products are more accurately described as “vinyl,”
“polyurethane laminate,” or “composite,” rather than with a term
that includes the word “leather.” J.A. 108.
The district court concluded that this statement expressed
an opinion “on how a customer would perceive the term bonded
leather.” J.A. 1777. DRI argues that, even if Dr. Cory’s
statement conveys an opinion, it is still actionable under the
reasoning of Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990).
In that case, the Supreme Court held that opinion statements are
not automatically protected against defamation claims because,
for example, the statement, “‘In my opinion Jones is a liar,’ .
. . implies a knowledge of facts which lead to the conclusion
that Jones told an untruth.” Id. at 18. The Court reasoned
21
that “[i]t would be destructive of the law of libel if a writer
could escape liability for accusations of [defamatory conduct]
simply by using, explicitly or implicitly, the words ‘I
think.’” Id. at 19 (quoting Cianci v. N.Y. Times Pub. Co., 639
F.2d 54, 64 (2d Cir. 1980)).
If we were to extrapolate the Milkovich rule to the Lanham
Act context, we could draw from it that statements of opinion
may not automatically be protected from false advertising claims
if they “imply a knowledge of facts which lead to the
conclusion” that the statement were true. Id. at 18. By this
reasoning, DRI’s argument is unpersuasive, however, because Dr.
Cory’s statement does not imply a basis in facts leading to the
conclusion that consumers are or have been deceived by the term
“bonded leather.” It communicates only the hypothesis--yet to
be proved or disproved--that “bonded leather” has the potential
to confuse consumers.
More pertinent to our analysis than the Milkovich
defamation rule are decisions rendered in the Lanham Act
context, which, as discussed above, have held that statements
“of general opinion [are] not actionable under [§ 1125].” Pizza
Hut, 227 F.3d at 496. Rather, an actionable statement must
“admit of being adjudged true or false in a way that . . .
admits of empirical verification.” Id. An example of a type of
statement not “admit[ting] of empirical verification” that
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courts have recognized is “[a] prediction, or statement about
the future, [which] is essentially an expression of opinion”
that is not actionable. Presidio, 784 F.2d at 680; see also id.
at 678-79.
In the context of an article suggesting that a marketing
term is “bound to confuse” consumers, stating that the term is
“deceptive” is merely putting that point a different way.
Unlike stating that the term “has been shown to deceive”
consumers, which might “admit[] of empirical
verification,” Pizza Hut, 227 F.3d 496, merely calling a term
“deceptive” suggests only that it is the speaker’s view that the
term has the potential to deceive. In other words, a prediction
about a term’s power to deceive expresses only an opinion about
the term’s likely effect on consumers; it is not a
representation of fact--false or otherwise--and is thus not
actionable under the Lanham Act. See Presidio, 784 F.2d at
680; Pizza Hut, 227 F.3d 496. Therefore, DRI has also failed to
substantiate its claim as to Dr. Cory’s statement in the Andrews
Article.
IV.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
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