False Advertising Claims May Be Based on Implied Falsity

In a false advertising case brought under the Lanham Act, 15 U.S.C. § 1125(a), a manufacturer of furniture coverings claimed that an advertisement placed in a trade magazine by a major furniture manufacturer was false and misleading. Design Resources, Inc., the plaintiff, argued that even if the ad and accompanying article were couched in terms of opinion, principles of defamation law teach that statements of apparent opinion can be actionable if they imply the existence of underlying facts. The district court accepted this notion but found that the ad in question did not imply any such facts and granted summary judgment for the defendants, Ashley Furniture Industries, Inc., and Leather Industries of America. On June 18, 2015, the Fourth Circuit affirmed.

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 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, LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir. 2011). As with defamation claims, false advertising liability requires both a statement of fact and falsity. A statement that is literally true may nevertheless give rise to liability if it is likely to mislead and confuse consumers when taken in context. In false-advertising claims, falsity can be conveyed (a) Bonded_leather.jpgexpressly, (b) by necessary implication, or (c) by other implication, if the statement would tend to mislead reasonable consumers.

In this particular case, however, the court found that the statements contained mere opinion and did not amount to false advertising. The dispute involved DRI’s “NextLeather” product, a “synthetic leather-look furniture covering product…composed of 61% polyurethane, 22% poly/cotton, and 17% leather.” According to DRI, the product “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.” DRI began marking its product as “bonded leather,” a term some others in the industry found misleading.

DRI alleged that Ashley Furniture ran a full-page ad in a widely read trade magazine containing the following message: “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!” In the same publication, Dr. Nicholas Cory, a leather chemist and another defendant, was quoted in an article as saying “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.”

The court found that Dr. Cory’s statements amounted to mere opinion and that they did not imply an underlying factual predicate leading to the conclusion that consumers have been misled. Rather, it reflected only his “hypothesis” that the term “bonded leather” has the potential to confuse consumers. “In other words,” the court wrote, “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.”

The court also held that the ad did not clearly refer to DRI or its product, and that therefore the ad did not confuse consumers about that product.

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