Verizon Directories Corp. v. Yellow Book Usa, Inc.

309 F.Supp.2d 401

VERIZON DIRECTORIES CORP., Plaintiff, v. YELLOW BOOK USA, INC., Defendant.

No. 04-CV-0251 (JBW).

United States District Court, E.D. New York.

March 22, 2004.

Schlam Stone & Dolan LLP by Richard H. Dolan, Esq., Jeffrey M. Eilender, Esq., New York City, Kirkland & Ellis LLP by Steven G. Bradbury, Esq., Winston & Strawn by Charles B. Molster, III, Esq., Washington, DC, for Plaintiff Verizon Directories Corp.

Davis Wright Tremaine LLP by Victor A. Kovner, Esq., Robert D. Balin, Esq., Sharon L. Schneier, Esq., New York City, for Defendant Yellow Book USA, Inc.

MEMORANDUM JUDGMENT & ORDER

WEINSTEIN, Senior District Judge.

I. Introduction

Verizon Directories Corporation ("Verizon") brings this action against Yellow Book USA, Inc. ("YB USA") for (1) false representations in sales and marketing communications and false advertising under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (2) unfair competition and false advertising under sections 349 and 350 of the New York General Business Law; and (3) product disparagement under New York common law. It seeks preliminary and permanent injunctions and damages. YB USA moves to dismiss all of Verizon's claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

For the reasons indicated below, the motion is granted only as to the product disparagement claim. Verizon is given leave to amend its complaint as to the product disparagement claim within twenty days.

II. Factual Allegations

YB USA publishes a yellow pages directory, the "Yellow Book," which competes with Verizon's yellow pages directory, the "SuperPages," in a number of major markets. YB USA promotes the Yellow Book in commercials on local and national broadcast and cable television and by use of sales representatives contacting prospective advertisers.

Verizon alleges that YB USA's commercials falsely represent that more people use the Yellow Book than use the SuperPages. It contends that, contrary to YB USA's claims, more people use the SuperPages than use the Yellow Book, and that it has been directly and irreparably harmed by YB USA's misrepresentations. It specifies three television commercials in its complaint. Video recordings of the three advertisements were shown at the hearing on the preliminary injunction. Each was apparently part of a coordinated campaign directed in sequence at the same television viewers.

The first commercial, the "Senior Focus Group," starts with three marketing men who work for the "Other Book" directory — which Verizon alleges is a thinly veiled pseudonym for Verizon's SuperPages — holding a focus group session with nine senior citizens. The men ask the senior citizens which book they use, the Yellow Book or the Other Book. Each senior responds that he or she uses the Yellow Book. The men then ask whether the seniors ever look at the Other Book. In response they receive only blank stares. The commercial closes with an image of the Yellow Book standing on end next to the Other Book, as a voice-over says, "More people choose Yellow Book, not the Other Book."

The second commercial, the "Apartment Lobby," opens with the same three men who work for the Other Book in the back of a van spying on an apartment building lobby. On the side of the van is a picture of the Other Book yellow pages directory and the words "The Other Book by the Phone Company." In the lobby are two large stacks of new yellow pages directories, one stack of the Yellow Book and one of the Other Book. The men watch as, one by one, residents of the apartment building come into the lobby to pick up a directory. The stack of Yellow Books quickly disappears, while all of the Other Books remain unclaimed. A voice-over says, "Today, people are choosing the Yellow Book, not that Other Book."

The third and final commercial, the "Wind Tunnel," opens on one of the marketing men from the Phone Company. He is carrying a copy of the Yellow Book and a copy of a yellow pages directory clearly titled "The Other Book by the Phone Company." He brings them into a wind tunnel that is identified as "The Phone Company Secret Test Site." The man says in disgust, "Consumers keep choosing Yellow Book yellow pages!" He holds up the Yellow Book. Two people dressed as scientists are behind a window in a control room; one says, "We'll find out which directory has the right stuff!" The marketing man places the two directories side-by-side on a platform. The scientists increase the speed of the wind machine. The Other Book gets blown away by a light wind, while the Yellow Book remains firmly in place even as the intensity of the wind increases to the point where the Other Book's marketer is blown off the screen.

Verizon claims that it has suffered significant damage as a result of the alleged misrepresentations contained in YB USA's television commercials and sales representations. It has moved for a preliminary injunction. It also seeks a permanent injunction, treble damages and other relief.

YB USA moves to dismiss all of Verizon's claims as to the television commercials on the ground that the commercials constitute nonactionable puffery as a matter of law. It also seeks dismissal of Verizon's product disparagement claim on the ground that Verizon has failed to plead special damages.

At a hearing on the preliminary injunction the court noted that it was dubious about granting a preliminary injunction without substantial survey and other evidence. The parties agreed that if the case were to go forward on the merits, hearings on the preliminary and final injunctions would be conflated.

The matter was referred to the Magistrate Judge for expedited discovery. In turn, the Magistrate Judge referred the case to this court's annexed mediation services.

Addressed in this memorandum and order are YB USA's motions directed to Verizon's complaint.

III. Law

A. Motion to Dismiss

1. Statement of a Claim

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss for "failure to state a claim upon which relief may be granted." The task of the court "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support...." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980). The court will accept the plaintiff's factual allegations as true, drawing reasonable inferences in plaintiff's favor. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996).

On a motion to dismiss, a court may consider "documents attached to the complaint as an exhibit or incorporated in it by reference [or] matters of which judicial notice may be taken." Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.2002). It may also consider a document if the plaintiff relied on its "terms and effect" in drafting the complaint. Id. Although this rule has not been explicitly held to apply to videotapes, it should logically be, and is now so extended in view of the extensive use of videotape evidence in modern litigation. The videotapes shown at the hearing are deemed embodied in the complaint.

B. Claims

1. Lanham Act § 43(a)

Section 43(a) of the Lanham Act provides that

any person who ... 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, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1)(B).

A plaintiff must allege that: (1) the defendant made false or misleading representations regarding the nature, characteristics, or quality of the plaintiff's services or commercial activities; (2) the representations were used in commerce; (3) the representations were made in the context of commercial advertising or promotion; and (4) the defendant's actions made the plaintiff believe it would be damaged by the representations. Galerie Gmurzynska v. Hutton, 257 F.Supp.2d 621, 629 (S.D.N.Y.2003), aff'd, 355 F.3d 206 (2d Cir.2004).

An advertisement must be: "(1) ... literally false as a factual matter, or (2) although ... literally true, ... likely to deceive or confuse customers." Lipton v. The Nature Co., 71 F.3d 464, 474 (2d Cir.1995) (citing McNeil-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544, 1549 (2d Cir.1991)); see also Johnson & Johnson * Merck Consumer Pharmaceuticals Co. v. Smithkline Beecham Corp., 960 F.2d 294, 297 (2d Cir.1992).

Context of the advertisement is critical, for it is "fundamental to any task of interpretation ... that text must yield to context." Avis Rent A Car Sys., Inc. v. The Hertz Corp., 782 F.2d 381, 385 (2d. Cir.1986) ("[T]he Supreme Court long ago inveighed against the tyranny of literalness."). In addition to its text, a commercial's visual images will be considered in determining falsity. S.C. Johnson & Son, Inc. v. The Clorox Co., 241 F.3d 232, 238 (2d Cir.2001).

False representations of fact are distinguished from puffery. Puffery is a somewhat amorphous concept. In the Lanham Act context, puffery has been defined alternately as "an exaggeration or overstatement expressed in broad, vague, and commendatory language," Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 945 (3d Cir.1993); as "a general claim of superiority over comparable products that is so vague that it can be understood as nothing more than a mere expression of opinion," Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 497 (5th Cir.2000); and as an "exaggerated, blustering, and boasting statement upon which no reasonable buyer would rely," Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir.1997). See also Lipton v. The Nature Co., 71 F.3d 464, 474 (2d Cir.1995); Groden v. Random House, Inc., No. 94 Civ. 1074, 1994 WL 455555 at *17 (S.D.N.Y. Aug 23, 1994), aff'd, 61 F.3d 1045 (2d Cir.1995); 4 J. Thomas McCarthy, McCarthy on Trademark and Unfair Competition, § 27:38 (4th ed.1998).

Puffery is...