In this political season, we will undoubtedly be subject to politicians' fondness for "plausible deniability." Denying responsibility for unfavorable actions, when there is no direct proof of knowledge or participation, is common. Sometimes defendants in false advertising claims will resort to similar methods, pointing out that the advertisement is not literally false. However, one Ohio appellate court recently made it harder for that argument to pave the way to victory.
Specifically, the Ohio Second District Court of Appeals adopted from federal law the "false by necessary implication" doctrine for claims under Ohio's Deceptive Trade Practices Act ("DTPA") that involve comparative advertising. Heartland of Urbana OH, LLC v. McHugh Fuller Law Group, PLLC, 2d Dist. Champaign, No. 2016-CA-3, 2016-Ohio-6959. Comparative advertising is advertising that refers directly to another entity's product or service. Id. at ¶ 73-74. The decision will make it easier for plaintiffs to survive summary judgment on DTPA claims in cases that involve intentionally misleading comparative advertising because causation and injury -- two elements of the claim -- can now be presumed.
In Heartland, McHugh (a law firm) published an advertisement in December of 2014 regarding Heartland, a nursing care facility. The advertisement stated:
"ATTENTION!
The government has cited
HEARTLAND OF URBANA NURSING
AND REHABILITATION CENTER
for failing to provide necessary care and
services to maintain the highest well-being
of each resident.
If you suspect that a loved one was
NEGLECTED or ABUSED
at Heartland of Urbana,
call McHugh Fuller today!
Has your loved one suffered?
Bedsores
Broken Bones
Unexplained Injuries
Death"
Id. at ¶ 5. However, Heartland had not had been cited for over two years, and had not had a citation remotely similar to the one alleged in the advertisement since June of 2010. Moreover, that June 2010 citation did not involve harm to any patient, and Heartland had corrected the deficiencies that same month. Id. at ¶ 5, 8-9.
Heartland sued McHugh for, among other things, violating the DTPA. The complaint alleged that the language in the advertisement falsely led readers to believe that Heartland had been cited recently and the violation was far more serious than in reality. However, the trial court granted McHugh summary judgment because Heartland failed to demonstrate any causal connection between the allegedly false statements and any harm resulting to Heartland. Id. at ¶ 7, 27-28, 57.
Ohio's Second District Court of Appeals reversed. Looking to federal caselaw interpreting the Lanham Act for guidance, the appellate court first explained that there are two different theories of recovery for a false advertising claim: (1) the challenged advertisement is literally false, i.e., false on its face, or (2) the challenged advertisement, while not literally false, is nevertheless likely to mislead or confuse consumers and leaves an impression on consumers that conflicts with reality. Under the first theory, consumer deception and injury to the plaintiff is presumed; under the second theory, there is no such presumption. Id. at ¶ 59, 62, citing Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 153 (2d Cir.2007).
The appellate court then reasoned that disparaging advertisements that identify a specific product or provider (i.e., comparative advertisements), and are intentionally misleading when considered in full context, necessarily diminish the value of the product or service in the minds of consumers -- even if not literally false. Id. at ¶ 65, 73-75, citing McNeilab, Inc. v. Am. Home Prods. Corp., 848 F.2d 34, 38 (2d Cir.1988) and Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1336 (8th Cir.1997). Thus, in those particular circumstances, a DTPA claim for false advertising that is based on the second theory of recovery will be treated like one based on the first theory. Consequently, the causation and injury elements of such a claim will be presumed (although that presumption can be rebutted), and may make it easier for plaintiffs to survive summary judgment. Id. at ¶ 78.
In making this holding, the appellate court adopted and used the relatively new "false by necessary implication" doctrine from federal Lanham Act caselaw. Id. at ¶ 59, 63, 79, citing Time Warner Cable (internal quotations omitted). "Under this doctrine, a…court evaluating whether an advertisement is literally false must analyze the message conveyed in full context, i.e., it must consider the advertisement in its entirety … If the words or images, considered in context, necessarily imply a false message, the advertisement is literally false and no extrinsic evidence of consumer confusion is required." Id. at ¶ 63, quoting Time Warner Cable, 497 F.3d at 158 (internal citations and quotations omitted).
McHugh's advertisement referred directly to Heartland; thus, Heartland's DTPA claim involved an advertisement that identified a specific product or provider, i.e., a comparative advertisement. Id. at ¶ 74, 76. The appellate court concluded "that McHugh's ad is literally false pursuant to the false by necessary implication doctrine. Although the statement that Heartland had been cited is not literally false, the words, considered in context, necessarily imply a false message." Id. at ¶ 76 (internal citation and quotation omitted). "When the advertisement was published, McHugh, a law firm, would have known [or had access to information] that [1] any claims based on the June 24, 2010 citations were barred due to the statute of limitations," [2] Heartland had not been later cited, and [3] none of the citations involved harm to any patient. Id. at ¶ 77.
The appellate court summarized:
"[T]he only reasonable conclusion is that the advertisement falsely implied Heartland was a facility where patients were being exposed to very dangerous conditions, including death, and that McHugh made impliedly false statements intended to deceive customers. As a result, Heartland's services were necessarily diminished in the minds of consumers, since Heartland was directly identified. . . . Furthermore, in view of the intentional deception, a rebuttable presumption of causation and injury in fact arose - which was not rebutted by McHugh."
Id. at ¶ 78 (internal citation omitted). Thus, the court overruled the trial court's decision, which had granted summary judgment to McHugh because Heartland had not demonstrated causation and injury.
As a result of Heartland, parties on both sides of a DTPA false advertising claim may need to alter their litigation and discovery strategies. They will need to consider, for example, (a) whether the advertisement at issue is comparative or non-comparative, (b) whether it implies a false message when considered in full context, and (c) whether the defendant can submit evidence to rebut a presumption that the plaintiff's products or services were diminished in the mind of consumers (i.e., the presumption of causation and injury). Finally, advertisers should realize that the bar for false advertising claims to reach trial just got a little lower.