FIRST AMENDMENT LAW LETTER, Summer 2002
Advertising and Commercial Speech Focus
California's "Creeping Commercial Speech": Kasky Decision Attacks Business Participation in Public Debates
Navigating the Web of Rules Governing
Internet Advertising
Celebrities Testing Limits of California's
Right of Publicity Laws
Actual Malice and the Commercial
Speech Doctrine
California's "Creeping Commercial Speech": Kasky Decision Attacks Business Participation in Public Debates
By Bruce
E. H. Johnson
In a far-reaching decision that could force corporations
to stay out of public-policy debates related to their own products
or services, the California Supreme Court held in Kasky v. Nike,
Inc.1 that a business could be liable to consumers for commercial deception
based on "issue advertising" long thought to be fully
protected by the First Amendment. The court held that Nike advertisements
responding to allegations about the company's labor practices amounted
to merely "commercial speech," notwithstanding that they
addressed a simmering public controversy, because one purpose of
the ads may have been to further sales of Nike's products.
The decision represents a radical departure from
First Amendment principles, and a threat to corporate speech generally.
First, some background: In 1986, the California Supreme Court reviewed
United States Supreme Court precedents and held that "commercial
speech" was defined "as speech that does 'no more than
propose a commercial transaction . . . .'"2 The court stressed that "commercial motivation does not transform
noncommercial speech into commercial speech."
The "no more than" definition was a
sensible one, embraced in many United States Supreme Court cases,
from Virginia State Board of Pharmacy v. Virginia Citizens Consumer
Council, Inc. ,3
to City of Cincinnati v. Discovery Network, Inc.4 As a matter of public policy, governmental regulation of "commercial
speech" was justified because such speech is not expression
if it does "no more than" propose a commercial transaction.
Justice Stevens summarized the reasons for this narrow First Amendment
exception in 44 Liquormart, Inc. v. Rhode Island,5
as follows:
[T]he State's power to regulate commercial transactions justifies
its concomitant power to regulate commercial speech that is "linked
inextricably" to those transactions. [Friedman v. Rogers,
440 U.S. 1, 10 n.9 (1979); Ohralik v. Ohio State Bar Ass'n,
436 U.S. 447, 456 (1978)] (commercial speech "occurs in an
area traditionally subject to government regulation"). As
one commentator has explained: "The entire commercial speech
doctrine, after all, represents an accommodation between the right
to speak and hear expression about goods and services and the
right of government to regulate the sales of such goods and services." [Laurence H. Tribe, American Constitutional Law § 12-15 at 903 (2d Ed. 1988)].
Thus, the sole justification for government's
extraordinary power to regulate commercial speech is the relation
of that speech to commercial transactions, as the California Supreme
Court recognized in 1986.
That was then; this is now. On May 2, 2002, in
Kasky, the same court by a one-vote margin rejected this
long-established authority, holding that Nike's defense of overseas
labor practices, responding to a major public controversy,was nothing
more than "commercial speech" and could be suppressed
by a plaintiff who suffers no damages but files suit claiming misrepresentations
under California's Unfair Competition Law ("UCL") (Bus.&
Prof Code § 17200 et seq.) and false advertising law
(Bus.& Prof Code § 17500 et seq.).
The Kasky case grew out of a major public
debate about labor conditions in Asian countries with lower labor
costs than in the United States. Because its shoes were manufactured
overseas, where costs were cheaper, Nike had been the target of
anti-globalization activists and was the subject of major media
coverage of their allegations. Beginning in 1996, in a major public
relations campaign waged in the news media, Nike's critics alleged
that workers in factories that manufactured Nike's products were
paid less than the applicable local minimum wage and were subjected
to abuse and unhealthy working conditions. Those reports received
wide coverage and transformed Nike's labor practices into matters
of significant public interest and concern, making Nike (in the
words of a noted First Amendment commentator) "the poster child
for the perceived social evils of economic globalization."
In response, Nike vigorously defended its manufacturers'
practices and actively participated in the public debate on globalization.
As the court noted, "Nike and the individual defendants made
these statements in press releases, in letters to newspapers, in
a letter to university presidents and athletic directors, and in
other documents distributed for public relations purposes. Nike
also bought full-page advertisements in leading newspapers to publicize
a report that GoodWorks International, LLC., had prepared under
a contract with Nike. The report was based on an investigation by
former United States Ambassador Andrew Young, and it found no evidence
of illegal or unsafe working conditions at Nike factories in China,Vietnam,
and Indonesia." The company's responses to its critics - including
a letter to the editor written in response to a New York Times
columnist who had criticized Nike's operations in Asia - became
the focus of the Kasky complaint filed by several plaintiffs' class-action
lawyers.
The lawsuit was dismissed by the trial court,
because only commercial speech could give rise to claims under the
UCL and false advertising laws and the Nike campaign was not commercial
speech. The intermediate appellate court affirmed the dismissal,
concluding that Nike's statements were noncommercial speech and,
consequently, fully protected by the state and federal constitutions.
In its Kasky decision, the California Supreme
Court reversed this ruling, introducing a new and extraordinarily
broad definition of commercial speech. The court majority rejected
the United States Supreme Court's "no more than" formula
and instead devised a three-part test for determining whether particular
statements constitute commercial speech. The test, it said, applies
"when a court must decide whether particular speech may be
subjected to laws aimed at preventing false advertising or other
forms of commercial deception. . . ."
Under the test invented by the Kasky court,
three elements must be considered: the speaker, the intended audience,
and the content of the message. The three-part commercial speech
test devised by the Kasky majority sweeps within its ambit
almost any statements by any corporate or commercial speaker, or
entity, involving any public controversy that touches upon the defendant's
practices and policies.
First, according to the Kasky majority,
the "speaker" element of the test will be met whenever
the speaker is "someone engaged in commerce" - that is,
generally, the production, distribution or sale of goods or services
- or "someone acting on behalf of a person so engaged."
Obviously, statements by any commercial enterprise will satisfy
the "speaker" element of the test. Even statements made
by nonprofit organizations could be included. Media entities that
discuss media news would potentially be subject to the new Kasky
rule.
The second element - the "intended audience"
for the speech - is similarly broad and explicitly focuses on statements
made to members of the press. This element is satisfied if the intended
audience is "likely to be actual or potential buyers or customers
of the speaker's goods or services, or persons acting for actual
or potential buyers or customers, or persons (such as reporters
or reviewers) likely to repeat the message to or otherwise influence
actual or potential buyers or customers." A broader and more
public and newsworthy controversy, according to Kasky, increases
the likelihood that statements will be deemed commercial speech.
The third Kasky element - the "content"
of the speech - is satisfied if the "speech consists of representations
of fact about the business operations, products, or services of
the speaker (or the individual or company that the speaker represents),
made for the purpose of promoting sales of, or other commercial
transactions in, the speaker's products or services." From
the standpoint of the Kasky case, this requirement is merely
a matter of pleading - and is satisfied if a lawyer can allege that
a corporation's ultimate purpose is promoting sales. Kasky's counsel
simply alleged the obvious, that Nike's letters to the editor and
press releases concerning its labor practices, "although addressed
to the public generally,were also intended to reach and influence
actual and potential purchasers of Nike's products."
Every public relations effort, of course, is designed
to "reach" and "influence" consumers. Indeed,
the court majority swept broadly to encompass any statement that
may affect a company's image, stating "it is necessary,we think,
to adequately categorize statements made in the context of a modern,
sophisticated public relations campaign intended to increase sales
and profits by enhancing the image of a product or of its manufacturer
or seller." The court also suggested (contrary to substantial
judicial precedents) that "Nike's speech is not removed from
the category of commercial speech because it is intermingled with
noncommercial speech." The "policy questions" discussed
by Nike, it said,were protected speech; the factual information
that explained and substantiated Nike's policy arguments was not.
In effect, by defending its views on these important policy questions
and challenging the public relations efforts of anti-globalization
activists, Nike was doing nothing more than peddling shoes.
Justice Brown wrote a compelling dissent, as did
Justice Chin, with Justice Baxter concurring. In his dissenting
opinion, Justice Brown noted that the majority's commercial speech
test, "taken to its logical conclusion, renders all corporate
speech commercial speech." Indeed, the majority's test "contravenes
longstanding principles of First Amendment law" and "stifles
the ability of speakers engaged in commerce, such as corporations,
to participate in public debates over public issues."
Both dissenting opinions also noted how the majority's
test unfairly, and unconstitutionally, handicaps one side of the
public debate. Justice Brown stated that "[u]nder the majority's
test, only speakers engaged in commerce are strictly liable for
their false or misleading representations . . . . Meanwhile, other
speakers who make the same representations may face no such liability,
regardless of the context of their statements." Justice Chin
added:
[w]hile Nike's critics have taken full advantage of their right
to "uninhibited, robust, and wideopen" debate, the same
cannot be said of Nike, the object of their ire. When Nike tries
to defend itself from these attacks, the majority denies it the
same First Amendment protection Nike's critics enjoy. . . .
Finally, the dissenters pointed out how the Kasky majority also violated existing First Amendment precedents that
grant full constitutional protection to "mixed" commercial
and non-commercial speech. For example, Justice Brown noted that,
under the usual commercial speech test, where commercial speech
and noncommercial speech are "inextricably intertwined,"
the courts "must apply the 'test for fully protected expression'
rather than the test for commercial speech." Justice Chin agreed,
noting that "Nike realistically could not discuss its general
policy on employee rights and working conditions and its views on
economic globalization without reference to the labor practices
of its overseas manufacturers, Nike products, and how they are made.
. . . Attempting to parse out the commercial speech from the noncommercial
speech in this context `would be both artificial and impractical.'"
Kasky's new test for distinguishing commercial
speech from other expression, to the extent that it is directly
contrary to existing United States Supreme Court precedent, seems
designed to demand review by the Court on a petition for certiorari.
In fact, even as it rejected the Court's commercial speech definition,
the Kasky majority went out of its way to suggest its holding
was "based on decisions of the United States Supreme Court."
While seemingly aberrant, the case joins several other recent trial
and appellate rulings that have attempted to expand the category
of "commercial speech" - and have also rejected the traditional
Supreme Court test.6
Kasky may force the Court once again to clarify that protected
speech remains protected speech, regardless of the economic motivations
of the speaker.
By hamstringing one side of a major public debate
but not the other, however, Kasky's attempted creation of
a new category of "creeping commercial speech" presents
special risks to fundamental First Amendment values. Kasky is a dangerous precedent, which could punish corporations and employees
who attempt to discuss public issues of concern only to become targets
of California plaintiffs who disagree with their views. At the end
of July, the California Supreme Court refused to reconsider its
decision. Nike is expected to seek certiorari this fall, requesting
a ruling that rejects the novel concept of "creeping commercial
speech" and reminds the lower courts of the proper constitutional
definition: "speech that does no more than propose a commercial
transaction."
Bruce
E. H. Johnson, a partner in DWT's Seattle office, is a co-author
of the Practising Law Institute's treatise Advertising and Commercial
Speech: A First Amendment Guide.
Bruce can be reached at (206) 628-7683 or email
at brucejohnson@dwt.com.
Footnotes:
1
27 Cal. 4th 939 (2002).
2
Blatty v. New York Times Co., 42 Cal. 3d 1033, 1048 n.3 (1986),
cert. denied, 485 U.S. 934 (1988) (quoting Pittsburgh
Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S.
376, 385 (1973)).
3
425 U.S. 748, 762 (1976).
4
507 U.S. 410, 422-23 (1993).
5
517 U.S. 484, 499 (1996).
6
See, e.g., World Wrestling Fed'n Entn't, Inc. v. Bozell,
142 F. Supp. 2d 514 (S.D.N.Y. 2001); Procter & Gamble Co.
v. Amway Corp., 242 F.3d 539 (5th Cir.), cert. denied,
122 S. Ct. 329 (2001); Downing v. Abercrombie & Fitch,
265 F.3d 994 (9th Cir. 2001).
Navigating the Web of Rules Governing Internet Advertising
By Thomas
R. Burke
Internet advertising revenue totaled $5.5 billion
in 2001, compared with a mere $20 million in 1995.1
Advertising online is predicted to reach $20 billion by 2010, accounting
for 5.3 percent of all media ad billings.2
Internet advertising offers businesses a new and
entirely different medium with which to attract consumers and maintain
brand loyalty. Current online options include pop-ups, pop-unders,
banners, splash pages and text-based ads. More creative forms of
online advertising are inevitable, including ads customized for
wireless applications. Consumer acceptance - or tolerance - of these
emerging forms of advertising is still being tested. While the medium
of Internet advertising presents an array of new choices for businesses,
the rules that apply to those ads are likely to be familiar.
Internet ads cannot be unfair or deceptive
Section 5 of the Federal Trade Commission Act
("Act") forbids "unfair or deceptive acts or practices" in trade or commerce.3
A practice is unfair if it causes or is likely to cause a
substantial injury that is not outweighed by other benefits to consumers
and is not reasonably unavoidable by the consumers.4
A practice is deceptive if it is a material representation
or omission that is likely to mislead consumers and affect their
decisions or behavior with regard to a specific product or service.5
These basic requirements apply equally to the online advertising
world.
Like other media forms, an Internet ad must disclose
material facts regarding a consumer transaction. In FTC v. Audiotex
Connection, Inc., No. CV-97 0726 (E.D.N.Y. 1997), the FTC pursued
Audiotex for deceiving customers in violation of Section 5 of the
Act by failing to disclose material facts about the costs incurred
with visiting its website. There, Audiotex invited consumers to
visit its "free adult sites" and directed them to download
a special image viewer in order to view the website. Audiotex did
not disclose that the image viewer was a software program that disconnected
consumers from their own local service, connected them with a phone
number in Moldova, and caused consumers to incur charges in excess
of $2 per minute. FTC and Audiotex entered into a consent decree,
in which Audiotex agreed to credit consumers for the telephone charges
totaling $2.74 million and to disclose material facts regarding
the costs of the transaction.6
As Internet scams have become more elaborate,
the FTC has become increasingly sophisticated in its enforcement
efforts and has formed the International Netforce, composed of the
FTC, eight state law enforcers in the United States, and four Canadian
agencies that coordinate efforts to investigate and enjoin various
Internet scams. As part of the International Netforce, the FTC obtained
a temporary restraining order in FTC v. BTV Industries, CV-8-02-0437
(D. Nev. 2002), preventing a scam that sent an unsolicited email
to consumers informing them they had won a Sony PlayStation or other
prize sponsored by Yahoo, and instead routed them to a adult Internet
site and charged them $3.99 per minute for the connection. The FTC
alleged in its complaint that the defendants' bait-andswitch practices
were deceptive under the Act (informing consumers they won a prize,
the e-mail was from Yahoo, and the connection to the website was
free) and violative of the Pay-Per-Call Rule by not disclosing that
the consumers were being connected to the website via a 900-number.7
Both Audiotex and BTV Industries demonstrate the FTC's
committed efforts to protect online consumers from deceptive practices.
Not only must online advertisements disclose material
facts, but those disclosures must also be clear and conspicuous.
In FTC v.Dell Computer and Micron Elecs., FTC File Nos. 982
3563 & 982 3565 (1999), the FTC charged both Dell and Micron
with disseminating deceptive ads. Dell's Internet ads stated that
consumers could purchase new computer systems by making low monthly
payments. The ads failed to adequately disclose that the payments
were for a lease, not a purchase, and the disclosure used inconspicuous
print in the ad. Micron's Internet ads for computer leasing omitted
fees due at lease signing (about $250) and buried information about
the term of the lease in unreadable blocks of fine print at the
bottom of the ads. The FTC reached a settlement agreement with Dell
and Micron, which required the companies to use disclosures that
were clear, readable and understandable by the consumer.8
Some popular forms of Internet advertising have
the unique ability to seemingly capture the attention of the consumer.
While this is arguably the ultimate goal of all advertising, holding
an audience captive may also constitute an unlawful practice under
the Act. For example, in FTC v. Zuccarini,No. 01-CV-4854
(E.D. Pa. 2001), the FTC obtained a preliminary injunction against
the defendant for engaging in unfair or deceptive practices by redirecting
consumers to websites they did not intend to visit and by obstructing
them from exiting websites.9 The defendant's tactic was to register common misspellings of domain
names and to then redirect consumers' browsers to one of his sites.
He would then "mousetrap" consumers by forcing them to
view pop-up ads each time they would click on the "close"
or "back" button. Consumers would have to click on ads,
generating 10 to 25 cents for the defendant from advertisers for
each click.
As advertisers develop new and different ways
to hold consumers' attention, the FTC also surfs the web looking
for what it believes are unfair or deceptive practices. For example,
the FTC enjoined a failed dot-com,Toysmart.com, Inc., from selling
its customer data as part of its assets. See FTC v.Toysmart.com,
LLC, No. 00- 11341 (D.Mass. 2000). Toysmart.com's privacy policy
provided that consumers' names, addresses, billing information,
and shopping preferences were never shared with a third party.10
The FTC therefore asserted that Toysmart.com's solicitation of bids
for such personal information was a deceptive practice under the
Act.
The FTC is not the only entity that regulates
online advertising. Recently, the Food and Drug Administration ("FDA")
stated it would make a case-by-case determination as to whether
claims made by food and dietary supplement manufacturers on websites
constitute labeling or advertising. In 1971, the FTC and the FDA
entered into a Memorandum of Understanding and agreed that the FTC
would regulate food advertising while the FDA would regulate food
labeling. Traditionally, labeling is viewed as the actual written
or graphic material on the label of a product that is present at
the point of retail sale. Advertising is the newspaper, television
or radio promotion that is not present at the point of sale. The
FTC allows food manufacturers to make advertising claims that are
not allowed by the FDA's labeling standard, such as statements that
a food is low in sodium or high in calcium. The FDA has argued that
some websites that sell food or dietary supplements have blurred
the line between labeling and advertising. Depending on the circumstances
of distribution, food and dietary supplement manufacturers may have
to comply with both labeling and advertising laws.11
Disclosures must be clear and conspicuous
Recognizing it is challenging to make a clear
and conspicuous advertising disclosure on an interactive website,
the FTC has issued guidelines regarding Internet disclosures.12 A disclosure is material information that must be given to the consumer
about the terms of the transaction. The FTC recommends the advertiser
consider the placement of the disclosure in the ad and its proximity
to the related claim. It is best if the claim and the disclosure
can be viewed together by the consumer on the same screen. If that
is not possible, then there should be an explicit instruction such
as "see below for important information on diamond weights"
to encourage the consumer to scroll. If the disclosure is lengthy,
a hyperlink to the disclosure may be appropriate if it is obvious
and is consistent with the other hyperlinks used in the ad. One
word hyperlinks, such as "disclosure" may be inadequate
without further information regarding the type of information available.
Additional considerations include the prominence
of the disclosure, the existence of items in other parts of the
ad that might distract the consumer, the need to repeat the disclosure
if the ad is lengthy, the volume and cadence of the disclosure in
an audio message, the duration of a disclosure in a visual message,
and the ability of the intended audience to understand the language
of the disclosure. Disclosures should always be made before an online
purchase. Indeed, the FTC encourages the disclosure to be made "when
the consumer is considering the purchase."
Traditional FTC guidelines apply to the Internet
as well
FTC rules that apply to written, printed, or direct
mail advertising may also apply to Internet advertising. For example,
Guides Concerning the Use of Endorsements and Testimonials in
Advertising applies to endorsements that consumers are likely
to believe.13
The rules regarding endorsements are not limited to a certain form
of media, and therefore apply equally to online advertising. Similarly,
the Telemarketing Sales Requirements that apply to direct
mail may also apply to direct e-mail.14
If an e-mail invites a consumer to call a vendor to purchase goods
or services, that telephone call and subsequent sale must comply
with the same requirements.
Consumer privacy laws also apply to information
acquired by businesses through the Internet. The nation's largest
advertising company, DoubleClick, Inc., learned the hard way that
using consumers' information without their permission could be a
violation of privacy. Following DoubleClick's announcement that
it would be integrating personally identifiable consumer information
with cookies it places on consumers' computers, several class action
lawsuits were filed against DoubleClick, alleging violations of
state and federal privacy and fraud laws. See In Re DoubleClick
Inv. Privacy Litigation, 00-CIV-0641 (S.D.N.Y. 2002). Consumers
charged, among other things, that DoubleClick wrongfully gathered
information by placing cookies on their computers without their
permission, and invaded their privacy by tracking and recording
their movements. DoubleClick reached a settlement resulting in the
dismissal of all pending lawsuits, in which it agreed to obtain
explicit permission from consumers before combining personally identifiable
information with data it collected in the past, to routinely purge
data collected online, and to not use data collected in a manner
materially inconsistent with its privacy policy.15
In sum, Internet ads, like all forms of advertising,
must be fair and truthful. Disclosures regarding material facts
must be clear and conspicuous. Consumer information collected through
online advertising must be consistent with posted privacy policies
and industry practices.
Thomas
R. Burke is a partner in DWT's San Francisco office. He practices
in the areas of commercial litigation, media and Internet law. His
experience includes handling libel, invasion of privacy and other
content-related lawsuits. He also provides prepublication counseling
and is experienced in all aspects of law relating to newsgathering
including defamation, privacy, shield laws and gaining access to
public records and government proceedings.
Tom can be reached at (415) 276-6552 or thomasburke@dwt.com.
Footnotes:
1
See Industry Analysis: Online Advertising Down, But Not Out,
Broadband Networking News, Feb. 12, 2002, available at www.lexis.com.
2
See A Sobering Look at Internet Advertising, Cable World,
Dec. 3, 2001, available at www.lexis.com.
3 15 U.S.C.
§45(a).
4 15 U.S.C.
§45(n).
5 "Deceptive"
acts or practices are not defined by 15 U.S.C. §45, et seq.,
but the FTC has defined deception in a policy
statement. See FTC Policy Statement on Deception, dated Oct.
14, 1983, available at www.ftc.gov/bcp/policystmt/addecept.
htm.
6 The Amended
Complaint, as well as the Consent Decree and Order, are available
at www.ftc.gov. See
also Victims of
Moldovan Modem "Hijacking" Scheme To Get Full Redress
Under FTC Settlements, Press Release, Nov. 4, 1997 and FTC
Says Internet Scam Re-Routes "Surfers" to International
Telephone Lines, Press Release, Feb. 19, 1997, both available
at www.ftc.gov.
7 The Complaint,
Temporary Restraining Order, and Press Release are available at
www.ftc.gov/opa/2002/04.btv.com.
8
The Complaint against Dell is available at www.ftc.gov/os/1999/9905/dellcomplaint.htm.
The Complaint against Micron is available at www.ftc.gov/os/1999/9905/microncomplaint.htm.
See also Dell Computer and Micron Electronics Settle FTC Charges
that Ads Misled Consumers About the Costs of Leasing Computers,
Press Release, May 13, 1999, available at www.ftc.gov/opa/1999/9905/dell.htm.
9
The Preliminary Injunction is available at www.ftc.gov/os/2001/10/cupcakepi.pdf.
See also Cyberscam Targeted by FTC, Press Release, Oct. 1, 2001,
available at www.ftc.gov/opa/2001/10/cupcake.htm.
10 The Amended
Complaint is available at www.ftc.gov/os/2000/07/toysmartcomplaint.htm.
The Stipulated Consent Agreement and Final Order is available at
www.ftc.gov/os/2000/07/toysmartconsent.htm.
11 See FDA
Letter on Labeling Food Products Presented or Available on the Internet,
available at www.cfsan.fda.gov/~dms/labwww.html.
12 See Dot
Com Disclosures, available at www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.html.
13 See
16 C.F.R. §255(b).
14 See
15 U.S.C. §6101 et seq.
15 Information
regarding the settlement is available at http://settlement.doubleclick.net.
Celebrities Testing Limits of California's Right of Publicity Laws
By A.
J. Thomas
Determining what constitutes an "advertisement"
in the context of today's diverse media field - populated with "infomercials"
and other hybrid publications that sometimes cannot be pigeonholed
easily into categories of "news" or "promotion" - presents challenges for both celebrities and those they sue. Four
recent decisions in the California courts and the Ninth Circuit
highlight some of these challenges.
Under California Civil Code § 3344, a statutory
misappropriation claim is stated when anyone "knowingly uses
another's name, voice, signature, photograph, or likeness, in any
manner, on or in products, merchandise, or goods,… without
such person's consent." Uses in connection with "news,"
"public affairs," and "sports" broadcasts or
accounts, however, are expressly protected under Section 3344. A
similar common law right of publicity claim can be stated in California
(and many other states) when: (1) the defendant uses the plaintiff's
identity; (2) the plaintiff's name or likeness is appropriated to
defendant's advantage, commercially or otherwise; (3) the plaintiff
does not consent; and (4) the plaintiff suffers resulting injury. E.g., Eastwood v. Superior Court, 149 Cal. App. 3d 409, 417
(1983).
Even if all of these elements are present, however,
a misappropriation claim may be trumped by a balancing analysis
that weighs the publicity rights of the plaintiff against the free
speech interests of the defendant. "'The First Amendment requires
that the right to be protected from unauthorized publicity … be balanced against the public interest in the dissemination of
news and information consistent with the democratic processes under
the constitutional guarantees of freedom of speech and of the press.'"
Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400,
409 (2001) (citations omitted). For statutory claims under Section
3344, the First Amendment analysis often is subsumed within the
court's determination whether the publication at issue fits within
the protected category of "public affairs," which includes
items of "interest" that may be "less important than
news." Dora v. Frontline Video, Inc., 15 Cal. App. 4th
536, 545-46 (1993).
As four recent cases applying California law reveal,
this First Amendment balancing exercise is critical to evaluating
whether a celebrity plaintiff can sustain a misappropriation claim.
Importantly, the outcome of the balancing analysis frequently hinges
on the context in which a plaintiff's name or image is published.
If the image is used in an advertisement or reproduced without alteration
on a piece of merchandise, the scale generally tips in favor of
the plaintiff. If the challenged publication is a news report, historical
account, or other literary work, the defendant's constitutional
free speech rights more often carry the day.
Deciding what constitutes news, art or literature
and what constitutes less protected speech, however, can be a challenge
that involves treading into the murky arena of whether the "primary"
message of the speech at issue is, "buy." Gionfriddo,
94 Cal. App. 4th at 413. A magazine that aims to boost its circulation
and make more money by putting photos of celebrities or sports figures
on its cover is engaging not in commercial speech but in fully protected
First Amendment expression. However, courts sometimes find the promotional
nature of a challenged publication dominates over its purported
news value, despite the long-standing United States Supreme Court
edict that the "core notion of commercial speech" is that
it "does no more than propose a commercial transaction."
Bolger v.Youngs Drug Products Corp., 463 U.S. 60, 66 (1983).
As a California appellate court reaffirmed last
year, an important exception to the general proposition that the
use of a celebrity's name or likeness will be actionable if published
in an advertisement arises when the item being promoted is itself
protected by the First Amendment. Thus, for example, a celebrity
photograph from a current or prior magazine issue can be used in
advertisements to promote the magazine, even without the celebrity's
consent. See Gionfriddo, 94 Cal. App. 4th at 414; Montana
v. San Jose Mercury News, Inc., 43 Cal. App. 4th 790, 796 (1995).
Similarly, last year's Gionfriddo decision noted that "even
if Baseball used depictions of players playing the game or recited
statistics or historical facts about the game to advertise
the game and promote attendance, the commercial speech cases …
would be inapposite. The owner of a product is entitled to show
that product to entice customers to buy it." 94 Cal. App. 4th
at 414.
The first of last year's important misappropriation
decisions was Comedy III Productions, Inc. v. Gary Saderup, Inc.,
25 Cal. 4th 387 (2001), where the California Supreme Court reaffirmed
that the First Amendment imposes significant limits on the state's
right of publicity tort. In an unusual move, however, the court
attempted to resolve the conflict between the First Amendment and
the right of publicity by formulating a balancing test loosely based
on one aspect of copyright law's "fair use" analysis.
Artist Gary Saderup, the Comedy III defendant,
had drawn realistic charcoal sketches of the former Three Stooges
comedy team, and reproduced them for sale as lithographic prints
and silk-screened images on t-shirts. The company owning the publicity
rights of the deceased Stooges sued under Section 990 of the California
Civil Code, which extends California's right of publicity to the
heirs and assigns of deceased celebrities.
After a long and scholarly discussion of the First
Amendment's protection of artistic expression, the California Supreme
Court resolved the tension between the right of publicity and the
First Amendment by asking whether the work at issue - i.e.,
the lithograph or t-shirt drawing - "adds significant creative
elements so as to be transformed into something more than a mere
celebrity likeness or imitation." 25 Cal. 4th at 391. The court
"imported" one of the factors from copyright law's four-pronged
"fair use" test - the "purpose and character of the
use," and specifically whether the new work is "transformative."
Id. at 404. The court then concluded that the First Amendment
does not apply where "artistic expression takes the form of
a literal depiction or imitation of a celebrity for commercial gain."
Id. at 405. The court also suggested that judges be guided
by a subsidiary inquiry: "does the marketability and economic
value of the challenged work derive primarily from the fame of the
celebrity depicted?" Id. at 407. In Saderup's case,
his sketches of the Three Stooges proved to be too literal and representational,
and he lost.
Comedy III did not involve commercial speech,
as the parties had stipulated that Saderup's lithographs and t-shirts
did not constitute an advertisement or endorsement of any product.
The court noted, however, that the creative contributions or "transformative"
elements that require First Amendment protection can take many forms,
including "factual reporting" and "fictionalized
portrayal." Yet the court's analysis seemed primarily geared
toward reproductions of celebrity images in artwork and on merchandise.
In that context, the court's approach inevitably favors parodies,
caricatures and abstract renderings of celebrity images over more
literal and conventional representations. Although the court protested
that it was not expressing "a value judgment or preference
for one type of depiction over another," id. at 409,
it acknowledged its balancing test will require courts to make a
qualitative, aesthetic inquiry, "asking whether the literal
and imitative or the creative elements predominate in the work,"
id. at 407.1
In contrast to Comedy III, three other
2001 misappropriation cases centered on distinguishing commercial
promotion and more protected expressive content.
In Hoffman v. Capital Cities/ABC, Inc.,
255 F.3d 1180 (9th Cir. 2001), Los Angeles Magazine had published
an article entitled "Grand Illusions" in which 16 stills
from famous movies - including Cary Grant in "North by Northwest,"
Marilyn Monroe in "The Seven Year Itch," and John Travolta
in "Saturday Night Fever" - had been altered using computer
technology to make it appear the actors were wearing Spring 1997
fashions. Using a famous still from the 1982 movie "Tootsie"
in which plaintiff Dustin Hoffman posed before an American flag
wearing a red sequined dress, the magazine replaced Hoffman's body
with that of a male model in the same pose,wearing a different evening
dress and designer shoes. The article commented that "Dustin
Hoffman isn't a drag in a butter-colored silk gown by Richard Tyler
and Ralph Lauren heels." Hoffman, 255 F.3d at 1183.
The article also directed readers to a "shopper's guide" at the back of the magazine that listed the stores and prices for
some of the clothing featured in the altered photographs. Id.
at 1185. Hoffman sued for misappropriation of his name and likeness.
The trial judge found the use of Hoffman's name
and likeness was an "exploitative commercial use" that
was not entitled to First Amendment protection.2
He also held that even if the article were noncommercial speech,
the magazine knowingly had presented a false image of Hoffman and
therefore was liable despite the First Amendment's protections.
Hoffman was awarded $1.5 million in compensatory damages and another
$1.5 million in punitive damages.
The Ninth Circuit reversed. It first held that
the Los Angeles Magazine article was noncommercial speech
entitled to full First Amendment protection. The court rejected
Hoffman's argument that the use of his identity was a thinly veiled
attempt to "attract attention" to the magazine and spur
sales. The Ninth Circuit reaffirmed the principle that "[a]
printed article meant to draw attention to the forprofit magazine
in which it appears … does not fall outside of the protection
of the First Amendment because it may help to sell copies."
Id. at 1186.
The Ninth Circuit concluded that the altered photograph
of Hoffman was not commercial speech because it "did not use
Hoffman's image in a traditional advertisement printed merely for
the purpose of selling a particular product … [n]or did the
article simply advance a commercial message." Id. at
1185. Rather, the court viewed the article "as a whole"
as "a combination of fashion photography, humor, and visual
and verbal editorial comment on classic films and famous actors"
[and] "a complement to and a part of the issue's focus on Hollywood
past and present." Id. The court further held that any
commercial aspects of the "Tootsie" photograph could not
be separated from the article's fully protected "expressive
elements," and thus the entire work was entitled to the heightened
protection afforded noncommercial speech. Id. In the court's
words, "common sense tells us this is not a simple advertisement."
Id. at 1186.
Hoffman illustrates the critical importance
of whether the use of the celebrity's name or likeness is categorized
as commercial or noncommercial speech - and the mischief that can
occur when courts stray, as the district court did, from defining
commercial speech narrowly as speech that "does no more than
propose a commercial transaction."
In Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir. 2001), the Ninth Circuit confronted another "hybrid" form of speech - a clothing catalog that also
contained "news" or "feature" articles - and
came out the other way. The publication at issue was the large quarterly
subscription catalog of the defendant clothing retailer. Each 250-page
issue was based on a theme such as "collegiate lifestyle, back
to school, or winter wear," and about a fourth of each catalog
was devoted to "stories, news and other editorial pieces." 265 F.3d at 999. Downing focused on the trendy retailer's
use of a 1965 photograph of the plaintiff surfers in connection
with its Spring 1999 catalog, which centered on a surfing theme.
Although Abercrombie purchased the photographs
from the photographer, it did not get permission from the surfers
to use their images. Abercrombie used the photos to illustrate an
article about the history of a California surf spot in a section
of the catalog that also included stories on the history of surfing
and the surfing lifestyle. The retailer also created t-shirts like
those worn by the surfers in the 1965 picture, and offered those
shirts for sale on catalog pages adjacent to the photo. The surfers
sued for statutory and common law misappropriation under California
law.
The Ninth Circuit distinguished its earlier decision
in Hoffman on the ground that the Los Angeles Magazine article at issue in that case was "noncommercial speech,"
even though it directed readers to a "shopping guide"
at the back of the magazine that listed stores and prices for the
gown and shoes depicted in the altered "Tootsie" photo.
On the other hand, the court held that the main purpose of the Abercrombie
catalog at issue in Downing was to sell Abercrombie merchandise.
The court also noted that Los Angeles Magazine "was
unconnected to and received no consideration from the designer for
the gown depicted in the article." Id. at 1002 n.2.
Although the court did not explicitly categorize the use of plaintiffs'
surf photo as commercial speech, it concluded that Abercrombie's
use "was much more commercial in nature" than the "Tootsie" still at issue in Hoffman. Id. at 2001 n.2. In making
this distinction, the Ninth Circuit focused in part on its finding
that the 1965 photograph of plaintiffs was only "tenuously"
related to the catalog's surfing theme. The court elaborated that
the picture was merely "window-dressing" since the catalog
did not explain who the plaintiffs were or directly connect them
to any of the surfing stories there. Id. at 1002. Abercrombie
therefore could not avail itself of a First Amendment defense.
Downing may not present much of an issue
with respect to advertising that traditional media publishers run
promoting another company's services or products. However,
the Ninth Circuit decision does impact any advertiser seeking to
promote its own merchandise. Use of celebrity likenesses
in catalogs, posters or pamphlets designed to promote any product
or service should be carefully scrutinized, even when the product
is, for example, a magazine, newspaper or television show.
In the fourth major right of publicity case decided
under California law last year, Gionfriddo v. Major League Baseball,
94 Cal. App. 4th 400 (2001), the California First District Court
of Appeal affirmed the broad reach of the "news," "public
affairs" and "public interest" safe harbors for using
celebrity images. Specifically, the court held that former professional
baseball players could not state a misappropriation claim based
on the inclusion of their names, photographs and statistics in media
guides and programs to the All-Star and World Series games, on the
Major League Baseball web site, and in television programs, such
as This Week In Baseball, containing game performances. All
three types of publications provided historical information about
major league baseball, including rosters and scores. Plaintiffs
claimed the use of their names and pictures violated their common
law and statutory rights of publicity. They played professional
baseball in the 1930s and 1940s, before the standard player contract
was modified to provide that pictures of players playing baseball
can be used by the Club for publicity purposes "in any manner
[the Club] desires." As part of its balancing analysis, the
Court of Appeal emphasized that plaintiffs knew their baseball games
were being covered by the media and that photographs and statistics
of them were "widely disseminated to the public" in the
'30s and '40s.
The Gionfriddo opinion elaborated that
there was a "substantial public interest" in the athletic
performance of the plaintiffs, and because defendants were "simply
making historical facts available to the public through game programs,Web
sites and video clips," their First Amendment interests prevailed.
As the court explained, "the public interest is not limited
to current events; the public is also entitled to be informed and
entertained about our history." Id. at 411.
In finding that the web site, television show,
and game programs were of public interest - and fit within the "public
affairs" exception of California's misappropriation statute
- the court in Gionfriddo once again rejected an argument
frequently made by misappropriation plaintiffs: the use of their
names and images was made in a profit-motivated "commercial" context not deserving of much First Amendment protection. Relying
on a long line of precedent, Gionfriddo reiterated that "[p]rofit,
alone, does not render expression 'commercial'" and that in
any event the First Amendment "is not limited to those who
publish without charge[.]" Id.
These four 2001 misappropriation decisions are
difficult to fully reconcile with each other. It seems clear, however,
that in misappropriation cases involving merchandise, a nearly determinative
issue is the nature of the publication: is it strictly a
news report, strictly an advertisement, or something in between?
If the publication has hybrid qualities, it is essential for the
defendant to convince the court that the primary purpose of the
publication is not to sell its merchandise or services. Los Angeles
Magazine succeeded with this argument with respect to its "Grand
Illusions" article that featured an altered photograph of Dustin
Hoffman. So did Major League Baseball with respect to television
and web site publications that discussed games from the 1930s and
1940s and used photographs of old-time players without their permission.
Abercrombie & Fitch failed to persuade the court that its subscription
catalog was not primarily published to sell merchandise, even though
a quarter of the tome contained editorial content of general interest.
In light of the nuances of these decisions, advertisers
would be well advised to obtain the permission of any celebrity
they want to name or depict in any of their promotional materials,
unless the underlying "product" is itself First Amendment
protected (such as a movie, television show, newspaper, book or
magazine) and the celebrity is featured in a story in that expressive
work. Moreover, these cases suggest caution is warranted even for
marketing efforts that incorporate elements of traditionally protected
news or public affairs commentary.
A very recent California appellate decision indicates
that even a highly caricatured use of a celebrity's likeness in
a non-advertising work of fiction may not constitute a "transformative
use" entitled to First Amendment protection under the California
Supreme Court's decision in Comedy III. In Winter v. DC Comics,
99 Cal. App. 4th 458 (2002), albino rock musicians Johnny and Edgar
Winter sued the publishers of a comic book series over their fictional
characters Johnny and Edgar Autumn, albino half-human, halfworm
villains with green tentacles dressed in cowboy garb. The court
affirmed summary judgment for the publishers on their defamation
and related claims, on the ground that fanciful comic book depictions
were too "surreal" and over-thetop to be reasonably viewed
as factual, yet it held that the Winters were entitled to present
their misappropriation claims to a jury because "triable questions
of fact exist whether or not the use of [the Winters'] likenesses
in the comic books qualifies as a transformative use." Id.
at 466-74. The Winter court, without serious consideration, blew
past one logical stopping point in applying Comedy III -
i.e., limiting it to literal depictions of celebrity images, where
the depiction of the celebrity "is the very sum and substance
of the work," 25 Cal. 4th at 406. In the process, the court
signaled that any celebrity who appears in any form as a character
in a fictional work - be it a novel, a comic book or an advertisement
- may be able to get to a jury on a misappropriation claim.
As Winter suggests, the Comedy III decision,
which involved the use of celebrity images on merchandise, leaves
open a host of questions. For example:
- Will editorial uses of a celebrity's likeness - in news or sports
reporting, or in a documentary or dramatic work - be evaluated under
Comedy III's "transformative" use criteria and,
if so,will such uses qualify automatically as "transformative" ones protected by the First Amendment even if the image is not altered
in any way? In Hoffman, the Ninth Circuit suggested in a
footnote that Comedy III's transformative use analysis may
be limited to situations where the use of a celebrity's unadorned
image is defended on the ground that it constitutes "artistic
expression." 255 F.3d at 1184 n.2. Winter suggests otherwise.
- Will using a caricatured or otherwise "transformed" image
of a celebrity in an advertisement still give rise to liability?
Ninth Circuit decisions that pre-date Comedy III would indicate
the answer is yes, as celebrities prevailed on claims based on caricatures
of themselves in Newcombe v. Adolf Coors Co., 157 F.3d 686,
691 (9th Cir. 1998) (caricature of baseball pitcher used in printed
beer ad) and White v. Samsung Elecs. Am., Inc., 971 F.2d
1395, 1396 (9th Cir. 1992) (use of robot dressed like game-show
hostess in print ad for electronic products).
- Will the threshold determination of whether the challenged use of
a celebrity's image is commercial or noncommercial speech continue
to be dispositive if the California or U.S. Supreme Court extends
greater protection to commercial speech in the future? Interestingly,
in a 2000 decision not cited in any of the four cases discussed
above, the California Supreme Court held in Gerawan Farming,
Inc. v. Lyons, 24 Cal. 4th 468, 491, 509, 516-17 (2000), that
the right to freedom of speech under Article I of the California
Constitution - including the right to engage in nonmisleading commercial
speech - is "broader and greater" than the First Amendment's
free speech guarantee, and is implicated in some situations where
the First Amendment is not. On the other hand, in Kasky v. Nike,
Inc., 27 Cal. 4th 939 (2002) (discussed elsewhere in this issue),
the California Supreme Court departed from long-standing precedent
to adopt a definition of "commercial speech" that sweeps
far more expression into this less-protected category.
Andrew
J. Thomas is a partner in DWT's Los Angeles office. He focuses
his practice in the areas of
media law, intellectual property and Internet law, including defamation,
priacy, access, prior
restraint, copyright, trademark and trade secret law.
A.J. can be reached at (213) 633-6861 or via email
at ajthomas@dwt.com.
Footnotes:
1
The Court visibly balked at taking the First Amendment protection
of artistic expression to its logical conclusion, fretting that
"were we to decide that Saderup's depictions were protected
by the First Amendment,we cannot perceive how the right of publicity
would remain a viable right other than in cases of falsified celebrity
endorsements." Id. at 409. To this worry, a less timid
First Amendment advocate might be tempted to answer, "so?"
See Cardtoons, L.C. v. Major League Baseball Players Ass'n,
95 F.3d 959, 972-76(10th Cir. 1996) (arguing that the social value
of the right of publicity is minimal, and insufficient to overcome
the First Amendment in most cases).
2 The trial court
reasoned that the magazine layout constituted commercial speech
because it "contained no commentary on fashion trends …
no statement that any particular style of clothing is in vogue,
that any particular color is becoming popular, or that any type
of fabric is attracting the attention of designers." 33 F.
Supp. 2d 867, 874 (C.D. Cal. 1999).
Actual Malice and the Commercial Speech Doctrine
By Constance
M. Pendleton
Despite the increasing protection the Supreme
Court has afforded commercial speech in recent years, advertisers
still must be wary of the extent to which they are protected from
defamation and related tort claims based upon the content of advertising,
even where the plaintiff is a public figure.
Judges and commentators advocating broader First
Amendment protection for commercial speech have argued that speech
is speech - whether commercial or not, it should be afforded the
same degree of protection.1
Based upon the Supreme Court's recent commercial speech decisions,
which increasingly recognize the constitutional value of commercial
speech, it may no longer be presumed that speech proposing a commercial
transaction merits less protection than other forms of speech. See
Greater New Orleans Broadcasting Ass'n v. United States, 527
U.S. 173 (1999); 44 Liquormart, Inc, 517 U.S. 484; Rubin
v. Coors Brewing Co., 415 U.S. 476 (1995). Yet, recent lower
court cases addressing the level of fault a public figure plaintiff
must demonstrate in a defamation, Lanham Act, or right of publicity
claim brought against an advertiser or other publisher of commercial
speech indicate that advertiser defendants confronted with such
claims may continue to be improperly deprived of the heightened
protection afforded noncommercial speech.
Since New York Times Co. v. Sullivan, 376
U.S. 254 (1964), and Curtis Publishing Co. v. Butts, 388
U.S. 130 (1967), courts have applied the actual malice standard
to defamation claims brought by public officials and public figures,
requiring them to prove the statement was made with the knowledge
that it was false or with reckless disregard of whether it was false
or not. But courts' application of the actual malice standard to
commercial advertising has been sparse. Only one appellate case
has squarely addressed the application of the actual malice standard
to allegedly defamatory advertising. In U.S. Healthcare, Inc.
v. Blue Cross of Greater Philadelphia, 898 F.2d 914 (3d Cir.),
cert. denied, 498 U.S. 816 (1990), a case involving a comparative
advertising war over health insurance, the Third Circuit held that
the actual malice standard did not apply to commercial speech alleged
to defame a public figure. The court stated that the ads at issue
had "all the characteristics that the Supreme Court has identified
in the commercial speech cases as making speech durable, not susceptible
to 'chill.' Consequently, they do not require the heightened protection
we extend to our most valuable forms of speech." 898 F.2d at
935. The Court determined that although the First Amendment protected
the advertisement, "the First Amendment requires no higher
standard of liability [in commercial libel cases] than that mandated
by the substantive law of each claim." Id. at 937. Commentators
and lower courts in other circuits have criticized the decision,2
but it remains good law.
Several recent cases reflect some disagreement
over whether actual malice applies to allegedly tortious commercial
speech about public figures.
Fifth Circuit holds that public figure plaintiff
need not show actual malice in Lanham Act commercial speech case
The most recent appellate attempt to resolve whether
public figure plaintiffs bringing commercial speech-related claims
against business competitors must prove the defendant acted with
actual malice came in a 2001 decision from the Fifth Circuit. In
Procter & Gamble Co. v. Amway Corp., the court concluded
that Supreme Court precedent precluded it from "importing the
actual-malice standard into cases involving false commercial speech."
Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 556
(5th Cir. 2001), cert. denied, ___ U.S. ___, 122 S. Ct. 329
(2001).
The case has its roots in a decades-old rumor
linking Procter & Gamble to Satanism. According to one version
of the rumor, Procter & Gamble's president revealed on a television
talk show that he worships Satan and that many of his company's
profits go to the Church of Satan. A distributor for Amway, a competitor
of Procter & Gamble in the household products market, forwarded
the rumor to fellow Amway distributors via an Amway voicemail system
in 1995. The message listed Procter & Gamble products and added,
"I guess my real question is, if people aren't being loyal
to themselves and buying from their own business, then whose business
are they supporting and who are they buying from." Some distributors
circulated fliers with the rumor printed on them to consumers. Two
retractions followed. Nonetheless, Procter & Gamble received
increasing numbers of complaints and inquiries about the Satanism
rumor.
Procter & Gamble filed suit in Utah and Texas
against Amway and its distributors. In the Texas case, Procter & Gamble asserted claims for defamation, fraud and Lanham Act and
RICO violations. Procter & Gamble Co. v. Amway Corp.,
80 F. Supp. 2d 639 (S.D. Tex. 1999). The district court dismissed
most of the claims. On the Lanham Act claim, it held that Procter & Gamble was a limited-purpose public figure and had failed
to present sufficient evidence of actual malice, which it required
in Lanham Act cases brought by limited-purpose public figures. The
Fifth Circuit rejected this requirement of proof of actual malice
as "trump[ing] the traditional view that there is no First
Amendment protection for false commercial speech." Amway,
242 F.3d at 547.
In reversing the district court's holding that
Procter & Gamble was required to show actual malice to prevail
on its Lanham Act claim, the Fifth Circuit began by noting that
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), applies
only to false or misleading commercial speech. From there it considered
whether Amway's speech was commercial speech, as the Supreme Court
has defined it. Applying the three-part test from Bolger v.Youngs
Drug Products Corp., 463 U.S. 60, 103 S. Ct. 2875 (1983), the
court emphasized the third factor: whether the speaker had an economic
motivation for the speech. The first factor - whether the speech
was an advertisement - depended on the result for the third factor.
If the distributors had an economic motivation in spreading the
rumor, then the voicemail was akin to an ad encouraging recipients
to avoid Procter & Gamble products and buy Amway products. If
they had no such motivation, then their message could be seen as
false speech dealing with a matter of public concern. The second
factor - whether the speech refers to a specific product or service
- was satisfied since the voicemail message listed Procter &
Gamble products. The Fifth Circuit remanded so the district court
could resolve whether Amway or the distributors spread the Satanism
rumor substantially out of economic motivation. If they did, then
the speech was commercial and Procter & Gamble's Lanham Act
claim could continue. If they did not, then the speech was not commercial
and thus could not form the basis of a Lanham Act claim.
The court then expanded on its view that the actual
malice standard should not apply in commercial speech cases. It
noted the "well-reasoned" decision in National Life
Insurance Co. v. Phillips Publishing, Inc., 793 F. Supp. 627
(D.Md. 1992), held that "a state's interest in regulating false
commercial speech and in providing some protection to public figures'
reputations must be balanced against the free speech interest individuals
have in being able to comment freely on public issues and public
figures." This balance, the district court held, can be achieved
by requiring public figure plaintiffs to prove actual malice. The
Fifth Circuit, however, returned to its refrain that Supreme Court
precedent mandates that false commercial speech receive no protection.
Thus plaintiffs who would be required to prove actual malice by
clear and convincing evidence in cases based on noncommercial speech
can prevail in Lanham Act cases regardless of whether a defendant
knew its message was false. Amway, 242 F.3d at 556, 552 n.
26; see also 15 U.S.C. 1125(a), which makes no reference
to fault.
Western District of Michigan distinguishes
Fifth Circuit's Amway decision and applies actual malice standard
in tortious interference case
Several months later, in yet another of the Satanism-rumor
cases between Procter & Gamble and Amway, the district court
for the Western District of Michigan recognized the distinction
between the fault standard in commercial and noncommercial speech
cases. Amway Corp. v. Procter & Gamble Co., 2001 U.S.
Dist. LEXIS 14455 (W.D.Mich. Sept. 14, 2001). Amway filed tortious
interference claims against Procter & Gamble, one of its law
firms and a website operator who had been hired as a consultant
to the law firm for the Utah litigation. Amway claimed the defendants
had spread "malicious attacks" against Amway on the Internet;
those "attacks" came from litigation documents from previous
Amway lawsuits that had been posted on the consultant's website.
In dismissing the claims against Procter &
Gamble and the law firm, the court first held that the case against
the two defendants was "solely about speech." Procter & Gamble, 2001 U.S. Dist. LEXIS 14455 at *25. As such, First
Amendment protections applied. The court then determined that Amway
- a multinational corporation with 14,000 employees, 3 million distributors
and 1998 retail sales of $5.7 billion - was a public figure. As
a public figure whose lawsuit was based solely on the speech of
the defendants, Amway was required to prove, by clear and convincing
evidence, that the defendants had acted with actual malice. This
it failed to do.
The court highlighted the distinctions between
the Michigan and Texas cases. First, the Texas litigation arose
out of Amway distributors' dissemination of the Satanism rumor,
which, depending on the speakers' motivation, could be commercial
speech. The Michigan case arose out of the dissemination of publicly
available litigation documents. Second, the Texas case, unlike the
Michigan case, involved a Lanham Act claim. The court also found
the fair reporting privilege shielded Procter & Gamble and its
law firm from liability for providing accurate reports of matters
of public record. Amway has appealed the decision to the Sixth Circuit.
Southern District of New York recognizes Amway
decision but does not resolve whether commercial speech plaintiff
must prove actual malice
Between the two chapters of the ongoing Amway
litigation, the district court for the Southern District of New
York recognized the Fifth Circuit's ruling on actual malice, stating
that commercial speech is sufficiently durable to merit a lower
level of scrutiny, but sidestepped a decision in the case before
it. In World Wrestling Federation Entertainment, Inc. v. Bozell,
the court described the Fifth Circuit's decision in Amway
as "an example of how courts have interpreted the Supreme Court's
directive to afford commercial speech 'less protection.'" World
Wrestling Fed'n Entm't, Inc. v. Bozell, 142 F. Supp.2d 514,
524 n. 3 (S.D.N.Y. 2001). It added, however, that the Second Circuit
has not addressed the issue. The court's observation came in a disturbing
ruling rejecting the defendants' motion to dismiss the complaint
for defamation, tortious interference with business relations, Lanham
Act violations and copyright infringement against a selfproclaimed
media monitoring group, its leaders and a defense attorney. The
claims were based upon statements made in the debate about a matter
of public concern - the extent to which professional wrestling programs
expose children to violence. Nonetheless, the Court found the speech
to be commercial simply because it also involved elements of fundraising
and selfpromotion, an analysis which could chill future political
and social advocacy speech. The court held that regardless of whether
the plaintiff needed to show actual malice for allegedly defamatory
commercial speech, the plaintiff had pled actual malice sufficiently
to survive a motion to dismiss. (The parties reportedly settled
the case in July 2002.)
Ninth Circuit recognizes Amway decision
but finds speech noncommercial in Hoffman v. Capital Cities/ABC
right of publicity case
In July 2001, the Ninth Circuit also recognized
- in dicta - the Fifth Circuit's actual malice ruling when it reversed
a $3 million verdict for actor Dustin Hoffman on his right of publicity
claim against Los Angeles Magazine and its publisher. Ultimately,
however, the court held that the magazine's use of Hoffman's photograph
- altered to appear that he was wearing a silk gown and high heels
reminiscent of the famous still from the 1982 movie Tootsie - was "noncommercial speech" entitled to "full First
Amendment protection" and that the magazine did not publish
the altered photograph with actual malice. Hoffman v. Capital
Cities/ABC, Inc., 255 F.3d 1180 (9th Cir. 2001). The photograph
appeared in an article in which still photographs of famous actors
in familiar scenes were digitally altered to depict the actors in
Spring 1997 fashions. The photograph of Hoffman depicted the actor
made up as "Tootsie," but replaced Hoffman's body and
the red sequined dress with the body of a male model dressed in
the some of the latest fashions. Hoffman had not consented to this
use of his image. He filed suit, alleging misappropriation and unfair
competition. The district court ruled against the defendants on
all counts, holding that "the First Amendment does not protect
the exploitative commercial use of Mr. Hoffman's name and likeness" nor does it protect knowingly false speech. Hoffman v. Capital
Cities/ABC, Inc., 33 F. Supp. 2d 867 (C. D. Cal. 1999). The
Ninth Circuit reversed, examining first whether the fashion spread
constituted commercial speech. The court noted that although commercial
speech is "entitled to a measure of First Amendment protection,
it does not receive the same amount of protection as other types
of expression," and that there is no First Amendment protection
for false or misleading commercial speech. 225 F.3d at 1184. In
dicta, the Court added that "[w]hen speech is properly classified
as commercial, a public figure plaintiff does not have to show that
the speaker acted with actual malice," citing the Fifth Circuit's Amway decision. Id. at 1185. The court acknowledged
that in many right of publicity cases the actual malice issue does
not arise because the use of the celebrity's likeness clearly constitutes
commercial speech in that it "does no more than propose a commercial
transaction." Id. (citing Bolger, 463 U.S. at
66). But the Court distinguished Hoffman from a line of Ninth
Circuit advertising cases in which the court found "the defendant
used an aspect of the celebrity's identity entirely and directly
for the purpose of selling a product," a use that does not
receive the same constitutional protection as expressions of editorial
opinion. Id. The court held the fashion spread at issue was
not commercial speech.
Moreover, the Ninth Circuit concluded that Hoffman
failed to present clear and convincing evidence that defendant magazine
acted with actual malice. Id. at 1189. After examining de
novo the "totality of [the magazine's] presentation," the court concluded that the article and photograph did not provide
clear and convincing evidence of intent to suggest the altered picture
was in fact Hoffman.
Conclusion
Despite the successful outcome for Los Angeles
Magazine, the Ninth Circuit's adoption - albeit in dicta - of
the Fifth Circuit's interpretation in Amway that public figure
plaintiffs need not show actual malice in commercial speech cases
is troubling for advertisers and their publishers. The Fifth Circuit's
decision in Amway, the U.S. Supreme Court's denial of certiorari
in that case, and acknowledgment of the decision from the Ninth
Circuit and lower courts demonstrate that, if presented squarely
with the same question, other courts may well adopt a similar, lower
standard of fault in commercial speech cases brought by public figure
plaintiffs. If so, courts will continue to deprive speech of its
full First Amendment protection once it is deemed "commercial."
Struggling with an imprecise definition of what constitutes "commercial
speech," lower courts may continue to apply the less stringent
standards of protection for commercial speech to a wide variety
of speech that warrants full constitutional protection.
In addition, the dearth of authority on point
suggests that commercial speech is not as "durable" as
some courts would lead us to believe. Rather than risk litigating
a claim under the lesser standards for commercial speech, advertisers
give the line between actionable and non-actionable speech a wider
berth. In doing so, they demonstrate that such speech may indeed
be chilled.
Constance
M. Pendleton is an associate in DWT's Washington, D.C. office.
She practices in the area of media law, including defamation, invasion
of privacy, newsgathering torts, and access, and provides advice
on advertising, marketing, contests and sweepstakes and other promotions.
Connie can be reached at (202) 508-6629 or conniependleton@dwt.com.
Footnotes:
1
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S.Ct. 2404,
2431-32 (2001) (Thomas, J., concurring); 44 Liquormart, Inc.
v. Rhode Island, 514 U.S. 484, 522-23 & n.4 (1996) (Thomas,
J., concurring); Cammarano v. United States, 358 U.S. 498,
514 (1959) (Douglas, J., concurring); P. Cameron DeVore, Robert
D. Sack, Steven G. Brody, Bruce E.H. Johnson, Advertising and
Commercial Speech: A First Amendment Guide (2002) ("DeVore
& Sack"); Rodney A. Smolla, Information, Imagery and
the First Amendment: A Case for Expansive Protection of Commercial
Speech, 71 TEX. L. REV. 777 (1993); Alex Kozinski & Stuart
Banner, Who's Afraid of Commercial Speech?" 76 VA. L.
REV. 627 (1990).
2 National Life
Ins. Co. v. Phillips Publ'g Inc, 793 F. Supp. 627 (D.Md. 1992);
Q-Tone Broad. Co. v. MusicRadio of Maryland, Inc.,
1995 Del. Super. LEXIS 598 (Del. Super. 1995), DeVore & Sack,
§7:1.2.
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