The U.S. Court of Appeals for the Second Circuit recently held that a claim for false advertising under the Lanham Act does not need to plead disparagement to survive a Rule 12(b)(6) motion for dismissal. Societe Des Hotels Meridien v. LaSalle Hotel Operating Partnership, L.P., No. 03-7346, 2004 U.S. App. LEXIS 17037 (2d Cir. Aug. 17, 2004).
The plaintiff, Meridien Hotels, operated two hotels, one in Dallas and the other in New Orleans, which were owned by the co-defendant LaSalle Properties. The parties became embroiled in a lease dispute in 2001 over the management of the two hotels. While the case was still ongoing, LaSalle began negotiations with the co-defendant, Starwood Resorts (dba Westin Hotels) to manage the disputed hotels. LaSalle succeeded in the court proceeding and then attempted to evict Meridien from the properties. However, this attempt failed on procedural grounds and Meridien continued to manage the two hotels. During this period when Meridien was losing its dispute with LaSalle but had not yet been evicted from the hotels, Starwood began to circulate its hotel directory prominently featuring the Dallas and New Orleans hotels and identifying them as Westin rather than Meridien properties.
After unsuccessfully pursuing Lanham Act and state law claims against the parties, Meridien filed an amended complaint under the Lanham Act for reverse palming (or passing) off and false advertising against Starwood including contributory claims against LaSalle. The defendants moved under Federal Rules of Civil Procedure (FRCP) 12(b)(6) to dismiss the claims, arguing that Meridien had failed to state a claim. The district court granted the defendants’ motion finding that the reverse palming off claim failed because the directory created only a small likelihood of confusion and that, in fact, Meridien would reap the benefits of any sales generated by it. The court also dismissed the false advertising claim because the directory did not disparage the quality of Meridien’s hotels.
The Second Circuit reversed. The court found that Meridien satisfactorily stated a claim for reverse palming off, which occurs under the Lanham Act when company A sells company B’s product under A’s name. Here, the court found that Starwood was including in its directory images of the two hotels and providing information on those hotels including the services offered even though it was not the source of those services. The court rejected Starwood’s argument that there was no reverse palming off because it did not use any of Meridien’s trademarks noting that removal of a competitor’s trademark is the hallmark of a reverse palming off claim. As to the false advertising claim, the court found that even though nothing in the directory disparaged the Meridien’s product, the depiction of the services as originating from Westin facilities misrepresented the nature and the quality of both Starwood’s and Meridien’s products and, therefore, was a sufficient basis to allege a claim of false advertising under the Lanham Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
