California Real Estate Companies Pursue Bogus Lanham Act Claim Against Tenants

Paul Levy of Public Citizen recently tipped us off to a new John Doe case in federal court in California.  In this case, two real estate companies, Parkmerced Investors Properties LLC and Stellar Larkspur Partners LLC, have sued eighteen unknown defendants for violation of the Lanham Act (15 U.S.C. § 1125(a)), libel, and tortious interference with contract.  The lawsuit revolves around anonymous and pseudonymous postings to Apartment Ratings, a forum site that invites discussion about residential apartment buildings in locations throughout the United States.

Parkmerced Investors Properties LLC owns Parkmerced, a community of 3000+ units in San Francisco.  Stellar Larkspur Partners LLC owns the Larkspur Shores Apartment Homes, a community of about 350 apartments in Larkspur, California. In the last couple of years, users of Apartment Ratings have posted a large number of comments, both positive and negative, about these two properties.  Some of the postings deal with issues like increasing rents and other expenses, maintenance problems, construction noise, crime, and the responsiveness of management to complaints.  In their complaint, Parkmerced and Stellar Larkspur identify eighteen allegedly false and misleading statements, all of which purport to relate to personal experiences of persons living in or visiting the Parkmerced and Larkspur Shores properties.

The complaint reads as if the Lanham Act were simply a federal cause of action for defamation or trade libel, which is particularly troublesome because the only basis for the federal court's jurisdiction is the Lanham Act claim. After identifying the allegedly false and misleading statements, count 1 of the complaint alleges: "Defendants' activities constitute false or misleading descriptions of fact and false or misleading representations of fact in violation of §43(a) of the Lanham Act, 15 U.S.C. § 1125(a)[,] because Defendants misrepresent the nature, characteristics and qualities of the Apartments." Cmplt. ¶ 33.

Superficially, this looks like a false advertising claim under 15 U.S.C. § 1125(a)(1)(B), but that statute also requires that the allegedly false or misleading statement be made "in commercial advertising or promotion."  The purpose of this limitation is precisely to protect the free speech rights of critics and consumers.  See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 27:95 (4th ed. 2008).  The complaint alleges no fact suggesting that the anonymous defendants criticized the two properties in connection with commercial advertising or promotion.  

Instead, there is one throwaway paragraph:

Upon information and belief, Defendants include employees, agents or representatives of competing residential apartment communities in the Bay Area, parties or their agents adverse to the Apartments in other proceedings, other persons who are not current or former tenants of the Apartments, and/or persons misrepresenting their identities.

Cmplt. ¶ 11. Even if true, this allegation would not establish that any of the statements were made in connection with commercial advertising or promotion.  

There is another possibility:  Parkmerced and Stellar Larkspur may be trying to state a claim for infringement of an unregistered trademark under 15 U.S.C. § 1125(a)(1)(A).  Unfortunately for them, this cause of action requires use of a trademark "on or in connection with any goods or services" in a way that is likely to cause consumer confusion about the source or sponsorship of those goods or services.  But the plaintiffs don't even allege ownership of valid trademarks, much less consumer confusion or use in connection with a good or service.

What's more, the complaint's own allegations establish beyond any doubt that this dispute has everything to do with ordinary criticism and nothing to do with trademark infringement, false advertising, or any other competitive injury.  Here's a sample of the statements on the website that are quoted in the complaint:

  •  I used to live at Villas Parkmerced up until last year.  I do not think the new management is sincerely trying to improve anything.  All of the improvements being made by Parkmerced are being done a [sic] surface level in an attempt to justify raising rents and attracting new tenants.  They are not fixing the problems that cause the leaks, broken heat, washing machines, or elevators.  I sincerely believe they only have their best interest at heart and not that have [sic] current or future tenants. . . .  (Cmplt. ¶ 20)

  • If you are looking to rent at larkspur shores, DONT.  Construction noise, poor management, tacky decor, and an indifferent staff make this one of the worst choices to live [sic].  I have lived here for almost two years and have watched this once quaint neighborhood transform into a slum.  If you are a current tenant and are posting on here because you are as fed up as I am, you have to understand we do have rights and I beg you to contact ____s at Marin Fair Housing ______, Alliance Residential Corporate Office located in Phoenix, AZ . . ., when you call this number there is a dial by name directory to screen calls, if you type in "___" "___" you get the voicemail of ____, probably not the most appropriate contact, but with enough people calling I am sure he will pass the message on to someone who is.  Anyone who would like to unite and get a petition going to demand action, please feel free to post.  I'll be sure to spread the message. (Cmplt. ¶ 26)

  • The apartment sticks [sic] from all the people that live on one level.  The office does not care about your problems.  Maintenance does no [sic] care.  The [sic] get new management and don't tell.  But worst of all i am pregnant and i moved in 3 months ago and me and my boyfriend started to notice every time we came home the apartment would smell like old people, [sic] A stinky restroom, old food evettime [sic] it smells different.  They won't do anything about it. . . .  (Cmplt. ¶ 28).

The other allegedly false statements are of the same basic character.  If this is what the Lanham Act is meant to protect against, I'll eat my hat. 

Armed with these allegations, Parkmerced and Stellar Larkspur have subpoenaed Apartment Ratings, asking for information identifying the authors of the critical comments made about them.  They've asked for the identities of those users who wrote the eighteen statements quoted in the complaint, as well as other users who wrote things not specifically mentioned in the complaint.  One of those users contacted Paul Levy, who last week filed an excellent brief asking the court for a protective order against the subpoena and moving to strike the plaintiffs' state-law claims under the California anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16). 

Mr. Levy argued that the website's anonymous posters have a qualified right to engage in anonymous speech, and that the plaintiffs' facially invalid Lanham Act claim cannot justify disclosing the posters' identities.  (As noted, without the Lanham Act claim, the federal court has no subject-matter jurisdiction over the case, so the potential merit of the libel and tortious interference claims should not matter.)  Based on the same weakness, Mr. Levy argued that the plaintiffs could not establish the probability of success required to survive his client's anti-SLAPP motion to strike.

If the court does not grant Mr. Levy's motions, I'll have to concur with Eric Goldman that federal trademark law is "completely broken," adding only that federal false advertising law is no better off.

You can monitor the progress of this case in our database entry, Parkmerced Investors Properties LLC v. Does.


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