No Harm, No Foul: No False Advertisement Where Trade Association Failed to Show Injury
The US Court of Appeals for the Tenth Circuit affirmed a district court’s grant of summary judgment in favor of a home inspector association on a false advertising claim brought by a competitor, finding no evidence of injury or harm and explaining that harm could not be presumed merely from the fact that the parties compete for members. Am. Soc’y of Home Inspectors, Inc. v. Int’l Ass’n of Certified Home Inspectors, Case No. 21-1087 (10th Cir. June 14, 2022) (Tymkovich, C.J.; Carson, Rossman, JJ.)
The International Association for Certified Home Inspectors (InterNACHI) and the American Society of Home Inspectors (ASHI) are competing national organizations that offer memberships with benefits such as advertising, online education and logo design to independent home inspectors. InterNACHI brought a false advertisement claim under the Lanham Act against ASHI, its sole national competitor, for featuring the slogan “American Society of Home Inspectors. Educated. Tested. Verified. Certified.” on its website. InterNACHI alleged that ASHI’s tagline was misleading because ASHI’s membership includes “novice” inspectors who are not trained or certified. These “novice” inspectors are promoted on ASHI’s online “find-an-inspector” tool, where home buyers can find a local inspector and view their contact information, qualifications and membership level (associate, inspector or certified inspector). According to InterNACHI, ASHI’s misleading slogan coupled with its public promotion of novice members as inspectors caused InterNACHI to lose potential members. The parties filed cross motions for summary judgment. The district court granted summary judgment in favor of ASHI, concluding that InterNACHI failed to show that it was injured by the tagline as required under the Lanham Act. InterNACHI appealed.
InterNACHI argued that the district court incorrectly concluded that no reasonable jury could find that InterNACHI was harmed by the slogan and improperly refused to presume harm from the parties’ relationship as direct competitors. The Tenth Circuit disagreed, explaining that a plaintiff claiming false advertising under the Lanham Act must plead “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” In support of its claim, InterNACHI offered the following:
A survey showing that consumers may be deceived by the slogan
Data showing an increase in ASHI associate membership following implementation of the slogan
A declaration by InterNACHI’s founder attesting to the harm caused to InterNACHI as a result of ASHI’s slogan.
The Tenth Circuit reasoned that consumer confusion does not bear on whether home inspectors are more likely to join ASHI instead of InterNACHI because of the slogan. The Court also declined to infer harm from ASHI’s increase in associate membership, which was likely attributable to other factors, such as the institution of reduced student membership fees or the closure of another national association for home inspectors around the time the slogan was introduced. The Court further noted that inspectors can join both organizations and that InterNACHI had not shown that its own membership levels decreased because of ASHI’s slogan. With respect to the declaration by InterNACHI’s founder that “use of th[e] slogan in connection with the Find an Inspector tool is harmful to InterNACHI,” the Court explained that “InterNACHI cannot rely on an unsupported and conclusory assertion to establish injury.” Because InterNACHI failed to identify a genuine issue of material fact that ASHI’s slogan injured InterNACHI, the Court concluded that summary judgment was appropriate.
The Tenth Circuit also agreed with the district court that InterNACHI was not entitled to a presumption of harm as a direct competitor of ASHI. The Court clarified that a factfinder can only presume harm in cases where an injury would likely flow from the defendant’s objectionable statements, such as when the “defendant has explicitly compared its product to the plaintiff’s.” Since ASHI’s slogan does not reference InterNACHI and home inspectors can join both associations, the Tenth Circuit refused to apply the presumption and affirmed the district court’s grant of summary judgment in favor of ASHI.