Strauss v. Angie's List ( 2020 )

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH March 9, 2020
Christopher M. Wolpert
UNITED STATES COURT OF APPEALS Clerk of Court
TENTH CIRCUIT
STEVE STRAUSS, d/b/a Classic Tree
Care,
Plaintiff - Appellant,
v. No. 19-3025
ANGIE’S LIST, INC.,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. NO. 2:17-CV-02560-HLT-TJJ)
Robert J. Bjerg, Colantuono Bjerg Guinn Keppler, LLC, Overland Park, Kansas,
for Appellant.
J. Gordon Cooney, Jr., Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania (Matthew R. Brunkhorst, Armstrong Teasdale LLP, Kansas City,
Missouri; Franco A. Corrado, Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania; J. Kevin Fee and Michael E. Kenneally, Morgan, Lewis & Bockius
LLP, Washington, DC, with him on the brief), for Appellee.
Before TYMKOVICH, Chief Judge, MURPHY, and CARSON, Circuit Judges.
MURPHY, Circuit Judge.
I. INTRODUCTION
Plaintiff, Steve Strauss, brought claims against Defendant, Angie’s List,
Inc., alleging violations of the Lanham Act. Strauss appeals from an order of the
district court dismissing his complaint on the basis that it fails to identify any
statements made by Angie’s List that qualify as commercial advertising or
promotion within the meaning of the Lanham Act’s false advertising provision.
See 15 U.S.C. § 1125(a)(1)(B). He maintains the district court erred by analyzing
his claims under the test adopted by this court in Proctor & Gamble Co. v.
Haugen, 222 F.3d 1262, 1273 (10th Cir. 2000) (adopting a four-part test for
determining what constitutes commercial advertising or promotion).
Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the dismissal of
Strauss’s Lanham Act claims.
II. BACKGROUND
During the relevant period, 1 Strauss owned a tree trimming/removal
business called Classic Tree Care (“Classic”). Defendant Angie’s List is an
internet-based consumer ratings forum on which fee-paying members can view
and share reviews of local businesses. According to Strauss, the membership
1
We provide only a summary of the factual background of the parties’
dispute. The district court’s orders contain a complete recitation of the factual
allegations in Strauss’s complaint. See Strauss v. Angie’s List, Inc., No. 2:17-CV-
02560, 2019 WL 399910, *1-2 (D. Kan. Jan. 31, 2019); Strauss v. Angie’s List,
Inc., No. 2:17-CV-02560, 2018 WL 5722561, *2-4 (D. Kan. Nov. 1, 2018).
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agreement between Angie’s List and its members leads members to believe that
businesses are ranked by Angie’s List according to unedited consumer
commentaries and endorsements when, in reality, the order in which businesses
are ranked is actually based on the amount of advertising the business buys from
Angie’s List. He alleges businesses are told they will be ranked more favorably
on the website if they pay advertising and referral fees to Angie’s List.
According to Strauss, from 2005 to 2016 he paid $200,000 in advertising
services fees and coupon retention percentages to Angie’s List “in an effort to
appear higher” in search results. The business relationship between Strauss and
Angie’s List, however, began to sour in 2013. Strauss alleges he failed to appear
in search results for a three-month period and then was “buried” in search-result
listings even though he had numerous favorable reviews and a high rating from
consumers.
In September 2017, Strauss filed a putative class action lawsuit against
Angie’s List, raising allegations that Angie’s List engaged in false advertising in
violation of § 45(a) of the Lanham Act, 15 U.S.C. § 1125. He also alleged
violations of the Kansas Consumer Protection Act (“KCPA”), Kan. Stat. Ann.
§§ 50-626 to 50-627. He supported these claims with assertions Angie’s List
published false and misleading statements of fact about him and his business on
its website. Angie’s List moved to dismiss Strauss’s complaint on multiple
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grounds, asserting, inter alia, the claims were time barred and the complaint
failed to plausibly plead essential elements of the claims. The district court
granted the motion as to nearly all of Strauss’s claims, concluding the majority
were time barred either under the doctrine of laches or under the state statute of
limitations. Strauss v. Angie’s List, Inc., No. 2:17-CV-02560, 2018 WL
5722561, *11 (D. Kan. Nov. 1, 2018); see also Petrella v. Metro-Goldwyn-
Mayer, Inc., 572 U.S. 663, 678 n.15 (2014) (noting the Lanham Act does not
contain a statute of limitations but “expressly provides for defensive use of
equitable principles, including laches” (quotation omitted)). The only claims not
time-barred were based on statements Angie’s List made on its website in 2016
(the “2016 Website Statements”). Strauss, 2018 WL 5722561, at *11. As to
those claims, the district court concluded Strauss failed to plausibly plead that the
statements were made in connection with “commercial advertising or promotion,”
an essential element of his Lanham Act claims. Id. at *14. The court also
dismissed the KCPA claims because Strauss did not plausibly plead the required
elements of reliance or causation. 2 Id. at *15.
Strauss filed a motion pursuant to Fed. R. Civ. P. 59(e) asking the district
court to amend or alter its judgment. In the motion, he argued the district court
2
The district court also denied Strauss’s request for leave to amend his
complaint, concluding amendment would be futile. Strauss, 2018 WL 5722561, at
*16.
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erred in determining his Lanham Act claims were barred by the doctrine of laches
and that he failed to plausibly allege Angie’s List made representations for the
purposes of influencing consumers to buy Angie’s List’s goods or services.
Strauss also challenged the court’s determination that he had waived any
argument based on a continuing violations theory. The district court denied the
motion in an unpublished order. Strauss v. Angie’s List, Inc., No. 2:17-CV-
02560, 2019 WL 399910, *1 (D. Kan. Jan. 31, 2019).
III. Discussion
As an initial matter, it is necessary to identify the scope of this appeal
because many of the issues resolved by the district court are not before this court.
In his opening brief, Strauss identifies the sole issue presented on appeal as
whether he has plausibly pled that the alleged false representations made by
Angie’s List induced consumers to buy Angie’s List’s goods or services. He
specifically states that he is not challenging the dismissal of either his KCPA
claims or the Lanham Act claims that were dismissed as untimely. Thus, the only
question before us is slightly narrower than articulated by Strauss. We will
address only whether he has pleaded facially plausible Lanham Act claims based
on the 2016 Website Statements. 3
3
Strauss also attempts to raise a vicarious liability argument that was not
presented to the district court. Generally, this court does not consider arguments
(continued...)
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We review de novo a district court’s dismissal of a complaint for failure to
state a claim. Doe v. Woodard, 912 F.3d 1278, 1299 (10th Cir. 2019). To
survive a Rule 12(b)(6) motion to dismiss, a plaintiff’s complaint must allege
sufficient facts “to state a claim to relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). Under the applicable standard, a
claim is facially plausible “when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The court’s
function on a Rule 12(b)(6) motion is not to weigh potential evidence that the
parties might present at trial, but to assess whether the plaintiff’s . . . complaint
alone is legally sufficient to state a claim for which relief may be granted. We
accept all well-pled factual allegations as true and view these allegations in the
light most favorable to the nonmoving party.” Peterson v. Grisham, 594 F.3d
723, 727 (10th Cir. 2010) (quotation and citation omitted).
The only Lanham Act claims not time-barred are based on three statements
Angie’s List made on its website in 2016. According to allegations in Strauss’s
3
(...continued)
raised for the first time on appeal. Singleton v. Wulff, 428 U.S. 106, 120 (1976).
Because Strauss has not addressed whether we should exercise discretion to
address these arguments, we conclude they are not properly before us. Lyons v.
Jefferson Bank & Trust, 994 F.2d 716, 720-22 (10th Cir. 1993) (discussing the
“unusual circumstances” in which discretion should be exercised in favor of
considering issues not passed on below).
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complaint, Angie’s List stated that his business (1) had no consumer ratings or
reviews; (2) had not met the criteria set by Angie’s List for inclusion on its
website; and (3) had no local offers to extend to consumers. To prevail on
Lanham Act claims arising from these statements, Strauss must show “(1) that
[Angie’s List] made material false or misleading representations of fact in
connection with the commercial advertising or promotion of its product; (2) in
commerce; (3) that are either likely to cause confusion or mistake as to (a) the
origin, association or approval of the product with or by another, or (b) the
characteristics of the goods or services; and (4) injure the plaintiff.” Sally
Beauty Co., Inc. v. Beautyco, Inc., 304 F.3d 964, 980 (10th Cir. 2002) (quotation
omitted). The district court concluded Strauss failed to plausibly plead the first
of these requirements because he could not show the statements were made in
connection with the commercial advertising or promotion of Angie’s List’s
products.
This court has adopted a four-part test to determine whether a statement
qualifies as “commercial advertising or promotion” for purposes of a Lanham Act
false advertising claim. To constitute commercial advertising or promotion under
§ 43(a)(1)(B) of the Lanham Act, the statements identified by Strauss “must be:
(1) commercial speech; (2) by a defendant who is in commercial competition with
plaintiff; (3) for the purpose of influencing consumers to buy defendant’s goods
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or services . . . [and] (4) must be disseminated sufficiently to the relevant
purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.”
Proctor & Gamble Co., 222 F.3d at 1273-74 (adopting a test first set out in
Gordon & Breach Sci. Publishers, S.A. v. Am. Inst. of Physics, 859 F. Supp.
1521, 1535-36 (S.D.N.Y. 1994)). The district court concluded Strauss’s
complaint failed to plausibly allege that the 2016 Website Statements were made
for the purpose of influencing consumers to buy Angie’s List’s goods or services.
At best, the court concluded, it could be reasonably inferred that the statements
were made to influence consumers to purchase goods and services from a tree
care business other than the one owned by Strauss. On appeal, Strauss does not
argue Angie’s List made the 2016 Website Statements in an attempt to influence
consumers to purchase goods and services from Angie’s List or that the district
court misapplied the Proctor & Gamble test as to those three statements. 4
4
In his opening brief, Strauss expressly states the following: “[T]he district
court dismissed all of the plaintiff’s Lanham Act claims that arose prior to
September 22, 2015 on the basis that they were time-barred by laches. Plaintiff
Strauss is not appealing that part of the district court’s order of dismissal.” The
district court expressly ruled that all the Lanham Act claims except those based
on the three 2016 Website Statements are barred by laches. In an argument
directly at odds with the concession in his opening brief, Strauss relies solely on
statements other than the 2016 Website Statements to support his contention that
Angie’s List made misrepresentations that influenced consumers to purchase
services from Angie’s List. Accordingly, we conclude those arguments are waived
and decline to address them. See United States v. Zubia-Torres, 550 F.3d 1202,
1205 (10th Cir. 2008) (“[W]aiver is accomplished by intent . . . .” (quotation
(continued...)
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Instead, he challenges the continued viability of the 2000 Proctor & Gamble test
in light of the Supreme Court’s 2014 decision in Lexmark International, Inc. v.
Static Control Components, Inc., 572 U.S. 118 (2014).
In Lexmark, the Supreme Court addressed the question of whether the
plaintiff had statutory standing to sue the defendant for alleged false advertising
in violation of the Lanham Act. 572 U.S. at 128. The Court rejected all three
standing tests used by the federal circuit courts, including one requiring the
plaintiff to be a direct competitor of the defendant. Id. at 134-37. Strauss argues
Lexmark’s holding altered the Proctor & Gamble test by eliminating the
requirements that the challenged statements be made by a defendant in
commercial competition with the plaintiff 5 and that the statements be made for
4
(...continued)
omitted)). Strauss does not advance any argument that the 2016 Website
Statements were made for the purpose of influencing consumers to buy Angie’s
List’s goods or services.
5
In cases decided after Lexmark, both the Fourth and Sixth Circuit Courts
of Appeals have adopted only three prongs of the Gordon & Breach test,
discarding the requirement that the defendant “be in commercial competition with
the plaintiff.” Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc.,
700 F. App’x 251, 256-57 (4th Cir. 2017); Grubbs v. Sheakley Group, Inc., 807
F.3d 785, 801 (6th Cir. 2015) (declining “to adopt the requirement that the parties
be in competition” because the Lanham Act “nowhere requires such a showing”).
The Fourth Circuit reasoned that post-Lexmark, the competitive relationship
between the parties is relevant to standing, not “whether a communication is
advertising.” Handsome Brook Farm, LLC, 700 F. App’x at 256. In his opening
brief, Strauss makes the unsupported assumption that Lexmark “clearly eliminates
prong number two” from the Proctor & Gamble test. But, as we conclude, infra,
(continued...)
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the purpose of influencing consumers to buy defendant’s goods or services. The
answer as to whether Lexmark abrogated the Proctor and Gamble test for
determining what constitutes commercial advertising is answered by the Lexmark
decision itself. In Lexmark, the Supreme Court expressly declined to address
whether the plaintiff’s representations were commercial advertising or promotion,
stating:
Lexmark contends that [Plaintiff’s] allegations failed to describe
“commercial advertising or promotion” within the meaning of 15
U.S.C. § 1125(a)(1)(B). That question is not before us, and we
express no view on it. We assume without deciding that the
communications alleged by [Plaintiff] qualify as commercial
advertising or promotion.
572 U.S. at 123 n.1. Instead, Lexmark addressed only the question of statutory
standing, id. at 128, an issue not presented in this appeal.
The Proctor & Gamble test aids the courts in determining whether
particular representations constitute “commercial advertising or promotion,” as
required by the Lanham Act. 15 U.S.C. § 1125(a)(1)(B); see also Proctor &
Gamble, 222 F.3d at 1273. The Lexmark Court specifically declined to address
the question of whether the defendant’s communications were commercial
5
(...continued)
the Proctor & Gamble test has not been abrogated by Lexmark. Even if an
argument could be made that the standing holding in Lexmark cannot be
reconciled with the second prong of the Proctor & Gamble test, that issue is not
properly before this panel.
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advertising or promotion. Thus, it is not superseding authority on the issue of the
appropriate test to apply. Because “[w]e are bound by the precedent of prior
panels absent en banc reconsideration or a superseding contrary decision by the
Supreme Court,” this court and the lower courts must continue to apply the
Proctor & Gamble test to determine what constitutes commercial advertising or
promotion for purposes of a Lanham Act false advertising claim. In re Smith, 10
F.3d 723, 724 (10th Cir. 1993). Since Strauss does not challenge the district
court’s application of the Proctor & Gamble test as to the 2016 Website
Statements, see n.4 supra, we conclude his claims were properly dismissed.
IV. Conclusion
The judgment of the district court dismissing Strauss’s class action
complaint is affirmed.
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