the New York store had received numerous complaints about customer service at the Short Hills store.
Fashion Boutique has submitted evidence that, in the period prior to July of 1991 when it closed, a total of eleven consumers were told by defendants' employees that the Short Hills store carried inferior merchandise. (Amore Decl. P 4; Bassett Decl. PP 3-5; Blomquist Dep. at 27; Green Decl. P 3; Lance Decl. PP 2-3; Mantel Aff. P 3; C. Montalbano Decl. PP 4, 6; M. Montalbano Decl. PP 6, 8; Ray Decl. P 4; Ring Decl. PP 3-4; Scheer Decl. P 3.) On four occasions, undercover investigators were told that the goods sold by the Short Hills store were not the same quality as the goods in the New York store. (Meierhofer Aff., Ex. 15, Ex. B at 2-3, 10; id. Ex. 15, Ex. D at 3-4; id. Ex. 15, Ex. F at 2, 5; id. Ex. 15, Ex. H at 1-2.) Three consumers were told that the Short Hills store sold "fake" or "bogus" Fendi merchandise. (Blomquist Dep. at 28; Lance Decl. P 3; Ray Decl. P 4.) One consumer was told that "a lot of people" were calling and writing to complain about customer service at the Short Hills store. (Meierhofer Aff., Ex. 16 at 7.) On three occasions when an undercover investigator complained about poor customer service at the Short Hills store, he or she was told that other people had similar complaints. (Meierhofer Aff., Ex. 15, Ex. A at 3; id. Ex. 15, Ex. B at 4, 7, 9; id. Ex. 15, Ex. C at 2, 6.) On three other occasions, undercover investigators were warned about poor customer service at the Short Hills store. (Id. Ex. 15, Ex. D at 2-3; id. Ex. 15, Ex. E at 2-3; id. Ex. 15, Ex. G at 2.)
None of the other evidence submitted by Fashion Boutique supports the allegation that defendants falsely disparaged the Short Hills store. Some of the allegedly false representations had nothing to do with the quality of the goods or customer service at Short Hills. (E.g., Martino Decl. P 3; Meierhofer Aff., Ex. 15, Ex. J. at 6.) On many occasions when consumers or undercover agents were told that the Short Hills store carried a different line of Fendi goods, no reference was made to the quality of the goods sold by the Short Hills store. Indeed, on three occasions, Fashion Boutique's undercover investigators were told that the quality of the merchandise was the same in both the New York and Short Hills stores. (Meierhofer Aff., Ex. 15, Ex. E at 4; id. Ex. 15, Ex. G at 1; id. Ex. 15, Ex. I at 2.)
The declarations from people who heard "rumors" that the Short Hills store sold "fake" Fendi merchandise are not properly considered on a motion for summary judgment. Only "such facts as would be admissible in evidence" are properly so considered. Fed. R. Civ. P. 56(e); see also Liberty Mut. Ins. Co. v. Rotches Pork Packers, 969 F.2d 1384, 1388 (2d Cir. 1992). Testimony about hearing rumors as evidence that defendants disparaged the quality of the goods sold by Fashion Boutique is inadmissible hearsay. See Fed. R. Evid. 802.
Nor do allegedly disparaging remarks made after the Short Hills store closed support a claim under the Lanham Act because at that point defendants were no longer competitors of the Short Hills store. In order to constitute "advertising or promotion" under section 43(a)(1)(B), the allegedly false representations must be made by someone who is in commercial competition with the plaintiff. Gordon and Breach Science Publishers v. American Inst. of Physics, 859 F. Supp. 1521, 1535-36 (S.D.N.Y. 1994); see also Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384 (5th Cir. 1996). Fashion Boutique has presented no evidence that it planned to re-open the Short Hills store or that comments by defendants' employees after July of 1991 prevented it from doing so.
The issue then is whether the admissible evidence is sufficient to withstand a motion for a directed verdict at trial on the question whether defendants engaged in "advertising or promotion" within the meaning of the Lanham Act. The Lanham Act does not define "advertising or promotion." The Act's legislative history is not helpful on this issue. The words of the statute, "advertising" and "promotion," connote reaching out to consumers. In modern jargon, these words connote proactive, not merely reactive, communication. Lanham Act "advertising or promotion" usually involves initiating notice to consumers, see, e.g., Gordon and Breach Science Publishers S.A. v. American Institute of Physics, 905 F. Supp. 169, 181-82 (S.D.N.Y. 1995); H & R Indus., Inc. v. Kirshner, 899 F. Supp. 995, 999-1000 (E.D.N.Y. 1995); Mobius Management Sys. v. Fourth Dimension Software, Inc., 880 F. Supp. 1005, 1010-11 (S.D.N.Y. 1994); Williams Elec., Inc. v. Bally Mfg. Corp., 568 F. Supp. 1274, 1282-83 & n.24 (N.D. Ill. 1983), making a sales presentation, see, e.g., Seven-Up Co., 86 F.3d at 1382; Gordon and Breach Science Publishers, S.A., 905 F. Supp. at 180-81; or initiating conversations with consumers, see, e.g., National Artists Management Co. v. Weaving, 769 F. Supp. 1224, 1235 (S.D.N.Y. 1991). Indeed, all of the cases relied on by plaintiff involved customer contacts that were actively sought by the defendant. There is no evidence in this case that defendants initiated communications about Fashion Boutique to any of Fashion Boutique's customers. On the contrary, the evidence shows that allegedly disparaging oral comments were made only to customers who visited the New York store and themselves initiated discussion of the Short Hills store.
In order to constitute "advertising or promotion" under section 43(a)(1)(B), the allegedly false representations must be disseminated sufficiently to the relevant purchasing public. Gordon and Breach Science Publishers, 859 F. Supp. at 1535-36; see also Seven-Up, 86 F.3d at 1384. The level of dissemination required to constitute advertising and promotion will vary from industry to industry and from case to case. See American Needle & Novelty, Inc. v. Drew Pearson Mktg., 820 F. Supp. 1072, 1078 (N.D. Ill. 1993).
Fashion Boutique argues that a statement to one customer is sufficient to prove a claim under the Lanham Act. Most of the courts that have addressed this issue have held that dissemination to a single consumer is not sufficient. Goldsmith v. Polygram Diversified Ventures, Inc., 1995 U.S. Dist. LEXIS 15351, No. 94 Civ. 8888 (DLC), 1995 WL 614560, at *7-8 (S.D.N.Y. Oct. 19, 1995); Garland Co. v. Ecology Roof Sys. Corp., 895 F. Supp. 274, 279 (D. Kan. 1995); American Needle & Novelty, Inc., 820 F. Supp. at 1078; but see Gordon and Breach Science Publishers, S.A., 905 F. Supp. at 182 (The "breadth of dissemination, although important, is not dispositive."). Mobius Management Sys., 880 F. Supp. 1005, cited by Fashion Boutique, is distinguishable. The court in Mobius found that "the relevant purchasing market [for report distribution system software for use on IBM mainframe computers] is quite small," and that the true relevant purchasing public in that case consisted of one consumer. Id. at 1020-21. Thus, the court held that a disparaging letter sent to that consumer made out a claim under the Lanham Act. Id.
In this case, the relevant purchasing public consists of thousands of consumers. After years of discovery, Fashion Boutique can show only that twelve customers and nine undercover investigators sent to instigate statements about the Short Hills store, heard defendants' employees make disparaging comments. This is not a case where the alleged misrepresentations reached a significant portion of a small purchasing public. See Seven-Up Co., 86 F.3d at 1386-87 (allegedly false representations made to eleven of seventy-four members of relevant purchasing public states a claim under Lanham Act); National Artists Management Co., 769 F. Supp. at 1235-36 (defendant's allegedly false representations to ten of plaintiff's thirty customers in an industry that is indisputably small and interconnected states a claim under Lanham Act).
Fashion Boutique argues that it was defendants' policy to disparage the Short Hills store. Fashion Boutique relies heavily on the testimony of Caroline Clarke to support this claim. However, Clarke testified that she did not know if defendants' employees disparaged the quality of Fashion Boutique's merchandise. (Clarke Dep. at 280.) She testified that it was defendants' policy to disparage the customer service provided by Short Hills. ( Id.) As discussed above, Fashion Boutique's best evidence is that seven people, six of whom were undercover investigators, heard defendants' employees make allegedly disparaging comments about customer service. This evidence does not prove that, as a result of defendants' policy, disparaging comments about customer service were sufficiently disseminated to the large relevant purchasing public. Nor is the fact that a handful of employees made disparaging comments to a small fraction of the relevant purchasing public evidence of a policy to disparage the quality or authenticity of the merchandise sold by Fashion Boutique. Cf. Medical Graphics Corp. v. Sensormedics Corp., 872 F. Supp. 643, 650 (D. Minn. 1994) (on motion for preliminary injunction, plaintiff failed to establish likelihood of success under Lanham Act where evidence showed that potential market is large and that only a handful of sales representatives made false representations).
In sum, in view of the large relevant purchasing public and the absence of the initiation by defendants of a single communication to the public, the conduct complained of does not constitute "advertising or promotion" within the meaning of the Lanham Act.
For the foregoing reasons, defendants' motion for summary judgment on the Lanham Act claim is granted.
Dated: New York, New York
October 23, 1996
MIRIAM GOLDMAN CEDARBAUM
United States District Judge