Free Trial Brief - District Court of Arizona - Arizona

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GREENBERG TRAURIG, LLP
ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, Group Vision International, L.L.C., et al., Defendants. And related cross claims and third party actions. Plaintiff Awareness Corporation ("Awareness") hereby submits its bench memorandum regarding its claim for product disparagement against the Distributor Defendants. Awareness brought suit against the Distributor Defendants for trade and product disparagement based upon their intentional publications of false statements regarding Awareness and its products. Awareness' claims for trade and product disparagement were not implicated in the parties' various motions for summary judgment, and were thus not contemplated by the Court's June 1, 2005 Order on the motions for summary judgment. This claim will therefore be determined at trial. No. CV03-2024-PHX-DGC PLAINTIFF AWARENESS CORPORATION'S BENCH MEMORANDUM NO. 12 RE: PRODUCT DISPARAGEMENT

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To establish a claim for trade and product disparagement, Awareness must establish that the Distributor Defendants (i) published to a third party (ii) a false statement (iii) harmful to the interests of Awareness (iv) that caused Awareness to suffer a pecuniary loss. RESTATEMENT (SECOND) OF TORTS § 623A. See also U-Haul Int'l, Inc. v. Jartran, Inc., 522 F.Supp. 1238, 1243 (D. Ariz. 1981) (noting that, in the absence of applicable statutes and/or case law, Arizona courts will follow the Restatement). A defendant is liable for disparagement if (i) he intends for the publication of the false and/or disparaging statement to result in harm to the pecuniary interests of the plaintiff, or either recognizes or should recognize that it is likely to do so, and (ii) he knows that the statement is false or acts in reckless disregard of its truth or falsity. RESTATEMENT (SECOND) OF TORTS § 623A. As provided in the Restatement: A statement is disparaging if it is understood to cast doubt upon the quality of another's land, chattels, or intangible things, or upon the existence or extent of his property in them, and (a) (b) the publisher intends the statement to cast the doubt, or the recipient's understanding of it as casting the doubt was reasonable.

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RESTATEMENT (SECOND) TORTS § 629. Accordingly, a false statement is actionable if it disparages the quality of another's property and results in pecuniary loss. Id. § 626. False statements are actionable only if they are published to a third party. "Publication" can be either by written or oral communication, and is broadly defined to include both intentional and negligent communications to third parties that affect plaintiff's interests. Id. § 630. A defendant is also subject to liability for harm resulting from a third party's repetition of the alleged disparagement if "(a) the repetition was
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authorized or intended by the original publisher, or (b) the third person was privileged to repeat it, or (c) the repetition was reasonably to be expected." Id. § 631. Plaintiff's pecuniary loss resulting from the publication of an injurious falsehood is restricted to: "(a) the pecuniary loss that results directly and immediately from the effect of the conduct of third persons, including the impairment of vendibility or value caused by disparagement, and (b) the expense of measures reasonably necessary to counteract the publication, including litigation to remove the doubt cast upon the vendibility or value caused by the disparagement." Id. § 633(1). Plaintiff's pecuniary loss may be established by "(a) proof of the conduct of specific persons, or (b) proof that the loss has resulted from the conduct of a number of persons whom it is impossible to identify." Id. § 633(2). The extent of pecuniary loss caused by defendant's prevention of a sale of plaintiff's products is typically determined by "the difference between the price that would have been realized by it and the salable value of the thing in question." Id. § 633 cmt. f. Plaintiffs may recover for a loss of market share, however, when the defendant's wide dissemination of the injurious falsehoods caused such "serious and genuine" pecuniary losses such that plaintiff will not be able to identify all persons affected by defendant's conduct. Id. § 633 cmt. h. Accordingly, where plaintiff is able to establish that defendant's conduct deprived plaintiff of a market that he would have otherwise found, "the rule requiring the identification of specific purchasers is relaxed and recovery is permitted for the loss of the market." Id. To recover pecuniary losses resulting from the defendant's trade and product disparagement, a plaintiff must show that defendant's conduct was the legal cause of the loss. "The publication of an injurious falsehood is a legal cause of pecuniary loss if (a) it is a substantial factor in bringing about the loss, and (b) there is no rule of law relieving the publisher from liability because of the manner in which the publication has resulted in the loss." RESTATEMENT (SECOND) OF TORTS § 632, cmt. c ("In order for the false
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statement to be a substantial factor in determining the conduct of an intending or potential purchaser or lessee, it is not necessary that the conduct should be determined exclusively or even predominantly by the publication of the statement. It is enough that the disparagement is a factor ... even though [the purchaser] is influenced by other factors."). "The causation element of a disparagement claim is met where the evidence establishes that the disparaging statements were a substantial factor in causing pecuniary loss. Plaintiff need not prove loss of specific customers." U-Haul Int'l, Inc. v. Jartran, Inc., 601 F.Supp. 1140, 1151 (D. Ariz. 1984) (emphasis added). RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corporation and Third Party Defendants Allcock and Schmidt

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CERTIFICATE OF SERVICE I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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