Navatar Group, Inc. v. DealCloud, Inc.
- Sidney Stein
- 1:21-cv-01255
- U.S. District Court · Southern District of New York
- 5
In Navatar Group v. DealCloud, Judge Stein granted DealCloud’s motion to dismiss the federal false-advertising claim and declined jurisdiction over state claims.
Navatar’s federal false-advertising claim was dismissed. The court declined to exercise supplemental jurisdiction over Navatar’s remaining New York-law claims; the opinion does not specify a separate disposition for each state-law claim.
What happened
Navatar Group, Inc. sued its competitor, DealCloud, Inc., claiming that DealCloud made false statements about Navatar to customers and potential customers. Navatar brought a federal false-advertising claim and several claims under New York law.
The court ruled that Navatar’s amended complaint described only two alleged communications: one email to a customer and one phone call with a customer. Because those allegations did not plausibly show that DealCloud’s statements were distributed widely enough to qualify as advertising or promotion under federal law, the federal claim could not proceed.
The court granted DealCloud’s motion to dismiss the Lanham Act claim and declined to exercise supplemental jurisdiction over the remaining New York-law claims. Judge Sidney H. Stein issued the order.
The detailed version
- Navatar Group, Inc. v. DealCloud, Inc. · No. 1:21-cv-01255
- Sidney Stein
- Feb. 7, 2023
Background
Navatar Group, Inc. alleged that DealCloud, Inc., a direct competitor, engaged in false advertising and made false or misleading statements about Navatar to current or prospective clients. The alleged statements included that Navatar was having trouble, charged three times as much as DealCloud, was in danger of bankruptcy, and had closed two deals in 2020 compared with DealCloud’s 200 deals.
Navatar’s amended complaint asserted one federal claim under the Lanham Act, a federal trademark and advertising statute, and several claims under New York law, including deceptive business practices, false advertising, commercial defamation, injurious falsehoods, unfair competition, and tortious interference. DealCloud moved to dismiss the amended complaint for failure to state a legally sufficient claim.
Lanham Act claim
The court explained that a Lanham Act false-advertising claim requires a plaintiff to plausibly allege that the challenged message was literally or impliedly false, material, used in interstate commerce, and caused actual or likely injury. The alleged misrepresentation also must have appeared in “commercial advertising or promotion.” In the Second Circuit, that generally requires commercial speech intended to influence consumers, distributed sufficiently to the relevant purchasing public. Isolated disparaging statements ordinarily do not satisfy that requirement.
The court had previously dismissed Navatar’s original complaint and had identified a lack of factual support for the alleged falsity and widespread dissemination of DealCloud’s statements. The court had specifically indicated that Navatar should provide details about additional contacts with its customers or potential customers.
In the amended complaint, Navatar incorporated factual material from a declaration by its chief executive and addressed why the statements in one email were allegedly false. The court concluded that this helped address the alleged falsity of the statements but did not establish widespread dissemination. The amended complaint added only one other example: a phone call between an unnamed DealCloud employee and an unnamed customer in April 2021. Thus, the complaint alleged two discrete communications, each apparently directed to one customer.
Although Navatar alleged that it had nearly 100,000 potential users, the court held that statements made to two of those people could not plausibly constitute distribution throughout the relevant market. The court therefore granted DealCloud’s motion to dismiss the Lanham Act claim.
New York-law claims
The Lanham Act claim was the only claim arising under federal law. After dismissing that claim, the court declined to exercise supplemental jurisdiction, meaning its authority to hear related state-law claims, over Navatar’s remaining claims under New York law. The opinion does not state a separate dismissal disposition for each of those state-law claims.
Disposition
The court concluded that DealCloud’s motion to dismiss the amended complaint was granted. Judge Sidney H. Stein signed the opinion and order.
Read the full 5-page opinion on CourtListener, the free public archive maintained by the Free Law Project.