Date: 01-04-2002

Case Style: Sports Unlimited, Inc. v. Lankford Enterprises, Inc.

Case Number: 00-3160

Judge: Holloway

Court: United States Court of Appeals for the Tenth Circuit

Plaintiff's Attorney: Bryan W. Smith and Todd D. Powell of Fisher, Cavanaugh, Smith & Lemon, P.A., Topeka, Kansas, for Plaintiff - Appellant.

Defendant's Attorney: Steven R. Fabert of Fisher, Patterson, Sayler & Smith, L.L.P., Topeka, Kansas, for Defendant - Appellee.

Description: Sports Unlimited, Inc. brought suit against Lankford Enterprises, Inc., presenting several theories for relief, all based on allegations that Defendant had caused Plaintiff to lose business and had injured its business reputation.(1) Jurisdiction in the district court was claimed under both 28 U.S.C. §§ 1331 & 1332; Plaintiff also invoked the court's supplemental jurisdiction under 28 U.S.C. § 1367 (which appears to have been important because the First Amended Complaint revealed on its face that Plaintiff and one of the defendants, who was later dismissed, see n.1, were both corporations deemed to be citizens of Oklahoma).

The district court granted summary judgment for Defendant and issued a Memorandum and Order, published at 93 F.Supp.2d 1164, explaining its analysis. The district judge held that Plaintiff's two claims based on Kansas law ­ tortious interference with contract and tortious interference with prospective business advantage ­ were barred by the applicable Kansas statute of limitations. The district judge also granted summary judgment against Plaintiff on its claim based on section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), concluding that Plaintiff had not proven sufficient dissemination of the allegedly misleading information to constitute commercial "advertising or promotion" within the meaning of the Lanham Act.

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I.

Although each party submitted voluminous materials in support of its position on Defendant's motion for summary judgment, the district judge very succinctly summarized the truly salient facts, 93 F.Supp.2d at 1166-67, and on appeal Plaintiff devotes only two paragraphs of its brief to providing the factual context for its arguments. Consequently, we too may be quite brief in setting out the essential background. We pause to note that, as the district judge was considering Defendant's motion for summary judgment, he credited Plaintiff's allegations in some crucial respects, which will be mentioned as appropriate.

Both Plaintiff and Defendant are in the business of supplying and installing gymnasium floors. In February 1996, Defendant came into possession of a "reference list" containing allegedly false and defamatory information about Plaintiff. The reference list consists of a list of some of Plaintiff's customers, followed in some cases by what appears to be a description of the customers' unfavorable comments about Plaintiff's work. Plaintiff contends that Defendant "would be the most probable source for some of the information." Although Defendant admitted distributing the reference list only to two persons, the architect and the general contractor on the Larned project mentioned below, Plaintiff alleged that Defendant distributed the list to all seven known recipients.

Plaintiff installed a floor in a gymnasium at a middle school in Larned, Kansas in early 1996. In the summer of that year, several problems with the floor developed. The architect, a Mr. Karst, telephoned Ms. Marie Franklin, president of Defendant, for advice on the floor problems. Ms. Franklin advised, both by telephone and by letter, that adjusting the humidity in the gymnasium might remedy the problem, but she said that the "fastest and surest" solution would be removal and replacement of the floor. She also sent a copy of the reference list to Mr. Karst and to Coonrod & Associates, the general contractor on the project. Later, Coonrod terminated Plaintiff's contract and hired Defendant to remove and replace the floor.

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In deciding to apply the one year statute of limitations, the district judge relied on Taylor v. I.U.E., 968 P.2d 685 (Kan. Ct. App. 1998), concluding that Plaintiff Sports Unlimited's claims, like those of the plaintiff in Taylor, were "clearly and solely based" on defamatory statements; that the gravamen of the claims thus was defamation; and that litigants should not be permitted to escape the bar of limitations "'by disguising an action for defamation and calling it one for tortious interference.'" 93 F. Supp.2d at 1167 (quoting Taylor, 968 P.2d at 690).

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Where an intermediate appellate state court rests its considered judgment upon the rule of law which it announces, that is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.

West v. A.T.&T., 311 U.S. 223, 236-37 (1940) (emphasis added; internal citations omitted).

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Plaintiff points to Rinsley v. Brandt, 446 F. Supp. 850 (D. Kan. 1977), affirmed, 700 F.2d 1304 (10th Cir. 1983), a case in which the plaintiff had pleaded claims for libel and invasion of privacy, inter alia. The district court in Rinsley determined that different periods of limitation should be applied to the claim of libel and the claim of invasion of privacy, in spite of the fact that the two claims for relief arose from the same facts and share some of the same elements. This result was termed an "anomaly," but was said to be dictated by the fact that the Kansas Supreme Court had recognized libel and invasion of privacy as separate torts. 446 F. Supp. at 858.

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Plaintiff's third claim was asserted under section 43(a) of the Lanham Act, and was centered on allegations that Defendant had circulated the reference sheet to others in the business. Aplt. App. 22-23. As the district judge succinctly explained, this provision of

[t]he Lanham Act prohibits persons from making "any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities . . . ." 15 U.S.C. § 1125(a)(1).

93 F. Supp.2d at 1168-69 (emphasis added).(6)

As to the Lanham Act claim, the district judge concluded that Defendant was entitled to summary judgment because Plaintiff's evidence regarding the extent of distribution of the reference sheet was not sufficient to establish "commercial advertising or promotion" within the meaning of the Lanham Act's proscription of unfair competition. The court relied on Garland Co. v. Ecology Roof Systems Corp., 895 F. Supp. 274, 277 (D. Kan. 1995), for its framework of analysis.(7) The fourth prong of the analysis adopted by the court, and the one on which its holding was based, focuses on whether the distribution of the alleged misrepresentations has been sufficient to constitute commercial promotion or advertising within the industry. Id. The judge concluded that here the Defendant had distributed the reference list to at least two, and possibly as many as seven, recipients. Because the evidence was that Plaintiff made at least 150 bids per year, the judge held that the distribution was too limited to be called advertising or promotion in the industry.

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We hold that Plaintiff's evidence of the extent of distribution was insufficient to defeat Defendant's motion for summary judgment. The distribution to two persons associated with the same project ­ a project on which Plaintiff had already been awarded the contract ­ simply does not, within the meaning of the Act, amount to commercial advertising or promotion and is not sufficient in the context of this case to establish a Lanham Act claim.

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Click the case caption above for the full text of the Court's opinion.

Outcome: The judgment of the district court is AFFIRMED.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: E-mail suggested corrections, comments and/or corrections to: Kent Morlan

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