43 F.4th 46
2d Cir.2022Background
- ICC is a nonprofit that authors model "I-Codes" and sells/or licenses I-Codes and Custom Codes that integrate local amendments; UpCodes is a for-profit competitor offering integrated code versions online.
- ICC sued UpCodes for false advertising under the Lanham Act and New York law, alleging UpCodes advertised codes as "always up to date," integrating all local amendments, and being the sole provider of integrated amendments.
- ICC alleged UpCodes' versions contained numerous errors: scanning mistakes, publishing non-law text as law, omitting adopted law, and failing to integrate many local amendments.
- The district court sua sponte treated the parties' three‑page pre‑motion letters as full briefing, dismissed ICC's complaint in its entirety, and found many statements nonactionable puffery or not false.
- On appeal the Second Circuit held the district court erred by not giving notice/opportunity to be heard, reached the merits, and reversed in part: most falsity and materiality allegations survived, but claims that UpCodes gives users a "complete understanding" were dismissed as nonactionable puffery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural: conversion of pre-motion letters to motion to dismiss | Marrero (ICC) argued court denied notice and chance to fully brief/defend complaint | UpCodes relied on district court practice; urged dismissal on merits | Court erred to dismiss without notice; appellate court reviews merits because full briefing on appeal existed |
| Falsity of claims that UpCodes integrates all local amendments | ICC: statements (e.g., "all the amendments integrated natively") are literal and false because many amendments omitted | UpCodes: statements could be read as limited/qualified or only partial integration | Second Circuit: ICC plausibly pled literal falsity for unambiguous claims promising integration of all amendments |
| Exclusivity claims (UpCodes is sole source) | ICC: UpCodes claimed to be only source for integrated amendments in some jurisdictions though ICC also offers Custom Codes | UpCodes: some statements were qualified to jurisdictions that lack integrated code books; ICC failed to rebut in pre‑motion letter | Court: ICC adequately alleged falsity as to explicit exclusivity assertions (e.g., New York) and reversal as to that claim |
| Accuracy claims ("always up to date", "never work from outdated code") | ICC: alleged concrete, provable errors show these claims are false and actionable | UpCodes: such promises are puffery; disclaimer on website negates deception | Held: accuracy claims are plausibly false and not dismissible as puffery at pleading stage; factual inquiry required (consumer perception, disclaimer effect) |
| Completeness claims (users gain a "complete understanding") | ICC: these statements imply comprehensiveness and were false given errors | UpCodes: puffery; subjective promotional language | Held: statements are nonactionable subjective puffery; dismissal of claims based on "complete understanding" affirmed |
| Materiality (would statements influence purchasing) | ICC: accuracy, integration, and exclusivity claims are central to purchasing decisions for code subscribers | UpCodes: disputed materiality | Held: ICC sufficiently pled materiality to survive motion to dismiss |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard requires plausible factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading framework)
- Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144 (2d Cir. 2007) (analyze advertising in full context; literal vs implied falsity and puffery)
- Church & Dwight Co. v. SPD Swiss Precision Diagnostics GmbH, 843 F.3d 48 (2d Cir. 2016) (literal falsity requires unambiguous message)
- Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247 (2d Cir. 2014) (elements of Lanham Act false advertising claim)
- Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51 (2d Cir. 2016) (materiality requirement under Lanham Act)
- McGinty v. New York, 251 F.3d 84 (2d Cir. 2001) (district court must give notice/opportunity before sua sponte dismissal)
- Snider v. Melindez, 199 F.3d 108 (2d Cir. 1999) (danger of dismissing without affording opportunity to be heard)
- Lipton v. Nature Co., 71 F.3d 464 (2d Cir. 1995) (discussion of puffery and nonactionable opinion)
- Fink v. Time Warner Cable, 714 F.3d 739 (2d Cir. 2013) (consumer deception inquiry and dismissal standards)
- ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013) (distinguishing fact and opinion in Lanham Act context)
- Nat'l Basketball Ass'n v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997) (materiality means likely to influence purchasing decisions)