United States District Court, E.D. Virginia, Alexandria Division
O'Grady, United States District Judge.
its tax settlement business received low ratings from several
regional Better Business Bureaus, plaintiff Wall &
Associates, Inc. ("Wall") sued the Better Business
Bureau Serving Central Virginia, Inc. ("Virginia
BBB"), the Better Business Bureau of Metropolitan
Washington, Inc. ("Washington BBB"), and the
Council of Better Business Bureaus, Inc. ("CBBB")
for false advertising, tortious interference with contract
and business expectancy, and defamation. Defendants move to
dismiss for failure to state a claim under Rule 12(b)(6).
(Dkt. No. 16). The Court heard argument on May 6, 2016. For
the reasons stated below, the Court will grant the motion to
dismiss and dismiss the complaint without prejudice.
a not-for-profit organization that purports to provide
consumers with objective, unbiased assessments of local
businesses. Compl. ¶¶ 14, 18. CBBB licenses the
Better Business Bureau name and model to a network of
not-for-profit regional bureaus. Id. ¶¶
16, 18. There are two components of the BBB model-business
reviews and business accreditation. Each regional BBB
maintains a website with a free, searchable database of
reviews of businesses in the region. A business review
contains background information on a business, an indication
of whether the business is BBB accredited, and a grade on a
scale of A to F generated by thirteen "elements."
Id. ¶25. BBBs generate revenue through
accreditation of businesses. The CBBB does not accredit
businesses, but indirectly benefits through regional BBBs
annual licensing fees. Id. ¶42.
"is in the business of assisting individuals and
businesses with the resolution of tax problems." Compl.
at 2. Without recounting every detail, it suffices to say
that Wall has had a long and tumultuous relationship with the
BBB. During the time Wall was headquartered in Washington,
D.C., the Washington BBB assigned Wall a "C-" grade
that was later downgraded to an "F." Id.
¶¶ 57, 65. When Wall moved to Virginia, the
Virginia BBB graded Wall a "C-" (later downgraded
to a "D-") and also placed an "alert" on
Wall's review page, warning consumers of a "pattern
of complaints" against Wall. Id. ¶¶
71, 80. Wall's efforts to understand the basis underlying
the grades and the alert has been marked by a lack of
transparency and a general contempt for the type of services
that Wall offers.
alleges that it has been significantly harmed by
Defendants' actions. Existing customers have breached
contracts and potential customers have declined to work with
Wall "on the basis of the Defendants
representations." Id. ¶ 144. Wall filed
suit against Defendants seeking damages and injunctive
move to dismiss Wall's Lanham Act claim for failure to
adequately allege statutory standing. The Supreme Court
recently considered the statute's language that "any
person who believes he or she will likely to be damaged by
[false advertising]" may bring a civil action. See
Lexmark Int'l, Inc. v. Static Control Components,
Inc., 134 S.Ct. 1377, 1388 (2014) (quoting 15 U.S.C.
§ 1125(a)(1)(B)). Prior to Lexmark, there was a
split among the courts of appeals as to "the appropriate
analytical framework for determining a party's standing
to maintain an action for false advertising."
Id. at 1385. The Court rejected all of the lower
court tests, replacing them with a two-part analysis:
"To invoke the Lanham Act's cause of action for
false advertising, a plaintiff must plead (and ultimately
prove)  an injury to a commercial interest in sales or
business reputation  proximately caused by the
defendant's misrepresentations." Id. at
1395. The Court made clear that standing is "an element
of the cause of action under the statute. . . . [that] must
be adequately alleged at the pleading stage in order for the
case to proceed." Id. at 1391 n.6.
contend Wall's asserted injury is too attenuated from
Defendants' alleged misrepresentations. In
Lexmark, the Court recognized that proximate
causation has not always been susceptible to a clear
definition, but the Court explained that in the context of
the Lanham Act a plaintiff "ordinarily must show
economic or reputational injury flowing directly
from the deception wrought by the defendant's
advertising." Id. at 1392 (emphasis added);
see also Id. at 1390 ("The question it presents
is whether the harm alleged has a sufficiently close
connection to the conduct the statute prohibits.").
Thus, the question for the Court is whether Wall has
adequately alleged that it can "trace its economic or
reputational damage directly to defendant's
misrepresentation." McCarthy on Trademarks and Unfair
Competition § 27:30 (4th ed.).
claim is not based on any false or misleading statements of
fact made by a BBB about Wall's business. Instead, the
claim centers on Defendants' self-characterizations of
the BBB rating system in promoting its accreditation
services. Wall alleges that Defendants falsely advertise and
promote the rating system as a national, uniform, and
unbiased standard when in reality it is implemented by
regional, independent licensees applying their own
"subjective, biased, and personal
criteria." Compl. ¶¶ 15-16, 149, 151. Wall
asserts it has been injured by these misrepresentations
"because consumers believe that [it] has been subjected
to a national, uniform, unbiased, and objective review
process when in reality its rating is the result of
subjective, biased, and arbitrary decisions made by the
Central Virginia BBB and Washington D.C. BBB."
Id. ¶ 153; see also Id. ¶ 147.
Because of that, consumers rely on BBB reviews and Wall's
from Point A to Point B requires the following causal chain:
Defendants' statements about its own product are
false and misleading -► Those statements generate
consumer reliance and trust in BBB reviews and accreditations
-► Defendants utilize that trust in selling
accreditation (the commercial link) -► Consumers rely
on Defendants' reviews of, and statements about,
Wall's business -► Consumers withhold or
withdraw business from Wall. This is are far removed from the
"classic Lanham Act false-advertising claim in which one
competitor directly injures another by making false
statements about his own goods or the competitor's goods
and thus inducing customers to switch."
Lexmark, 134 S.Ct. at 1391 (internal quotations and
alterations omitted); see also Belmora LLC v. Bayer
Consumer Care AG, 2016 WL 1135518 (4th Cir. March 23,
2016). While the Supreme Court rejected a requirement that
the plaintiff and defendant be in direct competition with one
another, the Court did note that "a plaintiff who does
not compete with the defendant will often have a harder time
establishing proximate causation." Id. at 1392.
That is certainly the case here where the relationship is
between a consumer review business and a tax settlement
business. Wall asserts that there is overlap between the two
businesses because Defendants' promotion of the rating
system targets individuals and businesses who are potential
Wall customers. The argument is that any individual or
business who uses the BBB must also pay taxes and therefore
may potentially need a tax-settlement business. That is too
flimsy a connection.
has suffered any direct injury, it is from the BBB's
grades and the "alert" on Wall's webpage. But
Wall cannot rely on those statements because they are almost
certainly non-actionable statements of opinion. It appears that
Wall, aware of that fact, has attempted to identify other
statements a few steps removed in the causal chain to try to
make its claim. While the asserted injury may have been
proximately caused by the unfavorable ratings, Wall has not
adequately alleged a direct injury caused by Defendants'
characterizations of its rating system as uniform, objective,
Wall's allegations, taken as true, are insufficient to
establish proximate causation and the claim must be
dismissed. Without a remaining basis for federal
jurisdiction, the Court dismisses the complaint in its
entirety. If Wall has a good faith belief that the defect may
be cured by amendment, it may file an amended complaint