Court: District Court, D. Rhode Island; September 30, 2018; Federal District Court
William E. Smith, Chief Judge, details a legal dispute involving Brian MacFarland, who authored blog posts criticizing RainSoft, a water-treatment company. RainSoft has sued MacFarland for defamation and violations of the Lanham Act. MacFarland claims his posts are protected under the First Amendment and argues they are substantially true. He operates a consumer-focused blog, lazymanandmoney.com, and began criticizing RainSoft after an in-home demonstration led by Gus Oster, an employee of Basement Technologies, a local RainSoft dealer. The demonstration adhered to a RainSoft-scripted sales pitch that emphasized the company’s brand without mentioning Basement Technologies.
The dealership agreement between RainSoft and Basement Technologies mandated that Basement Technologies promote only RainSoft products and adhere to specific branding guidelines, ensuring that all sales and customer relations emphasized RainSoft's brand reputation. The agreement also restricted Basement Technologies from selling or servicing other products without RainSoft's consent, which was never granted. MacFarland's initial blog post on RainSoft, titled "Is Home Depot's Water Test from RainSoft a Scam?", included both a favorable personal account of the salesman and criticisms of the sales tactics, describing the presentation as a "magic show" and accusing RainSoft of deceptive practices.
MacFarland expressed skepticism about Oster's intentions and the RainSoft water filtration system. He speculated that the bottles Oster provided could have been contaminated, highlighting his skeptical nature. MacFarland doubted Oster's claims that the filtration system would save him $20,000 in appliance-replacement costs over 20 years, calling the statistics dubious. He criticized Oster's high-pressure sales tactics, such as offering five years of free soap for immediate purchase, and found the lifetime warranty misleading due to the additional maintenance costs. While he concluded that RainSoft products were overpriced rather than a scam, he noted that his wife was impressed and they provided Oster with a $100 check to secure the free-soap offer.
In a follow-up post, MacFarland detailed negotiations that resulted in a $1,000 discount from Oster and noted a plumbing representative's surprise at being referred to RainSoft instead of exploring various filtration options. He expressed growing suspicion towards RainSoft, indicating he was leaning towards viewing it as a scam.
In a subsequent post, MacFarland reported that Oster cashed the $100 check, contrary to their agreement, and cautioned readers about dealing with potentially fraudulent companies. He later updated that RainSoft's parent company, Aquion, sent him a $100 check to rectify the situation. Over a year later, MacFarland published another post where he dismissed a positive comment about RainSoft from someone he suspected to be a dealer, accusing them of engaging in a "comment scam."
MacFarland expressed ongoing concerns regarding RainSoft's products and their ambiguous guarantee, which suggested that if a customer finds a better-performing product, they can keep the RainSoft system for free, yet lacked clear terms. He criticized the pricing of RainSoft's system, linking to cheaper alternatives and asserting his understanding of basic problem-solving and consumer scams. In his posts, MacFarland engaged with readers, often agreeing with supporters and challenging detractors, describing RainSoft's sales tactics as fear-based and deceitful. After RainSoft filed a lawsuit in April 2015, he clarified that his use of "scam" referred to a confidence trick rather than illegal activity and acknowledged his limited understanding of legal concepts. MacFarland's intent in clarifying his terminology was to avoid previous legal implications associated with the term "scam" in Illinois law. He became aware that RainSoft and Basement Technologies were separate entities before publishing a specific post criticizing RainSoft, noting that he wished to maintain anonymity regarding his location. MacFarland admitted that he recognized RainSoft's argument about its relationship with Basement Technologies.
MacFarland is facing allegations of defamation and a violation of the Lanham Act from RainSoft, which has filed a motion for summary judgment regarding MacFarland's posts. In response, MacFarland has also moved for summary judgment. The court will assess whether there are genuine material facts in dispute, and if not, whether the law supports granting judgment to the movant.
RainSoft's defamation claims categorize MacFarland's statements into two groups: (1) epithets, including terms like 'scam' and 'shady'; and (2) more measured critiques, such as accusations of 'false promises' and 'deceptive practices.' A key assertion is that MacFarland implied an inappropriate association between an individual, Oster, and RainSoft, suggesting intentional misdirection to attract website traffic.
Under Rhode Island law, a defamation claim requires proof of a false and defamatory statement. The assessment of truth and falsity is crucial, as a statement is deemed defamatory if it tends to degrade the plaintiff or incite public contempt. The First Amendment significantly influences state defamation law, protecting certain expressions as free speech, including hyperbolic or imaginative language. Statements characterized as subjective opinions rather than factual assertions are also protected, meaning MacFarland's derogatory remarks may not meet the threshold for defamation under these legal principles.
The First Circuit has acknowledged the prevalence of exaggeration and non-literal commentary in social discourse, noting that such speech is generally not actionable, regardless of its tastelessness. In Levinsky's case, the term "trashy," used by a store manager, was deemed not actionable due to its vague and multifaceted nature, which prevented it from being understood as having a clear, objectively verifiable meaning. The court emphasized that a word must have a specific, ascertainable meaning to be considered defamatory. Similar precedents were cited, including protected hyperbole in theater reviews and the use of strong language in union literature.
The court found that MacFarland’s statements, such as "scam," also fall within the realm of protected imaginative expression, as they are understood as metaphorical by reasonable readers. The term "scam" lacks a precise definition, making assertions of it incapable of being proven true or false. Other statements by MacFarland are protected under First Amendment principles, including the notion that false ideas do not incur liability, as the correction of such ideas relies on the competition of opinions rather than judicial intervention. Courts have clarified that only opinions implying false assertions of fact are susceptible to liability, and opinions based on true factual statements are protected from defamation claims.
The First Amendment protects statements of opinion related to public concern from tort liability, requiring plaintiffs to prove that such statements are not substantially true or materially false. Public concern encompasses topics that engage the interest of the public, as opposed to private disputes. Statements are considered substantially true if they are factually correct or if minor inaccuracies do not alter the overall meaning. MacFarland's posts, which address public issues including water safety and sales practices of RainSoft, are protected under this framework. He provides factual support for claims of "false promises" and "high-pressure sales tactics," detailing the sales presentation by RainSoft's Oster, which the company has not contested. Consequently, no genuine dispute exists regarding the material truth of MacFarland's statements. The legal standard protects opinions that are derived from factual descriptions, allowing for personal interpretations without fear of defamation claims, thereby encouraging public discourse. RainSoft's failure to differentiate itself from Basement Technologies, for which Oster worked, further complicates its challenge to MacFarland's posts.
RainSoft is not responsible for the actions of Basement Technologies, including any misleading representations made by Oster. However, the concept of "substantial truth" is critical in evaluating statements. A statement is considered substantially true if it does not significantly alter the reader's perception compared to the actual truth. For example, in Pan Am Systems, the portrayal of a CEO's departure was deemed substantially true despite differences in wording. Similarly, in Bustos v. A. E Television Networks, a Hispanic inmate could not sue for being inaccurately labeled a member of the Aryan Brotherhood since his interactions with its members were true, and the distinction was not materially relevant to the reasonable viewer. Other cases reinforce the idea that statements can be substantially true despite minor inaccuracies. In this context, MacFarland’s references to RainSoft are supported by the relationship between RainSoft and Basement Technologies, which operated under a contract to sell RainSoft products and was trained to represent itself as a local RainSoft dealer. The legal distinction between the two entities is less significant to the public perception than RainSoft argues.
A distinction is made between a company and its outsourced representatives, with MacFarland being protected by substantial truth in a case involving allegations of unfair competition. RainSoft's Lanham Act claim, alleging false advertising based on terms like "scam" and "magic show," asserts that MacFarland's actions constituted unfair competition under 15 U.S.C. § 1125(a)(1)(B). To prevail, a plaintiff must show that the defendant made a false or misleading representation in a commercial advertisement. This requires proving that the representation qualifies as commercial speech intended to influence consumer purchases and is disseminated as advertising.
RainSoft's claim fails due to undisputed evidence that MacFarland's posts were intended to sell products. Although it is acknowledged that he sold advertising space and benefited financially from product hyperlinks, the primary offering was his advice, which was free of charge. The court emphasized that there was no evidence of intent to sell in a manner that constituted commercial speech. A related case, Tobinick v. Novella, illustrated this point, where statements made in a blog post were deemed non-commercial because they did not propose a transaction. Ultimately, the court affirmed summary judgment in favor of MacFarland on the basis that his posts did not meet the criteria for commercial speech necessary for a Lanham Act violation.
The articles referenced exhibit traits of noncommercial speech, focusing on informing, expressing opinions, and articulating grievances, as supported by the Supreme Court ruling in New York Times Co. v. Sullivan. The website lazymanandmoney.com aims to educate users on money-saving strategies, a purpose consistent with MacFarland's posts about RainSoft. Despite MacFarland's lack of formal credentials and his self-identification as someone knowledgeable about scams, this does not categorize his writings as commercial speech due to the underlying educational intent. The fact that MacFarland earns revenue through advertisements and promotional kickbacks does not suffice to reclassify his work; were profit motives determinative, it would subject all journalistic endeavors to regulation, infringing upon First Amendment protections, as highlighted in Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations. Likewise, revenue from Amazon's Associates Program, generated through hyperlinks, is deemed incidental to his goal of providing consumer information. The First Amendment guarantees a necessary space for open debate, including discussions on practical matters like economical water filtration. Consequently, summary judgment is granted in favor of MacFarland on all counts, with the court noting the interchangeable use of Aquion, Inc. and RainSoft, and acknowledging updates MacFarland made to his article, including links to supporting articles and requests for financial assistance for legal fees.
MacFarland's emails, which contained admissions relevant to the case, were not disclosed to RainSoft until the eve of their summary-judgment deadline, raising concerns of discovery gamesmanship contrary to Federal Rules of Civil Procedure (FRCP) 26(b)(1) and 26(e). RainSoft's motion for sanctions was partially granted, requiring MacFarland to cover the reasonable costs incurred in preparing the sanctions motion and revising their summary-judgment brief, as supported by FRCP 37(c) and case law (Primus v. United States). The excerpt also references MacFarland's reports of receiving death threats related to his commentary on multilevel marketing companies, and compares the case to past rulings regarding defamation claims, highlighting that a competitor’s statements can be proven true or false. The court noted that the requirement for the speaker to be a competitor, previously part of defamation claims, was effectively removed by the Supreme Court in Lexmark Int'l, Inc. v. Static Control Components, Inc. RainSoft did not assert that MacFarland's paying customers were the target of its Lanham Act claim, and there was no evidence that MacFarland's alleged misstatements could deceive his advertisers, aligning with the necessary criteria for a false-advertising claim as outlined in Cashmere, Camel Hair.
