SEYBERT, District Judge:
Plaintiff Sleepy's LLC ("Plaintiff" or "Sleepy's") commenced this action against defendants Select Comfort Wholesale Corporation, Select Comfort Retail Corporation, and Select Comfort Corporation (collectively "Defendant" or "Select Comfort") seeking, inter alia, damages resulting from Select Comfort's alleged breach of a 2005 sales agreement. A bench trial was held before Judge Thomas C. Platt between March and June of 2012. Following the first phase of that trial, Judge Platt granted Select Comfort's motion for judgment as a matter of law. (Sept. 26, 2012 Memorandum and Order, Docket Entry 825.) On February 27, 2015, the Second Circuit vacated Judge Platt's order as to a number of Plaintiff's causes of action and remanded those causes for resolution. Sleepy's LLC v. Select Comfort Wholesale Corp., 779 F.3d 191, 193 (2d Cir.2015). On July 21 and 22, 2015, this Court heard testimony to complete the trial record.
Based on the evidence presented, the Court makes the following findings of fact pursuant to Federal Rule of Civil Procedure 52(a).
Sleepy's is a New York based company that owns a chain of retail stores that sell mattresses and other sleep products. (Tr. 74:19-79:8.
Three Sleepy's executives were heavily involved in the circumstances that led to this lawsuit: Harry Acker ("Acker"), Michael Bookbinder ("Bookbinder") and Ira Fishman ("Fishman"). Acker is Sleepy's founder, owner, and CEO. (Tr. 87:4-6, 385:15-22.) Bookbinder was, during the relevant time, Sleepy's Executive Vice President of Sales. (Tr. 74:13-18.) Bookbinder oversaw both the sales force and the advertising and marketing department, and he was responsible for dealing with Sleepy's suppliers. (Tr. 77:18-78:7.) Fishman was Sleepy's Vice President of Merchandising, and he was responsible for
Select Comfort is the manufacturer and retail seller of the Sleep Number bed. (Tr. 2250:22-2252:9, 2780:10-24.) In lieu of metal coils, the Sleep Number bed contains a series of air chambers that can be inflated or deflated to adjust the firmness. (Tr. 2780:25-2782:15.) The air chambers sit atop a solid, rigid foundation, and they are covered by various layers of foam and padding, similar to a traditional mattress. (Tr. 2626:10-2627:5.)
In 2000, Select Comfort began partnering with other mattress retailers to offer a version of the Sleep Number products in those retail stores. (Tr. 2616:9-13.) While Select Comfort sold its "Core Line" of products in its own retail stores, it offered the "Personal Preference Line" of products via its retail partners. (Tr. 2551:17-2553:3, 2624:9-16.) The Personal Preference Line was designed to complement the Core Line by offering models that fall between the Core Line models. (Tr. 105:8-106:11.) The technology and basic components of the Personal Preference Line products were exactly the same as those of the Core Line, and they were both covered by the same warranty. (Tr. 2272:22-2273:24; 2281:4-11.) Nonetheless, there were a number of differences. For example, while the Personal Preference Line products utilized a one-piece, wooden foundation, the Core Line products utilized a multi-piece, polymer foundation. (Tr. 2273:17-22; 2275:14-2276:6.) This difference was apparently motivated by shipping concerns; Select Comfort shipped its products via United Parcel Service, which limited its package sizes so that a single-piece foundation could not be shipped. (Tr. 2276:7-18.) Select Comfort's retail partners, on the other hand, could utilize a single-piece foundation because they used their own delivery services. (Tr. 2275:1-2277:25.)
On January 17, 2005, Sleepy's approached Select Comfort about becoming one of Select Comfort's retail partners. (Tr. 91:11-92:12.) After some initial diligence on the part of both Sleepy's and Select Comfort, the parties agreed that Sleepy's would become a Select Comfort retail partner.
In the Spring of 2005, the parties negotiated a contract entitled "Select Comfort Corporation Dealer Agreement" (the "Retail Partner Agreement" or the "Agreement"). (PX 133.) The Retail Partner Agreement, in essence, provided that Sleepy's would become an authorized dealer of the Personal Preference Line of Select Comfort products. (PX 133; Tr. 367:20-22.) The Agreement has two relevant provisions. Paragraph 4(c) reads as follows:
(PX 133 ¶ 4(c).) Paragraph 3(j) reads as follows:
(PX 133 ¶¶ 3(j).)
The Retail Partner Agreement became effective on June 17, 2005, and was scheduled
Almost immediately after the effective date of the Retail Partner Agreement, Sleepy's sales figures for the Personal Preference Line were disappointing. (Tr. 144:25-145:10.) The program never grew to the level that Select Comfort and Sleepy's had anticipated. (Tr. 183:16-19.) By the second quarter of 2006, the poor results lead to a series of meetings among members of Sleepy's upper management to determine the cause of the disappointing figures. (Tr. 185:13-188:11.)
By September 2006, Sleepy's began considering whether the disappointing results of their relationship with Select Comfort were caused by Select Comfort's disparaging the Personal Preference Line available at Sleepy's.
On either September 4 or November 4, 2006,
On a November 6, 2006 conference call, Bookbinder, Acker, and Fishman discussed how the results of Colon's secret shop well-positioned them for a potential slander lawsuit against Select Comfort. (DX 95.) Acker opined, "[t]his may be an enormous, fabulous lawsuit for Sleepy's to collect damages." (DX 95 at 4.) He went on:
(DX 95 at 4.) Later, Acker demanded a search for more of the same potential evidence that Colon uncovered:
(DX 95 at 6.)
Shortly after this conversation, Bookbinder sent an email to Sleepy's Regional Vice Presidents, Regional Managers, and Area Managers ordering a "blitz" of secret
Over time, Sleepy's instructions regarding what information to solicit during the secret shops of Select Comfort stores grew more specific. For example, by January 2007, the secret shop instruction template included questions such as: "[d]oes select comfort give reasons why not to buy from their retail partner, example: do they say anything regarding the `freshness' of the product;" "[d]o they denigrate their partner in any way;" and "[d]oes Select Comfort claim their services or products are better than their partners." (PX 1.61.)
In addition to the secret shop conducted by Colon discussed above, the Amended Complaint offers fifteen other secret shops that each form the basis of a claim for slander per se. (Am. Compl., Docket Entry 326, ¶¶ 66-78, Ex. E.) With the exception of four instances,
On November 5, 2006 Deborah Zaffron ("Zaffron"), then a Sleepy's District Manager (Tr. 668:17), conducted a secret shop of a Select Comfort retail store in Bay Shore, N.Y. (Tr. 692:8-14).
On November 8, 2006, Michael Grinnan ("Grinnan"), then a Sleepy's Regional Manager, performed a secret shop of a Select Comfort store in Deptford Township, New Jersey. (Tr. 1294:23-25; PX 1.38.) When Grinnan asked about the differences between the Personal Preference Line and Select Comfort's own line, the Select Comfort representative explained that "[T]hey're not the same. [Select Comfort's mattresses] don't have the same materials as the ones Sleepy's has. This is better." (Tr. 1307:18-21.) The Select Comfort representative compared the Personal Preference Line to other "knockoffs," such as those offered on the QVC home-shopping channel. (Tr. 1307:22-1308:1.)
On January 10, 2007, Bob Gorman ("Gorman"), then a Sleepy's Regional Manager, performed a secret shop of a Select Comfort store in Bay Shore, New York. (Tr. 1234:22-1235:3; 1238:3-9). When Gorman mentioned that Sleepy's carries a line of mattresses similar to Select Comfort, the Select Comfort representative told him that "buying from Sleepy's is like buying a knockoff of a Coach bag." (Tr. 1243:19-21.)
On January 12, 2007, Joseph Kilty ("Kilty"), then a Sleepy's District Manager, performed a secret shop of a Select Comfort store in Manchester, Connecticut. (Tr. 1497:1-2; PX 1.61.) Sometime during the secret shop, the Select Comfort representative analogized buying a mattress from the Personal Preference Line to another shopping experience:
(Tr. 1509:8-19.)
Kilty's report specifically addressed the questions asked in one version of Sleepy's secret shop instruction template. (PX 1.61.) Those questions included: "[d]oes select comfort give reasons why not to buy from their retail partner, example: do they say anything regarding the `freshness' of the product;" "[d]o they denigrate their partner in any way;" and "[d]oes Select Comfort claim their services or products are better than their partners." (PX 1.61.)
On January 12, 2007, Jim Constantinides ("Constantinides"), then a Sleepy's Regional Sales Manager, performed a secret shop of a Select Comfort retail store in Queens, New York. (Tr. 559:8-9; 576:2-6.) Constantinides explained to the Select Comfort representative that he had seen a Sleep Number bed at Sleepy's, and he wanted to know the difference between that bed and one sold at Select Comfort. (Tr. 580:22-581:1.) The representative explained that "Sleepy's carried a wood box spring that could warp and also hold allergens and that their polymer box was better. Also, that the Select Comfort mattresses were made to order and that Sleepy's would hold the product in the warehouse for a long period of time." (Tr. 581:19-25.)
Constantinides recalls that Bookbinder instructed him to perform this secret shop.
On January 14, 2007, Tyler Asa Pavia ("Pavia"), then a Sleepy's District Manager, performed a secret shop of a Select Comfort retail store in Yorktown Heights, New York. (Tr. 1153:13; 1156:24-1157:3.) At some point during the shop, Pavia mentioned that he was considering going to Sleepy's. (Tr. 1163:12-23.) The Select Comfort representative then explained that Sleepy's "keep[s] ... the Select Comfort mattress in the warehouse for extended periods where they can become stale and have pest infestation .... [I]f a bed sits too long in a warehouse it can become... full of bugs and degraded." (Tr. 1175:15-1176:4.) Additionally, the Select Comfort representative expressed that the polymer foundation used in the Core Line was superior to the wooden foundation used in the Personal Preference Line. (Tr. 1164:2-9.)
Like Kilty, Pavia did not prepare an independent report of this secret shop. (PX 1.73.) Instead, his secret shop report answers a series of questions put to him by management, including: "specifically, what did the sales person in the Select Comfort store above say about the Select Comfort products that Sleepy's carries;" "does the Select Comfort salesperson denigrate Sleepy's in any way;" and "does the select comfort salesperson make any statements about Sleepy's that are untrue or defamatory". (PX 1.73.)
On January 15, 2007, Joseph Seth ("Seth"), then a Sleepy's District Manager, performed a secret shop of a Select Comfort retail store in Staten Island, New York. (Tr. 903:7-8; 904:25-905:16.) When Seth asked what the differences were between a certain model in the Personal Preference Line and a similarly-priced model from the Core Line, the Select Comfort representative explained that the polymer foundation was unique to mattresses sold at Select Comfort, and it was stronger than the foundation used by Sleepy's. (Tr. 913:9-10.)
Prior to conducting the secret shop, Seth received a list of questions that he was expected to answer. (DX 34.) These questions were similar to those received by Pavia and Kilty, and included: "does select comfort give reasons why not to buy from their retail partner, example: do they say anything regarding the `freshness' of the products that you buy from Select versus the `freshness' of the products sold by Sleepy's (how long the products may have been `on the shelf'") and "do they denigrate their partner in any way?".
On January 16, 2007, Paul Mahoney ("Mahoney"), then a Sleepy's District Manager, performed a secret shop of a Select Comfort retail store in Freehold, New Jersey. (Tr. 1895:11-13; 1912:19-1915:17.) The Select Comfort representative explained
On January 16, 2007, Gerald Petrillo ("Petrillo"), then a Sleepy's District Manager, performed a secret shop of a Select Comfort retail store in Langhorne, Pennsylvania. (Tr. 807:14-15; 810:17-21; 818:17-819:5.) When he asked the Select Comfort representative why he should by from Select Comfort rather than Sleepy's, the representative responded that Select Comfort's plastic foundation was stronger than the one available at Sleepy's, and that a Select Comfort mattress would be "fresher" than one purchased from Sleepy's. (Tr. 819:23-820:13; 821:1-22.)
On January 17, 2007, Grinnan performed a secret shop of a Select Comfort retail store in Morristown, New Jersey. (Tr. 1333:19-1334:19.) When Grinnan mentioned having seen a Select Comfort mattress available at Sleepy's, the Select Comfort representative explained that "[t]he beds that Sleepy's carried had an inferior wood foundation." (1337:25-1338:1.)
On February 6, 2007, Jacqueline Grumman ("Grumman"), then a Sleepy's District Sales Manager, performed a secret shop of a Select Comfort retail store in Pottstown, Pennsylvania. (Tr. 1458:17-19; 1462:6-1463:7.) When Grumman mentioned that she had seen a similar mattress at Sleepy's, the Select Comfort representative explained that "[Select Comfort] was taking the contract away [from Sleepy's] because Sleepy's has screwed us ... the salespeople will lie to you, and they'll tell you anything to make a sale." (Tr. 1466:24-1467:2.) "Sleepy's finds every loophole ... the salespeople at Sleepy's will lie to you about almost everything." (Tr. 1470:25-1471:2.)
Although it was not separately pleaded in the Amended Complaint, the Court received evidence from Zaffron regarding another secret shopping incident. This incident merits some independent discussion.
Zaffron testified that sometime in the spring of 2007 or 2008, a customer visited the Sleepy's store located in Garden City, N.Y., to cancel a purchase that he had made earlier that day. (Tr. 672:5-674:6; 681:22-682:1.) The customer explained that he had just visited the Select Comfort retail store nearby, and he learned that the mattress that he had purchased from Sleepy's was inferior to those available at the Select Comfort store. (Tr. 681:22-682:1.) In an effort to save the sale, Zaffron called the Select Comfort store, and-on speaker phone with the customer present-inquired as to the differences between line of mattresses available at Sleepy's and those available at Select Comfort. (Tr. 682:16-683:14.) During that conversation, the Select Comfort employee repeated the derogatory statements, and told Zaffron and the customer "many negative things about the Select Comfort [bed] that Sleepy's sells," including that the Select Comfort beds at Sleepy's were inferior to the beds at the Select Comfort store. (Tr. 682:16-683:14.) The customer ultimately cancelled his purchase from Sleepy's. (Tr. 683:15-16.)
On April 18, 2007, the parties negotiated and signed a Wind-Up Agreement. (PX 123.) The parties terminated their relationship in accordance with that agreement.
Following remand from the Second Circuit, four of Plaintiff's causes of action remain: breach of contract, breach of the implied covenant of good faith and fair dealing, slander per se, and unfair competition. The Court considers each in turn.
Plaintiff first alleges that by systematically disparaging the Personal Preference Line, Select Comfort breached the Retail Partner Agreement. Specifically, Plaintiff contends that Select Comfort breached paragraph 4(c), which, in part, reads:
(PX 133 ¶ 4(c).) At first glance, it seems that the conduct of which Select Comfort is accused falls squarely within the conduct prohibited by this broad clause. Such a conclusion, however, would divorce this phrase from its context, and it is hornbook law that phrases and clauses of a contract may not be interpreted out of context. See, e.g., Grachek v. Grachek, 750 N.W.2d 328, 333 (Minn.Ct.App.2008) ("[L]anguage in a contract `should never be interpreted in isolation, but rather in the context of the entire agreement.'") (quoting Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 916 (Minn.1990)); George v. Evenson, No. A06-2133, 2007 WL 4303518, at *5 (Minn. Ct.App. Dec. 11, 2007) ("Phrases and sentences cannot be dissected and read separately and out of context with the entire agreement."), aff'd, 754 N.W.2d 335 (2008).
(PX 133 ¶ 4(c).)
Plaintiff would have the Court read Paragraph 4(c) as imposing on Select Comfort two completely separate obligations: (1) to provide standard warranty service and (2) to not impair, infringe upon, etc., Sleepy's brand image. This reading is illogical, however, because it requires the assumption that these two clauses are in no way related. A more reasonable reading of Paragraph 4(c) suggests that the broad language of the second clause is somehow limited by the first; that is, that the obligation of the second clause relates only to the duties that Select Comfort undertook in the first. See First State Bank v. City & Cnty. Bank, 872 F.2d 707, 713 (6th Cir.1989) ("[I]t is reasonable to assume that the second clause of the sentence in question is related solely to the duties enunciated in the first clause of the sentence, and is not related to some unmentioned or undisclosed duty or obligation."); Slay Warehousing Co. v. Reliance Ins. Co., 471 F.2d 1364, 1368 (8th Cir.1973) ("The clause relating to expense here is more reasonably related to the investigation and disposition of claims and suits mentioned in the preceding sentence." (internal quotation marks omitted)). By this reading, the mutual obligation on the parties to not impair the respective brand image of their counterparts relates solely to the warranty service
Other clauses in the Retail Partner Agreement support a narrower reading of paragraph 4(c) than Plaintiff urges. Paragraph 3(j) reads as follows:
(PX 133 ¶ 3(j).) This narrower, one-way disparagement clause in paragraph 3(j) would be superfluous if one were to read paragraph 4(c) as a broad, mutual non-disparagement clause. Because a "contract must be interpreted in a way that gives all of its provisions meaning," Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn.1995), the existence of Paragraph 3(j) suggests that Paragraph 4(c) is not as broad as Plaintiff suggests, but is instead limited to Select Comfort's obligation to provide warranty service.
At the very least, the language of paragraph 4(c), in the context of the entire agreement, is ambiguous. See ICC Leasing Corp. v. Midwestern Mach. Co., 257 N.W.2d 551, 554 (Minn.1977) ("A writing is ambiguous if, judged by its language alone and without resort to parol evidence, it is reasonably susceptible of more than one meaning." (citation omitted)). When a term is ambiguous, parol evidence may be allowed to determine the intent of the parties. Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 832 (Minn. 2012).
An earlier draft of the Retail Partnership Agreement did not have the disputed clause in paragraph 4(c). Sleepy's, therefore, expressed its concern that Select Comfort was servicing any warranty issues on the Personal Preference Line, but was under no obligation to service these warranties to the customers' satisfaction. Specifically, in responding to the first clause of paragraph 4(c), Sleepy's noted:
(DX 10 ¶ 4(c).) Bookbinder acknowledges that the "Brand Image" clause in Paragraph 4(c) was added in response to this concern. (Tr. 336:7-337:17.)
In short, Plaintiff contends that the disparaging conduct alleged breached a clause in the Retail Partner Agreement that (1) appears next to and logically limited by a clause regarding Select Comfort's obligation to provide warranty service, (2) renders superfluous a (presumably) bargained-for one-way non-disparagement clause in favor of Select Comfort, and (3) was added in response to concern that Select Comfort would not properly service warranties associated with the Personal Preference Line. The Court cannot countenance such a tortured reading of the Retail Partner Agreement; "in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves." James Baird Co. v. Gimbel Bros., 64 F.2d 344, 346 (2d Cir.1933) (Hand, J.). Accordingly, Plaintiff's breach of contract claim fails.
Alternatively, Plaintiff claims that Defendant's conduct breached the implied covenant of good faith and fair dealing that
The Retail Partner Agreement is subject to the Uniform Commercial Code,
Plaintiff's cause of action for breach of the implied covenant of good faith and fair dealing would fare no better if the Agreement was subject to Minnesota common law. "Under Minnesota law, every contract includes an implied covenant of good faith and fair dealing." In re Hennepin Cnty. 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn.1995). But this covenant is narrowly tailored; "[t]he law does not allow the implied covenant of good faith and fair dealing to be an everflowing cornucopia of wished-for legal duties." Comprehensive Care Corp. v. RehabCare Corp., 98 F.3d 1063, 1066 (8th Cir.1996) (citation omitted). In this vein, the implied covenant of good faith and fair dealing may not be construed to impose obligations "beyond the scope of the underlying contract." Hennepin, 540 N.W.2d at 503. Instead, the implied covenant of good faith and fair dealing operates as a gap filler to address circumstances not contemplated by the parties at the time of contracting. RBC Dain Rauscher, Inc. v. Fed. Ins. Co., No. 03-CV-2609, 2003 WL 25836278, at *7-9 (D.Minn. Dec. 2, 2003).
In light of the fact that the implied covenant of good faith and fair dealing operates to prohibit certain conduct not contemplated by the parties, it should not apply to a circumstance that the parties did contemplate at the time of contracting. See, e.g., United States v. Outer Harbor Dock & Wharf Co., 124 F.Supp. 337, 344 (S.D.Cal.1954) ("[T]here can be no implied covenant where the subject is completely covered by the contract."); United States v. Basin Elec. Power Co-op., 248 F.3d 781, 796 (8th Cir.2001) ("Since good faith is merely a way of effectuating the parties intent in unforseen circumstances, the implied covenant has `nothing to do with the enforcement of terms actually negotiated' and cannot `block [the] use of terms that actually appear in the contract.'") (quoting Cont'l Bank, N.A. v. Everett, 964 F.2d 701, 705 (7th Cir.1992) (alteration in original)). Here, the parties contemplated the possibility of product disparagement, and agreed on a one-way non-disparagement clause in favor of Select Comfort. Using the implied covenant of good faith and fair dealing to rewrite this one-way non-disparagement clause to a
Additionally, Minnesota courts require a showing of bad faith in order to find a breach of the implied covenant of good faith and fair dealing. See BP Products N. Am., Inc. v. Twin Cities Stores, Inc., 534 F.Supp.2d 959, 966 (D.Minn.2007) (collecting cases); Minnwest Bank, 689 N.W.2d at 303 ("To establish a violation of this covenant, a party must establish bad faith by demonstrating that the adverse party has an ulterior motive for its refusal to perform a contractual duty." (citation omitted)). Here, the record is devoid of evidence suggesting that Select Comfort, as a whole, acted in bad faith. Indeed, by all accounts, Select Comfort made significant effort to discipline those salespeople that were accused of disparaging the Personal Preference Line. (PX 145.) Thus, Plaintiff's claim for breach of the implied covenant of good faith and fair dealing fails for the independent reason that Plaintiff has failed to demonstrate bad faith on the part of Select Comfort.
Plaintiff asserts twelve causes of action for slander per se, each arising from a secret shopping instance discussed in the Findings of Fact. (Am. Compl. ¶¶ 66-78, Ex. E.) But beyond these individual instances, Sleepy's contends that the aggregate of these secret shops says something more; Sleepy's submits that it has demonstrated a pattern and practice of slander per se, and the existence of that pattern and practice begets a broader, more general cause of action. As discussed below, Sleepy's position is flawed for a host of reasons.
The elements of a cause of action for slander under New York law
Under New York defamation law, "publication is a term of art.... A defamatory writing is not published if it is read by no one but the one defamed. Published it is, however, as soon as read by any one else." Ostrowe v. Lee, 256 N.Y. 36, 38, 175 N.E. 505 (1931) (Cardozo, C.J.). On this basis alone, all of Plaintiff's claims for slander per se fail. In all of the instances pleaded in the Amended Complaint, the allegedly defamatory statement was made only to Sleepy's representatives, and the Court saw no evidence suggesting that any other individual overheard any of the twelve instances of disparagement. See Fashion Boutique of Short Hills v. Fendi USA, Inc., No. 91-CV-4544, 1998 WL 259942, at *5 (S.D.N.Y. May 21, 1998) (statements made to plaintiff's agents cannot support slander and disparagement claims).
Indeed, the Court heard direct evidence
Where the publication occurs with the consent of the defamed party, an action for defamation does not lie. See, e.g., Sleepy's LLC, 779 F.3d at 199. The consent given need not be unequivocal or affirmative; "in some circumstances, a person's intentional eliciting of a statement she expects will be defamatory can constitute her consent to the making of the statement." Id.; see also Schaefer v. Brookdale Univ. Hosp. & Med. Ctr., 18 Misc.3d 1142(A), 859 N.Y.S.2d 899 (Sup.Ct. 2008) (finding that plaintiff had consented to the defamatory statement by demanding the publication of information that he "had reason to anticipate ... would not be positive"), aff'd, 888 N.Y.S.2d 122, 66 A.D.3d 985 (2d Dep't 2009); Hirschfeld v. Inst. Inv'r, Inc., 260 A.D.2d 171, 688 N.Y.S.2d 31 (1st Dep't 1999) (plaintiff's sending a letter requesting a written statement of the reason for her termination was consenting to the publication); LeBreton v. Weiss, 256 A.D.2d 47, 680 N.Y.S.2d 532 (1st Dep't 1998) (plaintiff had two individuals contact defendant under the pretense of being landlords and had them make certain inquiries to which defendant responded by making the defamatory statements upon which the action was premised).
Although New York's highest court has offered little guidance on the rationale for the rule that consent to publication bars a defamation claim, the rule seems at least in part motivated by a desire to preclude a plaintiff from intentionally eliciting a defamatory
Sleepy's LLC, 779 F.3d at 199.
Here, Sleepy's had every reason to suspect that the comments that Zaffron solicited from the Select Comfort salesperson would be disparaging. The customer with whom Zaffron spoke immediately prior to the call told her as much. Moreover, Sleepy's had undertaken a mission to gather ammunition for a future lawsuit against Select Comfort. Acker even stated that he "love[d]" hearing the extent of Select Comfort's alleged disparagement. In light of this aim, Sleepy's inquiry cannot be considered an "honest inquiry or investigation." Restatement (Second) of Torts § 584 (1977) (stating that the honest inquiry exception to the consent rule does not apply where the publication is invited for the purposes of decoying the defendant into a lawsuit). In short, because the evidence shows that Sleepy's was both virtually certain that its inquiry would elicit allegedly slanderous statements and substantially motivated by the desire to bolster a contemplated lawsuit, Sleepy's consented to the publication of these allegedly defamatory statements. See Sleepy's LLC, 779 F.3d at 199.
Sleepy's submits that aside from the individually actionable slanders, it has established that Select Comfort has engaged in a pattern and practice of slander per se, and, in light of that pattern and practice, Sleepy's is entitled to general damages. (See Pl.'s Proposed FoF ¶ 53 ("Here, because the evidence shows a pervasive pattern and practice of disparagement and defamation going well beyond the specific defamatory statements proven, damages are not limited to the damage to Sleepy's reputation solely in the eyes of those to whom specific defamatory statements were made.").) Sleepy's argument fails both on the facts and as a matter of law.
Sleepy's correctly asserts that general damages are available for instances of slander per se, then, from that proposition, asks the Court to conclude that the alleged denigration was so pervasive and widespread that Sleepy's need not show any specific instance of slander. But that is a non sequitur. The availability of general damages does not absolve Sleepy's from having to prove a specific slander claim. Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 62 n. 3 (2d Cir.2002). The Court disagrees with Sleepy's suggestion that New York law supports a claim of "general slander per se" where a pattern of denigration is shown. As an initial matter, the Court notes that it has not been presented with, nor has it independently uncovered any case from any jurisdiction that supports
Plaintiff's suggestion that New York slander law would support a finding of liability based on a pattern and practice of disparagement may be based on Federal Rule of Evidence 406. Rule 406 states:
FED.R.EVID. 406. But Rule 406 does not purport to alter the substantive elements of a cause of action. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 407, 130 S.Ct. 1431, 1442, 176 L.Ed.2d 311 (2010). Thus, proof of a specific slanderous statement is still required. In any event, Rule 406 contemplates the routine practice evidence as tending to show a course of action "on a particular occasion." FED.R.EVID. 406. Here, Plaintiff offers no particular occasion, instead insisting that the Court find liability based on the practice alone. The Court declines to do so.
But even if New York law would espouse the new "general slander per se" suggested by Plaintiff, the Court concludes that Plaintiff has not produced sufficient evidence to show a pattern or practice of slander per se. Instead, the evidence shown demonstrated that in the majority of the secret shops performed, Select Comfort's comments were limited to how the Personal Preference Line was inferior to the Core Line, and it is well settled that disparaging statements about an organization's product do not constitute slander per se. See, e.g., Drug Research Corp. v. Curtis Pub. Co., 7 N.Y.2d 435, 440, 166 N.E.2d 319, 322, 199 N.Y.S.2d 33 (1960) ("The rule is that, if a product has been attacked, the manufacturer may recover in a cause of action for libel, providing he proves malice and special damages as well as the falsity of the criticism."); Angio-Med. Corp. v. Eli Lilly & Co., 720 F.Supp. 269, 274 (S.D.N.Y.1989) ("Language which merely disparages a product is not actionable unless special damages are pleaded and it appears that such damage is a natural and immediate consequence of the disparaging statements."); Alternative Electrodes, LLC v. Empi, Inc., 597 F.Supp.2d 322, 338 (E.D.N.Y.2009) ("In any event, plaintiff only has alleged disparaging statements about its product, and the amended complaint does not contain allegations regarding business methods or the integrity of the Company itself. Therefore, special damages must be alleged to sufficiently plead a claim for business disparagement."). Only in one or two instances did Select Comfort's comments arguably rise to an actionable slander per se, (see Tr. 1265:8-9 ("Sleepy's doesn't have the greatest reputation"), 1467:1-2 (Sleepy's "salespeople will lie to you, and they'll tell you anything to make a sale")), and that is insufficient to establish a routine pattern or practice.
Accordingly, for all these reasons, Plaintiff's slander per se claims fail.
Plaintiff also brings a claim for unfair competition under New York law. For the
Although a claim of unfair competition under New York law encompasses a broad range of unfair practices, Am. Footwear Corp. v. Gen. Footwear Co., 609 F.2d 655, 662 (2d Cir.1979), the doctrine's reach is not without limits, Carson Optical, Inc. v. Prym Consumer USA, Inc., 11 F.Supp.3d 317, 328 (E.D.N.Y. 2014). Though it is "broad" and "flexible," id., the New York Court of appeals has refused to broaden the tort of unfair competition to include every instance of "commercial unfairness." Ruder & Finn Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 671, 422 N.E.2d 518, 522, 439 N.Y.S.2d 858 (1981). Instead, it is limited to cases where one has misappropriated the skill, expenditures, and labor of another. See id.; Cue Pub. Co. v. Kirshenberg, 22 Misc.2d 188, 189, 198 N.Y.S.2d 993, 996 (1960) (noting that while there are many definitions of unfair competition, "[t]his is nothing but a convenient name for the doctrine that no one should be allowed to sell his goods as those of another" (internal quotation marks and citations omitted)). As a consequence, a claim for unfair competition will not lie absent the defendant's bad faith misappropriation of a commercial advantage belonging exclusively to the plaintiff. Ruder, 52 N.Y.2d at 671, 439 N.Y.S.2d 858, 422 N.E.2d at 522; LoPresti v. Mass. Mut. Life Ins. Co., 30 A.D.3d 474, 476, 820 N.Y.S.2d 275, 277 (2006); Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d Cir.1980) (collecting cases).
Here, the Court finds that Select Comfort did not misappropriate the skill, expenditures, or labor of Sleepy's. By all accounts, Select Comfort's sales representatives sought to distance their own products from those of the Personal Preference Line; they endeavored to maximize their own competitive advantage, not usurp Sleepy's. Plaintiff's claim that Select Comfort improperly denigrated the Personal Preference Line to the advantage of Select Comfort may constitute a product disparagement claim, but it is not a claim for unfair competition. See Gucci Am., Inc. v. Duty Free Apparel, Ltd., 277 F.Supp.2d 269, 275 (S.D.N.Y.2003) (similarly distinguishing an unfair competition claim from a product disparagement claim).
Accordingly, Plaintiff's unfair competition claim fails.
For the foregoing reasons, the Court finds in favor of Defendant on all of the remaining claims. As discussed in footnote three, Defendant is instructed to complete the electronic record by filing the remaining trial transcripts on the docket. Thereupon, the Clerk of the Court is directed to enter judgment consistent with these Findings of Fact and Conclusions of Law, and to mark this matter CLOSED.
SO ORDERED.
