“The Best Fans in Baseball” (or BFIB). That moniker long has been attributed to fans of the St. Louis Cardinals baseball team, or at least has been attributed by fans of that team to themselves. The original author of BFIB with respect to Cardinals’ fans remains something of a mystery– with stories pointing to players such as Mark McGwire and Jim Edmonds, baseball commentators like Peter Gammons, former manager Tony LaRussa, or fellow manager (and Friend of Tony) Jim Leyland. The labeling of Cardinals’ fan as the BFIB has caused quite a backlash among fans from other teams across Major League Baseball (MLB), a backlash which went into overdrive during St. Louis’ quest for a twelfth World Series Championship last October (thirteenth, actually, if you take into account the Don Denkinger debacle in 1985).
The reason for the backlash? As Jonathan Mahler wrote in a column published in the Chicago Tribune last fall, calling Cardinals’ fans the BFIB “implicitly denigrates every other team in baseball and their respective fans”. (Full disclosure: the Chicago Tribune is owned by the Tribune Company, which formerly owned the Chicago Cubs, a team which has not won the World Series since 1908). In other words, saying that Cardinals’ fans are the “best” fans in baseball suggests that fans of the other 28 MLB teams (29, if you count the Kansas City Royals) are, well, not the “best” fans, or at least not as good as Cardinals’ fans.
What if, however, Cardinals’ fans did not call themselves the “best” fans in baseball, but instead “really good” or “really knowledgable fans”? As in, Cardinals’ fans would never do The Wave during a lull in the sixth inning because they are really good, really knowledgeable fans. (Seriously, if anyone can stop The Wave, that would be great). If Cardinals’ fans said that they were “really good”, “really knowledgeable” fans, could one infer that other MLB teams’ fans were not good or knowledgable fans? In some cases, would that suggestion be implied?
That sort of question is one that businesses face when they market their products and services. What may originate as a company’s clever advertising campaign can result in a suit against the company by one of its competitors. For example, if a company advertises that its products are made of “natural” ingredients, does that suggest that a competitor’s products are made of “unnatural” ingredients? Or, if a company advertises that its products are made of “natural” ingredients, when in fact they are not, does such advertising denigrate a competitor’s products that are in fact made of “natural” ingredients?
Suits alleging damages in these situations can be based on a variety of legal theories, ranging from patent and trademark infringement to intentional or negligent misrepresentation. When such a lawsuit is filed, the question becomes whether that suit is covered by the backbone of most companies’ insurance programs, the commercial general liability (CGL) policy.
CGL policies typically provide insurance coverage for suits seeking damages because of “personal and advertising injury”. The definition of “personal and advertising injury” commonly includes:
injury…arising out of…[o]ral or written publication of material that slanders or libels a person or organization or disparages a person’s organization’s goods, products or services.
Policyholders have argued that suits based on statements that supposedly imply or infer the inferiority of their competitors’ products qualify under the “disparagement” component of “personal and advertising injury” coverage.
The California Court of Appeal for the Second District recently addressed a similar question in Hartford Casualty Insurance Company v. Swift Distribution, Inc., 210 Cal.App.4th 915 (2014). In the underlying action, Gary-Michael Dahl (“Dahl”) sued Swift Distribution, Inc. dba Ultimate Support Systems, Inc. (“Ultimate”) for patent infringement, unfair competition, dilution of a famous mark and misleading advertising on account of Ultimate’s sale of its product “Ulti-Cart”. Dahl had sold and received patents and trademarks for a “convertible transport cart” called “Multi-Cart”.
The Multi-Cart was not a cart that could be used to transport relief pitchers to the mound during a pitching change, but instead was a cart that could be manipulated into eight different configurations to move music, sound and video equipment. Dahl alleged that Ultimate’s product, the Ulti-Cart, was a “knock-off” of Dahl’s Multi-Cart, and that Ultimate simply dropped the letter “M” from the Multi-Cart name in order to create confusion in the market. Dahl alleged that any fault with Ultimate’s inferior Ulti-Cart would adversely affect Dahl’s future sales and the Multi-Cart’s reputation for high quality.
The insured Ultimate argued that Dahl’s suit against it qualified for insurance coverage under the disparagement component of the “personal and advertising injury” coverage afforded by Ultimate’s CGL policy. Ultimate contended that Dahl’s complaint alleged that Ultimate’s use of “Ulti-Cart”, a name similar to “Multi-Cart”, referred to Dahl and Dahl’s product by “reasonable implication”. Due to the confusion of the similar names and the potential for the inferiority of the Ulti-Cart to impact the reputation of the Multi-Cart negatively, Ultimate argued that Dahl’s suit was one for disparagement “by implication”. In making this argument, Ultimate relied on an earlier opinion in Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc., 207 Cal.App.4th 969 (2012), where the California Court of Appeal for the Fourth District held that a retailer’s sale of clothing at deeply discounted prices disparaged the clothing manufacturer’s reputation by implication.
The appellate court in Swift, however, punched out that argument (i.e. disagreed). It held that “disparagement” under a CGL policy requires an “injurious falsehood directed at the organization or products, goods, or services of another”. The California appellate court noted that Ultimate’s advertisements referred only to its product, not to Dahl’s Multi-Cart. Even if Ultimate’s use of “Ulti-Cart” could reasonably imply a reference to Dahl’s “Multi-Cart”, the court held that Ultimate’s disparagement argument failed because Dahl never alleged that Ultimate said or implied any false statements about Dahl’s product. The court explained that Ultimate’s advertisements did not make false comparisons between the two companies’ products, did not falsely claim that it had the right to use any of Dahl’s technologies, and did not imply that Dahl’s products were inferior. The appellate court in Swift commented that that its sister court’s earlier opinion in Charlotte Russe, where the insured similarly also made no such false statements, simply was wrongly decided.
Fortunately for Ultimate, the California Supreme Court agreed to review the Swift decision (not exactly Instant Replay review, but MLB’s is not either) and held oral argument in April 2014. Unfortunately for the policyholder, comments from at least one of the Justices at oral argument seemed to favor the insurer. Justice Goodwin Liu expressed concern that the insured’s argument would “turn…every piece of advertising into disparagement”. He added: “There is always an implication that ours is better, theirs is worse.”
The California high court’s ultimate decision may not be binding on St. Louis residents (or other Redbirds’ fans within the 50,000-watt signal of the team’s flagship radio broadcast station KMOX), but it will be influential. One hopes the decision will arrive in time for the Cardinals’ inevitable playoff run this fall so that the Best Fans in Baseball can plan accordingly.
UPDATE (6/13/2014): The BFIB may be able to rest a little easier. Yesterday, the California Supreme Court affirmed the appellate court’s opinion in Hartford Casualty Insurance Company v. Swift Distribution, Inc. You can read the opinion here. The court held that “disparagement” requires a “knowingly false or misleading publication that derogates another’s property or business and results in special damages.” For disparagement by implication to qualify, the claim must present more than a “statement that may conceivably or plausibly be construed as derogatory to a specific product or business.” Instead, there must be a “reasonable implication” of disparagement, which means disparagement by “clear or necessary inference.” The California high court disagreed that Ultimate made such a showing in this case. Perhaps now the BFIB can concentrate on other matters, such as Adam Wainwright’s right elbow.