Unfair Competition Claim Can be Based on False Statements About a Competitor’s Product

Count IV alleges unfair competition. Through the anticompetitive misconduct described in the ACTC, including Waste Connections’ false statements and unlawful inducements as to the existence, validity and enforceability of customer contracts, Waste Connections has wrongfully appropriated Twin Bridges’ business and commercial advantage to itself.

Movants contend that dismissal of this counterclaim is required because Twin Bridges has not alleged that the public is likely to confuse their services with those of Twin Bridges. Movants acknowledge that Twin Bridges also alleges misappropriation of its trade name through Movants’ creation of a website using the twinbridgeslitigation.com domain—conduct that is said to confuse and misdirect the public, including existing and prospective customers—but Movants argue there is no claim of confusion about goods or services, only that the website falsely disparaged the good name and reputation of Twin Bridges. Movants similarly argue the allegation that they intentionally deceived the public by disseminating and publishing its falsehoods as a means of confusing customers does not pertain to goods or services.

New York law has long recognized two theories of common-law unfair competition: palming off and misappropriation. Palming off—that is, the sale of the goods of one manufacturer as those of another—was the first theory of unfair competition endorsed by New York courts, and has been extended to situations where the parties are not even in competition. After the United States Supreme Court sanctioned the misappropriation theory of unfair competition in International News Service v Associated Press (248 US 215 [1918]), the principle that one may not misappropriate the results of the skill, expenditures and labors of a competitor has often been implemented in New York courts. The essence of the misappropriation theory is not just that the defendant has reaped where it has not sown, but that it has done so in an unethical way and thereby unfairly neutralized a commercial advantage that the plaintiff achieved through honest labor. No showing of consumer confusion is required under a misappropriation theory of unfair competition.

Here, Twin Bridges alleges that Movants have wrongfully appropriated its business and commercial advantage to themselves through the use of deliberately false statements and unlawful inducements, an allegation that sounds in misappropriation.

The misappropriation theory of unfair competition protects the intangible but real relationship existing between a merchant and its usual customers. Thus, cases applying New York law recognize that intentionally false statements about a competitor’s product may constitute misappropriation of customer goodwill.

Based on the foregoing and recognizing the broad and flexible nature of the doctrine of unfair competition under New York law, the branch of the motion seeking the dismissal of Count IV is denied.