On November 13, 2012, Sterling Jewelers filed a complaint charging its competitor, Zale Corporation, with false advertising under the Lanham Act and deceptive trade practices under Ohio law. Sterling operates 1,300 jewelry stores under the Kay Jewelers and Jared the Galleria of Jewelry brand names. Zale is a retailer operating 1,870 stores under the brand names Zales and Gordon’s Jewelers.
The Sterling Allegation
At issue are the Zales advertisements for its Celebration Fire™ diamond collection (“Celebration Fire”) which Zales promotes as “The Most Brilliant Diamond in the World.” The Celebration Fire promotions appeared on the Zales’ website, in the social media, and on point-of-purchase displays. In addition, the Zales catalog asserts that the Celebration Fire diamond “shines with more brilliance than any other diamond in the world based on independent laboratory testing conducted in 2012 of round-cut diamonds from select leading national jewelry store chains.” See Sterling Complaint. In the suit, Sterling characterizes the catalog advertisement as an establishment claim. According to Sterling, not only is the Celebration Fire diamond not the most brilliant diamond in the world, but the representation that “independent laboratory testing” proves the claim, is also false.
The Puffing Issue
Advertising claims that are exaggerations unlikely to be believed by consumers or those that are laudatory and phrased in broad and vague terms are generally not actionable because they are considered to be acceptable “puffing.” Thus, an entertainment company’s advertisement opining that its property was the “happiest place on earth” or an insurance company’s claim that “you are in good hands” would likely be considered non-actionable puffing because “happy places” and being in “good hands” do not lend themselves to measurement where truth or falsity might be discerned. Other claims represent closer calls and must be viewed in the context of the entire advertisement. For example, when Papa John’s Pizza advertised “Better Ingredients. Better Pizzas” the Fifth Circuit held that the slogan by itself was puffing because the phrase lacked an empirical means of being judged true or false. However, in the same ad Papa John’s asserted it used “fresh, vine-ripened tomatoes” and “clear filtered water” rather than “remanufactured tomato paste” and “tap” water. When considering its context, especially the comparison of food ingredients, the Court held the slogan “Better Ingredients. Better Pizza” was actionable. Pizza Hut, Inc. v. Papa John’s Int’l Inc., 227 F.3d 489 (5th Cir. 2000). In their respective pleadings, both parties appear to agree that “the brilliance of a diamond is a recognized property that is capable of being systematically, reliably and scientifically measured.” See Sterling Complaint; Zale Answer. Indeed, Zale refers to such tests in its advertising. In that context, the court may conclude Zale’s claim is less a laudatory opinion and more a statement of purported fact that can be shown by evidence to be false. However, there are experts in the industry who point out that while brilliance can be measured, there is no single, agreed-upon methodology to do so. At least one gemologist dismisses efforts to measure brilliance as “pseudoscience” and a mere marketing technique. In that light, the Sterling court might view the Zale advertisement as acceptable puffing.
The Establishment Claim
When testing or some other means of empirical analysis is asserted or implied to be the basis of an advertisement’s factual statement, the ad itself is said to contain an “establishment claim.” Establishment claims have inherent means to be shown as either true or not true: A study was or was not performed; it did or did not produce the reported result; the result can or cannot be reproduced in subsequent testing; the study protocol was or was not validated; and so forth. In its suit, Sterling contends that by testing only round cut diamonds and by limiting the samples tested to those supplied by “select leading national jewelry store chains” the study is fatally flawed if used to establish a claim of comparative brilliance among all diamonds worldwide. There are at least nine other cuts of diamonds beside a round cut. And Sterling points out that the “select chain” limitation excludes regional chains; independent jewelers; national chains not judged to be “leading;” the internet; and any seller outside the U.S.
The Zale Answer
In its answer to the complaint, Zale denies Sterling’s allegations and also asserts several defenses including laches, estoppel, and “unclean hands.” See Zale Answer (Doc. 27). The doctrine of unclean hands holds that a plaintiff may not seek the aid of a court to remedy an act when the plaintiff itself has engaged in similarly improper conduct that harmed the defendant. Zale’s answer does not set forth the facts upon which it bases its unclean hands defense. It is possible the defense is related to Sterling’s own advertising. According to the Wall Street Journal, The Leo Diamond sold at Kay and Jared has been promoted as “the first diamond ever to be certified visibly brighter.”
The Preliminary Injunction
Sterling requested that the court halt the Zale advertisements and on December 17 & 18 a hearing was held on the matter. Sterling presented two experts, one to testify about the issue of brilliance and one who did a survey of consumers viewing the Celebration Fire ads. Zale presented two experts on the topic of brilliance and testing and was denied the ability to present a consumer survey expert because he was a last minute surprise. From the hearing, a glimpse of the themes that each side is pursuing come into focus. In post-hearing briefing, Sterling argued that unlike cars or televisions which they characterize as “identical commodities,” diamonds are unique. In fact, says Sterling, Zale markets the Celebration Fire product as if “each diamond is the most brilliant available.” Therefore, despite the fact that there is no single accepted industry method of defining brilliance, in order to substantiate its claim, Zale would need to “test every individual Celebration Fire diamond against every competing diamond in the market.” See Sterling Post-Hearing Brief (Doc. 33) and Sterling Reply Brief (Doc. 37). Zale counters that it used a reliable test for brilliance, that its claims are in general accord with the database maintained by Sterling’s expert, and that its results are not contraindicated by any reliable methodology. More importantly, Zale points out that in Sterling’s consumer survey, many customers perceived “the most brilliant diamond in the world” to carry different meanings. Some perceived it as puffing, others thought the ad referred to a single diamond; some thought it referred to a class of diamonds and yet others thought it referred to the average brilliance of the Celebration Fire line. As such, the ad was ambiguous and therefore cannot be literally false. See Zale Post-Hearing Brief (Doc. 35). No decision has been issued yet relative to the preliminary injunction. The Brand Protection Blog will continue to monitor this case. Sources: Sterling Jewelers Inc. v. Zale Corporation, Case No. 5:12-cv-02823 (N.D. Ohio); Pizza Hut, Inc. v. Papa John’s Int’l Inc., 227 F.3d 489 (5th Cir. 2000).
This article was prepared by Bob Rouder (firstname.lastname@example.org / 512 536 2491) and Saul Perloff (email@example.com / 210 270 7166) of Fulbright’s False Advertising Practice.