Bose Corp. v. Consumers Union of US, Inc.

• Decision Date: 30 December 1981
• Docket Number: Civ. A. No. 71-481-C.
• Citation: 529 F. Supp. 357
• Parties: BOSE CORPORATION, Plaintiff, v. CONSUMERS UNION OF U. S., INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

529 F. Supp. 357

BOSE CORPORATION, Plaintiff, v. CONSUMERS UNION OF U. S., INC., Defendant.

Civ. A. No. 71-481-C.

United States District Court, D. Massachusetts.

December 30, 1981.

Blair L. Perry, Hale and Dorr, Boston, Mass., Charles Hieken, Waltham, Mass., for Michael N. Pollet and Marshal Beil, Karpatkin, Pollet, Delibert & Beil, New York City, for defendant.

OPINION

CAFFREY, Chief Judge.

This is a civil action, brought to obtain money damages and other relief for false statements published by the defendant about the plaintiff's product. This opinion supplements an opinion filed by the Honorable Anthony Julian, Senior United States District Court Judge and reported as Bose Corporation v. Consumers Union of United States, Inc., 508 F.Supp. 1249 (D.Mass.1981). This opinion constitutes the Court's findings of fact and conclusions of law with respect to the damages issues in the case and renders a final judgment for the plaintiff on the product disparagement claim.

Summary of Prior Proceedings

The plaintiff, Bose Corporation (Bose), a manufacturer of loudspeaker systems and other audio equipment, brought this civil action in 1971 against the defendant, Consumers Union of United States, Inc. (CU), a consumer product-testing and reporting organization. Bose claimed product disparagement, unfair competition, and Lanham Act violations on the basis of the defendant's publication of a rating of the plaintiff's product, the Bose 901 Series loudspeaker system, (the Bose 901). Judge Julian severed the issue of liability from the other issues in the case and ordered that a trial be held to determine damages only in the event that the plaintiff prevailed on the other issues. 508 F.Supp. 1249 at 1251.

After an extended trial on the liability issues, the Court ruled that the plaintiff had failed to prove allegations of unfair competition and Lanham Act violations. Accordingly, the Court entered judgment for the defendant with regard to counts I and II of the complaint. With regard to the claim of product disparagement, the Court ruled that the plaintiff had proved that the defendant published a false statement of material fact with the knowledge that it was false or with reckless disregard of its truth or falsity. Id. at 1277.

The second half of this nonjury trial, considering the damages issues only, was held before the undersigned on June 4, 5, and 8, 1981. The following findings of fact and conclusions of law are based on evidence introduced at that trial. Together with Judge Julian's findings, these findings represent final disposition of the case.

Summary of Findings on Liability

The Consumer Reports Article: On pages 272 through 279 of the May 1970 issues of Consumer Reports CU published an article entitled "Loudspeakers" (the Article). The Article contained CU's evaluation of the quality and performance of twenty-four different loudspeakers based on CU's tests of the loudspeakers. In a section (the Bose 901 Portion) boxed off from the main body of the Article, under the heading "Some loudspeakers of special interest," appeared comments about the Bose 901. Id. at 1252.

The Article contained some complimentary statements about the Bose 901, but the effect of that language is more than outweighed by other statements that are clearly critical of the Bose 901. Id. at 1260. The Court specifically noted that the following paragraph undercut the positive impact of the Article:

But after listening to a number of recordings, it became apparent that the panelists could pinpoint the location of various instruments much more easily with a standard speaker system than with the Bose system. Worse, individual instruments heard through the Bose system seemed to grow to gigantic proportions and tended to wander about the room. For instance, a violin appeared to be 10 feet wide and a piano stretched from wall to wall. With orchestral music, such effects seemed inconsequential. But we think they might become annoying when listening to soloists. On an impulse, we also played some monophonic records through the Bose. To our surprise, they too acquired the same special openness and size distortions as the stereo records.

Id. at 1260 n.20. See Id. at 1252-1254 for the complete text of the Bose 901 portion of the article. Judge Julian concluded that the Article, when read as a whole is disparaging.

Isolating statements in the Article for purposes of determining liability, Judge Julian found that while CU's use of the words "panel" and "panelists" was misleading, it did not cause harm to the plaintiff. Id. at 1260. Likewise, the Court found that the false implication that the accuracy of the tested loudspeakers was determined in an objective manner did not harm the plaintiff. Id. at 1262. CU's rating of the Bose 901 as "between the high- and medium-accuracy groups" was found to be only an opinion which cannot be proven true or false. Id. at 1262. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 339, 94 S.Ct. 2997, 3006, 41 L.Ed.2d 789 (1974).

The Court made no finding as to whether the impact of that rating was harmful to the plaintiff.

Power Requirements

With respect to the power requirements of the Bose 901, the Article stated: If you do consider buying the system, note well this fact: The Bose requires a rather gigantic amount of power. CU recommends you have an amplifier of 50 watts per channel for the deepest base response. Id. at 1263.

Judge Julian found that on the truth of this issue, neither party had produced trustworthy evidence. On the basis of the record he found that the matter was entirely within the realm of speculation, and that accordingly, plaintiff had failed to sustain its burden to prove the statement was false. Id. at 1263-1264.

Size and Movement

The bulk of the testimony at the first proceeding concerned the paragraph quoted above, which Judge Julian found undercut the complimentary statements about the product and rendered disparaging the Article as a whole. The operative statement in the paragraph is "worse, individual instruments heard through the Bose system seemed to grow to gigantic proportions and tended to wander about the room." Dissecting that sentence, Judge Julian found that the plaintiff had not proved that the statement about gigantic proportions was false. Id. at 1269. However, he found that the portion of the statement that instruments "tended to wander about the room" was both false and disparaging to the plaintiff. Id. at 1268. Judge Julian specifically found:

A statement that attributes such grotesque qualities as instruments wandering about the room to the plaintiff's product could have no effect other than to harm the reputation of the product. That such a harmful effect was intended is demonstrated by the use of the word "worse" to introduce the sentence. Use of the word "worse" obviously indicates that what preceded was a deficiency but what followed would be an even greater deficiency in the product.

Id.

The Court also found that the subsequent statement to the effect that the wandering effect might be annoying when listening to soloists enhanced the disparaging effects of the false statement. Id. at 1268 n.35.

Because Dr. Bose testified that the most frequent complaints he heard from dealers and consumers concerned "the enlarged and wandering instruments and the statement about gigantic power required" the Court found that the false statement could not be considered a de minimus violation of plaintiff's rights. Id. at 1269.

Finding that the statement was false and disparaging, the Court went on to find that the defendant had not observed the required standard of care in making the statement. Applying the rigorous test enunciated in New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), the Court found that the plaintiff proved clearly and convincingly that the defendant published a false statement of material fact with the knowledge that it was false or with reckless disregard of its truth or falsity. Id. at 1277. The remaining issue is what relief is to be granted the plaintiff.

Scope of Relief

The tort of product disparagement, as distinguished from individual or corporate defamation, is a narrow cause of action. The interests protected are not those of the reputation of the corporation or the intangible concerns peculiar to individual reputation such as community standing, privacy and psychic well-being. Bose Corporation v. Consumers Union of United States, Inc., 508 F.Supp. 1249 at 1270-71; Note, Corporate Defamation and Product Disparagement; Narrowing the Analogy to Personal Defamation, 75 Colum.L.Rev. 963, 980-81 (1975).

A cause of action for product disparagement is made out only when the plaintiff has satisfactorily proved that it suffered special damages flowing from a false statement concerning the nature or quality of plaintiff's product. Dooling v. Budget Publishing Co., 144 Mass. 258, 10 N.E. 809 (1887); Marlin Firearms Co. v. Shields, 171 N.Y. 384, 64 N.E. 163 (1902). The tort exists to provide redress only for tangible and direct pecuniary loss, a purely economic injury to which society accords a lesser value than reputational interests.

Under the law of both Massachusetts and New York "the plaintiff must allege and prove special damages — specific proof of pecuniary loss — before being entitled to recover." 508 F.Supp. at 1249 citing Dooling and Marlin, supra; see also Drug Research Corp. v. Curtis Publishing Co., 7 N.Y.2d 435, 199 N.Y.S.2d 33, 166 N.E.2d 319 (1960); Restatement (Second) of Torts §§ 623A, 633 (1976).

Special damages consist of the pecuniary loss that results directly from the effect of the wrongful conduct of the defendant, in this case, lost sales and expenses necessary to counteract the effect of publication. Id. § 633. Lost sales are those sales which plaintiff would have made if the defendant had not disparaged the plaintiff's product.¹

Injunctive Relief

Plaintiff in this action also seeks...