Avis Rent A Car System, Inc. v. Hertz Corp., 85-7692

• Decision Date: 03 February 1986
• Docket Number: No. 85-7692,85-7692
• Citation: 782 F.2d 381
• Parties: , 228 U.S.P.Q. 849 AVIS RENT A CAR SYSTEM, INC., Plaintiff-Appellee, v. The HERTZ CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 381

782 F.2d 381

54 USLW 2456, 228 U.S.P.Q. 849

AVIS RENT A CAR SYSTEM, INC., Plaintiff-Appellee, v.The HERTZ CORPORATION, Defendant-Appellant.

No. 85-7692.

United States Court of Appeals Second Circuit.

Argued Nov. 6, 1985.

Decided Feb. 3, 1986.

Douglas D. Broadwater, New York City(Thomas D. Barr, Kathleen L. Beggs, Alan B. Vickery, Cravath, Swaine & Moore, Lane & Mittendorf, New York City, of counsel), for defendant-appellant.

Steven J. Stein, New York City(Barry G. Felder, Steven M. Kayman, Anita J. Zigman, Proskauer Rose Goetz & Mendelsohn, New York City, of counsel), for plaintiff-appellee.

Before FRIENDLY, TIMBERS and PRATT, Circuit Judges.

FRIENDLY, Circuit Judge.

Avis Rent A Car System, Inc.("Avis"), plaintiff in this action in the District Court for the Eastern District of New York claiming false advertising under Sec. 43(a) of the Lanham Act,15 U.S.C. Sec. 1125(a), ¹ has long proclaimed to the world that it is Number 2 in the car rental business.Defendant, The Hertz Corporation("Hertz"), has just as loudly proclaimed that it is Number 1.The two giants have found themselves locked in hostile embrace as a result of a print advertisement that Hertz published in March and April 1984.²

The advertisement was an eye-catcher.It began by proclaiming at the top in large, bold type Hertz

has more new cars

than Avis has cars.

Centered under this was an underscored statement in italics:

We're rolling out over 135,000 1984 cars.

Next came a photograph showing mechanics shepherding a truckload of apparently new cars into an airport parking lot.The text went on as follows:

If you'd like to drive some of the newest cars on the road, rent from Hertz.Because we have more new 1984 cars than Avis or anyone else has cars--new or old.*³

Take off in a luxurious Continental Mark VII or a sporty Thunderbird with AM/FM stereo.Put the top down on a Mustang convertible with cruise control.Or cover a lot of ground in an economical Escort.

Whether you're renting for business or pleasure, chances are you'll find a domestic or imported car you'll want to drive.

So call your travel agent or Hertzat 1-800-654-3131.And take an '84 out for a test drive.

The advertisement concluded with an underscored statement in large, bold type:

The # 1 way to rent a car.^TM

and under that a statement in ordinary type:

Hertz features the exciting Ford Thunderbird.

Avis promptly brought this action on March 16, 1984, alleging that the statement "Hertz has more new cars than Avis has cars" in the advertisement's heading was false and seeking to enjoin further publication of the advertisement and to recover damages.After hearings in April and May, the district court issued findings of fact and conclusions of law on August 6, 1984.⁴At a pretrial hearing on August 17, the court orally ordered Hertz not to publish the advertisement during the pendency of the litigation.A trial lasting several days took place in September and November.On January 7, 1985, the court entered new findings of fact and conclusions of law to the effect that Hertz' claim that it had more new cars than Avis had cars was false--though not intentionally so, having been predicated on a study giving Hertz a reasonable expectation that the claim would be true as of sometime early in 1984.Seeinfra note 8.After a further hearing devoted to fashioning appropriate injunctive relief, ⁵the court entered a two-part injunction on January 24, 1985.One part enjoined Hertz

from employing [in] Hertz' advertising or promotional material, or otherwise in connection with Hertz' marketing or sales efforts, (1) any statement or representation comparing Hertz' fleet size or composition to Avis' fleet size or composition that is false or misleading; and (2) any statement or representation comparing Hertz' fleet size or composition to Avis' fleet size or composition that is not verified and accurate at the time such statement or representation is made.

The other part directed Hertz to publish in each of the media in which it had published the offending advertisement a notice in a form prescribed by the court.The notice, after reciting that in March 1984 Hertz had advertised in the particular journal the claim that "Hertz has more new cars than Avis has cars," went on to say: "This representation was a projected claim which was not true at the time it was made."The notice concluded with a paragraph saying that it was being published at Hertz' expense pursuant to the order of the court.Hertz has appealed.

DISCUSSION

Counsel for both parties have devoted the bulk of their briefs and arguments to Hertz' claim that the district court should not have issued either the negative or the mandatory injunction--the former because there was insufficient evidence that Hertz would repeat the challenged conduct, and the latter because the advertisement had not created a false impression sufficiently enduring to warrant such drastic relief.However, Hertz also presses the point that the judge was able to arrive at his determination of falsity only by counting as part of the Avis fleet cars that had been removed from availability for rental and had been earmarked for sale as of the date the advertisement was first published, whereas the advertisement, properly construed, made a comparative claim not about the total cars owned by the two companies but about those available for rental.Had the judge counted cars in accordance with the latter construction of the advertisement, Hertz argues, he would have found that the claim was true when made.Since we are persuaded that, for reasons developed below, it was clear error for the judge to construe the advertisement as he did, we reverse the judgment and direct dismissal of the complaint without reaching the arguments as to the propriety of the injunction if the necessary factual predicate had been laid.

The determinative question is whether the challenged claim in the advertisement referred to the rental fleets or the total fleets of the two companies.If it referred to the total fleets, as the judge concluded, the advertisement was false since, as he permissibly found:

10.In the period immediately following March 1, 1984 Hertz had 91,000 1984 model cars in its corporate fleet and approximately 6,000 in its licensee fleet, for a total of 97,000, while Avis continued to have approximately 102,000 cars in its corporate and licensee fleet.⁶

However, the figure of 102,000 cars for Avis included approximately 5503 cars in Avis' corporate fleet ⁷ and approximately 1273 cars in its licensee fleet that the record shows were in the process of being sold and were no longer available for rental.Deduction of these 6776 cars would mean that in the period immediately following March 1, 1984, Avis had only approximately 95,224 cars available for rental as against Hertz' 97,000 new 1984 cars, all but a small number of which were available for rental.Hence, if the advertisement compared the number of 1984 cars that Hertz had available for rental with the total cars that Avis had so available, the advertisement was facially true, though not to the same extent as Hertz had reasonably supposed it would be by that point in time and as it shortly became.⁸

Although argument could be made to the contrary, see, e.g., Antilles Steamship Co. v. Members of American Hull Insurance Syndicate, 733 F.2d 195, 203-07(2 Cir.1984)(Newman, J., concurring)(question how a reasonable person would understand a writing is one of "textual interpretation" and should be treated as a matter of law), we will assume arguendo, seeCoca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 317-18(2 Cir.1982), that the district judge's determination of the meaning of the advertisement was a finding of fact that "shall not be set aside unless clearly erroneous."F.R.Civ.P. 52(a).This means, in the classic language of United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746(1948), that we may not reverse the judge's finding that the advertisement referred to all cars rather than cars available for rental unless on the entire evidence we are "left with the definite and firm conviction that a mistake has been committed."SeeAnderson v. City of Bessemer City, --- U.S. ----, 105 S.Ct. 1504, 1511-12, 84 L.Ed.2d 518(1985).For the reasons that follow, we do have such a definite and firm conviction.

The district judge's findings and conclusions give no reasons why he interpreted the advertisement as he did; these must be eked out from the transcript, and even there the pickings are few.His most significant remark came in a discussion at a conference preceding the trial on issuance of the permanent injunction.After Hertz' trial counsel stated that he wished to adduce evidence with respect to Avis cars that were not available for rental, the judge said, "It didn't say 'for rent'; [it said]'for cars'."Avis' counsel chimed in, "It is an unqualified ad; it didn't qualify.It said, 'We have.' "Later, during the testimony of Spencer Bruno, president of a marketing and research firm that had conducted a "copy comprehension study" of the advertisement, the judge said, "[W]e have to go by the written word."Since the boldface type at the top of the advertisement proclaimed "Hertz has more new cars than Avis has cars," it was immaterial, in the judge's view, that over 6000 of the Avis cars that had to be counted to support a conclusion of falsity were in fact not available for rental.

As against this the evidence pointed unmistakably to an interpretation that Hertz was speaking of cars available for rental and not of total cars owned.Hertz and Avis have made their reputations as companies that rent cars, not companies that sell or merely own cars.The advertisement was placed in publications that would come to the attention of prospective renters, not car buyers or financial analysts.⁹The boldface proclamation at the top...