Hertz Corp. v. Avis, Inc.

• Decision Date: 03 November 1994
• Docket Number: No. 94 Civ. 7384 (JFK).,94 Civ. 7384 (JFK).
• Citation: 33 USPQ 2d 1517,867 F. Supp. 208
• Parties: The HERTZ CORPORATION, Plaintiff, v. AVIS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

867 F. Supp. 208

33 USPQ 2d 1517

The HERTZ CORPORATION, Plaintiff, v. AVIS, INC., Defendant.

No. 94 Civ. 7384 (JFK).

United States District Court, S.D. New York.

November 3, 1994.

Patterson, Belknap, Webb & Tyler, New York City (Thomas C. Morrison, Robert W. Lehrburger, Hertz Corp., Paul M. Tschirhart, of counsel), for plaintiff.

Morrison, Cohen, Singer & Weinstein, New York City (Malcolm I. Lewin, Sarah C. Lichtenstein, Arlene R. Smoler, of counsel), for defendant.

OPINION AND ORDER

KEENAN, District Judge.

Before the Court is the motion of plaintiff, pursuant to Fed.R.Civ.P. 65, for a preliminary injunction preventing defendant from falsely advertising a service, the "Return Valet" service, that it cannot provide. Defendant opposes plaintiff's application for a preliminary injunction.

The Court held a preliminary injunction hearing October 23, 1994. Submissions from the parties were received on October 26, 1994. For the reasons that follow, the motion is denied.

FINDINGS OF FACT

Plaintiff Hertz Corporation (hereinafter "Hertz") sued defendant Avis, Inc. (hereinafter "Avis") on two causes of action. The first cause of action provides jurisdiction in this Court — "false advertising under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)." Complaint at ¶ 1. Hertz's other cause of action is for "false advertising and unfair competition in violation of New York law." Id.

The rent-a-car industry is extremely competitive and is dominated by five companies — Hertz, Avis, Budget, Alamo, and National. Hertz and Avis have long been number one and number two respectively. Because all of the top companies rent comparable cars at similar prices, the primary area of competition between the companies is service. The primary demand of customers is speed and convenience.

Most major airports require car rental companies to utilize remote lots for the pickup and return of cars. Customers travel to and from these lots in shuttle busses. This procedure was designed to reduce the congestion that would otherwise result from all the rental car traffic.

Avis has recently begun advertising a new service allegedly available at major airports. In early October, Avis began advertising a "Return Valet" service. Avis represents that an Avis renter who is returning a car to a remote rental site at an airport would be met at the lot by an Avis driver who would then drive the renter to the terminal, allowing the renter to avoid the time-consuming shuttle bus. This is an attractive service to renters.

Avis's nationwide advertising of this service includes a television commercial, print advertisements and a brochure. The print advertisements have appeared in leading newspapers and magazines, including The Wall Street Journal, USA Today, Business Week and Frequent Flyer Magazine.

The commercial, first broadcast in early October, is scheduled to run through the end of December. The commercial features a man and a woman returning their Avis car to an airport with twenty minutes to catch their plane. The man expresses concern, but the woman tells him not to worry because Avis's new Return Valet service will get them to the terminal in time. The commercial shows the car pulling up to an Avis area with an "Avis Return Valet" sign. The Avis valet then drives the couple to the terminal telling them that he will have them there in five minutes. The man then says that he is not worried while the woman rolls her eyes. The commercial ends with the couple arriving at the terminal and the Avis valet handing them their baggage and waving goodbye.

This commercial is being broadcast (along with another unchallenged commercial espousing the same theme — "We're into the future ... We're into it now") during prime time television as well as during news programs and weekend sporting events. The commercial is being broadcast in major travel markets, including New York, Boston, Dallas, Chicago, San Francisco, Los Angeles, Miami and Washington D.C. Avis is spending in excess of $14 million for this campaign, including over $12 million on the television campaign. This is a very large expenditure for advertising in the industry.

Car rental operations are governed by contracts between the car rental companies and the airports. Avis has targeted the thirty-nine major airports that require shuttle busses for its Return Valet service. Hertz contends that Avis's advertising is false because a majority of the thirty-nine airports have told Avis that the Return Valet service will not be permitted.

Avis began its Return Valet service at different airports at different times, starting on May 31, 1994 at New Orleans International Airport and at Houston Intercontinental Airport. By late September, the service was operating at thirty-nine airports throughout the United States. Avis has now terminated the service at three airports — Sacramento, Minneapolis-St. Paul and Washington National Airport.

When Hertz learned of Avis's Return Valet service, it immediately undertook to initiate a similar service. Hertz canvassed the airports in question to see if such a service would be allowed. According to Hertz's investigation: fifteen airports have stated that they will not allow the service; two airports involve Avis licensees who have elected not to offer the service; six airports are currently reviewing the service; and sixteen airports have agreed to permit the service. Among the airports that have stated that they will not allow the service are the following: Atlanta; Boston; Dallas-Fort Worth; JFK; LaGuardia; Miami; Newark; San Francisco; and Washington National. The undecided airports include Chicago (O'Hare) and Los Angeles.

Despite the stated refusal to allow the service by fifteen airports, Avis continues to operate its service at all of those airports but the three mentioned above. Avis states that, while it has received refusals, it is continuing to negotiate with those airports and continues to offer the service while negotiations continue. Avis is therefore operating its service at thirty-six of the thirty-nine airports targeted.

Hertz contends that it is injured by Avis's allegedly false advertising. Hertz contends that it will lose business to Avis as a result of the advertising. Hertz also contends that it will be injured by means of the "image enhancement" that Avis will receive on account of this service.

Hertz commissioned a consumer survey from Bellomy Research to support its contention that it will be injured by the advertising. Bellomy Research, given only a few days to prepare and conduct its survey, was forced to operate under very hurried conditions. 178 respondents were questioned at eleven geographically dispersed shopping malls. The majority of those respondents, after viewing the commercial, found that the service offered "speed" and "convenience." According to Lacy Bellomy, the founder and President of Bellomy Research, this result shows that the commercial is serving its intended purpose. In addition, according to the survey a majority of those polled believed that the service was available at "all airports" or "all major airports." This survey was criticized for Avis by Dr. Yoram Wind, a Professor of Marketing at the Wharton School of the University of Pennsylvania, for a variety of short comings that in Wind's estimation render it valueless.

Avis contends that Hertz's true concern in this lawsuit is that Avis has "outgunned" Hertz. Avis contends that, instead of competing with Avis in the marketplace, Hertz filed this lawsuit in order to distract Avis from its marketing strategy.

CONCLUSIONS OF LAW

I. Section 43(a) of the Lanham Act

Section 43(a) of the Lanham Act, 15 U.S.C. § 1125, provides:

(a)(1) Any person who, on or in connection with any goods or services ... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities

shall be liable in a civil action by any person who believes that he or she is or is likely to be damages by such act.

Hertz's preliminary injunction motion attacks Avis's advertising campaign of its "Return Valet" service on the basis that it is literally false and that it is misleading.

II. Preliminary Injunctions Generally

To obtain a preliminary injunction in this Circuit, the moving party has the burden of showing (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting preliminary relief. See Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir. 1985) (quoting Bell & Howell: Mamiya Co. v. Masel Supply Co. Corp., 719 F.2d 42, 45 (2d Cir.1983) (quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979))). The burden upon the moving party is heightened when the movant, as plaintiff does here, seeks to disturb the status quo by ordering affirmative relief, as opposed to preserving the status quo by prohibiting the non-movant from altering the status quo:

Where ... the grant of the preliminary injunction will give the movant essentially all the relief she seeks, the injunction is often deemed mandatory rather than prohibitory, and a somewhat higher standard is applied, under which the movant must show a substantial likelihood of success on the merits, rather than merely a likelihood of success.

Johnson v. Kay, 860 F.2d 529, 540 (2d Cir. 1988); see also id. at 541 ("Mandatory injunctions, for which the higher standard is appropriate, are those that disturb the status quo by ordering affirmative relief, while prohibitory injunctions preserve...