## Facts

- Fashion Boutique of Short Hills, Inc. operated a standalone boutique in Short Hills, New Jersey selling only Fendi “international” line merchandise from 1983 to 1991.
- Fendi Stores, Inc. opened a competing Fendi-only boutique on Fifth Avenue in New York City in October 1989.
- After the Fifth Avenue store opened, Fashion Boutique’s sales declined; Fashion Boutique closed in July 1991.
- Fashion Boutique alleged Fendi employees disparaged Fashion Boutique’s goods by telling shoppers that Fashion Boutique sold fake or inferior merchandise and misrepresenting authenticity and quality.
- The evidentiary record reflected disparaging comments made to 11 shoppers, plus 16 shoppers who reported hearing similar rumors; the remarks were private, in-store, one-on-one conversations typically initiated by customers who mentioned Fashion Boutique.
- Fashion Boutique sued under § 43(a) of the Lanham Act for false disparagement as “commercial advertising or promotion,” and also asserted New York state-law claims including unfair competition/product disparagement and slander/defamation.
- The district court granted partial summary judgment for Fendi on the Lanham Act claim, later excluded Fashion Boutique’s damages expert as unreliable, and limited general slander damages to reputational injury shown as to three identified customers; the remaining state-law claims resulted in only limited recovery.
- Fashion Boutique appealed those rulings to the Second Circuit.

## Issues

1. Whether the alleged one-on-one disparaging statements by Fendi sales personnel to a small number of customers constituted “commercial advertising or promotion” under Lanham Act § 43(a)(1)(B).
2. Whether the district court abused its discretion by excluding Fashion Boutique’s expert testimony on business value and lost profits.
3. Whether the district court erred by limiting general damages for slander to reputational injury proven in the minds of three identifiable customers who heard the statements.

## Decision

- The Second Circuit affirmed summary judgment for Fendi on the Lanham Act claim.
- The court held the alleged remarks were not “commercial advertising or promotion” because they were too sporadic, private, and insufficiently disseminated to the relevant purchasing public.
- The court affirmed exclusion of Fashion Boutique’s expert valuation testimony as unreliable and speculative, finding no abuse of discretion.
- The court affirmed the slander damages instruction limiting general damages to reputational harm proven as to the three identified customers.

## Legal Principles

- Lanham Act § 43(a)(1)(B) “commercial advertising or promotion” generally requires: (1) commercial speech, (2) by a defendant in commercial competition with plaintiff, (3) intended to influence consumer purchasing decisions, and (4) dissemination sufficiently broad to the relevant purchasing public to qualify as advertising or promotion.
- Limited, isolated, oral one-to-one retail communications to individual customers ordinarily do not satisfy the dissemination requirement for “advertising or promotion.”
- Trial courts have broad discretion under Federal Rule of Evidence 702 to exclude damages expert testimony when the methodology is unreliable or rests on speculative assumptions and fails to account for alternative causes.
- Under New York slander principles applied, general damages must be tied to evidence of publication and demonstrated reputational impact; awards cannot rest on speculation about diffuse marketplace harm.

## Conclusion

The Second Circuit held that sporadic, private in-store disparagement to a small number of shoppers did not constitute Lanham Act “commercial advertising or promotion,” and it upheld the district court’s exclusion of speculative valuation expert testimony and its limitation of slander general damages to reputational injury proven as to identifiable listeners.


Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48 (2d Cir. 2002)