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Puffery and the Misstatement That Wasn’t

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  • Posted on: Oct 28 2019

To assert a fraud claim, a plaintiff must allege “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.” Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 (2011) (internal quotation marks and citation omitted); Lama Holding Co. v Smith Barney, 88 N.Y.2d 413, 421 (1996).

Often, plaintiffs complain that statements couched in terms of “belief” or “expectation” are false and should be actionable. Not surprisingly, however, courts have declined to find such statements actionable. The reason: they are “mere puff” or statements of opinion or exaggeration that no reasonable person would take seriously. Thompson v. Procter & Gamble Co., 2018 WL 5113052, at *2 (S.D. Fla. Oct. 19, 2018); see also Hamilton Exhibition, LLC v. Imagine Exhibitions, Inc., 2019 WL 2590639, at *3 (S.D.N.Y. June 11, 2019); Barilli v. Sky Solar Holdings, Ltd., 389 F. Supp. 3d 232, 252 (S.D.N.Y. 2019); Davis v. Avvo, Inc., 345 F. Supp. 3d 534, 542 (S.D.N.Y. 2018) (“[D]efendant’s … advertising of attorneys as ‘highly qualified,’ ‘the right,’ or the ‘best’ [is] nonactionable puffery” under the Lanham Act and New York General Business Law).

In contrast to puffery and expressions of opinion, a misrepresentation is a false statement of present or historical fact. Oregon Public Employees Retirement Fund v. Apollo Group Inc., 774 F.3d 598, 606 (9th Cir. 2014). Misrepresentations of fact are actionable because they are capable of objective verification. E.g., White v. Davidson, 150 A.D.3d 610, 611 (1st Dept. 2017). See also SEC v. Todd, 642 F.3d 1207, 1216-17 (9th Cir. 2011).

On October 25, 2019, Judge William H. Pauley III addressed the foregoing principles in The Hertz Corp. v. Accenture LLP, 19-cv-3508 (S.D.N.Y. Oct. 25, 2019) (here), wherein he dismissed a claim for violations of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) because the challenged statements, which the Court held sounded in fraud, were mere puffery or too vague to be actionable.

The Hertz Corp. v. Accenture LLP

Background

In 2016, Hertz decided to undergo a digital makeover by developing a new website and a suite of mobile applications for its vehicle rental brands (the “Project”). Since Hertz did not have the necessary expertise, it solicited proposals from technology service firms, including Accenture. Ultimately, Hertz hired Accenture following a one-day marketing presentation in which Accenture touted its expertise in website and mobile application development. The presentation contained slides stating that Accenture’s staff consisted of “800 [e]xperts” who comprised “[t]he best talent in the world.” The presentation also stated “[w]e’ve got the skills you need to win” and that Accenture would “put the right team on the ground [from] day one.”

The Project was to be conducted in phases, and the services and deliverables for each phase were, in turn, specified in letters of intent (“LOIs”) and corresponding statements of work (“SOWs”). The LOIs and SOWs were governed by a Consulting Services Agreement between Hertz and Accenture that had been in place since 2004.

Between August and November 2016, Accenture completed work on Phase 1, which involved various planning services and the development of a “Solution Blueprint” describing the processes and technologies needed to complete the Project. On January 30, 2017, Accenture and Hertz entered Phase 2 of the Project pursuant to an LOI that required Accenture to design, build, test, and deploy the website and mobile applications. Accenture committed to a December 2017 “go-live” date.

Phase 2, however, was plagued with difficulties. By September 2017, Accenture informed Hertz that it would not be able to meet the promised December 2017 go-live date and requested an extension until January 2018. Accenture later requested a second extension until April 2018. Hertz alleged that many of Accenture’s problems in completing the Project were related to Accenture’s misrepresentations about the expertise of its staff.

Hertz contended that Accenture’s developers were not experts as promised. Instead, they were inexperienced and unfamiliar with the technologies that Accenture recommended to Hertz for the Project. This inexperience, claimed Hertz, manifested itself in Accenture’s poor website and mobile application coding.

Hertz further alleged that Accenture struggled to implement its “RAPID” technology, which was intended to streamline the development of portions of Hertz’s new website. Accenture recommended the RAPID technology, explaining that its implementation required expertise which Accenture’s developers possessed. Based upon the foregoing, Hertz acquired licenses for the technology. Ultimately, however, according to Hertz, Accenture failed to implement RAPID, and it later acknowledged that it “spent a good deal of time” trying to “fight[] through [the] integration of RAPID” into the Project.

Thereafter, Hertz hired a new technology services provider for the Project in June 2018 and terminated Accenture’s services. After Hertz removed Accenture from the Project, Hertz allegedly learned that Accenture had misrepresented the extent of its code testing.

In total, Hertz paid Accenture over $32 million in fees and expenses during the Project.

Hertz filed suit alleging, inter alia, that Accenture violated the FDUTPA. In that regard, Hertz alleged that Accenture made two categories of misrepresentations: (1) misstatements contained in the 2016 marketing presentation; and (2) misstatements concerning Accenture’s expertise with RAPID technology and the extent of its code testing. Accenture moved to dismiss the FDUTPA claims on the grounds that they failed to state a claim.  Specifically, Accenture argued that the alleged misstatements in the first category (i.e., misstatements contained in the 2016 marketing presentation) were not actionable as they were mere puffery, and the misstatements in the second category (i.e., misstatements concerning Accenture’s expertise with RAPID technology and the extent of its code testing) failed to satisfy the heightened pleading requirements of Rule 9(b). The Court agreed with Accenture and dismissed the FDUTPA claims.

The Court’s Decision

Hertz contended that, within the 2016 marketing presentation, Accenture falsely represented that its staff consisted of “800 [e]xperts” amounting to “[t]he best talent in the world” and that Accenture would “put the right team on the ground [on] day one” – a team that Accenture represented possessed “the skills you need to win”.

Hertz averred that Accenture’s personnel were not experts. According to Hertz, most of Accenture’s developers were junior, inexperienced, and located offshore. Accenture claimed that, although the alleged misstatements satisfied the heightened pleading requirements of Fed. R. Civ. P. 9(b), they were nevertheless deficient because they were non-actionable puffery.

Judge Pauley held that Accenture’s representation that it housed “800 [e]xperts” amounting to “[t]he best talent in the world,” along with its promise that it had “the skills you need to win” and would “put the right team on the ground [on] day one,” were “quintessential examples of puffery.” Slip Op. at 9. Such statements, noted the Court, were “analogous to statements that courts within [Second C]ircuit have routinely dismissed as non-actionable puffery, albeit in non-FDUTPA cases.” Slip Op. at 8 (citations omitted).

The Court rejected Hertz’s reliance on two Florida cases in which the courts held the puffery to be actionable. In the first one, the statements involved consumer goods (e.g., beer and dish soap) that were purchased by ordinary shoppers who could consider them to be “more than just a salesman’s lavish claims” (Thompson, 2018 WL 5113052, at *2), and in the second one, the statements were part of a larger marketing campaign and packaging (Marty v. Anheuser-Busch Cos., 43 F. Supp. 3d 1333, 1342 (S.D. Fla. 2014)). The Court observed that Hertz did not resemble the plaintiffs in Thompson and Marty because it is a sophisticated, multi-billion-dollar company, which had a long-standing relationship with Accenture dating back to 2004. Slip Op. at 9.

Accordingly, the Court concluded that the alleged misstatements in the marketing presentation were not actionable.

Judge Pauley also held that Hertz failed to satisfy the heightened pleading requirements of Fed. R. Civ. P. with respect to Hertz’s claim that Accenture falsely represented its RAPID expertise and the extent of its website and mobile application code testing. Slip Op. at 9-10. The Court noted that the claim rested “on a single, vague accusation that ‘Accenture falsely led Hertz to understand that its developers had the required expertise to use RAPID properly.’” Id. at 10, citing the Complaint. “This conclusory allegation,” held the Court, “cannot satisfy Rule 9(b), as the Complaint fail[ed] to explain how or when Accenture led Hertz to develop that understanding.” Id. (citation omitted).  Under Rule 9(b), a plaintiff must (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent. Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (quotation marks omitted). In other words, the plaintiff must “set forth the who, what, when, where and how of the alleged fraud.” U.S. ex rel. Resnick v. Weill Med. Coll. of Cornell Univ., 2010 WL 476707, at *4 (S.D.N.Y. Jan. 21, 2010) (quotation marks omitted).

The Court explained that although Hertz discussed Accenture’s recommendation that Hertz use RAPID for the Project, it failed to plead more – i.e., the who, what, when, where and how of the alleged fraud. “[A]s Accenture notes,” said Judge Pauley, “the mere fact that Accenture recommended RAPID to Hertz [did] not support Hertz’s assertion that Accenture misrepresented its expertise.” Slip Op. at 10.

Judge Pauley deemed Hertz’s allegations concerning Accenture’s code testing to be “likewise insufficient.” Id. In this regard, the Court noted that Hertz failed to identify any misstatement, stating that “[t]he Complaint baldly assert[ed] that ‘Accenture’s developers . . . misrepresented the extent of their testing of the code’” without specifying “what Accenture represented about its code testing in the first place.” Id.

Thus, the Court dismissed “Hertz’s FDUTPA claim … with prejudice in its entirety.” Id.

Takeaway

Hertz shows that regardless of the circumstance, a plaintiff alleging fraud must plead the claim with particularity.

Hertz also reminds litigators that mere puffery will not suffice to state a claim for relief. More is needed. The plaintiff must come forward with statements that are objectively verifiable.

Finally, Hertz teaches that if a litigant is going to allege fraud, he/she must identify the statement or omission alleged to be false. Vague assertions about a fact or circumstance will not suffice to withstand a motion to dismiss.

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