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Article Archives >> Lead Stories >> March 1-15, 2008

Nonprofit May Be Sued
For Misusing Testimonial
Officer may be personally liable
for participation in improper conduct

A federal District Court in Michigan has refused to dismiss a series of claims by a woman and her son against a nonprofit organization and its founder who they claim improperly used their story of surviving cancer in literature to promote the nonprofit’s products and services.  (Hauf v. Life Extension Foundation, W.D. MI, So. Div., No. 1:06-cv-627, 3/4/08.)

In 1991, Virginia Hauf took her son Stephen Barrow to Mexico for Immune Augmentative Therapy to deal with his brain cancer.  He took shark cartilage supplements and the tumor began to shrink.  Hauf subsequently bought the supplements from the Life Extension Foundation, a Florida nonprofit, for about nine months.

Foundation founder William Faloon and his co-founder asked Hauf to tell her son’s story in the Foundation’s magazine, and she submitted a letter to the editor.  She submitted two more follow-up reports at their request in 1995 and 2002.  In each case, she alleged in the complaint, she reiterated that the information was not to be used for monetary gain.

Hauf also alleged that she and her son’s story had begun to gain widespread attention through the media and that she had devoted her life to helping “those afflicted with cancer and other diseases” by traveling throughout the country to speak to groups and help individuals.  She said she never took a fee for her work.

She claimed that in 2005, the Foundation mailed membership campaign materials across the country seeking new members and donations, including a two-page testimonial attributed to her and her son.  She filed claims for “false endorsement,” invasion of privacy—misappropriation, and defamation, among others.  The Foundation and its founder moved to dismiss them all.

The Court said a claim of false endorsement or association has been upheld under the federal Lanham Act, when a celebrity’s image or persona is used in association with a product so as to imply that the celebrity has endorsed the product.  It said the young man need not prove he was a “celebrity” and that commercial value could be established by proof of the distinctiveness of his identity and the degree of recognition among those receiving the publicity.

The Court said that he “may be able to demonstrate a notoriety among cancer patients or advocates of alternative medicine that is strong enough to have commercial value within the identifiable group.”  The allegation of the complaint that he and his mother  “are well known throughout the world for their story” was sufficient at this stage of the proceedings to defeat a motion to dismiss.

The invasion of privacy claim, sometimes called the “right of publicity,” also survived, the Court said, because the young man need not show that he is a national celebrity, but must show only that there is a value in associating an item of commerce with his identity.  The Foundation did not show that there was no possibility he could prove that situation.

The Court also allowed the defamation claim to proceed because Hauf alleged that given her status in the areas of cancer, disease, and alternative medicine, her reputation was and would continue to be lowered by being affiliated with the Foundation, an organization with which she does not share similar views or goals.

The founder sought dismissal of the claims against him personally on the ground that the mere fact that he was an officer of the corporation was not enough to invoke personal liability for actions of the corporation.  The Court said it was “well established that corporate employees and officials are personally liable for all tortious and criminal acts in which they participate, regardless of whether they are acting on the own behalf or on behalf of the corporation.”  Since the complaint claimed that he was personally involved in the actions, the case against him was allowed to proceed.

YOU NEED TO KNOW

The idea of defamation by association is intriguing.  How bad do you have to be, and in whose eyes do you have to be bad, for mere association with your name to be cause for damages from defamation?

Those issues would never come up, of course, if the organization had obtained specific permission to use the story and the testimonials.  The lesson of this case is pretty clear: get permission and a release whenever you use another’s persona or likeness in publicity for your organization.

Article Archives >> Lead Stories >> March 1-15, 2008