The Best Puffery Article Ever

AuthorDavid A. Hoffman
PositionAssistant Professor of Law, Temple University Beasley School of Law

David A. Hoffman: Assistant Professor of Law, Temple University Beasley School of Law; J.D., Harvard Law School; B.A., Yale College. I am grateful to Allison Brill, Mark Dugan, Nick Lierman, Olga Wayne, and especially Marcie Seiler for research assistance. Jane Baron, Jeffrey Dunoff, Daniel M. Filler, George Geis, Craig Green, Duncan Hollis, Peter Huang, Jonathan Lipson, Salil Mehra, Ivan Preston, Jeffrey Rachlinski, Kaimipono Wenger, and Joshua Wright provided helpful commentary at various stages in the completion of this Article. This work was generously supported by a summer grant from the Beasley School of Law. The views presented are mine, as are any errors.

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I Introduction

Glenn Gold had a hard choice to make: where to attend law school. Considering his alternatives, he decided on the Bridgeport School of Law, claiming to have relied particularly on the Dean's boast of a "friendly interaction" between students and professors.1 Gold-like many aspiring lawyers-would soon meet a professor who "bombarded him with questions that culminated in a violent vocal outburst when he perceived that [Gold] had not properly prepared for class."2 After his first year, when the school dismissed him for failing to maintain a minimum grade point average, Gold sued for fraud.

A jury found for Gold, but the Appellate Court of Connecticut reversed, holding that the challenged statements were "akin to mere 'puffing'" and could not give "rise to liability."3 Why? Because, "'favorable comments by sellers with respect to their products are universally accepted and expected in the market- place.'"4 That is, Bridgeport won because-in the court's view-it is incredible that law students and their professors will get along, even though the school had allegedly sold itself based on that very quality.

We are constantly exposed to speech like that of Bridgeport, encouraging us to buy goods, invest in stocks, and transact for services. This speech is often intentionally misleading, is usually vivid and memorable, and induces many of us to rely on it. But the law, which normally punishes lies for profit, encourages this speech by immunizing it as "mere puffery." "Puffery" is an increasingly important defense against criminal and civil actions in common law and regulatory settings, resulting in thousands of citations in cases and law reviews.5 However, puffery doctrine, a major element of the law of fraud and promissory obligation, is missing an explanatory theory.6

Most scholarly discussions of puffery have focused on one of the many discrete legal regimes in which puffery arguments are articulated:7 e.g., mail Page 1397 fraud,8 securities fraud,9 common-law fraud,10 legal ethics,11 common-law contracts,12 Uniform Commercial Code warranty cases,13 promissory misrepresentation,14 false advertising,15 and even law-review-publication decisions.16 Such articles are usually directed at practitioners and tell a simple story. Puffery is a "vague statement" boosting the appeal of a service or product that, because of its vagueness and unreliability, is immunized from regulation. Unfortunately, according to the story, judges sometimes are inconsistent in applying the "vague statement" standard;17 therefore, risk-averse clients would be well-advised to avoid hyperbolic posturing as much as possible.

Because each legal context where puffery appears serves quite different ends, it is possible to see courts' use of the word "puffery" as an example of convergent evolution.18 That is, there is no core theme unifying applications of the puffery defense. Such concerns have led many jurists to conclude that the puffery defense is lawless.19 This view is simply wrong. Page 1398

The basic claim I explore in this Article is that when courts confront fraud claims, they do so guided by a view of "bad" and "good" consumption.20 Courts seek to discourage speech leading to "bad" consumption and to protect speech leading to "good" consumption.21Courts believe that "bad consumption" happens when consumers purchase something as a result of believing false facts stated or implied by commercial speech. "Good consumption" is purchasing in the absence of false facts. Thus, the law views the consumption process as rational and factual, and it seeks to protect regretted purchasing decisions through liability and regulation only when those decisions are influenced by untruthful sellers' speech.

The "puffery defense" functions to draw a line between lawful and unlawful speech, based on legal authorities' assumptions about the rationality of consumption. To the extent that regulators and courts believe that some speech produced consumption that could not possibly have been "bad" (consumers could not have relied on the speech, or it implied no false facts), the law is more likely to label that speech "puffery" and immunize it. By contrast, if the speech could produce "bad" consumption, then the puffery defense will fail. Thus, the defense is an implicit indication of what legal authorities perceive as the motivation behind economic transactions.

Therefore, rule-of-law objections to the puffery defense are misdirected. The problem with puffery doctrine is not doctrinal chaos; courts and regulators have simply chosen a normative target that they are institutionally ill-suited to hit. In this context, walking the line between overdeterrence of speech and underdeterrence of fraud turns out to be beyond courts' competence. This institutional incapacity, coupled with a traditional fear of overregulating speech, leads authorities to overprotect commercial speech from liability.

Part II of this Article begins to deconstruct the myth of the puffery defense's incoherence by analyzing its application in a number of common law and regulatory actions. By comparing uses of the puffery defense in false- Page 1399 advertising, securities, Uniform Commercial Code, and promissory estoppel settings, I unearth the implicit goals courts and regulators are advancing when they protect often wildly misleading speech.

Part III of this Article considers whether current puffery doctrine is required by the First Amendment. The question is significant because it provides a baseline for reforms that would better tailor applications of the puffery defense to a realistic view of consumption. As the Supreme Court has held, the Free Speech Clause "requires that we protect some falsehood . . . to protect speech that matters."22 Is puffery the type of "falsehood" that must be protected under current First Amendment doctrine? We do not know, because no court has authoritatively resolved the issue, and also because scholarship to date has not considered the First Amendment implications of puffery doctrine. Nevertheless, the Supreme Court is highly likely to confront the puffery problem, or a variant, in the near future as part of its unsettled commercial-speech jurisprudence.23 Thus, Part III develops a constitutional framework the Court could use when it considers future commercial-speech cases involving puffery, and suggests how that framework ought to be applied to the regulatory and common-law contexts introduced in Part II.

To the extent that puffery doctrine is not constitutionally required, is it good policy to immunize exaggerated commercial lies? I consider this question in Parts IV and V of this Article.

Part IV considers the policy case for expanding the scope of puffery immunity using both rational and heterodox models of consumption. As I show, both models depend on assumptions about the relationship between puffery and purchasing decisions, which fail to describe actual behavior particularly well. I offer an alternative model of the relationship between puffing speech and consumption, based on a rich literature found in advertising and marketing journals.

Part V demonstrates institutional problems with the current formulations of the puffery defense. Courts and regulators are bad at distinguishing speech that produces "good" or "bad" consumption because they systematically underestimate when consumers rely on hyperbolic speech and the extent to which this speech communicates facts. Instead of this problematic approach, I develop a novel model of puffery as a type of speech that implies false facts as an externality. I then offer a burden-shifting scheme of liability for puffery, which would force sellers to consider the consumption-distorting aspects of their speech as part of their expected liability costs. This approach would help courts and regulators to accomplish their line-drawing task by reducing the number of puffing claims in general, Page 1400 and by systematically providing decision makers with evidence on the puffery question. It would, therefore, significantly improve the policy and constitutional underpinnings of our consumer-protection laws.

II What Is Puffery?

Puffery has a common,24 a commercial,25 and a legal definition. Legally, the most significant characteristic of "puffery" is that it is a defense to a charge of misleading purchasers of goods, investments, or services, or to a charge that a promisor has made a legally cognizable promise. That defense, whether or not actually asserted by a commercial speaker, highlights the general rule that speech that misleads consumers is presumptively unlawful. Defendants in turn argue: "This speech, which would otherwise be unlawful because it is...

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