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Court of Appeal:
Suit Against McDonald’s Over Diversity Pledge Properly Axed
Opinion Says Complaint by Media Companies, Alleging That Fast Food Giant Failed to Live up to Promise to Increase Advertising Dollars on Black-Owned Platforms, Was Properly Dismissed as SLAPP
By a MetNews Staff Writer
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BYRON ALLEN entrepreneur |
Div. Two of this district’s Court of Appeal yesterday affirmed an order granting McDonald’s USA LLC’s special motion to strike a complaint by two media companies—owned by Black entrepreneur Byron Allen—alleging that the fast food company reneged on a promise to allocate more advertising dollars to racially diverse platforms.
The plaintiffs sought $100 million in damages.
At issue is a pledge made by McDonald’s in 2021 to “accelerat[e] the allocation of advertising dollars to diverse-owned media companies, production houses and content creators” over the course of four years. Specifically, the plan promised to increase spending with Black-owned businesses, raising the expenditures from 2% to 5% by 2024.
Weather Group LLC and Entertainment Studios Networks Inc., both part of the Allen Media Group (“AMG”), claim that they submitted a $30 million advertising proposal with McDonald’s after the pledge was announced, but secured only $2.1 million in revenues. In 2023, the media groups filed a complaint against the fast-food giant for making a false promise, asserting a claim under Civil Code §1711, which provides:
“One who practices a deceit with intent to defraud the public, or a particular class of persons, is deemed to have intended to defraud every individual in that class, who is actually misled by the deceit.”
After McDonald’s moved to strike the complaint, under Code of Civil Procedure §425.16, then-Los Angeles Superior Court Judge Mel Red Recana (now retired) granted the motion, finding that the plaintiffs failed to meet their burden to show a probability of prevailing on the merits of their claim.
Presiding Justice Elwood Lui authored the unpublished opinion affirming the order. Justices Judith Ashmann-Gerst and Anne Richardson joined in the opinion.
Allegations in Complaint
In the complaint, the plaintiffs allege:
“AMG is by far the largest African American-owned media company in the county, and Plaintiffs represent over 90% of that category. As such, to fulfill its commitment, any allocation would require McDonald’s to spend in excess of $50 million annually to advertise on Plaintiffs’ properties.”
They contend that McDonald’s “rebuffed” the plaintiffs’ proposal, instead offering to spend “only a tiny fraction of its advertising budget on Plaintiffs’ properties” and fell “well short of its public commitment.”
The complaint adds:
“McDonald’s lied about its spend with Black Owned Media and never had an intent to fulfill its commitment to reach 5% by 2024.
“Plaintiffs have been harmed, as have all Black Owned Media, by McDonald’s failure to honor its promise.”
Weather Group and Entertainment Studios Networks sought punitive and exemplary damages as well as permanent injunctive relief requiring the company to “[s]pend at least 5% of its ad budget on Black Owned Media annually” and to provide annual reports to the court showing compliance.
Motion to Strike
Lui noted that under §425.16, the initial inquiry was whether McDonald’s announcement of its plan entailed an exercise of its First Amendment rights in connection with a matter of public interesr—which was conceded—with the the burden shifting to the plaintiffs to establish a probability of prevailing on the merits of their false-promise claim.
Turning to the second prong, he said that §1711 does not independently proscribe any oaer5icukar conduct but pointed to Civil Code §1709—which provides that “[o]ne who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers”—as giving rise to a cause of action for fraud.
He reasoned:
“[T]he Plan is not an actionable promise. It set a goal to increase future spending with unnamed media companies, production houses and content creators, without stating how the money would be divided among the three groups. The plain language of the Plan contradicts appellants’ claim that it was a promise to spend $50 million with them specifically.”
Lui added:
“[A]part from their inability to show a promise, appellants did not demonstrate that McDonald’s intended to deceive them or induce their reliance. They made a pitch for business, as they had done regularly since 2013. Nothing shows that McDonald’s solicited their proposal, and the Plan did not specify how candidates would be selected. Appellants could not reasonably presume that they would be ‘the most significant direct beneficiaries of McDonald’s Plan,’ as they argue.”
The jurist also declared that the plaintiffs “did not show nonperformance,” commenting that “[w]hen appellants filed this lawsuit on May 4, 2023, McDonald’s still had over a year and a half to reach the 5 percent goal by the end of 2024.”
Weather Group and Entertainment Studios Networks also contend that McDonald’s announcement is commercial speech and, as such, is statutorily exempt from the anti-SLAPP statute under Code of Civil Procedure §425.17.
Liu acknowledged that “[t]he Legislature limited the scope of the anti-SLAPP statute by enacting section 425.17” but found that the classification of McDonald’s activities as “commercial” fails. He wrote:
“The Plan did not sell goods or services….No commercial transaction was proposed to consumers. Though an advertisement may not be protected if it ‘links a product to a current public debate’…, no product is linked to a public debate here. The Plan did not ask the public to patronize a McDonald’s restaurant or reference a product.”
He continued:
“In context, amid the national debate on racial justice, McDonald’s sought to cast itself as a good corporate citizen. Any effect on sales was theoretical. Among some segments of the population, a company’s DEI aspirations could lower sales.”
The plaintiffs point to boilerplate language at the end of the press release saying McDonald’s “serves a variety of menu items…to nearly 25 million customers every day.” However, Liu said that “[t]his is not an advertisement for a product or service, and it would torture the English language to say otherwise” and concluded that “appellants have not carried their burden of showing that section 425.17 applies here.”
The case is Weather Group LLC v. McDonald’s USA LLC, B336996.
Acting on behalf of the plaintiffs were Louis R. “Skip” and Miller Eleanor Saegert Ruth of the Century City firm of Miller Barondess. John Charles Hueston, of the Newport office of Hueston Hennigan LLP, and Moez M Kaba, Michael Hayes Todisco, and Karen Lou Ding, of the firm’s Los Angeles office, represented McDonald’s on appeal.
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