RONALD S.W. LEW, Senior District Judge.
Currently before the Court is Defendant Shannon Packaging Co.'s ("Defendant" or "Shannon") Motion for Summary Judgment [27] ("Motion"), in which Defendant requests summary judgment in its favor on all three claims asserted against it by Plaintiff Caltex Plastics Inc. ("Plaintiff" or "Caltex"). Notice of Def.'s Mot. Summ. J. 1:21-2:4, ECF No. 27.
The Court, having reviewed all papers submitted and pertaining to Defendant's Motion [27],
1. Plaintiff Caltex, a California corporation with a principal place of business in California, manufactures, markets, and distributes polyethylene bags and laminated products for military and electronics. Pl.'s Resp. to Def.'s Statement of Uncontroverted Facts ("Pl.'s Facts") ¶ 11, ECF No. 35 (undisputed).
2. Defendant Shannon, also a California corporation with a principal place of business in California, is a leading supplier of custom pouches, tubing, and sheeting products that protect, unitize, and market products for a variety of industries.
3. The U.S. Department of Defense ("DOD") has a Qualified Products List ("QPL"), which lists products that the DOD has approved to be used in Defense Department contracts that require a "qualified" product.
4. The QPL does not apply to non-military contractors or applications, nor does it apply to military contracts that do not call for a qualified product.
5. Caltex's packaging products include flexible military packaging material that is qualified by the Department of the Navy ("DON") as meeting the DOD's MIL-PRF-81705 Type III specification for "flexible barrier materials, often supplied as bags."
6. The MIL-PRF-81705 specification's requirements are used to qualify types of flexible barrier material that is either Type I (moisture barrier) or Type III (static shielding).
7. Caltex's MIL-PRF-81705 Type III products have been approved by the DON and were placed on the DOD's QPL in February 2010. Pl.'s Facts ¶ 13 (undisputed).
8. At present, Plaintiff is the only entity qualified by the DON to provide materials designated MIL-PRF 81705 Type III to U.S. Defense contracts that require "qualified" product for MIL-PRF 81705 Type III material.
9. The QPL can be accessed by anyone on the Internet.
10. Plaintiff did not allege or produce evidence to support that Shannon ever stated that its products appear on the QPL or that Shannon's products have been qualified by the DOD.
11. Shannon's data sheets for some of Shannon's product, including Shannon's SS103 product, previously stated that the product was "[d]esigned to meet the performance of MIL PRF 81705 T3."
12. Shannon ceased to state that its products were "[d]esigned to meet the performance of MIL PRF 81705 T3" prior to the commencement of this lawsuit. Pl.'s Facts ¶ 6 (not disputed by admissible evidence); Walsh Decl. ¶ 8, ECF No. 30;
13. Shannon clearly communicates to its customers and potential customers that Shannon is not on the QPL for MIL-PRF 81705 Type III product, that Shannon products are not on the QPL, and that Shannon products are not qualified by the DOD. Pl.'s Facts ¶¶ 7, 23 (not disputed by admissible evidence); Walsh Decl. ¶¶ 12-15, Exs. C-D;
14. When accepting an order from a customer for its SS103 bags, Shannon advises the customer that the SS103 bags are not on the QPL. Pl.'s Facts ¶ 29 (not disputed by admissible evidence); Walsh Decl. ¶ 15.
15. Shannon's representation that its bags were "[d]esigned to meet the performance of MIL PRF 81705 T3" was based upon the results of testing Shannon conducted of its material, or which a third party conducted on behalf of Shannon of its material. Pl.'s Facts ¶ 8 (not disputed by admissible evidence); Walsh Decl. ¶ 11.
16. The bags Shannon described as being "[d]esigned to meet the performance of MIL PRF 81705 T3" have not been tested by Caltex, or by any third party on behalf of Caltex, to determine whether the material meets the performance requirements of MIL-PRF-81705 for Type III material. Pl.'s Facts ¶ 19 (undisputed).
17. Caltex tested the bags of some of its competitors, other than Shannon, to determine if those bags met the requirements of MIL-PRF-81705 Type III.
18. Shannon's data sheets for some of Shannon's product represent that the product has a physical property of "EMI Shielding" that is tested by the "MIL B 81705 C" "Test Method." Williams Decl., Ex. E.
19. No evidence of actual confusion has been offered by Caltex. Pl.'s Facts ¶¶ 21-22 (undisputed).
Federal Rule of Civil Procedure 56 states that a "court shall grant summary judgment" when the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Under Rule 56, the party moving for summary judgment has the initial burden to show "no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a);
Both parties make evidentiary objections, asserting that portions of witness declarations are inadmissible evidence. Pl.'s Objections to Walsh Decl., ECF No. 36; Def.'s Objections to Stein Decl., ECF No. 41; Def.'s Objections to Higgs Decl., ECF No. 42.
When determining a motion for summary judgment, the court may only consider evidence admissible at trial, though the form may be different at the summary judgment stage. Fed. R. Civ. P. 56(c)(2)-(4);
Plaintiff makes objections [36] to portions of the Walsh Declaration in support of Plaintiff's Motion for Summary Judgment. Plaintiff objects [36] on grounds of lack of foundation and relevance, among other arguments. "To the extent that the Court relied on objected-to evidence, [the Court] relied only on admissible evidence" and, therefore,
Defendant objects to the Higgs Declaration and portions of the Stein Declaration.
Defendant objects to the Declaration of Steven A. Stein because the Declaration "is misleading as to what occurred during and after the close of discovery in this matter" and raises irrelevant points. Def.'s Objections to Stein Decl. 1:23-2:12. Because the Court need not rely on the Stein Declaration to determine the present matter, Defendant's objections to the Stein Declaration are
Defendant objects to the Higgs Declaration on the grounds that "(1) it demonstrates Caltex's violation of the Stipulated Protective Order [ECF 24] in this matter; (2) the declarant appears to attempt to offer expert testimony without having been disclosed as an expert witness; and (3) the declarant's testimony is irrelevant." Def.'s Objections to Higgs Decl. 1:23-28. Defendant requests that the Court strike the entirety of the Higgs Declaration as being in violation of the parties' Stipulated Protective Order and the Federal Rules of Civil Procedure governing the disclosure of expert witnesses.
Defendant argues that the testimony in the Higgs Declaration goes beyond the scope of a lay witness and that Higgs was never disclosed as an expert witness, in violation of Rule 26(a) of the Federal Rules of Civil Procedure, which, under Rule 37(c)(1), should result in the exclusion of the Higgs Declaration.
To determine whether the Higgs Declaration should be excluded under Rule 37(c)(1), the Court must determine three things: (1) whether Higgs's testimony goes beyond the scope of lay witness opinion testimony, and is therefore expert testimony, under Rules 701 and 702 of the Federal Rules of Evidence; (2) whether Plaintiff failed to disclose Higgs as an expert witness, as required by Rule 26 of the Federal Rules of Civil Procedure; and (3) whether Plaintiff's failure to disclose was "substantially justified or harmless."
The Court must first determine whether Higgs's testimony goes beyond the scope of permissible lay witness testimony. Rule 701 of the Federal Rules of Evidence states that "[i]f a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is . . . (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702."
While a lay witness may testify based on their own experience, lay witness observations and opinions must be "common," i.e., based on common observations or experience, and must not require expertise.
Upon review of the Higgs Declaration, the Court finds that substantial portions of the Higgs Declaration go beyond the scope of permissible lay witness opinion testimony, as Higgs testifies to matters of expertise beyond "common" observations or experience.
Higgs testifies regarding MIL-PRF-81705 qualification specifications promulgated by the Department of the Navy, which include "designations as to the particular materials that must be used, the qualifications they must meet, their applications, and related specifications." Higgs Decl. ¶ 3. Higgs testifies about MIL-PRF-81705 "Performance Requirements," which, according to Higgs, include, among other requirements, "Seam fabrication," "Blocking resistance," "Contact corrosovity," "Static decay," "Surface resistivity," and "Electromagnetic interference (EMI) attenuation."
Such an opinion unquestionably requires a high level of expertise and "scientific, technical, or other specialized knowledge." Fed. R. Evid. 701. Higgs's opinions and conclusions are not based on common observations or experience but, instead, require "demonstrable expertise."
As such, the Court finds that portions of Higgs's testimony go beyond the scope of lay witness opinion testimony under Federal Rules of Evidence 701 and 702 and thus constitute expert witness testimony.
Second, the Court must determine whether Plaintiff complied with the disclosure requirements of Fed. R. Civ. P. 26(a)(2).
Rule 26 of the Federal Rules of Civil Procedure requires that parties make mandatory initial disclosures, including "the identify of any witness [the party] may use at trial to present evidence under Federal Rule of Evidence 702." Fed. R. Civ. P. 26(a)(2)(A). Rule 26 requires parties to not only disclose the identify of an expert witness, but to supply the opposing party with either a written report for "retained or specially employed" experts, or a statement of "the subject matter on which the witness is expected to present [Rule 702] evidence" and "a summary of the facts and opinions to which the witness is expected to testify" for all other experts. Fed. R. Civ. P. 26(a)(2)(C). Rule 26 states that such initial disclosures related to expert witnesses must be made "at least 90 days before the date set for trial" unless another date is stipulated to or ordered by the court. Fed. R. Civ. P. 26(a)(2)(D). Rule 26 requires the parties to "supplement these disclosures when required under Rule 26(e)." Fed. R. Civ. P. 26(a)(2)(E).
Here, it is clear that Plaintiff failed to disclose Higgs as an expert witness, as required by Rule 26(a)(2). Not only did Plaintiff fail to disclose Higgs as an expert, Plaintiff did not even disclose Higgs as a lay witness.
Because Plaintiff did not properly disclose Higgs as a witness, much less as an expert witness, and because the expert cut-off date in this Action has passed,
"Rule 37(c)(1) gives teeth to [Rule 26(a)(2)'s] requirements by forbidding the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed."
The Ninth Circuit has provided factors that may be used to "guide a district court in determining whether a violation of a discovery deadline is justified or harmless": "(1) prejudice or surprise to the party against whom the evidence is offered; (2) the ability of that party to cure the prejudice; (3) the likelihood of disruption of the trial; and (4) bad faith or willfulness involved in not timely disclosing the evidence."
Here, nothing supports a finding that Plaintiff's failure to disclose was "substantially justified." As in
Regarding prejudice or surprise, it is clear that the Higgs Declaration was a surprise to Defendant, as Defendant's Motion for Summary Judgment does not anticipate the material in the Higgs Declaration. Defendant even argues in its Reply that Plaintiff is trying to "amend its Complaint" by asserting completely new facts and legal theories not asserted in Plaintiff's Complaint. Reply 2:26-3:1, 6:15-7:9. It is also clear that the Higgs Declaration is highly prejudicial to Defendant, as Defendant had no opportunity to conduct discovery related to the content of the Higgs Declaration, no opportunity to depose Higgs about his technical testimony, and no reasonable opportunity to retain an expert who could testify on Defendant's behalf in response to the Higgs Declaration. At this late stage of the Action, within a few weeks of the trial date, Plaintiff does not have the practical "ability to cure the prejudice," and the delays caused by the new expert testimony would likely result in a "disruption of the trial."
Because Plaintiff's failure to disclose Higgs as a witness, as required by Rule 26, was not "substantially justified or harmless," the Court, pursuant to Rule 37(c)(1),
Regarding the Protective Order, Defendant states that the material in Exhibits 6 and 7 is designated "ATTORNEY'S EYES ONLY," which, under the Protective Order in this Action, cannot be disclosed to the receiving party due to the competitive harm that could result from such disclosure. Def.'s Objections to Higgs Decl. 2:17-3:19. Defendant states that Caltex's counsel allowed Caltex's Vice President, James Higgs, to review documents, including Exhibits 6 and 7, that were designated by Shannon as ATTORNEY'S EYES ONLY, even though Higgs did not fall within the category of persons allowed to review such material, as Higgs's company is Shannon's competitor.
The Court finds that Plaintiff violated the Protective Order [24] in this Action by disclosing Exhibits 6 and 7, properly marked "ATTORNEY'S EYES ONLY,"
To prove a prima facie case for false advertising in violation of 15 U.S.C. § 1125(a), a plaintiff must show, among other elements, that "the defendant made a false statement either about the plaintiff's or its own product."
Plaintiff alleges in its Complaint that "Shannon has misrepresented the nature, characteristics, qualities, and other material aspects of certain of its products" by representing in a film data sheet that Shannon's product is "[d]esigned to meet the performance of MIL PRF 81705 Type III." Compl. ¶¶ 18-19;
To prove that Shannon's representations are literally false, Plaintiff bears the burden of proving by affirmative evidence
Plaintiff offers the following allegations to support its claim of "literal falsity":
1) Shannon's products "have not been tested by the DON nor have they successfully passed the DOD qualifying activity," Compl. ¶ 20;
2) Shannon's products are not listed on the Qualified Products List under the Defense Standardization Program,"
3) Shannon's products "are not military grade products,"
4) Shannon's representations are "without the substantiation required under applicable laws," id. ¶ 27; and
5) Shannon's discovery material does not establish that Shannon's products were subjected to the MIL B 81705 C test method or to the performance requirements of MIL-PRF-81705 Type III, Opp'n 1:14-2:6.
Plaintiff's factual allegations related to the testing or qualification of Shannon's products by the Department of Defense ("DOD") or the Department of the Navy ("DON"), even if true, do not establish literal falsity.
As discussed in
Plaintiff's argument that Shannon's representations are literally false because Shannon's products "are not military grade products" also fails, if not for the above reasons, then for lack of proof. Plaintiff does not define the term, "military grade products," but if the term includes non-qualified products, then Plaintiff has failed to provide any admissible evidence showing that Shannon's products fail to meet military specification requirements.
Plaintiff's Complaint asserts that Shannon's representations are literally false because they are "without the substantiation required under applicable laws." Compl. ¶ 20. Plaintiff fails to identify any of the "applicable laws" to which Plaintiff refers and fails to provide any "applicable laws" that require Defendant to substantiate its advertising claims.
Plaintiff's allegation also misstates the law: in an action for false advertising, the burden of proof does not shift to the defendant to prove substantiation of advertising claims.
Though not mentioned in the Complaint,
An "establishment claim" theory of literal falsity is a "subspecies of the false by necessary implication doctrine"
Here, Plaintiff asserts for the first time in its Opposition to summary judgment that Defendant's representations that its product is "[d]esigned to meet the performance of MIL PRF 81705 T3" and was subjected to the MIL B 81705 C test method are advertisements "based on product testing." Opp'n 10:21-19:2.
Even if Shannon's representations qualify as establishment claims, Plaintiff still has the burden of producing evidence that "either attack[s] the validity of the defendant's tests directly or . . . show[s] that the defendant's tests are contradicted or unsupported by other scientific tests."
Without the Higgs Declaration, which has been excluded, Plaintiff fails to provide sufficient evidence showing that Shannon's product testing claims are "not sufficiently reliable to permit one to conclude with reasonable certainty that they established the claim made."
The Court finds that Plaintiff fails to show "literal falsity" by sufficient admissible evidence.
"[I]f a plaintiff cannot show literal falsity . . ., the plaintiff must prove, by extrinsic evidence, [that] the challenged advertisements tend to mislead or confuse consumers."
In conclusion, Plaintiff fails to meet its burden of proof as to the "falsity" element of Plaintiff's state
"California's Unfair Competition Law ("UCL") prohibits any `unlawful, unfair or fraudulent business act or practice.'"
To claim a UCL violation under the "unlawful" prong, a plaintiff must prove the defendant engaged in a business act or practice "`forbidden by law.'"
A "fraudulent act" under the UCL "may include a false statement, or one which, though strictly accurate, nonetheless has the likely effect of misleading or deceiving the public."
There is at least a three-way split among California appellate courts as to the proper standard for an "unfair" act under the UCL.
In conclusion, the Court finds that Plaintiff has failed to meet its burden of proof for establishing a claim of unfair competition under California's UCL. As such, the Court
Defendant requests an award of costs as the prevailing party. Def.'s Mem. P&A Mot. Summ. J. 15:28-16:1, ECF No. 28. Because the Court does not find that Plaintiff's claims against Defendant were "groundless, unreasonable, vexatious, or pursued in bad faith," Defendant's request for costs is
Based on the foregoing, the Court
As such, it is
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case." Fed. R. Evid. 702.
Furthermore, Plaintiff requested samples of product that Shannon sold as "`meets the electrostatic requirements' of MIL-B-81705 Type III," but there is no evidence that Shannon ever sold any products under that representation. As such, Shannon's failure to respond to that late discovery request is justified even if the request was not late. Stein Decl., Ex. C, at 3, ¶ 8.
Plaintiff asserts that the following vague allegation in its Complaint enables Plaintiff to fairly assert new facts under a new establishment claim theory of liability: "Defendants made express and implied claims about the Shannon products without the substantiation required under applicable laws." Pl.'s Resp. to Def.'s Statement Uncontroverted Facts ¶ 3 (quoting Compl. ¶ 27). Such an allegation does not put Defendant on "fair notice" of an establishment claim theory of liability, and no other allegations in the Complaint do so, either. As in
But, as discussed herein, even if Plaintiff's allegations in the Complaint could encompass the new facts and legal theory asserted in Plaintiff's Opposition, Plaintiff's claims still fail for lack of evidence.
