WILLIAM C. BRYSON, Circuit Judge.
Before the Court is
Thomas & Betts Corporation ("T&B") and the plaintiffs ("Robroy") compete in the market for polyvinyl chloride ("PVC") coated electrical conduit, which is used to carry electrical wiring in buildings or other structures. The two companies are the major suppliers of PVC-coated electrical conduit in the United States. Robroy offers its conduit products under several brand names. T&B's conduit is known as "Ocal."
On several occasions, disputes have arisen between the competing companies (including the predecessor producer of Ocal). Robroy has complained that T&B and its predecessor have made false claims about Ocal and about Robroy's products. In 2015, the dispute came to a head when Robroy filed this action charging that T&B had engaged in false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a), and had committed the Texas state law torts of unfair competition and trade defamation.
Robroy alleged that in advertising and in direct contacts with customers T&B had falsely claimed that only its Ocal products had certain features, and that Robroy's products lacked those features. In particular, T&B claimed that only its Ocal products met the UL 6 standard, which is the quality standard for PVC-coated electrical conduit established by a national standards-setting organization, Underwriters Laboratories, Inc. T&B also claimed that only its Ocal products satisfied the ANSI C80.1 standard, a standard established by the American National Standards Institute, and the NEMA RN-1 standard, a standard established by the National Electrical Manufacturers' Association. In addition, T&B claimed that "only Ocal" offers local installation training and certification. As to Robroy, T&B's promotional materials claimed that Robroy "abrade[s] the surface of the conduit prior to the application of the PVC," thereby "remov[ing] the protective coatings that the customer is paying for." T&B further claimed that Robroy used a standard employed by ETL Semko Intertek, "because UL standards are not being followed by the abrading of the conduits [sic] exterior zinc finish."
T&B has now moved for summary judgment on both the federal and state law claims. As to the federal Lanham Act claim, T&B argues that Robroy has not offered sufficient evidence that the false statements allegedly made by T&B agents caused any cognizable injury to Robroy. As to the state law claims, T&B argues that those claims also fail because of lack of proof of causation; in addition, T&B argues that Robroy's unfair competition claim fails because Robroy is not a "consumer" within the meaning of the Texas Deceptive Trade Practices and Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.45.
The Lanham Act provides, in pertinent part:
15 U.S.C. § 1125(a).
A plaintiff must establish five elements to make out a prima facie case of false advertising under the Lanham Act: (1) that the defendant made a false or misleading statement of fact about a product; (2) that the statement either deceived or had the capacity to deceive a substantial number of potential customers; (3) that the deception was material, in that it was likely to influence the consumers' purchasing decisions; (4) that the product was in interstate commerce; and (5) that the plaintiff has been or is likely to be injured as a result of the statement at issue.
In seeking summary judgment on Robroy's claim under the Lanham Act, T&B focuses exclusively on the element of causation. T&B contends that the evidence Robroy has pointed to during the summary judgment proceedings is insufficient to give rise to a genuine issue of material fact on the issue of causation, and that summary judgment should therefore be entered in T&B's favor. The Court disagrees. From the Court's review of the evidence in the summary judgment record, there is sufficient evidence of causation to create a genuine issue of fact on that element and thus to require that Robroy's Lanham Act claim be resolved by a jury.
T&B's position is that, even assuming its agents made false statements about its products and Robroy's products, the evidence does not show that those statements proximately caused the requisite injury to Robroy by causing customers to shift their purchases to T&B at Robroy's expense. T&B argues that Robroy's evidence showed no more than that it "simply faced the speculative harm of increased competition for a customer project or potential sale—not that it actually lost sales or incurred another such cognizable harm as a direct result of the statementsat-issue."
T&B makes three points in support of its motion: (1) that Robroy has never been "kicked off" a specification for PVC-coated conduit for any reason related to the T&B statements at issue; (2) the evidence shows that customers made purchasing decisions based on price, quality, availability, and other factors having nothing to do with the alleged false statements; and (3) the evidence shows that customers made decisions to add T&B's Ocal product to the specifications for particular projects and to purchase Ocal based on price and other factors, not because of the allegedly false statements.
Robroy offers two responses: First, Robroy argues that it is entitled to a presumption of causation of competitive injury, because the statements at issue were literally false and either explicitly or implicitly compared T&B's products with Robroy's. Second, Robroy contends that even without the presumption of injury, the evidence is sufficient to support its assertion that T&B's false statements caused Robroy's injury, i.e., caused Robroy to lose contracts that it otherwise would have won.
Robroy argues that in a case such as this one, involving a two-competitor market, T&B's false statements to potential customers about the competition were necessarily directed at Robroy. As such, Robroy invokes a line of cases holding that deliberately false or deceptive comparative advertising gives rise to a rebuttable presumption that the causation element of the Lanham Act cause of action is satisfied.
A number of circuits have adopted the presumption of causation in such cases.
In addition, numerous district courts have reached the same conclusion, including district courts in the Fifth Circuit.
Against this array of authority, T&B offers very little. It begins by asserting that the Fifth Circuit has not recognized a presumption of causation. While that is true, the Fifth Circuit has not rejected the presumption; it simply has not addressed the issue either way. T&B has pointed to no suggestion in any Fifth Circuit case that, if presented with an argument for recognizing the presumption of causation under circumstances in which the presumption has been recognized by the other circuits, the Fifth Circuit would strike out on its own and reject the presumption.
While T&B does not point to any Fifth Circuit case that rejects the presumption of causation, it hints at one point that the court's decision in
Other than the reference to the
The Fifth Circuit decision that, in the Court's view, requires the closest attention is
Logan argued that he was entitled to all of the profits on sales of products that HoneyBaked had made that were the result of HoneyBaked's false advertising. The court, however, rejected that argument and held that "where a plaintiff who has brought a Lanham Act claim for false advertising has failed to present evidence that the defendant benefitted from the alleged false advertising, the plaintiff will not be permitted to recover any of the defendant's profits . . . ." 263 F.3d at 465.
Although the court declined to apply a presumption of causation in the
T&B next asserts that "courts for decades have interpreted the Lanham Act's false-advertising prohibition as requiring proof that the false advertising at issue caused damage and the injury that plaintiff claims," and that the Act indicates the need for proof of a causal link between the damages claimed and the defendant's false advertising.
T&B contends that "it is ordinarily not the place of a lower court to impose on a reviewing court a new point of law contrary to that court's existing precedents."
As for T&B's assertion that courts have required proof of causation in Lanham Act cases for decades, that is true. What is also true, however, is that for decades courts have recognized that the original proof of causation in comparative false advertising cases can be established through a rebuttable presumption. T&B's argument that it is significant that Congress has not acted to adopt the presumption of causation in such cases actually cuts against T&B. Given that courts have uniformly recognized the presumption for the past 30 years, Congress's silence in the face of that now well-established line of authority suggests, if anything, that Congress is satisfied with the status quo.
Finally, T&B argues that even if the presumption of causation were applicable to willful, literally false comparative advertising, it would not be applicable in this case, because the PVC-coated conduit market is not a "two firm market," and because T&B's "Only Ocal" statements "do not explicitly reference or compare Robroy's PVC-conduit products."
Aside from the applicability of the presumption of causation, Robroy points to evidence in the record that creates a triable issue of fact as to whether T&B's false statements led directly to sales to T&B that otherwise would have gone to Robroy. Robroy's theory of the case is that the evidence shows that (1) in order to bid on a project, a manufacturer was required to be included on the specification for the project; (2) there were numerous projects on which T&B was not initially on the specification; (3) those contracts would have gone to Robroy but for T&B's actions that resulted in T&B being added to the project specifications; (4) it was T&B's false statements that caused project managers and engineers to alter the specifications to include T&B as a qualified bidder on those projects; and (5) on those projects on which T&B won the contract, Robroy suffered injury from the loss of a contract it would have won but for T&B's false advertising.
T&B responds that its customers purchased T&B's products because of price, quality, and availability, and not because of T&B's false statements. In reply, Robroy argues that T&B is focusing on the wrong part of the process. Robroy explains that while it may be true that in particular instances customers chose T&B's products over Robroy's products for reasons other than T&B's false statements, that occurred
As noted, for purposes of the summary judgment proceedings T&B does not dispute that it made false statements regarding Robroy's products and its own Ocal product. It also does not dispute that those false statements had the desired effect of deceiving customers. What T&B says Robroy has failed to show is that the false statements actually caused Robroy's injury, i.e., that the false statements were responsible for T&B winning contracts that otherwise would have gone to Robroy. The Court has reviewed the evidence Robroy has proffered on that issue and is persuaded that it is sufficient to defeat summary judgment.
To begin with, the false statements were clearly designed to cause engineers on the projects in question to "break" the specifications and "open" them to T&B's Ocal product.
Robroy proffers evidence that T&B's representatives made false statements disparaging the ETL standard and making false claims that Robroy's PVC-coated conduit products did not comply with other industry standards. For example, Robroy cites a form letter sent on behalf of T&B to engineers on numerous projects made a number of allegedly false statements about Robroy's compliance with industry standards, including the UL6 standard, the ANSI C80.1 standard, and the NEMA RN-1 standard. The letter included the following:
Dkt. No. 156-23, at ROB000028-29. Robroy points to evidence that it does not "remove" the protective coatings on the PVC-coated conduit, but instead abrades the surface of the zinc coating to ensure better bonding of the outermost PVC coating. Dkt. No. 156-3, at 112-13. Robroy's evidence also shows that Robroy's conduit satisfied the applicable UL standard and that when a T&B representative inquired about whether Robroy's products were certified under the UL standard, Underwriters Laboratories informed T&B that they were. Dkt. No. 156-73, at TNB00048006-07.
In addition, Robroy proffers evidence that T&B made a number of statements about Ocal on its website, stating that "only Ocal" had various qualities. Given that Robroy's evidence shows that the PVC-coated conduit market is essentially a two-competitor market, the evidence would support an inference that those statements constituted a direct comparison between T&B's product and Robroy's. T&B's website and other advertising made the following representations, according to Robroy's evidence:
Dkt. No. 156-3, at 69-70; Dkt. No. 156-24.
Robroy's evidence includes other statements made on behalf of T&B to project engineers and others involved with projects on which T&B sought to bid. Those statements included assertions that Ocal "is UL listed with both the HDG zinc coating and PVC coating investigated per UL 6—Rob Roy is not," that Ocal "is UL listed for UV resistance—Rob Roy is not," that "Ocal provides an undisturbed HDG zinc finish allowing for [satisfying the requirements of] NEMA RN-1," that "Ocal offers custom colors—Rob-Roy does not," that "Ocal offers custom colors—Rob Roy does not," and that "Ocal offers local certified installation training—Rob Roy does not." Dkt. No. 156-31, at 74223. In other promotional materials, T&B asserted, similarly, that "only Ocal" is "UL listed for both zinc and PVC"; only Ocal "meets NEMA RN-1 regarding undisturbed zinc coating"; only Ocal is "UL listed for UV resistance," only Ocal offers "local installation training and certification," and only Ocal offers "custom colors." Dkt. No. 156-30. Those statements were incorporated into a variety of T&B promotional materials and communications with project engineers, many of which consisted of direct comparisons between Ocal and Robroy's product, as Robroy's evidence makes clear.
Other evidence shows that T&B provided the same information as "talking points" and training materials for its representatives to use in their efforts to persuade project engineers to include Ocal in their projects' specifications. Dkt. Nos. 156-45, 156-46, 156-47, 156-48, 156-93. The evidence also showed that a form letter including several of these false statements was posted on an internal bulletin board that was available to the project specification specialists at T&B who were responsible for attempting to "break" specifications that specified only Robroy products or ETL-listed conduit. Dkt. No. 197-9, at 132-35.
Robroy proposes to prove that T&B's false statements caused it injury through evidence that the false statements enabled T&B's agents to "break" the specifications on a number of projects that had been designated for Robroy products or products that met the ETL standards. Robroy's evidence includes evidence that the specifications on a number of projects were changed after T&B representatives contacted the responsible engineers on those projects. Robroy has also adduced evidence of statements made by the T&B representatives to the effect that their promotional efforts had been successful. In particular, Robroy's evidence includes claims by T&B representatives that the form letter that T&B used with project engineers had gotten "several large project approvals," Dkt. No. 156-91, at TNB00029235, and that a letter touting T&B's "ETL vs. UL 6" had "helped convert over $300k Ocal over the past 1-1/2 years." Dkt. No. 156-94, at TNB 00119391;
Robroy proffers detailed evidence regarding several specific projects; that evidence supports its claim that T&B's false statements caused Robroy injury. For example, Tom Russ, a senior T&B sales representative, used the T&B form letter, which contained several alleged falsehoods, in an effort to "open" the specification for a project on the Ben Franklin Bridge in Philadelphia. After T&B managed to open the specification to enable it to bid,
On a second project, Mr. Russ sent the engineer copies of T&B's marketing materials containing the "only Ocal" statements; he subsequently recontacted the engineer and re-sent those materials. Dkt. Nos. 156-102, 156-103. The following day, Ocal was approved as an acceptable manufacturer on the project. Dkt. No. 156-105. And in a third instance, the engineer in charge of the project informed T&B that he was removing the ETL test from the specification because "it was proprietary and not an industry standard." That assertion was false, according to Robroy's evidence, but it tracked the false representations that had been included in T&B's promotional materials. Dkt. Nos. 156-85 through 156-87.
Citing
There is ample evidence that the statements at issue in this case were false. Moreover, the context in which the statements were made and the contemporaneous statements of T&B representatives provide strong evidence that the false statements were made in order to "break" the specifications on the target projects and ultimately to win contracts for T&B. But beyond that, and unlike in
This is not a case in which the proof is limited to showing no more than that the defendant's representatives intended to mislead potential customers or that false statements were made in the course of competitive bidding, after which one party lost the project. Here, according to Robroy's evidence, Robroy was initially designated as the sole prospective bidder on numerous projects, either because the specifications called for Robroy conduit or because the specifications called for conduit that met a quality standard only Robroy's conduit could meet. According to Robroy's evidence, Robroy was thus essentially guaranteed to be awarded a contract on those projects, until T&B "broke" the specifications, obtained the right to bid, and ultimately was awarded the contract. Robroy's theory is that T&B made false statements about Robroy's product and Ocal, and that it is reasonable to infer that those false statements played a pivotal role in the customers' decisions to allow T&B to bid on the projects.
The inferences on which Robroy relies are at least sufficiently reasonable to give rise to a genuine issue of fact. The strongest aspect of the inference that Robroy asks the Court to draw is that Robroy was the sole qualified bidder on certain projects until T&B contacted the engineers on those projects and persuaded them to open the specifications to T&B. While it is possible that the engineers decided to open the specifications for reasons unrelated to the falsehoods that were part of T&B's promotional efforts, there is ample room for a finder of fact to infer that the promotional materials, which were heavily focused on attacking Robroy's products, were very important to the decision to open the specifications. That inference is strengthened by the evidence that T&B's own representatives expressed their view that the characterizations of Robroy were responsible for the engineers' decisions to open the specifications to bidding by T&B, and that one of the project engineers repeated one such alleged falsehood when changing the specification to allow T&B to bid. Under these circumstances, the Court concludes that a reasonable jury could find that T&B's misrepresentations caused the injuries suffered by Robroy.
The parties devote very little attention to Robroy's request for injunctive relief; instead, they focus almost entirely on Robroy's claim for damages and the elements necessary to entitle Robroy to an award of damages. The elements that a plaintiff must prove in order to be entitled to an injunction under the Lanham Act are somewhat different from those that the plaintiff must prove to be entitled to damages. In order to be entitled to an injunction, a Lanham Act plaintiff need not prove actual injury, but only that consumers are likely to be misled and that the plaintiff is likely to be injured as a result.
The Court therefore DENIES T&B's motion for summary judgment with respect to Robroy's Lanham Act claim.
With respect to Robroy's claims of trade defamation (Count II of the complaint) and unfair competition (Count III of the complaint), T&B makes two arguments. First, T&B reprises its argument that Robroy has not shown a causal relationship between T&B's false statements and the injuries to Robroy. However, the same evidence that suffices to meet the causation requirement of the Lanham Act satisfies the causal relationship requirement for the two state law torts. Second, with regard to the unfair competition claim, T&B argues that the claim fails as a matter of law because Robroy does not qualify as a "consumer" within the definition of that term as used in the Texas Deceptive Trade Practices and Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.45.
As to the second argument, Robroy is asserting a common law unfair competition claim, not a claim under the Deceptive Trade Practices Act. It is therefore immaterial that Robroy is not a "consumer" within the meaning of that Act and accordingly was not able to take advantage of the Act's provisions, including the statutory procedures and remedies,
T&B cites no authority in support of its argument that an unfair competition claim under Texas law requires that the plaintiff qualify as a party who could bring an action under the Texas Deceptive Trade Practices Act. To the contrary, all that is required to establish the common law tort of unfair competition in Texas is proof that the defendant committed an illegal or tortious act that interfered with the plaintiff's ability to conduct its business.
T&B argues that Robroy's contention that its unfair completion claim is a common law claim under Texas law "is not a fair or reasonable reading of Robroy's pleading," and that Robroy's allegations in the complaint "tie its unfair-competition count" to the Texas Deceptive Trade Practices Act.
T&B has not pointed to any authority that holds that an act that is unlawful under the Texas Deceptive Trade Practices Act cannot also constitute an unlawful act for purposes of the Texas common law tort of unfair competition. The Court therefore concludes that T&B has not shown that Robroy is required to prove that it is a "consumer" in order to pursue its claim of unfair competition. Nor has T&B shown that the claims of unfair competition and business disparagement are otherwise deficient. The motion for summary judgment as to Robroy's state law claims is therefore DENIED.
IT IS SO ORDERED.