Precision IBC, Inc. v. PCM Capital, LLC et al
Order re: 145 Objection & Motion to Amend 130 Order. Mag. Judge's 130 Order is REVERSED in part & AMENDED to the extent that Plf's 98 Motion for Protective Order & and to Quash Non-Party Subpoenas is DENIED as set out. Signed by Judge Callie V. S. Granade on 7/12/2011. (tot)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
PRECISION IBC, INC.,
PCM CAPITAL, LLC., et al.,
CIVIL ACTION NO. 10-0682-CG-B
This matter is before the court on the magistrate’s order of June 6, 2001 (Doc.
130), defendants’ objection to and motion to amend the magistrate’s order of June 6,
2011 (Doc. 145), and plaintiff’s response in opposition to defendants’ motion (Doc. 162).
For reasons which will be explained below, the court finds that the magistrate’s order
should be reversed in part and that plaintiff’s motion for protective order and to quash
non-party subpoenas (Doc. 98) should be denied.
Plaintiff’s complaint asserts a claim for violation of 43(a) of the Lanham Act, 15
U.S.C. 1125(a) and for libel. (Doc. 1). Plaintiff and defendants operate competing
businesses that sell and lease intermediate bulk containers (“IBCs”) designed to store
and transport hazardous, sensitive, and degradable materials. A portion of plaintiff’s
inventory of 350 gallon stainless steel tanks were manufactured in China. Plaintiff
alleges that defendants posted on their website and included in advertising materials
several statements that tanks imported from China are “lower quality” and have
“serious quality issues” and advises customers that they should “stay away from” and
not “take the chance” with Chinese IBCs and that the “risks borne of using such units
far outweigh the apparent savings.” Plaintiff contends that the statements are false
and intended to mislead IBC consumers about the nature, characteristics, and quality
of plaintiff’s tanks, which were imported from China.
Defendants object to a portion of the magistrate’s order dated June 6, 2011.
(Doc. 130). In that order, upon plaintiff’s motion for protective order and to quash
non-party subpoenas (Doc. 98), the magistrate found that portions of the subpoenas
should be quashed because they sought information that was not relied upon by
defendants when they made the advertising claims in question. (Doc. 130, pp. 8-9). As
a result, the magistrate held that categories one through seven of the subpoenas
should be deleted and that defendants could not retain any documents that had
already been provided in response to categories one through seven. (Doc. 130, p. 9).
Defendants object to these findings and request the court to overrule the magistrate’s
partial grant of plaintiff’s motion for protective order and to quash non-party
subpoenas. (Doc. 145).
Upon a party’s objection to any non-dispositive matter assigned to the
magistrate judge, the district court “shall consider such objections and shall modify or
set aside any portion of the magistrate judge’s order found to be clearly erroneous or
contrary to law.” FED.R.CIV.P. 72(a); Accord, San Shiah Enterprise Co., Ltd. v. Pride
Shipping Corp., 783 F.Supp. 1334, 1335 (S.D.Ala. 1992); see also 28 U.S.C. §
636(b)(1)(A) ("A judge of the court may reconsider any pretrial matter under this
subparagraph (A) where it has been shown that the magistrate judge’s order is clearly
erroneous or contrary to law.”). This standard is considered a “very difficult one to
meet.” Thornton v. Mercantile Stores, 180 F.R.D. 437, 439 (M.D. Ala. 1998) (citing TaiPan Inc. v. Keith Marine, Inc., 1997 WL 714898, *11 (M.D. Fla. 1997)). The
magistrate judge’s orders “should not be disturbed absent a clear abuse of discretion
that leaves the reviewing court with ‘the definite and firm conviction that a mistake
has been committed.’” Rowlin v. Alabama Dept. of Public Safety, 200 F.R.D. 459, 460
(M.D.Ala. 2001)(citations omitted).
Defendants contend that the magistrate’s order should be reversed because the
majority rule is that to prevail on its Lanham Act claim, the plaintiff must prove
falsity, not just a lack of pre-existing substantiation. Defendants cite 5 MCCARTHY ON
TRADEMARKS AND UNFAIR COMPETITION § 2761 (4th Ed.) which includes the following
The issue has arisen as to whether an advertising claim of equivalence
or superiority, without pre-existing data in support of its truthfulness is
necessarily “false” under § 43(a). While one court held that it is, the
majority rule is that plaintiff must prove falsity, not just a lack of preexisting substantiation. The burden is on plaintiff to prove that the
challenged ad is false or misleading, not merely that pre-advertising
clinical or market tests in support of each advertising claim were
improperly conducted. The advertising claims may be true even though
the testing basis for the claims may not support them.
Ibid. (footnotes omitted). Defendants also point out numerous cases from around the
country that have held that a plaintiff must prove that a defendant’s advertising claim
is actually false or misleading, not merely that it is unsubstantiated. See, e.g., United
Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir. 1998) ("When challenging a
claim of superiority that does not make express reference to testing, a plaintiff must
prove that the defendant's claim of superiority is actually false, not simply unproven
or unsubstantiated."); Johnson & Johnson-Merck Consumer Pharmaceuticals Co. v.
Rhone-Poulenc Rorer Pharmaceuticals, Inc., 19 F.3d 125, 129 (3d Cir. 1994) ("A
plaintiff must prove that the claim is false or misleading, not merely that it is
unsubstantiated."); Procter & Gamble Co. v. Chesebrough-Pond's Inc., 747 F.2d
114, 119 (2d Cir. 1984) ("each plaintiff bears the burden of showing that the
challenged advertisement is false and misleading . . . not merely that it is
unsubstantiated by acceptable tests or other proof"); U-Haul Int'l, Inc. v. Jartran, Inc.,
522 F. Supp. 1238, 1248 (D. Ariz. 1981) aff'd, 681 F.2d 1159 (9th Cir. 1982) ("Jartran
did not have to prove the truth of its asserted product claims; the burden in this
regard rested on U-Haul, and it could not sustain its burden of persuasion by its
repeated assertions (and proof) that Jartran had done little, if any, testing of Jartran
trucks or trailers, and no comparative testing of U-Haul products."); P&G. Co. v.
Kimberly-Clark Corp., 569 F. Supp. 2d 796, 803 (E.D. Wis. 2008) ("What these
distinctions mean is that when the existence or results of tests are not incorporated
into the advertisement, as here, a plaintiff may not meet its burden of showing falsity
merely by leveling attacks at any tests that might happen to exist; such attacks are
simply not affirmative evidence of falsity. It is one thing to say 'that is false,' but
another thing altogether to say 'you have no proof.' In the Lanham Act context, the
latter is not enough."); Energy Four, Inc. v. Dornier Medical Systems, Inc., 765 F.
Supp. 724, 732 (N.D. Ga. 1991) ("To succeed on the merits it is not enough to show
that the representation is facially ambiguous or unsubstantiated -- a plaintiff must
show that the representations are (1) false or (2) mislead by tending to create
confusion.") (emphasis added); Toro Co. v. Textron, Inc., 499 F. Supp. 241, 253 (D. Del.
1980) ("The plain language of Section 43(a), which prohibits false rather than
unsubstantiated representations, requires that a plaintiff establish not merely that
the defendant's claim lacks substantiation but also that it is false or deceptive.")
Plaintiff, on the other hand, contends that defendants cannot salvage wholly
unsubstantiated statements with arguments cobbled together after the statements
were made. In support of this contention, plaintiff cites a Third Circuit case and three
district court cases (two of which are from the Third Circuit) that have found that
advertising claims that lack any evidentiary support are per se false and that in such
cases the plaintiff is not required to prove falsity. See e.g. Novartis Consumer Health,
Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 590 (3d Cir.
2002); Alpo Petfoods, Inc v. Ralston Purina Co., 720 F.Supp. 194, 205-206 & n.12
(D.D.C. 1989); W.L. Gore & Assoc., Inc., v. Totes, Inc., 788 Supp. 800, 812 (D. Del.
1992); Pharmacia Corp. v. GlasxoSmithKline Consumer Healthcare, LP, 292 F.Supp.
2d 594, 607 (D.N.J. 2003). These cases clearly do not counter defendants’ contention
that the majority of cases hold that the plaintiff must prove that the advertising claim
is false. In fact plaintiff agrees that where the advertisement claim merely asserts
superiority the majority rule is that the plaintiff must prove that the ad is false.
However, plaintiff contends that the claims in this case are different because they go
beyond touting superiority. However, the case law does not appear to support such a
distinction. Courts discussing whether an advertising claim is a statement of fact or
merely an opinion often refer to whether the statement implies a basis for the
statement or suggests that the product has been tested. This court previously found
that advertising statements that a competitor’s product is risky or poses a safety
hazard are more than subjective statements of superiority and, thus, are not merely
opinions.1 However, such advertising statements still claim superiority and are
This court found in a previous order that plaintiff had established a likelihood of success on the
merits under its Lanham claim because of the following: Defendants are correct that “[s]tatements
of opinion are generally not actionable.” Osmose, Inc. v. Viance, LLC 612 F.3d 1298, 1311 (11th
Cir. 2010) (citing Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 496 (5th Cir. 2000) (“Bald
assertions of superiority or general statements of opinion cannot form the basis of Lanham Act
brought under § 43(a) of the Lanham Act. In determining whether a plaintiff must
provide evidence of falsity, the courts have not distinguished between advertisements
that tout superiority and those that attack the safety or risk of a competitor’s product.
Additionally, the court notes that the Third Circuit case cited by plaintiff found
the advertisement claim in that case was per se false because the defendant “[did] not
argue or present any evidence to show” that its claim was true. Novartis, 290 F.3d at
590. As the GlasxoSmithKline case repeated: “[i]n this rare instance, where the
defendant has made “a completely unsubstantiated advertising claim,” the court may
find the claim to be false even “without additional evidence from the plaintiff to that
effect.” GlasxoSmithKline, 292 F.Supp 2d at 607-608 (quoting Novartis). The Novartis
liability.”)). However “[r]epresentations that the use of a particular product ‘poses a considerable
safety hazard’ because of a risk of failure or that structures . . . might be at risk . . . arguably are
reasonably interpreted as more than subjective statements regarding the efficacy or superiority of a
product.” Id. “Instead, they can be viewed as expressing an objective risk of serious consequences
that fairly implies a basis for that statement.” Id. (citation omitted). Advertisements that suggest
that customers compare their product with another company’s product have been held by courts to
be more than puffery, they suggest that a product's performance has in fact been tested and verified.
See Clorox Co. P.R. v. Proctor & Gamble Commercial Co., 228 F.3d 24, 34 (1st Cir. 2000) (finding
advertisement inviting consumers “Compare with your detergent ... Whiter is not possible”
actionable as false advertising under Lanham Act); Castrol Inc. v. Pennzoil Co., 987 F.2d at 941,
946 (finding statements that Pennzoil's motor oil provides “longer engine life and better engine
protection” were not general claims of superiority or mere puffery, but instead were “specific and
measurable by comparative research.”) Axcan Scandipharm Inc. v. Ethex Corp., 585 F.Supp.2d
1067, 1082-1083 (D.Minn. 2007) (finding “compare to” language suggests that a product’s
performance has in fact been tested and verified). Defendants have been unable to provide any
facts or data to support their claim that the Chinese tanks have “serious quality issues” or that using
them is chancy or risky. The Chinese tanks are UN/DOT compliant, just like the American tanks,
and defendants have produced no evidence that they are not fit for their intended purposes. There is
no evidence that the Chinese tanks have had any safety or quality issues that would make them
risky for customers to use.
(Doc. 126, pp. 4-5).
court did not refuse to entertain evidence of truthfulness, but merely found that in the
absence of evidence by the defendant of truthfulness, the lack of substantiation was
sufficient for the court to conclude that the advertisement was false. In other words,
since the defendant had no evidence of truthfulness, the plaintiff did not have to
submit additional evidence to prove falsity.
After reviewing the above case law, the court is not persuaded that evidence
tending to show that the advertising claims at issue were true when made is
irrelevant. The majority of courts have allowed defendants to attempt to substantiate
their advertising claims by demonstrating that the statements were true when made.
If defendants present evidence of truthfulness, then plaintiff cannot prevail on its
Lanham Act claim merely by demonstrating that defendants did not have in their
possession studies or firm data that conclusively proved the truth of the statements
prior to making them. As such, the court finds that defendants are entitled to seek
evidence from third parties concerning the truthfulness of the statements and the
court finds that the magistrates finding that defendants were not entitled to seek
evidence of truthfulness from third parties was contrary to law. The court makes no
comment as to the efficacy or weight of any evidence presented thus far, but merely
finds that defendants are entitled to seek evidence of truthfulness. Accordingly, the
court finds that plaintiff’s motion for protective order and to quash non-party
subpoenas (Doc. 98) should be denied.
For the reasons stated above, the magistrate judge’s order dated June 6, 2011 (Doc. 130) is
hereby REVERSED in part and AMENDED to the extent that plaintiff’s motion for protective
order and to quash non-party subpoenas (Doc. 98) is DENIED.
DONE and ORDERED this 12th day of July, 2011 .
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE
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