Caltex Plastics Inc v. Elkay Plastics Company Inc et al

Filing 62

RULING & ORDER re: BENCH TRIAL by Judge Ronald S.W. Lew. Having received, reviewed, and considered the evidence presented, as well as the Parties argumentsat trial, the Court makes the following ruling: IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Judgment be entered in favor of Defendant Elkay Plastics Company, Inc., and the parties shall bear their own costs and fees. SEE ORDER FOR COMPLETE DETAILS. (jre)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 CALTEX PLASTICS, INC., 13 Plaintiff, 14 15 v. 16 ELKAY PLASTICS COMPANY, 17 INC., 18 Defendant. 19 20 21 22 23 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2:12-cv-10033 RSWL (JEMx) RULING & ORDER re: BENCH TRIAL On November 18, 2014, the above matter commenced in 24 a bench trial before this Court. Plaintiff Caltex 25 Plastics, Inc. (“Plaintiff” or “Caltex”) brings this 26 Action against Defendant Elkay Plastics Co. 27 (“Defendant” or “Elkay”) for false advertising in 28 violation of the Lanham Act, 15 U.S.C. § 1125(a), and 1 1 California’s Business & Professions Code §§ 17200 and 2 17500. Compl. ¶ 1. Plaintiff alleges that Defendant 3 has falsely represented that Defendant’s StratoGrey 4 product line “meet[s]” a certain military 5 specification. Id. Plaintiff seeks actual damages in 6 the amount of $3,030,911.33. 7 ¶¶ 7-8. Pl.’s Closing Trial Br. Plaintiff also seeks treble damages, id. at 8 32:17-25, and attorneys’ fees, id. at 34:24-35:2. 9 Defendant seeks judgment in its favor and attorneys’ 10 fees. 11 Def.’s Closing Trial Br. 27:1-19. Having received, reviewed, and considered the 12 evidence presented, as well as the Parties’ arguments 13 at trial, the Court makes the following ruling: 14 IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that 15 Judgment be entered in favor of Defendant Elkay 16 Plastics Company, Inc., and the parties shall bear 17 their own costs and fees. 18 FINDINGS OF FACT 19 1. Plaintiff Caltex is a California corporation 20 that manufactures, markets, and distributes 21 polyethylene bags and laminated products for military 22 and electronics. 23 Compl. ¶¶ 2-3; Trial Tr. 150:14-15. 2. Plaintiff’s packaging products include “flexible 24 military packaging material” that is qualified by the 25 Department of the Navy as meeting the Department of 26 Defense’s (“DOD”) MIL 81705 Type III specification for 27 “flexible barrier materials, often supplied as bags.” 28 Pretrial Conference Order 3:4-22 (undisputed fact). 2 1 3. The term “MIL-PRF-81705” (formerly “MIL-B- 2 81705”) is a military specification defined by the DOD 3 that establishes qualification requirements for certain 4 types of military packaging for electronic components. 5 Pretrial Conference Order 3:4-22 (undisputed fact); 6 Magnifico Dep. 12:6-21, ECF No. 56. 7 4. The DOD maintains a Qualified Products List 8 (QPL) for products that have been submitted to the DOD 9 for qualification and have met the military 10 specification’s qualification requirements after 11 government testing. Magnifico Dep. 12:6-14:11; 20:12- 12 16. 13 5. If an entity wants to submit a product for 14 qualification, the entity must contact the DOD to begin 15 the process of qualification. Magnifico Dep. 20:12- 16 22:21. 17 6. The only way an entity can be placed on the QPL 18 is if the entity’s product has been tested by the 19 government and approved by the government for 20 qualification. Magnifico Dep. 28:7-19. No entity can 21 self-qualify; for qualification and placement on the 22 QPL, the product must be qualified by the government. 23 Id. at 47:4-20. 24 7. Prior to submitting a product to the DOD for 25 qualification, an entity can find the specific testing 26 requirements in the military specification, and the 27 entity must test its product to ensure that the product 28 passes the tests before the DOD will begin testing the 3 1 product for qualification. 2 27:15-28:6. 3 Magnifico Dep. 22:4-23:1, 8. When a military specification has a 4 qualification requirement, products with that military 5 specification may be purchased by the military from 6 only “qualified” manufacturers listed on the QPL. 7 Magnifico Dep. 15:10-16:18. 8 9. Anyone can access the QPL on the Internet. 9 Magnifico Dep. 50:8-51:3. 10. The Department of the Navy (DON) is the only 10 11 entity that can qualify products under the MIL-PRF12 81705 specification. Pretrial Conference Order 3:4-22 13 (undisputed facts). 11. Plaintiff’s MIL-PRF-81705 Type III products 14 15 have been approved by the DON and were placed on the 16 DOD’s QPL in February 2010. Pretrial Conference Order 17 3:4-22 (undisputed facts); Magnifico Dep. Ex. 1. 12. At present, Plaintiff Caltex is the only 18 19 manufacturer that has been qualified by the DON and 20 placed on the QPL for MIL-PRF-81705 Type III product. 21 Pretrial Conference Order 3:4-22 (undisputed facts). 13. There had not been a qualified manufacturer for 22 23 MIL 81705 Type III product for approximately ten years 24 prior to Caltex’s qualification in February 2010. 25 Trial Tr. 154:7-155:2, 223:4-8, 225:3-15; Magnifico 26 Dep. 41:4-48:24, 54:12-57:5, 77:9-21, Exs. 2-3. 27 14. Mr. Magnifico of the DON sent out a problem 28 advisory, dated May 8, 2012, to the Government Industry 4 1 Data Exchange Program (GIDEP) to alert GIDEP members 2 that if defense contracts required qualified product 3 for MIL-PRF-81705 Type III product, such products 4 needed to be purchased only from qualified 5 manufacturers on the QPL and not from non-qualified 6 manufacturers who were claiming their product met the 7 MIL 81705 Type III requirements. Magnifico Dep. 41:48 47:20, Ex. 2. Mr. Magnifico sent a similar letter, 9 dated July 23, 2012, to the DOD. 10 66:15, Ex. 3. 11 Magnifico Dep. 59:3- 15. Defendant Elkay, a California corporation, 12 Def.’s Ans. ¶ 4, is a “master distributor of 13 polyethylene products” that sells its products solely 14 through distributors and has no direct sales. 15 Tr. 15:18-23, 16:2-3. 16 Trial 16. Elkay advertises its products to its customer- 17 distributors via Elkay’s catalogs and brochures, web 18 site, specification sheets, and Elkay-employed 19 consultants. Trial Tr. 16:1-20. 20 approximately 4300 distributors. 21 Elkay has Id. at 36:16-37:4. 17. Elkay does not manufacture the StratoGrey 22 static shielding bags it sells. 23 18:19-25, 21:13-16, 254:17-20). 5:19-20 (Trial Tr. Elkay’s suppliers for 24 its StratoGrey static shielding bags are Shannon 25 Packaging and Techflex. Trial Tr. 21:13-16, 48:4-9. 26 18. At least since February 2010 when Caltex was 27 placed on the QPL for MIL 81705 Type III product and 28 until October 2012 when Elkay removed any reference to 5 1 81705 from its marketing materials, Elkay has 2 advertised via the Elkay website, Elkay catalogs and 3 brochures, and Elkay specification sheets that Elkay’s 4 StratoGrey static shielding product line “meets the 5 electrostatic requirements for MIL 81705 Type III.” 6 Trial Tr. 18:5-11; Trial Ex. 4. 7 19. Elkay has no independent evidence that its 8 StratoGrey static shielding product line “meets the 9 electrostatic requirements for MIL 81705 Type III,” and 10 Elkay has not tested its StratoGrey bags to see if the 11 bags pass the qualification requirements for MIL 81705 12 Type III. Trial Tr. 20:12-17, 24:20-27:14. 20. Elkay did not request its suppliers to prove to 13 14 Elkay that the StratoGrey bags met the MIL 81705 Type 15 III requirements. Id. at 73:10-74:4, 77:2-9. 16 21. Plaintiff tested the Elkay bags via Senawang to 17 see if the Elkay bags met the MIL 81705 Type III 18 requirements. Trial Tr. 238:16-24. 19 22. Elkay’s StratoGrey static shielding bags have 20 not been qualified by the Department of Defense, 21 including the Department of the Navy, and are not 22 listed on the QPL. Trial Tr. 18:14-15, 75:8-11. 23. There is no evidence that Elkay ever advertised 23 24 that its StratoGrey products were “qualified” by the 25 military or on the QPL list. Cf. Pl.’s Reply Br. 7:1326 16. 27 24. Caltex sent Elkay a letter dated October 12, 28 2012, in which Caltex demanded that Elkay withdraw its 6 1 representations regarding the MIL-PRF-81705 2 specifications and give written notice to its customers 3 that the Elkay products were not approved by the 4 Department of Defense. Trial Tr. 48:10-50:22; Trial 5 Ex. 220. 25. In response to Caltex’s letter to Elkay, Elkay 6 7 stated in a letter dated October 31, 2012, that Elkay’s 8 statements “concerning the standards met by its 9 moisture barrier bags were accurate,” but Elkay 10 nevertheless agreed to remove all references to 11 “specification number 81705 from its website and 12 printed materials pertaining to the barrier bags in 13 question,” and Elkay has since then refrained from 14 making any such references. Trial Tr. 50:6-54:12; 15 Trial Ex. 221; see Trial Ex. 298. CONCLUSIONS OF LAW 16 17 Plaintiff’s claims are for (1) False Advertising in 18 violation of 15 U.S.C. § 1125(a); (2) False Advertising 19 in violation of Cal. Bus. & Prof. Code § 17500; and (3) 20 Unfair, Unlawful, or Fraudulent Trade Practices in 21 violation of Cal. Bus. & Prof. Code § 17200. 22 A. False Advertising, 15 U.S.C. § 1125(a) 23 To prove a prima facie case for false advertising 24 in violation of 15 U.S.C. § 1125(a), a plaintiff must 25 show: 26 (1) the defendant made a false statement either 27 about the plaintiff’s or its own product; 28 7 1 (2) the statement was made in a commercial 2 advertisement or promotion; 3 (3) the statement actually deceived or has the 4 tendency to deceive a substantial segment of its 5 audience; 6 (4) the deception is material, in that it is likely 7 to influence the purchasing decision; 8 (5) the defendant caused its false statement to 9 enter interstate commerce; and 10 (6) the plaintiff has been or is likely to be 11 injured as a result of the false statement, either 12 by direct diversion of sales from itself to the 13 defendant, or by a lessening of goodwill associated 14 with the plaintiff’s product. 15 Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 16 829, 835 n.4 (9th Cir. 2002) (citing Southland Sod 17 Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 18 1997)). 19 Plaintiff Caltex must first prove that Defendant 20 Elkay’s advertisements that Elkay’s StratoGrey product 21 “meets the electrostatic properties of MIL-B-81705, 22 Type III” are “false.” Jarrow, 304 F.3d at 835 n.4. 23 “Falsity” can be proved by showing either that the 24 advertisement is “literally false” or, if not literally 25 false, that the representation is “likely to mislead or 26 confuse consumers,” which requires proof, “by extrinsic 27 evidence,” that the advertisements “tend to mislead or 28 confuse consumers.” In re Century 21-RE/MAX Real 8 1 Estate Adver. Claims Litig., 882 F. Supp. 915, 922-23 2 (C.D. Cal. 1994); see Southland Sod Farms, 108 F.3d at 3 1139. 1. 4 5 Literal Falsity Plaintiff states that “[t]he false advertising that 6 is the subject matter of this litigation” “involves the 7 representation by Elkay that its StratoGrey line of 8 static shielding products ‘meets the electrostatic 9 requirements of MIL B-81705 Type III.’” Pl.’s Reply 10 Br. 7:13-16. Plaintiff asserts that such 11 advertisements by Elkay are “literally false.” Pl.’s 12 Closing Trial Br. 27:20-25. To prove that Elkay’s 13 advertisements are literally false, Plaintiff bears the 1 14 burden of proving, by affirmative evidence, that 15 Elkay’s StratoGrey products do not meet the 16 requirements for MIL 81705 Type III specification. 17 18 19 20 21 22 23 24 25 26 27 28 1 See Hansen Beverage Co. v. Vital Pharm., Inc., No. 08-cv1545-IEG, 2010 WL 1734960, at *4-*5 (S.D. Cal. Apr. 27, 2010) (stating that “[b]ecause [the defendant] does not expressly represent” that its advertising claim “is based on product testing, or implicitly make that claim through visual representations, [the plaintiff] must affirmatively prove that the claim is false”). In this case, Elkay did not “expressly represent” that it tested its Elkay bags or implicitly make a claim of testing based on graphs or any sort of visual representation; thus, Elkay’s advertisement is less like an “establishment claim” and more like a statement that “lacks substantiation.” See Fraker v. Bayer Corp., No. 08-1564, 2009 WL 5865687, at *7-*9 (E.D. Cal. Oct. 6, 2009) (noting that in a case for false advertising under the Lanham Act, the burden of proof does not shift to the defendant to prove substantiation of advertising claims because otherwise, a plaintiff could use a false advertising claims to “shoehorn an allegation of violation of the Federal Trade Commission Act,” which does not allow private causes of action). 9 1 Plaintiff proffers the following evidence to 2 support its claim of “literal falsity”: (1) only the 3 Government can qualify a product as being a MIL SPEC 4 81705 Type III product approved for defense contracts, 5 and (2) Elkay has no independent evidence that its 6 StratoGrey bags meet the MIL 81705 Type III 7 requirements. Pl.’s Closing Trial Br. 27:20-31:19; 8 Pl.’s Reply 2:8-4:19. a. No Self-Qualification Argument 9 10 Plaintiff first argues that Defendant’s 11 advertisements that its StratoGrey product “meets” the 12 requirements of MIL 81705 Type III are “literally 13 false” “since only the Department of the Navy can make 14 that determination and Elkay’s products were never 15 qualified thereby.” Pl.’s Closing Trial Br. 27:20-25. Plaintiff’s argument is conflated and flawed: the 16 17 fact that Elkay’s products were not qualified by the 18 DON does not prove that Elkay’s StratoGrey products do 19 not meet the testing requirements for MIL 81705 Type 20 III specification. Plaintiff’s claim that “only the 21 Department of the Navy” can determine whether a product 22 meets the requirements for a military specification is 23 unfounded and unsupported by any law, regulation, or 24 evidence. 25 Plaintiff is essentially arguing that only 26 “qualified” products (products tested by the government 27 and placed on the DOD’s QPL) can, in fact, “meet” MIL 28 81705 Type III qualification requirements. 10 See Pl.’s 1 Closing Trial Br. 27:20-25. But the evidence at trial 2 proved otherwise: a product can “meet” the 3 qualification requirements of a military specification 4 without ever having been tested by the military. See 5 Magnifico Dep. 12:6-14:11, 21:2-14, Ex. 2; Trial Tr. 6 153:19-154:6. The only time the military must be 2 7 involved is to qualify a product. To “meet” the MIL-PRF-81705 Type III qualification 8 9 requirements, a product must merely successfully 10 perform the required tests for the qualification, and 11 non-military entities can and do test products to see 3 Trial Tr. 12 if they pass the qualification tests. 13 238:16-24, 154:4-6; Magnifico Dep. 22:4-23:1, 27:514 28:15. Thus, a product that has not been tested or 15 qualified by the military could very well still “meet” 16 the qualification requirements for a military 17 specification such as MIL-PRF-81705 Type III. 18 19 2 Defendant Elkay did not advertise that its products were 20 “qualified” by the military or on the QPL, but only that its StratoGrey static shielding bags met the requirements for MIL 21 81705 Type III. 22 3 23 24 25 26 27 28 Mr. Frank James Magnifico, Jr., Materials Engineer for the Naval Air Warfare Center, Magnifico Dep. 4:17-5:5, testified in his deposition that “if a company wants to make product X, and product X has a military specification qualification requirement, [the company] should at least have a copy of that specification. [The specification] will detail all the requirements that [the product] has to meet. . . . And you would have the – the procedure would be in those – those test methods and then the manufacturer, before submitting that product to us, would have to have done all those tests and successfully passed them before we would even begin testing a product.” Magnifico Dep. 22:4-21. 11 1 For example, a company must choose to submit its 2 product to the DOD for testing in order for its product 3 to be “qualified.” Magnifico Dep. 12:6-14:11, 21:2-14. 4 A company that chooses not to submit its product to the 5 DOD for testing may still manufacture or sell a product 6 that does, in fact, “meet” the qualification 7 requirements for a military specification, even if that 8 product has not been tested by the military. Plaintiff 9 itself has proved that this can be so: Plaintiff 10 admitted that it had the Elkay bags tested by Senawang 11 to see if the Elkay bags, and other competitors’ 12 products, “met” the MIL 81705 Type III requirements. 13 Trial Tr. 238:16-24; see also id. at 154:4-6; Magnifico 14 Dep. 22:4-23:1, 27:5-28:15. Thus, the Court rejects 15 Plaintiff’s argument that Elkay’s advertisements are 16 “literally false” because “only the Department of the 17 Navy” can say when a product “meets” the testing 18 requirements for MIL 81705 Type III specification. b. No Independent Evidence Argument 19 20 Plaintiff argues that Elkay’s advertisements are 21 “literally false” because Elkay has “no independent 22 evidence” that its StratoGrey bags meet the MIL 81705 23 Type III requirements. Pl.’s Reply 3:15-18. 24 Plaintiff’s argument cannot prevail because it is a 25 “lack of substantiation” argument, and a false 26 advertising claim cannot be proved on “lack of 27 28 12 4 Fraker v. Bayer Corp., No. 1 substantiation” grounds. 2 08-1564, 2009 WL 5865687, at *7-*9 (E.D. Cal. Oct. 6, 3 2009) (noting that, in a case for false advertising 4 under the Lanham Act, the burden of proof does not 5 shift to the defendant to prove substantiation of 6 advertising claims; otherwise, a plaintiff could use a 7 false advertising claim to “shoehorn an allegation of 8 violation of the Federal Trade Commission Act,” which 9 does not allow private causes of action). Defendant has maintained that its advertisements 10 11 were true. Def.’s Closing Trial Br. 5:21-6:12, 8:2-8. 12 It is irrelevant that Defendant failed to test its own 13 bags; Defendant does not have the burden of proof and 14 15 16 17 18 19 20 21 22 23 24 25 26 27 4 Fraker v. Bayer Corp., No. 08-1564, 2009 WL 5865687, at *8 (E.D. Cal. Oct. 6, 2009) (“Plaintiff has provided no authority for the proposition that the absence of substantiation of an advertising claim is, itself, falsity or somehow misleading. . . . [T]he court is unwilling to make that leap. If Plaintiff is going to maintain an action against Defendant for false or misleading advertising, then Plaintiff will be required to adduce evidence sufficient . . . to show that Defendant's advertising claims with respect to Product are actually false; not simply that they are not backed up by scientific evidence.”); see Eckler v. Wal-Mart Stores, Inc., No. 12-cv-727-LAB-MDD, 2012 WL 5382218, at *3 n.3 (S.D. Cal. Nov. 1, 2012) (noting that “lack of substantiation” claims are “distinguishable from a case, like this one, in which plaintiffs point to studies that they claim actually disprove a product’s claims”); Dabish v. Infinitelabs, LLC, No. 13-cv-2048, 2014 WL 4658754, at *2 (S.D. Cal. Sept. 17, 2014) (listing Ninth Circuit courts that have considered “lack of substantiation” allegations in the context of false advertising claims); Hughes v. Ester C Co., 930 F. Supp. 2d 439, 456-59 (E.D.N.Y. 2013) (discussing California district courts’ consideration of “lack of substantiation” arguments in false advertising cases and concluding that “‘merely because a fact is unsupported by clinical tests does not make it untrue’”). 28 13 1 is thus not required to show that its advertisements 2 are substantiated by testing. Id. As Fraker points 3 out, “the government, representing the Federal Trade 4 Commission, can sue an advertiser for making 5 unsubstantiated advertising claims; a private plaintiff 6 cannot.” Fraker, 2009 WL 5865687, at *8. A private 7 litigant asserting false or misleading advertising “has 8 the burden to plead and prove facts that show” that the 9 defendant’s advertising claims “are false or 10 misleading,” not merely unsubstantiated. Id.; see 11 Sandoz Pharm. Corp. v. Richardson-Vicks, Inc., 902 F.2d 12 222 (3d Cir. 1990) (“[A] Lanham Act plaintiff ‘bears 13 the burden of showing that a challenged advertisement 14 is false or misleading, not merely that it is 15 unsubstantiated by acceptable tests or other proof.’”). In sum, because Plaintiff has not provided 16 17 affirmative evidence that Defendant’s StratoGrey bags 18 do not meet the testing requirements of MIL 81705 Type 19 III, Plaintiff’s allegation of “literal falsity” fails. 20 Thus, to prevail on its false advertising claim, 21 Plaintiff must show that Defendant’s advertisements 22 were “misleading.” 23 2. Misleading 24 Falsity “can be established . . . by showing that 25 although the statement was ‘literally true[,]’ it was 26 nonetheless ‘likely to mislead or confuse consumers’ as 27 evidenced by consumer surveys.” Mutual Pharm. Co. v. 28 Ivax Pharm., Inc., 459 F. Supp. 2d 925, 932 (C.D. Cal. 14 1 2006); Southland Sod Farms, 108 F.3d at 1139; see 2 CytoSport, 894 F. Supp. 2d at 1295 (E.D. Cal. 2012). 3 Extrinsic proof of consumer deception is required for a 4 “true but misleading” false advertising claim because 5 “whether a representation is impliedly misleading is 6 not something that is readily susceptible to being 7 evaluated absent ‘evidence [showing] actual consumer 8 deception.’” Mutual Pharm., 459 F. Supp. 2d at 932; 9 see William H. Morris Co. v. Grp. W, Inc., 66 F.3d 255, 10 258 (9th Cir. 1995) (“Where a statement is not 11 literally false and is only misleading in context, . . 12 . proof that the advertising actually conveyed the 13 implied message and thereby deceived a significant 14 portion of the recipients becomes critical.”); Zeltiq 15 Aesthetics, Inc. v. BTL Indus., Inc., No. 13-cv-0547316 JCS, 2014 WL 1245222, at *8 (N.D. Cal. Mar. 25, 2014). 17 Here, Defendant’s representations that its 18 StratoGrey bags met the MIL 81705 requirements could 19 mislead consumers to believe that the Elkay StratoGrey 20 bags were actually qualified by the military; but it is 21 Plaintiff’s burden to show proof of customer deception. 22 Mutual Pharm., 459 F. Supp. 2d at 932. The only 23 arguable evidence of consumer deception provided by 24 Plaintiff is the testimony of Caltex’s witness, Mr. Jim 25 Higgs, that Caltex “was told numerous times that 26 [customers] already were getting material that meets 27 the requirements and, you know, ‘Why am I going to pay 28 you 40 percent or more for a product that we’re already 15 1 being told that already meets the requirement?’” Trial 2 Tr. 156:24-157:9. However, this testimony does not 3 prove consumer deception because the statement does not 4 show that customers believed that Elkay’s products were 5 “qualified” by the military or were on the QPL list, 6 but only that there were other, cheaper products on the 7 market that “met” the MIL 81705 testing requirements, 8 and Plaintiff has not shown such a belief to be false. 9 Plaintiff does provide evidence of confusion among 10 the defense community regarding the DOD’s qualification 11 requirements for MIL 81705 Type III product once Caltex 12 was qualified in February 2010. Trial Tr. 223:4-8. 13 However, the evidence clearly shows that this consumer 14 confusion was not caused by Elkay’s advertising, but by 15 the DOD’s failure to inform the defense-related 16 community of the qualification requirements for MIL 5 Plaintiff’s evidence does not 17 81705 Type III product. 18 19 20 21 22 23 24 25 26 27 28 5 See Trial Tr. 154:7-156:3; 217:11-228:10; see id. at 223:4-8 (“‘We are hearing that folks will continue using the commercial static shielding materials and don’t believe they need to use the approved film. It’s been ten years since the Type III has been on the approved list, so they’ve been using commercial materials that weren’t approved.’”); see id. at 239:15-240:1 (When asked why Caltex filed the lawsuit against Elkay, Mr. Higgs, testified that Caltex wanted “to basically set the record straight so people understand that they need to use a qualified product that meets all the specifications” and agreed that the lawsuit was “part of Caltex’s overall effort to advise the defense contractor industry that they need to use qualified product”); see id. at 225:3-15 (Mr. Higgs testifying that he emailed Mr. Magnifico of the DON on April 27, 2010, “asking him [if] there [is] anything [Mr. Magnifico] can do to help get the word out that Caltex is the approved MIL SPEC for 81705 III”). Mr. Magnifico testified that in the Government Industry Data 16 1 show that consumers thought Elkay’s products were 2 qualified or on the QPL, or that consumers were led to 3 believe any other falsity due to Elkay’s 4 advertisements. 5 Not necessary but further convincing, the following 6 evidence lessens the likelihood of consumer deception: 7 (1) anyone can access the QPL online to check if a 8 product is qualified, Magnifico Dep. 30:11-14, 50:89 51:3; and (2) consumers purchasing static shielding 10 products are arguably sophisticated and thus less 11 likely to be deceived, especially in light of the 12 publicly accessible QPL, see Trial Tr. 219:3-9; 13 Magnifico Dep. 13:12-14:11. See, e.g., Bober v. Glaxo 14 Wellcome PLC, 246 F.3d 934, 939 (7th Cir. 2001) (when 15 considering a similar lack-of-substantiation claim, 16 noting that not only was there no evidence of falsity, 17 18 Exchange Program (GIDEP) problem advisory of May 8, 2012, he sought to clarify that a product that merely “meets the 19 requirements of MIL-PRF-81705” is not necessarily a “qualified” product on the QPL and that “qualified manufacturers are detailed 20 on the qualified products list.” Magnifico Dep. 41:4-47:20. 21 There was a “misconception” about the qualification requirements 22 23 24 25 26 27 for MIL 81705, and the GIDEP problem advisory was sent “to get people a little bit more calibrated into what they really need to know.” Id. The problem advisory requested “that industry and government material buyers verify manufacturers listing on the QP,” “that industry and government QA personnel rereview contract packaging and ESD control program requirements,” and that “[r]eceiving personnel . . . verify materials received and convey noncompliance immediately.” Id. at 54:12-57:5; see also id. at 77:9-21 (“Existing contracts may still allow use of the non-mil spec material. Folks have to be educated in their buying habits. I continually stress the use of qualified products at all meetings and conferences that I attend.”). 28 17 1 but “there was significant information available to 2 consumers . . . providing accurate information . . . ,” 3 thereby dispelling “any tendency to deceive that the 4 statements at issue might otherwise have had”). 5 The Court finds that Plaintiff has failed to prove 6 falsity, the first element of a false advertising claim 7 under 15 U.S.C. § 1125(a), and therefore cannot prevail 8 on its federal false advertising claim. 9 B. False Advertising, Cal. Bus. & Prof. Code § 17500 10 Section 17500 of the California Business & 11 Professions Code is California’s false advertising law 12 and prohibits any advertising that is “untrue or 13 misleading” to the “reasonable consumer.” People v. 14 Forest E. Olson, Inc., 186 Cal. Rptr. 804, 806 (Cal. 15 Ct. App. 1982); Cal. Bus. & Prof. Code § 17500; see 16 Consumer Advocates v. Echostar Satellite Corp., 8 Cal. 17 Rptr. 3d 22, 29 (Cal. Ct. App. 2003). Under the 18 “reasonable consumer” standard, a plaintiff must “show 6 19 that members of the public are likely to be deceived.” 20 Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th 21 22 23 24 25 26 27 28 6 While Section 17500 “prohibits negligent as well as intentional dissemination of misleading advertising” and thus “imposes a duty of [reasonable] investigation,” the duty of investigation is imposed only if the advertising is first proven to be false or misleading. See People v. Forest E. Olson, Inc., 186 cal. Rptr. 804, 807 (Cal. Ct. App. 1982); People v. Lynam, 61 Cal. Rptr. 800 (Cal. Ct. App. 1967) (stating a plaintiff must allege: “(1) statements in the advertising are untrue or misleading, and (2) defendant knew, or by the exercise of reasonable care should have known, that the statements were untrue or misleading.”). 18 1 Cir. 2008) (internal quotation marks omitted); Bank of 2 West v. Sup. Ct., 833 P.2d 545 (Cal. 1992); In re 3 Tobacco II Cases, 207 P.3d 20 (Cal. 2009). “In an action for false advertising under 4 5 [California law], the plaintiff ‘bears the burden of 6 proving the defendant's advertising claim is false or 7 misleading.’” Stanley, 2012 WL 1132920, at *3 (citing 8 Nat’l Council Against Health Fraud, Inc. v. King Bio 9 Pharm., Inc., 133 Cal. Rptr. 2d 207 (Cal. Ct. App. 10 2003)). California courts have held that “lack-of11 substantiation arguments” are “insufficient, on their 12 own, to support a false or misleading advertising 13 claim.” Hughes v. Ester C Co., 930 F. Supp. 2d 439 14 (E.D.N.Y. 2013); see In re Clorox Consumer Litig., 894 15 F. Supp. 2d 1224, 1231-32 (N.D. Cal. 2012); Stanley v. 16 Bayer Healthcare LLC, No. 11-cv-862-IEG, 2012 WL 17 1132920, at *3 (S.D. Cal. Apr. 3, 2012); King, 133 Cal. 18 Rptr. 2d 207, 214-16 (Cal. Ct. App. 2003). 19 In Fraker, the district court dismissed the 20 plaintiff's claims for false or misleading advertising 21 under Cal. Bus. & Prof. Code §§ 17500 and 17200 because 22 the plaintiff had failed to “prove facts that show that 23 the claims that Defendant made in connection with 24 product are false or misleading,” as the plaintiff’s 25 lack of substantiation claim was not sufficient to 26 prove falsity or deception. Fraker, 2009 WL 5865687, 27 at *8-*9. Similarly, in Stanley, the district court 28 rejected the plaintiff’s false advertising-related 19 1 claims under Cal. Bus. & Prof. Code §§ 17200 and 17500 2 even though it was “undisputed that [the] Defendant did 3 not independently conduct clinical studies” of its 4 product. 2012 WL 1132920, at *5 n.4. The plaintiff in 5 Stanley failed to provide evidence showing that the 6 defendant’s advertisements were “actually false” or 7 would “mislead a reasonable consumer.” Id. at *5. As in Stanley, and as discussed above, Plaintiff 8 9 has not proved that Defendant’s advertisements of its 10 StratoGrey bags were false or were likely to “mislead a 11 reasonable consumer” into believing that the StratoGrey 12 bags were qualified by the military or any other false 13 belief. Thus, Plaintiff cannot prevail on its state14 law false advertising claim under Cal. Bus. & Prof. 15 Code § 17500. 16 C. Unfair Trade Practices, Cal. Bus. & Prof. Code § 17 17200. 18 “California’s Unfair Competition Law (“UCL”) 19 prohibits any ‘unlawful, unfair or fraudulent business 20 act or practice.’” Williams v. Gerber Prods. Co., 552 21 F.3d 934, 938 (9th Cir. 2008); Cal. Bus. & Prof. Code § 22 17200. To state a cause of action under the UCL, the 23 plaintiff must allege either an unlawful act, an 24 “unfair” act, or a fraudulent act. See Williams, 552 25 F.3d 934, 938; VP Racing Fuels, Inc. v. Gen. Petroleum 26 Corp., 673 F. Supp. 2d 1073, 1086-88 (E.D. Cal. 2009). 27 To claim a violation of the UCL based on an 28 “unlawful” act, a plaintiff must prove the defendant 20 1 violated some underlying law. VP Racing, 673 F. Supp. 2 2d at 1086-88. Plaintiff’s false advertising claims 3 under the Lanham Act and Cal. Bus. & Prof. Code § 17500 4 fail, and Plaintiff asserts no other legal violation to 5 support its UCL claim under the “unlawful” prong. There is at least a three-way split among 6 7 California appellate courts as to the proper standard 8 for an “unfair” act under the UCL. Graham v. Bank of 9 Am., N.A., 172 Cal. Rptr. 3d 218, 233 (Cal. Ct. App. 10 2014). Upon review of the various tests, the Court 11 finds that Plaintiff has not proved an “unfair” 12 business act. See id. 13 A “fraudulent act” under the UCL “may include a 14 false statement, or one which, though strictly 15 accurate, nonetheless has the likely effect of 16 misleading or deceiving the public.” Zeltiq 17 Aesthetics, Inc. v. BTL Indus., Inc., No. 13-cv-0547318 JCS, 2014 WL 1245222, at *9 (N.D. Cal. Mar. 25, 2014) 19 (citing Garcia v. Sony Computer Entm't Am., LLC, 859 F. 20 Supp. 2d 1056, 1062 (N.D. Cal. 2012)). Because 21 Plaintiff has not provided sufficient evidence to show 22 that customers were actually deceived by Elkay’s 23 advertisements, Plaintiff cannot prevail under the 7 24 fraudulent prong of the UCL. 25 7 Zeltiq Aesthetics, 2014 WL 1245222, at *10 (noting that 26 though the plaintiff provided evidence showing that the 27 defendant’s advertising could mislead customers to think the 28 product was FDA cleared, the plaintiff could not prevail because it had failed to submit any evidence showing that customers were 21 1 D. Attorney Fees & Costs 2 Section 1117(a) of the Lanham Act states that the 3 “court in exceptional cases may award reasonable 4 attorney fees to the prevailing party.” 15 U.S.C. § 5 1117(a). An “exceptional” case warranting an award of 6 attorney fees is one in which the non-prevailing 7 party’s actions were “‘groundless, unreasonable, 8 vexatious, or pursued in bad faith.’” Gracie v. 9 Gracie, 217 F.3d 1060, 1071 (9th Cir. 2000). Defendant requests an award of attorney fees and 10 11 costs pursuant to 15 U.S.C. § 1117(a), arguing that 12 this case is “exceptional” in that “Caltex acted in bad 13 faith by filing suit against Elkay even though Elkay 14 ceased the alleged wrongful conduct” and “attempt[ed] 15 to hold Elkay liable for claims that Caltex knew were 16 true and which were released pursuant to Caltex’s 17 previous settlement with 3M Company.” Def.’s Closing 18 Trial Br. 27:1-14. The Court does not find that 19 Plaintiff’s claims against Defendant were “groundless, 20 unreasonable, vexatious, or pursued in bad faith.” 21 Thus, Defendant’s request for attorney fees and costs 22 under 15 U.S.C. § 1117(a) is DENIED. 23 24 actually deceived by the defendant’s advertisements, and rejecting “a general claim of deceptive impact” when the 25 plaintiff’s evidence showed only that customers in general would presume the product was FDA cleared and when the plaintiff did 26 not present evidence that the customers “who actually purchase[d] 27 the [product] . . . believed it was FDA cleared”; also stating 28 that the sophistication of the customers made it unlikely that the customers would be deceived). 22 1 CONCLUSION 2 Because Plaintiff has failed to prove its three 3 claims against Defendant, Judgment is entered in favor 4 of Defendant. The parties shall bear their own costs 5 and fees. 6 7 IT IS SO ORDERED. 8 DATED: February 4, 2015 HONORABLE RONALD S.W. LEW Senior U.S. District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23

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