Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co.

Filing 33

Judge Nathaniel M. Gorton: MEMORANDUM & ORDER entered granting in part and denying in part 4 Motion for Preliminary Injunction (Danieli, Chris)

United States District Court
District of Massachusetts
SPRUCE ENVIRONMENTAL
TECHNOLOGIES, INC.,
Plaintiff,
v.
FESTA RADON TECHNOLOGIES, CO.,
Defendant.

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Civil Action No.
15-11521-NMG

MEMORANDUM & ORDER
GORTON, J.
This case arises from an advertising campaign by defendant
Festa Radon Technologies, Co. (“Festa”) which plaintiff Spruce
Environmental Technologies, Inc. (“Spruce”) alleges contains
literally false and misleading statements about Spruce’s
products.

Spruce and Festa are direct competitors in the radon

mitigation industry, a market that provides products for testing
and reducing indoor levels of the colorless and odorless
radioactive gas radon.
Pending before the Court is plaintiff’s motion for a
preliminary injunction to enjoin Festa from continuing its “Dare
to Compare” advertising campaign and to publish corrective
advertising.

For the reasons that follow, the motion will be

allowed, in part, and denied, in part.
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I.

Background
A.

Parties

Spruce is a Massachusetts corporation in the business of
manufacturing and selling radon mitigation devices including a
line of radon mitigation fans under the trade name RadonAway®.
Festa is a Pennsylvania corporation also in the business of
manufacturing and supplying radon mitigation devices.

It

entered the radon mitigation fan market in 1999 when that
portion of the industry was dominated by Spruce and one other
company.

Festa’s line of radon mitigation fans are marketed and

sold under the name AMG.
B.

The Subject Advertising

In or about February, 2015, Festa began marketing its
products through a catalog containing a comparison of radon
mitigation fans by Festa and Spruce.

That section, which spans

several pages, is titled “*Dare to Compare* US versus THEM” and
provides photographs and statements juxtaposing the two lines of
products.

For example, Festa compares a “7 year old AMG Fan vs.

[a] 5 year old fan from our competitor” and provides a
photograph of a gray Festa fan next to a bright yellow Spruce
fan.
The next few pages list a series of differences between the
products along with side-by-side photographs of the products
accompanying those claims.

The comparisons are as follows:
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US (referring to Festa) versus THEM (referring to Spruce)
1) “Secure Lock Lever Nuts”

“Inexpensive Wirenuts”

2) “Solid lid with four screws
to ensure a watertight fit.
Comes with 2 extra in case you
drop one”

“Molded Plastic lid secured
with only two screws”

3) “Factory Sealed Motor Wire”

“Motor wire caulked to seal”

4) “Solid motor lead wires”

“Stranded motor lead wires”

5) “Factory Stamped, Dated, &
Serialized”

“Generic-No Manufacture Info”

6) “Terminal Box With (4)
Screw Holes With Brass Inserts
To Prevent Stripping”

“Terminal Box With (2) Screw
Holes. Screw Directly Into
Plastic”

7) “Motor Mounted With (4)
Mounting Screws. Allows For
Better Stability And Quiet,
Vibration Free Operation”

“Motor Mounted With only (2)
screws”

8) “Capacitor With Factory
Installed Lead Wires For
Direct Connect”

“Capacitor Requires Wires
Installed during assembly”

9) “Watertight Pivoting
Grommet”

“Plastic Sleeve Requiring
Caulking”

The content of Festa’s direct comparison is also depicted
on the company’s website and several of the images in Festa’s
catalog portray products bearing labels indicating that they are
both Home Ventilating Institute (“HVI”) and Energy Star
certified.
C.

Procedural History

Plaintiff filed the instant lawsuit and motion for
preliminary injunction in April, 2015.
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The complaint asserts

claims for 1) violation of the Lanham Act, 15 U.S.C. § 1125(a),
2) violation of M.G.L. c. 93A, 3) violation of M.G.L. c. 266, §
91 and 4) commercial disparagement.
Defendant filed an amended answer and counterclaims for 1)
violation of the Lanham Act, 15 U.S.C. § 1125(a), 2) violation
of M.G.L. c. 93A and 3) commercial disparagement and responded
to the pending motion in June, 2015.

A hearing was held shortly

thereafter.
II.

Plaintiff’s Motion for a Preliminary Injunction
A.

Legal Standard

In order to obtain a preliminary injunction, the moving
party must establish
(1) a substantial likelihood of success on the merits,
(2) a significant risk of irreparable harm if the
injunction is withheld, (3) a favorable balance of
hardships and (4) a fit (or lack of friction) between
the injunction and the public interest.
Nieves-Marquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003)
(citation omitted).

Out of these factors, the likelihood of

success on the merits “normally weighs heaviest on the
decisional scales.” Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d
62, 66 (1st Cir. 2009).
The Court may accept as true “well-pleaded allegations [in
the complaint] and uncontroverted affidavits.” Rohm & Haas Elec.
Materials, LLC v. Elec. Circuits, 759 F. Supp. 2d 110, 114, n.2
(D. Mass. 2010) (quoting Elrod v. Burns, 427 U.S. 347, 350, n.1
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(1976).

The Court may also rely on otherwise inadmissible

evidence, including hearsay, in deciding a motion for
preliminary injunction. See Asseo v. Pan American Grain Co.,
Inc., 805 F.2d 23, 26 (1st Cir. 1986).
B.

Application
1.

Likelihood of Success

To prevail on its Lanham Act claim based on false
advertising, 15 U.S.C. § 1125(a)(1)(B), plaintiff must prove
that
(1) the defendant made a false or misleading description
of fact or representation of fact in a commercial
advertisement about his own or another's product;
(2) the misrepresentation is material, in that it is
likely to influence the purchasing decision;
(3) the misrepresentation actually deceives or has the
tendency to deceive a substantial segment of its
audience;
(4) the defendant placed the false
statement in interstate commerce; and

or

misleading

(5) the plaintiff has been or is likely to be injured as
a result of the misrepresentation, either by direct
diversion of sales or by a lessening of goodwill
associated with its products.
Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d
302, 310-11 (1st Cir. 2002).

Moreover, when an advertisement is

literally false, a plaintiff can succeed on a false advertising
claim without evidence of consumer deception. Id. at 311.

When

an advertisement is implicitly false (where a claim is true or
ambiguous but misleading), however, a plaintiff must demonstrate
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consumer deception or provide evidence that the “defendant[]
intentionally deceived the consuming public.” Id. at 311, n. 8.
Spruce contends that it is likely to succeed on the merits
of its claim under the Lanham Act because Festa’s direct
comparative advertising contains literally false statements
including 1) depictions of Festa’s products as HVI and Energy
Star certified when they are not, 2) claims that Festa fans have
solid motor lead wires even though, as do the Spruce fans, they
use stranded wires, 3) claims that the Spruce fan motors are
“Generic-No Manufacture Info” even though they do have a
manufacturer’s label, 4) implications that the Spruce fan casing
will degrade and change into a yellow color after five years
even though plaintiff has samples of its own five-year-old
products that have not changed color and 5) implications that
the Spruce motor wires and capacitors are not factory sealed and
otherwise require some sealing during installation.

Plaintiff

avers that those literally false statements and the
representations are material because they are likely to
influence consumers’ purchasing decisions.
Plaintiff further contends that even if the Court construes
Festa’s statements as implicitly false, Spruce is entitled to
injunctive relief because defendant intentionally set out to
mislead the public through its comparative advertisement.

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Defendant responds by addressing each of plaintiff’s
allegations.

It maintains that the comparative advertising

segment was published only after Spruce’s sales representatives
told customers that Festa’s radon mitigation fans were “garbage”
and “junk.”
With respect to the issue of discoloration of plaintiff’s
fans, defendant has submitted additional photographs of
RadonAway fans that have undergone pronounced yellowing after
exposure to sunlight.

At the motion hearing, defendant

displayed the RadonAway fan that was photographed in Festa’s
catalog.

Although the fan certainly was discolored, it was not

the bright shade of yellow portrayed in the photograph.
Defendant admitted that plaintiff’s fan was photographed
with flash while defendant’s fan was not, which may have
resulted in the enhanced brightness of the Spruce fan.

The

Court concludes that plaintiff will therefore likely succeed on
the merits of its false advertising claim based on some of the
photographs in defendant’s advertisement because they are
misleading and present an inaccurate comparison.
As for the certifications, defendant acknowledges that
there is currently a lapse in its Energy Star certification due
to missing paperwork and that its fans have not been HVI
certified since 2010.

Festa notes that although it has already

submitted the necessary paperwork and expects to be Energy Star
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certified again shortly, it has removed references to Energy
Star from its website and is no longer placing Energy Star
stickers on its fans.

The Court concludes that, even though the

fans photographed in the catalog themselves were Energy Star
certified, defendant is falsely representing to consumers that
its fans are currently Energy Star compliant.

The same applies

to the older photographs of fans displaying an HVI sticker.
With respect to the description of the Spruce motor as
“Generic-No Manufacturer Info,” defendant contends that the
product meets a dictionary definition of “generic” which defines
the term as “a product (such as a drug) that is not sold or made
under a particular brand name.”

GENERIC,

MERRIAM-WEBSTER DICTIONARY

(2015), http://www.merriam-webster.com/dictionary/generic.
Defendant has submitted examples of the labels on plaintiff’s
fan motors and maintains that the motors appear generic because
the labels lack the model number, product name, trademark and
manufacturer name.

It also contends that one of the motor

manufacturer’s own sales representatives did not recognize the
motor because the product was not branded.
Although the motor was manufactured by another company and
specifically tailored to plaintiff’s needs, the Court concludes
that the description is not literally false in the context of
the advertisement.

Moreover, to the extent that it is

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misleading, the Court is not persuaded that plaintiff will prove
that defendant intended to deceive through its description.
As for the motor wires, defendant contends that there is
no question in the industry that Festa uses solid motor lead
wires while Spruce uses stranded wires.

Because neither party

has cited any authority on the issue, the Court declines to
address the truth or falsity of that statement at this stage of
the litigation.
Finally, the Court concludes that defendant’s description
of the Spruce motor wires and capacitors does not falsely
represent to customers that they have to seal the fan’s motor
during installation.
Accordingly, the Court determines that plaintiff is likely
to succeed on its false advertising claim based only on
defendant’s photographic comparison of the colors of the fans
and its representations concerning the status of its Energy Star
and HVI certifications.
2.

Irreparable harm

Irreparable harm is “a substantial injury that is not
accurately measureable or adequately compensable by money
damages.” Ross-Simons of Warwick v. Baccarat, Inc., 102 F.3d 12,
19 (1st Cir. 1996).

A plaintiff alleging irreparable injury

must show more than a “tenuous or overly speculative forecast of
anticipated harm.” Id.

Examples of irreparable injuries include
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loss of incalculable revenue and harm to goodwill or reputation.
Id. at 19-20.

In the preliminary injunction context, the First

Circuit Court of Appeals measures irreparable harm
on a sliding scale, working in
party’s likelihood of success
the strength of the showing
harm depends in part on the
success shown.

conjunction with a moving
on the merits, such that
necessary on irreparable
degree of likelihood of

Braintree Labs., Inc. v. Citigroup Global Markets Inc., 622 F.3d
36, 42-43 (1st Cir. 2010) (citations omitted).
Plaintiff asserts that it will suffer irreparable harm if
the Court does not grant the preliminary injunction because
Spruce and Festa are direct competitors and the false and
misleading advertising will affect purchasing decisions of
consumers.
Spruce alleges that at least one customer has already been
affected by Festa’s advertisements.

That customer emailed

plaintiff expressing concern over several aspects of RadonAway
fans, including the discoloration issue because it suggests that
“it is a cheap product casing.”

Although plaintiff can be

compensated for the most part by money damages if it prevails on
the merits of its claims, the Court concludes that plaintiff has
demonstrated a modicum of irreparable harm to its goodwill and
reputation.

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3.

Remaining factors

Plaintiff contends that the balance of equities tips in its
favor because any potential harm Festa endures from being
required to discontinue its false advertising is entirely selfinflicted.

The Court concludes that the balance of equities

tips somewhat in plaintiff’s favor, but not decisively because
the false representations made by defendant, if any, do not
appear to the Court to be egregious.
Finally, Spruce avers that its requested relief comports
with the public interest in ensuring that businesses do not
engage in false and misleading advertising.

Festa responds that

the imposition of an injunction would be contrary to public
interest because competition is encouraged in the marketplace.
It contends that this lawsuit is yet another attempt by Spruce
to pressure defendant into selling its business to plaintiff or
to intimidate Festa into agreeing to engage in a scheme to raise
prices of radon mitigation fans in the marketplace.
Plaintiff’s motive for initiating this lawsuit may become
relevant later but consideration of motive is beyond the scope
of the pending motion and the Court agrees with plaintiff that
it is in the public interest to remove false advertising from
the marketplace.

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C.

Security under Fed. R. Civ. P. 65(c)

A movant for injunctive relief must give security in an
amount that the Court considers proper to pay costs and damages
sustained by any party found to have been improvidently
enjoined. Fed. R. Civ. P. 65(c).

The Court will therefore

require the posting of a security bond in the amount of $25,000
to cover defendant’s potential cost of correcting its website
and distributing revised advertising brochures.

ORDER
For the foregoing reasons, plaintiff’s motion for
preliminary injunction (Docket No. 4) is ALLOWED, in part, and
DENIED, in part, and plaintiff is entitled to injunctive relief
as more fully described in the preliminary injunction attached
hereto.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated July 2, 2015

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