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

Filing 88

Judge Nathaniel M. Gorton: ENDORSED ORDER entered granting in part and denying in part 66 Motion for Preliminary Injunction (Caruso, Stephanie)

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 involves two direct competitors in the radon
mitigation industry, a market that provides products for testing
and reducing levels of the radioactive gas radon.

Each party

alleges that the other engaged in false advertising.
Pending before the Court is defendant’s motion for a
preliminary injunction.

For the foregoing reasons, that motion

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

Background
Plaintiff Spruce Environmental Technologies, Inc.

(“plaintiff” or “Spruce”) is a Massachusetts corporation that
manufactures and sells radon mitigation devices including a line
of radon mitigation fans under the trade name RadonAway.

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Defendant Festa Radon Technologies, Co. (“defendant” or
“Festa”) is a Pennsylvania corporation that also manufactures
and supplies radon mitigation devices.

It entered the radon

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

Festa markets

and sells a line of radon mitigation fans under the name AMG.
Plaintiff initiated this action in April, 2015 by filing a
complaint alleging that defendant’s advertisements contained
false and misleading statements in violation of the federal
Lanham Act and various Massachusetts laws.
Plaintiff also filed a motion for a preliminary injunction
requiring defendant to “cease its false and disparaging
advertising . . . [and] publish corrective advertising”.

That

motion was allowed, in part, and denied, in part in July, 2015.
Accordingly, the Court directed defendant to revise its
advertisements and to cease making representations with respect
to the certification of its radon fans.
In November, 2015, defendant filed a second amended answer
with a counterclaim asserting that plaintiff’s advertisements
contained false and misleading statements in violation of the
federal Lanham Act and various Massachusetts laws.

The three

counts raised in defendant’s counterclaim closely mirror three
of the four counts raised in plaintiff’s complaint.

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In late February, 2016, defendant filed the pending motion
for a preliminary injunction.
II.

Motion for a preliminary injunction
A.

Legal standard

In order to obtain a preliminary injunction, the moving
party must establish 1) a reasonable likelihood of success on
the merits, 2) the potential for irreparable harm if the
injunction is withheld, 3) a favorable balance of hardships and
4) a favorable effect on the public interest. Jean v. Mass.
State Police, 492 F.3d 24, 26-27 (1st Cir. 2007).

Out of those

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 counterclaim] 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 (1976).

The Court may rely on otherwise inadmissible

evidence, such as hearsay, so long as it finds that, after
weighing all the attendant factors, including the need
for expedition, this type of evidence was appropriate
given the character and objectives of the injunctive
proceeding.
Asseo v. Pan Am. Grain Co., Inc., 805 F.2d 23, 26 (1st Cir.
1986).

Ultimately, the issuance of preliminary injunctive

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relief is “an extraordinary and drastic remedy that is never
awarded as of right.” Peoples Fed. Sav. Bank v. People’s United
Bank, 672 F.3d 1, 8-9 (1st Cir. 2012) (quoting Voice of the Arab
World, Inc. v. MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st
Cir. 2011)).
B.

Application

Defendant seeks a preliminary injunction to enjoin
plaintiff from advertising that 1) all RadonAway fans are
certified for outdoor use under the safety standards set forth
in “UL 507 – Standard for Electric Fans” (“UL 507”) and 2) the
RP260 and RP380 models of RadonAway fans are “Energy Star
Rated”.
1.

Likelihood of success

To prevail on its claim of false advertising under the
Lanham Act, defendant must prove that
(1) the [plaintiff] made a false or misleading
description of fact or representation of fact in a
commercial advertisement about [its] 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 [plaintiff] placed the false
statement in interstate commerce; and

or

misleading

(5) the [defendant] has been or is likely to be injured
as a result of the misrepresentation, either by direct
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diversion of sales or by a
associated with its products.

lessening

of

goodwill

See Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284
F.3d 302, 310-11 (1st Cir. 2002).

If defendant alleges that the

advertisement is literally false, then it need not present
evidence of consumer deception. Id. at 311.
a.

Statements on outdoor use

Defendant contends that plaintiff’s advertisements contain
false statements that plaintiff’s RadonAway fans are certified
for outdoor use.

It proclaims that those statements are

literally false because the fans have not been tested or
certified by Intertek Testing Services NA, Inc. (“Intertek”), an
independent laboratory which tests and certifies products for
compliance with safety and performance standards, under the UL
507 standards for outdoor use.

Defendant seeks to enjoin

plaintiff’s continued use of those statements in its
advertising.
Defendant offers a number of affidavits in support.

The

first is an affidavit, dated February 23, 2016, by Daryl Festa
(“Daryl Festa”), its vice president and general manager,
declaring that 1) the advertised RadonAway fans do not bear
stickers specifically marking them for outdoor use, 2) Intertek
did not issue an “Authorization to Mark” the fans for outdoor
use, 3) Intertek omits RadonAway fans from its list of products

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that qualify for outdoor use under the UL 507 standards, 4) his
own efforts to disassemble and inspect the fans reveal that they
do not in fact satisfy the UL 507 standards and 5) industry
publications report that RadonAway fans increase the risks of
shorting, overheating, electrical shock and house fires.
Plaintiff challenges Daryl Festa’s declarations as 1) based
upon mere speculation, 2) ignoring reports stating that the fans
were tested and certified for outdoor use and 3) constituting
lay witness testimony on a matter on which he lacks personal
knowledge.

It asks the Court to strike or disregard the

affidavit and submits that those defects are not excused by a
need for expedition,
particularly where this case has been pending for almost
a year, and Festa apparently has engaged no qualified
experts to engage in any actual testing to determine
whether Spruce’s RadonAway fans comply with UL 507
standards for outdoor use.
Defendant counters with a supplemental affidavit from Daryl
Festa, dated March 16, 2016, explaining that his declarations
are based upon years of personal knowledge and experience in
designing and testing radon fans under the UL 507 standards.

He

also states that there is no evidence that RadonAway fans passed
the Water Spray or UV light tests or were marked for outdoor or
rooftop use, and that the fans thus did not comply with the UL
507 standards.

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Defendant next presents an affidavit from Adam Black
(“Black”), a Senior Safety Engineer at F2 Labs, an independent
laboratory that it retained to test two RadonAway fans from the
XP201C and GP501 model series for compliance with the UL 507
standards.

Black declares that neither fan satisfied the

outdoor requirements because neither fan passed the Water Spray
Test or bore the proper label.
Defendant proclaims that plaintiff’s customers,
professional contractors who install radon mitigation systems on
residential property, would not buy or use RadonAway fans for
exterior systems if they knew that the fans were not certified
for outdoor use.

Defendant argues that it will likely lose

customers and goodwill as a result of the false statements.
Plaintiff responds that the challenged statements are true
and not literally false because its RadonAway fans have indeed
been tested and certified under the UL 507 standards for outdoor
use.

It presents an affidavit by Peter Sedor (“Sedor”), a

Safety Engineering Team Leader at Intertek, who claims that
Intertek tested and certified all of its RadonAway fans for
outdoor use pursuant to the UL 507 requirements.
Plaintiff also submits an affidavit by David Kapturowski
(“Kapturowski”), its vice president and co-founder, declaring
that Intertek 1) tested and certified several of its products
for outdoor use and 2) authorized plaintiff to state in its
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packaging insert label that the products were certified for
outdoor use.
In response, defendant refers the Court back to Daryl
Festa’s supplemental affidavit which notes that Kapturowski
previously admitted that he was not involved in product testing
and had not inquired as to whether RadonAway fans had been
tested for outdoor use.

The supplemental affidavit also faults

the Kapturowski and Sedor affidavits for not explaining how
RadonAway fans could comply with the UL 507 standards when they
have not been marked for outdoor use.
At the motion hearing, plaintiff provided the Court with a
letter, dated March 21, 2016, sent by Sedor and another Intertek
employee to Kapturowski that authorized plaintiff to label
RadonAway fans for outdoor use pursuant to the UL 507 standards.
After weighing and reviewing the affidavits and evidence,
including Daryl Festa’s affidavit from February 23, 2016, the
Court finds that defendant is unlikely to show that the
advertising statements that plaintiff made concerning outdoor
use were literally false.

Defendant is unlikely to prevail on

its claim of false advertising with respect to outdoor use and
is therefore not entitled to injunctive relief on that claim.
See Tuxworth v. Froehlke, 449 F.2d 763, 764 (1st Cir. 1971)(“No
preliminary injunction should be granted in any case unless
there appears to be a reasonable possibility of success on the
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merits.”); Weaver v. Henderson, 984 F.2d 11, 12 (1st Cir.
1993)(“In the ordinary course, plaintiffs who are unable to
convince the trial court that they will probably succeed on the
merits will not obtain interim injunctive relief.”).
Accordingly, defendant’s motion for injunctive relief will
be denied with respect to the statements concerning outdoor use.
b.

Statements on Energy Star Ratings

Defendant asserts that plaintiff’s advertising references
to the RP260 and RP380 models of RadonAway fans as Energy Star
Rated are literally false.

Defendant submits that those

statements influence the purchasing decisions of customers and
will likely cause a direct diversion of defendant’s sales to
plaintiff.

It seeks to enjoin plaintiff’s use of those false

statements in its advertisements.
Plaintiff concedes that its RP260 and RP380 models do not
comply with the most recent set of Energy Star standards but
nevertheless contends that defendant is unlikely to prevail on
its claim because plaintiff 1) did not intentionally make those
false statements and 2) does not intend to advertise those fans
as Energy Star Rated in the future.

Plaintiff stresses that it

has acted in good faith throughout the course of this action by
removing inaccurate references to Energy Star Ratings
immediately upon discovering them.

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The issue of the non-moving party’s good faith in curing
the violation is more relevant to the discussion of irreparable
harm than to the moving party’s likelihood of success on the
merits. Camel Hair & Cashmere Inst. of Am., Inc. v. Assoc. Dry
Goods Corp., 799 F.2d 6, 13 (1st Cir. 1986)(“Although a showing
of intent or lack of good faith on the part of the defendant is
not necessary to make out a claim under the Lanham Act, . . . we
agree with the district court that Federated’s good faith . . .
is a significant factor to take into account in determining the
likelihood that Federated will cause injury to the plaintiff’s
members in the future.”).
Accordingly, the Court finds that the parties do not
dispute that plaintiff made literally false statements in its
advertisements that the RP260 and RP280 models of RadonAway fans
were Energy Star Rated.

Defendant has shown a likelihood of

success on its claim of false advertising with respect to the
statements on Energy Star Ratings.
2.

Remaining factors

The Court will thus consider the remaining factors for
injunctive relief with respect to the statements concerning
Energy Star Ratings.
Defendant contends that it faces irreparable harm because
it will likely lose customers and goodwill if plaintiff
continues to advertise falsely that its identified RadonAway
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fans are Energy Star Rated.

Defendant disputes plaintiff’s good

faith in promptly removing such false statements based upon
evidence suggesting that plaintiff 1) knew in June, 2015 that
its advertisements contained false statements on Energy Star
Ratings but 2) waited at least eight months before removing all
of those statements.

Defendant views the delay as a reflection

of plaintiff’s inability to “police its advertising and that of
its agents and distributors” and concludes that plaintiff’s
actions are likely to cause it injury in the future.
Defendant argues that the balance of hardships favors
injunctive relief because 1) any harm to plaintiff would be
“entirely self-inflicted,” 2) a prohibition on false statements
would not otherwise prejudice plaintiff’s advertisement
interests and 3) the injunction would not burden plaintiff with
any additional hardship in that it has already removed the
offending statements and is contractually obligated as an Energy
Star Partner to ensure that its distributors do not falsely
advertise its products.
Plaintiff responds that 1) defendant cannot rely only on
“bald assertions in a legal brief of lost sales or goodwill” to
assert irreparable harm, 2) defendant has reported a “consistent
growth rate of an increased percentage” every year despite the
alleged presence of false statements in plaintiff’s
advertisements and 3) any harm to defendant would be an
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incidental result of competition in the radon fan market.
Plaintiff surmises that an injunction would cripple its
business, potentially cause many employees to lose their jobs
and injure the public interest in market competition.
Although defendant can be compensated by money damages for
lost sales if it prevails on the merits of its claims, the Court
concludes that it has sufficiently demonstrated irreparable harm
to its goodwill.

The fact that defendant may enjoy increasing

success in the marketplace is irrelevant to the issue of whether
it will face irreparable harm and relatively more hardship in
the absence of injunctive relief.

The requested injunction

would merely prevent plaintiff from making false statements with
respect to Energy Star Ratings in the future, a hardship that is
outweighed by defendant’s potential loss of customers and
goodwill if plaintiff continues to falsely advertise.
On balance, the factors for injunctive relief tip in
defendant’s favor only with respect to the statements concerning
Energy Star Ratings.

Accordingly, defendant’s motion for a

preliminary injunction will be allowed, in part, and denied, in
part.

ORDER
For the foregoing reasons, defendant’s motion for a
preliminary injunction (Docket No. 66) is ALLOWED, IN PART, AND
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DENIED, IN PART, as more fully described in the preliminary
injunction attached hereto.

So ordered.
/s/ Nathaniel M. Gorton_____
Nathaniel M. Gorton
United States District Judge
Dated April 21, 2016

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