Fan Fi International, Inc. et al v. Interlink Products International, Inc.

Filing 81

ORDER granting in part and denying in part ECF No. 48 Motion for Judgment on the Pleadings; dismissing the claims insofar as they are based on violations of 10 C.F.R. § 430.32(p). Signed by Judge Robert C. Jones on 9/27/2017. (Copies have been distributed pursuant to the NEF - KR)

Download PDF
1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 6 7 8 9 10 11 ______________________________________ ) ) FAN FI INTERNATIONAL, INC. et al., ) ) Plaintiffs, ) ) vs. ) ) INTERLINK PRODUCTS ) INTERNATIONAL, INC., ) ) Defendant. ) 3:16-cv-00661-RCJ-VPC ORDER 12 This case arises out of alleged false advertising. Pending before the Court is a motion for 13 14 judgment on the pleadings. 15 I. FACTS AND PROCEDURAL HISTORY 16 A. The New Jersey Actions 17 On February 29, 2016, Interlink Products International, Inc. (“Interlink”) sued Fan Fi 18 International, Inc. (“Fan Fi”) for patent infringement in the U.S. District Court for the District of 19 New Jersey, alleging that Fan Fi’s sale of certain dual showerhead products violated U.S. Patent 20 No. 7,299,510. (See Compl., ECF No. 1 in D.N.J. Case No. 2:16-cv-1142). Interlink amended 21 the complaint on June 23, 2016 to add ETL, LLC as a defendant. (See Am. Compl., ECF No. 14 22 in D.N.J. Case No. 2:16-cv-1142). 23 24 1 of 9 1 On March 4, 2016, Interlink again sued Fan Fi in the U.S. District Court for the District 2 of New Jersey, this time for trademark infringement and unfair competition under both federal 3 and state law, based on Fan Fi’s use of the “POWER SPA” mark. (See Compl., ECF No. 1 in 4 D.N.J. Case No. 2:16-cv-1244). Interlink amended the complaint on June 23, 2016 to add ETL, 5 LLC as a defendant. (See Am. Compl., ECF No. 13 in D.N.J. Case No. 2:16-cv-1244). On July 6 29, 2016, Fan Fi and ETL counterclaimed for a declaration of non-infringement and cancellation 7 of the mark. (See Answer & Countercl., ECF No. 23 in D.N.J. Case No. 2:16-cv-1244). 8 9 On August 2, 2016, Interlink sued Fan Fi and ETL for a third time in the U.S. District Court for the District of New Jersey for false advertising under the Lanham Act and several 10 related state law causes of action based on advertising claims Fan Fi and ETL made in relation to 11 their showerhead products. (See Compl., ECF No. 1 in D.N.J. Case No. 2:16-cv-4663). 12 On September 28, 2016, the three New Jersey actions were consolidated in that district, 13 with the ‘1142 Case as the lead case. That court denied a motion by Fan Fi and ETL to transfer 14 the cases to this District under 28 U.S.C. § 1404(a). 15 B. The Present Action 16 On November 16, 2016, Fan Fi and ETL sued Interlink in this Court for false advertising 17 under the Lanham Act and deceptive trade practices and unfair competition under Nevada law. 18 Plaintiffs allege that certain of Defendant’s showerheads violate federal regulations because they 19 permit a flow of greater than 2.5 gallons per minute at 80 pounds per square inch when the flow 20 restrictor is removed and that the flow restrictors can be removed with less than eight pounds of 21 force. Plaintiffs allege that Defendant’s advertising claims that its showerheads comply with 22 federal law are therefore false. 23 24 2 of 9 Defendant moved to dismiss for failure to state a claim. The Court granted the motion in 1 2 part. Plaintiffs had only alleged that Defendant’s showerheads violated flow rate limitations if 3 modified by consumers, not as sold by Defendant. The Court gave Plaintiffs leave to amend in 4 that regard. The Court did not dismiss as to the allegation that Defendant’s showerheads’ flow 5 restrictors could be removed with less than eight pounds of force (“the force test”), but the Court 6 ordered Plaintiffs to make a more definite statement as to that allegation, i.e., to specify which of 7 Defendant’s products violated the force test. Plaintiffs filed the First Amended Complaint (“FAC”). Defendant moved to dismiss the 8 9 FAC for failure to state a claim and also moved for summary judgment. The Court dismissed the 10 claims based on violations of flow rates and false claims of LED lifespan, with leave to amend as 11 to the LED lifespan issue. The Court refused to dismiss based on violations of the force test. 12 The Court struck the allegations concerning federal labeling and marking requirements because 13 there was no leave to add those claims. As to any claims surviving dismissal, the Court denied 14 summary judgment without prejudice, as discovery was ongoing. Plaintiffs filed the Second Amended Complaint (“SAC”). Defendant has answered and 15 16 has moved for judgment on the pleadings. 17 II. 18 LEGAL STANDARDS “After the pleadings are closed—but early enough not to delay trial—a party may move 19 for judgment on the pleadings.” Fed. R. Civ. P. 12(c). The standards governing a Rule 12(c) 20 motion are the same as those governing a Rule 12(b)(6) motion. See Dworkin v. Hustler 21 Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). 22 Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the 23 claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of 24 3 of 9 1 what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 2 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action 3 that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 4 12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720 5 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for 6 failure to state a claim, dismissal is appropriate only when the complaint does not give the 7 defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell 8 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is 9 sufficient to state a claim, the court will take all material allegations as true and construe them in 10 the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th 11 Cir. 1986). The court, however, is not required to accept as true allegations that are merely 12 conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden 13 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 14 A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a 15 plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just 16 “possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556) 17 (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to 18 draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is, 19 under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a 20 cognizable legal theory (Conley review), he must also allege the facts of his case so that the court 21 can determine whether he has any basis for relief under the legal theory he has specified or 22 implied, assuming the facts are as he alleges (Twombly-Iqbal review). Put differently, Conley 23 only required a plaintiff to identify a major premise (a legal theory) and conclude liability 24 4 of 9 1 therefrom, but Twombly-Iqbal requires a plaintiff additionally to allege minor premises (facts of 2 the plaintiff’s case) such that the syllogism showing liability is complete and that liability 3 necessarily, not only possibly, follows (assuming the allegations of fact are true). “Generally, a district court may not consider any material beyond the pleadings in ruling 4 5 on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the 6 complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner 7 & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents 8 whose contents are alleged in a complaint and whose authenticity no party questions, but which 9 are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) 10 motion to dismiss” without converting the motion to dismiss into a motion for summary 11 judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule 12 of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay 13 Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court 14 considers materials outside of the pleadings, the motion to dismiss is converted into a motion for 15 summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 16 2001). 17 III. ANALYSIS 18 Defendant first argues that false advertising claims cannot be based on unsettled 19 regulatory provisions. In PhotoMedex, Inc. v. Irwin, the Court of Appeals held that because the 20 Food, Drug, and Cosmetic Act permitted no private action, one could not invoke the Lanham Act 21 based on an alleged misrepresentation where the Food and Drug Administration had neither 22 made a contrary finding nor brought an enforcement action itself. 601 F.3d 919, 922 (9th Cir. 23 2010). The question is whether a determination of the falsity of a representation would require a 24 5 of 9 1 court to perform an original interpretation of the governing agency’s own regulations. Id. at 928. 2 Unless the relevant regulation leaves no room for ambiguity, the relevant agency must have itself 3 made an unambiguous statement concerning the issue that the alleged misrepresentation 4 contradicts. Id. at 929. Otherwise, the appropriate forum is the regulatory agency itself, not a 5 Lanham Act claim in the district court. Id. Defendant argues that the force test regulation, 10 C.F.R. § 430.32(p), is ambiguous, 6 7 noting that the Department of Energy (“DOE”) itself—the agency that promulgated the 8 regulation containing the test—has expressly stated in the Federal Register that the meaning is so 9 unclear that it has yet to establish a test method to determine whether a shower head satisfies the 10 test. See 78 FR 62970, 62974. Plaintiffs argue that 8.0 pounds of force is not ambiguous. But 11 the DOE itself has refused to adopt a test procedure because of concerns articulated by 12 commenters as to the testing procedure. See id. The Court agrees that a false advertising claim is 13 not appropriate as to this issue while the DOE remains in the notice-and-comment phase of 14 administrative rulemaking as to the meaning of the force test. Plaintiffs focus on the clarity of 15 “8.0 pounds,” but just as a remedy can be as important as the underlying right, the testing 16 procedure used can be as important as the objective force threshold. 1 17 18 1 Must 19 20 21 22 23 24 the force be applied perpendicularly to the plane of the flow restrictor, or may it be applied at an angle? If at an angle, must the force be a straight pull in a constant direction, or may the flow restrictor be pried out via a lever? Must the force be measured at the extreme tip of the lever, or only at the point where the lever’s force is actually applied to the flow restrictor? What if the lever touches the flow restrictor over a span where the force required is both greater than and less than eight pounds? What if the flow restrictor is shaped so as not to be susceptible to a conventional pull or pry? What if less than eight pounds is required to saw the flow restrictor into pieces so that it can be pulled out, but more than 8 pounds would be required to pull it out intact? What if eight pounds of force causes a flow restrictor to become dislodged from its initial position but does not result in a flow rate above 2.5 gallons per minute? What if eight pounds of force can result in a flow rate of over 2.5 gallons per minute, but the flow restrictor remains generally in place? 6 of 9 1 Second, Defendant argues that the relevant regulations only apply to showerheads sold by 2 manufacturers and private labelers, not those in the possession of consumers or retailers. The 3 Court rejects this argument, although the issue is moot given the result under PhotoMedex. The 4 Court has already ruled that because there was no allegation that the showerheads violated flow 5 rates when sold, but only if freely modified by consumers, there was no claim of falsity as to the 6 flow rate. But the Court found that Plaintiffs had sufficiently alleged that Defendant’s 7 showerheads failed the force test as sold. 8 Third, Defendant argues that the SAC has not cured the defects in the FAC as to the 9 claims of LED lifespan. Plaintiffs previously alleged that Defendant advertises a 100,000-hour 10 lifespan, which exceeds typical industry claims of 25,000-to-50,000 hours and argued that the 11 advertising claim was false because it would take 11 ½ years to substantiate and unidentified 12 consumers had complained that the LEDs failed in as little as two weeks. The Court dismissed, 13 with leave to amend, reasoning that a manufacturer needn’t demonstrate an advertising claim is 14 true but that a claim of product life could be based on a reasonable estimate, and that isolated 15 instances of product failure did not show falsity. Plaintiffs would have to base their claim of 16 falsehood on something objective, e.g., a mechanical comparison of Defendant’s LED system 17 with an LED system of known lifespan, or some other objective examination that would give 18 plausibility to the allegation that a 100,000-hour lifespan is false. 19 Plaintiffs have now incorporated allegations made against Defendant in another case and 20 alleged that the relevant party has tested one of the showerheads, finding a lifetime of 199 hours. 21 (See Second Am. Compl. ¶¶ 34–35, ECF No. 45). The Court finds that the allegations in another 22 party’s answer in a fourth New Jersey action, as incorporated into the SAC, is sufficient to make 23 out a plausible claim of falsity as to LED lifespan: 24 7 of 9 Cathy Trading has purchased and tested Interlink product number 1487. Cathy Trading conducted testing by running water between 23-27 Celsius degree from 10:00AM, May 26, 2016, continuously non-stop, the LED lights installed in Product 1487 stopped functioning at 4:43PM on June 3, 2016. The total lifetime of the workable LED light system installed in this showerhead was 198 hours and 43 minutes. Cathy Trading further consulted with experts in the LED light industry, and identified Interlink distributes numerous showerhead products embedded with the similar type of LED lights in them. These LED lights comprise an LED light system that includes a motor that generates power to the LED light from the movement of water through the showerhead. This motor lasts for several hundred or several thousand hours. Hence, the LED light systems installed in Interlink’s showerhead products never have the ability of reaching 100,000 hours as the life is limited by the motor or the actual LED light bulbs themselves which rarely experience a 100,000 life span. 1 2 3 4 5 6 7 8 (See Answer ¶ 24, ECF No. 55 in D.N.J. Case No. 2:16-cv-2153). These allegations are based 9 not on pure disbelief or anonymous claims of isolated failure but on a claim of an actual test and 10 a mechanical explanation by experts of why the claims are almost certainly false. Defendant 11 notes that there is no indication of expert testing or testing of more than one unit. But at the 12 pleading stage, Plaintiffs need only make plausible allegations. The allegations of testing and the 13 likely impossibility of the advertising claims being true based on the mechanical characteristics 14 of the product is enough to cross the line from possible to plausible. This is more than a simple 15 statement of disbelief or anonymous claims of isolated failure. Although only one unit failed, 16 that was the only unit tested. That makes it plausible that the claim of a 100,000 hour LED 17 lifespan is generally false, whereas a single report of failure out of thousands of products sold 18 could just as easily indicate an isolated manufacturing defect. Plaintiffs will have to do more to 19 survive summary judgment, of course, but they have plausibly alleged falsity at the pleading 20 stage based on their incorporation of the allegations made in the answer in the ‘2153 Case from 21 the District of New Jersey. 22 /// 23 /// 24 8 of 9 CONCLUSION 1 2 IT IS HEREBY ORDERED that the Motion for Judgment on the Pleadings (ECF No. 48) 3 is GRANTED IN PART and DENIED IN PART. The claims are dismissed insofar as they are 4 based on violations of 10 C.F.R. § 430.32(p). 5 6 IT IS SO ORDERED. Dated:this 8th27th of August, 2017. Dated This day day of September, 2017. 7 8 _____________________________________ ROBERT C. JONES United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 9 of 9

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?