Fringe Insurance Benefits, Inc. v. Beneco, Inc. et al

Filing 52

MEMORANDUM OPINION AND ORDER. Signed by Judge Andrew W. Austin. (klw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
FRINGE INSURANCE BENEFITS, INC.,
V.
BENECO, INC. and J. ZANE SMITH.

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A-13-CV-034-AWA

MEMORANDUM OPINION AND ORDER
Before the Court is the above-entitled cause of action. The parties appeared for a bench trial
and the Court heard testimony and evidence on May 21, 2014. Pursuant to the Court’s Order of May
22, 2014, (Dkt. No. 40), the parties filed post-trial briefing. The last of all the Court-ordered briefing
was received August 4, 2014.

Defendants Beneco, Inc., and J. Zane Smith (collectively

“Defendants”) also submitted a Sur-Reply Brief on August 7, 2014, which Plaintiff Fringe Insurance
Benefits, Inc. (“FIBI”), opposed and sought to strike. See Dkt. Nos. 47, 48. Although Beneco did
not seek leave to file the sur-reply, the Court permitted its filing, but allowed FIBI to file a Sur-Reply
Brief to the extent it wished to do so. See Dkt. No. 50. Having considered the evidence and
testimony and post-trial briefing, the Court enters the following Memorandum Opinion and Order.
I. FINDINGS OF FACT1
This case arises out of a dispute between competing providers of employee benefit plans.
Fringe Insurance Benefits, Inc. (“FIBI”) and Beneco, Inc. specialize in providing fringe-benefit
services to government contractors who must comply with prevailing wage laws, such as the DavisBacon Act. Beginning in June 2012, Beneco sent mass mailings and emails to various customers

1

The Court sets out its findings and conclusions in narrative form. To the extent that any
finding of fact is more appropriately considered a conclusion of law, or vice verse, then such findings
or conclusions are deemed as such.

that FIBI claims violated the Lanham Act prohibiting false advertising. The Court finds that Beneco
made the following statements:
•

That Beneco’s plan was a “Department of Labor approved plan” Plaintiff’s Exhibits
14, 33, or “the Department of Labor approved plan.” Plaintiff’s Exhibit 17 (emphasis
added);

•

That the plan was “endorsed by various construction associations, including
numerous ABC Chapters, Independent Electrical Contractors Associations, American
Subcontractors Association and others.” Plaintiff’s Exhibit 14, See also Plaintiff’s
Exhibit 22 (containing substantially similar language);

•

Beneco sent out flyers that included the logos of the Associated Builders and
Contractors and Independent Electrical Contractors trade associations, implying that
the plan was endorsed by these entities. Plaintiff’s Exhibit 17;

•

That Beneco historically finds that its plan is “typically 50% less in cost than [FIBI’s]
plan.” Plaintiff’s Exhibits 12-14;

•

That Beneco customer Elting Northwest, Inc. “would save an estimated $1,523 if [it]
were to remain with Beneco” instead of switching to FIBI. Plaintiff’s Exhibit 2.

•

That specific prospective customers would save “$12,609,” “$6,348,” “10,546,” or
“1,008.” Defendant’s Exhibits 29, 30, 32, 33, respectively.

•

That FIBI’s “internal fees and expenses are 3 times higher than [Beneco’s], which
they will hide from you.” Plaintiff’s Exhibit 4.

•

That “FIBI has been under investigation by the Federal [Department of Labor].”
Plaintiff’s Exhibit 5.

•

Implied that FIBI’s plans do not have “an independent third party trustee,” instead
“naming you or an individual of your company as a discretionary trustee,” such that
“you are forced to take on the fiduciary liability for the investment selection.”
Plaintiff’s Exhibit 2.

FIBI also alleges that Beneco violated FIBI copyrights. On May 1, 2009, the Independent
Electrical Contractors published “Management Methods: Avoiding the Potential Prevailing Wage
Pitfalls in Federal Contracting” in its national trade publication. Plaintiff’s Exhibit 39. The article
was written by FIBI, who registered its copyright to it. Plaintiff’s Exhibits 38. In December 2010,

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an IEC chapter newsletter published a substantially similar article entitled “ARRA Offers Great
Opportunity & Potential Challenges for Electrical Contractors,” for which FIBI also filed an
application to register a copyright. Plaintiff’s Exhibits 40, 42, 43. The Court finds that FIBI has a
valid copyright to these articles.
Over several months in 2012, Defendant Zane Smith sent to hundreds of potential Beneco
customers a stock email that included an article entitled “Expanded Opportunity & Potential
Challenges for Contractors doing Prevailing Wage Projects.” Plaintiff’s Exhibit 33. In early 2013,
Smith published “Become a ‘Bona Fide’ Contractor on Prevailing Wage Projects” in both the print
and online versions of Construction Executive magazine. Plaintiff’s Exhibits 30, 31. In 2014, Smith
sent another article, entitled “Davis Bacon Dilemma: Expanded Opportunity for Contractors doing
Prevailing Wage Project,” to over 200 prospective clients. Plaintiff’s Exhibit 41, Tr. at 293.2 Each
article contains large amounts of language lifted directly from FIBI’s copyrighted 2010 article. At
trial, Smith admitted he had directly copied FIBI’s article. Tr. at 282, 289-290.
II. CONCLUSIONS OF LAW
As an initial matter, the Court addresses Defendants’ contention that the Court need not even
reach the merits of FIBI’s claims. Dkt. No. 45 at 2-3. In their post-trial briefing Defendants contend
for the first time that regardless of whether FIBI has demonstrated that wrongful acts have been
committed, FIBI failed to show that the entity named as a defendant—Beneco, Inc.—was responsible
for any of those wrongful actions. Indeed, they argue that showing Beneco was responsible is
impossible, because Beneco, Inc. is a non-functioning shell entity. In response, FIBI argues that
(1) Defendants waived any “improper party” defense, and (2) the evidence demonstrates that even

2

The transcript of the trial is filed as Tr., and is cited throughout this opinion as “Tr. at__.”
3

Defendants refer to all of their various entities as “Beneco” in their marketing materials. Dkt. No.
46 at 1–2. Defendants couch their argument as a “no-evidence point” because to raise it as a
challenge to the parties at this late date would be untimely. Ultimately, Defendants have failed to
convince the Court that they are not raising a challenge that Beneco, Inc. is an improper party.
Because Defendants failed to raise this issue as an affirmative defense, see Dkt. No. 15, they have
waived this contention.
Defendants’ attempt to characterize its argument as merely a “no-evidence point” is
unconvincing for several reasons. Defendants’ strategy in this case appears to have been to imply,
but never explicitly assert, that FIBI has sued the incorrect “Beneco” entity. As will be further
explained below, the evidence before the Court clearly demonstrates that wrongful acts were
committed by one or more entities referred to and known by all as “Beneco.” Indeed, Defendants
concede that the actions upon which this suit is based were performed by the “functioning Beneco
entities.” Dkt. No. 45 at 1, n.1. Additionally, Defendants highlight that they “do not concede that
Beneco, [which Defendants define for the first time to mean the functioning Beneco entities], has
been properly sued or served in this action.” Id. By stating that FIBI has not properly sued the
“Beneco” entities that committed the wrongful actions, Defendants are basically arguing that FIBI
has sued the incorrect party in this case. But Defendants have waived this contention, as they did
not raise the issue as an affirmative defense. See Jordan v. City of Baton Rouge, 192 F.3d 125 at *3
(5th Cir. 1999); see also Aguilar v. Arthritis Osteoporosis Ctr., No. M-03-243, 2006 WL 2478476
at *5 n.8 (S.D. Tex. Aug. 26, 2006) (“Arguments raised for the first time in post-trial briefing are
waived.”).
Furthermore, although Defendants might believe that the evidence clearly demonstrates that
FIBI should have known it was suing the incorrect party, the Court notes that the evidence presents,
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at best, an unclear picture. During trial, Rhett Smith testified that Defendants do not distinguish
between the various “Beneco” entities in their marketing information. Tr. 278–279. Additionally,
while there was testimony regarding the structure of “Beneco,” Zane Smith unambiguously stated
that there were no other “Beneco” entities during his deposition. Dkt. No. 45, Exhibit A (“Q: Okay.
Are there other Beneco entities? A: No.”). Based on Defendants own representations, it is not at
all clear that FIBI has in fact sued the wrong entity. Thus, to the extent that one might construe
Beneco’s argument as something other than a waived objection that it is not the proper party, the
argument fails factually as well.
A.

FIBI’s Claim of Lanham Act Violations
In order to succeed on a claim of false advertising under the Lanham Act a plaintiff must

show that: (1) a defendant made a false statement of fact about its product in a commercial
advertisement; (2) the statement actually deceived or has a tendency to deceive a substantial segment
of its audience; (3) the deception is likely to influence the purchasing decision; (4) the defendant
caused the false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to
be injured as a result. Logan v. Burgers Ozark Country Cured Hams Inc., 263 F.3d 447, 462 (5th
Cir. 2001).
However, when statements “are shown to be literally false, the plaintiff need not introduce
evidence on the issue of the impact the statements had on consumers . . . . In such a circumstance,
the court will assume that the statements actually misled consumers.” Id. (internal quotation marks
omitted). In addition, when a plaintiff seeks only injunctive relief it need not prove a specific
amount of actual damages, only that it was “likely to be injured as a result of the violation of the
Act.” Schlotzsky's Ltd. v. Sterling Purchasing & Nat. Distrib. Co., 520 F.3d 393, 401 (5th Cir. 1999)
(citing Logan, 263 F.3d at 463 and King v. Ames, 179 F.3d 370, 373-374 (5th Cir. 1999)).
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FIBI focuses its Lanham Act claim on nine statements by Defendants, each of which is
discussed individually in the following subsections. From the evidence at trial, the Court concludes
that each of the statements is “commercial advertising” that Beneco caused to enter interstate
commerce. At issue is whether or not each statement was “literally false” or deceptive under the
Lanham Act. That issue is discussed as to each statement in what follows.
1.

Beneco’s Department of Labor “Approval” and American Subcontractors
Association/Associated Builders and Contractors “Endorsement” Claims

Courts have repeatedly held that companies made “literally false” statements when they
claimed official approval or endorsements they had not received. See, e.g., Sw. Recreational Indus.,
Inc. v. FieldTurf, Inc., 01-50073, 2002 WL 32783971, at *3-4 (5th Cir. Aug. 13, 2002) (finding
“literally false” statements that artificial turf company's product was “approved” by FIFA); N. Am.
Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1225 (11th Cir. 2008) (affirming finding that
an advertisement stating a product was “FDA approved” was “literally false”). Beneco’s statements
that its plan was Department of Labor approved were literally false. The plan was not approved or
endorsed by the Department of Labor in any way. Tr. at 185. Beneco’s statements that its plan was
endorsed by the American Subcontractors Association and Associated Builders and Contractors trade
associations were also literally false. While Beneco may be endorsed by particular chapters of these
associations, they are not endorsed by the national groups. Tr. at 261 (endorsed by local chapters),
189 (not endorsed by American Subcontractors Association), 186 (not endorsed by Associated
Builders and Contractors). Indeed, both organizations sent letters to Beneco demanding that it stop
using its logo in advertisements. Tr. at 186 (Associated Builders and Contractors), Plaintiff’s
Exhibit 21 (American Subcontractors Association). Such literally false statements misled consumers

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regarding Beneco’s product, and harmed FIBI in the process. FIBI has produced sufficient evidence
in support of these claims, and Beneco’s conduct violated the Lanham Act.
2.

Beneco’s Claim that its Plan Costs 50% Less than FIBI

FIBI also contests Beneco’s claims that “we historically find that our . . . plan is typically
50% less in cost than [FIBI’s] plan.” Plaintiff’s Exhibits 12-14. Courts have held that cost
comparisons that are “literally false” violate the Lanham Act. See, e.g., Rent-A-Ctr. W., Inc. v. Aaron
Rents, Inc., CIV.A.3:03-CV-1595-K, 2004 WL 813225, at *2, *6 (N.D. Tex. Apr. 14, 2004)
(enjoining advertisement that inflated plaintiff's alleged fees); Garden Way, Inc. v. Home Depot, Inc.,
94 F. Supp. 2d 276, 278 (N.D.N.Y. 2000) (noting that “if Defendants wish to secure the undoubted
advantage of numerical comparisons, then they should get them right”).
FIBI argued that it is “literally false” to claim that Beneco’s plan is 50% less expensive. Had
Beneco made such a claim, it probably would have violated the Lanham Act. As discussed below,
FIBI showed at trial that several specific cost comparisons Beneco sent to potential customers were
“literally false.” Morever, Beneco never identified the analysis or study that caused it to “historically
find” such savings. Rhett Smith, executive vice president at Beneco was asked at trial whether he
could point to “any spreadsheets, any documents that you have” that support Beneco’s statement.
Tr. at 276. Smith said, “Yeah,” but then changed the subject. Id. Plaintiff’s counsel did not press
the issue. Nonetheless, to demonstrate that Beneco did not historically find such savings, and
therefore that the statement was “literally false” under the Lanham Act, FIBI would have had to
submit a more thorough comparison of the two products or evidence that Beneco had never done any
analysis justifying its claim.
Still, Beneco’s claim is clearly misleading. When a plaintiff seeks injunctive relief for a
statement that is not “literally false” but merely misleading, she must prove “that the advertisement
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tends to deceive consumers.” Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 497 (5th Cir.
2000).

To do so, she must “show that at least some consumers were confused by the

advertisements.” Id. at 498. FIBI did not produce any evidence that this statement confused any
particular customers. The only evidence of consumer confusion it produced pertained to other
statements FIBI has challenged. Plaintiff’s Exhibits 1, 8. As FIBI has not shown that any customers
were confused by Beneco’s statement that “we historically find that our . . . plan is typically 50% less
in cost than [FIBI’s] plan,” it has not met its burden of proof. Accordingly, these statements did not
violate the Lanham Act.3
3.

Beneco’s Specific Cost Comparisons

FIBI next protests the specific cost comparisons Beneco made in letters to Elting Northwest,
Inc., a customer that had elected to switch from Beneco to FIBI. Plaintiff’s Exhibit 2. Beneco stated
that Elting would save “an estimated $1,523" if it stayed with Beneco. Id. That estimate was based
on an attached spreadsheet in which Beneco made several errors. Among them: misplacing a
decimal point, thereby increasing FIBI’s cost by over $1,900; using an outdated service fee, inflating
FIBI’s cost by $1,541; and misstating a record keeping fee by $1/per participant, thereby inflating
the cost by $108. Tr. at 200-201; 203-204; 201. As a result of these mistakes, Beneco provided
Elting with an estimate that was “literally false,” As noted, supra., “literally false” cost comparisons
violate the Lanham Act.
FIBI also claims that Beneco sent specific customers inaccurate cost savings estimates.
According to spreadsheets produced by Beneco and sent to certain customers, each could save
“$12,609,” “$6,348,” “10,546,” or “1,008” by switching to Beneco. Defendant’s Exhibits 29, 30,

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A word of caution: Demonstrating the literal falsity of a statement under the Lanham Act
is a heavy burden. A party’s failure to meet that burden does not mean that the statement was true.
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32, 33, respectively. Each estimate is incorrect. In Defendant’s Exhibit 29, Beneco misstated FIBI’s
insurance company expenses, pegging them at 1.23% instead of .68%, thereby inflating FIBI’s costs
by $3,650. Tr. at 206-210. It made the same mistake in Defendant’s Exhibits 30 and 32, inflating
FIBI’s costs by $2,559 and $3,487, respectively. Id. at 211-12, 213-15. In Defendant’s Exhibit 33,
Beneco stated FIBI’s administrative fees were $1,200 when they are actually $506. Id. at 215-217.
Beneco even made basic arithmetic errors, miscalculating the sum of its own total costs by $2,326.
Id. at 212. It is clear that these estimates, rife with errors as they are, were “literally false”
statements that violated the Lanham Act.
4.

Beneco’s Claims about FIBI’s Hidden Fees and Being Under Investigation

On October 24, 2012, Zane Smith, on behalf of Beneco, sent an email to Douglas Philippa,
manager at ESI Electric, LLC, a contractor that had chosen FIBI’s plan over Beneco. Smith stated
that FIBI’s “internal fees and expenses are 3 times higher” than Beneco’s, and that FIBI will hide
its fees from ESI. Plaintiff’s Exhibit 4. In a second email, he stated that “FIBI has been under
investigation by the Federal DoL.” Plaintiff’s Exhibit 5. FIBI contends that each of these statements
were “literally false” and violations of the Lanham Act.
FIBI had the burden to show that Smith’s statement that FIBI’s “internal fees and expenses
are 3 times higher” than Beneco’s is “literally false.” It has not met that burden. The only evidence
FIBI cites in its post-trial brief is its own executive vice president’s testimony that he had never seen
any documentation that supported the statement. FIBI did spend considerable time at trial
demonstrating errors in an “apples-to-apples” analysis done by a third party financial advisor,
Bluestone Financial Advisors. See, Tr. at 219, Defendant’s Exhibit 39. That analysis compared FIBI
and Beneco’s plans as they would be applied to a particular potential customer. It showed that
FIBI’s fees and expenses were four times higher that Beneco’s. FIBI effectively pointed out the
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errors in those calculations, thereby impeaching Beneco’s only evidence in support of its statement.
At best, though, FIBI has proven that one third party financial advisor mistakenly advised his client
regarding the difference in FIBI and Beneco’s fees. FIBI did not show that Beneco’s statement that
FIBI has three times higher fees is wrong in every case, or even a majority of cases.4 As with
Beneco’s claim of 50% lower costs, in order to show that the statement was “literally false” FIBI
would have had to have either submitted a thorough comparison of the two products across several
customers or evidence that Beneco had never done any analysis justifying its claim.
Finally, even if the statement is merely misleading, FIBI failed to prove that it was “likely
to be injured as a result of the violation of the Act.” Schlotzsky's Ltd., supra., 520 F.3d at 401.
Indeed, there was no actual harm here, as the statement was made in an email to a customer who had
already chosen to leave Beneco for FIBI. It is clear then that this statement did not violate the
Lanham Act.
However, it is clear that Beneco’s statement that FIBI hides its fees from customers is
“literally false.” FIBI discloses all of its fees in its written agreements with customers and in its
marketing materials. See, e.g., Defendant’s Exhibit 22, Plaintiff’s Exhibit 46. Beneco’s statements
that FIBI hides its fees from customers violated the Lanham Act.
Beneco’s statement that FIBI has been under investigation by the Department of Labor is
neither literally false nor misleading. FIBI itself has not been under Department of Labor
investigation, but its affiliate, Plan Benefit Services, has been sued by the Department of Labor.
Defendant’s Exhibit 6. Plan Benefit Services and FIBI are affiliates that share common ownership,
common control, and function together in the same market. See, Tr. at 74. The Department of Labor

4

Indeed, the “apples-to-apples” analysis FIBI impeached could not have been the source of
Smith’s claim: Bluestone sent the analysis to its client after Smith’s email to ESI Electric.
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filed suit against Plan Benefit Services in January, 2011, alleging violations of the Employment
Retirement Income Security Act of 1974. Defendant’s Exhibit 6. The Department of Labor
prevailed on that action: the court found that provisions of Plan Benefit Services’ plans were void
as against public policy, and the company was enjoined from continuing to include those provisions
in its products. Defendant’s Exhibit 8. Thus, while the statement that “FIBI has been under
investigation by the Federal DoL” may not be entirely accurate, it is not sufficiently misleading to
trigger Lanham Act liability. Moreover, FIBI has not proven that the statement actually deceived
the customer to whom it was sent, nor that such a statement has a tendency to deceive a substantial
segment of its audience. Accordingly, the Court finds that this statement did not violate the Lanham
Act.
5.

Beneco’s Claims Regarding FIBI’s Lack of Third-Party Trustee Protection

Beneco stated that FIBI plans did not provide a third party trustee, thereby forcing customers
to take on fiduciary liability. Plaintiff’s Exhibit 2. This claim is also “literally false:” FIBI’s plans
include third party trustees and do not force customers to take on such liability. Tr. at 38-39. These
statements violated the Lanham Act.
B.

FIBI’s Claim of Unfair Competition under Texas Law
FIBI claims that Beneco’s conduct also constituted unfair competition under Texas law. To

succeed on a claim for unfair competition a plaintiff must “show an illegal act by the defendant
which interfered with the plaintiff’s ability to conduct its business.” DP Wagner Mfg. Inc. V. Pro
Patch Sys., Inc., 434 F. Supp. 2d 445, 462 (S.D. Tex. 2006). An “independent tort,” such as a
violation of the Lanham Act, satisfies the law’s requirement. Id. The Court finds that Beneco’s
violations of the Lanham Act constitute an independent tort for the purposes of Texas unfair

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competition law. Accordingly, the Court finds that Beneco committed unfair competition under
Texas law.
C.

FIBI’s Claim of Tortious Interference
FIBI brought a claim for tortious interference in its original complaint. Dkt. No. 1 at 7.

However, it did not present any evidence in support of the claim, or make any arguments advancing
the claim at trial. It made no mention of the claim in its post trial briefing. It is not clear to the Court
whether FIBI still contends that Beneco has interfered with its business relationships. Regardless,
FIBI has not met its burden on this point. To the extent that FIBI is still pursuing that claim, because
it failed to offer proof of the claim at trial, or to brief it in its post-trial briefs, it has abandoned the
claim.
D.

FIBI’s Claim of Copyright Infringement
To succeed on a copyright infringement claim, a plaintiff must prove that: (1) he owns a valid

copyright in the applicable work, and (2) the defendant copied constituent elements of the plaintiff's
work that are original. Positive Black Talk Inc. v. Cash Money Records, Inc., 394 F.3d 357, 367 (5th
Cir. 2004). To satisfy the first element of the test a plaintiff may produce a valid copyright certificate
of registration or, absent approval, the application, fee and deposit submitted for registration. See
R. Ready Prods., Inc. v. Cantrell, 85 F. Supp. 2d 672, 682 (S.D. Tex. 2000); Lakedreams v. Taylor,
932 F.2d 1103, 1108 (5th Cir. 1991). To satisfy the second element, “a plaintiff must prove:
(1) factual copying and (2) substantial similarity.” Positive Black Talk, 394 F.3d 357, 367. To prove
factual copying, a plaintiff must show that “(1) the defendant had access to the copyrighted work
before creation of the infringing work, and (2) the works contain similarities that are probative of
copying.” Armour v. Knowles, 512 F.3d 147, 152 (5th Cir. 2007). Substantial similarity is proven
when the two works are “sufficiently alike that the copyright to the original work has been
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infringed.” Id.
As noted, supra., FIBI has a copyright to the articles at issue. As for copying, Smith admitted
at trial that he had copied and reprinted the articles on behalf of Beneco. Copying is admitted, and
even if it were not, there can be little question, given the nearly identical nature of the two articles,
and the undisputed evidence that FIBI is the author of the original text. Accordingly, the Court finds
that both Smith and Beneco violated FIBI’s copyright in the article at issue.
III. REMEDIES
FIBI is not seeking an award of monetary damages, but instead asks only that the Court enter
a permanent injunction against Smith and Beneco, enjoining them from committing Lanham Act
violations in the future.
Injunctions are proper relief for violations of the Lanham Act. 15 U.S.C. § 1116 (a). A
plaintiff seeking a permanent injunction “must establish (1) success on the merits; (2) that a failure
to grant the injunction will result in irreparable injury; (3) that said injury outweighs any damage that
the injunction will cause the opposing party; and (4) that the injunction will not disserve the public
interest.” VRC LLC v. City of Dallas, 460 F.3d 607, 611 (5th Cir. 2006). As detailed supra., FIBI
has shown that Smith and Beneco violated the Lanham Act, thereby satisfying the first element of
the test.
FIBI argues that irreparable harm is presumed if a statement is found to have been literally
false. Dkt. No. 44 at 15. This is not a correct reading of Fifth Circuit false advertising precedent,
“which explicitly requires a plaintiff to prove irreparable injury ‘[i]n addition’ to proving falsity.”
Eastman Chem. Co. v. PlastiPure, Inc., 969 F. Supp. 2d 756, 767-68 (W.D. Tex. 2013) (citing
Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1369, 1390 (5th Cir. 1996)). To be sure, it is difficult to
prove “irreparable injury” in a false advertising case. Id. (citing PBM Prods., LLC v. Mead Johnson
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& Co., 639 F.3d 111, 126-27 (4th Cir. 2011)).5 Nonetheless, should Beneco continue to make such
statements FIBI will be irreparably harmed. See, e.g., Tr. at 28 (FIBI V.P. noting the small size of
the benefit plan market and that “when information is provided that’s incorrect in those small circles,
it gets around pretty quickly and can be damaging.”); at 64 (FIBI V.P. noting that many customers
are small, “family-run” businesses easily influenced by false endorsements). That many of the
statements were contained in emails sent directly to customers makes an injunction all the more
appropriate: as FIBI correctly notes, such “difficult-to-monitor channels” are the most likely source
of future harm. Eastman Chemical Co., supra., at 768.
The equities also support an injunction in this case: requiring Beneco to refrain from making
false statements and post a copy of this order serves the public interest and causes no direct harm to
Beneco. Accordingly, the Court enjoins Defendants, their employees, agents, or affiliates from
distributing commercial material that:
•

states or suggests that Beneco or its products are approved by the Department of
Labor;

•

states or suggests that Beneco or its products are endorsed by the American
Subcontractors Association or the national Associated Builders and Contractors
organization, unless they have actually received an endorsement from either national
organization;

•

includes inaccurate and/or incomplete customer-specific comparisons between the
costs, fees, or expenses of FIBI and Beneco products;

•

states or suggests that FIBI hides its costs, fees, or expenses;

•

states or suggests that FIBI does not have a third party independent trustee or that
FIBI’s plan forces customers to take on fiduciary liability for investment selections;

5

Generally, it is unwise to argue one point, supported only by out-of-circuit law, and then
in the very next paragraph cite a case, Eastman Chemical Co., that explicitly rejected the holdings
of the out-of-circuit courts as “plainly inconsistent” with Fifth Circuit precedent. 969 F. Supp. 2d
at 767-68. But this is what FIBI did. Dkt. No. 44 at 15.
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In addition, the Court orders that Beneco post a copy of this memorandum opinion and order, and
a copy of the final judgment in this action, to its website. It shall also place a link to the judgment
on its corporate home page. The link shall be no smaller than 12 point type and readily apparent to
the site’s visitors with no other accompanying commentary or explanatory statement. Both the
documents and the link shall remain in place for 30 days. Beneco shall provide notice to the Court
when it publishes the documents and again at the completion of the period.
Beneco and J. Zane Smith also infringed FIBI’s copyright. “Irreparable harm is presumed
when a copyright is infringed.” Entm't & Sports Programming Network, Inc. v. Edinburg Cmty.
Hotel, Inc., 735 F. Supp. 1334, 1343 (S.D. Tex. 1986). FIBI made considerable investment of time,
talent and treasure in producing and distributing the articles to potential customers, all for naught if
Beneco continues to reprint them under its own name. See, Tr. 157-59, 162-64. The burden of an
injunction against continued copying would be light on both Beneco and the public. Accordingly,
the Court enjoins Defendants and their employees, agents and affiliates from infringing FIBI’s
copyrights to publications, articles, literature or marketing material.
SIGNED this 11 day of February, 2015.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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