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Robroy Industries - Texas LLC v. Thomas & Betts Corp.

United States District Court, E.D. Texas, Marshall Division

April 10, 2017

ROBROY INDUSTRIES - TEXAS, LLC, a Texas corporation, and ROBROY INDUSTRIES, INC., a Pennsylvania corporation, Plaintiffs,
v.
THOMAS & BETTS CORPORATION, a Tennessee corporation, Defendant. THOMAS & BETTS CORPORATION, a Tennessee corporation, Plaintiff,
v.
ROBROY INDUSTRIES - TEXAS, LLC, a Texas corporation, and ROBROY INDUSTRIES, INC., a Pennsylvania corporation, Defendants.

          MEMORANDUM OPINION AND ORDER

          WILLIAM C. BRYSON UNITED STATES CIRCUIT JUDGE.

         Before the Court is Thomas & Betts' Motion for Summary Judgment for Lack of Evidence Required by Plaintiff's False-Advertising, Product Defamation, and Unfair Competition Claims, Dkt. No. 134 (“Summary Judgment Motion”). The motion is DENIED.

         BACKGROUND

         Thomas & Betts Corporation (“T&B”) and the plaintiffs (“Robroy”) compete in the market for polyvinyl chloride (“PVC”) coated electrical conduit, which is used to carry electrical wiring in buildings or other structures. The two companies are the major suppliers of PVC-coated electrical conduit in the United States. Robroy offers its conduit products under several brand names. T&B's conduit is known as “Ocal.”

         On several occasions, disputes have arisen between the competing companies (including the predecessor producer of Ocal). Robroy has complained that T&B and its predecessor have made false claims about Ocal and about Robroy's products. In 2015, the dispute came to a head when Robroy filed this action charging that T&B had engaged in false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a), and had committed the Texas state law torts of unfair competition and trade defamation.

         Robroy alleged that in advertising and in direct contacts with customers T&B had falsely claimed that only its Ocal products had certain features, and that Robroy's products lacked those features. In particular, T&B claimed that only its Ocal products met the UL 6 standard, which is the quality standard for PVC-coated electrical conduit established by a national standards-setting organization, Underwriters Laboratories, Inc. T&B also claimed that only its Ocal products satisfied the ANSI C80.1 standard, a standard established by the American National Standards Institute, and the NEMA RN-1 standard, a standard established by the National Electrical Manufacturers' Association. In addition, T&B claimed that “only Ocal” offers local installation training and certification. As to Robroy, T&B's promotional materials claimed that Robroy “abrade[s] the surface of the conduit prior to the application of the PVC, ” thereby “remov[ing] the protective coatings that the customer is paying for.” T&B further claimed that Robroy used a standard employed by ETL Semko Intertek, “because UL standards are not being followed by the abrading of the conduits [sic] exterior zinc finish.” Complaint, Dkt. No. 1; Dkt. Nos. 1-1 through 1-4. Robroy contends that each of those statements was false.

         T&B has now moved for summary judgment on both the federal and state law claims. As to the federal Lanham Act claim, T&B argues that Robroy has not offered sufficient evidence that the false statements allegedly made by T&B agents caused any cognizable injury to Robroy. As to the state law claims, T&B argues that those claims also fail because of lack of proof of causation; in addition, T&B argues that Robroy's unfair competition claim fails because Robroy is not a “consumer” within the meaning of the Texas Deceptive Trade Practices and Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.45.

         DISCUSSION

         I. The Lanham Act Claim

         The Lanham Act provides, in pertinent part:

Any person who [uses any] false or misleading description of fact, or false or misleading representation of fact, which . . . misrepresents the nature, characteristics, [or] qualities . . . of his or her or another person's goods . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a).

         A plaintiff must establish five elements to make out a prima facie case of false advertising under the Lanham Act: (1) that the defendant made a false or misleading statement of fact about a product; (2) that the statement either deceived or had the capacity to deceive a substantial number of potential customers; (3) that the deception was material, in that it was likely to influence the consumers' purchasing decisions; (4) that the product was in interstate commerce; and (5) that the plaintiff has been or is likely to be injured as a result of the statement at issue. IQ Prods. Co. v. Pennzoil Prods. Co., 305 F.3d 368, 375 (5th Cir. 2002); Logan v. Burgers Ozark Country Cured Hams Inc., 263 F.3d 447, 462 (5th Cir. 2001); Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 495 (5th Cir. 2000). To recover money damages under the Lanham Act, a plaintiff seeking compensation for injury “must prove both actual damages and a causal link between defendant's violation and those damages.” Rhone-Poulenc Rorer Pharms., Inc. v. Marion Merrell Dow, Inc., 93 F.3d 511, 515 (8th Cir. 1996); see also Versign, Inc. v. XYZ.com LLC, 848 F.3d 292, 299 (4th Cir. 2017); L.S. Heath & Son, Inc. v. AT&T Info. Sys., Inc., 9 F.3d 561, 575 (7th Cir. 1993); ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 959 (D.C. Cir. 1990). The causation element requires the plaintiff to prove causation under the “proximate cause” standard. Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1390-91 (2014).

         In seeking summary judgment on Robroy's claim under the Lanham Act, T&B focuses exclusively on the element of causation. T&B contends that the evidence Robroy has pointed to during the summary judgment proceedings is insufficient to give rise to a genuine issue of material fact on the issue of causation, and that summary judgment should therefore be entered in T&B's favor. The Court disagrees. From the Court's review of the evidence in the summary judgment record, there is sufficient evidence of causation to create a genuine issue of fact on that element and thus to require that Robroy's Lanham Act claim be resolved by a jury.

         T&B's position is that, even assuming its agents made false statements about its products and Robroy's products, the evidence does not show that those statements proximately caused the requisite injury to Robroy by causing customers to shift their purchases to T&B at Robroy's expense. T&B argues that Robroy's evidence showed no more than that it “simply faced the speculative harm of increased competition for a customer project or potential sale-not that it actually lost sales or incurred another such cognizable harm as a direct result of the statements-at-issue.” Summary Judgment Motion, Dkt. No. 134, at 18. T&B further asserts that “there is no substantial evidence showing that Robroy lost a project or customer, or that Thomas & Betts ever gained one at Robroy's expense, because of these ‘Only Ocal' statements.” Id.[1]

         T&B makes three points in support of its motion: (1) that Robroy has never been “kicked off” a specification for PVC-coated conduit for any reason related to the T&B statements at issue; (2) the evidence shows that customers made purchasing decisions based on price, quality, availability, and other factors having nothing to do with the alleged false statements; and (3) the evidence shows that customers made decisions to add T&B's Ocal product to the specifications for particular projects and to purchase Ocal based on price and other factors, not because of the allegedly false statements.

         Robroy offers two responses: First, Robroy argues that it is entitled to a presumption of causation of competitive injury, because the statements at issue were literally false and either explicitly or implicitly compared T&B's products with Robroy's. Second, Robroy contends that even without the presumption of injury, the evidence is sufficient to support its assertion that T&B's false statements caused Robroy's injury, i.e., caused Robroy to lose contracts that it otherwise would have won.

         A. The Presumption of Causation

         Robroy argues that in a case such as this one, involving a two-competitor market, T&B's false statements to potential customers about the competition were necessarily directed at Robroy. As such, Robroy invokes a line of cases holding that deliberately false or deceptive comparative advertising gives rise to a rebuttable presumption that the causation element of the Lanham Act cause of action is satisfied.

         A number of circuits have adopted the presumption of causation in such cases. See, e.g., Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 259-61 (2d Cir. 2014); Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1336 (8th Cir. 1997); Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1146 (9th Cir. 1997); Balance Dynamics Corp. v. Schmitt Indus., Inc., 204 F.3d 683, 694 (6th Cir. 2000); Pharmanetics, Inc. v. Aventis Pharms., Inc., 182 F. App'x 267, 273 (4th Cir. 2006); Hutchinson v. Pfeil, 211 F.3d 515, 522 (10th Cir. 2000). No circuit appears to have rejected that rule.

         In addition, numerous district courts have reached the same conclusion, including district courts in the Fifth Circuit. See, e.g., Snac Lite, LLC v. Nuts 'N More, LLC, Case No. 2:14-cv-1695, 2016 WL 6778268, at *10 n.13 (N.D. Ala. Nov. 10, 2016); Greater Houston Transp. Co. v. Uber Techs., Inc., 155 F.Supp.3d 670, 703 (S.D. Tex. 2015); W. Sugar Coop. v. Archer-Daniels-Midland Co., No. CV 11-3473, 2015 WL 12683192, at *3 (C.D. Cal. Aug. 21, 2015); Gen. Steel Domestic Sales, LLC v. Chumley, Civil Action No. 10-cv-1398, 2013 WL 1900562, at *15 (D. Colo. May 7, 2013); Campagnolo S.R.L. v. Full Speed Ahead, Inc., No. C08-1372, 2010 WL 455195, at *2 (W.D. Wash. Feb. 1, 2010); Trilink Saw Chain, LLC v. Blount, Inc., 583 F.Supp.2d 1293, 1321 (N.D.Ga. 2008); HipSaver Co. v. J.T. Posey Co., 497 F.Supp.2d 96, 108-09 (D. Mass. 2007); Healthpoint, Ltd. v. Status Pharms., Inc., ...


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