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Boltex Manufacturing Company, L.P. v. Galperti, Inc.

United States District Court, S.D. Texas, Houston Division

March 29, 2018

Boltex Manufacturing Company, LP, et al., Plaintiffs,
v.
Galperti, Inc., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          GRAY H. MILLER, UNITED STATES DISTRICT JUDGE

         Pending before the court is defendants Officine Nicola Galperti e Figlio S.p.A. (“ONG”) and Galperti, Inc.'s (“Galperti”) (collectively, “Defendants”) motion to dismiss for failure to state a claim, or, in the alternative, a motion for a more definite statement. Dkt. 20. Plaintiffs Boltex Manufacturing Company, L.P. (“Boltex”) and Weldbend Corporation (“Weldbend”) (collectively, “Plaintiffs”) responded. Dkt. 27. Defendants replied. Dkt. 28. Having considered the motion, response, reply, and applicable law, the court is of the opinion that the motion should be DENIED.

         I. Background

         This is a false advertising and unfair competition case. Dkt. 1 at 1-3. All parties manufacture carbon steel flanges.[1] Id.

         This dispute centers on normalization, a heat treatment process that changes the physical composition of carbon steel to increase its machinability and toughness. Id. at 1, 8. The process involves additional time and resources. Id. Thus, it is more expensive for manufacturers to produce normalized flanges than non-normalized (or forged) ones. Id. at 1, 8.

         Plaintiffs manufacture, market, and sell normalized flanges. Id. at 9. Plaintiffs' normalization processes comply with American Society of Testing and Materials (“ASTM”) standards. Id. at 8-9. Those standards require manufacturers to apply heat treatment to certain types of flanges. Id. at 9. Manufacturers can choose from several processes including normalization. Id. However, many customers will only purchase certain flanges if they are normalized. Id. Plaintiffs stamp normalized flanges to indicate their compliance with ASTM standards. Id. at 10. Plaintiffs also indicate normalization in a Mill Test Report (“MTR”)-an industry-standard report “used to promote and certify a material's compliance with the appropriate ASTM standards, applicable dimensions, and physical and chemical specifications.” Id. Further, Plaintiffs charge more for normalized flanges than they do for forged ones. Id.

         Defendants advertise some flanges as normalized and as meeting the the ASTM standards. Id. at 11. Specifically, Defendants stamp their flanges as normalized, just like Plaintiffs do. Id. And, Defendants indicate normalization in MTRs that accompany shipments of flanges. Id. But, according to Plaintiffs, Defendants flanges: (1) are not normalized; and (2) do not comply with ASTM standards. Id.

         Plaintiffs sued Defendants for false advertising and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a) as well as common law unfair competition. Id. at 23. Defendants move to dismiss under Rule 12(b)(6) or, alternatively, for a more definite statement under Rule 12(e). Dkt. 20.

         II. Legal Standard

         Rule 8(a)(2) requires that the pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A party against whom claims are asserted may move to dismiss those claims when the nonmovant has failed “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “[T]he burden is on the moving party to prove that no legally cognizable claim for relief exists.” 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (3d ed.).

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955 (2007)). “Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (citations omitted). While the allegations need not be overly detailed, a plaintiff's pleading must still provide the grounds of his entitlement to relief, which “requires more than labels and conclusions, ” and “a formulaic recitation of the elements of a cause of action will not do.” Id.; see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937 (2009). “[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). Instead, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         Evaluating a motion to dismiss is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. “Ultimately, the question for a court to decide is whether the complaint states a valid claim when viewed in the light most favorable to the plaintiff.” NuVasive, Inc. v. Renaissance Surgical Ctr., 853 F.Supp.2d 654, 658 (S.D. Tex. 2012).

         III. Applicable law

         A. Judicial notice

         Federal Rule of Evidence 201(b)(2) provides: “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b)(2). Further, “[t]he court . . . must take judicial notice if a party requests it and the court is supplied with the necessary information.” Fed.R.Evid. 201(c)(2). “The court may take judicial notice at any stage of the proceeding.” Fed.R.Evid. 201(d).

         B. False advertising in violation of the Lanham Act[2]

         “The Lanham Act was enacted ‘to protect persons engaged in such commerce against unfair competition.'” Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1382-84 (5th Cir. 1996) (quoting 15 U.S.C. § 1127). To state a prima facie case of false advertising, a plaintiff must establish: (1) a false or misleading statement of fact about a product; (2) such a statement either deceived, or had the capacity to deceive a substantial segment of potential customers; (3) the deception is material, in that it is likely to influence the consumer's purchasing decision; (4) the product is in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the statement at issue. Derrick Petrol. Servs. v. PLS, Inc., Civil Action No. H-14-1520, 2017 WL 3456920, at *1, *5(S.D. Tex. Aug. 11, 2017) (Rosenthal, J.) (internal alterations omitted) (quoting Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 495 (5th Cir. 2000)).[3]

         “To obtain money damages for false advertising under § 43(a) of the Lanham Act, the plaintiff must first demonstrate that the advertisement was (1) literally false; or (2) likely to mislead and confuse customers.” IQ Prods. Co. v. Pennzoil Prods. Co., 305 F.3d 368, 375 (5th Cir. 2002). “For a statement to be literally false, the statement must be ‘false on its face.'” Derrick, 2017 WL 3456920, at *5.

         “If the statement at issue is shown to be literally false, the court must assume that it actually mislead consumers, without requiring any evidence of such deception from the plaintiff.” IQ Prods., 305 F.3d at 375; see also Pizza Hut, 227 F.3d at 497 (“plaintiff need not introduce evidence on the issue of the impact the statements had on customers.”). However, “if the statement is . . . misleading or ambiguous . . . the plaintiff must demonstrate actual deception.” IQ Prods., 305 F.3d at 375. “The statements at issue must be a specific and measurable ...


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