United States District Court, S.D. Texas, Houston Division
MEMORANDUM & ORDER
S. HANEN UNITED STATES DISTRICT JUDGE
Boltex Manufacturing Company, LP and Weldbend Corporation
(hereinafter referred to respectively as "Boltex"
and "Weldbend" or collectively as
"Plaintiffs") have filed a Motion for Summary
Judgment (Doc. Nos. 97 [redacted version]; 98 [sealed
version]; 106 [corrected redacted version]). Defendants Ulma
Forja S. Coop, and Ulma Piping USA Corp. (hereinafter
referred to as "Ulma" or "Defendants")
have filed a Response (Doc. No. 110). Plaintiffs subsequently
filed a Reply in support (Doc. Nos. 128 [redacted version];
129 [sealed version]).
dispute arises between carbon steel flange manufacturers. A
flange is a "disc collar or ring that attaches to a
pipe, providing a method of connecting pipes, valves, pumps
and other equipment to form a piping system." (Doc. No.
1 at 4). Flanges are formed from steel forgings. Rough
forgings must be heat treated, machined, and finished in
order to become a flange. Weldbend buys forgings from
domestic and foreign suppliers and manufactures the forgings
into flanges in its Illinois facility. (Doc. No. 98 at 3).
Boltex makes most of its own forgings domestically and
performs its heat treating in one of its two plants located
in Houston. (Id. at 4). In its second Houston plant,
Boltex machines, finishes, and warehouses its flanges.
(Id.). Defendants produce their flanges in Spain.
and Defendants sell their flanges to distributors who in turn
sell the flanges to customers. Some of these distributors
include: DNOW, L.P., Industrial Valco, and Wolseley
Industrial Group/Ferguson. Defendants allege that Plaintiffs
falsely advertise their product and falsely designate their
products' origin in violation of § 43(a) of the
Lanham Act, codified at 15 U.S.C. §
1125(a). Specifically, Defendants contend that
Boltex and Weldbend falsely stamp or otherwise advertise that
their flanges are "Made in the USA" or
"American Made" when at least some of the steel in
the flanges is internationally sourced. (Doc. Nos. 68 at 16;
98 at 4, 9). Similarly, Defendants allege that Weldbend's
packaging contains pictures of Uncle Sam and the American
flag and that its social media accounts display
representations such as, "This product [sic] Made in the
USA with USA Steel." (Id. at 18). Defendants
also allege that Weldbend falsely advertises that its goods
are made with "unquestionable traceablility." (Doc.
No. 68 at 30). After Plaintiffs initiated this suit, alleging
that Defendants violated the Lanham Act as well as common
laws against unfair competition, Defendants countersued based
upon the representations cited above.
Standards of Review
judgment is warranted "if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law." Fed.R.Civ.P.
56(a). "The movant bears the burden of identifying those
portions of the record it believes demonstrate the absence of
a genuine issue of material fact." Triple Tee Golf,
Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir. 2007)
(citing Celotex Corp. v. Catrett, 477 U.S. 317,
322-25 (1986)). Once a movant submits a properly supported
motion, the burden shifts to the non-movant to show that the
Court should not grant the motion. Celotex, 477 U.S. at
non-movant then must provide specific facts showing that
there is a genuine dispute. Id. at 324;
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). A dispute about a material fact is
genuine if "the evidence is such that a reasonable jury
could return a verdict for the nonmoving party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). The Court must draw all reasonable inferences in the
light most favorable to the nonmoving party in deciding a
summary judgment motion. Id. at 255. The key
question on summary judgment is whether a hypothetical,
reasonable factfinder could find in favor of the nonmoving
party. Id. at 248.
False Advertisement Under the Lanham Act
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)
(internal quotation marks omitted). 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 *5 (S.D. Tex. Aug. 11,
2017). "The failure to prove the existence of any
element of the prima facie case is fatal to the plaintiffs
claim." Pizza Hut, Inc. v. Papa John's Int 7,
Inc., 227 F.3d 489, 495 (5th Cir. 2000).
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.
PennzoilProds. 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
misled 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 ("[P]laintiff
need not introduce evidence on the issue of the impact the
statements had on customers."). On the other hand,
"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 claim, capable of being proved false
or being reasonably interpreted as a statement of objective
fact." Pizza Hut, 227 F.3d at 496 (internal quotation
turning to its analysis, the Court would like to point out
Defendants' troubling way of responding to
Plaintiffs' Motion for Summary Judgment: Defendants chose
to lump both Plaintiffs together for a majority of its
arguments, occasionally providing argument and evidence
against Weldbend separately, but rarely providing argument or
evidence against Boltex. This made it difficult for the Court
to discern which evidence applied to which Plaintiff.
having been said, Defendants make false advertisement claims
against both Boltex and Weldbend, arguing that
Plaintiffs' representations on or accompanying their
products- "Made in the USA" or "American
Made"-are literally false. Defendants also claim that
both Plaintiffs' use of American iconography confuses
consumers into believing that all of Plaintiffs' products
are made in the U.S. using only U.S. sourced materials.
Defendants make additional false advertisement claims against
Weldbend, contending that Weldbend's representations that
its products are "unquestionably traceable" are
literally false or likely misleading. Finally, Defendants
make claims against both Plaintiffs, stating that
Plaintiffs' representations violate common law rules
against unfair competition. Below, the Court discusses each
of these in turn.
False Advertisement & False Designation of Origin Claims
- Made in the USA & American Made
urge the Court to grant summary judgment in their favor on
Defendants' Lanham Act counterclaims. First, Plaintiffs
argue that their representations that their products are
"Made in the USA," "American Made," or
"domestically manufactured" are literally true, and
that Defendants lack evidence to the contrary. (Doc. No. 98
at 2). Second, Plaintiffs dispute whether a genuine issue of
material fact remains as to whether the representations are
misleading or had the capacity to mislead consumers.
(Id. at 3). Third, Plaintiffs argue that Defendants
have no evidence of materiality. (Id. at 18). Last,
Plaintiffs allege that Defendants have no evidence that any
of the alleged statements at issue caused harm to Defendants.
support of their arguments, Defendants provide the Federal
Trade Commission's Enforcement Policy Statement on
U.S. Origin Claims, which they claim enumerates the
standards by which the Court should judge the falsity of
Plaintiffs' claims. (Doc. No. 110 at 9). In Greater
Houston Transp. Co. v. Uber Techs., Inc., the plaintiff
sued the defendant for false advertisement under the Lanham
Act for, among other things, advertising its service as
"ridesharing." 2015 WL 1034254, at *12 (S.D. Tex.
Mar. 10, 2015). Plaintiff proffered the definition of
"ridesharing" as defined by the Houston Code of
Ordinances. Id. The court dismissed this argument
stating, "[a] claim based on Plaintiffs'
interpretation of [the Houston Code of Ordinances] provision
would amount to [an] attempt to enforce a local
ordinance." Id. (citing Dial A Car, Inc. v.
Transp., Inc., 82 F.3d 484 (D.C. Cir. 1996)). Similarly,
here, it seems that Defendants are attempting to enforce the
Federal Trade Commission standards using a Lanham Act claim.
this Court appreciates Defendants' attempt to provide it
with a standard by which to judge the alleged falsity of
Plaintiffs' statements, Defendants do not cite
controlling case law indicating that the Fifth Circuit has
applied the Federal Trade Commission's standards to
Lanham Act cases, and the Court could find none in its own
search. In fact, courts actually "caution against blur
[ring] the distinctions between the FTC and a Lanham Act
[claim]" because a Lanham Act claimant must show that
the disputed advertisements "are literally false or
misleading to the public, not merely that the advertisements
violate FTC guidelines." Millennium Imp. Co. v.
Sidney Frank Imp. Co., Inc., No. Civ. 03-5145 JRT/FLN,
2004 WL 1447915, at *6 (D. Minn. June 11, 2004) (first citing
Surdyk's Liquor, Inc. v. MGM Liquor Stores,
Inc., 83 F.Supp.2d 1016, 1022 n.2 (D. Minn. 2000); then
citing B. Sanfield, Inc. v. Finlay Fine Jewelry
Corp., 168 F.3d 967, 972 n.3 (7th Cir. 1999)).
argue that Plaintiffs' representations that their
products were "Made in the USA" or "American
Made" are literally false. Defendants argue that
Plaintiffs misrepresent their products in two ways: (1)
Plaintiffs misrepresent that their flanges are "Made in
the USA" when they are in fact made with imported steel
and (2) Plaintiffs' overall advertisement scheme implies
that all of their flanges are "Made in the USA,"
when in fact some are made using imported steel. Below, the
Court separately analyzes the summary judgment evidence
against Boltex and the summary judgment evidence against
Weldbend on each of these points.
Court finds that Defendants have not demonstrated that a
genuine issue of material fact remains regarding whether
Boltex's statements were literally false. That is,
Defendants have not demonstrated a fact issue as to whether
Boltex stamps or advertises flanges made with imported steel
as "Made in the USA." In fact, Defendants provide
no evidence in support of these claims. To the contrary,
Boltex provides evidence in the form of deposition testimony
from Boltex representative, Franco Geremia, who avers that
Boltex "verifies the particular mill number belonging to
that particular flange, and based on the source of the
steel," will mark the flange "Made in the
USA." (Doc. No. 98 at 7); (Geremia Depo. Doc. No. 110,
Ex. 21 at 116) (stating that Boltex maintains "100
percent traceability of the product[s]" from start to
finish). Thus, while Boltex does not dispute that it
manufactures some flanges with internationally sourced steel
billets, it provides evidence that it does not mark these
flanges "Made in the USA." (Doc. No. 98 at 6).
further attempt to prove their counterclaims, Defendants
provide interrogatory answers, their expert's report, and
lists of materials which Boltex imported during the time
period in question. This evidence, such as it is, is
insufficient to raise a fact issue. While the evidence
demonstrates that Boltex imported steel, it does not
demonstrate that this imported steel was used in flanges
marked as "Made in the USA." Indeed, Plaintiffs
provide evidence that: "[Boltex] only mark[s] 'Made
in USA' on flanges that have been produced from domestic
steel, forged here, heat treated here and finished
here," and that Boltex flanges "will say 'Made
in USA' if the raw material was produced or made in the
USA-melted in the USA." (F. Bernobich Depo. Doc. No.
103, Ex. 7 at 117); (Geremia Depo. Doc. No. 103, Ex. 11 at
145). Defendants have failed to produce evidence
demonstrating a fact issue as to these representations.
Defendants have failed to provide evidence of an
"overall [Boltex] advertising scheme" in which
Boltex represents that all of its flanges are made in the
have, however, adduced evidence demonstrating a genuine issue
of material fact as to the falsity of Weldbend's
representations. Weldbend and Defendants both point to an
advertisement in which the following statement is made:
Our American Made line uses only top-quality steel
from U.S. mills, forged into fittings and flanges at
Weldbend's own plant in Argo, Illinois.
(Doc. No. 110, Ex. 7 at 10) (emphasis added). The
parties' arguments focus solely on the phrase
"American Made," but the inquiry is not necessarily
so limited. The Court must also analyze the context in which
the representation at issue appears. See Pizza Hut,
227 F.3d at 501-02 (holding that "Papa John's has
given definition to the word 'better'" by
placing the word in the context of ads comparing its own
sauce and dough to a competitor's). While the parties
argue whether "American Made" is an ambiguous
phrase, the Court finds that it is not ambiguous because,
like Papa John's, Weldbend has "given
definition" to the phrase "American Made" by
placing the phrase in the above quoted sentence which
specifically seeks to define the term.
argue that the statement in this advertisement is literally
false because, while Weldbend executive James Coulas avers
that Weldbend flanges that are described as "American
Made" may use steel from a U.S. mill or from an offshore
mill, the advertisement clearly states that flanges described
as "American Made" use only steel from
U.S. mills. (J. Coulas Depo. Doc. No. 103, Ex. 8 at 69-70)
(Doc. No. 110, Ex. 7 at 10). The Court agrees that
Weldbend's conflicting statements raise a genuine issue
of material fact. Additionally, while Weldbend clearly
represents in this advertisement that these flanges are
"forged" at Weldbend's Illinois plant, Coulas
admits in his deposition that Weldbend does not forge any of
its own fittings or flanges. (J. Coulas Depo. Doc. No. 103,
Ex. 8 at 71). Thus, Defendants have demonstrated that a
genuine issue of material fact remains concerning the literal
falsity of Weldbend's representations that its American
Made line uses "only" U.S. sourced steel and that
it forges its own flanges.
Likely to Mislead
Court will now analyze whether Boltex or Weldbend made
representations that were misleading to consumers or that had
the capacity to mislead consumers. See Pizza Hut,
227 F.3d at 503 (finding that where a claimant fails to
provide evidence that the representation is literally false,
it must submit evidence that the statement was, at the very
least, misleading or had the capacity to mislead consumers).
First, although the Court has found that there is no genuine
issue of material fact as to the literal falsity of
Boltex's representations, it must still determine whether
a fact issue remains as to whether its representations are
likely to mislead consumers. Additionally, since the
evidentiary burden changes based on the literal falsity of
the statements at issue, the Court will also perform the
likely-to-mislead analysis for Weldbend's alleged
misrepresentations in order to address Defendants'
argue that summary judgment is improper because a fact issue
remains "as to whether [Plaintiffs'] use of
unqualified and express U.S. origin claims, American
iconography, and other statements leave a false and
misleading impression that all of their products are
manufactured in the U.S. with U.S.-sourced steel." (Doc.
No. 110 at 13). In support of its claims against both
Plaintiffs, Defendants provide testimony from Plaintiffs'
customers and screenshots of certain social media posts. In
support of its claims against Weldbend, Defendants provide
emails between Weldbend and its customers. The Court will
look at each of these in turn.
Defendants argue that both Plaintiffs' representations
are misleading because Plaintiffs' customers have varying
interpretations of the phrases "Made in the USA" or
"American Made" (among others). (Id. at
16). In support, Defendants provide deposition testimony from
corporate representatives at DNOW, Ferguson, and Valco, ...