Wednesday, June 11, 2014

Tough sledding: statements to industry-focused publication can be commercial speech

Skedco, Inc. v. ARC Products, LLC, 2014 WL 2465577, No. 3:13–CV–00696 (D. Or. Jun. 2, 2014)
The parties compete in the market for emergency medical rescue equipment, and are suing over false advertising. Plaintiff’s Sked is “an evacuation sled system designed to quickly evacuate wounded people from confined spaces, from high angles, in technical rescues, and in traditional land-based rescues.” Defendant’s Vertical Lift Rescue Sled (VLR Sled) “is an evacuation device that provides quick transport of a nonambulatory individual in a difficult rescue situation or a confined space.” Here, the court analyzes three of defendant’s false advertising counterclaims.
First, ARC alleged that Skedco claimed that the Sked sled was composed of “Low density E-Z glide polyethylene plastic[,]” commonly referred to as LDPE, that would begin to melt at 450 degrees F to 500 degrees F. In fact, ARC alleged, “publically available technical specification materials demonstrate that LDPE plastic generally starts to melt at the substantially lower temperature of approximately 248 degrees.” ARC attached an example ad flyer, and alleged that Skedco distributed it to third parties, precise identities and dates of distribution to be determined by discovery.
Skedco argued that this pleading flunked Rule 9(b). But ARC gave Skedco enough to prepare an adequate defense: it identified the allegedly false statement, its theory of falsity, and an example ad. Though it didn’t identify a time period or a recipient, or how/if a customer was deceived, the Rule 9(b) standards “may be relaxed where the circumstances of the alleged fraud are peculiarly within the [plaintiff’s] knowledge or are readily obtainable by him.” Skedco can figure out when it distributed its ad, and discovery is required for ARC to know to whom Skedco distributed it. As for deception, ARC sufficiently pled falsity syllogistically, which was enough to put Skedco on notice of the nature of the claim.
Next claim: “Skedco claims its cross-strap Cobra buckles are rated at 3,000 pounds, but this claim is materially misleading because the Sked sled cross-straps are likely to fail where said straps attach to the Sked sled, and that such failure is likely to occur at a significantly lower weight than 3,000 pounds.” ARC challenged similar representations about Skedco’s lift rope strength, claimed to be over 5,000 pounds when, according to ARC, the rope would pull the attachment grommets free from the Sked sled at a lesser weight. These were allegedly misleading claims, not literally false ones. Skedco argued that these claims were inadequately pled because ARC didn’t include any details about actual consumers being misled. But ARC identified the allegedly false statements and the reasons why they were allegedly misleading, and attached a relevant ad. “[T]he court finds it near impossible for defendant to allege which of plaintiff’s customers were actually misled by the advertisement without the benefit of discovery.” There was adequate notice of the claim. ARC also argued falsity by necessary implication (which seems like a valid argument to me, especially given the safety-related nature of the claims), but didn’t plead that; it could seek to amend. (I didn’t realize you needed to plead your precise subtheory of falsity! If you do, I don’t quite understand why the court allowed the misleadingness theory to proceed without allegations about survey evidence or other consumer reaction evidence.)
Finally, ARC challenged representations about Skedco’s loading speed. According to ARC, “Skedco’s Carston ‘Bud’ Calkin made assertions in his capacity as an executive and agent of Skedco in a published interview titled ‘Cleared for Takeoff,’ which appeared in the publication ‘Military Medical & Veterans Affairs Forum’ … that an individual person can have an injured person ready for transport in a Sked sled in a mere 20 seconds and that Calkin [who told the interviewer he was 75] could perform this ‘routinely,’ when in reality it takes significantly longer for an injured person to be loaded into and ready for transport into a Sked sled.” The interview appeared in close proximity to a paid Skedco ad. ARC alleged that in reality it takes substantially longer to load an injured person.
Skedco argued that statements a journalist attributed to a Skedco officer weren’t commercial speech. The journalist might not have been engaging in commercial speech, but “defendant did not bring a claim against the author.” Calkin’s statements highlighted new features of the Sked sled and explained their added benefits to customers. The magazine that published the article claimed to reach a “targeted mailing list” of “the military’s top leadership,” which is to say Skedco’s primary customer. “The court cannot find a purpose behind Calkin’s statements other than to promote his company’s product to potential customers.” Thus, the statements were commercial speech.
They also satisfied the rest of the test for “commercial advertising and promotion”: the parties competed; the statements were about the product; they were meant to influence readers of the article to purchase the Sked sled. Given the targeted audience, Calkin’s statements were disseminated sufficiently to the relevant purchasing public to constitute promotion. Thus, they were actionable under the Lanham Act.

No comments:

Post a Comment