Friday, February 03, 2017

Blast from the past: claims to comply with vague industry standard weren't literally false

Lamons Gasket Co. v. Flexitallic L.P., No. H–14–0247, 2015 WL 12831719 (S.D. Tex. May 13, 2015)

The parties competed in the market for spiral wound gaskets and other products used in the oil and gas industry to join and secure pipes. “A spiral wound gasket consists of a piece of material wound tightly in a circular form contained by a solid metal outer ring.”  The American Society of Mechanical Engineers (ASME) issued relevant industry standards, providing a specified range for the Outer Diameter (OD) of a “4–inch” gasket. The ASME standard did not, however, specify the method for measuring the OD and specifically didn't provide whether the loose end, or “tail,” of the winding material should be included in the measurement.

Flexitallic told customers that the outer diameter of Lamons’s spiral wound gaskets failed to comply with the ASME standard.  Lamons alleged that this was false, because Lamons’s spiral wound gaskets complied with the ASME standard if measured using Lamons’s methodology.  Flexitallic alleged that, in retaliation for Flexitallic’s statements about Lamons’s gaskets, Lamons advertised that two Flexitallic spiral wound gaskets, depicted in a photograph, failed to comply with the standard, and that Flexitallic had adopted or endorsed Lamons’s methodology for measuring the OD of spiral wound gaskets.  Lamons sued for false advertising and business disparagement, and Flexitallic counterclaimed for the same things.

Flexitallic had no evidence of actual deception, and thus had to show literal falsity.  Lamons’s method for measuring OD involved measurement with the gasket in a compressed state, and included the tail in the measurement.  Flexitallic didn’t show that, measured using this method, the gaskets didn’t comply with the ASME standard.  Flexitallic did show that if the OD was measured using Flexitallic’s method or some variation of the Lamons method, the OD was too small.  However, the ASME standard didn’t address how the OD was to be measured. Indeed, after the Lamons ad was distributed, the ASME Committee for Gaskets and Flanged Joints [I love the whole world and all its mysteries] discussed the definition of “gasket outer diameter” and decided that “an inquiry [would] be submitted in order to better clarify the definition.”  Dow Chemical Company also opined that the OD standard was “vague” and subject to “open interpretation.”  Flexitallic’s evidence indicated that many—perhaps most—companies in the industry measured the OD in a manner more similar to Flexitallic’s method.  But that didn’t show that Lamons’s method was impermissible under the ASME standard.  Thus, the claim was at most misleading and, without evidence of actual deception, summary judgment for Lamons on the Lanham Act counterclaim was proper.

However, there was a genuine issue of material fact on the Lanham Act and disparagement claims based on Lamons’s statements that two Flexitallic spiral wound gaskets did not comply with the ASME standard, and that Flexitallic had adopted or endorsed Lamons’s measuring methodology.  First, there was evidence that one of the gaskets wasn’t Flexitallic’s, which meant literal falsity.  Also, there was evidence of literal falsity in that Flexitallic steadfastly maintained that Lamons’s measuring method was improper.

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