Monday, October 23, 2006

Casket case

The York Group, Inc. v. Horizon Casket Group, Inc., 2006 WL 2934258 (S.D. Tex.)

A somewhat confusing complaint leads to an equivocal result in this case about the implications of leaving off the label “Made in China” when the default legal regime, set out by the Tariff Act of 1930, requires all foreign-made goods to be labeled. The importer of unlabeled goods has violated the law, but does a competitor have a Lanham Act claim? It would be reasonable for consumers to infer that unlabeled goods are domestically produced, given the background rule to which they are constantly exposed. Other cases have held that failure to label imported goods is a violation of the Lanham Act – a sort of falsity by necessary implication. But the court here, after extensive discussion of the precedents, was not convinced.

Plaintiff York makes caskets. Delta Casket used to have a distributorship agreement with York, but it was terminated at the end of 2001. In 2002, Delta decided to import caskets from China, allegedly sending sample Delta caskets to the Wuxi Tractor Co. for copying. Delta’s distributors for these imported caskets shortly thereafter incorporated as defendant Horizon. The Chinese caskets were not individually labeled “Made in China,” though the Tariff Act requires that such a label be affixed so that the ultimate purchaser can see the country of origin. By 2004, Delta was competing with York.

York sued Delta for violating the Lanham Act, including trademark-type claims (based on copying casket designs and names) and false advertising/false designation of origin claims (based on the mislabeling). York argued that the failure to label was a per se violation of the Lanham Act. But the district court found that likelihood of confusion must still be shown. The Fifth Circuit has held that a violation of a different labeling statute, the Federal Hazardous Substances Act, does not constitute a per se violation of the Lanham Act. The FHSA has no private cause of action, and the court in that case ruled that it would not anticipate an administrative agency’s response to a particular set of factual circumstances.

The court pointed out that York could still proceed on a theory of likely deception, and the fact that Delta violated the Tariff Act might be relevant to assessing that claim. I am not sure what nonleading survey methodology could be found to show likely deception – asking consumers to inspect a Delta casket could easily lead to plenty of guessing and “I don’t know” responses. I’d be more attracted to a survey asking them to look at multiple caskets – even though the absence of labels on Delta caskets would stand out, that’s the point: where labeling of imported goods is pervasive, it’s reasonable for consumers to make the leap that unlabeled goods are domestic.

Some of York’s trouble here may have come from failure to make use of the large body of law on falsity by necessary implication. Under that doctrine, one could readily maintain that failure to comply with a pervasive labeling requirement is inherently false.

Further comment: Some state unfair practices statutes, like California’s, explicitly make “unlawful” conduct a violation of state law, allowing plaintiffs to enforce laws that themselves have no private right of action. In California, the violation of the Tariff Act would be enough to sustain the state-law claim.


Anonymous said...

I found this post interesting, so I looked up the case. I believe you're receiving your information from 459 F.Supp.2d 567 (S.D. Tex., 2006). This is only a rejection of a motion for summary judgment. Do you know what happened when the case went to trail? I would love a citation if you have one.
China based trademark and copyright infringement are big issues today and its nice to see you blogging about them.

RT said...

I'm afraid I don't know what happened next--I rely pretty heavily on my Westclip alert, and I don't think it showed up again. You might contact the lawyers involved in the case.