Wednesday, April 02, 2008

Concrete claim not firmly founded on standing

Vexcon Chemicals, Inc. v. CureCrete Chemical Co., Inc., 2008 WL 834392 (E.D. Pa.)

Vexcon sued CureCrete for false advertising. Both parties sell concrete treatments, and Vexcon alleged that CureCrete made false claims that its product cures concrete, as “cure” is defined by American Standard Test Management ("ATSM") and the American Concrete Institute ("ACI"), relevant standard-setting bodies. CureCrete argued that its claims weren’t false because it admitted noncompliance with the ASTM and ACI standards. This interesting dispute was short-circuited, rather oddly, by standing.

Vexcon’s president and Rule 30(b)(6) designee Manuel testified at deposition that CureCrete’s sales had no effect on Vexcon’s sales, and that the product’s disappearance from the market wouldn’t increase Vexcon’s sales (apparently because specifications for curing concrete don’t provide for substituting one type of product for the others). Vexcon argued that, as a direct competitor, it had standing, and that though it has no single product equivalent to CureCrete, it sells two products that in combination produce the same effect.

Third Circuit law requires a “reasonable basis” for a plaintiff to believe it will likely be damaged by false advertising; this showing must be more substantial in the absence of direct competition or comparative advertising. Moreover, a plaintiff who shows literal falsity can show damages without showing that the public was actually misled; a plaintiff who shows misleadingness can provide evidence of public deception to establish standing. In the Breathasure case, the court of appeals held that a plaintiff could establish standing for injunctive relief by showing literal falsity plus “general” competition—in Breathasure, the plaintiff didn’t make breath-freshening gum like the defendant did, but it was in the general market for breath fresheners. (Literal falsity and evidence of likely consumer deception, usually survey-based, are substitutes for one another—plaintiffs win falsity by showing either one. By logical extension, evidence of actual deception plus general competition should also suffice under Breathasure. But see below, where the court apparently excludes this possibility, for no reason I can make out.)

Vexcon argued that (1) if a customer doesn’t buy defendant’s product, it will buy an ASTM compliant product or products, like the ones Vexcon sells; (2) CureCrete claims an advantage over other concrete hardeners because it claims to cure, densify, seal and harden all in one product, which ASTM compliant products can’t claim; and (3) Vexcon has been “shut out” of bidding jobs where CureCrete’s product was used.

The court found that these claims failed. Vexcon had no evidence of customer reliance, or of likely consumer deception. Vexcon’s theories were speculative and couldn’t overcome Manuel’s concession that CureCrete had no effect on Vexcon’s sales. Vexcon argued that Manuel’s statements were taken out of context—he had formerly chaired the relevant ASTM committee, and he was saying that the ASTM specifications didn’t allow for substitution. This was the statement: “[W]hen we look at the specifications that exist, when they have them, they don't say to use Vexcon products in place of that. They just say cure the concrete in the following methods, and the method in use today and for the last eight or nine years is with curing blankets. So it makes no difference to Vexcon's business.”) The court rejected this (though it seems like a perfectly reasonable explanation to me; obviously some customers aren’t following the specifications if they’re using CureCrete, and they might do so if CureCrete’s product was unable to make the claims at issue).

The court held that Breathasure did not establish that any direct competitor may presume standing. It distinguished Breathasure because Vexcon couldn’t show falsity, and therefore couldn’t show standing. Vexcon’s burden to show standing requires “specific, articulable facts.” CureCrete’s ad says that its product will “uniformly cure” concrete. It admittedly doesn’t cure “in the manner ASTM recommends,” and Vexcon’s expert reports rely on ASTM tests to measure curing. But Vexcon failed to show that CureCrete’s product “does not effectively cure concrete under any and all standards” (emphasis added).

Comments: 1. Wow, talk about collapsing the inquiries. So if your false advertising claim fails, you lack standing? This case is my new poster child for the argument that courts are using standing to kick out claims as early in the proceedings as possible, to the possible detriment of the actual merits.

2. Though sometimes industry standards don’t define terms, the highly technical and even safety-related issues here make ASTM standards good references for the appropriate definitions. If I define “cure” to mean “blow on” concrete, that doesn’t make it true. “Under any and all standards” is a bad gauge of falsity; the appropriate one would be “under the standards generally used in the industry.” And that seems to be what the court really means; let’s hope its casual language is not misused. The court says in a footnote that there are other tests for curing concrete. If they’re widely accepted, then there’s plainly an issue of what reasonable consumers of the product would understand. The proof of the pudding is in the eating; the cure of the concrete is “whether the appropriate properties are developed,” and the court noted that CureCrete has evidence that its product develops those properties quite well.

Just to make sure, though, the court also held that Vexcon lacked prudential standing under Conte Bros., another instance of retroactively applying a standard designed for noncompetitors to actual competitors. But Manuel’s testimony trumped Vexcon’s expert report on the concrete market, establishing that the parties aren’t competing for the same customers. So, without running through the Conte Bros. factors, the court found that, because there was no injury in fact, there was also no prudential standing.

1 comment:

Anonymous said...

Wow! What an odd event. It seems it would be unprofitable for Vexcon to even pursue this type of a legal action against Curecrete, especially when you consider they're claiming false advertisement on a product that really doesn't compete with any of the products that Vexcon supplies. I mean, there is always more than one way to skin a cat right. Vexcon ( uses chemicals and curing additives, powerblanket ( focuses on heat control using electric blankets, and other companies put their eggs in other baskets. Vexcon is attacking without reasonable cause and that's just wrong.