Wednesday, July 07, 2010

Lack of substantiation equates to falsity

CertainTeed Corp. v. Seattle Roof Brokers, 2010 WL 2640083 (W.D. Wash.)

CertainTeed makes asphalt shingles, including the fiberglass Presidential lines. James Garcia runs a business named Seattle RoofBrokers, using some other names too, and owns and similar domain names. Garcia distributes information about roofing products, but he’s not a roofer, a licensed contractor, or an inspector. He makes money by connecting homeowners to roofers and retaining a portion of the cost of the project. He drives around in search of homes that need new roofs and then sends them letters.

His letters, as well as his website, say nasty things about asphalt shingles in general and CertainTeed in particular. Basically, he said that asphalt shingles have a history of premature failure, and can’t pass resale inspection (which he argues is necessary to sell a house without a substantial price hit) within 15 years. His letters included a picture that he labeled as Presidential shingles splitting and failing less than 15 years after installation. He also noted that CertainTeed shingles are currently subject to a class action lawsuit. The website said that there were numerous examples of CertainTeed asphalt roofs failing within 6-15 years, that one roofing contractor reported submitting over 600 warranty claims to CertainTeed within the last 4 years, and that most roofs fail in 10 to 15 years, all without substantiation.

Now a detour into weird: the court held that some of Garcia’s statements did not seem to have been made “in commerce” within the scope of the Lanham Act, because they only went to Washington residents. The court declined to hold that use of the US mail was enough to be “in commerce.” I find this weird not only because of the obvious effect on interstate commerce, but because there’s a mote/beam problem here: Is Garcia a competitor or inflicting competitive injury on CertainTeed? (A footnote addressed the “advertising” question: Garcia routinely used these letters/claims in soliciting business, so it was a general practice, not a single letter that might not be actionable.) Anyway, the website statements were made in interstate commerce by their nature, and thus, unlike the letters, likely to reach out of state residents.

Further, the state consumer protection law (CPA) covered the same conduct as the Lanham Act, so even the letter statements were actionable—here at least is a rationale for bringing state-law claims along with Lanham Act claims. The CPA requires a public interest, and as state law declares that certain roofing practices “substantially affect the public interest,” the court concluded that the letters did so as well.

The court then turned to the specific statements. As to the statement that the “real functional life” of asphalt shingles “is only 10-15 years,” the court found that it need not determine whether the statement is true or false, because it couldn’t find that the statement targeted CertainTeed. The website listed a bunch of shingle manufacturers and said that the “best” options would last 20-25 years, leaving the reader unclear which manufacturers were the worst and which the best.

However, claims that Presidential Shingles “will not be able to pass a resale inspection after 15 to 20 years” and “most roofs fail in 10 to 15 years” (in a section in which CertainTeed was the only named manufacturer) were false, along with unsubstantiated “examples” of over 20 CertainTeed roofs that failed in 10 years or fewer and the claim that “one roofing contractor reports submitting over 600 warranty claims to CertainTeed within the last 4 years.” CertainTeed provided evidence of numerous Seattle-area roofs shingled with CertainTeed products that have lasted more than 10 years and would pass a 20-year inspection. The court noted that this wasn’t easy, because CertainTeed didn’t directly sell its products on the West Coast until 1998. Despite these difficulties, CertainTeed was able to trace 20 roofs from 1991-1999. It examined “several” of these roofs, deeming them in good condition, and took pictures. Garcia had no counterevidence. “From this evidence, a reasonable jury could only conclude that there are Seattle-area Presidential roofs between 16 and 19 years old that not only could pass a resale inspection, but that would be able to do so after twenty years.”

Garcia’s claims about deteriorated roofs were hearsay, plus his statement that he recently observed two CertainTeed roofs that wouldn’t pass inspection. The court thought it likely that none of his evidence was admissible, but did not rely on that conclusion. Even if he could prove that one or more Seattle-area roofs had deteriorated, Garcia still would have had “no basis for declaring that no Presidential shingle could pass a resale inspection after 15 to 20 years, and no basis for declaring a specific lifetime for any CertainTeed product, much less a lifetime of ten years or less.”

Likewise with the statement that Presidential shingles have “a history of premature failure.” CertainTeed provided information on “claims” received about its products, from oral complaints to warranty claims. Though this evidence was not a model of clarity, it indicated that only a tiny percentage of its products were subject to claims. This was much better evidence than Garcia provided, which the court expressed “many reasons to doubt”—he didn’t provide names, addresses, or any other information that would allow anyone else to test his claims. Even if his testimony was evidence of some roof failures, it was less probative than CertainTeed’s.

In any event, evidence that “a tiny fraction” of CertainTeed’s products had failed was not sufficient to support the “history of premature failure” claim. That claim was therefore literally false by necessary implication. In context, it meant more than “a few incidences of undesirable performance.” But coupled with assertions that the products won’t pass resale inspection, the necessary implication was that there was a body of evidence that CertainTeed shingles inevitably or nearly inevitably fail. Such evidence was absent. (Garcia also argued that “failure” was an opinion. The court disagreed. “To anyone with a reasonable command of the English language, ‘failure’ connotes a serious adverse event, and in the context of Mr. Garcia’s advertisements, it connotes a roof that no longer functions.”)

The photo included in the letters also made a false representation. Though Garcia refused to disclose the location of the house, CertainTeed provided expert testimony that, based on the physical characteristics of the shingles as they appeared from the photo, they were made from different materials than Presidential shingles are. With no contradictory evidence in the record, the court found no genuine issue of material fact on this subject.

The court, however, found that it was literally true to say that Prudential shingles were “part of” or “named products” in class action lawsuits, even if, as CertainTeed argued, the suits now focus solely on organic shingles (which Presidential shingles aren’t). CertainTeed might be able to prove misleadingness either with evidence of intent or consumer reaction. “Indeed, it is likely they will succeed in proving as much, given the context in which Mr. Garcia’s statements appear.” But summary judgment had to be denied.

The court also rejected Garcia’s cross-motion for summary judgment, which was premised on the idea that CertainTeed couldn’t prove the durability of any of its products beyond 15 years. First, there was uncontroverted evidence of 16- to 19-year-old roofs in the Seattle area. But even without such examples, Garcia would not have “license” to make his claims. “He can no more declare that ‘CertainTeed’s roofs fail after 20 years, unless CertainTeed proves me wrong,’ than Pepsi can declare that ‘people who drink Coca-Cola die 20 years later, unless Coca-Cola proves us wrong.’”

Notes: the Third Circuit has held that completely unsubstantiated claims violate the Lanham Act; this is the same holding. Also compare the law of defamation: it’s reckless to make claims of this sort. But in slightly different circumstances—say, a consumer who’d had a bad experience, or someone who had general reason to think that all asphalt shingled roofs only last 20 years and no evidence beyond CertainTeed’s assurances to think that CertainTeed roofs were an exception—I’d be hesitant to find recklessness. Just another reason why holding competitors to a higher standard than noncompetitors requires us to care about defining competitors!

Garcia argued that his ads were opinions, and noted that CertainTeed’s declarants had varying views about the lifetime of CertainTeed products, such that his observations were no more true or false than theirs. The court held that he was mistaken. The evidence shows that roof lifetimes depend on many factors, including installation and weather. It was understandable that “no one really knows how long a particular CertainTeed roof will last. If Mr. Garcia’s advertisements merely expressed these uncertainties, he might have escaped CertainTeed’s lawsuit. Instead, he expresses with certainty that all or most CertainTeed roofs will not last beyond a term of years he arbitrarily decrees. These are statements of fact, not opinion, and he has no evidence to counter CertainTeed’s evidence that they are false.”

Many of his statements were unchallenged opinion, such as his extended discussion of roofing warranties. Garcia concludes that warranties are deceptive marketing tools because they imply the wrong product lifetime and mislead consumers into thinking that a roof that fails will be replaced while in fact providing only limited coverage. This is either pure opinion or opinion “marbled with facts that can be neither proven nor disproven.” Note: again, there’s a difference between defamation’s looser treatment and the Lanham Act. If a competitor said “consumers are misled into believing that the warranty covers more than it does,” that would be a factual, testable statement: indeed, it’s precisely the kind of claim that consumer surveys routinely test. The fact that the claim is made to consumers only increases the number of things that would have to be proven under the Lanham Act; it doesn’t make the statement nonfalsifiable. But this is a sideshow, since CertainTeed wasn’t challenging those statements.

The court also noted that two wrongs don’t make a right: CertainTeed’s alleged false advertising doesn’t allow him to spread falsehoods. The balance of equities favored an injunction. On remedy, the court ordered that Garcia could, at the top of every page on his website, include a prominent hyperlink to an electronic version of the court’s order, with text stating, “Please click here for court order finding that this website contains false statements.” This order will apply until Garcia notifies the court that the false statements have been removed and the court agrees. Alternatively, Garcia could take the whole site offline, purge the statements, and submit the new website content to the court for approval. Garcia’s website still seems to have the challenged statements; the injunction requires compliance no later than July 12.

The court concluded that both sides had much to gain from settling. Garcia can still target CertainTeed with truthful statements or opinions likely to discourage consumers from doing business with CertainTeed, and many of his ads contained just those things. CertainTeed, however, was “highly likely” to succeed at trial. “Not only will the trial itself divert Mr. Garcia’s time away from his business, but the result of the trial is likely to further damage him via a verdict in CertainTeed’s favor, and costs (including the cost of mediation) to be imposed against him. In short, there are many reasons why a trial might not be in either party’s best interests.” So, was the court suggesting that CertainTeed should look for a settlement that would bar Garcia from attacking it with opinion or truth as well as falsehood? That seems like the only benefit to CertainTeed from settling inferrable from the court’s statement, though of course unrecoupable costs of litigation would also factor in.

No comments: