"strictest industry standards" can be false when performance is bad enough

Muhler Company, Inc. v. Window World of N. Charleston LLC, 2014 WL 4269078, No. 2:11–cv–00851 (D.S.C. Aug. 28, 2014)

This is a default judgment.  The parties compete to supply and install replacement windows in Charleston County, South Carolina, and in neighboring coastal counties. Defendant WWNC advertised that it adhered to the “strictest industry standards” in the conduct of its replacement window installation services. It advertised that it provided the “best for less” and that it was “lead certified.” However, Muhler contended, WWNC installed windows without legally required permits, contrary to its claims to meet the “strictest industry standards.”  It also frequently neglected to notify homeowners of lead-based paint concerns, neglected to check or perform testing to determine if lead-based paint was present, or failed to perform lead remediation when installing replacement windows, contrary to its representations to be “lead certified.”

The court found that WWNC’s failure to obtain permits or meet lead-based paint requirements “forecloses any possibility that it complied with the ‘strictest industry standards.’”  Indeed, “no industry standard could allow WWNC to ignore governmental permitting requirements and lead-based paint requirements.”  (There are other cases, though not many, finding that even claims that are generally puffery can be actionable when no reasonable person could agree with the puff.)  Plus, WWNC’s representation that it was “lead certified” and recommendation that consumers hire a “Window World certified professional” to check for lead-based paint because they are “certified risk assessors or inspectors, and can determine if your home has lead or lead hazards” implied that WWNC complies with federal and state regulations associated replacing with windows in homes with lead-based paint. These claims, the court found, were false and deceptive.  Muhler showed that in over 1700 instances WWNC didn’t apply for or receive the required governmental permit for the installation. It often charged homeowners for permit fees, but just kept the funds.  Muhler provided similar evidence about widespread noncompliance with good lead abatement practices.

The court then found WWNC’s conduct had been willful, given its extent, and that Muhler lost contracts of nearly $160,000 during the relevant period due to WWNC’s misrepresentations; the court also found that there were likely to be other lost sales that hadn’t been identified. The court awarded Muhler its average profits for the proven lost contracts, a little under $83,000, and then trebled the damages.  It also considered disgorgement of WWNC’s gross revenue from more than 1700 jobs done without a permit, a over $5.7 million; while WWNC didn’t show up to prove any discussions, a full recovery “would almost certainly penalize WWNC instead of compensating Muhler.” Instead, the court used Muhler’s profit margin to reasonably approximate WWNC’s profits, resulting in an award of nearly $2.9 million.

The court also awarded attorneys’ fees, considering that the misconduct was willful.  The award was over $118,000, considering that Lanham Act and unfair competition “are generally recognized as complex areas of the law” and that proving the claims here required extensive investigation of public records through FOIA requests as well as discovery.  The default made things easier, but it came late in the case.