Underground Solutions, Inc. v. Palermo, No. 13 C 8407, 2015
WL 1594189 (N.D. Ill. Apr. 7, 2015)
Previous
ruling on this dispute between Underground Solutions and a person
who basically served as an expert supporting its competitor. Related
case about a website impersonating Palermo.
In its amended complaint, Underground Solutions alleged trade libel,
violation of the Lanham Act, intentional interference with prospective economic
advantage, and violation of California’s UCL. Palermo moved to dismiss the last
two, and the court denied the motion.
For intentional interference, a plaintiff has to show “that
it is reasonably probable that the lost economic advantage would have been
realized but for the defendant’s interference.” This usually means alleging “a
lost contract, failed negotiation, or ongoing business relationship.” This time around, Underground Solutions
alleged that an engineer had approved its pipe for a bid on a project in Santa
Clara, but the local water district expressed concern about the pipe after
reviewing materials authored by Palermo, and the engineer subsequently withdrew
his approval, precluding Underground Solutions from bidding on the project. In
addition, Underground Solutions alleged that it was the sole supplier of the
relevant pipe in the US. The court found that the business discussions about a
specific construction project, resulting in an approved use, formed a
relationship sufficient to give rise to a tortious interference claim.
Palermo argued that he didn’t now about any particular
prospective deal, but it sufficed to allege that “Palermo knew that UGSI’s
Fusible PVC® pipe was being considered by several municipalities for upcoming
projects, and knew or should have known that his false and misleading
statements would reflect negatively on UGSI’s Fusible PVC® pipe, causing the
contractors considering UGSI’s Fusible PVC® pipe to reject said pipe.” Palermo further argued that other competitors
were still being considered for the project. But including Underground
Solutions’ pipe in a narrowed set of approved pipes was sufficient—all that’s
required is reasonably probable benefit, not certain benefit.
As for the state law false advertising claim, Underground
Solutions had standing because it allegedly lost money or property by virtue of
being “forced to expend time, effort, and funds to correspond and meet with
potential clients to debunk the misstatements....” Nor did Underground
Solutions need to allege that it
relied on the false advertising; this is a competitor suit and not a consumer
suit. “Requiring a competitor to allege
reliance … would effectively read unfair competition claims out of the statute.
That would be contrary to the legislature’s express intent.” Proposition 64’s
express intent was to protect “California businesses
and consumers from unlawful, unfair, and fraudulent business practices”
(emphasis added).
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