Monday, November 23, 2015

Court rejects recall when falsely advertising defendant already notified customers

Riverdale Mills Corp. v. Cavatorta North America, Inc., 2015 WL 7295541, No. 4:15-CV-40132 (Nov. 18, 2015)
Riverdale makes welded wire mesh for use in marine traps using a “galvanized after welding” (GAW) process followed by a polyvinyl chloride (PVC) coating (GAW + PVC). The combination extends the durability and longevity of the wire mesh in marine environments. A cheaper, less effective method involves galvanization before welding, which leaves the mesh more prone to corrosion even if it’s then coated in PVC.  Riverdale has extensively educated customers on the difference between GAW and GBW mesh.
Cavatorta distributes Italian-made wire mesh.  Its main focus is on GAW + PVC mesh, used for making marine traps, but it also makes non-GAW products to serve the fence and cage industries. Its GAW products were used interchangeably with Riverdale’s by fishermen and marine trap distributors, and prominently advertised as GAW + PVC.  Its products are sold to companies that buy rolls of wire mesh and then use the mesh to build marine traps for sale to fishermen.
Between April of 2014 and May of 2015, the mesh producer made a significant manufacturing error and produced about three million pounds of mesh that was GBW, not GAW, but was packaged as GAW (sold under the name SEAPLAX).  When one of Cavatorta’s customers complained, Cavatorta contacted each of its nine customers.  It reached agreements with some of these customers regarding discounts and other forms of monetary compensation for the error, and it repossessed much of the mistaken product and transported about 1.5 million pounds to a warehouse. One of its customers, Ketcham, has not yet been satisfied with Cavatorta’s offers to make him whole, but he knew of the mistake and wasn’t not using or selling mislabeled product.
Riverdale sued for violation of the Lanham Act, seeking to require Cavatorta (a) to cease all sales, including any importing of the falsely labeled Seaplax product [not clear whether the comma after ‘importing’ was deliberately missing, but the court treats it as present]; (b) to avoid false advertising, including false GAW claims; (c) to recall all the falsely labeled product; (d) to prominently label [mislabeled] SEAPLAX as GBW; and (e) to issue corrective advertising.  Cavatorta consented to (a), (b), and (d), but contested the recall and corrective advertising.
The parties agreed on falsity and materiality; literal falsity gave a presumption of consumer deception. However, though there could be no doubt of initial deception, “Cavatorta has since taken significant steps to remedy any resulting confusion.”  It told all its customers and took custody of all the mislabeled product that its customers wished to return. “[I]t is in the best interest of Cavatorta’s customers who received mislabeled product to alert their own customers who may be affected. Credible testimony was presented during the hearing that the lobster-fishing industry is a tight-knit community and is generally aware of the issue through word-of-mouth communication.”  Thus, the court was convinced that Cavatorta took sufficient corrective action to make ongoing confusion unlikely.
Riverdale argued that it was suffering ongoing injury because it has built its reputation on the superiority of the GAW process:
The lobster fishing season is currently nearing its end in New England. Riverdale predicts that when the traps are pulled out of the water and stored for the winter, those made from GBW mesh will develop blooms of rust. Riverdale further predicts that this will cause fishermen who thought that their traps were made from GAW mesh—but who actually received mesh from one of Metallurgica’s failed production runs—to doubt Riverdale’s claims about the long-lasting nature of the GAW product. In turn, this will harm the reputation that Riverdale has worked so hard to form.
The court conceded that reputational harm was difficult to prove, and that an erosion of consumer confidence in a product could take time to fully develop. Still, the court concluded, this was nothing more than conjecture, and in fact Riverdale experienced an increase in sales since the industry became aware of Cavatorta’s mistake. This would be a completely different case if Cavatorta were still selling mislabeled mesh, but the court predicted that, on these facts, the industry wouldn’t blame the GAW process, or Riverdale by association, for any prematurely rusting marine traps. Thus, there was no likelihood of injury to Riverdale’s reputation.
The status quo had been restored without need for injunctive relief. Cavatorta’s existing actions were sufficient to protect consumers from the harm of false advertising.

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