Friday, November 09, 2018

Straight-up falsity can't get preliminary injunction where lost sales can be calcuated

Vault Cargo Management, LLC v. Rhino U.S.A., Inc., No. 18-cv-01517-H-LL, 2018 WL 5809516 (S.D. Cal. Nov. 6, 2018)

The parties compete to sell products, including a variety of vehicle straps. Rhino allegedly created the false impression that its products are made in the United States, even though import records show that the products are shipped from China. In response to a customer question on Amazon Marketplace, Rhino said that its products are manufactured overseas, but Vault also pled examples of Rhino explaining that its products are American made, “hundreds” of examples of Rhino republishing, approving, or endorsing customer reviews that state that its products are made in the United States; and one example of Rhino answering a consumer question on explaining that its products are made in Naperville, Illinois.

That looks pretty bad, but Vault didn’t show irreparable harm for preliminary injunction purposes.  Vault showed that its sales varied depending on Rhino’s market activity, e.g., when Rhino began selling ratchet straps, Vault’s sales declined by 50 percent and when Rhino’s ratchet strap listing is not active, Vault’s ratchet strap sales double. But those are “simply economic harms that may be recovered in the ordinary course of litigation.”  As to loss of goodwill and damage to reputation, Vault didn’t provide enough evidence that Rhino would enjoy brand loyalty built on the false statements even if Vault wins. A declaration from Vault’s CEO to this effect was insufficient without further evidence/explanation. In addition, Vault itself pled that there were “many different sellers of cargo and vehicle recovery accessories, offering varying levels of product quality across a wide array of price points[.]” There wasn’t enough evidence that customers concerned with the manufacturing origins of a product wouldn’t instead choose to purchase the product from one of the other “many different sellers” of similar products.

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