false claims about duration of business could be actionable

SPS Technologies, LLC v. Briles Aerospace, Inc., 2019 WL 6841992, No. CV 18-9536-MWF (ASx) (C.D. Cal. Oct. 30, 2019)

The parties compete in the market for high-strength aerospace fasteners. SPS, using information that is allegedly confidential/proprietary to it, makes the SLEEVbolt, which uses a tapered bolt and sleeve system that allegedly offers significant benefits over competing aerospace fasteners. Boeing is the primary SLEEVbolt customer—for more than forty years. In 2011, SPS bought the assets of Paul R. Briles, Inc. (PB Fasteners), which included the proprietary information and trade secrets necessary to make the SLEEVbolt. Before then, Robert Briles was the President of PB Fasteners, and Michael Briles worked as its Director of Sales and Marketing. Robert and Michael Briles also allegedly entered into agreements with SPS about keeping confidential information confidential, but, you will not be surprised to read at this point, allegedly disclosed PB Fasteners’ proprietary information to Briles Aerospace, which was founded shortly after the SPS acquisition. Briles Aerospace allegedly agreed to sell more than 10% of Boeing’s SLEEVbolt requirements for Boeing’s 787 aircraft, contrary to Boeing’s contractual obligations to SPS, of which Briles Aerospace knew. Boeing qualified Briles Aerospace and Lisi Aerospace as additional manufacturers of the SLEEVbolt; allegedly, neither could have obtained the necessary qualifications without misappropriating PB Fasteners’ proprietary information.

SPS also alleged that Briles falsely advertised on its website and elsewhere by claiming: “Briles companies have been valued Manufacturers of High Strength Aerospace Fasteners for over half a century” when Briles Aerospace was founded in May 2012, allegedly misappropriating the reputation and goodwill of PB Fasteners. These ads are allegedly likely to influence the purchasing decision of customers in the aerospace fastener market because they will believe that Briles Aerospace has extensive engineering expertise and industry know-how, and Boeing and other customers allegedly relied on such statements in choosing to do business with Briles Aerospace rather than PB Fasteners.

Standing under California UCL: A business plaintiff claiming injury by a competitor doesn’t have to allege that it relied on the false advertising, so SPS had standing. Unlike the plaintiffs whose abuses spurred the passage of Proposition 64 tightening UCL standing requirements, competitor-plaintiffs actually do suffer an injury from false advertising that diverts consumers’ business, thus satisfying the injury requirement. Imposing a direct reliance requirement would be inconsistent with the point of competitor false advertising claims.

SPS also had a sufficient commercial interest under the Lanham Act. (Somewhat oddly, SPS asserted that it only wanted a false advertising claim; false association would have eased its burdens in terms of commercial advertising/promotion and materiality, both of which might present some issues here, and false association is not obviously a terrible claim on these facts.)

Defendants argued that “Briles companies have been valued Manufacturers of High Strength Aerospace Fasteners for over half a century” was truthful, but didn’t explain why and also that didn’t deal with the allegation that the statement misleadingly suggested that defendants had more than 50 years of experience manufacturing high-strength aerospace fasteners and that Briles Aerospace had significant engineering expertise in the aerospace fasteners industry. Nor could the court conclude that this was puffery as a matter of law. While “valued” was opinion or puffery, the assertion that the companies have been manufacturing the aerospace fasteners for “over half a century” was “quantifiable” and “verifiably true or false.” [Interesting trade secret interaction: what if the advertising claim is true, but only because they took information that, according to the other allegations in the complaint, they had no right to take?]

Defendants argued that the allegations of reliance or consumer deception were conclusory and unsupported by any actual facts. Not every court would agree, especially in the context of a sophisticated customer base as here, but the court concluded that no further evidence was required on a motion to dismiss. Likewise, on materiality, defendants argued “that it is simply not plausible that a highly sophisticated company like Boeing would rely on one statement … in choosing to source critical parts for commercial airplanes.” Discovery might reveal this to be true, and other allegations in the complaint suggested that Boeing relied on other information and statements, but the allegedly misleading statement need not be the only reason to work with defendants as long as it contributed to the decision. [I mean, presumably Boeing knew it was contracting with a new company other than the one that had been its exclusive supplier for 40 years, so ...]

Other claims also survived.