Wednesday, September 30, 2020

mistaken exclusion of materiality survey leads to remand in false advertising case

Wing Enters., Inc. v. Tricam Indus., Inc., --- Fed.Appx. ----, 2020 WL 5739718, 2019-2279 (Fed. Cir. Sept. 25, 2020)

A remand because the district court wrongly excluded one survey in this false advertising case (though didn’t abuse its discretion in excluding another), then granted defendant’s motion for summary judgment.

Wing and Tricam compete in the market for multi-position ladders. Wing alleged that Tricam violated the Lanham Act and the coordinate Minnesota Deceptive Trade Practices Act by falsely advertising that its ladders complied with ANSI A14.2, an industry safety standard that applies to metal multi-position ladders. Wing alleged that Tricam’s ladders flunked the requirement that the rung on a multi-position ladder have a “step surface of not less than 1 inch.” Tricam’s allegedly false advertising appeared on: (1) the label on the side of Tricam’s ladders, which reads “manufacturer certifies conformance to OSHA ANSI A14.2 code for metal ladders,” (2) a statement on The Home Depot’s website, which reads “ANSI Certified, OSHA Compliant,” and (3) a statement on Tricam’s website, which reads “ANSI A14.2; OSHA.”

False advertising requires materiality, which frankly I would think a jury could infer from the fact that it’s an industry safety standard, but Wing had Hal Poret conduct two surveys.

The Importance Survey asked respondents to rank the factors they consider important when purchasing a ladder. The survey provided respondents with a list of factors, which included “strength/duty rating,” “compliance with industry safety standards,” “hinge lock size/style,” “feet material/style,” and “company name.” According to Mr. Poret, the survey results showed that “compliance with industry safety standards was ranked first as the most important factor by more respondents (19%) than any other factor except for strength/duty rating” and that a “total of 58% of respondents rated compliance with industry safety standards an important factor.” From these results, Mr. Poret concluded that “compliance with industry safety standards is the type of issue that is important to consumers and would tend to ... impact purchase decisions.”

The Labeling Survey showed a test group the side labeling of a Gorilla Ladder containing the allegedly false ANSI statement as well as a statement about OSHA compliance. A control group saw “an altered version” of the labeling in which “all references to compliance with OSHA/ANSI standards were removed.” While 69% of the test group members indicated that they were “extremely or very likely to purchase the ladder with the OSHA/ANSI content present,” only 55% of the control group did so, leading Poret to find “a significant impact on reported likelihood of purchase.”

Tricam’s surveyor, by contrast, concluded that “only 2% of the ... respondents [in her survey] could have potentially been influenced by the ANSI label,” though 67.5% of survey respondents “stated they had read the side label before buying the ladder,” 42.4% of the respondents had heard of ANSI, and 21.9% of the respondents clearly knew what ANSI was. Tricam’s surveyor Triese also criticized Poret’s work for failing to “isolate the effect, if any, of the ANSI” statement on consumers, focusing instead on the effect of an ANSI-OSHA statement or on industry safety standards in general.

In apparent response to this criticism, Wing sought to add OSHA compliance-related contentions, which the magistrate struck as untimely. Based on that, the district court excluded Poret’s testimony about the surveys, reasoning that they were “not relevant to the question of whether the ANSI-conformance statement that is at issue in this case is material to consumers’ purchasing decisions.” It reasoned that “[k]nowing that industry safety standards in general are important to consumers’ purchasing decisions does nothing to predict whether consumers might be dissuaded from buying a ladder that does not meet current ANSI standards” because Mr. Poret did not “ask about ANSI specifically.” Also, the surveys tested ANSI conformance in combination with OSHA conformance, so they weren’t relevant. [This is part of a trend of hyperspecificity in materiality requirements, which I think is generally a very bad idea as well as inconsistent with the historical treatment of materiality as “the kind of thing consumers care about.” Among other things, consumers aren’t great at telling you exactly why they do what they do, so demands for super-specificity can lead to lots of false negatives. If falsity/misleadingness is established, then in general we shouldn’t take the risk of allowing consumer harm unless there’s very good reason to think that the difference between the advertising and the truth wouldn’t matter to consumers.]

In addition, the court excluded the Labeling Survey because it would confuse the jury, being premised “on the conclusion that the OSHA-conformance statement is false,” and Tricam had lacked an opportunity to take meaningful discovery on the interplay between ANSI and OSHA.

Without the survey, the district court found there was insufficient evidence of materiality—testimony from a high-level Wing executive, Tricam’s president, and the chairman of the ANSI Labeling Committee was “too speculative.”

“Because Mr. Poret’s testimony concerning the Importance Survey would have at least some tendency to make a fact of consequence more probable than it would be without the evidence, and because such testimony is not so unsupported that it would offer no help to the jury, we determine that the district court abused its discretion in excluding Mr. Poret from testifying about the Importance Survey.” Even if it doesn’t mention ANSI, “ANSI is unquestionably an industry safety standard and is one of the two potential industry safety standards relating to ladders in the United States.” Asking about safety standards in general wasn’t irrelevant. Other courts have accepted materiality surveys as relevant even when the surveys didn’t ask about “the particular statement or product at issue.” Note: As well they should! Tricam also argued that the survey didn’t show that consumers know that ANSI is an industry safety standard. “This argument seems aimed more at the weight that the Importance Survey’s results should be accorded than whether the survey is relevant. Still, as the district court determined, ladder consumers could potentially ascertain that ANSI is an industry safety standard based on how Tricam displayed ANSI conformance.” Also, Tricam’s own survey results suggested that consumers know that ANSI is an industry safety standard, and it was ok to rely on the opposing party’s survey results for that proposition.

However, the district court didn’t abuse its discretion in excluding the Labeling Survey, because compliance with OSHA wasn’t part of the case and that was too intertwined with this survey, such that the jury would be confused. Wing argued that the jury could be instructed that the survey was only submitted for the materiality of the ANSI label, but the survey was still premised on the conclusion that the OSHA-conformance statement was false; Poret concluded that the survey showed that the “OSHA/ANSI content did have a significant impact on reported likelihood of purchase” (emphasis added). Tricam never had reason to explore in discovery the relationship between OSHA and ANSI on which the survey was premised.

With the one survey in, there was enough to survive summary judgment. That survey “suggests that consumers consider compliance with industry safety standards an important consideration when making a purchasing decision.” Consumers could know that, as Tricam’s survey suggested.  Result: remand, which could consider some other unsettled legal arguments.


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