Cracks in the foundation: Laches and proximate cause defeat auto glass false advertising claim

Campfield v. Safelite Gp., Inc., 2021 WL 1215869, No. 2:15-cv-2733 (S.D. Oh. Mar. 31, 2021)

Plaintiffs alleged that Safelite misrepresented the nature and characteristics of plaintiffs’ products to consumers in violation of the Lanham Act. Safelite counterclaimed for various business torts/CFAA violations. Safelite managed to kick out the Lanham Act claim for want of proximate cause.

The parties compete in vehicle glass repair and replacement (VGRR) services. Safelite’s business focuses on “sale and installation of replacement windshields.” It primarily serves insurance companies, administering their glass breakage coverage; commercial customers who have vehicle fleets; and indivudal consumers who may or may not have windshield damage insurance. Plaintiffs focus on the sale of products used to repair cracks longer than six inches (called “long cracks”), as well as the service of performing such repairs.

Safelite follows the “dollar bill” rule and neither recommends nor performs long-crack repairs. In 2007, ANSI approved windshield industry repair standards, the Repair of Laminated Automotive Glass Standards (ROLAGS), that stated windshield cracks up to fourteen inches are repairable. Plaintiffs alleged that the dollar bill rule is no longer the prevailing view in the industry, and that Safelite’s internal documents show that it knew that the repair of windshield cracks “up to 24 [inches] ... can be safe and is viable.” Safelite allegedly falsely advertised that (1) “if damage spreads beyond the size of a dollar bill, a replacement will be necessary”; (2) “when a chip is smaller than a dollar bill, it can usually be repaired without replacing the windshield.”

Safelite counterclaimed for trade secret theft not related to advertising.

Prior opinions narrowed the case in Lanham Act relevant ways. As to basic Lanham Act coverage: (1) Safelite’s statements to policyholders in its role as a claims administrator are not commercial advertising or promotion under the Lanham Act [hmmm]; (2) Safelite is not liable for any statements made by insurance companies regarding the dollar-bill rule, even if drafted by Safelite [double hmm; seems at least secondary liability would be appropriate]; (3) Safelite may be liable for statements it made directly to insurers, including in brochures and educational materials, if these statements were made for the purpose of ultimately influencing customers or even insurance companies to buy (or contract for the provision of) Safelite’s goods and service, as opposed to for the purpose of explaining an insurance company’s existing policies; and (4) unsurprisingly, statements made by “Safelite’s front-line sales force” directly to consumers may be “commercial advertising or promotion.”

As to substance, the first category of challenged statements (“if damage spreads beyond the size of a dollar bill, a replacement will be necessary”) could be literally false, while the second category needed to be proven misleading.

Laches: The parties agreed that Ohio’s two year statute of limitations was analogous, so if they actually or constructively knew of the alleged violative activity more than two years before the August 2015 filing, there’d be a presumption of laches. Safelite argues that “Plaintiffs knew of Safelite’s dollar bill policy and thought it was false and misleading decades before they filed suit.” By 1998, Campfield (a relevant person and counterdefendant) was telling insurance companies that Safelite was lying to consumers by using the dollar bill rule. He also unsuccessfully sued insurance companies and Safelite based on similar claims in the past, including in 2003 and 2004.

Plaintiffs argued that they rebutted a presumption of prejudice, that there was good cause for their delay, and that Safelite’s “egregious” conduct excused the delay.

As to prejudice, they argued that Safelite wasn’t going to stop no matter what, with a relevant person saying, in response to the new ROLAGS standards, that “[a relevant entity] has made it clear to insurance companies that it is not going to change its repairable dimensions to include crack repair until we research the safety implications.” That wasn’t enough to show that Safelite would have ceased its conduct if ordered to do so by a court, which was the relevant question. [Is “ordered by the court” really the relevant question for assessing prejudice? I thought it was whether Safelite would have had, and possibly taken, an opportunity to minimize the damage it was causing by changing its conduct/building goodwill some other way.] More plausibly: “Every year that Plaintiffs delayed in bringing this lawsuit is another year that Safelite continued its use of the dollar bill rule, prejudicing Safelite by increasing potential damages that Plaintiffs could claim as well as increasing money Safelite invested in promoting the dollar bill rule.” So the presumption of prejudice applied.

Did they have good cause for delay? Plaintiffs argued that their previous losses meant that they couldn’t sue until there was a real industry standard. But elsewhere plaintiffs expressly denied that their claims depend on the ROLAGS industry standard. There was also no evidence that the nature of Safelite’s statements to insurers or consumers materially changed after the earlier litigation, meaning that there was no analogue to progressive encroachment. Anyway, the industry standard came to be in 2007, eight years before filing.

Was Safelite’s alleged conduct egregious enough to avoid laches because it involved safety? In a footnote, the court said that economic harm to consumers wasn’t enough to be egregious conduct. Plaintiffs failed to create a genuine issue of material fact as to whether the statements put consumers at risk. Although an expert stated that “in [his] professional opinion the risk of personal injury or death to a driver or passenger in a vehicle accident can result more from improper windshield replacement than an improper windshield repair,” he didn’t specifically testify that Safelite windshield replacements “put consumers’ safety at risk.” Rather, he testified that Safelite’s windshield replacement process complies with the Auto Glass Replacement Safety Standard (AGRSS), which in his view means that it is safe for “everyone who rides in that car.” He was not aware of a single instance in which a Safelite windshield replacement failed and caused injury or death to a consumer.

Thus, laches barred plaintiffs from obtaining some of their requested damages, but not injunctive relief or post-filing damages because there was no estoppel. Safelite argued that egregious delay could bar injunctive relief in false advertising cases, but the court saw no reason to distinguish them from trademark cases, which do allow injunctive relief even when damages are lached.

Were plaintiffs’ injuries proximately caused by Safelite? Plaintiffs provided testimony from nine customers (individuals who perform long-crack repair) that Safelite’s use of the dollar-bill rule makes it more difficult for them to sell long-crack repair to their own customers, and that if underlying demand for repair increased they’d definitely buy more of plaintiffs’ products. They also argued that Safelite’s ads denigrated their products/services, given that “Plaintiffs’ business is premised on long-crack repair ... Safelite advertises, markets, and promotes just the opposite,” and that Plaintiffs are the “face of long-crack repair” whose success depends “on the industry’s acceptance of that practice.” One expert’s surveys found that individuals who did not see statements advertising the dollar bill rule were more likely to repair instead of replace a windshield with a long crack.

Under Lexmark, economic or reputational injury flowing directly from deception “occurs when deception of consumers causes them to withhold trade from the plaintiff. That showing is generally not made when the deception produces injuries to a fellow commercial actor that in turn affect the plaintiff.” That was the case with respect to the first harm argument; it was too indirect. (Since plaintiffs’ customers are apparently unconcentrated, that means that they could never recover unless a court allowed a plaintiff class.) Absent the allegedly false advertising, car owners would need to choose one of plaintiffs’ customers to perform the repair, making demand increase enough for those customers to order more of the products. This was too speculative. True, the plaintiff in Lexmark sold to customers too, but it was allegedly 100% or nearly of the market, which doesn’t seem to be the case here.

Plaintiffs’ own expert said:

The fact that, Safelite notwithstanding, the crack repair industry is “highly fragmented” and that the competition between Safelite and Ultra Bond is multi-faceted makes assessing the particular impact of Safelite’s actions to Ultra Bond difficult. …While Ultra Bond’s position as a leading seller of Long Crack repair supplies suggests that Safelite’s gains result in lost market opportunities for Ultra Bond, estimating Ultra Bond’s losses is difficult because not every lost repair would have been from Ultra Bond.

The disparagement argument was more legally sound, but still unavailing. Plaintiffs didn’t show that Safelite denigrated their product by name or singled out their products, as opposed to a concept of long-crack repair.

Because proximate cause is an element of the cause of action, the claim failed even as to injunctive relief, not just monetary damages.  “In the absence of proximate causation, no Lanham Act claim—whether for monetary damages or injunctive relief—can proceed.” Comment: Super important statement after the TMA. If this applies to trademark claims as well, then harm is still a requirement of some sort even with a presumption of irreparable harm after the cause of action has been adequately made out.

Summary judgment for Safelite.