ULTRA BOND vs. SAFELITE LAWSUIT TO MOVE FORWARD

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

Richard Campfield, et ai.,

Plaintiffs, Case No. 2:15—cv—2733
Vv. Judge Michael H. Watson
Magistrate Judge Kemp

Safelite Group, Inc., ef ai.,

Defendants.

OPINION AND ORDER
Plaintiffs Richard Campfield and Ultra Bond, Inc. (collectively, “Ultra Bond”)
allege that Defendants Safelite Group, Inc., Safelite Solutions LLC, and Safelite
Fulfiliment, Inc. (collectively, “Safelite”) misrepresented the nature and
characteristics of Ultra Bond’s products to consumers. Plaintiffs bring one claim
for relief under section 43({a) of the Lanham Act, codified at 15 U.S.C.

§ 1125(a)(1)(B). Safelite now moves to dismiss this claim.

For the reasons that follow, the Court GRANTS IN PART and DENIES IN
PART Safelite’s motion. Specifically, the Court DENIES the motion with respect
to specific statements on Safelite’s website and GRANTS the motion with
respect to the remaining alleged statements.

I. BACKGROUND
The following facts are taken from Ultra Bond’s complaint and are

assumed true for purposes of this Opinion and Order.
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This case involves the market for vehicle glass repair and replacement
("“VGRR’). Safelite maintains a significant stake in the sale and installation of
replacement windshields. Ultra Bond, on the other hand, maintains a significant
stake in 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 operates in the windshield replacement market through multiple
entities. One entity manufactures replacement windshields, another sells
replacement windshields to wholesalers, and another provides VGRR services to
retail and individual customers. Replacement windshields are separate and
distinct from the “original equipment manufactured,” or “OEM,” windshields that
come with new vehicles. Compl. J 26, ECF No. 1. Safelite does not
manufacture or distribute OEM windshields.

Another Safelite entity acts indirectly in the windshield replacement market
by administering VGRR claims on behalf of insurance companies. Approximately
175 insurance companies, including nineteen of the top thirty companies, use
Safelite to administer VGRR claims.

In its capacity as a third-party administrator, Safelite deals directly with
insured policyholders who contact their insurer to report non-collision windshield
damage (such as, inter alia, damage from vandalism and stones hitting
windshields). Calls of this nature are routed from the insurance company to a
Safelite call center. A Safelite representative answers the call and speaks
directly to the policyholder about his or her policy, the vehicle, and the damage to

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the windshield. Safelite then helps the policyholder schedule repair or
replacement services.

Although Safelite acts as the insurer's agent during these calls, it maintains
considerable autonomy over where to send policyholders for repair or
replacement services. Safelite has a network of “glass shops’ that perform these
services. /d. J 59. That network includes Safelite entities, as well as entities that
Safelite does not operate. Of the latter group, some entities order non-OEM
replacement windshields that Safelite manufactured or distributed, and some do
not.

Safelite representatives must follow a script during each of their calls with
insured policyholders. After asking about the damage to the insured’s
windshield, the Safelite representative must recommend a scripted course of
action based on the insured’s answer.

If an insured reports a windshield crack that is shorter than six inches, the
Safelite representative discusses repair options. If, however, the caller reports a
long crack, the Safelite representative processes the claim as a windshield
replacement. Ultra Bond does not allege that Safelite makes any specific
representations about why it is doing so. Rather, “the script will skip the
discussion of repair options and show the operator the next section of the script.”
Id. J 101.

At no point in these conversations does Safelite disclose the option or the
benefit of repairing a long crack. If an insured asks about long crack repair,

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Safelite informs the insured that such a repair is not safe, is unlikely to hold, and
could compromise the structural integrity of the windshield.

Safelite also has scripted answers to questions about windshield
replacement. If an insured asks about the safety implications of installing a non-
OEM replacement windshield, Safelite informs the insured that such
replacements are equivalent to factory-installed OEM windshields.

Ultra Bond disagrees with these statements. According to Ultra Bond, long
crack repairs are preferable to windshield replacement. Not only is the repair
process cheaper than replacing the windshield, but repair maintains the structural
integrity of the OEM windshield, which is factory-installed to ensure the best
possible seal for safety purposes. Ultra Bond asserts that Safelite’s
representations and omissions regarding long crack repairs and the safety of
non-OEM windshields are false or misleading to insureds.

The history of long crack repairs is relevant to this assertion. Before 1989,
long crack repair was considered infeasible. The so-called “dollar bill rule”
developed: if a crack is longer than a dollar bill, the windshield must be replaced.
This rule changed in 1989 when Ultra Bond developed a new method for
repairing long cracks. Ultra Bond’s process allows vehicle owners to repair long
cracks rather than replacing the windshield, thus preserving the integrity of the
factory-installed OEM windshield. In 2007, the American National Standards

Institute approved windshield repair standards stating that windshield cracks up

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to fourteen inches are repairable. As such, according to Ultra Bond, the dollar bill
rule is no longer the prevailing view in the industry.

Safelite nevertheless continues to process claims according to the dollar
bill rule. Ultra Bond contends that Safelite has a financial! incentive to do so, in
that windshield replacement is more expensive than repair and therefore
generates more money for the insurance companies (thus securing Safelite’s role
as third-party administrator for those companies). Ultra Bond also argues that
Safelite’s representations bolster the market for windshield replacement, which in
turn bolsters profits for the Safelite entities that manufacture, distribute, and
install non-OEM replacement windshields. Ultra Bond notes that insured
policyholders typically lack knowledge about the VGRR industry and therefore
are particularly vulnerable to Safelite’s recommendations.

In addition to advising policyholders over the phone, Safelite also
maintains a website designed to assist insureds reporting windshield damage.
This website contains the phrases “replace my windshield” and “damage larger
than six inches’ close together, thereby insinuating (according to Ultra Bond) that
the dollar bill rule still applies. /d. 118. The website also contains the phrases
“repair” and “does the crack fit under a dollar bill?” in close proximity to one
another. /d. A video on the Safelite website states: “If the damage spreads
beyond the size of a dollar bill a replacement will be necessary.” /d. In previous
versions of the website, a video stated: “Your windshield helps keep you safe. If
the damage is larger than 6”, it cannot be repaired. You need a replacement.”

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Id. $119. The video went on to inform customers who indicated online that their
windshield had a long crack: “It sounds like we need to replace your windshield.
This is because if the damage is too big . . . the structural integrity of the glass is
beyond repair.” /d. Finally, another video on Safelite’s website states that its
technology places replacement windshields “in perfect position for a strong
reliable bond.” /d. J 120.

Ultra Bond also asserts an additional category of misrepresentations. Ifa
policyholder contacts Safelight about repairing a long crack, Safelite informs the
policyholder about the reimbursement amount the insurance company will
provide. Safelite quotes a reimbursement price that is lower than the actual cost
of repairing a long crack. Safelite informs the policyholder and/or the shop that
said price is the “prevailing rate” for all repairs. /d. 124. This policy causes
shops performing long crack repair to be underreimbursed, which further deters
shops and policyholders from offering and seeking long crack repair services.

Ultra Bond asserts that it has been damaged by Safelite’s conduct. Ultra
Bond notes that it is the dominant manufacturer of long crack repair kits, while
Safelite is the dominant third-party administrator and retailer of non-OEM
windshields. Over 90% of policyholders would have (according to Ultra Bond)
chosen long crack repair over windshield replacement had Safelite accurately
described that option. More businesses would have purchased long crack repair

kits, it alleges, and a portion of this business would have gone to Ultra Bond.

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Ultra Bond brings its claim under section 43(a) of the Lanham Act, 15
U.S.C. § 1125(a)(1)(B) (referred to throughout this Opinion and Order as
§ 43(a)). Regarding damages, Ultra Bond seeks to recover lost sales based on
those consumers who would have opted for long crack repair but for Safelite’s
misconduct. Ultra Bond also seeks to recover lost sales from an advanced repair
system that it has not been able to develop, market, or license due to the
artificially depressed market. Finally, Ultra Bond seeks injunctive relief and
disgorgement of Safelite’s ill-gotten gains.

Safelite moves to dismiss this claim pursuant to Federal Rule of Civil
Procedure 12(b)(6).

ll. © STANDARD OF REVIEW

Dismissal pursuant to Rule 12(b)(6) is proper if the complaint fails to state
a claim upon which the Court can grant relief. Fed. R. Civ. P. 12(b)(6). The
court must construe the pleading in favor of the party asserting the claim, accept
the factual allegations contained therein as true, and determine whether those
factual allegations present a plausible claim for relief. See Bell Ail. Corp. v.
Twombly, 550 U.S. 554, 570 (2007). To be considered plausible, a claim must
be more than merely conceivable. Bell Atl. Corp., 550 U.S. at 556; Ass'n of
Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007).
“A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Assuming all

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well-pleaded allegations as true, “Rule 12(b)(6) is the appropriate vehicle to
analyze the viability of the legal theories on which a plaintiff bases his or her
claim.” Perkins v. Wells Fargo Bank, N.A., No. 2:11-cv—952, 2012 WL 5077712,
at *5 (S.D. Ohio Oct. 18, 2042).
lil. ANALYSIS
Section 43(a) of the Lanham Act precludes any person from making any
“false or misleading representation of fact, which . . . in commercial advertising or
promotion, misrepresents the nature, characteristics, qualities, or geographic
origin of his or her or another person’s goods, services, or commercial
activities ....” 15 U.S.C. § 1125(a)(1)(B). Plaintiffs asserting a § 43(a) claim
must meet a five-part test, known in this circuit as the “Podiatric Physicians” test:
1) the defendant has made false or misleading statements of fact
concerning his own product or another's; 2) the statement actually
deceives or tends to deceive a substantial portion of the intended
audience; 3) the statement is material in that it will likely influence
the deceived consumer's’ purchasing decisions; 4) the
advertisements were introduced into interstate commerce; 5) there is
some causal link between the challenged statements and harm to
the plaintiff.
Grubbs v. Sheakley Grp., Inc., 807 F.3d 785, 798 (6th Cir. 2015) (quoting Am.
Council of Certified Podiatric Physicians & Surgeons v. Am. Bd. of Podiatric
Surgery, Inc., 185 F.3d 606, 613 (6th Cir. 1999)). The Court first addresses

Safelite’s argument that Ultra Bond fails to allege affirmative “statements” within

the meaning of this test.

A. Actionable Representations

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Both the Podiatric Physicians test and the plain language of the statute
require an affirmative representation that can be proven false. See id. (requiring
a “statement of fact”); 15 U.S.C. § 1125(a)(1)(B) (requiring a “representation of
fact”); Nat’! Air Traffic Controllers Assn v. Sec. of Dep't of Transp., 654 F.3d 654,
657 (6th Cir. 2011) (setting forth the general rule that courts must interpret
federal statutes consistently with their plain language). A defendant's failure to
mention the plaintiff or its products, therefore, is not itself actionable under
§ 43(a). See id.; accord Alexso, Inc. v. First Database, Inc., No. CV 15-01893,
2015 WL 5554005, at *2 (C.D. Cal. Sept. 21, 2015) (rejecting the plaintiffs
argument that an entity’s failure to list the plaintiffs pharmaceutical product in a
database of pharmaceutical products was an actionable “representation” under
§ 43(a) absent a corresponding representation that the list was exhaustive); see
also Univ. City Studios, inc. v. Sony Corp. of Am., 429 F. Supp. 407, 410 (C.D.
Cal. 1977) (“It is hard to see how a simple failure to disclose can be brought
within [§ 43(a)’s] terms. ... The absence of any statement is neither ‘false’ nor a
‘representation.”). That is especially true when a for-profit entity lists or
discusses some products and not others. “[G]iven the myriad reasons” why this
might occur, the entity's omission of certain products “cannot plausibly be read
as an affirmative representation of any kind regarding those products.” A/exso,
Inc., 2015 WL 5554005, at *2.

Ultra Bond argues that a statement can be actionable if it is “untrue as a

result of failure to disclose a material fact.” Resp. 25, ECF No. 27 (quoting

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Trekeight, LLC v. Symantec Corp., No. 04—cv-1479, 2006 U.S. Dist. LEXIS
100609 at *17-18 (S.D. Cal. May 23, 2006) and Tire Kingdom, Inc. v. Morgan
Tire & Auto, inc., 915 F. Supp. 360, 366 (S.D. Fla. 1996)). That proposition of
law, however, does not change § 43(a)’s requirement that a plaintiff identify an
affirmative representation by the defendant.

Safelite’s failure to mention long crack repair products and services during
its discussions with policyholders does not satisfy this requirement. The facts
that Safelite does not inform policyholders about the option or benefit of long
crack repair, and that its automated script skips to a discussion of windshield
replacement when a policyholder reports a long crack, are not statements or
representations that can be proven false. Indeed, because there are various
reasons that insurance companies might choose to process claims in this
manner, this conduct does not represent anything about Safelite’s or Ultra Bond’s
products. See Alexso, Inc., 2015 WL 5554005, at *2. This conduct therefore
cannot be considered a misrepresentation under § 43(a).

The same is true regarding the headings on Safelite’s website. Ultra Bond
alleges that the website contains the phrase “damage larger than six inches”
under the heading “replace my windshield,” and the phrase “does the chip or
crack fit under a dollar bill” under the heading “repair my windshield.”

Compl. 7 118, ECF No. 1. But these phrases do not make any representations
about long crack repair or about Safelite’s products. Even if this portion of the
website implies that insurers process claims pursuant to this formula, there are

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“myriad reasons” why they might choose to do so. Alexso, Inc., 2015 WL

5554005, at *2. This portion of the website therefore is not an affirmative

“statement” about Safelite’s or Ultra Bond's products under § 43(a).

Only the following affirmative statements are alleged in the Complaint:

In response to policyholders’ questions about long crack repair,
Safelite informs policyholders that such an option is unsafe, is
unlikely to hold, and could compromise the structural integrity of the
windshield;

In response to policyholders’ questions about non-OEM windshields,
Safelite informs customers that they are equivalent to OEM
windshields;

In response to inquiries from policyholders or glass shops, Safelite
states that a certain rate is the “prevailing rate” for long crack
repairs;

Safelite makes the following statements in videos posted to its
website: “If the damage spreads beyond the size of a dollar bill a
replacement will be necessary;” “if the damage [to a windshield] is
larger than 6”, it cannot be repaired. You need a replacement,” and
“if the damage [to the windshield] is too big . . . the structural integrity
of the glass is beyond repair;” and

Safelite states in a video that its technology places replacement
windshields in perfect position for a strong, reliable bond.

Of these, Ultra Bond does not allege that the last representation is false. The

Complaint states that non-OEM windshields are not equivalent to OEM

windshields and that the OEM bond cannot be replicated. But even if true, this

fact does not render false or misleading the statement that Safelite’s technology

places replacement windshields in perfect position for a strong, reliable bond.

This statement cannot reasonably be interpreted to represent that Safelite’s non-

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OEM windshields have the same bond as OEM windshields. This representation
therefore cannot form the basis for a § 43(a) claim.

The Court is left with Safelite’s scripted responses to specific inquires and
its statements in certain videos posted on its website. Safelite next argues that
these statements are not “commercial advertising or promotion” within the
meaning of § 43(a).

B. “Commercial Advertising or Promotion”

The issue of whether a plaintiff alleges “commercial advertising or
promotion” is a prerequisite to the Podiatric Physicians test. Where, as here, the
plaintiff does not allege a traditional form of advertising, the Sixth Circuit asks
whether the plaintiff has alleged:

(1) commercial speech; (2) for the purpose of influencing customers

to buy the defendant's goods or services; (3) that is disseminated

either widely enough to the relevant purchasing public to constitute

advertising or promotion within that industry or to a substantial
portion of the plaintiffs or defendant's existing customer or client
base.
Grubbs, 807 F.3d at 798. “[T]he touchstone of whether a defendant’s actions
may be considered ‘commercial advertising or promotion’ under the Lanham Act
is that the contested representations are part of an organized campaign to
penetrate the relevant market.” /d. (quoting Fashion Boutique of Short Hills, inc.
v. Fendi USA, Inc., 314 F.3d 48, 57 (2d Cir. 2002)). Such campaigns “may not

necessarily entail widespread, market-wide dissemination of any given message

or false statement as junk mail, newspaper advertisements, and television

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commercials might,” but as long as they employ “targeted promotion” aimed at
persuading discrete segments of the population, they will be considered
“commercial advertising or promotion.” /d.

Safelite’s scripted responses to policyholders’ questions do not qualify as
“commercial advertising or promotion” under the third prong of the Grubbs
standard. Because many insurance companies do not use Safelite to process
their claims, the policyholders to whom Safelite speaks represent only a portion
of the “relevant purchasing public” for Ultra Bond’s products. Within this limited
portion of the market, Safelite makes the representations at issue only to those
who affirmatively ask about long crack repair or OEM versus non-OEM
windshields. The complaint does not plausibly suggest that a large number of
policyholders make these inquiries; rather, most policyholders allegedly lack
knowledge about the VGRR options available. As such, even viewing Ultra
Bond’s allegations in its favor, the Court cannot conclude that the representations
at issue are widely disseminated or delivered to a substantial portion of the
VGRR market. The fact that Satelite could, but does not, make these
representations to all policyholders with whom it communicates further indicates
that such representations are not part of an organized campaign to penetrate the
relevant market.

The Court reaches the opposite conclusion with respect to the videos on
Safelite’s website. Many courts have concluded that posting a statement on a

website constitutes “commercial advertising or promotion” within the meaning of

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§ 43(a). See, e.g., C=Holdings B.V. v. Asiarim Corp., 992 F. Supp. 2d 223, 243
(S.D.N.Y. 2013) (calling the internet “an obvious ‘campaign to penetrate the
relevant market”). Safelite does not offer any contrary authority. Instead,
Safelite argues that the Complaint asserts only that the website was “viewable,”
not that it was actually viewed by the relevant purchasing public, and that it is
unclear from the complaint whether these statements were made “outside of the
third party administrator context.” Mot. Dismiss 12 n. 3, ECF No. 25.

Safelite’s argument is not compelling. Ultra Bond’s allegations that the
website is or was “viewable to retail and insurance customers alike” and that
Safelite’s statements have substantially impacted the long crack repair market,
viewed in Ultra Bond’s favor, are sufficient to support the inference at this stage
of the litigation that the statements at issue were widely disseminated to the
relevant purchasing public. Ultra Bond therefore has alleged “commercial
advertising or promotion” with respect to these statements.

Safelite’s final argument is that Ultra Bond lacks statutory standing to bring
its claim. The Court proceeds to address this argument.

C. Statutory Standing

The issue of statutory standing is a second prerequisite to the Podiatric
Physicians test. As the Supreme Court explained in Lexmark International, inc.
v. Static Control Components, inc., not only must a § 43(a) plaintiff have Article
flk standing to sue, but he or she also must “fall[] within the class of plaintiffs

whom Congress has authorized to sue under § [43(a)].”_ 134 S. Ct. 1377, 1387

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(2014). Statutory standing has two requirements: (1) that the plaintiff's interests
“fall within the zone of interests protected by the law invoked,” and (2) that “his or
her injuries are proximately caused by violations of the statute.” /d. at 1388,
1390. In the § 43(a) context, a plaintiff comes within the zone of interests if he or
she “allege[s] an injury to a commercial interest in reputation or sales.” /d. at
1390. A plaintiff seeking to demonstrate proximate cause “must show economic
or reputational injury flowing directly from the deception wrought by the
defendant’s advertising; and that that occurs when deception of consumers
causes them to withhold trade from the plaintiff.” /d. at 1391.

Safelite identifies three categories of damages in Ultra Bond’s complaint:
harm to the public interest, harm based on a future product that has not been
developed, and harm based on lost sales. Safelite appears to concede that the
third category of damages, as alleged, meets Lexmark’s zone of interest and
proximate cause requirements at this stage of the litigation. See Mot. Dismiss 8—
9, ECF No. 25. Ultra Bond, for its part, clarifies that it is not seeking damages on

the public’s behalf. Only the second category of damages remains in dispute.

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Safelite argues that the loss of generalized business opportunities from
future products is too speculative to satisfy Article Hl or Lexmark. Ultra Bond
responds, inter alia, that the undeveloped products at issue are “simply a
continuation of Plaintiffs’ earlier patented Long Crack repair products which
Plaintiffs have marketed.” Resp. 15, ECF No. 27. Safelite disputes this factual
assertion.

Because Ultra Bond has alleged lost sales from the current version of its
products on the market, the Court finds that the issue of whether Ultra Bond can
seek additional damages related to an undeveloped product that may or may not
be a continuation of an existing product presents a factual issue that is premature
at the Rule 12(b)(6) stage. Ultra Bond’s allegations regarding its lost sales from
current products bring it within the purview of the statute. Safelite’s arguments
regarding statutory standing therefore do not provide a basis for dismissal.

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN
PART Safelite’s motion to dismiss, ECF No. 25. Only the allegations regarding
Safelite’s statements in videos posted to its website remain pending in this

litigation.

IT 1S SO ORDERED. LA hig,

ICHAEL H. WATSON, JUDGE —
UNITED STATES DISTRICT COURT

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