RICHARD CAMPFIELD, et al.
UNITED STATE DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Case No. 2:15-cv-2733
Plaintiffs
v.
Judge Michael H. Watson
Magistrate Judge Terrence P. Kemp
SAFELITE GROUP, INC., et al.
Defendants
PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS
TABLE OF CONTENTS
TABLE OF AUTHORITIES
iii
INTRODUCTION
1
STATEMENT OF FACTS
3
I. The ROLAGS (Which Safelite Ignores in its Brief)
3
II. The Ultra Bond Process for Repairing Long Cracks
4
III. Safelite’s VGRR Operations
5
IV. Safelite’s False and Misleading Statements on its Website and FNOL
Scripts 6
LEGAL STANDARD
7
ARGUMENT
8
I. The Lanham Act under Lexmark
8
II. Plaintiffs Have Standing to Pursue Lanham Act Claims under Lexmark
9
A. Plaintiffs meet the “zone of interests” test.
9
B. Plaintiffs adequately plead proximate cause.
12
III. Safelite’s Arguments that the Lanham Act Does Not
Otherwise Apply to
Plaintiffs’ Claim Is Contrary to Established Law
16
A. LidoChem supports denial of Defendants’ motion.
16
B. Safelite’s remaining arguments are without merit
19
IV. Laches Is Not Appropriately Resolved on a Motion to Dismiss
21
CONCLUSION
23
PROOF OF SERVICE
24
TABLE OF AUTHORITIES
Cases
Advanced Fluid Systems, Inc. v. Huber, 28 F. Supp. 3d 306, 334 (M.D. Pa. 2014)
18
Agence France Presse v. Morel, 769 F. Supp. 2d 295, 308 (S.D.N.Y. 2011)
20
Alpo Pet Foods, Inc. v. Ralston Purina Co., 997 F.2d 949, 953-54 (D.C. Cir.
1993) 11
Am. Needle & Novelty, Inc. v. Drew Pearson Mktg., Inc., 820 F. Supp. 1072, 1078
(N.D.
Ill. 1993)
19
Axcan Scandipharm Inc. v. Ethex Corp., 585 F. Supp. 2d 1067, 1082 (D. Minn.
2007) 22
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
8
Bern Unlimited, Inc. v. The Burton Corp., 25 F. Supp. 3d 170 (D. Mass. 2014)
14, 16
Campfield v. State Farm Mut. Auto Ins. Co., 532 F.3d 1111 (10th Cir. 2008)
22
Cataldo v. US Steel Corp., 676 F.3d 542 (6ᵗʰ Cir. 2012)
23
CMH Mfg., Inc. v. U.S. GreenFiber, LLC, 2013 U.S. Dist. LEXIS 91914,
at *2 (E.D.
Tenn. July 1, 2013)
21
Cross, Inc. v. Zerbonia, 2010 U.S. Dist. LEXIS 103173 at*32-33 (N.D.
OH. Sept. 29,
2010)
................................................................................
..........................................................18
Diamond Triumph Auto Glass, Inc. v. Safelite Glass Corp., 441 F.
Supp. 2d 695, 710
(M.D. Pa. 2006)
21
Educational Impact, Inc. v. Danielson, 2015 U.S. Dist. LEXIS 9467 at
*37-38 (D.N.J.
Jan. 28, 2015)
17
First Health Grp. Corp. v. BCE Emergis Corp., 269 F.3d 800, 803-04 (7th Cir.
2001) 19
Greater Houston Transp. Co. v. Uber Tech., Inc., 2015 U.S. Dist. LEXIS 28867
*19-20
(S.D. Tex. March 10, 2015)
14, 15
Healthnow New York, Inc. v. Catholic Health System, Inc., 2015 U.S.
Dist. LEXIS
129656 at *9 (W.D.N.Y. Sept. 26, 2015)
17
In Re: Syngenta Ag Mir 162 Corn Litig., 2015 U.S. Dist. LEXIS 124087 at *277
(D. Kan.
Sept. 11, 2015)
12
Kellogg v. Exxon Corp., 209 F.3d 562, 568 (6ᵗʰ Cir. 2000)
22
Laukus v. Rio Brands, Inc., 391 Fed. Appx. 416, 422 (6ᵗʰ Cir. 2010)
22
Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014)
8, 9, 10, 12
LidoChem, Inc. v. Stoller Enters.,Inc., 500 F. App’x. 373, 379 (6th Cir. 2012)
8, 16, 19
Logan v. Burgers Ozark Country Cured Hams Inc., 263 F.3d 477, 461 (5ᵗʰ Cir.
2001) 11, 14
Maine Springs, LLC v. Nestle Waters North America, 2015 U.S. Dist. LEXIS 33259
(D.
Me. March 18, 2015)
12
Marten Transp. Ltd. v. Platform Advertising, Inc., 2015 U.S. Dist. LEXIS 8985
at *10
(D. Kan. Jan. 26, 2105)
13, 18
Par Sterile Products, LLC v. Fresenius Kabi USA LLC, 2015 U.S. Dist. LEXIS
32409 at
*7 (N.D. Ill. March 17, 2015)
12
PDK Labs, Inc. v. Friedlander, 103 F.3d 1105 (2d Cir. 1997)
12
Platinum Sports Ltd. v. Snyder, 715 F.3d 615 (6th Cir. 2013)
12
Princeton Graphics Operating v. NEC Home Elec. Inc., 732 F. Supp.
1258, 1264
(S.D.N.Y. 1990)
11
Republic Bank & Trust Co. v. Bear Stearns & Co., 683 F.3d 239, 246 (6th Cir.
2012) 7
Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1386 (5th Cir. 1996)
19
Severe Records, LLC v. Rich, 658 F.3d 571, 578 (6th Cir. 2011)
8
The Hershey Co., v. Friends of Steve Hershey, 2015 U.S. Dist. LEXIS 22789 at
*14 (D.
MD. Feb. 26, 2015)
13
Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 915 F. Supp. 360, 366 (S.D.
Fla. 1996) 21
Trekeight, LLC v. Symantec Corp., 2006 U.S. Dist. LEXIS 100609 at *17-18 (S.D.
Ca.
May 23, 2006)
21
Westfield Ins. Co., v. Tosh, 2013 U.S. Dist. LEXIS 42970 at *9
(W.D. Ky. March 27,
2013)
................................................................................
..........................................................21
Wilcox Associates, Inc. v. Xspect Sols., 2009 U.S. Dist. LEXIS 87902, at *5
(E.D. Mich.
Sept. 24, 2009)
23
Zaluski v. United American Healthcare Corp., 527 F.3d 564, 570 (6th Cir. 2008)
8
Statutes
15 U.S.C. § 1125(a)(1)(B)
2, 8, 19
Treatises
5 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane & Richard L. Marcus,
Federal
Practice & Procedure § 1277 (3d ed.)
21
J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition §§ 27:65,
31:29
(2006)..........................................................................
.........................................................21, 22
INTRODUCTION
This is a straightforward case. Defendant Safelite Group, Inc., and
its wholly-owned
subsidiaries, including Defendants Safelite Fulfillment, Inc., and
Safelite Solutions LLC
(collectively “Safelite”), make up the largest retail operations in the
country for vehicle glass
repair and replacement (“VGRR”) services for windshield damage claims.
Safelite is also the
nation’s largest third-party administrator (“TPA”) for processing and
adjusting policyholders’
vehicle glass damage claims. In the course of its business, Safelite falsely
advertises, promotes,
and otherwise misleads consumers into believing that, without exception, if
their windshield has
a crack longer than six inches, it cannot be repaired—and that it
would be unsafe to do so.
Instead, Safelite falsely tells consumers that their windshield must be
replaced—referred to as
the “Six Inch Rule” or the “Dollar Bill Rule.” Safelite performs
approximately 3,000,000
windshield replacements each year. Not surprisingly, windshield replacements
are vastly more
profitable to Safelite than windshield repairs.
Contrary to Safelite’s statements in its advertisements and promotions,
windshield cracks
longer than six inches are, in fact, repairable (but far less profitable for
Safelite). Indeed, the
repair of cracks up to 14 inches is the VGRR industry standard. Specifically,
in June 2007 and
updated in February 2014, the American National Standards Institute approved
windshield repair
standards known as the “Repair of Laminated Automotive Glass
Standards” (“ROLAGS”).
These industry standards were developed by the National Glass
Association and the National
Windshield Repair Association and expressly state that cracks longer than six
inches—known in
the VGRR industry as “Long Cracks”—and up 14 inches can be repaired. Safelite
knows that
Long Cracks up to 14 inches are repairable because its representatives sat on
the committee that
developed and approved the ROLAGS in 2007, but knowingly ignores the ROLAGS to
improve
its bottom line.
Plaintiff Ultra Bond, Inc. (founded and owned by Plaintiff
Richard Campfield,
collectively “UB”) is, among other things, a windshield repair
manufacturer that licenses and
sells its products to auto-glass shops and related businesses across the
country and worldwide.
UB holds (or held) several patents related to the repair of
windshield cracks longer than six
inches. These patents cover methods of repairing Long Cracks, the
tools to be utilized when
repairing Long Cracks, and the specific viscosities of chemical resins
that are suitable for
repairing Long Cracks in windshields.
As detailed in the Complaint, UB’s business is based on the industry
standard that
windshield cracks between six inches and fourteen inches are repairable. In
fact, as described
below, repairs are a safer and more reliable option than replacement because
the factory seal of
the windshield is not broken. Safelight itself admits in its internal Training
Reference Guide that
“nothing can duplicate the factory seal of the original windshield.”
Windshield repair is also
cheaper than replacement, further making it a preferable option.
Safelite’s knowingly false
statements and related omissions to consumers that windshield cracks
longer than six inches
cannot be repaired and, indeed, that it is “unsafe” to do so, has proximately
damaged Plaintiffs’
commercial interests in the form of lost sales and harm to its
reputation. Safelite’s false and
misleading statements give rise to a classic claim under the Lanham Act, which
prohibits false or
misleading statements of fact “in commercial advertising or
promotion.” 15 U.S.C.
§ 1125(a)(1)(B).
Safelite does not dispute that its statements are false and
misleading. Faced with
indisputable facts demonstrating the knowing and literal falsity of
their statements, Safelite
attempts to distract the Court by attacking straw man claims that
Plaintiffs do not assert,
mischaracterizing or ignoring core facts pertinent to the claims asserted here,
and even arguing
the wrong legal standard for analyzing Lanham Act claims. Contrary to
Defendants’ argument,
this case is not an antitrust case nor does it mirror Plaintiffs’ previous case
decided by the Tenth
Circuit in 2008. Among other things, the ROLAGS—which are central to the
allegations here—
did not exist at the time of that case. The ROLAGS show that
Defendants’ statements that
windshield cracks longer than six inches cannot be repaired and are unsafe are
false. Tellingly,
Defendants do not even mention the ROLAGS in their brief.
Nor do Plaintiffs claim to represent the interests of consumers who have been
damaged
by Safelite’s misrepresentations—though such evidence is relevant to
the egregious nature of
Defendants’ misconduct. And Plaintiffs do not allege that Safelite must
expressly promote UB’s
products and services. Rather, Plaintiffs simply allege that Safelite must
stop making false and
misleading statements in its commercial advertisements and promotions
that: (1) a windshield
must be replaced when a crack is longer than six inches; (2) it is unsafe or
unreliable to repair a
crack longer than six inches; and (3) Safelite’s windshield replacements are as
safe and reliable
as repaired factory-installed windshields. These false and misleading
statements are archetypical
Lanham Act violations. Defendants’ Motion to Dismiss (Doc. 25) should be
denied.
STATEMENT OF FACTS¹
I. The ROLAGS (Which Safelite Ignores in its Brief)
A vehicle’s original factory-sealed windshield glass (referred to as “original
equipment
manufactured” or “OEM” glass) is an integral part of a vehicle’s overall
passenger safety system.
¶26. Among other things, a factory-sealed windshield is part of a vehicle’s
airbag crash pulse
system and also serves as part of the vehicle’s structural system to
prevent roof collapse in a
rollover crash, providing up to 60% of the roof’s support. Id.
OEM windshields are
meticulously designed with strict quality specifications, jointly
developed between the car
manufacturer and the windshield manufacturer, and are installed at the
factory using robotic,
temperature and humidity controlled methods to ensure a precise seal of the
windshield to the
car’s frame. ¶¶27-29. In fact, Safelite’s Windshield Safety Video states
that, “after your seatbelt
and airbags what do you think is the next most important safety feature on your
vehicle? Your
brakes, your tires… In fact, the answer is right before your eyes, your
windshield…” ¶26.
Non-OEM replacement windshields, such as those manufactured and
sold in the
aftermarket (known as auto replacement glass (“ARG”)) by Safelite are not as
safe and are lower
in quality than OEM windshields. ¶¶27-30. Windshield repair is
most often preferable to
¹ All “¶” references are to Plaintiffs’ Complaint (Doc. 1) filed
August 18, 2015. For a full
description of the alleged facts, Plaintiffs incorporate the facts pled
therein.
replacement with an ARG windshield because a properly repaired
windshield restores the
structural integrity of a windshield, without breaking its factory
sealed bond. ¶¶32-42, 133.
And, as an additional benefit, it is a less expensive than replacing the
windshield. Id.
Windshield repair and/or replacement is a huge market in which “[m]ore than 11
million
auto glass service incidents take place every year.” ¶47, n.2. Recognizing
this important market,
the VGRR industry developed the ROLAG Standards which were first approved in
April 2007.
¶84. The Foreword to the ROLAGS states in part:
ROLAGS represents the windshield repair industry’s statement of best practices
as compiled under ANSI guidelines by a ‘balanced’ committee of
windshield
repair system manufacturers, glass manufacturers, windshield repair
and
replacement retail practitioners, trade associations and other ‘interested
parties’.
Id., attaching Ex. D, Foreword at p. iii.
The 2007 ROLAGS expressly state that it is the intention that these standards
are to be
used “to consistently evaluate damages on laminated auto glass in order to aid
in the decision to
repair or replace the glass.” The ROLAGS also state that the “Scope of th[e]
standard shall be to
define: Repairable damages.” ¶87. The ROLAGS establish an
industry-wide standard that
windshield cracks up to and including 14 inches are repairable. ¶84.
Safelite’s representative
voted in favor of the 2007 ROLAGS 14 inch Long Crack windshield repair
standard, which was
updated and again approved on February 11, 2014. ¶¶86, 88, 105.
II. The Ultra Bond Process for Repairing Long Cracks
Plaintiff Richard Campfield is the founder and owner of Plaintiff
Ultra Bond, Inc., a
windshield repair manufacturer. ¶¶12-15. UB sells and/or licenses
repair kits to VGRR
businesses consisting of specialized tools, specially manufactured resins,
primers, additives, and
pre-treatment chemicals to be used for repairing (versus replacing)
windshields damaged by
Long Cracks (i.e., windshield cracks up to 14 inches), in accordance with the
ROLAGS, which
are a common occurrence. ¶¶13-14, 72-79. Campfield himself also owns retail
glass repair and
replacement businesses in Colorado and Pennsylvania and recently completed a
two and one-half
year term as the President of the National Windshield Repair Association.
¶¶15-16.
Prior to the 2007 ROLAGS, Campfield was issued two patents in 1992
and 1995 (the
“1990s Patents”) covering the UB process for repairing Long Cracks. ¶¶66-70.
In September
2012, Campfield was awarded another patent (the “2012 Patent”), which is even
easier to use
than the 1990s Patents. ¶71. UB is the dominant provider of Long Crack
repair products and
services, having between 50-75% of the U.S. market. ¶14. The
historical rates of customer
satisfaction, as judged by warranty claims and customer complaints, is over 99%
for windshields
repaired using the UB method. ¶83. Data tabulated by UB (from
its business records)
demonstrates that when customers are told the truth about repair vs.
replacement of Long Cracks,
customers choose windshield repair over 80-90% of the time. ¶148.
III. Safelite’s VGRR Operations
Defendant Safelite Group, Inc., is comprised of four wholly-owned subsidiaries
covering
all aspects of the VGRR market, all with the common goal of maximizing the
profits of Safelite
Group, Inc. ¶17. Defendant Safelite Fulfillment, Inc., one of these
wholly-owned subsidiaries,
operates in all 50 states, serves more than 4.1 million customers each year,
and has annual sales
of approximately $825 million. ¶4. Of those 4.1 million customers, only
about 1 million jobs
result in repair of windshield chips or cracks shorter than six inches. The
remainder are almost
exclusively windshield replacements. ¶¶5, 116. The vast majority of
Safelite’s profits stem from
the approximately 3 million windshields that Safelite sells and installs each
year using non-OEM
ARG. ¶¶5, 91.
Defendant Safelite Solutions LLC is another wholly-owned subsidiary of Safelite
Group,
Inc., and serves as a TPA to process VGRR claims on behalf of automobile
insurance companies.
¶¶18, 54-65, 90-93. Safelite Solutions operates two national call centers in
Columbus, Ohio, and
one in Chandler, Arizona, that are staffed 24/7 by approximately
2,000 customer service
representatives (“CSRs”) trained to handle calls from policyholders
reporting a vehicle glass
claim (known as the first-notice-of-loss (“FNOL”)) call to Safelite Solutions’
insurance company
clients. Id. Safelite Solutions currently serves as a TPA for more than 175
insurance and fleet
companies, including 19 of the top 30 insurance companies. ¶¶18, 141.
Safelite’s TPA network
consists of approximately 500 Safelite Fulfillment-owned shops
and 9,000 independent
automotive glass shops who have network provider agreements (“NPAs”) with
Safelite Solutions
handling 40% of all insurance VGRR claims annually across the United States.
¶¶61-65.
Safelite Solutions’ computer and phone systems are synced to recognize
the incoming
FNOL calls. CSRs process the policyholders’ calls by following a series of
scripted prompts that
are displayed automatically on each CSR’s computer terminal. ¶¶94-95. CSRs
are required to
read the script precisely as written, and to strictly follow the sequenced
stages without deviation.
If they change the script, they are subject to disciplinary action or
termination. ¶96. Safelite also
promotes its products and services to millions of insurance consumers
making claims for
damaged windshields through Safelite’s TPA-run network and FNOL scripts.
¶¶90-92, 99, 103.
Because a customer’s insurance deductible is often higher than the
cost of a windshield
replacement, Safelite Solutions essentially becomes the call center for
insurance referred retail
customers paying for windshields out of their own pocket. ¶¶6, 49, 52.
IV. Safelite’s False and Misleading Statements on its Website and FNOL
Scripts
Safelite uses its website to advertise and promote its products and
services to both
insurance referred retail customers and to retail customers. ¶117-22, 132. In
its advertisements
and promotions, Safelite contradicts the ROLAGS in a video entitled
“Windshield repair” by
stating that: “If the damage spreads beyond the size of a dollar
bill a replacement will be
necessary.” ¶¶119, 121. Safelite also lists criteria on its
website for evaluating windshield
damage. Under the heading “Replace my windshield,” Safelite lists as
a criteria for such
replacement: “[d]amage larger than 6,” and “[d]oes the chip or crack
fit under a dollar bill?”
¶¶118, 121.
Safelite’s website contains another video which falsely states and/or
implies that its
windshield replacement is as safe and reliable as a factory-installed OEM
windshield. ¶¶120-21.
In that video, Safelite depicts an OEM factory robot installing a windshield
with a Safelite model
stating in the background that “In the factory high tech robotics
installed your original
windshield precisely. That precision inspired us to create our exclusive True
Seal Technology
which consistently places the new glass in perfect position for a strong
reliable bond. That’s just
another reason to choose the Safelite advantage.” ¶120. Safelite
knows this is a false and
misleading statement because it admits in its internal, nonpublic Training
Reference Guide that
“nothing can duplicate the factory seal of the original windshield”
and that the only way to
preserve the “the original factory seal” is to repair (i.e., not to replace)
the windshield. ¶121.
Regarding Safelite’s computer-generated FNOL scripts, the script compels
the CSR to
process the claim as requiring a windshield replacement when a windshield crack
is longer than
six inches. ¶¶100-01. Safelite admitted in a court filing that: “if a
policyholder indicates during
the call that his car’s windshield has a crack that is smaller than
a dollar bill, the script will
prompt the customer service representative to discuss with the
policyholder the possibility of
repairing the windshield, rather than replacing it… [b]ut if the
policyholder indicates that the
crack is larger than a dollar bill, the script will skip the discussion of
repair options and show the
operator the next section of the script.” ¶101. If a policyholder
asks about repairing a crack
longer than six inches, the CSRs falsely state that such repair is not safe; is
unlikely to hold or,
will compromise the structural integrity of the windshield. ¶102. If an
insurance customer asks
if there is a difference between Safelite’s non-OEM ARG windshields and OEM
windshields,
CSRs falsely tell the customers they are equivalent. ¶¶29-30, 39, 103.²
LEGAL STANDARD
When deciding motions to dismiss, the allegations in the complaint are taken as
true and
are construed in the light most favorable to the nonmoving party. See, e.g.,
Republic Bank &
Trust Co. v. Bear Stearns & Co., 683 F.3d 239, 246 (6th Cir. 2012). A court
cannot dismiss
² In addition, when policyholders or independent automobile glass repair shops
contact Safelite
Solutions about a Long Crack repair, Safelite Solutions only offers to
pay the repair shop the
same reimbursement as for a chip repair (often at or below $65-75)
and misrepresents to the
insured (and to the shop) that such a rate is the “prevailing rate” for all
repairs (including Long
Crack repairs). ¶¶124-25. Long Cracks are more expensive to fix than chips
due to the need to
purchase specialized equipment and resins, and increased
material. Id. Safelite’s
misrepresentations about the “prevailing rate” damage Plaintiffs by suppressing
the market for
Long Crack repair. ¶126
simply because it suspects a plaintiff cannot prove the claims in the
complaint. Zaluski v. United
American Healthcare Corp., 527 F.3d 564, 570 (6th Cir. 2008) (quoting Bell
Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) ). Unless a plaintiff “undoubtedly can prove
no set of facts
in support of [its] claims that would entitle [the plaintiff] to relief,”
dismissal is improper. Severe
Records, LLC v. Rich, 658 F.3d 571, 578 (6th Cir. 2011). Accordingly, a
complaint “attacked by
a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations,” but rather need
only “raise a right to relief above the speculative level.” Twombly, 550 U.S.
at 555.
ARGUMENT
I. The Lanham Act under Lexmark
The Lanham Act provides a private right of action to a business whenever a
competitor or
another market participant disseminates a false or misleading description of
products or services
that causes a commercial harm. Section 43(a) of the Lanham Act extends broadly
to any “false
or misleading description of fact, or false and misleading
representation of fact” that
“misrepresents the nature, characteristics, qualities, or geographic origin of
[the advertiser’s] or
another person’s goods, services, or commercial activities.” 15 U.S.C.
§ 1125(a)(1)(B). The
Lanham Act “is broadly construed to provide protection against
a variety of deceptive
commercial practices, including false advertising and promotion.”
LidoChem, Inc. v. Stoller
Enters.,Inc., 500 F. App’x. 373, 379 (6th Cir. 2012) (“LidoChem”)
(reversing summary
judgment).
In Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S.
Ct. 1377 (2014)
(“Lexmark”), the Supreme Court clarified a split amongst the Circuit Courts and
liberalized the
test for standing in Lanham Act false advertising cases, removing any notion
that a Lanham Act
plaintiff must be a direct competitor to the defendant. In that case, Static
Control and Lexmark
were not direct competitors. Lexmark, 134 S. Ct. at 1384. Lexmark made
toner cartridges and
Static Control made microchips used by companies who refurbished Lexmark’s
toner cartridges.
The Supreme Court held that a plaintiff asserting false advertising
claims under the
Lanham Act have standing when the plaintiff’s “interests fall within
the zone of interests
protected by the law invoked.” Id. at 1388. And, that “to come within the
zone of interests in a
suit for false advertising under § 1125(a), a plaintiff must allege
an injury to a commercial
interest in reputation or sales.” Id. at 1390. In addition, a plaintiff
must also adequately plead
that its injuries “are proximately caused by violations of the statute.” Id. at
1390. The Supreme
Court further stated that proximate cause exists where “a plaintiff
suing under §1125(a) …
show[s] 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.” Id. at 1391 (emphasis added).
II. Plaintiffs Have Standing to Pursue Lanham Act Claims under Lexmark
Defendants’ arguments that Plaintiffs lack standing to assert Lanham Act claims
have no
merit. See Defendants’ Memorandum in Support of Motion to Dismiss
(“Def. Mem.”) at 8.
Contrary to Defendants’ arguments, Plaintiffs are asserting
claims for injuries to their
“commercial interests and reputation” caused by Defendants false
advertising—not the injuries
to the public. Plaintiffs have standing to pursue claims for lost profits
and future profits, and
Plaintiffs have adequately plead that Defendants’ Lanham Act violations
proximately caused
these injuries.
A. Plaintiffs meet the “zone of interests” test.
Plaintiffs’ claims “fall within the zone of interests protected by” the Lanham
Act because
Plaintiffs “allege an injury to a commercial interest in reputation or sales.”
Lexmark, 134 S. Ct.
at 1388-90. Recognizing this, Defendants mischaracterize Plaintiffs’ claims by
creating a chart,
selecting a snippet of the allegations (¶¶146-47, 150-52) out of the Claim for
Relief section of
the Complaint. Defendants then mischaracterize such statements as Plaintiffs’
“core” claims to
make it appear as though a large portion of Plaintiffs’ claims are premised
solely on harm to the
public. Def. Mem. 7-8. Defendants’ attempt to distract the Court
from Plaintiffs’ true core
allegations is as misleading as it is obvious.
For example, in their chart, Defendants ignore ¶¶139-45,
directly preceding the
allegations Defendants list in their chart, as well as ¶148, which all detail
Safelite’s Lanham Act
violations. As described in these paragraphs (as well as in the
remainder of the Complaint),
Plaintiffs’ core claims are that, in the course of advertising or promotion,
Safelite falsely and/or
misleadingly states that: (i) a windshield must be replaced when a crack is
longer than six inches
–contrary to the ROLAGS; (ii) it is “unsafe” to repair a crack longer than six
inches—contrary to
the ROLAGS; and (iii) that Safelite’s windshield replacements are as
safe and reliable as
repaired factory-installed windshields.³ Safelite does not even mention the
word “ROLAGS,”
which indisputably demonstrates the falsity of their statements. Defendants’
deliberate refusal to
acknowledge Plaintiffs’ true “core” allegations underscores the
fatal weakness of their
arguments.
Regarding the Lanham Act “zone of interest” prong, contrary to Defendants’
arguments,
Plaintiffs are not acting as a “vicarious avenger of the public” injured by
Safelite’s indisputably
false statements. Def. Mem. 8. Instead, Plaintiffs allege damage to their
commercial interests
and reputation. See, e.g., ¶¶11, 67-83, 127-38, 139-45, 148, 150-52.
Indeed, Defendants
contradict themselves at Section II.C. of their brief, recognizing that
Plaintiffs plead commercial
harm to their business, not harm to the public. Def. Mem. 5-6.
Plaintiffs compete in the same market as Safelite—both provide products and
services to
VGRR businesses and, independently, provide VGRR services to consumers.
¶¶12-20. Indeed,
though it is not necessary under Lexmark that Plaintiffs and Defendants be
“direct competitors,”
Plaintiffs and Safelite are direct competitors in the sense that
Plaintiffs’ products offer one
solution for windshield cracks that are six to fourteen inches long (repair),
while Safelite offers a
different solution (replacement). By comparison, in Lexmark,
Static Control simply
manufactured a microchip that “could mimic the microchip” Lexmark made
which allowed
“remanufacturers … to refurbish and resell used” proprietary Lexmark
cartridges. Lexmark, 134
S. Ct. at 1384. Regardless of whether Plaintiffs and Safelite are “direct”
competitors, which is
not required under Lexmark, Plaintiffs are within the “zone of interests”
protected by the Lanham
³ See ¶¶ 90-126, ¶¶127-38, incorporated by reference at ¶139.
Act because they have suffered an injury to a commercial interest in sales and
reputation relating
to the repairs of Long Cracks in the VGRR industry. Id. at 1390.
Safelite also violates the Lanham Act by misrepresenting the nature
of its goods by
implying that Safelite’s windshield replacements are as safe and
reliable as factory-installed
windshields that have been repaired. Safelite, however, admits
internally that “nothing can
duplicate the factory seal of the original windshield.” ¶121. These
are classic Lanham Act
violations. See, e.g., Logan v. Burgers Ozark Country Cured Hams Inc., 263
F.3d 477, 461 (5ᵗʰ
Cir. 2001) (rejecting defendant’s argument that plaintiff patent holder lacked
standing because he
was not a competitor, stating “it is clear that [plaintiff] has a direct
business interest in the sales
of spiral sliced meats. Moreover, his ability to license his spiral slicing
method to others may
have been directly affected by [defendant’s] false advertising offering spiral
sliced products.”).
In addition, Safelite argues that Plaintiffs lack standing to pursue damages
for lost sales
related to the 2012 Patent. Def. Mem. 8-9. In the Complaint, Plaintiffs
describe the 2012 Patent
expressly alleging that “because of the lost profits and destruction
of the Long Crack repair
market via Safelite’s material misrepresentations and omissions, UB has
been unable to bring
this more advanced technology to market.” ¶¶71, 83, 135-37. Such
losses are plainly
recoverable under the Lanham Act. See, e.g., Alpo Pet Foods, Inc. v. Ralston
Purina Co., 997
F.2d 949, 953-54 (D.C. Cir. 1993) (rejecting defendant’s argument
that lost profits based on
plaintiff’s inability to enter the market were too “speculative,” stating that
“ALPO would have
expanded nationally but was stymied by Ralston’s false advertisements.”);
Princeton Graphics
Operating v. NEC Home Elec. Inc., 732 F. Supp. 1258, 1264 (S.D.N.Y.
1990) (rejecting
argument that plaintiff lacked standing under the Lanham Act, although its
monitor had not yet
entered the market).
This is especially true here because the products used to repair Long Cracks
under the
2012 Patent are simply a continuation of Plaintiffs’ earlier patented Long
Crack repair products
which Plaintiffs have marketed. Plaintiffs adequately allege that Defendants’
misconduct caused
them to “delay marketing and selling” the improved, patented Long
Crack repair method
(¶152)—not that Plaintiffs are not ready to do so absent Defendants’
misconduct. Lexmark, 134
S. Ct. at 1389-90 (stating that Lanham Act false advertising cause
of action protects against
“unfair competition,” which is “concerned with injuries to . . .
present and future sales”)
(emphasis added); See also Par Sterile Products, LLC v. Fresenius Kabi USA LLC,
2015 U.S.
Dist. LEXIS 32409 at *7 (N.D. Ill. March 17, 2015) (rejecting
defendant’s argument that
plaintiff “has no standing to bring a Lanham Act claim because it has not yet
begun to sell” its
product.).
The cases relied on by Defendants are either irrelevant or actually
support Plaintiff’s
claims. Def. Mem. 9. Defendants’ reliance on Platinum Sports Ltd. v. Snyder,
715 F.3d 615 (6th
Cir. 2013), is especially perplexing. That case involved claims by a strip
club complaining about
a violation of its free speech rights, which has nothing to do with Lanham Act
claims.⁴
B. Plaintiffs adequately plead proximate cause.
Defendants spend over five pages—again selectively citing to the Complaint—to
make a
tortured argument based on a misleading reading of Lexmark to argue
that Plaintiffs do not
adequately plead proximate cause. Def. Mem. 16-21. Other than Main Springs,
distinguished
supra, Defendants do not cite any other authority to support their argument.
However, it is well-
settled that “evidence of injury” is not necessary to survive a motion to
dismiss. Lexmark, 134
S.Ct. at 1395 (emphasis in original). Proximate cause is a question of fact
that is normally not
appropriately resolved on a motion to dismiss. See, e.g., In Re: Syngenta Ag
Mir 162 Corn Litig.,
2015 U.S. Dist. LEXIS 124087 at *277 (D. Kan. Sept. 11, 2015)
(analyzing Lexmark, stating
“[p]laintiffs have at least alleged a plausible claim that
[defendant’s] false and misleading
⁴ Defendants’ reliance on its other cases is equally flawed. PDK
Labs, Inc. v. Friedlander,
103 F.3d 1105 (2d Cir. 1997), held that “a future ‘potential for a
commercial or competitive
injury’ can establish standing,” but found that plaintiff and defendant were
“not competitors for
purposes of Lanham Act standing.” Id. at 1112 (emphasis added). And, unlike
this case, Maine
Springs, LLC v. Nestle Waters North America, 2015 U.S. Dist. LEXIS 33259 (D.
Me. March 18,
2015), held that the “[c]omplaint does not allege that Maine Springs
has ever marketed any
bottled water or that it is prepared to sell bottled water at this time.” Id.
at *15 (emphasis added).
statements caused [the] sales of [its products] which in turn caused
contamination [of plaintiff’s
products]… because proximate cause ordinarily presents a question of
fact, the Court cannot
conclude as a matter of law at this stage that plaintiffs’ injuries were not
fairly traceable to or
proximately caused by [defendant’s] conduct.”).⁵ Here,
Plaintiffs properly allege that
Defendants’ false and misleading statements proximately caused their injuries.⁶
First, Safelite selectively quotes the standard for pleading loss causation
under Lexmark
and ignores the Court’s elucidation of that standard that immediately
follows. That guidance
eviscerates Defendants’ entire follow-on argument on pages 18-21 of their
brief. Specifically,
Safelite relies on Lexmark, stating that a plaintiff:
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. That
showing is
generally not made when the deception produces injuries to a fellow commercial
actor that in turn affect the plaintiff.
Id. at 1391 (emphasis added). Def. Mem. 17.
However, Defendants conveniently ignore the sentence that immediately follows
which
explains:
⁵ See also The Hershey Co., v. Friends of Steve Hershey, 2015 U.S.
Dist. LEXIS 22789 at
*14 (D. MD. Feb. 26, 2015) (analyzing Lexmark, stating that “[i]n the
complaint, Hershey pled
damage to their goodwill and reputation. . . Although this may not
be sufficient to ultimately
succeed on their § 1125(a) claim, it is enough to survive a motion to dismiss
before discovery.”);
Marten Transp. Ltd. v. Platform Advertising, Inc., 2015 U.S. Dist. LEXIS 8985
at *10 (D. Kan.
Jan. 26, 2105) (analyzing Lexmark, stating “plaintiff has argued that
such confusion could
increase the use of defendant’s websites among plaintiff's competitors,
which could in turn
increase traffic to those sites and reduce traffic to sites listing
plaintiff's openings . . . .
Arguments relating to proximate cause are more appropriately considered
at the summary
judgment stage or at trial.”).
⁶ Defendants contend that Plaintiffs “acknowledge” the UB Long Crack
repair process is
“more expensive,” and imply that this is the reason why UB has not
been more successful in
selling its products. Def. Mem. 3. Defendants ignore that the Complaint
states that while “Long
Cracks are more expensive to fix than chips” (¶125), this pricing
disparity is irrelevant to
Plaintiffs’ claims about windshield replacement, which is far more expensive
than Long Crack
repair. ¶¶41-42, 133.
[f]or example, while a competitor who is forced out of business by a defendant’s
false advertising generally will be able to sue for its losses, the same is
not true of
the competitor’s landlord, its electric company, and other commercial parties
who
suffer merely as a result of the competitor’s ‘inability to meet
[its] financial
obligations.’
Id. (emphasis added).
Here, Plaintiffs and Defendants are both in the VGRR industry.
Plaintiffs are not the
equivalent of a complaining competitor’s “landlord, its electric company, and
other commercial
parties who suffer merely as a result of the competitor’s ‘inability
to meet [its] financial
obligations.’” Id. Indeed, Defendants unwittingly demonstrate that Plaintiffs
meet this standard;
i.e., that Defendants’ “deception of consumers causes them to withhold trade
from” Plaintiffs.
Id. Specifically, Defendants’ summary states in part: “[1] Safelite follows
insurance company
scripts that [deceptively] inform policyholders not to repair
long cracks. [2] Therefore
policyholders choose glass replacements instead of long crack repair… [7]
[Absent Defendants’
false and misleading statements], Plaintiffs would sell more licenses
and products to some of
these shops, who would undoubtedly turn to Plaintiffs for their long crack
repair needs.” Def.
Mem. 16-17. Defendants’ rendition is the standard under Lexmark to
adequately plead
proximate cause.
In Bern Unlimited, Inc. v. The Burton Corp., 25 F. Supp. 3d 170 (D. Mass.
2014), the
court faced similar arguments as Defendants make here. Analyzing Lexmark in
connection with
a defendant’s counterclaim under the Lanham Act, the court rejected
the argument that
defendants did not plead proximate cause stating that defendants:
allege that plaintiff’s false advertising deceived customers, which
resulted in
increased sales for plaintiff and decreased sales for defendants. Assuming
those
allegations are true, defendants suffered harm directly caused by plaintiff's
false
advertising. The counterclaims therefore allege sufficient facts to state a
claim for
false advertising under the Lanham Act.
Id. at 184 (emphasis added).⁷
⁷ See also Logan, 263 F.3d at 461, discussed supra.; Greater Houston
Transp. Co. v. Uber
Tech., Inc., 2015 U.S. Dist. LEXIS 28867 *19-20 (S.D. Tex. March 10, 2015)
(stating “[w]hile
Plaintiffs have not offered the precise amount of business they have lost, they
have alleged that
Second, though Plaintiffs adequately plead proximate cause based solely
on the above
allegations, Plaintiffs’ other allegations bolster causation as well. Those
additional allegations,
ignored by Defendants, are found at ¶¶104, 127-38 (“Safelite Has Caused Ultra
Bond Significant
Damage Due To Its Misrepresentations and Nondisclosures Concerning Long
Crack Repair”),
and at ¶¶146, 148, 150-52 (“Claim for Relief”). Defendants’ selective citation
to the Complaint
at ¶¶2, 14, 92-93, 130-31, is as obvious as it is damning. Def.
Mem. 17. For example,
Defendants completely ignore any causation allegations in Claim for
Relief section. There,
Plaintiffs expressly plead, based on customer surveys, that “80-90% of total
replacements could
in fact have been repaired had the market for Long Crack repair not
been suppressed and
negatively impacted by Safelite’s misrepresentations and nondisclosures,” which
is evidence of
causation that Defendants apparently don’t want the Court to consider. ¶¶133,
148.⁸
Plaintiffs also adequately plead proximate cause in connection with
Safelite’s false
representations about its products, i.e., that its aftermarket
replacement windshields—which
require breaking the factory seal of the original windshield—are as safe and
reliable as repairing
a factory-installed windshield. ¶¶120-21. However, Safelite admits
the truth in its internal
documents—that replacement is not as safe or reliable as repairs.
Id. Defendants’ false
statements about its products are alleged to have harmed Plaintiffs by
“result[ing] in increased
Defendants’ misrepresentations sway consumers of vehicle-for-hire services to
use their services,
resulting in damage to competing transportation services, such as
Plaintiffs.”).
⁸ Defendants also argue (incorrectly) that in Lexmark the Supreme
Court required close to
a 1:1 relationship between lost sales and the misrepresentations.
Def. Mem. 18-20. The
Supreme Court did not make any such sweeping qualification to the proximate
cause standard it
had just enunciated. Rather, the Court simply discussed the
particular facts of the parties’
relationship. Lexmark, 134 S. Ct. at 1394; see also Greater Houston, 2015
U.S. Dist. LEXIS
28867 *19-20 (rejecting defendant’s argument that proximate cause would be too
“speculative”
because plaintiffs were not the only injured competitors.). However,
as discussed above,
Plaintiffs do plead close to a 1:1 relationship —which Defendants ignore—in
alleging that 80-
90% of customers would chose Long Crack repair if they had been told the truth.
¶¶133, 148.
sales for [Safelite] and decreased sales for [Plaintiffs].” Bern Unlimited,
25 F. Supp. 3d 170 at
184.⁹
III. Safelite’s Arguments that the Lanham Act Does Not Otherwise
Apply to
Plaintiffs’ Claim Is Contrary to Established Law
As explained above, Plaintiffs clearly plead an actionable claim under the
Lanham Act
under Lexmark. However, Safelite makes four other scattershot
arguments in support of its
motion that: (i) the alleged misstatements are not “commercial
advertising or promotion”; (ii)
Safelite acts as an agent for insurers for purposes of the Lanham Act; (iii)
there is no allegation
that Safelite made any representations about Plaintiffs’ or their products; and
(iv) the Lanham
Act does not require Safelite to promote Plaintiffs’ products. Def.
Mem. 9. These arguments
have no merit.
A. LidoChem supports denial of Defendants’ motion.
It is well-settled that “the ‘commercial speech’ covered by the
Lanham Act extends
beyond the classic advertising campaign into other forms of promotion
used to influence
consumers to purchase goods or services… Speech does not have to
resemble a typical
advertisement to be commercial.” LidoChem, 500 F. App’x. at 379
(reversing summary
judgment) (citations omitted). Defendants’ arguments that their false and
misleading statements
on their website and in their scripts used by Safelite’s CSRs do
not constitute “commercial
advertising or promotion” under LidoChem either have no basis in law
or mischaracterize
Plaintiffs’ claims.
First, Defendants reliance on the entire four-part test enunciated in LidoChem
is incorrect.
The second element articulated in LidoChem, that the statement be made “by a
defendant who is
⁹ Plaintiffs also adequately plead damage to their “reputation” in
connection with Safelite’s
CSR scripts, by which CSRs falsely tell insurance customers that repairing a
windshield crack
longer than six inches is not safe, is unlikely to hold, or will compromise the
structural integrity
of the windshield. ¶102. Defendants are, for all intents and
purposes, stating that Plaintiffs’
products and services are unsafe and unsound. ¶104. As the Court stated in
Lexmark, “when a
party claims reputational injury from disparagement, competition is not
required for proximate
cause; and that is true even if the defendant’s aim was to harm its immediate
competitors, and the
plaintiff merely suffered collateral damage.” Lexmark, 134 S. Ct. at 1394
(emphasis added).
in commercial competition with plaintiff,” argued by Defendants here, no longer
applies. Def.
Mem. 10. Lexmark expressly rejected the “direct competitor” test.
Id. at 1391; see also
Healthnow New York, Inc. v. Catholic Health System, Inc., 2015 U.S. Dist. LEXIS
129656 at *9
(W.D.N.Y. Sept. 26, 2015) (“‘competitors’ requirement [of this four-part test]
was firmly closed
by the Supreme Court’s decision in Lexmark”); Educational Impact, Inc. v.
Danielson, 2015 U.S.
Dist. LEXIS 9467 at *37-38 (D.N.J. Jan. 28, 2015) (same).
Next, Defendants’ argument that Plaintiffs “fail element (3) of the
LidoChem test
because, when Safelite Solutions makes statements as a third party
administrator, it is not for the
purpose of influencing the policyholders to buy Safelite products” is not only
false but is directly
contradicted by the sworn testimony of Safelite’s corporate representative.
Def. Mem. 11. First,
Defendants do not address the false and misleading statements made on
Safelite’s website in
their argument and thus concede this element for those statements.
¶¶117-22. Second, the
Complaint details how Safelite uses its scripted false and misleading
statements to promote
Safelite’s products and services to millions of consumers (¶¶54-65, 90-116) and
even compels
CSRs to process insurance claims by having Safelite shops install
Safelite’s non-OEM ARG
windshields. ¶103.
Furthermore, Safelite’s corporate representative admitted, under oath, that
Safelite uses
these scripts to direct customers to buy Safelite’s products and services.
Specifically, in Safelite
Group Inc. v Jespen, (referred to at ¶101 n.4), Safelite sought a
preliminary injunction
challenging the constitutionality of a Connecticut law targeting the
same scripts at issue here.
That law, known as an “anti-steering” law, required Safelite to
change its scripts to “prohibit
Safelite from informing its insurance customers’ policyholders about
Safelite-owned [VGRR]
shops unless Safelite simultaneously recommends another local glass
repair shop.”¹⁰ Safelite
argued that the law infringed upon its First Amendment right to engage in
“commercial speech.”
¹⁰ Safelite’s Memorandum In Support of Motion for Preliminary
Injunction. See Exhibit A
at 1. The Court may take judicial notice of this document as it is expressly
referenced in the
Complaint.
That filing included the declaration of Brian O’Mara, Safelite’s VP,
National Contact
Center Operations (the “O’Mara Decl.”). O’Mara testified that Safelite
uses these scripts to
“include a recommendation to Safelite AutoGlass.” O’Mara Decl. ¶11 (attached as
Exhibit B).
O’Mara testified further that “[i]f Safelite AutoGlass shops deliver poor
customer service, it will
certainly impact the insurer’s decision to utilize Safelite Solutions as its
third party administrator
of vehicle glass claims, resulting in a decrease in referrals to
Safelite AutoGlass [and]
undoubtedly affect the customers’ willingness to accept a
recommendation to use Safelite
AutoGlass.” Id. at ¶12. For Safelite to argue here that the scripts are not
“for the purpose of
influencing the policyholders to buy Safelite products” is, at best,
disingenuous.
Lastly, Defendants’ argument that Plaintiffs’ “allegations also fail
element (4) of the
standard adopted in LidoChem because the statements are not alleged to have
been ‘disseminated
sufficiently to the relevant purchasing public’ to constitute
advertising or promotion in the
industry” is without merit. Def. Mem. 11-12. First, Defendants argue that
“Plaintiffs identify
neither the source of these statements, which Defendant made them,
nor when the statements
appeared … [or that they] were actually viewed” by consumers.” Def. Mem. 12
n.3. In making
this erroneous argument, Defendants ignore the allegations in the
Complaint where Plaintiffs
specifically identify the web address and statements from Safelite’s website.
¶¶117, 120. The
Complaint further goes on to expressly state that the statements are “current”
or uses the present
tense. And there is not any requirement under the Lanham Act for
Plaintiffs to plead which
consumers viewed Safelite’s website. These false statements are
clearly actionable under the
Lanham Act. See, e.g., Cross, Inc. v. Zerbonia, 2010 U.S. Dist. LEXIS 103173
at*32-33 (N.D.
OH. Sept. 29, 2010) (statements from Defendants’ website actionable under the
Lanham Act).¹¹
The Complaint also adequately pleads that Safelite uses its scripts to
disseminate false
and misleading information to the market of insurance consumers
seeking windshield repair.
¹¹ See also Marten Transp, 2015 U.S. Dist. LEXIS 8985 at *10
(same); Advanced Fluid
Systems, Inc. v. Huber, 28 F. Supp. 3d 306, 334 (M.D. Pa. 2014)
(concluding websites are a
medium of advertising under the Lanham Act stating “[a]n internet website is a
broad advertising
medium, offering wide-ranging and instantaneous dissemination of the false
information.”).
Safelite Solutions is the nation’s largest TPA, currently serving more
than 175 insurance and
fleet companies, and handling at least 40% of all insurance VGRR
claims reported per year
across the entire United States. ¶¶2, 18, 61, 65. The scripts used by the
CSRs make uniform
false and misleading statements to millions of customers each year, who usually
have to pay out
of their own pocket for windshield replacements. ¶¶4-6, 20, 49, 95-96,
100-104, 108-13, 116.
Safelite’s use of these scripts constitutes sufficient dissemination to the
market to be actionable
under the Lanham Act. LidoChem, 500 F. App’x. at 379-80 (“[t]he
required level of
dissemination to the relevant purchasing public ‘will vary according
to the specifics of the
industry.’ … The ‘touchstone’ is whether the ‘contested representations are
part of an organized
campaign to penetrate the relevant market.’”) (citing Seven-Up Co. v. Coca-Cola
Co., 86 F.3d
1379, 1386 (5th Cir. 1996) (presentation to 11 reps out of market
of 74 reps “disseminated
sufficiently to the relevant purchasing public to constitute ‘advertising" or
"promotion’”).¹²
B. Safelite’s remaining arguments are without merit.
Safelite’s remaining arguments are equally without merit. First,
Safelite argues that it
cannot be liable for its false and misleading statements in its
scripts because the insurance
companies that Safelite services are to blame for those statements.
Def. Mem. 13. Safelite
proclaims, without any legal support, that “[t]his is not the sort of thing
that can be redressed by
Plaintiffs against Safelite under the Lanham Act.” Id. Safelite’s “who, me?”
defense is baseless.
The plain text of the Lanham Act directly contradicts Safelite’s argument
stating: “Any
person who … in commercial advertising or promotion, misrepresents the nature,
characteristics,
[or] qualities … of his or her or another person’s goods, services, or
commercial activities, shall
be liable” under the Act. 15 U.S.C. § 1125(a)(1)(B) (emphasis added).
Safelite disseminates the
¹² None of the cases Defendants rely on support their argument. First
Health Grp. Corp. v.
BCE Emergis Corp., 269 F.3d 800, 803-04 (7th Cir. 2001), dealt with
“negotiations between[the
defendant] and particular hospitals—negotiations handled in private, among
business executives
and lawyers” and further the plaintiff did “not established that any of
[defendants’] statements
was false or even misleading.”); Am. Needle & Novelty, Inc. v. Drew Pearson
Mktg., Inc., 820 F.
Supp. 1072, 1078 (N.D. Ill. 1993) (“single private correspondence”).
false and misleading statements, and is promoting its own products and services
in connection
with those scripts. And, contrary to Safelite’s misleading argument that it is
an innocent conduit
for the false and misleading language in the scripts, Safelite’s
representative testified in the
Connecticut action that “the CSRs communicate with policyholders
through scripted language
that Safelite develops in conjunction with each insurance provider.” O’Mara
Decl. ¶8. Whether
or not Safelite initially answers the phone on behalf of the insurance company,
the scripts are an
attempt by them to sell their goods and services to consumers who usually have
to pay out of
their own pocket for the windshield replacement. ¶¶6, 49, 108-09.
Second, Safelite argues that “Plaintiffs do not challenge any factual
statement that
concerns ‘the nature, characteristics, qualities, or geographic origin’
of Plaintiffs’ products or
services.” Def. Mem. 14. Safelight also argues that its statements to
consumers that Long Crack
repairs are “unsafe” or that its “replacement windshields are equivalent to
original windshields”
are not actionable because they are purportedly “highly generalized” statements
that “say nothing
about Plaintiffs or their products.” Id. To argue that Defendants’
statements at issue here are
“highly generalized” strains credulity. It doesn’t get much more specific
than: (i) falsely telling
consumers that if the windshield crack is longer than six inches,
the windshield “must be
replaced”; (ii) saying it is “unsafe” to repair a windshield
crack over six inches; and
(iii) depicting a robot installing a windshield at the factory and
claiming “[t]hat precision
inspired us to create our exclusive True Seal Technology which consistently
places the new glass
in perfect position for a strong reliable bond.” Safelite’s argument that
such statements are too
“highly generalized” is not credible.
Moreover, there is no requirement that the Defendants specifically reference
Plaintiffs or
their products by name to violate the Lanham Act, nor do Defendants cite any
authority for that
proposition.¹³ Falsely stating that a windshield over six inches cannot be
repaired, and that it’s
¹³ The cases cited by Defendants do not relate to naming a plaintiff’s
product. For instance,
in Agence France Presse v. Morel, 769 F. Supp. 2d 295, 308 (S.D.N.Y. 2011), the
court found
that a statement about authorship was not a statement about nature,
characteristics, qualities, or
geographic origin at all –the case did not relate to naming a company by name.
Similarly, in
unsafe and unreliable to do so, says all it has to about UB’s products
characteristics and quality
to be actionable. And Plaintiffs do not allege that Defendants
must expressly “inform
policyholders about the alleged relative merits of Plaintiffs’ products and
services.” Def. Mem.
15-16. But their false and/or misleading statements and omissions
that injure Plaintiffs’
commercial interests and reputation are actionable. See, e.g., Trekeight, LLC
v. Symantec Corp.,
2006 U.S. Dist. LEXIS 100609 at *17-18 (S.D. Ca. May 23, 2006) (“[A] statement
is actionable
under § 43(a) if it is affirmatively misleading, partially incorrect,
or untrue as a result of
failure to disclose a material fact.”) (quoting J. Thomas McCarthy, McCarthy on
Trademarks
and Unfair Competition § 27:65 (2006)) (emphasis in original).¹⁴
IV. Laches Is Not Appropriately Resolved on a Motion to Dismiss
Defendants’ laches argument raises a number of fact issues that
confirm long standing
precedent that laches is not appropriately resolved on a motion to dismiss.
Def. Mem. 21-22.
“Because [laches is] ‘inherently fact specific,’ district courts throughout
this circuit and others
have found that challenges to an action based on the doctrine of laches are
“‘not amenable to
dismissal at the pleading stages.’” Westfield Ins. Co. v. Tosh, 2013 U.S.
Dist. LEXIS 42970 at
*9 (W.D. Ky. March 27, 2013) (collecting cases). Laches “involves more than
the mere lapse of
time and depends largely upon questions of fact… and a motion to
dismiss generally is not a
useful vehicle for raising the issue.’” Id. at *8-9, quoting 5
Charles Alan Wright, Arthur R.
Miller, Mary Kay Kane & Richard L. Marcus, Federal Practice & Procedure §
1277 (3d ed.).
CMH Mfg., Inc. v. U.S. GreenFiber, LLC, 2013 U.S. Dist. LEXIS 91914, at *2
(E.D. Tenn. July
1, 2013), the claim failed because the alleged misrepresentation was not about
the quality of the
plaintiff’s product.
¹⁴ Any the omission by Safelite regarding Long Crack repair is
part and parcel with
Defendants’ misrepresentation that cracks longer than six inches cannot be
repaired because in
either instance Safelite falsely states, misleads or implies that Long Crack
repair is not feasible.
“[W]here an advertisement becomes untrue or is affirmatively misleading
as a result of a
competitor's failure to disclose a material fact, an actionable Lanham Act
violation may arise.”).
Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 915 F. Supp. 360,
366 (S.D. Fla. 1996).
Safelight’s reliance on Diamond Triumph Auto Glass, Inc. v. Safelite Glass
Corp., 441 F. Supp.
2d 695, 710 (M.D. Pa. 2006), is not relevant as the court merely held that
advertising could be
used for persuasion, not that an advertiser could utter blatant falsehoods as
Defendants do here.
Regardless, laches “does not bar injunctive relief.” Kellogg v. Exxon Corp.,
209 F.3d 562, 568
(6ᵗʰ Cir. 2000).
Further underscoring why laches is not appropriately decided on a motion to
dismiss is
that it is a rebuttable presumption which can be defeated by “‘(1) rebu[ting]
the presumption of
prejudice; (2) establish[ing] that there was a good excuse for its delay; or
(3) show[ing] that the
defendant engaged in 'particularly egregious conduct which would
change the equities
significantly in plaintiff's favor.’” Laukus v. Rio Brands, Inc., 391 Fed.
Appx. 416, 422 (6ᵗʰ Cir.
2010) (citing McCarthy on Trademarks and Unfair Competition, § 31:29
(collecting cases
holding time delays of between three months and thirteen years not
sufficient for laches
defense)). A myriad of fact issues are present here.
First, Defendants incorrectly argue that this case is “nearly identical” to the
allegations in
Campfield v. State Farm Mut. Auto Ins. Co., 532 F.3d 1111 (10th Cir. 2008).
Def. Mem. 3, 22.
Neither the Lanham Act nor Safelite’s actions were at issue in that litigation.
And, unlike this
case, the Tenth Circuit upheld the dismissal of Mr. Campfield’s claim
because there were no
industry standards (i.e., ROLAGS) concerning windshield repair. Id.
at 1121. Second,
Campfield was awarded in a new patent in 2012 and the ROLAGS were updated just
recently in
2014. ¶¶71, 88. Third, whether Defendants have been unduly prejudiced by any
purported delay
in filing this action is a fact issue. As Defendants allude to in their
Introduction, there is a long
history between Safelite and Campfield which will be relevant to whether laches
is appropriate.
Safelite also ignores that both Safelite and Campfield sat on the committee of
industry
representatives that approved the ROLAGS. ¶105, Ex. D Foreword at
p. iii. Safelite
indisputably knows the falsity of its statements at issue and yet continues to
make these false and
misleading statements.¹⁵ Finally, the egregiousness of Defendants’
misconduct cannot be
¹⁵ Axcan Scandipharm Inc. v. Ethex Corp., 585 F. Supp. 2d 1067,
1082 (D. Minn. 2007)
(“In other words, if the Defendants’ conduct would have been the same
regardless of whether
Axcan sued earlier, then they cannot demonstrate any “change” in their position
as a result of
Axcan's delay and, hence, they cannot demonstrate prejudice.”).
overstated. In addition to damaging Plaintiffs, Defendants not only willfully
bilked hundreds of
millions of dollars from consumers, they also admittedly
endangered their safety by
unnecessarily breaking the factory seal on the windshield to replace it for
ill-gotten profits. See
Wilcox Associates, Inc. v. Xspect Sols., 2009 U.S. Dist. LEXIS 87902, at *5
(E.D. Mich. Sept.
24, 2009) (accepting allegation of willful behavior as sufficient for pleading
egregious conduct).
In short, at a minimum, it is premature to determine whether laches should
apply. But, if the
Court finds that laches applies, Plaintiffs have rebutted the presumption of
prejudice.¹⁶
CONCLUSION
Therefore, Defendants’ Motion to Dismiss (Doc. 25) should be denied.
Respectfully submitted,
s/ Drew Legando
Drew Legando (0084209)
Jack Landskroner (0059227)
LANDSKRONER GRIECO MERRIMAN LLC
1360 West 9th Street, Suite 200
Cleveland, Ohio 44113
T. (216) 522-9000
F. (216) 522-9007
E. drew@lgmlegal.com
jack@lgmlegal.com
Kurt B. Olsen, Esq.
KLAFTER OLSEN & LESSER, LLP
1250 Connecticut Ave., NW, Suite 200
Washington DC 20036
T. (202) 261-3553
F. (202) 261-3533
E. ko@klafterolsen.com
Fran L. Rudich, Esq.
KLAFTER OLSEN & LESSER, LLP
Two International Drive, Suite 350
Rye Brook, New York 10573
T. (914) 934-9200
¹⁶ Defendants’ reliance on Cataldo v. US Steel Corp., 676 F.3d
542 (6ᵗʰ Cir. 2012), is
misplaced. Not only is that case not a Lanham Act claim, it did
not involve laches, or a
continuing wrong as in this case.
F. (914) 934-9220
E. fran@klafterolsen.com
Peter R. Kahana, Esq.
Michael Kane, Esq.
Y. Michael Twersky, Esq.
BERGER & MONTAGUE, P.C.
1622 Locust Street
Philadelphia, Pennsylvania 19103
T. (215) 875-3000
F. (215) 875-4604
E. pkahan@bm.net, mkane@bm.net,
mitwerseky@bm.net
Counsel for Plaintiffs
PROOF OF SERVICE
A copy of this document was served by the Court’s ECF System on counsel of
record on
December 15, 2015, pursuant to Fed. R. Civ. P. 5(b)(2)(E).
Signed by,
s/ Drew Legando
Drew Legando (0084209)
