Antitrust Law Daily Wrap Up, ADVERTISING—4th Cir.: Window dealer fails to show proximate cause in its false advertising claims, (Feb 11, 2016)

By Linda O’Brien, J.D., LL.M.

A replacement window dealer failed to establish that a window manufacturer’s alleged mislabeling of its windows was the proximate cause of the dealer’s lost sales in order to pursue false advertising and unfair competition claims against the manufacturer, the U.S. Court of Appeals in Richmond has ruled in an unpublished opinion. Thus, the district court’s grant of summary judgment in favor of the manufacturer was affirmed (The Muhler Company, Inc. v. Ply Gem Holdings, Inc., February 10, 2016, Per Curiam).

Ply Gem manufactures exterior building products, including windows and patio doors for replacement or new construction projects. The Muhler Company is engaged in the business of supplying and installing replacement windows. Muhler filed suit against Ply Gem, alleging false advertising under the Lanham Act and unfair competition in violation of the South Carolina Unfair Trade Practices Act (SCUTPA) in the mislabeling of Ply Gem windows. The district court granted summary judgment in favor of Ply Gem and Muhler appealed.

The district court properly determined that Muhler failed to provide sufficient evidence to support a nonspeculative damages calculation, the appellate court found. To show proximate cause under the Lanham Act, the plaintiff is required to demonstrate “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising,” the court explained.

Here, according to the appellate court, the undisputed evidence established that retail pricing of windows produced by Ply Gem resulted from multiple factors beyond the cost of production, many of which were controlled by Muhler and other competing window dealers. Muhler’s evidence that a local contractor attributed his decision to buy Ply Gem windows based on price did not show that Muhler would have obtained the sale had the contractor not selected a Ply Gem product.

Additionally, testimony from Muhler sales staff that they lost specific sales to Ply Gem products was based on speculation and did not show that the retail prices were attributable to Ply Gem’s mislabeling as opposed to pricing decisions made by the dealer or other intervening factors. Finally, Muhler’s evidence regarding the manufacturing and certification process did not provide a nonspeculative basis to determine that any reduced manufacturing costs were reflected in the retail prices or that the mislabeling resulted in any appreciable increase in Ply Gem’s market share.

In the appellate court’s view, Muhler failed to show that its losses were the natural and probable consequence of Ply Gem’s purported mislabeling of its windows. Even viewing the evidence in the light most favorable to Muhler, the evidence of proximate cause was lacking and therefore insufficient to sustain claims under the Lanham Act or SCUTPA.

The case is No. 15-1843.

Attorneys: Andrew K. Epting, Jr. (Andrew K. Epting, Jr., LLC) and M. Dawes Cooke, Jr. and Bradley B. Banias (Barnwell Whaley Patterson & Helms, LLC) for The Muhler Company, Inc. Steve M. Pharr, Stacey Bailey Pharr, and Matthew M. Pagett (Pharr Law, PLLC) for Ply Gem Holdings, Inc.

Companies: The Muhler Company, Inc.; Ply Gem Holdings, Inc.

Cases: Advertising StateUnfairTradePractices MarylandNews NorthCarolinaNews SouthCarolinaNews VirginiaNews WestVirginiaNews