Antitrust Law Daily Wrap Up, ADVERTISING—D. Me.: Customer relationship dooms installation company’s Lanham Act claim, (Jul 25, 2016)

By Greg Hammond, J.D.

An installation services provider could not move forward with a Lanham Act false advertising claim against a cordset manufacturer and distributor, based on allegations that the defendants referenced cordsets as "tray rated" when they were not. In granting dismissal of the Lanham Act claim, the federal district court in Bangor, Maine, concluded that the installation services provider lacked standing because its relationship with the manufacturer and distributor was that of a customer (Zajac, LLC v. Walker Industrial, July 21, 2016, Singal, G.).

Zajac, LLC, a business that provides installation services, filed suit against distributor Walker Industrial and cordsets manufacturer Turck, Inc., alleging that the two defendants falsely advertised that Turck’s cordsets were tray rated. Zajac claimed that the defendants violated the Maine Uniform Deceptive Trade Practices Act (MUDTPA) and engaged in false advertising, in violation of the Lanham Act. Walker and Turck moved to dismiss.

MUDTPA claim. Zajac claimed that Walker and Turck violated the MUDTPA because they falsely advertised the cordsets as "tray rated" when they knew that they were not so rated. Walker sought dismissal of the MUDTPA claims, arguing that Zajac failed to state a warranty claim against Walker, and because Zajac conceded in the complaint that in March of 2015, the Turck website no longer described the cordsets as "tray rated." The court denied the motion, first finding that the complaint did state warranty claims against Walker.

In addition, although Zajac specifically alleged that Turck’s website did not describe the cordsets as "tray rated" in March 2015, this allegation did not render the MUDTPA claim entirely moot. Rather, the court found it premature to determine whether Zajac failed to state a claim for injunctive relief, under the MUDTPA, because the complaint did not allege whether there were references to the cordsets as "tray rated" on the Turck website after March 2015 and Zajac also alleged false advertising in the Turck catalog that Walker allegedly distributed to Zajac.

Lanham Act claim. Nevertheless, the court granted dismissal of the Lanham Act claims, finding that Zajac failed to plead the elements of a cause of action for false advertising. Zajac alleged that the false representation that the cordsets were tray rated caused Zajac to purchase and use the cordsets, which harmed Zajac’s business reputation and could have resulted in lost sales. The court agreed with Walker’s argument that nothing in the complaint could bring Zajac within the "zone of interests" that is a requisite of a Lanham Act action. Although Zajac claimed that its commercial stature was harmed by its purchase and use of the cordsets, this harm, to the extent it existed, resulted from Zajac’s relationship to Turck and Walker as a consumer, according to the court, demonstrating that Zajac had no standing to bring this cause of action.

The case is No. 2:15-cv-507-GZS.

Attorneys: A. Robert Ruesch (Verrill Dana LLP) for Zajac LLC. Philip M. Coffin, III (Lambert Coffin) for Walker Industrial. David G. Parry (Stinson Leonard Street LLP) and Gregory Paul Hansel (Preti, Flaherty, Beliveau, & Pachios, LLP) for Turck Inc.

Companies: Zajac LLC; Turck Inc.; Walker Industrial

Cases: Advertising StateUnfairTradePractices MaineNews