Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Pa.: Fact questions remain in flooring products misrepresentation, reselling case, (Jan 8, 2015)

By Greg Hammond, J.D.

A rubber flooring products company was not entitled to judgment as a matter of law on claims that a competing company engaged in false advertising of flooring products. The federal district court in Reading, Pennsylvania denied the flooring company’s motion for summary judgment, finding that the company failed to establish all of the necessary elements for its false advertising claim (Ecore International, Inc. v. Downey, January 6, 2015, Schmehl, J.).

Background. Plaintiff Ecore International, Inc. is a rubber flooring products company that produces flooring underlayments designed to reduce noise. Defendant Paul Downey is the sole shareholder of defendant Pliteq, Inc., which is also in the business of sound-control flooring products. Ecore filed suit against Downey and Pliteq, alleging that they engaged in a scheme to relabel, misrepresent, and resell Ecore products as Pliteq products. Specifically, Ecore alleged that Downey and Pliteq: (1) purchased unlabeled Ecore products and put Pliteq labels on them; (2) purchased labeled Ecore products, removed those labels, and replaced them with Pliteq labels; and (3) misrepresented that Pliteq created and manufactured those products. Ecore brought claims, in part, for false advertising and reverse passing off, in violation of the Lanham Act. The company moved for summary judgment in favor of its claims.

False advertising. To establish a false advertising claim under the Lanham Act, Ecore was required to allege: (1) defendants made false or misleading statements as to Ecore’s product; (2) there was actual deception or at least a tendency to deceive a substantial portion of the intended audience; (3) the deception is material in that it is likely to influence purchasing decisions; (4) the advertised good traveled in interstate commerce; and (5) there is a likelihood of injury to the plaintiff in terms of declining sales, or loss of good will.

In support of its motion for summary judgment, Ecore argued that the second element (actual deception or a tendency to deceive) and third element (materiality of the deception) could be presumed, because the representations at issue were literally false rather than simply misleading. The court, however, noted that this presumption was effective only when seeking injunctive relief and that Ecore must prove actual consumer deception, even if the claim were based on literal falsity. Because Ecore’s reliance on the literal falsity of the misrepresentations was insufficient to conclude, as a matter of law, that it had made its case on all of the necessary elements of a false advertising claim, the motion for summary judgment was denied with regard to the Lanham Act claim.

Reverse passing off. In opposition to the motion for summary judgment on the reverse passing off claim, the defendants argued that Ecore actually agreed to the relabeling arrangement, quoting a September 28, 2010 email from Downey to Ecore’s CEO discussing competitors’ products and price comparisons. The court, however, determined that the email was difficult to comprehend from an outside perspective, and questions remain regarding: what the email actually meant; whether Ecore’s CEO read it; and whether the parties’ conduct corroborates the existence of an agreement. Consequently, the court determined that whether an agreement to engage in relabeling existed was a matter for the jury to assess. The motion for summary judgment was therefore denied.

The case number is 12-2729.

Attorneys: Joseph E. Wolfson (Stevens & Lee) for Ecore International, Inc. James Robert Sobieraj (Brinks Gilson & Lione) for Paul Downey and Pliteq, Inc.

Companies: Ecore International, Inc.; Pliteq, Inc.

Cases: Advertising PennsylvaniaNews