Antitrust Law Daily Wrap Up, ADVERTISING—ED Tenn.: Product misrepresentation claims not covered by Lanham Act, (Mar 25, 2014)

By Jody Coultas, J.D.

CMH Manufacturing, Inc. failed to state Lanham Act false advertising claims against US GreenFiber for allegedly misrepresenting the nature of its home insulation product, the federal district court in Knoxville has held (CMH Manufacturing, Inc. v. US GreenFiber, LLC, March 24, 2014, Caldwell, K.). Even if CMH had stated a claim, it would be barred by the doctrine of laches.

GreenFiber sold loose-fill insulation to CMH for installation in CMH’s manufactured homes. CMH asserts that GreenFiber misrepresented how thick the FTC required that the insulation be installed. Insulating power is represented by a number called an R-value. The FTC requires that insulation manufacturers label insulation with various information, including a chart showing the minimum thickness at which the insulation has to be installed to achieve particular R-values ranging from 13 to 49.

A class of CMH’s home buyers initiated arbitration against CMH, claiming that the insulation in their homes did not meet the R-value claimed by CMH because the thickness of the insulation in some areas of the attic cavity was less than the minimum thickness necessary to achieve that R-value. After CMH settled the arbitration, it sought to recover from GreenFiber the amounts it paid to defend and settle the arbitration action.

Misrepresentations about products. The Lanham Act prohibits advertising that “misrepresents the nature, characteristics, qualities, or geographic origin of [a person’s] or another person’s goods, services, or commercial activities.”

The court held that CMH failed to allege allegations covered by the Lanham Act. CMH alleged that GreenFiber misrepresented the FTC’s requirements regarding the amount of loose-fill insulation that has to be installed to achieve the R-values set forth on every insulation product label. This is not a misrepresentation about the “the nature, characteristics, qualities, or geographic origin of” GreenFiber’s particular insulation, but rather the FTC’s requirements.

Laches. Even if CMH properly alleged its Lanham Act claim, the court would dismiss the claim based on the doctrine of laches. CMH argued that it should be permitted discovery on GreenFiber’s laches defense. However, it was clear that the claim was barred. The one-year limitations period began to run when CMH knew or had reason to know of the injury. CMH was made aware of its injury the day the class action arbitration was filed by the home buyers. CMH also failed to set forth any reason for its delay in filing suit. Although GreenFiber insisted that their instruction manual was accurate, CMH’s reliance on those misrepresentations was not reasonable.

GreenFiber did not breach the warranty agreement between the parties, according to the court.

The case is No. 3:12-273.

Attorneys: Charlotte Sonn Wolfe (Ogletree, Deakins, Nash, Smoak & Stewart, PC) for CMH Manufacturing, Inc., CMH Hodgenville, Inc., CMH Manufacturing West, Inc., Southern Energy Homes, Inc., and Giles Industries, Inc. Stephen E Embry (Frost, Brown, Todd LLC) for US GreenFiber, LLC.

Companies: CMH Manufacturing, Inc.; US GreenFiber, LLC

Cases: Advertising TennesseeNews