Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ga.: Garage door company partially granted leave to amend Lanham Act claims against competitor, (Jun 11, 2014)

By Greg Hammond, J.D.

A competing garage door repair and sales company was partially granted leave to amend its complaint to include new false advertising and unfair competition claims under the Lanham Act. In reaching its decision to partially grant and partially deny the company’s motion for leave to amend, the federal district court in Atlanta determined that the company sufficiently demonstrated good cause for leave to amend two false advertising claims, but failed to do so for another (D.H. Pace Company, Inc. v AOD Group, LLC, June 9, 2014, Duffey, W).

Background. D.H. Pace Company, Inc. and AOD Group, LLC are competitors that sell and repair garage doors in the Atlanta area. The two companies previously reached a settlement, wherein AOD agreed to not use certain terms in its advertisements, marketing materials, and “tag clouds” on websites. However, the instant case was brought against AOD, alleging that it used prohibited terms in its online advertisements and in “tag clouds” on specific websites, in violation of the companies’ settlement agreement. D.H. Pace specifically alleged, in part, that AOD engaged in false advertising by falsely claiming: (1) its businesses were accredited by the Better Business Bureau (BBB); (2) its “National Overhead Doors” business was in operation for 10 years; and (3) it operates in multiple states. After discovery was conducted, D.H. Pace filed an untimely motion to amend, seeking leave to file a second amended complaint.

Additional false advertising claims. D.H. Pace sought to assert claims that AOD violated the Lanham Act and engaged in unfair competition, by falsely advertising that its businesses were accredited by the BBB, that “National Overhead Doors” had been operating for 10 years, and that it is a national company. The court determined that D.H. Pace demonstrated good cause to amend its complaint with regard to the BBB and “10 years” false advertising claims, but it failed to demonstrate why it was unable to learn about AOD’s “national” claims before filing its original complaint. Consequently, leave to assert the “national” claim was denied.

AOD first argued that D.H. Pace could not bring its unfair competition claims because it did not satisfy the five-factor test for “prudential standing.” However, the court noted that the U.S. Supreme Court expressly rejected the five-factor test and stated that a plaintiff need only plead “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations,” under a Lanham Act false advertising claim. Because AOD did not argue that D.H. Pace did not meet this standard, the court determined that D.H. Pace’s false advertising claims should not be denied on standing grounds.

It was also argued that D.H. Pace’s BBB claim should be denied because the company stopped using BBB accreditation marks on its advertising materials and the claim was therefore moot. However, the court disagreed with AOD’s argument, noting that just because the company stopped its allegedly unfair activities did not mean that D.H. Pace’s damages or AOD’s liability for injunctive relief were deemed moot. As such, the court concluded that the BBB claim should be allowed.

AOD’s last argument was that the “10 year” false advertising claim should be denied, as AOD has been in business for 10 years. Conversely, D.H. Pace argued that AOD’s operation as “National Overhead Doors” is new and that the “10 years in business” claim is misleading and likely to confuse consumers. Because this claim involves a factual dispute, the court concluded that it would not be appropriate to resolve the claim in the context of a motion to amend. Consequently, it concluded that the “10 year” false advertising claim should be allowed.

The case number is 1:12-cv-3854-WSD.

Attorneys: Richard Charles Henn, Jr. (Kilpatrick Townsend & Stockton, LLP) for D.H. Pace Co., Inc. Clifton Travis Tunnell (Anderson Dailey, LLP) for AOD Group, LLC.

Companies: D.H. Pace Co., Inc.; AOD Group, LLC

Cases: Advertising GeorgiaNews