Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ill.: False advertising claim against ice machine manufacturer barred, (Mar 28, 2014)

By Edward L. Puzzo, J.D.

The developer of a device for commercial ice machines, intended to rectify an alleged defect in those machines that allowed airborne contaminants to enter, could not maintain a false advertising claim against an ice machine manufacturer who denied the existence of the defect, the federal district court in Chicago has ruled (Almblad v. Scotsman Industries, Inc., March 26, 2014, Darrah, J.). An allegation that the manufacturer made a false statement in writing and during a standards-setting teleconference lacked the required particularity, and the developer failed to sufficiently allege that the statement was made for commercial advertising or promotional purposes.

Scotsman Industries manufactures commercial ice machines. Robert Almblad asserted that certain types of ice machines, including those sold by Scotman, had a tendency to accumulate contaminants, such as slime, mold, and airborne microorganisms. Almblad determined that these types of ice machines had a design defect that allowed for the intake of sewer gas. He developed a device that would prevent sewer gas intake, and established a company, Origin Tech, to sell the device to ice machine manufacturers.

On February 28, 2012, NSF, a standards organization, organized a teleconference to discuss possible revision of the standards for automatic ice-making equipment. Scotman and Almblad both participated the teleconference. At that teleconference and in a written statement issued that day, Scotsman denied that the design defect alleged by Almblad existed in their equipment. Scotman called Almblad’s claims about airborne contamination in their equipment erroneous, and “mischaracterizations…meant to serve his commercial purposes.”

False advertising. Almblad brought an action alleging that Scotsman had engaged in false advertising regarding his device in violation of the Lanham Act. Scotsman sought to dismiss the action for failure to state a claim upon which relief could be granted under Fed. R. Civ. P. 12(b)(6).

A claim brought under Section 43(a)(1) of the Lanham Act required in this instance a showing that Scotsman “made a material false statement of fact in a commercial advertisement and that the false statement deceived or had the tendency to deceive a substantial segment of its audience” and that Almblad was likely to be injured as a result of the false statement, either by the loss of goodwill associated with his product or the diversion of sales from Almblad to Scotsman.

In asserting his claim, Almblad cited Scotsman’s written statement on the day of the teleconference, further arguing that similar actionable statements were made which were “exemplified’ by that statement. The court stated that this allegation lacked the “particularity”—the who, what, when, where, and how—required of fraud allegations by Fed. R. Civ. P. 9(b).

As to the Lanham Act requirement that the prohibition on false advertising be limited to misrepresentations in commercial advertising or promotion, Almblad’s allegation that all ice machine manufacturers were potential customers affected by the alleged misstatements was insufficient. Further, the court stated, Almblad failed to allege that Scotsman’s participation in the standards-setting teleconference was for advertising or promotional purposes. Consequently, regarding the statements allegedly made by Scotsman on the day of the teleconference, the court ruled that Almblad failed to state a claim, plausible on its face, of false advertising upon which relief could be granted and dismissed the Lanham Act claim with prejudice. However, the court granted leave to Almblad to file an amended complaint within 30 days if he could allege actionable conduct by Scotsman occurring on other than the date of the teleconference.

The case is Civil Action No. 13-CV-1297.

Attorneys: Nicholas J. Motherway (Motherway & Napleton, LLP) for Robert Almblad. Charles H. R. Peters (Schiff Hardin LLP) for Scotsman Industries, Inc.

Companies: Scotsman Industries, Inc.

Cases: IllinoisNews Advertising