Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Fla.: ADT customers not secure from competitors’ misleading representations, (Aug 4, 2014)

By Jody Coultas, J.D.

Home security company ADT LLC stated Lanham Act claims against competitor Vision Security, LLC for training its sales agents to misrepresent their association with ADT and for tricking ADT customers into switching their service away from ADT, the federal district court in West Palm Beach has held. However, the court dismissed ADT’s Florida Deceptive and Unfair Trade Practices Act claim (ADT LLC v. Vision Security, LLC, July 30, 2014, Hurley, D.).

ADT and Vision, an agent of Security Networks, LLC, do not manufacture alarm systems, but instead purchase them from manufacturers. Vision sales agents were required to locate ADT customers and pose as technicians “with” an alarm manufacturer. The Vision agents would inform homeowner they were there to provide a free upgrade required by the local fire and police departments. The agent would then explain to the homeowner that the alarm manufacturer preferred Security Networks over ADT and sign up the homeowner with Security Networks.

The parties entered into a settlement agreement, releasing claims as of that date, and the court issued an injunction prohibiting Vision from making false statement regarding ADT or misrepresenting that ADT security system was outdated or deficient. ADT again filed suit against Vision alleging misconduct by Vision and its sales agents. Vision moved to dismiss, arguing that ADT failed to comply with the pre-suit procedure of the injunction.

Neither the injunction nor ADT’s compliance with it precluded the present suit, according to the court. The injunction prohibited ADT from filing a motion or proceeding alleging a violation of the injunction without discharging its pre-suit obligations. However, ADT did not allege a violation of the injunction and chose to bring a separate cause of action for statutory and common law violations. Therefore, ADT was not required to discharge its pre-suit obligations.

Lanham Act claims. ADT stated Lanham Act false advertising and false endorsement claims against Vision, according to the court. Vision’s training seminars instructed its salesmen to misrepresent who they worked for, that local police and fire departments required the upgrades his system, and that the alarm manufacturer encouraged homeowners to switch from ADT to Security Networks. These statements were literally false and presumptively deceptive. The misrepresentations also likely influenced each consumer’s decision to change their alarm keypad and switch from ADT to Vision, causing ADT injury. Because Vision trained agents in multiple states, advertises in multiple states, and sold its service in multiple states, the advertising had entered interstate commerce.

To state a claim for false endorsement, ADT was required to show it had trademark rights and that Vision adopted a mark or name that was the same, or confusingly similar to its mark, such that consumers were likely to confuse the two. ADT customers complained that Vision agents affirmatively represented themselves as “with” or “on behalf of” ADT. Implying an association with one company to procure business for another is false endorsement and prohibited by the Lanham Act. ADT also stated a false endorsement claim, according to the court.

Florida DUTPA claim. Because Florida law did not apply to the case, the court dismissed the DUTPA claim. Florida did not have the most significant relationship to the occurrence or the parties.” ADT also failed to allege a specific state where the injury occurred. ADT’s pure economic loss was felt at its headquarters in Florida, but the injury also occurred where ADT lost customers. Unfair competition claims place a heavy weight on the place of the injurious conduct. Vision’s sales agents were never trained in Florida, and Vision had no relationship to Florida.

The case is No. 13-81197-CV-HURLEY/HOPKINS.

Attorneys: Charles Sanders McNew (McNew PA) for ADT LLC. John M. O'Bryan (Freeborn & Peters, LLP) for Vision Security, LLC.

Companies: ADT LLC; Vision Security, LLC

Cases: Advertising StateUnfairTradePractices FloridaNews