Exaggerated and outdated photos literally false, court rules

Spruce Environmental Technologies, Inc. v. Festa Radon
Technologies, Co., 2015 WL 4038802, No. 15–11521 (D. Mass. July 2, 2015)
 
Spruce and Festa compete in the radon mitigation industry, selling
products for testing and reducing indoor levels of the colorless and odorless
radioactive gas radon.  Festa began using
a catalog with a section titled “*Dare to Compare* U.S. versus THEM.” It
compared a “7 year old AMG Fan v.[a] 5 year old fan from our competitor” and
provided a photograph of a gray Festa fan next to a bright yellow Spruce fan. 
 

Further comparisons, with side by side photos, compared US (referring to Festa) and THEM (referring to Spruce)
 
1)     
“Secure Lock Lever Nuts”
“Inexpensive Wirenuts”
2)     
“Solid lid with four screws to ensure a
watertight fit. Comes with 2 extra in case you drop one”
“Molded Plastic lid secured
with only two screws”
3)     
“Factory Sealed Motor Wire”
“Motor wire caulked to seal”
4) “Solid motor lead wires”
“Stranded motor lead wires”
5) “Factory Stamped, Dated, & Serialized”
“Generic–No Manufacture Info”
6) “Terminal Box With (4) Screw Holes With Brass Inserts
To Prevent Stripping”
“Terminal Box With (2) Screw Holes. Screw Directly Into
Plastic”
7) “Motor Mounted With (4) Mounting Screws. Allows For
Better Stability And Quiet, Vibration Free Operation”
“Motor Mounted With only (2) screws”
8) “Capacitor With Factory Installed Lead Wires For Direct
Connect”
“Capacitor Requires Wires Installed during assembly”
9) “Watertight Pivoting Grommet”
“Plastic Sleeve Requiring Caulking”
 
Festa put the same content on its website. Several of the
images in Festa’s catalog portray products bearing labels indicating that they
are both Home Ventilating Institute (“HVI”) and Energy Star certified.
 
The court evaluated five falsity claims, but didn’t go into
detail on two so I won’t either.  The key
claims: 1) depictions of Festa’s products as HVI and Energy Star certified when
they are not, 2) claims that the Spruce fan motors are “Generic–No Manufacture
Info” even though they do have a manufacturer’s label, and 3) implications that
the Spruce fan casing will degrade and change into a yellow color after five
years. Even if these weren’t literally false claims, Spruce argued, Festa’s
intentional deception justified an inference of actual deception.
 
Festa responded that it engaged in comparative advertising only
after Spruce’s sales representatives told customers that Festa’s radon
mitigation fans were “garbage” and “junk.”
 
As for the yellowing issue, Festa submitted photos of Spruce
fans that “have undergone pronounced yellowing after exposure to sunlight.”  However, at the hearing, Festa displayed the
Spruce fan shown in Festa’s catalog.  “Although
the fan certainly was discolored, it was not the bright shade of yellow
portrayed in the photograph.” RT: Note the finding of literal falsity based on
visual exaggeration—not unique, but worth highlighting (so to speak). The lack
of apples-to-oranges comparison, discussed next, probably plays a role: “Defendant
admitted that plaintiff’s fan was photographed with flash while defendant’s fan
was not, which may have resulted in the enhanced brightness of the Spruce fan.”
The court therefore found likely success on the merits as to this comparison.
 
As for the certifications, Festa acknowledged that there was
a lapse in its Energy Star certification due to missing paperwork and that its
fans had not been HVI certified since 2010. Festa submitted the necessary
paperwork and expected to be Energy Star certified again shortly, but also
removed references to Energy Star from its website and no longer places Energy
Star stickers on its fans. The Court found that, even though the fans
photographed in the catalog themselves were Energy Star certified, defendant was
falsely representing that its fans were currently
Energy Star compliant, and likewise with older photos of fans showing an HVI
sticker.
 
How about the description of the Spruce motor as “Generic–No
Manufacturer Info”?  Festa argued that
the motors appeared generic because the Spruce labels lacked a model number,
product name, trademark and manufacturer name, and that one of the motor
manufacturer’s own sales representatives did not recognize the motor because
the product was not branded.  The court
concluded that, though the motor was specifically made for Spruce by another
company, the description wasn’t literally false, and that Spruce didn’t prove
intentional deception.
 
Thus, Spruce was likely to succeed on its false advertising
claim based only on the comparison of the colors of the fans and the Energy
Star and HVI representations. 
 
The First Circuit measures irreparable harm on a sliding
scale, in conjunction with likely success on the merits.  Spruce presented an email from a customer expressing
concern over several aspects of its fans, including the discoloration issue
because it suggests that “it is a cheap product casing.” The court concluded
that money damages would mostly compensate Spruce, but that Spruce showed a “modicum”
of irreparable harm to its goodwill and reputation.  Likewise, the balance of equities tipped
somewhat in Spruce’s favor because the false representations weren’t egregious.  Festa argued that an injunction would be
against the public interest because it would suppress competition, but
consideration of Spruce’s potentially anticompetitive motives for suing would
have to wait for a later stage; it was in the public interest to remove false
advertising from the marketplace.  Thus,
the court granted a limited preliminary injunction.
 

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