Presumptions and evidence of causation both work in false advertising cases

Robroy Indus.–Texas, LLC v. Thomas & Betts Corp., No. 15-CV-512,
No. 2:16-CV-198, 2017 WL 1370545 (E.D. Tex. Apr. 10, 2017)
T&B and Robroy compete in the market for PVC-coated
electrical conduit, which is used to carry electrical wiring in buildings or
other structures. The parties are the major suppliers of PVC-coated electrical
conduit in the United States; T&B’s conduit is known as “Ocal.”  Robroy alleged that T&B made a number of
false claims that only its Ocal products had certain features, such as meeting
the UL 6 standard, the ANSI C80.1 standard, and the NEMA RN-1 standard, all significant
industry standards.
 T&B also claimed
that “only Ocal” offers local installation training and certification. And its
promotional materials claimed that Robroy “abrade[s] the surface of the conduit
prior to the application of the PVC,” thereby “remov[ing] the protective
coatings that the customer is paying for.” T&B further claimed that “UL
standards are not being followed by the abrading of the conduits [sic] exterior
zinc finish.”
T&B argued that there was insufficient evidence of harm
causation to survive summary judgment. The court disagreed.  T&B had three key arguments (1) that
Robroy has never been “kicked off” a specification for PVC-coated conduit for
any reason related to the T&B statements at issue; (2) the evidence shows
that customers made purchasing decisions based on price, quality, availability,
and other factors having nothing to do with the alleged false statements; and
(3) the evidence shows that customers made decisions to add T&B’s Ocal
product to the specifications for particular projects and to purchase Ocal
based on price and other factors, not because of the allegedly false
statements.
The court agreed with Robroy that, because this was a case
of allegedly deliberately false comparative advertising in a functionally
two-party market, causation could be presumed. 
[Why “deliberately”?  The
two-party market situation appears independently significant, assuming the
claim is material; the deliberateness might justify a presumption of
effectiveness as well. But that’s what the cases say.] A number of circuits and
district courts have adopted this rule; no case appears to have rejected it;
and the Fifth Circuit hasn’t said anything to cast it into doubt.  Causation is required by the Lanham Act, but “that
does not speak to whether and under what circumstances that element can be
satisfied by a presumption.”  Also, “[g]iven
that courts have uniformly recognized the presumption for the past 30 years,
Congress’s silence in the face of that now well-established line of authority
suggests, if anything, that Congress is satisfied with the status quo.”
T&B argued that this wasn’t really a two-party market,
but Robroy provided evidence that “during the period at issue in this case, the
PVC-coated electrical conduct market has been effectively a two-competitor
market.” Also, some of the allegedly false statements were directed at Robroy
by name, and many of the challenged statements were comparative, which would be
understood as referring to Robroy by clear implication.  Summary judgment on causation denied.
Separately, there was evidence about actual causation.
Robroy’s theory of the case was:
(1) in order to bid on a project, a
manufacturer was required to be included on the specification for the project;
(2) there were numerous projects on which T&B was not initially on the
specification; (3) those contracts would have gone to Robroy but for T&B’s
actions that resulted in T&B being added to the project specifications; (4)
it was T&B’s false statements that caused project managers and engineers to
alter the specifications to include T&B as a qualified bidder on those
projects; and (5) on those projects on which T&B won the contract, Robroy
suffered injury from the loss of a contract it would have won but for T&B’s
false advertising.
While it might be true that in particular instances
customers chose T&B’s products over Robroy’s products for reasons other
than T&B’s false statements, Robroy argued, that occurred after the stage of the process in which
the project engineers were persuaded to alter the specifications for their
projects to allow T&B to bid, which was the critical point at which the
false advertising was allegedly effective.  If T&B hadn’t been allowed to bid, according
to Robroy’s evidence, “on many of the projects the specifications initially
called for Robroy products or required quality assurances that only Robroy
could meet.” The critical step was project engineers’ decisions to “open” the
specifications to allow T&B to bid on the projects.  And there was evidence in the record that
this “opening” at least sometimes came as a result of the challenged
statements.  [Is there an analogy here to
bait-and-switch initial interest confusion? 
Initial qualification deception?] 
The allegedly false statements were clearly designed toward getting
engineers to open the specs.  E.g., “a
form letter including several of these false statements was posted on an
internal bulletin board that was available to the project specification
specialists at T&B who were responsible for attempting to ‘break’
specifications that specified only Robroy products or ETL-listed conduit.”  And T&B reps claimed success in their
endeavors. One internal comment: “That job was specified [Robroy] but with the
help of you and T[o]m Russ [a senior T&B sales representative who promoted
the use of the “only Ocal” material during efforts to “break” specifications]
we were able to open it up to Ocal.”
Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489
(5th Cir. 2000), found that evidence of subjective intent to deceive on the
part of the defendants’ executives was insufficient to show that the false
advertising in question actually succeeded in persuading customers to buy the
defendant’s products instead of the plaintiff’s.  However, here there was “evidence—including
statements by T&B representatives—that the effort succeeded.”
The evidence was mostly circumstantial, and circumstantial
evidence isn’t always enough, but here it was. 
“This is not a case in which the proof is limited to showing no more
than that the defendant’s representatives intended to mislead potential
customers or that false statements were made in the course of competitive
bidding, after which one party lost the project.” On Robroy’s evidence, Robroy
was “essentially guaranteed to be awarded a contract on those projects, until
T&B ‘broke’ the specifications, obtained the right to bid, and ultimately
was awarded the contract.” It was reasonable to infer that the challenged
statements played a pivotal role in the customers’ decisions to allow T&B
to bid on the projects, even if there might also be other reasons that
engineers might have opened the specs. The inference of causation was “strengthened
by the evidence that T&B’s own representatives expressed their view that
the characterizations of Robroy were responsible for the engineers’ decisions
to open the specifications to bidding by T&B, and that one of the project
engineers repeated one such alleged falsehood when changing the specification
to allow T&B to bid.”

Robroy’s state-law unfair competition claim under the common
law also proceeded.

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