mistaken exclusion of materiality survey leads to remand in false advertising case

Wing Enters., Inc. v. Tricam Indus., Inc., — Fed.Appx.
—-, 2020 WL 5739718, 2019-2279 (Fed. Cir. Sept. 25, 2020)

A remand because the district court wrongly excluded one
survey in this false advertising case (though didn’t abuse its discretion in
excluding another), then granted defendant’s motion for summary judgment.

Wing and Tricam compete in the market for multi-position
ladders. Wing alleged that Tricam violated the Lanham Act and the coordinate
Minnesota Deceptive Trade Practices Act by falsely advertising that its ladders
complied with ANSI A14.2, an industry safety standard that applies to metal
multi-position ladders. Wing alleged that Tricam’s ladders flunked the
requirement that the rung on a multi-position ladder have a “step surface of
not less than 1 inch.” Tricam’s allegedly false advertising appeared on: (1)
the label on the side of Tricam’s ladders, which reads “manufacturer certifies
conformance to OSHA ANSI A14.2 code for metal ladders,” (2) a statement on The
Home Depot’s website, which reads “ANSI Certified, OSHA Compliant,” and (3) a
statement on Tricam’s website, which reads “ANSI A14.2; OSHA.”

False advertising requires materiality, which frankly I
would think a jury could infer from the fact that it’s an industry safety standard,
but Wing had Hal Poret conduct two surveys.

The Importance Survey asked
respondents to rank the factors they consider important when purchasing a
ladder. The survey provided respondents with a list of factors, which included
“strength/duty rating,” “compliance with industry safety standards,” “hinge
lock size/style,” “feet material/style,” and “company name.” According to Mr.
Poret, the survey results showed that “compliance with industry safety
standards was ranked first as the most important factor by more respondents
(19%) than any other factor except for strength/duty rating” and that a “total
of 58% of respondents rated compliance with industry safety standards an
important factor.” From these results, Mr. Poret concluded that “compliance
with industry safety standards is the type of issue that is important to
consumers and would tend to … impact purchase decisions.”

The Labeling Survey showed a test group the side labeling of
a Gorilla Ladder containing the allegedly false ANSI statement as well as a
statement about OSHA compliance. A control group saw “an altered version” of
the labeling in which “all references to compliance with OSHA/ANSI standards
were removed.” While 69% of the test group members indicated that they were
“extremely or very likely to purchase the ladder with the OSHA/ANSI content
present,” only 55% of the control group did so, leading Poret to find “a
significant impact on reported likelihood of purchase.”

Tricam’s surveyor, by contrast, concluded that “only 2% of
the … respondents [in her survey] could have potentially been influenced by
the ANSI label,” though 67.5% of survey respondents “stated they had read the
side label before buying the ladder,” 42.4% of the respondents had heard of
ANSI, and 21.9% of the respondents clearly knew what ANSI was. Tricam’s
surveyor Triese also criticized Poret’s work for failing to “isolate the
effect, if any, of the ANSI” statement on consumers, focusing instead on the
effect of an ANSI-OSHA statement or on industry safety standards in general.

In apparent response to this criticism, Wing sought to add
OSHA compliance-related contentions, which the magistrate struck as untimely.
Based on that, the district court excluded Poret’s testimony about the surveys,
reasoning that they were “not relevant to the question of whether the
ANSI-conformance statement that is at issue in this case is material to
consumers’ purchasing decisions.” It reasoned that “[k]nowing that industry
safety standards in general are important to consumers’ purchasing decisions
does nothing to predict whether consumers might be dissuaded from buying a
ladder that does not meet current ANSI standards” because Mr. Poret did not
“ask about ANSI specifically.” Also, the surveys tested ANSI conformance in
combination with OSHA conformance, so they weren’t relevant. [This is part of a
trend of hyperspecificity in materiality requirements, which I think is
generally a very bad idea as well as inconsistent with the historical treatment
of materiality as “the kind of thing consumers care about.” Among other
things, consumers aren’t great at telling you exactly why they do what they do,
so demands for super-specificity can lead to lots of false negatives. If
falsity/misleadingness is established, then in general we shouldn’t take the
risk of allowing consumer harm unless there’s very good reason to think that
the difference between the advertising and the truth wouldn’t matter to
consumers.]

In addition, the court excluded the Labeling Survey because
it would confuse the jury, being premised “on the conclusion that the
OSHA-conformance statement is false,” and Tricam had lacked an opportunity to
take meaningful discovery on the interplay between ANSI and OSHA.

Without the survey, the district court found there was
insufficient evidence of materiality—testimony from a high-level Wing
executive, Tricam’s president, and the chairman of the ANSI Labeling Committee was
“too speculative.”

“Because Mr. Poret’s testimony concerning the Importance
Survey would have at least some tendency to make a fact of consequence more
probable than it would be without the evidence, and because such testimony is
not so unsupported that it would offer no help to the jury, we determine that
the district court abused its discretion in excluding Mr. Poret from testifying
about the Importance Survey.” Even if it doesn’t mention ANSI, “ANSI is
unquestionably an industry safety standard and is one of the two potential
industry safety standards relating to ladders in the United States.” Asking
about safety standards in general wasn’t irrelevant. Other courts have accepted
materiality surveys as relevant even when the surveys didn’t ask about “the
particular statement or product at issue.” Note: As well they should! Tricam
also argued that the survey didn’t show that consumers know that ANSI is an
industry safety standard. “This argument seems aimed more at the weight that
the Importance Survey’s results should be accorded than whether the survey is
relevant. Still, as the district court determined, ladder consumers could
potentially ascertain that ANSI is an industry safety standard based on how
Tricam displayed ANSI conformance.” Also, Tricam’s own survey results suggested
that consumers know that ANSI is an industry safety standard, and it was ok to
rely on the opposing party’s survey results for that proposition.

However, the district court didn’t abuse its discretion in
excluding the Labeling Survey, because compliance with OSHA wasn’t part of the
case and that was too intertwined with this survey, such that the jury would be
confused. Wing argued that the jury could be instructed that the survey was
only submitted for the materiality of the ANSI label, but the survey was still
premised on the conclusion that the OSHA-conformance statement was false; Poret
concluded that the survey showed that the “OSHA/ANSI content did have a
significant impact on reported likelihood of purchase” (emphasis added). Tricam
never had reason to explore in discovery the relationship between OSHA and ANSI
on which the survey was premised.

With the one survey in, there was enough to survive summary
judgment. That survey “suggests that consumers consider compliance with
industry safety standards an important consideration when making a purchasing
decision.” Consumers could know that, as Tricam’s survey suggested.  Result: remand, which could consider some
other unsettled legal arguments.

 

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