solar flareup: Panasonic and Tesla successor in interest in false advertising battle

I know you want to read about a false advertising dispute that, for once, tries to work around the restrictions of trademark law and not the other way around!

Kinect Solar, LLC v. Panasonic Corp., No. 1:20-CV-378-LY, 2020
WL 6385292 (W.D. Tex. Oct. 30, 2020) (magistrate R&R)

Panasonic entered into a partnership with Tesla to
manufacture a line of solar panels known as “SolarCity” solar panels. Tesla
began liquidating its SolarCity panels in 2019, and Kinect bought them. It
began selling the SolarCity panels “through its normal channels” at a price
that was “substantially discounted” compared to the solar panels that Panasonic
sells directly through its own distribution network. Panasonic calls these
“grey market” sales, even though they … aren’t? And one reason we know this is
that there is no trademark counterclaim, despite trademark claims being much
easier to win than false advertising claims.

Kinect allegedly contained Panasonic’s authorized installers
“claiming that they were selling discounted SolarCity modules that were backed
by and warranted by Panasonic.” Panasonic allegedly received messages from its
authorized installers “inquiring whether the SolarCity solar panels were
subject to the same warranties as Panasonic solar panels and whether these
panels were part of Panasonic’s authorized installer program.”

A Panasonic rep told Kinect: “I just want to make sure that
you guys understand that these panels do not have Panasonic Warranty and only
Tesla is responsible for their warranty on those panels so the fact that we
make them has not value to them [sic]. We’ll soon communicate to all our
authorized installers about this to make sure they are aware of it.”

Kinect argued that this and related statements to installers
were false, because Panasonic issued an “OEM Warranty” on the SolarCity panels.
Panasonic acknowledged that Panasonic owed a 10-year workmanship warranty to
Tesla for the SolarCity panels.

Panasonic then sent a letter to “certain of its business
partners,” stating that the SolarCity panels “were not covered under any
warranty by Panasonic Life Solutions of America,” and allegedly disseminated
the letter to PV Tech, “an online news and trade company,” which published an
article titled “US solar installers of Tesla designated panels [are] on the
market with no warranties.” This allegedly harmed Kinect’s sales, and Kinect
sued for business disparagement, defamation, tortious interference with
prospective business relations, and unfair competition.

Panasonic counterclaimed for Lanham Act false advertising
and tortious interference with business relations. Panasonic alleged that
“there are significant differences in warranties and benefits associated with
the two brands of solar panels including the entity issuing and administering
the consumer warranty.” The Panasonic warranty only applies where the SolarCity
panels are included in a photovoltaic systems sold by SolarCity/Tesla. And the
SolarCity panels provide purchasers a 10-year limited warranty for workmanship
by Tesla, while Panasonic-brand panels are provided a 25-year workmanship
warranty. Kinect allegedly “knew that the limited warranty associated with the
SolarCity panels was provided to end consumers by Tesla,” but nonetheless
marketed the SolarCity panels under the Panasonic brand name and failed to
disclose the differences between the brands of panels, including the
warranties. Panasonic “is now inundated with installer and consumer questions
and complaints directly associated with the misinformation being spread by
Kinect.”

The magistrate largely recommended refusing to dismiss the
claims/counterclaims, with the exception of an undeveloped common-law unfair
competition claim.

Kinect’s business disparagement claim: Requires “(1)
publication of disparaging and false words, (2) with malice, (3) which cause
special damages, and (4) lack of privilege.”

Panasonic argued that it was literally true that the
SolarCity panels were not covered by warranties issued by Panasonic Life
Solutions Company of America, as it said, but Kinect sufficiently alleged
implied falsity because the panels were backed by another Panasonic
entity/division, and omitting that fact from the Panasonic letter created a
false impression that Kinect was falsely advertising the presence of a
Panasonic warranty. Kinect also sufficiently alleged the other elements,
including special damages by alleging that sales representatives “have had
prospective purchasers decline to purchase the [SolarCity panels], citing the
reason that they were informed that the panels were not covered by a Panasonic
warranty.”

Defamation: Requires that “(1) the defendant published a
false statement; (2) that defamed the plaintiff; (3) with the requisite degree
of fault regarding the truth of the statement (negligence if the plaintiff is a
private individual); and (4) damages, unless the statement constitutes
defamation per se.” Similarly, the challenged statements were capable of a
defamatory meaning. A plaintiff can bring a claim for defamation “when discrete
facts, literally or substantially true, are published in such a way that they
create a substantially false and defamatory impression by omitting material
facts or juxtaposing facts in a misleading way.”

Tortious interference with prospective business relations:
Here, Kinect didn’t identify specific prospective or existing clients with
which it would have done business but for Panasonic’s conduct, so the
magistrate recommended dismissal.

Panasonic’s false advertising counterclaim: Also facially
plausible. The court couldn’t resolve whether Panasonic was right on a motion
to dismiss. Panasonic alleged that Kinect marketed the solar panels with “a
doctored spec sheet … which completely removes the Tesla name and refers to the
SC-Series as “Panasonic SC Modules.” In fact, the only company identified on
the spec sheet is Panasonic with the words ‘manufactured by Panasonic’ at the
top of the sheet.” Although this was literally true, Panasonic plausibly
alleged misleadingness because “the panels were manufactured by Panasonic for
Tesla in accordance with Tesla’s specifications” and the original spec sheet “clearly
identified Tesla as the seller issuing the end consumer warranties.” The
revised specification sheet could plausibly lead a reasonable consumer to
believe Panasonic would be their contact for the warranties covering the
SolarCity panels. [Given what I said above, I should say that this does strike me as a perfectly coherent false advertising claim, and grey goods cases would benefit from being framed as false advertising cases so that courts would take materiality seriously, as they do in false advertising cases.]

The court’s own examination of the marketing spec
sheet—integral to the complaint and thus properly considered on a motion to
dismiss—showed that the words “Manufactured by Panasonic” had been added, while
this was deleted:

Modules are manufactured by
Panasonic to the specification of SolarCity. Modules are only warranted by Panasonic
if the modules are included in a PV system sold by SolarCity or Tesla.
SolarCity and Tesla make no warranties related to the modules, which are sold
as-is. SolarCity will handle any warranty claims on behalf of any purchaser.

Also, a reference to the module technology replaced “Manufactured
by Panasonic for SolarCity” with “Panasonic SC Series Modules.” This was enough
for a motion to dismiss.

Panasonic’s tortious interference claim was also sufficient,
which seems a little contradictory since Panasonic didn’t identify specific
customers, but it did allege that, “[w]hen the end-consumers and installers
discovered that Kinect misrepresented the product affiliation, warranties, and
benefits associated with the SolarCity panels, the end-consumers looked to
Panasonic to remedy the mistake. In order to protect the goodwill of the
Panasonic brand and maintain the loyalty of its customers, [Panasonic] assisted
with the replacement of the SolarCity panels with Panasonic branded panels for
these end-consumers,” which sufficed.

 

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