Cracks in the foundation: Laches and proximate cause defeat auto glass false advertising claim

Campfield v. Safelite Gp., Inc., 2021 WL 1215869, No.
2:15-cv-2733 (S.D. Oh. Mar. 31, 2021)

Plaintiffs alleged that Safelite misrepresented the nature
and characteristics of plaintiffs’ products to consumers in violation of the
Lanham Act. Safelite counterclaimed for various business torts/CFAA violations.
Safelite managed to kick out the Lanham Act claim for want of proximate cause.

The parties compete in vehicle glass repair and replacement
(VGRR) services. Safelite’s business focuses on “sale and installation of
replacement windshields.” It primarily serves insurance companies,
administering their glass breakage coverage; commercial customers who have
vehicle fleets; and indivudal consumers who may or may not have windshield
damage insurance. Plaintiffs focus on the sale of products used to repair
cracks longer than six inches (called “long cracks”), as well as the service of
performing such repairs.

Safelite follows the “dollar bill” rule and neither
recommends nor performs long-crack repairs. In 2007, ANSI approved windshield
industry repair standards, the Repair of Laminated Automotive Glass Standards
(ROLAGS), that stated windshield cracks up to fourteen inches are repairable. Plaintiffs
alleged that the dollar bill rule is no longer the prevailing view in the
industry, and that Safelite’s internal documents show that it knew that the
repair of windshield cracks “up to 24 [inches] … can be safe and is viable.” Safelite
allegedly falsely advertised that (1) “if damage spreads beyond the size of a
dollar bill, a replacement will be necessary”; (2) “when a chip is smaller than
a dollar bill, it can usually be repaired without replacing the windshield.”

Safelite counterclaimed for trade secret theft not related
to advertising.

Prior opinions narrowed the case in Lanham Act relevant
ways. As to basic Lanham Act coverage: (1) Safelite’s statements to
policyholders in its role as a claims administrator are not commercial
advertising or promotion under the Lanham Act [hmmm]; (2) Safelite is not
liable for any statements made by insurance companies regarding the dollar-bill
rule, even if drafted by Safelite [double hmm; seems at least secondary
liability would be appropriate]; (3) Safelite may be liable for statements it
made directly to insurers, including in brochures and educational materials, if
these statements were made for the purpose of ultimately influencing customers
or even insurance companies to buy (or contract for the provision of)
Safelite’s goods and service, as opposed to for the purpose of explaining an
insurance company’s existing policies; and (4) unsurprisingly, statements made
by “Safelite’s front-line sales force” directly to consumers may be “commercial
advertising or promotion.”

As to substance, the first category of challenged statements
(“if damage spreads beyond the size of a dollar bill, a replacement will be
necessary”) could be literally false, while the second category needed to be
proven misleading.

Laches: The parties agreed that Ohio’s two year statute of
limitations was analogous, so if they actually or constructively knew of the
alleged violative activity more than two years before the August 2015 filing,
there’d be a presumption of laches. Safelite argues that “Plaintiffs knew of
Safelite’s dollar bill policy and thought it was false and misleading decades
before they filed suit.” By 1998, Campfield (a relevant person and
counterdefendant) was telling insurance companies that Safelite was lying to
consumers by using the dollar bill rule. He also unsuccessfully sued insurance
companies and Safelite based on similar claims in the past, including in 2003
and 2004.

Plaintiffs argued that they rebutted a presumption of
prejudice, that there was good cause for their delay, and that Safelite’s
“egregious” conduct excused the delay.

As to prejudice, they argued that Safelite wasn’t going to
stop no matter what, with a relevant person saying, in response to the new
ROLAGS standards, that “[a relevant entity] has made it clear to insurance
companies that it is not going to change its repairable dimensions to include
crack repair until we research the safety implications.” That wasn’t enough to
show that Safelite would have ceased its conduct if ordered to do so by a
court, which was the relevant question. [Is “ordered by the court” really the
relevant question for assessing prejudice? I thought it was whether Safelite
would have had, and possibly taken, an opportunity to minimize the damage it
was causing by changing its conduct/building goodwill some other way.] More
plausibly: “Every year that Plaintiffs delayed in bringing this lawsuit is
another year that Safelite continued its use of the dollar bill rule,
prejudicing Safelite by increasing potential damages that Plaintiffs could
claim as well as increasing money Safelite invested in promoting the dollar bill
rule.” So the presumption of prejudice applied.

Did they have good cause for delay? Plaintiffs argued that
their previous losses meant that they couldn’t sue until there was a real
industry standard. But elsewhere plaintiffs expressly denied that their claims
depend on the ROLAGS industry standard. There was also no evidence that the
nature of Safelite’s statements to insurers or consumers materially changed
after the earlier litigation, meaning that there was no analogue to progressive
encroachment. Anyway, the industry standard came to be in 2007, eight years
before filing.

Was Safelite’s alleged conduct egregious enough to avoid
laches because it involved safety? In a footnote, the court said that economic
harm to consumers wasn’t enough to be egregious conduct. Plaintiffs failed to
create a genuine issue of material fact as to whether the statements put
consumers at risk. Although an expert stated that “in [his] professional
opinion the risk of personal injury or death to a driver or passenger in a vehicle
accident can result more from improper windshield replacement than an improper
windshield repair,” he didn’t specifically testify that Safelite windshield
replacements “put consumers’ safety at risk.” Rather, he testified that
Safelite’s windshield replacement process complies with the Auto Glass
Replacement Safety Standard (AGRSS), which in his view means that it is safe
for “everyone who rides in that car.” He was not aware of a single instance in
which a Safelite windshield replacement failed and caused injury or death to a

Thus, laches barred plaintiffs from obtaining some of their
requested damages, but not injunctive relief or post-filing damages because
there was no estoppel. Safelite argued that egregious delay could bar
injunctive relief in false advertising cases, but the court saw no reason to
distinguish them from trademark cases, which do allow injunctive relief even
when damages are lached.

Were plaintiffs’ injuries proximately caused by Safelite?
Plaintiffs provided testimony from nine customers (individuals who perform
long-crack repair) that Safelite’s use of the dollar-bill rule makes it more
difficult for them to sell long-crack repair to their own customers, and that
if underlying demand for repair increased they’d definitely buy more of
plaintiffs’ products. They also argued that Safelite’s ads denigrated their
products/services, given that “Plaintiffs’ business is premised on long-crack
repair … Safelite advertises, markets, and promotes just the opposite,” and
that Plaintiffs are the “face of long-crack repair” whose success depends “on
the industry’s acceptance of that practice.” One expert’s surveys found that
individuals who did not see statements advertising the dollar bill rule were
more likely to repair instead of replace a windshield with a long crack.

Under Lexmark, economic or reputational injury
flowing directly from deception “occurs when deception of consumers causes them
to withhold trade from the plaintiff. That showing is generally not made when
the deception produces injuries to a fellow commercial actor that in turn
affect the plaintiff.” That was the case with respect to the first harm
argument; it was too indirect. (Since plaintiffs’ customers are apparently
unconcentrated, that means that they could never recover unless a court allowed
a plaintiff class.) Absent the allegedly false advertising, car owners would
need to choose one of plaintiffs’ customers to perform the repair, making
demand increase enough for those customers to order more of the products. This
was too speculative. True, the plaintiff in Lexmark sold to customers
too, but it was allegedly 100% or nearly of the market, which doesn’t seem to
be the case here.

Plaintiffs’ own expert said:

The fact that, Safelite
notwithstanding, the crack repair industry is “highly fragmented” and that the
competition between Safelite and Ultra Bond is multi-faceted makes assessing
the particular impact of Safelite’s actions to Ultra Bond difficult. …While Ultra
Bond’s position as a leading seller of Long Crack repair supplies suggests that
Safelite’s gains result in lost market opportunities for Ultra Bond, estimating
Ultra Bond’s losses is difficult because not every lost repair would have been
from Ultra Bond.

The disparagement argument was more legally sound, but still
unavailing. Plaintiffs didn’t show that Safelite denigrated their product by
name or singled out their products, as opposed to a concept of long-crack

Because proximate cause is an element of the cause of
action, the claim failed even as to injunctive relief, not just monetary
damages.  “In the absence of proximate
causation, no Lanham Act claim—whether for monetary damages or injunctive
relief—can proceed.” Comment: Super important statement after the TMA. If this
applies to trademark claims as well, then harm is still a requirement of some
sort even with a presumption of irreparable harm after the cause of action has
been adequately made out.

Summary judgment for Safelite.

from Blogger

This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s