Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co.

Citations: 248 F. Supp. 3d 316; 2017 WL 1246327; 2017 U.S. Dist. LEXIS 51239Docket: Civil Action No. 15-11521-NMG

Court: District Court, D. Massachusetts; April 3, 2017; Federal District Court

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The legal dispute involves Spruce Environmental Technologies, Inc. (Plaintiff) and Festa Radon Technologies, Co. (Defendant), both competitors in the radon extraction industry. Spruce alleges that Festa engaged in false advertising, violating the Lanham Act (15 U.S.C. § 1125(a)), the Massachusetts Consumer Protection Act (M.G.L. ch. 93A), and a Massachusetts statute against misleading advertisements (M.G.L. c. 266, § 91), as well as committing commercial disparagement. Festa counters that Spruce has also violated the Lanham Act and Chapter 93A and has engaged in commercial disparagement.

The procedural history includes Spruce filing a complaint in April 2015, with both parties seeking preliminary injunctions. The Court granted an injunction against Festa for using inaccurate photos and false certification claims regarding its fans, and later enjoined Spruce from claiming Energy Star certification for its fans. In November 2016, Spruce moved for partial summary judgment regarding Festa's alleged false advertisements and sought a permanent injunction against such claims. Spruce also sought dismissal of Festa's counterclaims regarding its own advertising.

The memorandum outlines the legal standard for summary judgment, emphasizing that the moving party must demonstrate the absence of genuine disputes regarding material facts, and that the Court must consider the evidence in favor of the non-moving party. Summary judgment is warranted if, after this consideration, there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law.

The Lanham Act prohibits misleading commercial advertising that misrepresents a product's nature or qualities. To succeed in a claim under this statute, a plaintiff must demonstrate five elements: (1) the defendant made a false or misleading description in a commercial advertisement, (2) the misrepresentation is material, (3) it has the tendency to deceive a significant portion of the audience, (4) the misleading statement was disseminated in interstate commerce, and (5) the plaintiff suffered or is likely to suffer injury due to the misrepresentation. A plaintiff may prove a Lanham Act violation by showing an advertisement is 'literally false' (presuming consumer deception) or 'literally true or ambiguous' but misleading. Materiality is assessed based on whether the statement likely influences purchasing decisions or concerns an inherent characteristic of the product. If seeking only injunctive relief, the plaintiff need only demonstrate a likelihood of consumer confusion without proving actual harm. Claims under the Lanham Act and Chapter 93A are interdependent; if summary judgment is justified for one, it is for the other.

Spruce seeks summary judgment against Festa for alleged violations of the Lanham Act and Chapter 93A based on false promotions regarding the color of Spruce's fans, Festa's Energy Star certification, and HVI membership. Specifically, Spruce claims that Festa's advertisement features a misleading photo of a bright yellow fan, while the actual product is a different shade. Spruce argues that this misrepresentation is material, citing customer feedback indicating color influences purchase decisions. Festa counters that Spruce's claims are unfounded, noting that Spruce acknowledges the fans change color over time, and challenges the admissibility of the customer email as evidence of materiality or injury. The court finds that genuine issues of material fact remain regarding the photo's accuracy, its materiality, and whether Spruce experienced any injury, as testimony from Daryl Festa, who took the photo, indicates no intentional alteration was made.

A genuine issue of material fact exists regarding whether the photos in question are literally false or merely misleading, impacting the presumption of customer deception. To establish materiality, it must be shown that the false statement likely influences purchasing decisions or involves an inherent quality. Festa argues that a consumer email indicating color influence is hearsay and inadmissible, leading the court to disregard it. Consequently, it remains unclear if the color difference in the fan constitutes an inherent quality, as its primary function is to remove toxic radon rather than serve as decoration. Additionally, Spruce has not provided sufficient evidence of injury, relying on vague assertions about advertising effects without demonstrating customer confusion. Therefore, Spruce is not entitled to summary judgment on its Lanham Act and Chapter 93A claims regarding the fan's color.

Regarding the Energy Star certifications, Festa acknowledges that its certifications had expired but argues that Spruce has not proven injury or claims of unclean hands. Festa effectively counters Spruce's claims by highlighting the lack of customer complaints or lost sales connected to the Energy Star references. A genuine issue of material fact persists regarding Spruce's injury. Furthermore, Spruce's claims are hindered by the doctrine of unclean hands, which bars equitable relief if the plaintiff has engaged in misconduct related to the case's merits.

Spruce seeks a permanent injunction against Festa for allegedly falsely advertising Energy Star certifications for its products. The court finds that Spruce has admitted to making false claims about its RP260 and RP280 RadonAway fan models being Energy Star Rated, which precludes Spruce's claims under the unclean hands doctrine. Regarding Spruce's Lanham Act and Chapter 93A claim against Festa for using expired HVI certification labels in advertisements, the court determines that summary judgment is not warranted due to unresolved factual issues: whether Festa's statements were misleading, the materiality of the labels, and whether Spruce suffered any consumer harm. 

Additionally, Spruce's motion for summary judgment on Festa's counterclaim about Spruce falsely advertising its fans as Intertek certified and compliant with UL 507 standards for outdoor use is also denied. Genuine issues of material fact exist concerning compliance with UL 507, changes in fan design, and evidence of outdoor testing. Testimony from Intertek’s witness indicates uncertainty about which fan models were tested, and Festa's expert provides conflicting evidence regarding compliance. Thus, Spruce's motion for partial summary judgment is denied.