Petition for Writ of Certiorari — Koster v. Michigan

Supreme Court brief2002

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Text

(") Supreme Court, U.S,

FILED

021100 van 2 2 2003

In the

Supreme Court of the Anited States

IQ Propucts ComPANY,

Petitioner,

PENNZOIL-QUAKER STATE COMPANY AND

PANDORA MANUFACTURING, INC.,

Respondents.

On Petition For Writ OF CERTIORARI

To Tue Unitep States Court Or APPEALS ©

For Tae Firtrs Circuit

' PETITION FOR WRIT OF CERTIORARI

Ke. NETH M. Morris

Cc «nsel of Record

KENNETH M. Morris, P.C.

600 JEFFERSON STREET

Surre 800

Houston, TX 77002

(713) 659-8697

Counsel for Petitioner

BECKER GALLAGHER LEGAL PUBLISHING, INC.,

CINCINNATI, OHIO 800-890-5001

- = at niall cee ns

QUESTION PRESENTED

Federal law requires that a flammable aerosol product

be labeled “Flammable” on the can.

‘ Does the omission of the required-“Flammable” label

constitute a “false or misleading description of fact”

or a “false or misleading representation of fact” about

the product under the Lanham Act when the omission

conveys the false message that the product is not

flammable?

PARTIES TO THE PROCEEDING

Petitioner

Petitioner is IQ Products Company (“IQ”), a

corporation that is a wholly owned subsidiary of IQ Holdings,

Inc. None of IQ Holdings, Inc.’s stock is publicly held. IQ

was the plaintiff, intervenor defendant, and counter claimant

in the district court and the appellant in the Fifth Circuit Court

of Appeals.

Respondents

lL. Pennzoil-Quaker State Company (“Pennzoil”) is a

corporation. All of Pennzoil’s stock is owned by a

wholly owned subsidiary of Royal Dutch Petroleum

Company, whose stock is publicly held and traded on

the New York Stock Exchange. Pennzoil was the

intervenor plaintiff and counter defendant in the

district court and an appellee in the Fifth Circuit Court

of Appeals.

a. Pandora Manufacturing, Inc. (“Pandora”) is a

corporation whose stock is not publicly held. Pandora

was the defendant in the district court and an appellee

in the Fifth Circuit Court of Appeals.

TABLE OF CONTENTS

«senses gon: ol ee er re

‘ The Fifth Circuit’s Decision Conflicts

With and Confuses Decisions of Other

ra ey

» 2 The Fifth Circuit’s Decision Is

DN Pence

3 The Question Presented Is Important . .

ERY NOR GIF el en ae

Appendix

Appendix A

Court of Appeals’ Opinion, 9/23/02......._.

ili

Appendix B

District Court’s Final Summary Judgment,

WE «cb de CUR OW ene hea 22a

Appendix C

District Court’s Order, 7/S/Ol ........... 24a

Appendix D

District Court’s Memorandum and Order,

WE aa a er eae ae ek ee ee 28a

Appendix E

District Court’s Memorandum and Order,

EE + ai6k ce eee Se awe ee ee 59a

Appendix F

Court of Appeals’ Order Denying Petition for

Rehearing and Rehearing En Banc, 10/24/02 .. 70a

TABLE OF CITED AUTHORITIES

CASES

ALPO Petfoods, Inc. v. Ralston Purina Co. ;

913 F.2d 958 (D.C. Cir. 1990)......... 10, 24

Coastal Abstract Serv., Inc. y. First Am. Title Ins. Co.,

173 F.3d 725 (9th CE re ace es ba. 16

Coca-Cola Co. v. Proctor & Gamble Co.,

822 F.2d 28 (6th Cir. 6s cb kein 22, 23

Dial A Car, Inc. v. Transportation, Inc. F

82 F.3d 484 (D.C. Cir. 1996) .... 10, 16-17, 20

Global Discount Travel Servs., LLC v. Trans

World Airlines, Inc.,

960 F.Supp. 701 (S.D.N.Y. ee ex kk bo 17

Mylan Labs., Inc. v. Matkari,

7 F.3d 1130 (4th Cir. 1993), cert. denied,

510 U.S. 1197 (1994) .......... 10, 14-17, 20

Pizza Hut, Inc. v. Papa John’s Int’l, Inc.,

227 F.3d 489 (5th Cir. 2000),

cert. denied, 532 U.S. 920 (2001) Pbweee eek. 18

Sandoz Pharmaceuticals Corp. v. Richardson- Vicks, Inc.,

902 F.2d 222 (3rd Cir. 1990) ..... 10-14, 17, 20

Two Pesos, Inc. v. Taco Cabana, Inc.,

We ID POO ENON. go occ vk ccc. 21, 25

U-Haul Int’l, Inc. v. Jartran, Inc..,

681 F.2d 1159 (9th Cir. 1982) ......... 23-24

STATUTES

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Re eae OED + 450-066 be aN eae eee 2-4

gk ee ee eer ee eee ee ee ee 2,4

BP Wes: OEE ov noe ce bawe wes A eRNS 2,3 .

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Oe iA BA 8 eh oka ReR KEES ae 1

FEDERAL REGULATION

16 C.F.R. § ISOO.SCNGM VED) . ww eee 2,4, 7, 19

TO THE SUPREME COURT OF THE UNITED STATES:

IQ respectfully petitions for a writ of certiorari to

review the judgment of the Fifth Circuit Court of Appeals in

this case.

STATEMENT OF JURISDICTION

The judgment of the Fifth Circuit Court of Appeals

was entered on September 23, 2002. The Fifth Circuit’s

opinion (App. A at 1a) is reported at 305 F.3d 368 (Sth Cir.

2002). The Court of Appeals entered an order denying a

timely petition for rehearing and a timely petition for

rehearing en banc on October 24, 2002. !

Section 1254(1) of the Judicial Code, 28 U.S.C. §

1254(1), confers this Court’s jurisdiction.

STATUTES AND REGULATIONS INVOLVED

This case involves the following statutory and

regulatory provisions:

A. IS U.S.C. § 1125(a)(1)(B) (the

Lanham Act), providing a private right

of action for the false advertising of

goods.

B. 15 U.S.C. § 1263(a) (the Federal

Hazardous Substances Act), prohibiting

the introduction into interstate

' App. F at 70a.

commerce of any misbranded

hazardous substance.

15 U.S.C. § 1261(p)(1)(E),

defining a “misbranded

hazardous substance” to include

a “flammable” substance that is

not labeled “Flammable”

conspicuously on its container.

15 U.S.C. § 1261(f(1)(A){V),

defining a “hazardous

substance” to include any

substance or mixture of

substances which is

“flammable.”

15 U.S.C. § 1261()(1),

providing that the term

“flammable” as applied to the

content of a self-pressurized

container shall be defined by

regulations issued by the

Consumer Product Safety

Commission.

15 U.S.C. § 1261(n), defining

“label” to mean a display of

written, printed, or graphic

matter upon the immediate

container of any substance.

16 C.F.R. § 1500.3(c)(6)(viii),

defining “flammable contents of a self-

pressurized container” pursuant to 15

U.S.C. § 1261(1)(1).

IS U.S.C. § 1125(a)(1)(B)(2002)

provides that “[a]ny person who, op or

in connection with any goods or

services, or any container for goods,

uses in commerce any word, term,

name, symbol, or device, or any

combination thereof, or any false

designation of origin, false or

misleading description of fact, or false

or misleading representation of fact,

which . . . in commercial advertising

or promotion, misrepresents the nature,

characteristics, qualities, or geographic

origin of his or her or another person’s

goods, services, or commercial

activities shall be liable in a civil action

by any person who believes that he or

she is or is likely to be damaged by

such act.”

“6 ty S.C. § 1263(a)(2002) provides

t “[t}he following acts and the

cael thereof are prohibited: [t]he

introduction or delivery for

introduction into interstate commerce

of any misbranded hazardous

substance. . . .”

15 U.S.C. § 1261(p)(1)(E) (2002)

provides that “[t]he term ‘misbranded

hazardous substance’ means a

hazardous substance . . . if such

SE, Sk es ee eT

substance . . . fails to bear a label

which states conspicuously an

affirmative statement of the principal

hazard or hazards, such _ as

‘Flammable’... .

15 U.S.C. § 1261(f)(1)(A)(v)(2002)

provides that “[t]he term ‘hazardous

substance’ means [a]ny substance or

mixture of substances which is

flammable... .”

15 U.S.C. § 1261(1)(1)(2002) provides

that “[t]he terms ‘extremely

flammable,’ ‘flammable,’ and

‘combustible’ as applied to . . . the

content of a self-pressurized container

shall be defined by regulations issued

by the [Consumer Product Safety]

Commission.”

15 U.S.C. § 1261(n)(2002) provides

that “[t]he term ‘label’ means a display

of written, printed, or graphic matter

upon the immediate container of any

substance... .”

16 C.F.R. § 1500.3(c)(6)(viii) (2002)

provides that “[t]he Consumer Product

Safety Commission, by the regulations

published in this section, defines the

term{] . . . flammable . . ., appearing

in section 2(1) of the Federal

Hazardous Substance Act, as follows:

Flammable contents of self-pressurized

container means contents of a self-

pressurized container that, when tested

by the method described in Sec.

1500.45, a flame projection exceeding

18 inches is obtained at full valve

opening, or flashback (a _ flame

extending back to the dispenser) is

obtained at any degree of valve

opening.”

STATEMENT OF THE CASE

IQ asserted false advertising claims under the Lanham

Act against Pandora 7 and Pennzoil in the district court.

Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),

conferred district court jurisdiction.

IQ manufactures and sells two tire-inflator products.

The brand names of these two tire inflators are RepairSafe and

AirUp.

Pandora manufactured and sold a tire-inflator product

under the brand name Fix-A-Flat at all relevant times before

November 4, 1997. Pandora sold its rights to the Fix-A-Flat

brand and its tire-inflator business (among other assets) to

Pennzoil on November 4, 1997. Pennzoil has sold a tire-

inflator product under the brand name Fix-A-Flat

continuously since November 4, 1997.

2 Pandora was formerly known as Snap Products, Inc. (“Snap”).

Snap changed its name to Pandora Manufacturing, Inc. on February

1, 1998.

In substance, a tire-inflator product uses pressurized

gas to reseal and inflate a tire after the tire has deflated. Tire

inflators are packaged and sold in self-pressurized aerosol

containers.

The concept behind the tire-inflator product is simple:

provide consumers with a compact can of inflator and sealer

that can be introduced into an automobile tire to repair a leak

until a more permanent repair or replacement can be made.

These products have two essential components: (1) a gas

propellant, which injects the sealant and inflates the tire; and

(2) a liquid sealant, which patches the leak.

. Tire inflators can be dangerous if their formula is

flammable. Metal tools are used by many repairmen to repair

or replace a tire. These tools are used to punch through the

tire (tire reaming), or to remove the tire from the wheel rim.

Further, repairmen occasionally weld on rims or engage in

other metal-on-metal contact while working with damaged

tires or wheels. These techniques can easily result in a spark.

Even a slight spark can cause a significant explosion if the

tire-inflator’s formula is flammable. Consequently, tire

inflators containing a flammable formula can be extremely

dangerous under conditions that are known in the industry to

occur.

The Fix-A-Flat tire inflator that Pandora and Pennzoil

sold before February 18, 1999, was flammable; that is, it

contained a formula that flamed and exploded. * Yet — in

> Pennzoil initiated a nationwide recall of Fix-A-Flat on February

18, 1999, because of Fix-A-Flat’s flammability and its potential to

explode. (Pennzoil had been sued two months earlier by a widow

whose husband had been decapitated in an explosion allegedly

violation of federal law — Pandora and Pennzoil never labeled

their flammable Fix-A-Flat “Flammable.” 4

IQ and Pandora (and then Pennzoil) sold their

competing tire inflators to retailers, who, in turn, sold these

products to consumers. In other words, neither IQ nor

Pandora (or Pennzoil) sold their competing tire inflators

directly to consumers. Retailers were the market.

Major retailers were not purchasing tire inflators for

sale to their customers (consumers) that were labeled

“Flammable.” Responsible retailers knew that flammable tire

inflators were dangerous. The absence of a legally required

“Flammable” label on a can of tire inflator conveyed the

message to retailers that the product did not contain a

flammable formula. The omission of the legally required

“Flammable” label on Fix-A-Flat cans conveyed the false

message to retailers that Fix-A-Flat was not flammable.

IQ asserted that Pandora’s and Pennzoil’s failure to

label their flammable Fix-A-Flat “Flammable” constituted a

“false or misleading description of fact” or a “false or

misleading representation of fact” about Fix-A-Flat under

section 43(a)(1)(B) of the Lanham Act. °

caused by this flammable Fix-A-Flat).

* The Federal Hazardous Substances Act required that the Fix-A-

Flat product at issue in this case be labeled “Flammable” on its

cans because it was “flammable” under 16 C.F.R.

§ 1500.3(c)(6)(viii) (2002).

* 15 U.S.C. § 1125(a)(1)(B) (2002).

Pandora and Pennzoil moved for summary judgment,

arguing that their omitted “Flammable” label could not (as a

matter of law) constitute a “false or misleading description of

fact” or a “false or misleading representation of fact” under

the Lanham Act, even assuming (i) that federal law required

the omitted label and (ii) that the omitted label conveyed a

materially false message about Fix-A-Flat to retail purchasers.

The district court granted this summary-judgment motion. °

The Fifth Circuit affirmed. ’

The district court’s ruling on this pivotal (and purely

legal) issue controlled the further disposition of this case,

resulting in the district court’s entry of a final summary

judgment against IQ. ® The district court excluded IQ’s

experts because they had relied in part in formulating and

expressing their opinions on Pandora’s and Pennzoil’s failure

to label Fix-A-Flat properly as “Flammable.” ° The district

court then concluded that IQ — without this excluded expert

testimony — lacked evidence of injury. '° The Fifth Circuit

affirmed the district court’s exclusion of IQ’s experts on the

° App. E at 59a.

App. A at 12a (“[W]e conclude that defendants’ failure to label

the product in keeping with FHSA regulations, even if true, does

not constitute a false or misleading statement that is actionable

under the Lanham Act.”).

8 App. B at 22a.

° App. C at 26a.

10 App. D at 52a-53a.

same basis, which resulted in the Fifth Circuit’s affirmation

of the entire summary disposition of this case. "'

REASONS FOR GRANTING THE PETITION

1. The Fifth Circuit’s Decision Conflicts

With and Confuses Decisions of

Other Circuits.

Section 43(a)(1)(B) of the Lanham Act provides in

pertinent part:

“Any p°rson who, on or in connection with

any goods . . ., or container for goods, uses .

false or misleading description of fact, or

false or misleading representation of fact, —

which . . . misrepresents the nature,

characteristics [or] qualities of his or her goods

shall be liable in a civil action by any person

who believes that he or she is likely to be

damaged by such act.”

The Fifth Circuit (in reaching its erroneous legal

conclusion that Pandora’s and Pennzoil’s “failure to label

11 App. A at 16a-18a.

12 15 U.S.C. § 1125(a)(1)(B) (2002).

——

[Fix-A-Flat] in keeping with FSHA regulations, even if true,

does not constitute a false or misleading statement that is

actionable under the Lanham Act” '*) inaccurately analogized

this case to three other Circuit Court of Appeals’ decisions. ““

To the extent that these three Circuit Court of

Appeals’ decisions provide guidance, they dictate a legal

conclusion — applied to the facts of this case — directly

contrary to the Fifth Circuit’s legal conclusion. Not one of

these three cases supports the Fifth Circuit’s far-reaching legal

conclusion as applied to the facts in this case. IQ analyzes

these cases here in order of their decision.

First, in 1990, the Third Circuit decided Sandoz, '°

which concerned section 43(a) of the Lanham Act as it existed

before “Congress [in 1988] redrafted section 43(a),

sharpening the section’s focus on false and deceptive

advertising.” '° The Sandoz court defined the legal issue there

as follows:

‘3 App. A at 12a (emphasis supplied).

4 App. A at 9a-12a; Mylan Labs., Inc. v. Matkari, 7 F.3d 1130

(4th Cir. 1993), cert. denied, 510 U.S. 1197 (1994) (App. A at 9a-

10a); Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902

F.2d 222 (3rd Cir. 1990) (App. A at 10a-11a); and Dial A Car,

Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996) (App.

A at lla). The Fifth Circuit concluded that “[tJhis case is

analogous to [these] three cases . . ., especially Mylan.”) App. A

at 12a.

‘5 Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, 902 F.2d

222 (3rd Cir. 1990).

16 ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 964

n.6 (D.C. Cir. 1990) (opinion by now Justice Thomas).

“Our conclusions depend on the resolution of

an interesting legal issue arising out of the

interface between the Lanham Act and the

Food, Drug and Cosmetic Act, 2] U.S.C. §§

301-92 (1982). The controversy centers on

whether a Lanham Act plaintiff needs to show

only that the defendant’s advertising claims of

its own drug’s effectiveness are inadequately

substantiated under FDA _ guidelines, or

whether the plaintiff must also show that the

claims are literally false or are misleading to

the public. For the reasons that follow, we

conclude that the additional proof that a

defendant’s claims are literally false or actually

misleading is necessary to sustain a Lanham

Act claim.” '”

In addressing the history of section 43(a) of the

Lanham Act, the Sandoz court wrote:

“After initial uncertainty as to the statute’s

reach, with some believing it to be little more

than a codification of the common law action

for deceitful advertising, it is now settled that

it creates a new statutory tort of broader scope,

which requires neither proof of literal or

obvious falsehood, nor of intent to deceive.

[Section] 43(a) of the Lanham Act

encompasses more than blatant falsehoods. It

embraces innuendo, indirect imitations, and

ambiguous suggestions evidenced by the

17 Sandoz, 902 F.2d at 224.

consuming public’s misapprehension of the

hard facts underlying an advertisement.” '*

SF TO ee Fee ee ee ee eT

Importantly , the Sandoz court noted that “context can

often be important in discerning the message conveyed and

this is particularly true where, as here, the target of the

advertising is not the consuming public but a more well

informed and sophisticated audience.” '? The Sandoz court

concluded: “Hence, a target audience’s special knowledge of

a Class of products is highly relevant to any os" that it was

misled by an advertisement for such a product.”

Significantly, Sandoz is not a summary judgment case.

The district court had found “[a]fter an extensive hearing”

that Sandoz “had failed to meet its burden of proving that any

of Vicks’s advertising claims was false.” 7! The Sandoz court

held that a Lanham Act plaintiff must show that advertising

“claims are literally false or are misleading to the public,” not

merely that advertising claims “are inadequately substantiated

under FDA guidelines.” *

On the facts, the Sandoz court determined: “Assuming

arguendo that false labeling is actionable under the Lanham

18 Sandoz, 902 F.2d at 227 (internal quotation marks and citations

omitted).

'9 Id. at 229 (citation omitted).

0 Id. at 229-30.

21 Sandoz, 902 F.2d at 224.

22 Id. at 229.

———EEEE—E—EEE

Act, Sandoz cannot prevail on its labeling claim because it has

not proved that Vicks’s labeling is false.” *°

The Sandoz court wrote that it was “unable to

conclude that Vicks’s labeling of Pediatric 44’s demulcents as

inactive [was] literally false” because the “FDA has not found

conclusively that demulcents must be labelled as active or

inactive ingredients within the meaning of 21 C.F.R. §

210.(3)(b)7.” The Sandoz court was understandably

unwilling “to usurp administrative agencies’ responsibility for

interpreting and enforcing potentially ambiguous

regulations.” *

Here, the facts are entirely different. Congress has

determined conclusively that a flammable aerosol product —

Fix-A-Flat — must be labeled “Flammable.” Pennzoil has

never argued — and neither the district court nor the Fifth

Circuit found — that the regulations mandating this

“Flammable” labeling are ambiguous or potentially

ambiguous. Unlike Sandoz, this case does not require an

original court interpretation concerning the applicability of an

agency-enacted regulation.

Here, Pandora’s and Pennzoil’s failure to label their

flammable Fix-A-Flat “Flammable” as required by federal

law does constitute a false or misleading description of fact or

a false or misleading representation of fact. The omission

conveyed the false message to the targeted audience of

3 Id. at 230.

4 Sandoz, 902 F.2d at 230-31 (emphasis supplied).

5 Id. at 31.

retailers that Fix-A-Flat was not flammable and thus did not

require the “Flammable” label.

The Sandoz court never suggested, hinted, or held that

the omission of a required warning label that conveys a false

message about a product can never constitute (as a matter of

law) a “false or misleading description of fact” or a “false or

misleading representation of fact” under § 43(a)(1) of the

Lanham Act. To the contrary, the Sandoz court emphasized

the importance of context in discerning the message conveyed,

particularly where “the target of the advertising is not the

consuming public but a more well informed and sophisticated

audience.” The targeted audience in this case — the

retailers to whom IQ, Pandora, and Pennzoil sold their tire-

inflator products — understood that the absence of a

“Flammable” warning label on the can meant that the product

was not flammable under federal warning-label law, a patently

false message as related to the flammable Fix-A-Flat.

Second, in 1993, the Fourth Circuit decided Mylan. *’

Two points about Mylan are important and relevant here.

One, Mylan did not concern or decide the legal effect

under the Lanham Act of a false message conveyed by an

omission in labeling or advertising. The Mylan court noted:

‘rinere simply are no allegations of ‘material

omissions’ in the complaint. Accordingly,

even if these omissions created a cause of

action under the Lanham Act -- a matter hotly

76 Sandoz, 902 F.2d at 229 (citation omitted).

27 Mylan Labs, Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993).

<<. 0° °° 1

disputed by the appellees -- it has no bearing in

the instant case in light of the failure to plead

such a claim.” “

Two, in Mylan, the defendants had placed a generic

drug on the market that did not require FDA approval “with

standard package inserts often used for FDA-approved

drugs.” * The defendants, however, had never claimed that

their generic drug was FDA-approved. Mylan — the Lanham

Act plaintiff — argued that the defendants’ use of these

standard package inserts often used for FDA-approved drugs

falsely implied that the defendants’ drugs had been FDA-

approved.

The Mylan court found that “Mylan’s claims that the

defendants’ falsely advertised that their drugs had been

‘properly approved by the FDA’ must fail” because the

defendants’ advertising had never claimed “proper FDA

approval.” *° The Mylan court concluded “that the very act

of placing a drug on the market, with standard inserts often

used for FDA-approved drugs” does not falsely imply that

“the drug had been properly approved by the FDA.” *

78 Mylan, 7 F.3d at 1138 n.9. Here, IQ pleaded specifically that

Pandora’s and Pennzoil’s omission in failing to label their

flammable Fix-A-Flat “Flammable” as required by federal law

constituted a “false or misleading description of fact” or a “false or

misleading representation of fact” about Fix-A-Flat under the

Lanham Act.

29 Mylan, 7 F.3d at 1139.

- a

= 22

Hence, no false advertising existed in Mylan, through

affirmative misrepresentation, material omission, of

otherwise.

Again, the present case differs materially. Here, the

omission of the “Flammable” label from the flammable Fix-

A-Flat cans conveyed the false message to retailers that Fix-

A-Flat was not flammable because retailers knew that federal

law required a flammable product to be labeled “Flammable.”

Third, in 1996, the D.C. Circuit decided Dial A

Car. * The Dial A Car court upheld the district court’s

dismissal of a Lanham Act claim on the ground that the

challenged representations were not provably false because the

D.C. Taxicab Commission had not yet interpreted the

controlling municipal regulation. ** The court found that it

was not clear whether the regulation at issue even applied to

Blue Car service.

Importantly, the Dial A Car court wrote:

“We agree with the dissent that, hypothetically

speaking, a regulation might conceivably be

drafted that would be so clear on its face that

no good faith doubt concerning its

interpretation would be possible, even without

an explicit statement from the Taxicab

Commission.” *

2 82 F.3d 484 (D.C. Cir. 1996) (2 to 1 decision).

33 Dial A Car, 82 F.3d at 488-89.

4 Id. at 489 n. 3. See, also, Coastal Abstract Serv., Inc. v. First

Am. Title Ins. Co., 173 F.3d 725, 731-32 (9th Cir. 1999) and

The present case does not involve the same or similar

issues of interpretation or application of a regulation that the

Dial A Car court addressed. Here, federal labeling law

unquestionably applied and unambiguously required that the

flammable Fix-A-Flat be labeled “Flammable” (which it was

not). Thus, under the facts here, Dial A Car suggests that IQ

has asserted a valid Lanham Act claim stemming from a false

or misleading message about Fix-A-Flat derived from the

omission of a legally mandated warning label:

“Flammable.” *

In short, neither Sandoz nor Mylan nor Dial A Car

supports the Fifth Circuit’s far-reaching and erroneous legal

conclusion that the omission of a legally required warning

label from a self-pressurized aerosol product (sold in a can)

can never — as a matter of law — constitute a “false or

misleading description of fact” or a “false or misleading

representation of fact” under the Lanham Act, regardless of

the false message that the omission conveys. Succinctly put,

the Fifth Circuit’s emasculation of the Lanham Act in this

case is unprecedented.

2. The Fifth Circuit’s Decision Is

Incorrect.

IQ understands that it must prove five elements to

prevail on its false advertising claims under section

Global Discount Travel Servs., LLC v. Trans World Airlines, Inc..,

960 F.Supp. 701, 706-07 (S.D.N.Y. 1997) (both of which discuss

Sandoz and Dial A Car).

33 Dial A Car, 82 F.3d at 489 n.3.

43(a)(1)(B) of the Lanham Act. * As applied to this case,

these five elements are:

. a false or misleading description of fact

or a false or misleading representation

of fact about Fix-A-Flat that

misrepresented Fix-A-Fiat’s nature,

characteristics, or qualities (“Element

1”);

Z. that such false or misleading

description of fact or false or

misleading representation of fact either

deceived, or had the capacity to

deceive, a substantial segment of

potential retailers (“Element 2”);

3. that the deception was material, in that

it was likely to have influenced the

retailer’s purchasing decision

(“Element 3”);

4. that Fix-A-Flat was in_ interstate

commerce (“Element 4”); and

3. that IQ has been or is likely to be

injured as a result of the false or

misleading description of fact or the

false or misleading representation of

fact at issue (“Element 5”).

36 Pizza Hut, Inc. v. Papa John’s Int'l, Inc., 227 F.3d 489, 495

(5th Cir. 2000), cert. denied, 532 U.S. 920 (2001).

IQ submits that Pandora’s and Pennzoil’s failure to

label the flammable Fix-A-Flat “Flammable” as required by

federal law (thereby conveying a false message to retailers

that Fix-A-Flat was not flammable) satisfies Element 1 of its

Lanham Act claims. IQ has never asserted that it

automatically prevails by proving only Element 1 of its

Lanham Act claims.

Yet, the district court and the Fifth Circuit erroneously

concluded that IQ is attempting to assert an unauthorized

private right of action under the Federal Hazardous

Substances Act for Pandora’s and Pennzoil’s failure to label

the flammable Fix-A-Flat “Flammable.” 7” IQ is not. IQ

does not seek to enforce the Federal Hazardous Substances

Act through an impermissible private right of action. To the

contrary, IQ seeks only to enforce the private right of action

that Congress expressly afforded when Congress enacted the

Lanham Act.

The legal issue in this case concerns only Element 1 of

IQ’s Lanham Act claims. It is undisputed here that federal

law requires that a flammable aerosol product be labeled

“Flammable” on the can. The flammable Fix-A-Flat was not

labeled “Flammable.”

With regard only to Element 1 of IQ’s Lanham Act

claim, the legal issue is whether the omission of the required

*7 The Consumer Product Safety Commission never issued a

finding concerning whether the Fix-A-Flat product at issue in this

casé was or was not flammable under 16 C.F.R. §

1500.3(c)(6){viii) (2002). For analytical purposes, the Fifth Circuit

assumed correctly that the Fix-A-Flat product at issue was

flammable and was not labeled “Flammable” as required by federal

law.

“Flammable” label from the Fix-A-Flat cans does (or can

legally ever) constitute a “false or misleading description of

fact” or a “false or misleading representation of fact” under

the Lanham Act, assuming (i) that the omission conveys the

false message to its intended audience that Fix-A-Flat was not

flammable and (ii) that IQ can prove the remaining four

elements of its Lanham Act claims. The Fifth Circuit

seriously erred in framing and deciding this issue.

The Fifth Circuit concluded erroneously that Pandora’s

and Pennzoil’s failure to label the flammable Fix-A-Flat

“Flammable” in “keeping with FHSA regulations, even if

true, does not constitute a false or misleading statement that

is actionable under the Lanham Act.” * Yet, the Fifth Circuit

fails to state any specific reasons for its implicit conclusion

that Pandora’s and Pennzoil’s omission of the required

“Flammable” label does not (and cannot as a matter of law)

satisfy Element 1 of IQ’s Lanham Act claim, when the

omission (in context) conveyed the false message to retailers

that Fix-A-Flat was not flammable.

As shown, the Fifth Circuit flatly misplaced its

reliance on Sandoz, Mylan, and Dial A Car. Pandora’s and

Pennzoil’s failure to label the flammable Fix-A-Flat

“Flammable” conveyed to retailers a “false or misleading

description of fact” or a “false or misleading representation

of fact” about Fix-A-Flat because retailers understood that a

flammable product was required to be labeled “Flammable”

on the can. The Lanham Act simply does not exempt (or

grant immunity to) a material omission that conveys a false or

misleading message about a product.

38 App. A at 12a (emphasis supplied).

3. The Question Presented Is

Important.

This Court has acknowledged that “[t]he Lanham Act

was intended to make actionable the deceptive and misleading

use of marks and to protect persons engaged in commerce

against unfair competition.” * Ever since its 1946

enactment, the Lanham Act has proscribed false advertising.

As Justice Stevens wrote in his concurring opinion in Two

Pesos:

“The deleterious effects of false advertising

were described by one commentator as

follows:

‘[A] campaign of false advertising may

completely discredit the product of an

industry, destroy the confidence of consumers

and impair a communal or trade good will.

Less tangible but nevertheiess real is the injury

suffered by the honest dealer who finds it

necessary to meet price competition of inferior

goods, glamorously misdescribed by the

unscrupulous merchant.

The competition of a liar is always dangerous

even though the exact injury may not be

susceptible of precise proof.” “

3 Two Pe ios, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-68

(1992) (internal quotation marks and citations omitted).

“0 Two Pesos, 505 U.S. at 778-79 n.4 (Stevens, J., concurring)

(quoting Handler, Unfair Competition, 2] Jowa L. Rev. 175, 193

Likewise, courts have often emphasized the

importance of section 43(a) of the Lanham Act in deterring

false advertising of any nature. For example, in Coca-Cola

Co. v. Proctor & Gamble Co., *' the Sixth Circuit wroie:

“The language of the Act, the proper starting

point for any statutory interpretation, includes

the following phrase: ‘any false description or

representation. ’

The plain meaning of that statutory phrase

clearly encompasses a false description or

misrepresentation about the characteristics or

qualities or overall quality of a product.

* * *

In addition to the plain language of the statute

and other courts’ interpretations supporting

what we believe is a common _ sense

application, policy considerations are

implicated in this case.

P&G observes that the advertising industry is

a self-policing industry that considers claims of

misrepresentations of quality, and P&G argues

that federal courts need not, and should not, be

bogged down with detailed claims of false

advertising.

(1936)).

“

F.2d 28 (6th Cir. 1987).

—a_avw

LA,

Congress, however, has enacted a statute that

creates a cause of action in federal court for

false advertising.

Protecting consumers from false or misleading

advertising, moreover, is an important goal of

the statute and a laudable public policy to be

served.

Under our economic system, competitors have

the greatest interest in stopping misleading

advertising, and a private cause of action under

section 43(a) allows those parties with the

greatest interest in enforcement, and in many

Situations with the greatest resources to devote

to a lawsuit, to enforce the statute rigorously.

Public policy, therefore, is indeed well served

by permitting misrepresentation of quality

claims to be actionable under section 43(a).”

Further, the Ninth Circuit stressed — in connection

with its Lanham Act analysis — in U-Haul Int 1, Inc. v.

Jartran, Inc., ® that:

“Quite clearly, the Congressional intent was to

allow a private suit by a competitor to stop the

kind of unfair competition that consists of

lying about goods or services, when it occurs

in interstate commerce.

* Coca-Cola, 822 F.2d at 31 (internal citation omitted).

* 681 F.2d 1159 (9th Cir. 1982).

Unlike prior law, the Lanham Act is directed

toward protecting the consumer as well as the

competitor from false and deceptive

advertising.” “*

In 1988, “Congress redrafted section 43(a) [of the

Lanham Act], sharpening its focus on false and deceptive

advertising.” ““ The Senate Report that accompanied these

1988 amendments emphasized with approval that “[s]ection

43(a) of the Act fills an important gap in federal unfair

competition law [and] has been widely interpreted as creating,

in essence, a federal law of unfair competition.” “

Recent developments involving Enron, Arthur

Andersen, and WorldCom (among others) have focused public

awareness on the ever-present need for integrity in America’s

competitive marketplace. The Lanham Act’s express anti-

false-advertising provisions give teeth to a competitor who

seeks to ensure honest competition.

Pandora and Pennzoil engaged in patently unfair

competition by failing to label their flammable Fix-A-Flat

“Flammable,” thereby conveying a false message about Fix-

“4 U-Haul, 681 F.2d at 1162 (internal quotation marks and

citations omitted).

‘5 ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 964

n.6 (D.C. Cir. 1990) (emphasis supplied) and Trademark Law

Revision Act of 1988 (1988 Act), Pub. L. No. 100-667, sec. 132,

§ 43(a), 102 Stat. 3935, 3946 (amending 15 U.S.C. § 1125(a)).

“© S. Rep. No. 100-515, p. 40 (1988).

Pa Oe Tee ee ee

A-Flat to Fix-A-Flat purchasers. This false message —

conveyed through a material omission that violated the same

federal warning-label law that governs all tire-inflator

manufacturers, including IQ — rightfully constitutes a “false

or misleading description of fact” or a “false or misleading

representation of fact” about Fix-A-Flat under the explicit

language, the plain meaning, and clear intent of the Lanham

Act.

This Court has never decided a Lanham Act false-

advertising case, either before or after the 1988

amendments. “’ The far-reaching legal and policy

implications of the Fifth Circuit’s erosion of the Lanham Act

in this case beg for this Court to bring the corrected clarity

and focus to these important Lanham Act issues that only this

Court can (and should) do.

CONCLUSION

Because the Fifth Circuit’s unprecedented decision in

this case erroneously emasculates the important private right

of action expressly afforded by Congress in the Lanham Act,

conflicts with and confuses other Circuit decisions, and is

incorrect, IQ prays that this Court grant its petition for a writ

of certiorari.

*" Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992) is

a Lanham Act case involving trade dress, not a Lanham Act false

advertising case.

Respectfully submitted,

Kenneth M. Morris

Counsel of Record

Attorney for Petitioner

600 Jefferson, Suite 800

Houston, Texas 77002

Telephone: (713) 659-8697

Facsimile: (713) 659-3020

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 01-20764

[Filed September 23, 2002]

IQ PRODUCTS COMPANY,

Plaintiff-Intervenor Defendant-Counter

Claimant-Appellant,

PENNZOIL PRODUCTS COMPANY,

Intervenor Plaintiff-Counter

Defendant-Appellee,

PANDORA MANUFACTURING

INCORPORATED, also known as

Snap Products, Incorporated,

Defendant-Appellee.

atl li i i i i i i a a a a

Appeal from the United States District Court

For the Southern District of Texas

H-99-CV-1909

Melinda Harmon, US District Judge

JUDGES:

Before DAVIS, DeMOSS, and STEWART, Circuit Judges.

OPINION

W. EUGENE DAVIS, Circuit Judge:

Plaintiff IQ Products Co. brought suit against

defendants Pandora Manufacturing, Inc. (formerly known as

Snap Products, Inc.) and Pennzoil Products Co., alleging that

defendants falsely advertised their competing tire inflator

product, Fix-A-Flat, in violation of the Lanham Act. The

district court granted summary judgment in favor of

defendants. For the reasons given below, we affirm.

This case involves competing tire inflator products.

Plaintiff IQ Products Co. (“IQ”) manufactures tire inflators

under the brand names Repair Safe, AirUp, and Primis.

Defendant Pandora Manufacturing, Inc. (formerly known as

Snap Products, Inc.) and later defendant Pennzoil Products

Co. (“Pennzoil”) manufactures a competing tire inflator

called Fix-A-Flat.' IQ alleges that from early 1994 to

February 18, 1999, the defendants failed to label the product

as “flammable” and falsely advertised Fix-A-Flat as “non-

explosive” in violation of the Lanham Act. Accordingly, IQ

argues that it is entitled to lost profits, disgorgement of

defendants’ ill-gotten profits, and attorneys’ fees.

| The parties sell these tire inflators to retailers, not

directly to consumers.

Fifth Circuit Opinion - 9/23/02

A tire inflator is a can of chemicals under pressure that

a motorist uses to repair a leak in an automobile tire until a

more permanent repair or replacement can be made. A

motorist uses a tire inflator to inject pressurized gas into a tire

to inflate it and also to patch the leak with a liquid sealant.

. Tire inflators may be dangerous if their formula is flammable

or explosive because repairmen making permanent repairs to

damaged tires use metal tools and occasionally weld wheel

rims while working on damaged tires. These activities may

create sparks, which can cause a fire or explosion.

Snap Products began manufacturing and marketing

Fix-A-Flat in 1990. In early 1994, Snap introduced a new

formula of Fix-A-Flat, which is at issue in this lawsuit. IQ

contends that this generation of Fix-A-Flat was both

flammable and explosive. On November 4, 1997, Snap sold

Fix-A-Flat and its “Snap” trade name to Pennzoil.? Pennzoil

continued to sell Snap’s 1994 formula of Fix-A-Flat until

January 1998, when Pennzoil slightly modified the formula.

Both parties agree that this slight change did not significantly

alter the flammability or explosiveness of the product for

purposes of this lawsuit. Pennzoil continued to sell this

slightly modified version of Fix-A-Flat until February 18,

1999, when it recalled the product and began selling a new

formula of Fix-A-Flat.

IQ argues that from early 1994 to February 18, 1999,

the Fix-A-Flat formula was flammable and explosive.’

* Snap changed its name to Pandora on February 1, 1998.

> Because of a release executed between IQ and Pandora

in a prior suit, IQ’s claims are limited to the period of March 25,

Fifth Circuit Opinion - 9/23/02

Nevertheless, IQ alleges that the defendants failed to label

Fix-A-Flat properly as “flammable” or “extremely

flammable” as required by federal law. IQ also maintains that

the defendants falsely advertised that Fix-A-Flat was “non-

explosive.”

IQ brought suit against Snap in June 1998, alleging

that the defendants’ false advertising violated the Lanham

Act. Pandora (Snap’s new corporate name) filed an answer

and counterclaim against IQ. In August 1998, Pennzoil

intervened and filed a complaint against IQ. IQ then

counterclaimed against Pennzoil.

The district court granted the defendants’ motion for

partial summary judgment on March 13, 2001. The district

court concluded that (1) IQ’s claims that the defendants

falsely advertised Fix-A-Flat as non-tlammable were limited

to the defendants’ alleged failure to label Fix-A-Flat properly

as “flammable;” and (2) so construed, IQ’s flammability

claims did not survive summary judgment. On July 5, 2001,

the district court granted final summary judgment for the

defendants on the remaining issues. IQ now appeals.

Il.

IQ first argues that the district court erred by granting

summary judgment for the defendants on IQ’s claims that the

defendants falsely advertised Fix-A-Flat as “non-flammable”

1997 through February 18, 1999. IQ does not contend that the

formulation of Fix-A-Flat that Pennzoil began marketing after

February 18, 1999 is falsely labeled or advertised.

Fifth Circuit Opinion - 9/23/02

in violation of the Lanham Act. We review the district court’s

grant of summary judgment de novo.‘

As an initial matter, we must resolve whether the

district court properly limited IQ’s claims to the defendants’

failure to label Fix-A-Flat cans as “flammable.” IQ maintains

that its complaint should not be so narrowly construed, but

should be read to allege that the defendants also affirmatively

advertised Fix-A-Flat as “non-flammable.”

The district court rejected this argument in its March

13, 2001 order granting partial summary judgment to the

defendants and later clarified its holding in its July 5, 2001

order. The district court reasoned that:

IQ never pled any claims related to

flammability under the Lanham Act other than

the failure to label the Fix-A-Flat can. 1Q

never amended its pleading to expand its claim

to include other affirmative representations of

non-flammability. Discovery has long been

closed, trial is imminent, and the time has

passed when such an amendment would not be

severely prejudicial to Defendants.°

After reviewing the record, we agree. IQ’s complaint

nowhere alleges that the defendants affirmatively

* See Blow v. City of San Antonio, 236 F.3d 293, 296 (Sth

Cir. 2001).

5 R. at 1809-10.

ARIA PEN ANNIE SE CI LIE UNS OTR AAT AEE ISCAS i eB rman

Fifth Circuit Opinion - 9/23/02

misrepresented Fix-A-Fiat as “non-flammable.” On the

contrary, the complaint states, in relevant part, that:

These misrepresentations have occurred

because (i) Snap has not-as required by federal

law-labeled its Fix-A-Flat as “Flammable,”

thereby falsely representing that Fix-A-Flat is

“non-flammable” when, indeed, it is not; and

(ii) Snap has falsely represented Fix-A-Flat as

containing a “Non-Explosive Formula.”°

Admitting that it never expressly alleged that the defendants

affirmatively represented that Fix-A-Flat was “non-

flammable,” IQ urges this court to interpret the term “non-

explosive,” as used in the complaint, to include within its

scope the term “non-flammable.” This argument is

unpersuasive. Throughout its complaint, IQ consistently treats

its claims that the defendants failed to label Fix-A-Flat as

“flammable” and that they affirmatively advertised the

product as “non-explosive” as two distinct concepts.

Moreover, while the two terms are related, they are not

mutually exclusive; significantly, according to the ordinary

understanding of the terms, material may be flammable--that

is, tend to burn--while not being explosive.’ Given the lack of

®° R. at 4.

7 Webster’s Third New International Dictionary defines

“flammable” as “capable of being easily ignited and of burning

with extreme rapidity.” Webster’s Third New International

Dictionary 864 (1993). It defines “explosive” as “relating to,

characterized or operated by, or suited to cause explosion.” Jd. at

802. “Explosion,” in turn, is defined as “a violent expansion or

Fifth Circuit Opinion - 9/23/02

any assertion in the complaint that the defendants made

affirmative misrepresentations that Fix-A-Flat was “non-

flammable” and IQ’s failure to amend -its complaint in a

timely fashion, we conclude that the district court correctly

limited IQ’s flammability claims to the defendant’s alleged

failure to label the Fix-A-Flat cans as “flammable.”

IQ next argues that the district court improperly

granted summary judgment for the defendants on its claims

that the defendants failed to properly label Fix-A-Flat as

“flammable” or “extremely flammable” as required by

federal law. IQ asserts that the omission of the word

“flammable” from Fix-A-Flat’s label misled consumers into

believing that the product had passed the federally-mandated

flame extension test required under 16 C.F.R. §

1500.3(c)(6)(vii).

The Lanham Act imposes liability on “any person who

. .. uses in commerce any . . . false or misleading description

of fact, or false or misleading representation of fact, which .

. . in commercial advertising or promotion, misrepresents the

nature, characteristics, qualities, or geographic origin of his

bursting that is accompanied by noise and is caused by a sudden

release of energy from a very rapid chemical reaction, from a

nuclear reaction, or from an escape of gases or vapors under

pressure.” Id.

In absence of technical expert testimony giving a

specialized technical meaning of a term, we use its ordinary

meaning. IQ offered no expert testimony tending to support the

argument it now advances-i.e. that all flammable materials are

explosive and vice versa.

Fifth Circuit Opinion - 9/23/02

or her or another person’s goods, services, or commercial

activities.”* As explained more fully below, the district court

granted summary judgment for the defendants on IQ’s failure

to label claims primarily because it reasoned that IQ was

attempting to use the Lanham Act to circumvent the Federal

Hazardous Substances Act (“FHSA”).’ A brief overview of

federal regulation of hazardous substances is therefore

appropriate.

The FHSA establishes a comprehensive scheme of

product regulation and labeling.'© The Consumer Product

Safety Commission (“CPSC”) is responsible for enforcing the

FHSA and promulgating, interpreting, and enforcing

regulations under the FSHA."' The CPSC has the discretion

to exempt substances from the FHSA’s full requirements’* and

to determine whether to prosecute FHSA violations.'* The

FHSA does not authorize a private cause of action.

Since 1994, IQ has complained about Fix-A-Flat to the

Federal Trade Commission (“FTC”) and the CPSC. The FTC

referred IQ’s complaint to the National Highway Traffic

Safety Administration, which declined to take any regulatory

® 15 U.S.C. § 1125(a)(1)(B) (2002).

9 15 U.S.C. § § 1261-78 (2002).

- &£

2 15 U.S.C. § 1262.

3 16C.F.R. § 1009.8.

iiiinimniiiiiiliialsiiiaid lates

Fifth Circuit Opinion - 9/23/02

action. Likewise, the CPSC investigated and refused to take

further action.

The district court granted partial summary judgment

for the defendants on IQ’s failure to label claims in its March

13, 2001 order. The district court explained that by bringing

a Lanham Act claim against defendants for failing to properly

label Fix-A-Flat, “IQ is impermissibly attempting to

circumvent the FHSA by converting the Lanham Act into a

vehicle to enforce the FHSA, which bars private actions, and

to usurp the regulatory function of the CPSC here.”'* In

reaching this conclusion, the district court relied on three

cases, which we discuss below.

First, in Mylan Laboratories, Inc. v. Matkari,"> the

plaintiff drug manufacturer brought a Lanham Act claim

against a competing drug manufacturer and its Officers,

alleging that the defendants’ use of package inserts,

brochures, and advertisements violated the Lanham Act

because these materials falsely represented or implied that the

drugs had been approved by the FDA. The Fourth Circuit

affirmed the district court’s dismissal of the case under Rule

12(b)(6)."° The court explained that the plaintiff did not allege

that the defendants affirmatively represented that the drugs

were “FDA-approved.”’’ The court further reasoned that:

4 R. at 1312.

'S 7 F.3d 1130, 1137-39 (4th Cir. 1993)

- =

17 Id. at 1139.

EN,

Fifth Circuit Opinion - 9/23/02

. . . That fatal deficiency cannot be cured by

contentions that the very act of placing a drug

on the market, with standard package inserts

often used for FDA-approved drugs, somehow

implies (falsely) that the drug had been

“properly approved by the FDA.” Such a

theory is, quite simply, too great a stretch

under the Lanham Act. We agree with the

defendants that permitting Mylan to proceed

on the theory that the defendants violated §

43(a) merely by placing their drugs on the

market would, in effect, permit Mylan to use

the Lanham Act as a vehicle by which to

enforce the Food, Drug, and Cosmetic Act. .

Mylan, in short, is not empowered to enforce

independently the FDCA. . . .”°

Similarly, in Sandoz Pharmaceuticals Corp. v.

Richardson-Vicks,"° the plaintiff, who manufactured children’s

cough syrup, alleged that its competitor violated the Lanham

Act by mislabeling one of its ingredients as “inactive.” The

Third Circuit affirmed the district court’s denial of a

preliminary injunction.” The court stated that the FTC and

18 Jd. (emphasis in original).

19 902 F.2d 222, 230-32 (3rd Cir. 1990).

10a

Fifth Circuit Opinion - 9/23/02

the FDA heavily regulate drug labeling requirements.?' The

court reasoned that “neither of these agencies’ constituent

Statutes Creates an express or implied private right of action

and what the FD&C Act and the FTC Act do not create

directly, the Lanham Act does not create indirectly, at least

not in cases requiring original interpretation of these Acts or

their accompanying regulations.”

Finally, in Dial A Car, Inc. v. Transportation, Inc.,2

the plaintiff limousine service brought suit against taxi cab

companies, alleging that the companies misrepresented that

they were allowed to provide corporate account transportation

services outside their counties of licensure. The D.C. Circuit

affirmed the district court’s dismissal of the plaintiff's claims

under the Lanham Act.% The court explained that this

question was within the jurisdiction of- the local Taxicab

Commission.” Citing Sandoz, the court explained that “by

entertaining appellant’s claim, we would be transforming the

Lanham Act into a handy device to reach and decide all sorts

of local law questions.”

i Sah ee.

2 Id. at 231 (internal citations omitted).

317 U.S. App. D.C. 240, 82 F.3d 484, 488-90 (D.C.

Cir. 1996).

- -

25 Id. at 488.

%6 Id. at 490.

Fifth Circuit Opinion - 9/23/02

This case is analogous to the three cases discussed

above, especially Mylan. Like the Food, Drug and Cosmetic

Act (at issue in Mylan and Sandoz), the FHSA does not create

a private cause of action. Rather, the FHSA vests the CPSC

with the authority to enforce federal labeling requirements. In

this case, the CPSC was aware of Fix-A-Flat’s alleged

labeling deficiencies but took no action. As a result, IQ

essentially seeks to enforce the labeling requirements of the

FHSA-an action which the CPSC, the enforcing agency,

declined to do. For these reasons, we conclude that the

defendants’ failure to label the product in keeping with FHSA

regulations, even if true, does not constitute a false or

misleading statement that is actionable under the Lanham Act.

Thus, we hold that the district court correctly granted

summary judgment for the defendants on IQ’s claims that the

defendants failed to label its product as flammable.

Ii.

IQ next argues that the district court erred by granting

summary judgment for the defendants on its claims that the

defendants falsely advertised Fix-A-Flat as “non-explosive”

when, in fact, they knew that this was not true. This court

reviews the district court’s grant of summary judgment de

novo.”

As stated above, § 43(a) of the Lanham Act provides,

in relevant part:

27 See Blow v. City of San Antonio, 236 F.3d 293, 296

(Sth Cir. 2001).

12a

Fifth Circuit Opinion - 9/23/02

Any person who... uses... any. . . false

or misleading description of fact, or false or

misleading representation of fact, which .

misrepresents the nature, characteristics, [or]

qualities . . . of his or her or another person’s

goods . . . shall be liable in a civil action by

any person who believes that he or she is

likely to be damaged by such act.”

The plaintiff must establish five elements to make out a prima

facie case of false advertising under the Lanham Act:

(1) A false or misleading statement of fact

about a product;

(2) Such statement either deceived or had

the capacity to deceive a substantial

segment of potential consumers;

(3) The deception was material, in that it is

likely to influence the consumer’s

purchasing decision;

(4) The product is in interstate commerce;

and

8 15 U.S.C. § 1125(a).

13a

Fifth Circuit Opinion - 9/23/02

(5) The plaintiff has been or is likely to be

injured as a result of the statement at

issue.”

“The focus of the Lanham Act is on commercial

interests [that] have been harmed by a competitor’s false

advertising.”*° To obtain money damages for false advertising

under § 43(a) of the Lanham Act, the plaintiff must first

demonstrate that the advertisement was (1) literally false; or

(2) likely to mislead and confuse customers.*' If the statement

at issue is shown to be literally false, the court must assume

that it actually misled consumers, without requiring any

evidence of such deception from the plaintiff.’ If the

statement is shown to be misleading or ambiguous, however,

the plaintiff must demonstrate actual deception through direct

evidence of consumer reaction to the advertising or evidence

of consumer surveys or consumer reaction tests.”

IQ alleges that the defendants made several false or

misleading statements that falsely advertised Fix-A-Flat as

“non-explosive.” First, IQ alleges that the defendants

affirmatively misrepresented that the product was “non-

29 Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d

489, 495 (Sth Cir. 2000).

0 Procter & Gamble Co. v. Amway Corp., 242 F.3d 539,

563 (Sth Cir. 2001) (internal quotation marks and citation omitted).

31 See Pizza Hut, 227 F.3d at 495.

32 Id. at 497.

14a

Fifth Circuit Opinion - 9/23/02

explosive,” a statement that IQ maintains was literally false.

In addition, IQ points out other statements that the defendants

made that, while not literally false, were misleading and

deceptive to consumers.*4

The district court granted summary judgment for the

defendants with respect to all of the contested statements. The

district court first found that the defendants’ advertisement of

Fix-A-Flat as “non-explosive” was not literally false, and

therefore, actual deception and materiality could not be

presumed. The court then explained that the summary

judgment evidence did not establish any actual deception or

materiality as to any of the contested statements.

IQ argues that the district court erred in finding that

the statement that Fix-A-Flat was “non-explosive” was not

literally false. IQ points té the testimony of its expert, Dr.

John Jacobus to support its position. Dr. Jacobus reported that

he had tested Fix-A-Flat formula at issue and found that it

was explosive under some circumstances.

Even if the district court erred in finding that IQ failed

to present a genuine issue of material fact on the literal falsity

of the defendants’ statement that Fix-A-Flat was “non-

** Specifically, IQ alleges that the defendants made the

following misleading statements: “Do NOT use with other tire

inflator products. Other products may contain explosive gases

which could cause injury to you or a tire repair professional;” and

“DO NOT WELD ON A RIM WITHOUT FIRST REMOVING

THE TIRE FROM THE RIM. FAILURE TO DO SO COULD

CAUSE THE TIRE TO EXPLODE REGARDLESS OF

WHETHER THE TIRE INFLATOR IS USED.”

15a

Fifth Circuit Opinion - 9/23/02

explosive,” which we do not decide, IQ failed to produce

competent summary judgment evidence that it was harmed by

the defendants’ allegedly false and misleading advertisement.

IQ presented no competent summary judgment evidence that

indicates that consumers would have bought IQ’s tire inflator

products instead of Fix-A-Flat in the absence of the

defendants’ allegedly false and misleading statements.

IQ responds that the testimony of two of its expert

witnesses, Dr. Al E. Birdwell and Yohanne Gupta, establish

that IQ suffered actual harm. IQ contends that the district

court improperly excluded the testimony of both witnesses

under Federal Rule of Evidence 702. Dr. Birdwell gave

opinions on the materiality of defendants’ false statements

(i.e.-the effect on the buying decisions of consumers) and the

damage to IQ as a result. The magistrate judge excluded Dr.

Birdwell’s testimony under Rule 702 because it was based on

“insufficient data” and “unreliable methodology.”* The

magistrate judge explained that Dr. Birdwell’s opinions were

based on the combined effect of the defendants’ failure to

label their product as flammable and the representation that

Fix-A-Flat was “non-explosive.”* The judge reasoned that

the flammability issue was no longer in the case, and

therefore, was irrelevant. The judge also found that Dr.

Birdwell did not conduct any market or survey research or

any data that could be subject to testing and verification.”

35 R. at 1565; see Daubert v. Merrell Dow Pharms., Inc.,

509 U.S. 579, 125 L. Ed. 2d 469, 113 S. Ct. 2786 (1993).

3% OR. at 1565.

37 R. at 1564.

16a

Fifth Circuit Opinion - 9/23/02

The district court also excluded testimony of Yohanne

Gupta, IQ’s CEO, essentially for the same reasons as Dr.

Birdwell. The magistrate judge reasoned (and the district

court subsequently adopted the reasoning) that Gupta had no

reliable basis for his opinion that “consumers would have

purchased [IQ’s] products instead of Fix-A-Flat if Fix-A-Flat

had been properly labeled.”28 Gupta offered no market

research or tests to support his opinions. Instead, he based his

opinion on “common sense.”

This court reviews rulings on the admissibility of

expert evidence for abuse of discretion.* Based on our review

of the record, we cannot Say that the district court abused its

discretion in excluding the testimony of Dr. Birdwell and

Gupta. Neither expert conducted reliable survey or market

research, commonly employed by market analysts, to support

their conclusions that consumers would have purchased IQ’s

tire inflators were it not for the defendants’ allegedly

misleading statements about the explosiveness of the

product.*' Furthermore, both witnesses’ opinions describe the

effect of the combination of defendants’ failure to label the

8 OR. at 1563.

9% R. at 1563.

Inc., 224 F.3d 402, 405 (Sth Cir. 2000).

*" See, for example, Pizza Hut, Inc. y. Papa John’s Int’l,

Inc., 227 F.3d 489, 497 (Sth Cir. 2000) (explaining that “the

plaintiff may not rely on the judge or the jury to determine, ‘based

solely upon his or her intuitive reaction, whether the advertisement

is deceptive.’”) (internal citation omitted).

17a

Fifth Circuit Opinion - 9/23/02

product as flammable and advertisement of it as non-

explosive. Neither expert testified about what effect, if any,

the defendants’ advertisement of Fix-A-Flat as “non-

explosive” had on IQ independent of the flammability issue.

It follows that the experts’ opinions were flawed because they

based their conclusions in part on the failure to label claims

which the district court correctly rejected. For these reasons,

we conclude that the district court did not err in granting the

defendants’ motion for summary judgment on IQ’s claims that

the defendants falsely advertised Fix-A-Flat as “non-

explosive.”

IV.

Finally, IQ contends that it is entitled to a new trial

because 28 U.S.C. § 455(b)(5)(iii) and 28 U.S.C. § 455(a)

mandated the district judge’s disqualification. Specifically, IQ

maintains that because Judge Harmon’s father-in-law was a

retired partner of Baker Botts, the firm that represented

Pennzoil, she was required to recuse herself.

Section 455(b)(5)({iii) provides that a United States

judge “shall” disqualify himself when “he or his spouse, or

a person within the third degree of relationship to either of

them, or the spouse of such a person . . . is known by the

judge to have an interest that could be substantially affected

by the outcome of the proceeding.” In Potashnick v. Port City

“2 1Q raises a number of other evidentiary objections to

the court’s refusal to consider various summary judgment evidence.

We have considered these objections and conclude that even if the

district court erred, it had no effect on the correctness of its ruling.

18a

Fifth Circuit Opinion - 9/23/02

Construction Co.,“ the district judge declined to disqualify

himself from a case in which the lawyer for one of the parties

was the law partner of the judge’s father. This court held that

the district judge should have recused himself under §

455(b)(5)(iii).“ The court stated that “when a partner in a law

firm is related to a judge within the third degree, that partner

will always be ‘known by the judge to have an interest that

could be substantially affected by the outcome’ of a

proceeding involving the partner’s law firm.”*

In contrast, in Weinberger v. Equifax, Inc.,” this

court held that the district judge need not recuse himself

where his son was an associate in a law firm that represented

one of the parties in the litigation. The court explained that

the son’s “salary interest as an associate is too remote to fall

under this ‘financial interest’ prohibition.”

In this case, Judge Harmon’s father-in-law, Frank

Harmon, was a retired partner of Baker Botts from the time

the judge received the case in 1998 until Mr. Harmon’s death

on August 5, 1999. Mr. Harmon received retirement benefits

from Baker Botts until his death, at which point, Mr.

Harmon’s sor (Judge Harmon’s husband) received death

* 609 F.2d 1101 (5th Cir. 1980).

“Id. at 1113.

wae

“557 F.2d 456, 463 (Sth Cir. 1977).

- »

19a

Fifth Circuit Opinion - 9/23/02

benefits from the firm. Both the retirement and death benefits

were fixed sum amounts, with the exception that part of both

formulae included a cost of living adjustment that included the

lesser of (1) “the cost of living adjustment called for by the

U.S. Department of Labor’s U.S. Consumer Price Index in a

given year” or (2) “the percentage increase in income of the

fifth highest paid partner” at Baker Botts.

IQ argues that the component of the cost of living

adjustment that takes into account the salary of the fifth

highest paid partner is sufficient to require Judge Harmon’s

disqualification under § 455(b)(5)(iii). This argument is not

sound. First, no matter how much money the fifth highest

paid Baker Botts partner earns, the Consumer Price Index

always functioned as a ceiling on the adjustment to which

Frank was entitled. This is so because Frank or his son was

only entitled to the lesser increase of the two factors. The

interest of Judge Harmon’s father-in-law and husband in

Baker Botts’ earnings is more remote than an associate’s

interest in the financial well-being of his firm. An associate’s

continued employment or the amount of his bonus may

depend on the financial success of the firm. However, this is

an insufficient financial interest to require disqualification

under Weinberger. It follows that Judge Harmon was not

required to recuse herself under 28 U.S.C. § 455(b)(5)(iii).

Similarly, § 455(a) requires a federal judge to

disqualify himself in any proceeding in which “his

impartiality might be reasonably questioned.” This test is

4 28 U.S.C. § 455(a).

20a

4 Fifth Circuit Opinion - 9/23/02

objective.” A judge should disqualify himself “if the

reasonable man, were he to know all the circumstances,

would harbor doubts about the judge’s impartiality .”*°

Based on the above discussion, we are satisfied that

the fact that Judge Harmon’s father-in-law was a retired

partner at Baker Botts is too remote to raise a reasonable

doubt about her impartiality. Therefore, Judge Harmon was

4 not required to recuse herself in this case under either §

455(b)(5)(iii) or § 455(a), and IQ is not entitled to a new

trial.

For the reasons given above, the judgment of the

district court is AFFIRMED.

AFFIRMED.

See Potashnick, 609 F.2d at 1111.

°° See Potashnick, 609 F.2d at 1111.

2la

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Civil Action No. H-98-1909

[Filed July 6, 2001]

IQ PRODUCTS COMPANY,

Plaintiff

VS.

SNAP PRODUCT,

)

Defendant )

)

FINAL SUMMARY JUDGMENT

Pursuant to the memoranda and orders issued by this

Court on March 12, 2001 (# 98) and on July 3, 2001 (#121

and 122), the dismissal of all counter claims against Plaintiff

IQ Products Company (“IQ”) brought by Intervenor-

Defendant Pennzoil Products Company n/k/a Pennzoil-Quaker

State Company (“Pennzoil”) and Defendant Snap Products

Inc. n/k/a Pandora Manufacturing, Inc. (“Pandora”) (#105)

in the above referenced action, the Court

ORDERS that FINAL SUMMARY JUDGMENT is

GRANTED in favor of Pennzoil and Pandora Manufacturing

22a

ee ee

against IQ. IQ shall take nothing and shall bear all costs of

court.

THIS IS A FINAL JUDGMENT.

SIGNED at Houston, Texas, this _6" day of July,

2001.

/s/

MELINDA HARMON

UNITED STATES DISTRICT JUDGE

23a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Civil Action No. H-98-1909

[Filed July 5, 2001]

IQ PRODUCTS COMPANY,

Plaintiff

VS.

SNAP PRODUCT,

)

Defendant )

)

ORDER

Pending before the Court in the above referenced

action, alleging under section 43 (a) of the Lanham Act, 15

U.S.C. § 1125(a), false labeling and advertising of the tire

inflator product “Fix-A-Flat” in use between March 25, 1997

and February 18, 1999 as being non-flammable and non-

explosive, is Plaintiff IQ Products Company’s appeal of the

magistrate’s order entered on May 16, 2001 and motion for

this Court to reconsider or clarify its memorandum and order

entered on March 12, 2001 (instrument #117).

District Court Order - 7/5/01]

Because Judge Stacy’s order excluding expert

testimony was based on this Court’s March 12, 2001

memorandum and order, the Court reviews the motion to

reconsider or clarify first.

Plaintiff argues that this Court ruled only that the

omission of “flammable” from the label of Fix-A-Flat was not

actionable under the Lanham Act and that Lanham Act claims

based on Pennzoil’s false statements in sales catalogues, sales

Sheets, sales brochures, technical _ bulletins, print

advertisements, and written or oral Statements to purchasers

or potential purchasers of Fix-A-Flat still remain before the

Court. IQ complains that Judge Stacy wrongly interpreted the

Court’s order when she found that all the flammability issues

were thereby removed from the case.

IQ also contends that this Court erred in its decision

regarding the omission of a federally mandated “flammable”

label from the Fix-A-Flat can because the label then conveyed

a false message about the product to the targeted audience of

retailers, not end users, since the Fix-A-Flat aerosol can

cannot pass the flame-extension test under 16 C.F.R. §

1500.3 (c) (6) (viii).

Defendant Pennzoil-Quaker State Company

(“Pennzoil) objects that the motion for summary judgment

granted by the Court was limited to the failure to label Fix-A-

Flat as “flammable” or “extremely flammable” because IQ’s

pleading regarding flammability under the Lanham Act also

addressed only the labeling on the can. Furthermore, Pennzoil

insists that the motion to reconsider offers no new authorities,

but merely rehashes the same arguments made and rejected by

the Court previously.

25a

District Court Order - 7/5/01

This Court agrees with Pennzoil and denies the motion

to reconsider. The Court stands by its earlier ruling that IQ is

impermissibly using the Lanham Act to usurp the role of the

Consumer Product Safety Commission to enforce IQ’s

interpretation of how the flame extension test should be

applied under the Food, Drug and Cosmetic Act and the

regulations promulgated under that Act. In addition the Court

grants IQ’s motion to clarify only to the extent necessary for

it to make clear that IQ never pled any claims related to

flammability under the Lanham Act other than the failure to

label the Fix-A-Flat can. IQ never amended its pleadings to

expand its claim to include other affirmative representations

of non-flammability. Discovery has long been closed, trial

is imminent, and the time has passed when such an

amendment would not be severely prejudicial to Defendants.

IQ appeals Judge Stacy’s order excluding the majority

of the opinions of IQ’s experts (Dr. Al E. Birdwell, Yohanne

Gupta, and Dr. O. John Jacobus), in light of this Court’s

summary judgment on the flammability issue, as not relevant

to the remaining issues in this case and as unreliable. Fed. R.

Evid. 702; Daubert v. Merrell Dow Pharmaceuticals, Inc.,

509 U.S. 579 (1993); Kumho Tire Co. v. Carmichael, 526

U.S. 137 (1999). Most of the appeal relies on IQ’s arguments

that other issues of flammability remain, which the Court has

just rejected. Thus the only Lanham Act claims still pending

relate to representations concerning the explosivity of Fix-A-

Flat. The Court has reviewed Judge Stacy’s order and the

underlying record in detail and de novo and agrees with her

rulings in all respects.

26a

District Court Order - 7/5/01]

Accordingly, for the reasons stated above, the Court

ORDERS that (1) IQ’s motion to reconsider is

DENIED; (2) its motion to clarify is GRANTED to the extent

that the Court finds that IQ never pled any claims related to

flammability under the Lanham Act other than the failure to

label the Fix-A-Flat can; and (3) Judge Stacy’s order

excluding most of IQ’s expert testimony is AFFIRMED.

SIGNED at Houston, Texas, this 3" day of July,

2001.

/s/

MELINDA HARMON

UNITED STATES DISTRICT JUDGE

27a

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Civil Action No. H-98-1909

[Filed July 5, 2001]

IQ PRODUCTS COMPANY, )

Plaintiff )

)

VS. )

)

SNAP PRODUCTS, )

Defendant )

)

MEMORANDUM AND ORDER

Pending before the Court in the above referenced

action, alleging under section 43(a) of the Lanham Act, 15

U.S.C. § 1125(a), false labeling and advertising of the tire

inflator product “Fix-A-Flat” in use between March 25, 1997

and February 18, 1999 as being non-flammable and non-

explosive, is a motion for summary judgment regarding

damages' (instrument #70), filed by Pennzoil-Quaker State

' Because Pennzoil no longer sells the formulation of Fix-

A-Flat in dispute, IQ’s prayer for injunctive relief is moot.

28a

District Court Memorandum and Order - 7/5/01

Company (“Pennzoil”), formerly known as Pennzoil Products

Company. Defendant Pandora Manufacturing, Inc., formerly

known as Snap Products, Inc., was granted leave to adopt

Pennzoil’s motion (#105).

Snap Products (“Snap”) manufactured and sold Fix-A-

Flat from April 1993 through November 3, 1997. On

February 1, 1996, Snap Products, Inc. changed its name to

Pandora Manufacturing Inc. On November 4, 1997 Pennzoil

purchased certain assets of Pandora Manufacturing, Inc.,

including Fix-A-Flat, and reformulated the product, which it

placed on the market in January 1998.

Three defending entities involved here, i.e., Snap,

Pandora Manufacturing, and Pennzoil, were or are

competitors of IQ Products Company (“IQ”) in the tire

inflator business and sold their products in and to the same

market, i.e. to retailers who in turn sold them to consumers.

IQ’s tire inflator products are marketed under the brand

names of “RepairSafe,” “AirUp,” and “Primis.”

For purposes of liability of Pennzoil, it is important to

distinguish evidence relating to the period before Pennzoil’s

Moreover, on March 13, 2001, this Court granted a partial

summary judgment in favor of Pennzoil, concluding that the

Lanham Act is not a proper vehicle for 1Q’s claim of failure to label

the product as flammable. In response to a motion to clarify or

reconsider, this Court recently made clear that because the sole

Lanham Act claim relating to flammability that was plead by IQ

was Defendants’ failure to label Fix-A-Flat as “flammable” or

“extremely flammable,” the only remaining claim relates to alleged

misrepresentations about the product’s non-explosivity.

29a

District Court Memorandum and Order - 7/5/0i

ownership of Fix-A-Flat from any evidence relating to the

time when Pennzoil did own the product. IQ has unfortunately

lumped them together and called them “Pennzoil-Quaker

State. ”?

The movant seeking a federal summary judgment

initially must inform the court of the basis for its motion and

point out those portions of the pleadings, depositions, answers

to interrogatories, and admissions on file that demonstrate the

absence of a genuine issue of material fact and show that it is

entitled to a judgment as a matter of law. Fed. R. Cir. P.

56(c) ; Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

The movant need not negate the opposing party’s claims nor

2 In the opening of its complaint and at { 9, IQ explained

that it

files its COMPLAINT complaining of Snap

Products, Inc. or its successors, the defendant in

this case (“Snap”) ....

9. As necessary, IQ will amend its Complaint to

include the current manufacturer and seller of Fix-

A-Flat continues to list Snap Products, Inc. as its

manufacturer, IQ commences this case only against

Snap, but “Snap” as used herein includes any Snap

successor who possessed an interest in Fix-A-Flat

from March 25, 1997, through the present, or who

now possesses an interest in or to Fix-A-Filat.

IQ never amended, and in the instant motion, Instead of using

“Snap” to refer to all thosewho subsequently acquired an interest in

“Fix-A-Flat,” IQ has, perhaps with questionable motive, employed

“Pennzoil” as the all encompassing name.

30a

District Court Memorandum and Order - 7/5/01

produce evidence showing an absence of a genuine factual

issue, but may rely on the absence of evidence to support

essential elements of opposing party’s claims.’ International

Assoc. of Machinists & Aerospace Workers, Lodge No. 2504

v. Intercontinental Mfg. Co., 812 F.2d 219, 222 (Sth Cir.

1987). The burden then shifts to the non-movant to set forth

specific facts and competent summary judgment evidence to

raise a genuine issue of material fact on each essential element

of any claim on which it bears the burden of proof at trial.

Fed. R. Civ. P. 56(c). The substantive law governing the suit

identifies the essential elements of the claims at issue and

therefore indicates which facts are material. Anderson y.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-

moving party may not rest on mere allegations or denials in

its pleadings, but must produce affirmative evidence and

specific facts. Anderson, 477 U.S. at 256-57. It meets this

burden only if it shows that “a reasonable jury could return a

verdict for the non-moving party.” Jd. at 254. A mere

scintilla of evidence will not preclude granting of a motion for

summary judgment. /d. at 252.

All reasonable inferences must be drawn in favor of

the non-moving party. Matsushita Electric Industrial Co.,

Lid, v. Zenith Radio Corp., 475 U.S. 574. 587-88 (1986),

citing United States v. Diebold, 369 U.S. 654, 655 (1962).

Once the burden of proof has shifted to the non-movant, it

“must do more that simply show that there is some

metaphysical doubt as to the material facts.” Jd. at 586.

* IQ erroneously argues that Pennzoil is required to

demonstrate with portions of pleadings and discovery documents the

absence of a genuine issue of material fact on claims on which IQ

bears the burden of proof.

3la

District Court Memorandum and Order - 7/5/01

Instead it must produce evidence upon which a jury could

reasonably base a verdict in its favor. Anderson, 477 U.S. at

249. “[T]here is no issue for trial unless there is sufficient

evidence favoring the nonmoving party for a jury to return a

verdict for that party. If the evidence is merely colorable, or

is not significantly probative, summary judgment may be

granted.” /d., 477 U,S. at 249-50. Moreover the non-movant

must “go beyond the pleadings and by its own affidavits or by

depositions, answers to interrogatories and admissions on file,

designate specific facts that show there is a genuine issue for

trial.” Webb v. Cardiothoracic Surgery Assoc. of North

Texas, P.A., 139 F.3d 532, 536 (Sth Cir. 1998).

Unsubstantiated and subjective beliefs and conclusory

allegations and opinions are not competent summary judgment

evidence. Grimes v. Texas Dept. of Mental Health and Mental

Retardation, 102 F.3d 137, 139-40 (Sth Cir. 1996); Forsyth

v. Barr, 19 F.3d 1527, 1533 (Sth Cir.), cert. denied, 513

U.S. 871 (1994); Topalian v. Ehrman, 954 F.2d 1125, 1131

(Sth Cir.), cert. denied, 505 U.S. 825 (1992). The non-

movant cannot discharge its burden by offering vague

aliegations and legal conclusions. Salis v. Carpenter 908 F.2d

299, 305 (Sth Cir. 1992); Lujan v. National Wildlife Fed’n,

497 U.S. 871, 889 (1990).

Contrary to IQ’s stance in this action, pleadings are

not summary judgment evidence. Wallace v. Texas Tech

University, 80 F.3d 1042, 1045 (Sth Cir. 1996), citing Little

v. Liquid Air Corp., 37 F.3d 1069, 1075 (Sth Cir. 1994)(en

banc) .

Furthermore, a district court is not required by Rule

55 to sift through the record in search of evidence to support

a party’s opposition to summary judgment. Ragas v.

32a

District Court Memorandum and Order - 7/5/01

Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (Sth Cir.

1998), citing Skotak v. Tenneco Resins, Inc , 953 F.2d 909,

915-16 & n.7 (Sth Cir.), cert. denied, 506 U.S. 832 (1992).

Section 43(a) of the Lanham Act provides in relevant

part,

Any person who... uses. . . any... false

or misleading description of fact, or false or

misleading representation of fact, which . . .

misrepresents the nature, characteristics, [or]

qualities . . . of his or her or another person’s

goods shall be liable in a civil action by any

person who believes that he or she is likely to

be damaged by such act.

15 U.S.C. § 1125(a) (i) (West 1998).

To prevail on such a claim under the Lanham Act, a

plaintiff has the burden of proving a prima facie case of false

advertising under section 43(a) of the Lanham Act by

establishing all of the following elements:

(1) A false or misleading statement of fact

about a product;

(2) Such statement either deceived or had the

Capacity to deceive a substantial segment of

potential consumers;

(3) The deception was material, in that it is

likely to influence the consumer’s purchasing

decision;

(4) The product is in interstate commerce; and

33a

District Court Memorandum and Order - 7/5/01

(5) The plaintiff has been or is likely to be

injured as a result of the statement at issue.

Pizza Hut v. Papa John’s Int’l, Inc. , 227 F.3d 489, 495 (Sth

Cir. 2000), cert. denied, 121 S. Ct. 1355 (2001).

“The focus of the Lanham Act is on ‘commercial

interests [that] have been harmed by a competitor’s false

advertising.’” Procter & Gamble Co. v. Amway Corp., 242

F.3d 539, 563 (Sth Cir. 2001). To obtain monetary damages

for false advertising under § 43(a) of the Lanham Act, the

basis of the motion for summary judgment here, under the

first prong of the Pizza Hut test, a plaintiff must demonstrate

that the advertisement was (1) literally false or (2) likely to

mislead and confuse customers. Pizza Hut, 227 F.3d at 495.

While a statement of fact is actionable under § 43(a), a

statement of general opinion, including puffery,‘ is not. Jd. If

the statement in issue is shown to be literally false, the court

must simply assume that it actually misled consumers, without

requiring any evidence of such deception from the plaintiff.

Id. If the statement is shown to be misleading or ambiguous,

however, to recover monetary damages under § 43(a) a

plaintiff must demonstrate actual deception, i.e., that it

actually misled or confused consumers, by introducing

* The Fifth Circuit indicates that “non-actionable ‘puffery’

comes in at least two possible forms: (i) an exaggerated, blustering,

and boasting statement upon which no reasonable buyer would be

justified in relying; or (2) a general claim of superiority over

comparable products that is so vague that it can be understood as

nothing more than a mere expression of opinion.” 227 F.3d at 497.

The Court finds that the statements in dispute here do not constitute

puffery.

34a

District Court Memorandum and Order - 7/5/01

extrinsic evidence of the disputed statement’s impact on

consumers, i.e., materiality. Jd. at 497.5 In other words, the

plaintiff must prove actual deception by direct evidence of

consumer reaction to the advertising or by circumstantial

evidence of consumer surveys Or Consumer reaction tests. /d.

Thus for statements not literally false, Plaintiff IQ Products

Company (“IQ”) must prove that at least some customers

were actually deceived and that it has been injured by the

reliance of those consumers on the false advertising. 4 J.

Thomas McCarthy, McCarthy on Trademarks and Unfair

Competition § 27:42, at 27-67 (4th ed. 2000) (actual

deception and resulting customer reliance can be

demonstrated by evidence of actual diversion of sales, by

customer surveys, or by testimony of a dealer, distributor or

customer).° Furthermore, IQ must demonstrate that Pennzoil’s

allegedly false advertising was a substantial factor in Causing

its customer-retailers to purchase Fix-A-Flat instead of IQ’s

tire inflator products. Seven-Up Co. v. Coca Cola Co. , 86

F.3d 1379, 1387 (5th Cir. 1997).

> One must view the allegedly false or misleading

Statement in the light of the overall context in which it appears.

Pizza Hut, 227 F.3d at 495 1.5. “Context will often help to

determine whether the statement at issue is so overblown and

exaggerated that no reasonable consumer would likely rely upon

it.” Id.

° The burden for injunctive relief is lower. The plaintiff

must show that the defendant’s representations “have a tendency to

deceive customers” by showing that some customers were confused

by the advertisements, but it need not offer consumer surveys or

testimony demonstrating actual deception. 227 F.3d at 497.

35a

District Court Memorandum and Order - 7/5/01

Pennzoil’s motion contends that IQ has not and cannot

meet its burden of proof to support its claim for damages for

false advertising under the Lanham Act. IQ has failed to show

that customers were actually deceived by allegedly false

advertising claims made by Pennzoil or that IQ had been

injured by actual consumer reliance on the allegedly false

advertising. Nor has it shown that but for Pennzoil’s allegedly

false advertising of Fix-A-Flat, IQ would have obtained all of

Pennzoil’s sales. It has not performed a customer survey nor

found evidence of actual diversion of sales nor presented the

testimony of a dealer, distributor or customer showing

deception by Pennzoil and customer reliance on that

deception. Pennzoil maintains that it is therefore entitled to

summary judgment and to dismissal of IQ’s claims in their

entirety.

In response, IQ asserts that on February 18, 1999,

Pennzoil initiated a nationwide recall of its Fix-A-Flat cans

because of their potential to explode and that Pennzoil

subsequently manufactured and sold the product with a new

formula. IQ contends that two of Pennzoil’s advertising

statements were literally false, i.e., (i) that Fix-A-Flat was

non-explosive and contained a non-explosive formula

(hereinafter, “first statement”) and (2) that Fix-A-Flat was

non-flammable (hereinafter, “second statement”). IQ urges

that two other advertising statements, while not literally false,

were false and misleading in the context of Pennzoil’s

advertising: the third disputed statement, “DO NOT use with

other tire inflator products. Other products may contain

explosive gases which could cause injury to you or a tire

repair professional” (hereinafter, “third statement”); and the

fourth, “DO NOT WELD ON A RIM WITHOUT FIRST

REMOVING THE TIRE FROM THE RIM. FAILURE TO

36a

District Court Memorandum and Order - 7/5/01

DO SO COULD CAUSE THE TIRE TO EXPLODE

REGARDLESS OF WHETHER TIRE INFLATOR IS

USED” (hereinafter, “fourth Statement”). IQ asserts that each

of the four statements either deceived or had the Capacity to

deceive a substantial segment of potential purchasers and was

material in that it was likely to influence a purchaser’s

purchasing decision. IQ further represents that Fix-A-Flat

was in interstate commerce, a fact not contested by

Defendants, and that IQ was injured as a result, an assertion

that Pennzoil maintains IQ has not proven. IQ asserts that the

Challenged advertising inter alia appeared not only on labels

on Fix-A-Flat cans, but in sales catalogues, sales sheets, sales

brochures, technical bulletins, print advertisements, and

written or oral statements to purchasers or potential

purchasers of Fix-A-Flat.

IQ emphasizes that the summary judgment motion

focuses on only two elements of the Pizza Hut prima facie

case, i.e., the third, materiality, and the fifth, 1Q’s resulting

injury. Citing Pizza Hut, IQ contends that because Pennzoil’s

first two statements are literally false, IQ need not show

materiality, or that these two Statements actually deceived

purchasers; instead the Court must presume that they actually

misled the retail purchaser. Pizza Hut, 227 F.3d at 495

(“With respect to materiality, when the statements of fact at

issue are shown to be literally false, the plaintiff need not

introduce evidence on the issue of the impact of the statements

on Consumers. In such a circumstance, the court will assume

that the statements actually misled consumers. “5

IQ lists the exhibit numbers of various documents that

it submitted under seal, allegedly as evidence of actual

deception of retailer-purchasers for the third and fourth

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statements, which IQ claims are false and misleading,’ but not

literally false. Exs. 1,8 3-5,° 9-12,"

7 IQ argues that the third statement was false and

misleading in context because it implies that while “[o]ther products

may contain explosive gases which could cause injury to you or a

tire repair professional,” Fix-A-Flat did not. In actuality, Fix-A-

Flat was explosive and did contain a mixture of explosive gases,

insists IQ. The fourth statement was false and misleading because

it failed to inform the purchaser that the likelihood of tire explosion

increased significantly with the use of Fix-A-Flat.

8 A copy of Olson v. Snap Products, Inc., 29 F. Supp.

1027 (D. Minn. 1998) (holding that under Minnesota law, evidence

that in 1994-1996 Snap Products deceptively labeled Fix-A-Flat tire

inflator as nonexplosive despite knowing of the high probability of

tire welding explosions was sufficient to support the plaintiff-

consumer’s pleading of a claim for punitive damages).

° Ex. 3 is a copy of Pandora’s Answer and Counterclaim

(#5 in the record of this action); Ex. 4 is a copy of Pennzoil’s

Complaint against IQ (#8 in the record); and Ex. 5 is a copy of the

deposition of Steven Koch, Senior Vice President, Marketing

Services and Customer Department at Pennzoil and its corporate

representative for deposition.

10 Ex. 9 is a September 8, 1998 memorandum from Dick

Doyle to Northeast Sales Reps, maintaining that Fix-A-Flat is not

flammable, that therefore a marketing decision had been made some

time previously to replace the “non-Flammable” claim from the

label with a Starburst declaring Snap’s 25th anniversary, and that

appropriate warnings were clearly stated on the can.

Ex. 10 compares market dollar share of various “Flat Tire

Fixers” yearly from 1995 through 1999, while Ex. 11 compares the

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20," 22-23,’ 27-30, '°32-36,"4 39-4915

Unit Share of competitive tire inflator products.

Ex. 12 is a confidential list of customers of Pennzoil and

the number of cans of Fix-A-Flat each purchased in 1998.

'' Ex. 20 is identical to Ex. 9.

2 Ex. 22 isa copy of a page from Snap Products, Inc.

Technical Bulletin describing Fix-A-Flat. Ex. 23 is an interoffice

Pennzoil memorandum from Dewey Szemenyei to Don Johnson

regarding motor oil.

'3 Ex. 27 isa May 25, 1994 letter report to Paul Hughett

from C. James Dahn of Safety Consulting Engineers, Inc. regarding

a series of tests performed to measure the flammability of sealed

pressure tire inflators, specifically the effect of introducing an

ignition source (sparks from a spark plug) into tires injected with

different tire inflators mounted on a Ford Explorer. Snap’s Fix-A-

Flat met the consumer test criteria. Ex. 28, a report of the same

date to Hughett relates to the same tests. Ex. 29 is a report

submitted on July 8, 1994, by Dahn to Snap Products, Inc.

regarding the explosibility tests it requested. Its conclusion was,

“The Snap Fix-A-Flat inflator used in the manner as tested per

consumer test criteria did not display any fire or explosion hazards

in its use. Further testing is planned to identify any fire or

explosion hazards in other situations.” Ex. 30 appears to be an

advertisement for Snap products, including three sizes of Fix-A-Flat

using “a safe, nonflammable propellant.”

'* Ex. 32 is a March 31, 1994 summary by Jim Wells of

a meeting of Snap’s Sam McGinnis and others regarding standard

flame testing of “six (6) samples of SNAP material.” It recites that

McGinnis witnessed a flame flashing back and extending beyond the

18 inch mark. They discussed the fact that despite assurances that

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the product would not explode in a tire, McGinnis had considered

stopping a shipment the previous week, but was advised by his

attorney not to. He stated that he realized that a recall was a

possibility, but that it would cost millions of dollars and could cost

him his job and put Snap out of business. He also stated that he was

still considering a recall if there was any danger to the public.

Outside laboratory work had characterized a tire explosion as strong

enough to be fatal to anyone standing nearby. McGinnis showed

Wells more than twenty pages written by Monty Johnsen on the

safety of Fix-A-Flat. Wells commented that “it was a cheap trick

intended to deceive the public into believing that the Fix-A-Flat

product was harmless.”

Ex. 33 is an April 11, 1994 memorandum from McGinnis

regarding his own investigation and conclusion that” the product is

possibly unsafe and has the potential to cause bodily harm or death

to an unsuspecting tire repair professional or consumer through

misuse.” He noted that regarding labeling, the product failed the

flame test and the drum test. As for explosivity, McGinnis

reported, “Product evacuated into a large diameter ball under

pressure will erupt into a massive fireball when exposed to an

ignition source. The experiment exposed the samples to an ignition

source in both the liquid and vapor phase of the product. Both are

volatile.” He reported that the Consumer Product Safety

Commission was investigating Snap’s mislabeling and warned, “if

they conclude a problem does exist, I think each of you realize [sic]

the consequences.” He placed the product on hold until proper

investigation had been conducted and data supporting the product’s

safety were submitted. He also stated that employees would be told

the product was on hold because of a documentation glitch.

Ex. 34 is a June 15, 1994 memorandum from Jeff

Ketchledge updating the situation and indicating that Snap modified

the specifications of Fix-A-Flat to pass the flame extension test,

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tested it, and issued updated reports. “This change will protect

Snap from competition’s misinformation to our customers.”

Ex. 35 is a compliancy summary, but the copy is not

completely legible.

Ex. 36 is “Everything you always needed to know” about

“NEW FORMULA FIX-A-FLAT,” touting the product and

assuring Consumers that it is not dangerous. When asked about

Snap’s advertising of the product as “non-explosive” rather than

“nonflammable,” the brochure, assuring the reader that the product

would “absolutely not” explode, provided two reasons:

(1) Non-flammable by aerosol standards does not

mean that the product will not ignite. It only means

the product will not extend a flame greater than 18

[inches] when actuated for four to six seconds.

(2) “Non-Flammable” is a word Snap chose for

marketing back in 1990. The inside industry

understands this terminology but not many end

users--that is, the actual consumers--do. Snap

recently conducted a consumer panel test and

explained the background of the old flammable

inflators without using the words “non-flammable”

or “non-explosive.” The results were

overwhelmingly in favor of “nonexplosive.”

Ex. 39 is a May 20, 1996 letter from Snap’s President,

Tim Shingleton, to Chris McClain of Wal*Mart Stores regarding

Fix-A-Flat. After apologizing for any problems in conducting

business with Snap, the letter touts Snap’s 51.8% marketshare and

States that all testing has demonstrated “that the product is what we

Say it is and is labeled correctly.”

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Ex. 40 is an October 9, 1996 letter report from Snap’s Tom

Davis to Debbie Sawyer of Keller Sawyer, Inc. regarding prices of

products, including Fix-A-Flat. Ex. 41 is a letter to potential

customer Dennis Katz of Trak Auto providing prices for Fix-A-Flat

and stating, “Dennis, I cannot stress enough the fact that most

customers of your stature do not dabble in Tire Inflator that consists

of an explosive formula.” Ex. 42, a sales proposal to Western Auto

from Snap, describes its product line, including Fix-A-Flat, which

it characterizes as “safe and easy to use.” Ex. 43 is a technical

bullet for the product. Ex. 44, a letter from Snap’s McGinnis to

Tim Hazzard of Saxon Industries complaining of Fix-A-Flat’s low

rating in Auto Express magazine, insists that “[t]he propellants that

are blended to create a safe non-explosive gas do not generate as

high a vapor pressure as butane/iso-propane propellants. We are not

aware of a single complaint or safety related incident in the US

related to low pressure in a tire treated with a tire inflator. This

combines 25 years of extensive use and over an estimated 625

million cans of total products sold in the US.” He insists, “The

instructions adhere to strict US standards with proper and adequate

warnings to the person using the product and safety issues for the

tire repair professional. “ Ex. 45 is an October 3, 1997

memorandum from Andy Barron incorporating a September 29,

1997 letter from Tim Shingleton regarding new samples being sent

to a lab for testing after modification of the Fix-A-Flat formula that

failed flame extension testing and did not pass labeling

requirements.

Ex. 46, a June 26, 1998 letter to Leighton Hankins of the

Kunkel Service Company from Pennzoil’s Joel Khan, states, “in no

uncertain terms: Fix-A-Flat branded tire inflator is not a flammable

aerosol!” It further states that Pennzoil has chosen not to refer to

the issue of flammability on the label because, unlike some

competitive brands, it is not flammable. Ex. 47, a September 27,

1999 letter from Khan to Tom Cinnamon of EBY-BROWN,

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to #83, and Exs. 1-9 to #81. For the most part, the Court

notes Plaintiffs have not pointed to specific sections of these

documents nor identified and analyzed or characterized

specific portions that Plaintiffs believe to be relevant

supporting evidence for their allegations in response to the

motion for summary judgment. The Court has indicated that

it is not required by Rule 56 to sift through the record in

search of evidence to support a party’s opposition to s

judgment. Ragas v. Tennessee Gas Pipeline Co., 136 F.3d

455, 458 (Sth Cir. 1998), citing Skotak v. Tenneco Resins,

Inc., 953 F 2d 909, 915-16 & n.7 (Sth Cir.), cert. denied,

506 U.S. 832 (1992).

Citing the discussion of the history of the tire-inflator

market and Fix-A-Flat’s role in that market in Olson v. Snap

Products, 29 F. Supp.2d 1027 (S. Minn. 1998) (Ex. 1 to

#83), even though that lawsuit does not relate to the product

at the time it was owned by Pennzoil nor deal with the

modifications in the product made by Pennzoil, IQ represents

that originally Fix-A-Flat was non-explosive and non-

flammable, but that in early 1994 Snap Products changed the

formula. According to IQ, Pennzoil’s own tests demonstrated

that the product was then explosive and flammable, even

concerning price increases in Fix-A-Flat because of the propellant,

states, “Non-Flammability is an expensive feature. Fix-A-Flat is the

overwhelming category leader.” Ex. 48 is a videotaped pretrial

examination of nonparty witness Troy H. Scriven, who worked as

a research engineer for Pennzoil from August 1991 till January

1993.

Ex, 49, a copy of McGinnis’ January 18, 1999 deposition

in the Olson case.

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though it advertised otherwise from January 1994 until

Pennzoil recalled the product on February 18, 1999 because

of its potential to explode. Exs. 1, 33, 26-28, 32 and 48 (to

instrument #83). IQ ignores the distinction between ownership

by Snap/Pandora and ownership by Pennzoil, but lumps them

together with evidence that relates only to the former entity.

IQ further argues that Pennzoil knew that explosivity and

flammability are often decisive factors in retailers’ purchasing

decisions, but presents no evidence of a customer-retailer

actually relying on representations of non-flammability and

non-explosiveness in purchasing the product from

Snap/Pandora or Pennzoil. Instead IQ points to “admissions”

in Pandora’s and Pennzoil’s pleadings that IQ contends, in a

strained and umpersuasive argument, establish actual

deception. Specifically, Pandora and Pennzoil’s pleadings

initially alleged that IQ made false claims that Defendants

marketed Fix-A-Flat with incorrect and unsafe labeling that

deceived a number of their customers and caused IQ actual

harm. According to IQ, the pleadings thus demonstrate that

retailers relied on Defendants’ deceptive representations of

Fix-A-Flat’s advertised non-explosivity and non-flammability.

Defendants’ early pleadings also asserted that IQ’s false

claims “have likely deceived a substantial number of

Pennzoil’s customers,” “have caused Pennzoil actual harm,”

“have caused Pennzoil pecuniary loss” and that “there is

actual deception of, or at least a tendency to deceive, a

substantial portion of the intended audience.” Thus IQ argues

that Pandora and Pennzoil’s pleadings’ admissions establish

actual deception.’

16 This Court disagrees and reiterates that pleadings do not

constitute summary judgment evidence. Wallace v. Texas Tech

University, 80 F.3d 1042, 1046 (Sth Cir. 1996), citing Little v.

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IQ maintains that its remedies under the Lanham Act

include recovery of Pennzoil’s profits, lost profits, and

reasonable attorney’s fees. According to IQ, because the

motion does not address the first, the profits issue must be

decided by evidence at trial.'’ IQ further maintains that the

motion deals only with 1Q’s claim for recovery of its own lost

profits and that the motion argues that IQ has shown no injury

from Pennzoil’s Lanham violations to support a remedy of

IQ’s lost profits.

This Court does not agree with IQ regarding trial

being necessary for the remedies issues because the motion

for summary judgment failed to address that issue. If IQ

cannot avoid summary judgment because of a failure to

submit evidence on an essential element of its prima facie case

under the Lanham Act, on which it bears the burden of proof,

the Court need never reach the remedy issue.

IQ insists that because the first two challenged

statements are literally false, the Court must assume that the

two statements actually misled retain purchasers and IQ need

not produce evidence to establish that deception. As for

Pennzoil’s third and fourth Statements, which IQ characterizes

as false and misleading in the context of Pennzoil’s claims

that Fix-A-Flat was non-explosive and non-flammable, IQ

Liquid Air Corp., 37 F.3d 1069, 1075 (Sth Cir. 1994)(en banc).

' IQ states that to recover Pennzoil’s profits, IQ need

only prove Pennzoil’s sales; Pennzoil must prove all elements of

cost or deduction that it claims. 15 U.S.C. § 1117(a). Ex. 50 lists

Pennzoil’s monthly Fix-A-Flat sales and profits from January 1997

through December 31, 1999. See also Exhibit 4.

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insists that the record is replete with proof of actual deception

of the retail purchasers. It conclusorily states that Pennzoil

was able to make its Fix-A-Flat sales between March 25,

1997 and the recall on February 18, 1999 “only because

Pennzoil continued to make false claims about Fix-A-Flat in

its advertising,” and that had the retailers known that they

| were buying a product that was flammable and explosive,

| they would not have purchased it. IQ contends that Pennzoil

knew such was the case as early as November 1996 when its

sales manager wrote a potential retailer-customer, “I cannot

stress enough the fact that most customers of your stature do

not dabble in Tire Inflator that consists of an explosive

formula.”'*® Ex. 41.

IQ insists that to recover lost profits under 15 U.S.C.

§ 1117 (a),”® the plaintiff need prove only the defendant’s

'8 The Court finds that IQ has taken out of context and

misinterpreted this statement by Snap’s Sales Manager, which

constituted a kind of flattery to encourage a purchase of Fix-A-Flat,

as evidenced by the whole of the letter in which it is found. The

Court reads the remark, which was calculated to persuade Dennis

Katz to purchase Fix-A-Flat over other brands, as unambiguously

referring to tire inflators of competitors in contrast to the non-

explosive Fix-A-Flat.

'9 Under § 1117, “subject to the principles of equity,” the

Lanham Act allows the successful litigant to recover “(1)

defendant's profits; (2) any damages sustained by the plaintiff; and

(3) the costs of the action.” It further provides, “If the court shall

find that the amount of the recovery based on profits is either

inadequate or excessive the court may in its discretion enter

judgment for such sum as the court shall find to be just, according

to the circumstances of the case.”

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sales, while the defendant must prove all elements of cost or

any Claimed deduction. It points to Exhibit 50 to #83 and Ex.

4 to #81 to show that Pennzoil sold more than 35 million cans

of Fix-A-Flat during the relevant period and profited millions

of dollars from the sale. IQ maintains, without evidentiary

Support, that Pennzoil was able to effect Sales during the

relevant period only because it made the false claims in its

advertising. Again without proof, IQ states that it was the

only competitor in the market selling tire inflator products at

comparable prices to Pennzoil’s with the ability and capacity

to absorb Pennzoil’s share. Thus IQ claims to have suffered

material injury from Pennzoil’s Lanham Act claims.

In reply, Pennzoil first objects to IQ’s summary

judgment evidence, specifically Ex. 1 (opinion in Olson v.

Snap Products, Inc.); 6 (letter of Robert Youth with

attachments); 17 (chart prepared by IQ’s lawyer); 18 (lawyer

chart); 19 (lawyer chart); and 49 (deposition of Sam

McGinnis in a different lawsuit). Pennzoi! contends that these

exhibits are inadmissible under the Federal Rules of Evidence

because they are hearsay and are irrelevant Ex. 49, it further

contends, should be excluded under Rule 32 of the Fed. R. of

Civ. P.

Pennzoil further complains of “IQ’s confusing

convergence of Pennzoil-Quaker State and Pandora under the

moniker ‘Pennzoil,’” even when IQ relies on evidence that

pre-dates Pennzoil’s ownership of Fix-A-Flat. The Court also

finds this to be the critical failure in IQ’s opposition to the

motion for summary judgment. Pennzoil identifies Exs. 16,

22, and 27-45 as irrelevant, because Pennzoil did not yet own

the product, and some of them to be hearsay as to Pennzoil.

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After reviewing these exhibits, the Court agrees with

Pennzoil that they are not admissible.

Pennzoil also objects to IQ’s incorporation by

reference and moves to strike Exs. 1-9 to instrument #81,”

materials submitted in IQ’s opposition to Pennzoil’s motion-to

exclude IQ’s experts, and argues these materials are

inadmissible and not evidence properly before the Court.

Pennzoil is incorrect here, as the district court considers the

entire record in reviewing a motion for summary judgment.

Blow v. City of San Antonio, Texas, 236 F.3d 293, 296 (Sth

Cir. 2001) (“Summary judgment is appropriate only if the full

20 ‘Ex. 1, an affidavit from marketing expert Al E.

Birdwell, stating inter alia, that the “non-explosive” advertising

was merely a marketing tool to distinguish Fix-A-Flat from other

products and that had it been correctly labelled as “flammable,”

retailers and consumers would not have purchased it Because the

Court has granted partial summary judgment in favor of Pennzoil

on the issue of product labelling and flammability, this affidavit is

irrelevant as to IQ’s claim relating to the labelling on the can. Ex.

2 is a copy of Birdwell’s 187-page deposition testimony, which IQ

has not marked nor identified particular portions on which it relies

for specific arguments. Ex. 3 consists of exhibits to the deposition.

Other exhibits are apparently documents reviewed by

Birdwell in his marketing review to determine damages. Ex. 4 is a

chart demonstrating sales of RepairSafe and AirUp in 1997, 1998,

and 1999. Ex. 5 if a summary of IQ Tire Inflator sales, units and

profit dollars in the same three years. Ex. 6 consists of documents

supporting IQ’s damage analysis for the period from March 1, 1997

through December 31, 1998. The Court cannot identify Exs. 7 and

8. Ex. 9 consists of copies of advertisements for a variety of

products.

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record discloses ‘no genuine issue as to any material fact and

. . . the moving party is entitled to judgment as a matter of

law.’”); Thomas v. Great Atlantic & Pacific Tea Co., 233

F.3d 326, 329 (Sth Cir. 2000) (On reviewing a motion for

Summary judgment, the district court, and subsequently the

appellate court de novo, reviews “the record as a whole, but

must disregard evidence favorable to the moving party that

the jury is not required to believe. This is, we give credence

to evidence favoring the nonmoving party as well as that

evidence supporting the moving party that is uncontradicted

and unimpeached, at least to the extent that such evidence

comes from disinterested witnesses. ”). Nevertheless, in light

of Plaintiff’s lack of specific discussion of the significance of

these documents as support for their opposition to Pennzoil’s

motion and their failure to provide such evidence relating to

the period when Pennzoil owned and assumed liability for any

defects in the product, the Court finds that IQ’s exhibits are

irrelevant as to Pennzoil. Moreover, because they relate to

damages remedies before IQ has leaped the hurdle of

demonstrating a prima facie case of copyright infringement,

these arguments are premature.

As for the substantive issues, Pennzoil contends that

neither of the first two Statements is literally false and

therefore IQ’s failure to show actual deception with respect to

all four statements is fatal to itscase. The only evidence in the

record of the alleged explosivity of Fix-A-Flat is the testing

and other material, submitted by IQ through its expert, O.

John Jacobus, Ph.D. and relati to testing in April and

September 1997, before Pennzoil purchased the Fix-A-Flat

line from Pandora on November 4, 1997 and shortly

thereafter reformulated the Fix-A-Flat products in January

1998. (Snap/Pandora has not independentl; responded to the

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motion for summary judgment.) Thus there is no evidence of

explosivity of Fix-A-Flat at the time it was advertised and

sold by Pennzoil. The Court agrees.

Pennzoil also argues that when viewed in context

(Pizza Hut, 227 F.3d at 495 n.5.), which would include any

directions for proper use, the statement is not literally false

because the Fix-A-Flat directions warned consumers not to

add air to the tire after using Fix-A-Flat. Dr Jacobus, in

testing the product, did add air after injecting Fix-A-Flat into

the tire. Pennzoil insists that because there is no

governmental or industry test to determine explosivity and

because Dr. Jacobus concedes that he did not comply with the

directions, his evidence of “explosivity,” while admissible,”

does not establish literal falsity. Munoz, 200 F.3d at 301 (“If

the basis for an expert’s opinion is clearly unreliable, the

district court may disregard that opinion in deciding whether

a party has created a genuine issue of material fact.”). IQ has

21 Magistrate Judge Frances Stacy, in ruling on Pennzoil’s

motion to exclude Plaintiff's experts, considered the reliability of

Dr. Jacobus’ evidence and found it admissible. Noting that the

absence of a standardized methodology does not, by itself,

invalidate an expert’s testing or his conclusions from that testing,

she further found that adding air to the tire in contravention of the

instructions did not invalidate the results of his test. She wrote,

“While such addition of air may call into question or provide a

suitable basis for criticizing Dr. Jacobus’ testing methodology, or

may limit the scope of his explosivity opinion to the circumstances

under which the testing was performed, given that Defendant Snap

also added air to tires containing Fix-A-Flat in connection with its

explosivity testing in 1994, it cannot be said that Dr. Jacobus’

addition of air to a tire containing Fix-A-Flat renders his testing

methodology unreliable.”

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not responded with any evidence to the contrary. Once again,

the Court agrees with Pennzoil that IQ has failed to

demonstrate that the first two statements are literally false on

their face or to point to any evidence of flammability or

explosivity in Pennzoil’s reformulated product during its

ownership of Fix-A-Flat.

Furthermore, Pennzoil maintains, IQ asserted only two

claims of violation of the Lanham Act, the first targeting

failure to label the Fix-A-Flat tire inflator product as

“flammable” and the other, representing that Fix-A-Flat was

non-explosive. Pennzoil contends that because the Court

granted partial summary judgment and held that the Lanham

Act was not a proper vehicle for a failure-to-label claim, the

Court should dismiss all claims relating to the allegedly

second false statement related to flammability. Thus the

second of the four challenged statements should not be

considered by the Court. In its supplemental brief (#119) and

in its opposition to IQ’s pending motion to reconsider,

Pennzoil argues that IQ’s only claim regarding flammability

related solely to labeling the product as “flammable” and did

not include claims that Defendants affirmatively

misrepresented that Fix-A-Flat was non-flammable. Pennzoil

further insists that in a Lanham Act false advertising case, the

alleged misrepresentations must be specifically identified. Jn

re Century 21-Re/Max Real Estate Advertising Claims Litig. ,

882 F. Supp. 915, 926-27 (C.D. Cal, 1994); Max Daetwyler

Corp. v. Input Graphics Inc., 608 F. Supp. 1549, 1556 (E.D.

Pa. 1985).” 1Q’s pleadings do not allege that Pennzoil or

2 The Court would add Sanderson v. Brugman, No.

IPO0459CHG, 2001 WL 699876, *8 (S.D. Ind. May 29, 2001);

Barr Laboratories, Inc. v. Quantum Pharmics, Inc., 827 F. Supp.

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Pandora affirmatively misrepresented Fix-A-Flat as non-

flammable, but instead limit the false or misleading statements

about flammability to Defendants’ failure to label Fix-A-Flat

as flammable. Plaintiff’s original Complaint {{ 16, 19, 22,

29, 31 and 34 (#1); Plaintiff's Answer to Pennzoil’s

Complaint and Counterclaim {{ 11, 12, 15, 18, 25, 27 and 30

(#14) .

Pennzoil filed the pleadings with these documents

before the Court ruled on IQ’s motion to clarify and

reconsider its order granting summary judgment on

flammability. In denying the motion to reconsider, the Court

made clear that as Pennzoil contends, the Court has ruled that

flammability is no longer an issue in this case. As this Court

noted, moreover, discovery has been completed and trial is

imminent in this action. Thus any fair notice to Defendants

about the misrepresentations at issue here under Rule 8's

pleading requirement should have been provided by a

requested amendment a long time ago. To do so now, given

the stage of this litigation, would be inequitable and grossly

prejudicial to Defendants.

Moreover, Pennzoil continues, the excluded opinions

of IQ’s experts related “specifically and exclusively to the

effect_in combination of [Pennzoil’s] allegedly improper

failure to label Fix-A-Flat as ‘flammable’ and [Pennzoil’s]

alleged false representations that Fix-A-Flat contained a ‘non-

explosive’ formula. IQ’s experts never opined that the cause

of IQ’s damages was affirmative representations by [Pennzoil]

that Fix-A-Flat was ‘non-flammable,’ nor did IQ make such

111, 117-18 (E.D. Pa.).

District Court Memorandum and Order - 7/5/01

a contention until long after [Pennzoil] moved for summary

judgment on IQ’s flammability claim.” Furthermore the fact

that IQ’s damages theory does not assert that the non-

explosivity claim independently of its nonflammability

labeling claim caused IQ to lose sales undermines any

argument that IQ can prove damage causation solely as a

result of the non-explosivity claim. Because the Court granted

summary judgment in favor of Pennzoil as to flammability

labeling, only the non-explosivity claim remains. Pennzoil

reiterates that IQ has no evidence that the non-explosivity

claim by itself misled buyers. Thus even if IQ could prove

literal falsity or actual deception, urges Pennzoil, it lacks

evidence of damages because it damages case has always been

premised on a combination of the two claims and it has no

viable damage model in the absence of flammability labeling.

With the exclusion of its witnesses as unreliable and irrelevant

by the magistrate’s order,” IQ also has no evidence of

damages causation.

Pennzoil alternatively argues that if the Court does

choose to consider the second statement, IQ has not provided

any evidence to establish the literal falsity of the statement as

to Pennzoil, because the claim is based on the same evidence

of Dr. Jacobus based on testing conducted before November

4, 1997 and before Pennzoil purchased Fix-A-Flat and

** Pennzoil points out that Judge Stacy concluded that the

evidence on which Dr. Birdwell relied “does not support any

conclusion about the marketing effect of the ‘non-explosive

formula’ label on Fix-A-Flat. Rather, the data and evidence relates

two labeling factors in combination: the absence of a ‘flammability’

label from Fix-A-Flat cans and the presence of the ‘non-explosive

formula’ label on Fix-A-Flat cans.” Instrument #1 16 at p. 5.

53a

District Court Memorandum and Order - 7/5/01

reformulated it and modified its spray nozzle to improve its

already passing performance on a flame extension test.

Finally, relating to the explosivity Lanham Act claim,

Pennzoil argues that IQ has failed to submit any evidence that

a single retailer-purchaser was actually deceived by

Pennzoil’s allegedly misleading statements. The summary

judgment exhibits identified by IQ are mostly either internal

documents, some predating Pennzoil’s ownership of the

Product in dispute, or the challenged statements themselves.

None constitutes evidence of retailer customers’ actually

being deceived by the statements. IQ failed to perform a

customer survey or to depose and submit the testimony of a

dealer, distributor or customer demonstrating deception and

reliance thereon. The only evidence of actual customer

reaction is the testimony of Yohanne Gupta. Ex. 5 to #81.

Mr. Gupta testified that Wal-Mart purportedly accepted the

proposition that Fix-A-Flat was flammable, but nevertheless

continued to sell it. Pennzoil argues that logically Gupta’s

statement cannot establish actual deception and resulting

reliance.

As for IQ’s reliance on Pennzoil’s and Pandora’s

pleadings as evidence of actual deception, Pennzoil insists that

the allegations in these pleadings, which have since been

dismissed, cannot remedy IQ’s evidentiary deficiencies. The

Court agrees. Moreover, Pennzoil’s pleadings denied the cited

pertinent allegations made in IQ’s pleadings, thus forcing IQ

to prove its case.

Pennzoil concludes that summary judgment therefore

should be granted in favor of Pennzoil because there is no

competent summary judgment evidence of literal falsity or of

54a

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District Court Memorandum and Order - 7/5/01

actual deception and reliance in even a single lost sale, no less

that IQ would have obtained all of Pennzoil’s sales from Fix-

A-Flat.

In its supplemental brief (#119), Pennzoil re-

emphasizes that IQ has failed to show that Defendants’

representation that Fix-A-Flat was non-explosive was literally

false” or that it actually deceived their retail buyers. It has

also failed to provide evidence of separate and independent

damage causation, as is required. Rhone-Poulenc Rorer

Pharms., Inc. v. Marion Merrell Dow, Inc. , 93 F.3d 51 1,515

(Sth Cir. 1996); ALPO Petfoods, Inc. v, Ralston Purina Co. ;

913 F.2d 958, 959 (D.C. Cir. 1990); Harper House, Inc. v.

Thomas Nelson, Inc., 889 F.2d 197, 210 (9th Cir. 1989) ;

Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767, 771 (2d

Cir. 1984) ; Porous Media Corp. v. Pall Corp., 110 F.3d

1329, 1332-22 (Sth Cir. 1997) (en banc). Specifically

Pennzoil contends that IQ has not and could not present

competent evidence of either of the two components of its

damage model, i.e, that Pennzoil would have lost all of its

sales of Fix-A-Flat because retail buyers would not have

purchased a single can were it not for the alleged Lanham Act

violations and that IQ would have obtained every single sale

lost by Pennzoil.

* Pennzoil argues that in context, the instructions on the

can label (“READ ALL CAUTIONS AND DIRECTIONS ON

BACK PANEL BEFORE USING ”), if followed, would prevent the

set of conditions that make a tire rupture possible, specifically the

warning not to continue to add air to the tire if the leak persists

after using Fix-A-Flat.

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District Court Memorandum and Order - 7/5/01

As noted, the Court agrees with Pennzoil that IQ’s

pleadings clearly and unambiguously restrict its Lanham Act

claims relating to non-flammability to the labeling on Fix-A-

Flat cans. It has not pled claims for general

misrepresentations in other media, i.e., in sales catalogues,

sales sheets, sales brochures, technical bulletins, print

advertisements, and written or oral statements to purchasers

or potential purchasers of Fix-A-Flat. Nor has the Court

changed its mind about granting summary judgment in favor

of Pennzoil and Snap/Pandora on the non-flammability

labeling claim.

Even if it had not concluded as a matter of law that the

Lanham Act is not a proper vehicle for IQ’s claim of failure

to label the product as flammable, IQ’s failure to distinguish

the time period and the reformulated product when Pennzoil

owned and marketed Fix-A-Flat and to show that Pennzoil’s

product was flammable and explosive is a failure in its burden

of proof against Pennzoil. All of its evidence appears to relate

to the period prior to Pennzoil’s ownership, i.e., when Fix-A-

Flat was owned by Snap/Pandora. Thus Pennzoil would have

been entitled to summary judgment on the claim, although

Snap/Pandora would not, had the Court not granted summary

judgment in favor of both Pennzoil and Snap/Pandora on the

non-flammability issue.

The same is true for the non-explosivity Lanham Act

claim. There is no evidence of explosivity of the Fix-A-Flat

tire inflator during the period of Pennzoil’s ownership of it.

Of the four challenged statements, the second relates

to flammability and is therefore not properly at issue before

the Court. Of the other three, the Court agrees with Pennzoil

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SND PDEA ire PTE RE As 28 eset B Ban! (Oty

EAE CREE ORES (eat

District Court Memorandum and Order - 7/5/01

that when viewed in the context of the instructions on its use,

none is literally false on its face. Thus IQ bears the burden of

demonstrating materiality with extrinsic evidence, i.e., that

the statements about non-explosivity individually or in

combination have misled or confused the retailer-consumers

by means of direct evidence of their actual reaction to the

Statement(s) or by circumstantial evidence, such as surveys or

reaction tests. Pizza Hut, 227 F.3d at 497. IQ also bears the

burden of showing that the statements were a substantial

factor in causing IQ’s retailer/customers to purchase Fix-A-

Flat rather than IQ’s tire inflator products. Seven-Up, 86 F.3d

at 1387. IQ has failed to produce competent summary

judgment demonstrating actual deception and reliance or

Causation.

Moreover, Pennzoil is again correct that IQ has failed

to demonstrate that misrepresentations about the product’s

explosivity, independent of the failure to label Fix-A-Flat as

“flammable,” caused damages to IQ. Thus for this reason,

too, Pennzoil and Snap/Pandora are entitled to summary

judgment on damages.

Accordingly, the Court.

ORDERS that for the reasons indicated above,

Pennzoil’s motion for summary judgment on damages is

GRANTED as to Pennzoil and Snap/Pandora.

Still pending are Pandora’s counterclaims against IQ

for interference with prospective business relations, business

and product disparagement and misrepresentations about IQ’s

AirUp products and Pandora’s Fix-A-Flat products. Pandora

shall inform the Court immediately whether it wishes to

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District Court Memorandum and Order - 7/5/01

pursue these counterclaims at trial on July 13, 2001. SIGNED

at Houston, Texas, this day of July, 2001.

/s/

MELINDA HARMON

UNITED STATES DISTRICT JUDGE

58a

APPENDIX E

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Civil Action No. H-98-1909

[Filed March 13, 2001]

IQ PRODUCTS COMPANY,

Plaintiff

VS.

SNAP PRODUCTS,

)

Defendant )

)

MEMORANDUM AND ORDER

Pending before the Court in the above referenced

action, alleging violations of the Lanham Act since March 25,

1997 through the false advertising, labeling, and marketing of

Fix-A-Flat (a tire inflator product sold in aerosol cans) and

unfair competition with IQ ProductsCompany’s (“IQ’s”) sale

of tire inflator products (known as “AirUp” and

“RepairSafe”), is inter alia Intervenor-Defendant and

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District Court Memorandum and Order - 3/13/01

competitor Pennzoil-Quaker State Company’s (“Pennzoil’s”)'

motion for [partial] summary judgment on Plaintiff IQ

Products Company’s claim that Pennzoil falsely advertised its

Fix-A-Flat products when’ it failed to label its product as

flammable (instrument #66). Defendant Pandora

Manufacturing, Inc. fAk/a-Snap-Products, Inc. (“Pandora”)?

seeks to adopt (#76) the motion and Pennzoil’s reply to IQ’s

response, against opposition from IQ (#79) for reasons stated

in its response (#67) to Pennzoil’s motion for summary

judgment.

Because the Court finds that IQ has failed to provide

any reason, no less a persuasive one, why Pandora should not

be permitted to adopt Pennzoil’s pleadings, the Court allows

it to do so.

The movant seeking a federal summary judgment

initially must inform the court of the basis for his motion and

' Effective February 1, 1996, Snap Products changed its

name to Pandora Manufacturing Company. On November 4, 1997,

Pennzoil purchased assets of Snap Products, including the tire

inflator products in dispute. Since that purchase, Pandora has

manufactured, packaged and shipped the tire inflator and other

products for Pennzoil. Pennzoil intervened in this suit because to

the extent that IQ has disseminated misleading information and

material misrepresentations and harmed the business relationship

with customers since November 4, 1997, Pennzoil is the real party

in interest.

2 Pandora has counterclaimed against IQ for falsely

promoting and misrepresenting IQ’s tire inflator products and has

alleged claims of Lanham violations, interference with business

relations, and business and product disparagement.

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District Court Memorandum and Order - 3/13/01

point out those portions of the pleadings, depositions, answers

to interrogatories, and admissions on file that demonstrate the

absence of a genuine issue of material fact and show that he

is entitled to a judgment as a matter of law. Fed. R. Civ. P.

56(c) ; Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

The movant need not negate the opposing party’s claims nor

produce evidence showing an absence of a genuine factual

issue, but may rely on the absence of evidence to support

essential elements of opposing party’s claims. International

Assoc. of Machinists & Aerospace Workers, Lodge No. 2504

v. Intercontinental Mfg. Co., 812 F.2d 219, 222 (Sth Cir.

1987). The burden then shifts to the non-movant to set forth

specific facts and competent summary judgment evidence to

raise a genuine issue of material fact on each essential element

of any claim on which he bears the burden of proof at trial.

Fed. R. Cir. P. 56(c). The substantive law governing the suit

identifies the essential elements of the claims at issue and

therefore indicates which facts are material. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-

moving party may not rest on mere allegations or denials in

its pleadings, but must produce affirmative evidence and

specific facts. Anderson, 477 U.S. at 256-57. He meets this

burden only if he shows that “a reasonable jury could return

a verdict for the non-moving party.” Jd. at 254. A mere

scintilla of evidence will not preclude granting of a motion for

summary judgment. Jd. at 252.

All reasonable inferences must be drawn in favor of

the non-moving party. Matsushita Electric Industrial Co, Ltd.

v. Zenith Radio Corp., 475 U.S. 574. 587-88 (1986), citing

United States v. Diebold, 369 U.S. 654, 655 (1962). Once the

burden of proof has shifted to the non-movant, he “must do

more that simply show that there is some metaphysical doubt

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District Court Memorandum and Order - 3/13/01

as to the material facts.” Jd. at 586. Instead he must produce

evidence upon which a jury could reasonably base a verdict

in his favor. Anderson, 477 U.S. at 249. “[T]here is no issue

for trial unless there is sufficient evidence favoring the

nonmoving party for a jury to return a verdict for that party.

If the evidence is merely colorable, or is not significantly

probative, summary judgment may be granted.” Jd., 477 U.S.

at 249-50. Moreover the non-movant must “go beyond the

pleadings and by his own affidavits or by depositions, answers

to interrogatories and admissions on file, designate specific

facts that show there is a genuine issue for trial.” Webb v.

Cardiothoracic Surgery Assoc. of North Texas, P.A., 139

F.3d 532, 536 (Sth Cir. 1998). Unsubstantiated and subjective

beliefs and conclusory allegations and opinions are not

competent summary judgment evidence. Grimes v. Texas

Dept. of Mental Health and Mental Retardation, 102 F.3d

137, 139-40 (Sth Cir. 1996); Forsyth v. Barr, 19 F.3d 1527,

1533 (Sth Cir.), cert. denied, 513 U.S. 871 (1994) ; Topalian

v. Ehrman, 954 F.2d 1125, 1131 (Sth Cir.), cert. denied, 506

U.S. 825 (1992). The non-movant cannot discharge his

burden by offering vague allegations and legal conclusions.

Salis v. Carpenter, 908 F.2d 299, 305 (Sth Cir. 1992) ; Lujan

v. National Wildlife Fed’n, 497 U.S. 871, 889 (1990).

The motion for summary judgment argues that IQ has

improperly tried to assert a cause of action for Pennzoil’s

alleged failure to label Fix-A-Flat as “Extremely Flammable”

or “Flammable” under the Lanham Act, when the claim must

be brought under the comprehensive scheme of product

regulation and labeling established by the Federal Hazardous

Substances Act (“FHSA”), 15 U.S.C. §§ 1261-78. The

regulatory agency of the Consumer Product Safety

Commission (“CPSC”) is responsible for enforcing the FHSA

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District Court Memorandum and Order - 3/13/01

and promulgating, interpreting, and enforcing regulations

under the FHSA.? Indeed, among the broad range of powers

given to the CPSC by the FHSA is discretion to exempt

substances from the FHSA’s full requirements, 15 U.S.C. §

1262(c), and to determine whether to prosecute a FHSA

violation, 16 C.F.R. § 1009.8.

Pennzoil points out with supporting documentation that

IQ since at least 1994 has complained about Fix-A-Flat to the

Federal Trade Commission ( “FTC”) and to the CPSC. The

FTC referred IQ’s complaint to the National Highway Traffic

Safety Administration (NHTSA”), which declined to take a

regulatory action because it was not Warranted. The NHTSA

found that the risk of using tire inflation products was “not

unreasonable to the consumer or motoring public” and “ [T]he

dangers seem to relate more to the repair or servicing

mechanic, who may use short cuts or ignore some of the basic

Safety precautions relating to tire repair.” Exhibit 6, U.S.

Department of Transportation Engineering Action Report at

4, Dec. 1991. The CPSC investigated and refused to take

regulatory action. IQ now sues in federal court for injunctive

relief it was unable to obtain from these federal agencies, as

well as for damages. In essence, IQ asks this Court to usurp

the role of the CPSC by interpreting the regulations

promulgated by the CPSC in the same was as IQ and by

* Both the statute and its legislative history evidence

Congress’ intent that the CPSC should enforce the scheme of the

FHSA. Riegel Textile Corp. v. Celanese Corp., 649 F.2d 894, 901

(2d Cir. 1981) (FHSA intended to be enforc« { “solely through

agency action”); Isgett v. WalMart Stores, 976 F. Supp. 422, 427-

28 (S.D. Miss. 1997) (no evidence in legislative history that

Congress intended to remove enforcement power from CPSC).

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District Court Memorandum and Order - 3/13/01

enforcing that interpretation of federal labeling requirements

under the FHSA in a manner contrary to the decisions of the

CPSC and the FTC.

Pennzoil emphasizes that there is no private right of

action under the FHSA. Riegel, 649 F.2d at 901; Isgett, 976

F. Supp. at 429. Private litigation under the statute would

“transfer regulatory interpretation and discretion” from the

CPSC, with its experience in consumer products, to courts,

“which are ill-equipped to undertake the burdens thus

imposed upon them.” Riegel, 649 F.2d at 902. The Second

Circuit further opined,

Implicit in [the FHSA] enforcement scheme is

the need of the CPSC to evaluate the exercise

of its enforcement power in light of a broad

range of policy considerations, particularly the

development of a coordinated regulatory

program. Because litigants in pursuit of a

_ private remedy are unconstrained by

institutional policies of uniformity, they could,

by instituting multiple lawsuits, undermine the

Act’s goal of a coordinated regulatory

program. Private litigation could deprive the

CPSC of an opportunity to build upon the

foundation provided by the FHSA and the

CPSC in establishing a sound and strong

federal regulatory policy governing hazardous

substances. Specifically, such litigation would

diminish the discretion of the CPSC to decide

whether a substance can be made safe merely

through cautionary labeling or must be banned

from the marketplace... .

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District Court Memorandum and Order - 3/13/01

Riegel, 649 F.2d at 901-02. Other courts have followed

Riegel in finding no private right of action under the FHSA.

Isgett, 976 F. Supp; at 429; Christenson v. St. Mary’s Hosp..,

835 F. Supp. 498, 501 (D. Minn. 1993); Palmer v. Liggett

Group, Inc., 635 F. Supp. 392, 297 (D. Mass. 1984), rev'd

on other grounds, 825 F.2d 620 (1st Cir. 1987); Thompson v.

Proctor & Gamble Co., 1982 WL 114, *3 (N.D. Cal. Dec.

8, 1982); Sparks v. Metalcraft, Inc., 408 N.W.2d 347 (Iowa

1987).

IQ’s reliance on the Lanham Act appears to be the

result of not being allowed to assert a cause of action under

the FHSA. Yet IQ specifically alleges that Fix-A-Flat

products should be labeled “flammable” pursuant to

regulations promulgated by the CPSC under the FHSA. IQ

merely and wrongly attempts to circumvent the regulatory

authority of the CPSC and to convert the Lanham Act into a

private_vehicle for enforcing the FHSA. “What [a statute

does] not create directly, the Lanham Act does not create

indirectly, at least not in cases requiring original

interpretation of [the statute] or the accompanying

regulations.” Sandoz Pharmaceuticals v. Richardson-Vicks,

Inc., 902 F.2d 222, 231 (3d Cir. 1990). See also Dial A Car,

Inc. v. Transportation, Inc., 884 F. Supp. 584, 593 (D.D.C.

1995) (inappropriate in a Lanham act case for a court to

determine how an administrative agency will interpret and

enforce its own regulations, thereby usurping the agency’s

area of responsibility), aff'd, 82 F.3d 484 (D.C. Cir. 1996).

By analogy Pennzoil demonstrates that the Third and

Fourth Circuits have rejected similar Lanham Act efforts in

cases that should fall under the Food, Drug and Cosmetic Act

(“FDCA”) . Sandoz, 902 F.2d at 230-31 (refusing to “usurp

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District Court Memorandum and Order - 3/13/01

the administrative agencies’ responsibility for interpreting and

enforcing potentially ambiguous regulations”); Mylan

Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1139 (4th Cir

1993)(refusing to allow Mylan to use the Lanham Act to

enforce the FDCA). Riegel notes the relationship between the

FDCA and the FHSA. 649 F.2d at 901. In Dial A Car. v.

Transportation, Inc., 82 F.3d at 488-90, the D.C. Circuit,

embracing the rational of Sandoz, dismissed a plaintiff's

Lanham Act claim and warned against turning the Lanham

Act into a “handy device” for enforcement of other laws.

Furthermore, argues Pennzoil, a determination of

whether Fix-A-Flat is flammable would require analysis,

interpretation and application of the FHSA and CPSC

regulations, exactly what the courts should avoid. Moreover,

the CPS has already considered this question. “[T]he CPS is

entitled to substantial amount of deference in interpreting the

regulations and implementing their objectives.” United States

v. Shelton Wholesale, Inc., 34 F. Supp. 2d 1147, 1155 (W.D.

Mo. 1999), citing Udal' v. Tallman, 380 U.S. 1, 16 (1965).

“Even if a court would have adopted a better alternative of

implementing a statute or regulation, the court is not

permitted to substitute its judgment for that of the agency.”

Id., citing Chevron U.S.A.v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 843 n. 11 (1984).

In response, IQ charges that the motion for summary

judgment, which does not challenge IQ’s ability to prove any

required element of its Lanham Act claim,‘ is “a disguised

* IQ states that it must prove the following elements for

its claim for misleading advertising under the Lanham Act: (1)

Pennzoil made false or misleading statements of fact concerning

me 66a

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District Court Memorandum and Order - 3/13/01

request for an early and untimely evidentiary ruling that the

fact that Fix-A-Flat was not properly labeled ‘Extremely

Flammable’ or ‘Flammable’ (as required by federal law) is

somehow irrelevant to IQ’s ability or entitlement to prove that

Pennzoil falsely advertised Fix-A-Flat.” IQ has never asserted

a private cause of action to enforce the FHSA, nor does-it

seek to enforce the FHSA through the Lanham Act; it seeks

only to impose liability on Pennzoil for its violations of the

Lanham Act.

IQ charges that each case cited by IQ is inapposite,

although its discussions of those cases are unclear.

Nevertheless, the cases speak for themselves and the Court

has reviewed them. In essence IQ insists that it will prove that

Pennzoil’s advertising that Fix-A-Flat was “Non-Explosive”

was literally false and misleading to the public and that the

advertising and labeling as to flammability was misleading to

the public, which would think that Fix-A-Flat was not

flammable because Pennzoil did not disclose on the cans that

it was “Extremely Flammable” or “Flammable.” Olson v.

Snap Products, Inc., 29 F. Supp. 2d 1027 (D. Minn. 1998)

(discussing Fix-A-Flat’s history and its false aid misleading

claims). IQ maintains that it will prove that purchasers of Fix-

Fix-A Flat; (2) the statement actually or tends to deceive a

substantial portion of the intended audience; (3) the statement is

material in that it will likely influence the deceived consumer’s

purchasing decisions; (4) the advertisements were introduced into

interstate commerce; and (5) there is some causal link between the

challenged statements and harm to IQ. American Council of

Certified Podiatric Physicians & Surgeons v. American Board of

Podiatric Surgery, Inc., 185 F.3d 606, 613 (6th Cir. 1999) ; Seven-

Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 n.3 (Sth Cir. 1996).

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District Court Memorandum and Order - 3/13/01

A-Flat considered it nonflammable because it was not labeled

“Extremely Flammable” or “Flammable.”

Furthermore, IQ argues that no preemptive

interpretation of any regulation is involved here. The CPSC

has already issued objective criteria that determine when a

tire-inflator product in a pressurized aerosol cans must be

labeled “Extremely Flammable” or “Flammable” to comply

with federal law.

In reply, Pennzoil observes that IQ is

mischaracterizing its suit and that “it is because labeling

requirements under the [FHSA] are so central to IQ’s suit that

Pennzoil contends that summary judgment is appropriate” to

bar IQ from ‘impermissibly seek[ing] to privately enforce the

FHSA through the Lanham Act.” Any proof of a misleading

label that IQ can offer turns on the Court’s threshold

determination of whether Fix-A-Flat is “Extremely

Flammable” or “Flammable”, as defined by CPSC

regulations promulgated under the FHSA. Pennzoil urges the

Court to agree with the Second Circuit that courts are “ill

equipped” to exercise this regulatory function under the

statute.

After reviewing the pleadings and the applicable law,

the Court concurs with Pennzoil that as a matter of law, IQ is

impermissibly attempting to circumvent the FHSA by

converting the Lanham Act into a vehicle to enforce the

FHSA, which bars private actions, and to usurp the regulatory

function of the CPSC here. Indeed, IQ has failed to controvert

Pennzoi!’s statements and evidence that the CPSC has already

acted on IQ’s labeling claims about flammability. Moreover,

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District Court Memorandum and Order - 3/13/01

IQ has not cited any decision in which a court allowed such

a Lanham Act to go forward.

Accordingly, the Court

ORDERS that Pennzoil’s motion for summary

judgment (#66) solely regarding IQ’s claim of misleading

labeling as to flammability is GRANTED.

SIGNED at Houston, Texas, this 12th day of March,

2001.

/s/ _

MELINDA HARMON

UNITED STATES DISTRICT JUDGE

APPENDIX F

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 01-20764

[Filed October 24, 2002]

IQ PRODUCTS COMPANY,

Plaintiff - Intervenor Defendant -

Counter Claimant - Appellant

PENNZOIL PRODUCTS COMPANY,

Intervenor Plaintiff - Counter

Defendant - Appellee

, PANDORA MANUFACTURING

INCORPORATED, also known as

Snap Products, Incorporated,

Defendant - Appellee

ee ee ee ee ee i a a ae ee a, ae, ee ae ee

Appeal from the United States District Court |

for the Southern District of Texas, Houston

70a

JUDGES:

Before DAVIS, DeMOSS, and STEWART, Circuit Judges.

Chief Judge King and Judges Jones and Clement did not

participate in the consideration of the rehearing en banc.

OPINION

ON PETITION FOR REHEARING AND

REHEARING EN BANC

PER CURIAM:

( X ) The Petition for Rehearing is DENIED and no

member of this panel nor judge in regular active service on

the court having requested that the court be polled on

Rehearing En Banc, (FED.R.APP.P. and STH CIR.R. 35) the

Petition for Rehearing En Banc is also DENIED.

( ) The Petition for Rehearing is DENIED and the court

having been polled at the request of one of the members of

the court and a majority of the judges who are in regular

active service not having voted in favor, (FED.R.APP.P. and

5th CIR.R. 35) the Petition for Rehearing En Banc is also

DENIED.

( ) A member of the court in active service having

requested a poll on the reconsideration of this cause en banc,

and a majority of the judges in active service not having voted

in favor, Rehearing En Banc is DENIED.

ENTERED FOR THE COURT:

/s/

W. Eugene Davis

United States Circuit Judge

ee Tla

Chief Judge King and Judges Jones and Clement did not

participate in the consideration of the rehearing en banc.

72a

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.