Opinion
Civil Action No. 01-2407-CM
August 28, 2002
MEMORANDUM AND ORDER
Plaintiff Accessible Technologies, Inc. has sued defendant Paxton Automotive Corporation under both the Lanham Act, 15 U.S.C. § 1125(a), and state common law. This matter is before the court on defendant's Motion to Dismiss (Doc. 34).
Background
Plaintiff in this case is in the business of manufacturing and distributing automotive superchargers and supercharger systems. Superchargers are air compressors that increase the horsepower and torque of an internal combustion engine. Defendant is a direct competitor with plaintiff. This lawsuit involves an article ("the Article") posted on defendant's website which, plaintiff alleges, sets forth false and misleading representations about plaintiff's supercharger, the F-3SC.
The Article, entitled "The B.S. of Racing and Parts for Your Mustang," states as follows:
Most of the current Pro 5.0 cars for example are closer to a Pro-Stock car than a Mustang. All the components are custom one-off pieces including engine parts and power adders.
There is nothing wrong with modifying the rules to allow cars to run fast. The dishonest part is representing that any custom component shares any of the abilities of the standard system sold for the street market. A recent advertisement in a Mustang magazine shows a supercharger system for the street with a caption that reads "7.02 @ 200 MPH, need we say more?" It would be impossible to perform that time with the supercharger displayed or any production supercharger available.
(Pl.'s Compl. ¶ 15). A photograph of plaintiff's supercharger is displayed above this statement. Plaintiff alleges that its F-3SC supercharger is the subject of defendant's article. Plaintiff further alleges that defendant's assertions are false because the F-3SC superchargers used on Pro 5.0 cars are not "custom one-off pieces," but rather, are off-the-shelf parts available to any customer of plaintiff's; the superchargers used by the Pro 5.0 racers are not custom components; and the "7.02 @ 200 MPH" claim is completely true and was achieved by Jim Summers, a driver, who used a standard, off-the-shelf, unmodified F-3SC to post a quarter-mile run of 7.02 seconds at 200 miles per hour.
Plaintiff also alleges that Jim Summers later beat that time using a standard, off-the-shelf, unmodified F-3SC to post a quarter-mile run of 6.95 seconds at 201 miles per hour and that Doug Mangrum used a standard, off-the-shelf, unmodified F-3SC to post a quarter-mile run of 6.98 seconds at 200.02 miles per hour.
Plaintiff claims that the foregoing assertions by defendant constitute false and misleading representations and unfair competition in violation of the Lanham Act and Kansas common law. Defendant argues that plaintiff cannot state a claim for relief under either theory of recovery.
Standard
The court will dismiss a cause of action for failure to state a claim only when it appears beyond a doubt that the plaintiff can prove no set of facts in support of the theory of recovery that would entitle him or her to relief, Conley v. Gibson , 355 U.S. 41, 45-46 (1957); Maher v. Durango Metals, Inc. , 144 F.3d 1302, 1304 (10th Cir. 1998), or when an issue of law is dispositive, Neitzke v. Williams , 490 U.S. 319, 326 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, Maher , 144 F.3d at 1304, and all reasonable inferences from those facts are viewed in favor of the plaintiff, Witt v. Roadway Express , 136 F.3d 1424, 1428 (10th Cir. 1998). The issue in resolving a motion such as this is not whether the plaintiff will ultimately prevail, but whether he or she is entitled to offer evidence to support the claims. Scheuer v. Rhodes , 416 U.S. 232, 236 (1974), overruled on other grounds, Davis v. Scherer , 468 U.S. 183 (1984).
Discussion State Law Claim
Plaintiff asserts that the representations made by defendant in the Article constitute unfair competition under Kansas law. Defendant argues that plaintiff's allegations do not state a claim for unfair competition because Kansas does not recognize plaintiff's cause of action. As a general rule, Kansas unfair competition law provides a cause of action for the misuse of trademark or other intellectual property. Schofield Auto Plaza, L.L.C. v. Carganza, Inc. , 26 Kan. App. 2d 104, 105, 979 P.2d 144, 147 (1999) ("The common-law tort of unfair competition allows a similar cause of action to prevent confusion between parties' products."); Packerware Corp. v. Corning Consumer Prods. Co. , 895 F. Supp. 1438, 1452 (D.Kan. 1995) ("The [Kansas state] law of unfair competition imposes liability against one who markets goods bearing an unprivileged imitation of the physical appearance of another's goods."); Wichita Clinic, P.A. v. Columbia/HCA Healthcare Corp. , 45 F. Supp.2d 1164, 1199 (D.Kan. 1999) ("Recent Kansas cases discussing the tort of unfair competition have all involved claims of misuse of intellectual property."). Plaintiff recognizes this fact, admitting that no Kansas court has allowed an unfair competition claim outside the confines of intellectual property law. Plaintiff argues, however, that the Kansas Supreme Court likely would recognize an unfair competition claim based on false advertising.
In support of its argument, plaintiff relies on Airport Systems International, Inc. v. Airsys ATM, Inc. , 144 F. Supp.2d 1268 (D.Kan. 2001). In Airport Systems , Judge Vratil rejected the notion that unfair competition claims under Kansas law are restricted to the wrongful use of intellectual property, and recognized a claim for unfair competition based on misuse of trade secrets and other confidential information. Id. at 1270-72. In so holding, Judge Vratil turned to the Restatement (Third) of Unfair Competition . Section 1 of Restatement (Third) provides that the tort of unfair competition is available for misappropriation of "trade secrets." Restatement (Third) of Unfair Competition § 1(a)(3). Judge Vratil recognized that Kansas has not adopted the Restatement (Third) of Unfair Competition , but predicted that the Kansas Supreme Court would apply the general principles outlined therein.
Plaintiff contends that, based on the reasoning set forth in Airport Systems , there is every reason to believe the Kansas Supreme Court would recognize a claim for unfair competition based on deceptive marketing. Plaintiff points out that the Restatement (Third) provides that the tort of unfair competition is available for "other acts or practices of the actor determined to be actionable as an unfair method of competition." Id. More specific to this case, plaintiff directs the court's attention to that section of the Restatement (Third) which provides that "deceptive marketing" is an actionable claim. Id. § 1(a)(1). However, upon review, the court determines that, unlike the facts in Airport Systems , the Restatement (Third) does not specifically provide a cause of action for plaintiff in this case.
The Restatement (Third) states:
One who causes harm to the commercial relations of another by engaging in a business or trade is not subject to liability to the other for such harm unless:
(a) the harm results from acts or practices of the actor actionable by the other under the rules of this Restatement relating to:
(1) deceptive marketing, as specified in Chapter Two
Restatement (Third) of Unfair Competition: The Freedom to Compete § 1 (emphasis added). The Introductory Note to Chapter Two provides in part:
This Chapter addresses the rules governing liability for injury to the commercial interests of competitors and others arising from the use of deceptive representations in the marketing of goods and services. It encompasses representations falsely describing the qualities or characteristics of a seller's goods or services, often referred to as "false advertising," and misrepresentations relating to the source of a seller"s goods or services, sometimes referred to as "passing off."
Restatement (Third) of Unfair Competition: Deceptive Marketing introductory note. The relevant section of Chapter Two then states:
One who, in connection with the marketing of goods or services, makes a representation relating to the actor's own goods, services, or commercial activities that is likely to deceive or mislead prospective purchasers to the likely commercial detriment of another under the rule stated in § 3 is subject to liability to the other for the relief appropriate under the rules stated in §§ 35-37.
Id. § 2 (emphasis added). In the case at hand, plaintiff complains not about defendant's representations relating to defendant's own goods, but rather about defendant's representations relating to plaintiff's goods. The plain language of the Restatement (Third) does not appear to apply to cases in which a plaintiff complains about a defendant's deceptive advertising relating to that plaintiff's goods, services, or commercial activities. The court is not willing at this juncture to predict that the Kansas Supreme Court would interpret the Restatement (Third) as providing a cause of action not expressly stated therein, where a plaintiff complains about a defendant's deceptive advertising relating to that plaintiff's goods, services, or commercial activities.
Such a conclusion is especially compelling in light of the fact that Kansas courts have to date allowed claims for unfair competition only when such claims involve the misuse of trademark or other intellectual property. Additionally, plaintiff's claim in this case closely resembles a claim for business or product disparagement, which Kansas courts have not yet recognized. See, e.g., Rodriguez v. ECRI Shared Servs., 984 F. Supp. 1363, 1368 (D.Kan. 1997) ("[T]he court can find no cases suggesting that Kansas recognizes business disparagement as a distinct cause of action.").
This case therefore differs from Airport Systems. In Airport Systems, the cause of action plaintiff asserted, misappropriation of trade secrets, was expressly provided for in the Restatement (Third). Moreover, in Airport Systems, the court allowed an unfair competition claim for the misappropriation of trade secrets, which is consistent with the Kansas courts' recognition of claims involving the misuse of intellectual property.
The court therefore concludes that plaintiff has failed to state a claim for unfair competition under state law. No Kansas court has recognized such a cause of action, and this court declines to predict that the Kansas Supreme Court would recognize such a cause of action. Plaintiff's unfair competition claim is therefore dismissed.
Lanham Act Claim
Plaintiff alleges a cause of action under the Lanham Act. Section 43(a) of the Act, as amended, provides in relevant part that:
Any person who, on or in connection with any goods or services, . . . uses in commerce . . . any . . . false or misleading representation of fact which . . . in commercial advertising or promotion misrepresents the nature, characteristics, [or] qualities . . . of . . . 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.15 U.S.C. § 1125(a)(1)(B). Defendant first argues that the Article does not identify plaintiff's product, identify or attack any good's inherent quality, nor make any representation about the nature, characteristics, qualities, or geographic origin of plaintiff's product.
With respect to defendant's contention that the Article does not specifically identify plaintiff's product, the court notes that an advertisement need not specifically name a competitor to be considered a form of false comparative advertising. Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 946 (3d Cir. 1993). In this case, the reference to plaintiff's product is by necessary implication, especially in light of the fact that a photograph of plaintiff's product is displayed with the text of the Article and the Article specifically refers to the supercharger displayed in the photograph. (Pl.'s Compl. ¶ 15) ("It would be impossible to perform that time with the supercharger displayed. . . .). Consumers are left with the obvious conclusion that defendant's Article refers to plaintiff's product. The court finds that the Article does in fact identify plaintiff's product.
The court also finds that the Article attacks the inherent quality of plaintiff's product. The Article represents that plaintiff's product cannot perform the quarter-mile in the time plaintiff claims. The time in which a supercharger can perform is an essential characteristic or quality of that supercharger. Thus, the Article's representation attacks a characteristic or quality of plaintiff's supercharger by claiming that the supercharger cannot perform the quarter-mile in 7.02 seconds at 200 miles per hour.
Defendant next asserts that plaintiff's claim is not actionable because plaintiff has failed to allege that the advertisement claiming "7.02 @ 200 MPH" belongs to plaintiff. The Article apparently refers to an advertisement by one of plaintiff's dealers which depicts plaintiff's supercharger, displays plaintiff's name, and refers to plaintiff's commercial activities. The court finds that simply because plaintiff did not write or pay for the advertisement at issue does make defendant's statements any less disparaging to plaintiff's product.
Finally, defendant argues that plaintiff has failed to allege that the Article's representations about the photographed product are false or misleading. Defendant asserts that there is no allegation or reference that the photographed product could, in fact, possibly perform as claimed by the advertisement. However, upon review of plaintiff's complaint, the court finds that plaintiff has alleged that the F-3SC is not a custom component and can perform the quarter-mile in 7.02 seconds at 200 miles per hour. (Pl.'s Compl. ¶¶ 11, 12, 17-19). The statement by defendant that "[i]t would be impossible to perform that time with the supercharger displayed or any production supercharger available" is an assertion that plaintiff's supercharger cannot achieve the quarter-mile results cited in the advertisement. Therefore, plaintiff has sufficiently alleged in the complaint that defendant's statement is false.
Defendant disputes that the Article contains false representations and contends that, when viewed in context, the Article merely sets forth the opinion that advertising within the industry is inaccurate, thereby underscoring the need for industry participants to avoid touting performance in a way that creates the false impression that customers may purchase racing performance "off-the-shelf." While the Article does in fact state an opinion regarding advertising in the industry, the Article uses plaintiff's product for illustrative purposes and declares that plaintiff's product cannot perform as claimed. Viewing the Article in its entirety does not alter the court's conclusion that plaintiff has stated a claim under the Lanham Act. Accordingly, defendant's motion to dismiss this claim is denied.
IT IS THEREFORE ORDERED that defendant's Motion to Dismiss (Doc. 34) is granted in part and denied in part. Plaintiff's state law claim for unfair competition is dismissed. The claim remaining in this case is plaintiff's claim under the Lanham Act.