Boltex Manufacturing Company v. Galperti, I ( 2020 )

Case: 19-20440 Document: 00515560578 Page: 1 Date Filed: 09/11/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 11, 2020
No. 19-20440
Lyle W. Cayce
Clerk
BOLTEX MANUFACTURING COMPANY, L.P.; WELDBEND
CORPORATION,
Plaintiffs - Appellants Cross-Appellees
v.
GALPERTI, INCORPORATED; OFFICINE NICOLA GALPERTI E FIGLIO
S.P.A.,
Defendants - Appellees Cross-Appellants
Appeals from the United States District Court
for the Southern District of Texas
USDC No. 4:17-CV-1439
Before SMITH, HIGGINSON, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
Boltex Manufacturing Co., L.P. (Boltex) and Weldbend Corp. (Weldbend)
filed Lanham Act claims for false advertising and unfair competition, as well
as Texas common law claims for unfair competition, against Galperti, Inc.
(Galperti) and its Italian affiliate, Officine Nicola Galperti e Figlio (ONG).
Galperti counterclaimed alleging false advertising, false designation of origin,
*Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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and unfair competition. The district court granted summary judgment on all
of the parties’ claims. We AFFIRM.
I.
The parties in this case manufacture carbon steel flanges, which are
metal discs and rings used to connect pipes, valves, pumps, and other
equipment in the oil and gas, petrochemical, and construction industries. The
American Society of Testing and Materials (ASTM) issues standards
prescribing chemical and mechanical property requirements for forged carbon
steel flanges. Under the ASTM A105 standard, flanges above pressure class
300 must undergo a heat treatment process to increase the carbon steel’s
toughness and ductility. Here, the dispute centers on an extensive heat
treatment process called normalization. Because normalized flanges cost more
to manufacture, they are generally priced higher than non-normalized flanges.
Plaintiffs Boltex and Weldbend alleged that Defendants Galperti and
ONG advertise their flanges as normalized, even though they are not. Galperti
counterclaimed that Boltex and Weldbend falsely advertise their products as
American-made and misrepresent their quality, characteristics, and technical
standards. 1 The district court concluded that Plaintiffs failed to produce
summary judgment evidence creating a genuine issue of material fact as to
their alleged injury; accordingly, the court granted summary judgment in favor
of Defendants on Plaintiffs’ Lanham Act and unfair competition claims. The
district court likewise found that Galperti had not raised sufficient evidence of
likelihood of injury to withstand summary judgment on its counterclaims; the
court therefore granted summary judgment in favor of Plaintiffs on Galperti’s
Lanham Act and unfair competition counterclaims. Both sides appeal.
1 ONG filed its own answer which did not include any counterclaim(s).
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II.
We review a grant of summary judgment de novo, applying the same
legal standard as the district court. Springboards To Educ., Inc. v. Houston
Indep. Sch. Dist., 912 F.3d 805, 811 (5th Cir. 2019). Summary judgment is
warranted when the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law. Id.;
Fed. R. Civ. P. 56(a). When, as here, cross-motions for summary judgment
have been ruled upon, we examine “each party’s motion independently” and
view “the evidence and inferences in the light most favorable to the nonmoving
party.” Springboards, 912 F.3d at 811 (quoting JP Morgan Chase Bank, N.A.
v. Data Treasury Corp., 823 F.3d 1006, 1011 (5th Cir. 2016)). A genuine issue
of material fact exists if a reasonable jury could find for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 US. 242, 252 (1986).
III.
Section 43(a) of the Lanham Act, codified at 15 U.S.C. § 1125, establishes
a cause of action for, among other things, false advertising:
Any person who, on or in connection with any goods or services, or
any container of 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 is likely to cause
confusion, or to cause mistake, or to deceive as to the affiliation,
connection, or association of such person with another person, or
as to the origin, sponsorship, or approval of his or her goods,
services, or commercial activities by another person, or 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
likely to be damaged by such act.
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15 U.S.C. § 1125(a)(1)(A)–(B). To establish a prima facie case of false
advertising under Section 43(a), the plaintiff must show that the defendant
made (1) a false or misleading statement of fact about a product; (2) the
statement was deceptive; (3) the deception is material; (4) the product is in
interstate commerce; and (5) the plaintiff has been injured or is likely to be
injured as a result. Logan v. Burgers Ozark Country Cured Hams, Inc., 263
F.3d 447, 462 (5th Cir. 2001). “The failure to prove the existence of any element
of the prima facie case is fatal to the plaintiff’s claim.” Pizza Hut, Inc. v. Papa
John’s Int’l, Inc., 227 F.3d 489, 495 (5th Cir. 2000).
The motions for summary judgment here turn on the final element:
injury. At the outset, Plaintiffs contend that the district court erred by
applying too stringent a standard for injury. The requisite burden of proof on
the injury element of a false advertising claim is dependent upon the type of
relief sought. A claimant seeking injunctive relief must prove that he is likely
to be injured. See Schlotsky’s, Ltd. v. Sterling Purchasing and Nat’l Distrib.
Co., 520 F.3d 393, 401 (5th Cir. 2008). A claimant seeking disgorgement of
profits “must demonstrate injury or likely injury due to the defendant’s false
advertising.” Retractable Techs., Inc. v. Becton Dickinson & Co., 919 F.3d 869,
877 (5th Cir. 2019). A claimant seeking actual damages must prove that he
has been injured in some way. See Logan, 263 F.3d at 463. The “some injury”
requirement does not necessitate proof of actual losses. See id. at 462–63. “A
plaintiff must nevertheless put forth ‘competent summary judgment evidence
that indicates that consumers would have bought [plaintiff’s] products instead
of the [defendant’s products] in the absence of the defendant[’]s[] allegedly false
. . . statements.” IQ Prods. Co. v. Pennzoil Prods. Co., 305 F.3d 368, 376 (5th
Cir. 2002).
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In their complaint, Plaintiffs seek, among other forms of relief, injunctive
relief, disgorgement of profits, and actual damages. Accordingly, Plaintiffs
assert that they should have been required to prove only the likelihood of
injury, as opposed to actual injury, in order to survive summary judgment.
Plaintiffs further contend that the district court erred by requiring a specific
type of evidence—lost sales. But a review of the court’s summary judgment
order belies that assertion. The district court simply evaluated the injury
evidence that Plaintiffs presented, most of which was offered in support of their
allegation of lost sales. We agree with the district court that Plaintiffs’ injury
evidence fails to raise a genuine issue of material fact.
In their opening brief, Plaintiffs contend they raised several categories
of injury evidence at summary judgment: (1) Plaintiffs and Defendants were
direct competitors in the flange market; (2) deposition testimony from
Plaintiffs’ executives that Defendants’ statements caused Plaintiffs to lose
sales; (3) customer statements which the district court declined to consider
because they constitute inadmissible hearsay; and (4) Plaintiffs’ damages
expert report and testimony. 2 We address each in turn.
First, Boltex and Weldbend contend that because they and Defendants
are among the market leaders for flanges within a limited pool of competitors,
2To the extent Plaintiffs argue that emails sent to two customers by Galperti create
an independent factual dispute as to likely injury, the Lanham Act is only triggered by
“commercial advertising or promotion.” 15 U.S.C. § 1125(a). Long-standing precedent in this
circuit holds that, in order to constitute “commercial advertising or promotion,” the
challenged communication must have been “disseminated sufficiently to the relevant
purchasing public.” Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384 (5th Cir. 1996).
Though we have held that a communication sent to 11 customers in a market consisting of
74 customers was sufficiently disseminated to trigger the protections of the Lanham Act, id.,Galperti has demonstrated that the “relevant purchasing public” here consisted of as many
as 81 customers—a fact that Boltex does not deny—while the challenged communications
were only distributed to two customers. Further, Plaintiffs do not argue and have identified
no evidence suggesting that the two customers who received the challenged communications
wield outsized purchasing power. Because these two emails were not “commercial
advertising or promotion,” the Lanham Act does not apply to representations made in them.
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there should be a presumption that they were injured by Defendants’ allegedly
false statements that their flanges were normalized. But Plaintiffs cite no
controlling caselaw which sets out such a flexible standard. 3 Without more,
Plaintiffs’ argument on this point is meritless.
Next, Boltex and Weldbend point to deposition testimony as evidence of
lost sales. Plaintiffs begin with testimony from Frank Bernobich, Boltex’s
president, and James Coulas Jr., Weldbend’s president, asserting that if
Galperti had not normalized their flanges or their customers knew that they
were not normalized, Plaintiffs would have gotten some of that business. A
review of these executives’ testimony confirms the district court’s conclusion
that it is speculative and inadmissible hearsay.
When asked which customers had purchased Defendants’ flanges
instead of Plaintiffs’, Bernobich speculated about losing a few customers before
concluding, “I have no idea the number of people.” When further prodded by
counsel about lost sales, Bernobich summarily concluded that customers would
not have purchased flanges that were not normalized and Plaintiffs “would
have certainly gotten a portion of that business.” Bernobich’s testimony serves
as nothing more than the kind of conclusory allegations and unsubstantiated
assertions which cannot defeat summary judgment. See SEC v. Arcturus
Corp., 928 F.3d 400, 409 (5th Cir. 2019).
Coulas’ testimony is likewise unhelpful. After Coulas named four
customers that had allegedly purchased Defendants’ flange instead of
Plaintiffs’, counsel asked how he knew that, and Coulas responded, “I’m pretty
sure we’ve been told that they placed orders with Galperti or ULMA, because
3 Even the out-of-circuit cases Plaintiffs cite in their reply brief to support their
argument that being in direct competition with Defendants, standing alone, is sufficient to
demonstrate likely injury are unpersuasive, as the cases Plaintiffs cite have significant
factual and evidentiary distinctions from the instant case.
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their—their customers are now requesting it.” Not only is the reliability of this
testimony tenuous at best, but also, whatever limited knowledge Coulas has of
these alleged lost sales stems from statements made by customers to a
Weldbend salesperson; this information was then at some point relayed to
Coulas by an unidentified source. This is classic hearsay evidence; and indeed,
certain portions of Coulas’ testimony actually constitute hearsay within
hearsay. See Fed. R. Evid. 801(c)(2). Accordingly, Coulas’ testimony cannot be
considered at summary judgment unless Plaintiffs show that the material may
be presented in a form that would be admissible at trial. See Lee v. Offshore
Logistical and Transp., L.L.C., 859 F.3d 353, 355 (5th Cir. 2017). Plaintiffs
failed to do so. Fowler v. Smith, 68 F.3d 124, 126 (5th Cir. 1995).
Plaintiffs’ other testimonial evidence suffers from similar defects. In his
deposition, Doyle Adam, Boltex’s sales manager, testified that two customers
told Boltex that it had lost sales to Defendants. 4 Again, this is plainly hearsay.
See Fed. R. Evid. 801(c). Therefore, Adam’s testimony, like Coulas’ testimony,
was properly identified by the district court as inadmissible hearsay evidence
which should not be considered at summary judgment, other than in a form
that would be admissible. 5 Moreover, in responding to counsel’s prompts,
Adam agreed that price, the delivery date, and the lead time are common
reasons why Boltex could lose a sale, but at no point did Adam indicate the
4Adam, however, does not identify who at Boltex was told about these lost sales.
5 Although Plaintiffs neglected to raise this argument in the district court, Plaintiffs
now contend that Adam’s testimony meets the business records hearsay exception under Rule
803(6) because Adam testified that Boltex keeps customer reports about lost sales. This
argument has no merit. Most obviously, the business records exception does not apply here
because the evidence in question is deposition testimony about supposed customer reports,
not the actual customer reports themselves. See United States v. Wells, 262 F.3d 455, 460–
62 (5th Cir. 2001). There is no indication, nor do Plaintiffs even argue, that they produced
these customer reports, an affidavit attesting to their existence or authenticity, or otherwise
show that Adam’s testimony satisfies any of the requirements for business records. See Fed.
R. Evid. 803(6). Plaintiffs’ additional argument that Adam’s testimony is admissible as a
residual exception under Rule 807 likewise lacks merit. See Fed. R. Evid. 807.
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reason for these unidentified lost sales that allegedly went to Defendants. So,
even if Adam’s testimony were considered on summary judgment, there is
nothing in the record to suggest that the alleged lost sales Adam mentions were
the result of Defendants’ normalization representations.
Although the next round of testimony Plaintiffs offer as evidence is
admissible, it does not create a genuine issue of material fact as to injury.
Plaintiffs first cite the testimony of F.T. Graff, a vice president at MRC Global
(MRC), a distributor of flanges in the United States. Graff’s statements
confirm that at some point in the past MRC purchased flanges from Galperti
and that MRC currently purchases flanges from Boltex. But there is no
testimony indicating that MRC would have bought Boltex’s flanges—much less
Weldbend’s flanges—instead of Galperti’s in the absence of Defendants’
allegedly false statements. See IQ Prods., 305 F.3d at 376. Plaintiffs then cite
the testimony of Susan Bouquet, a director at another distributer,
DistributionNOW (DNOW). Bouquet testified that DNOW relies on Galperti’s
representations that it normalizes its flanges, and further that, hypothetically,
if DNOW could not get a flange from Galperti, DNOW, generally speaking,
would be able to get the flange from another one of its core suppliers. Bouquet’s
testimony though does not demonstrate that DNOW would actually take such
action or would even be likely to take that action—only that DNOW, generally
speaking, would be able to do so. Moreover, even contemplating such a
situation, there is a fourth core supplier, Coffer, to which any potential diverted
sales could have gone if Galperti could not supply the normalized flanges
DNOW sought. And there are also additional suppliers, e.g. ULMA, from
whom DNOW may have purchased the flanges sought. Although Plaintiffs
need not show specific lost sales, they must still produce enough evidence to
confirm there exists a “real and immediate threat of future or continuing injury
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apart from any past injury.” See Retractable Techs., 919 F.3d at 875. We
conclude that these two customers’ testimonies do not suffice.
Lastly, Plaintiffs assert that they demonstrated evidence of injury
through the report of their damages expert, Thomas Britven. But this
argument is unpersuasive. Plaintiffs did not rely on Britven’s report to
establish causation before the district court. Indeed, Plaintiffs did not identify
any portion of the report related to causation in their summary judgment
briefing to the district court. We will not consider this new theory about the
evidence that was never pinpointed for the district court.
As to Plaintiffs’ unfair competition claims, we generally analyze Lanham
Act false advertising claims and common law unfair competition claims
together. See, e.g., King v. Ames, 179 F.3d 370, 374–75 (5th Cir. 1999).
Consequently, Plaintiffs’ failure to produce injury evidence creating a genuine
issue of material fact on their Lanham Act claims dooms their unfair
competition claims, as well. Accordingly, we AFFIRM the district court’s
summary judgment on all of Plaintiffs’ claims.
IV.
In its answer to Plaintiffs’ complaint, Galperti raised counterclaims
against Plaintiffs for false designation of origin on its goods, false advertising,
and unfair competition. 6 Galperti alleged that Plaintiffs violated the Lanham
Act by advertising their flanges as being of U.S. origin. Galperti sought, inter
alia, injunctive relief and disgorgement of profits.
Yet, as with Plaintiffs’ claims, the district court summarily concluded
that Galperti, on its counterclaims, likewise failed to provide any evidence that
created a genuine issue of material fact as to injury. Accordingly, the court
6 Recall that ONG did not bring counterclaims against Plaintiffs.
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granted summary judgment in favor of Plaintiffs on all of Galperti’s Lanham
Act counterclaims. And the court granted summary judgment on all of
Galperti’s unfair competition claims, as well. On appeal, Galperti contends
that it produced sufficient summary judgment evidence to create a fact issue
as to whether Galperti was likely to be injured by Plaintiffs’ alleged
misrepresentations and whether Galperti was entitled to disgorgement of
Plaintiffs’ profits.
Because of the type of relief it sought, Galperti was not required to prove
actual injury, but had to at least prove the likelihood of injury. See
Schlotzsky’s, 520 F.3d at 401. Nevertheless, the district court concluded that
Galperti failed to prove even a likelihood of injury because Galperti had not
presented any evidence that would allow a factfinder to infer that the parties
are competitors in the market for U.S.-sourced flanges. We agree.
At summary judgment, Galperti did not point to evidence of, nor did it
even assert, that it produces U.S.-sourced flanges. Instead, Galperti appears
to argue that it is likely to be injured because it does not falsely advertise its
foreign-sourced flanges as being U.S.-sourced, as Plaintiffs allegedly do. But
that theory of injury fails for Galperti because any profits Plaintiffs gain from
their allegedly false advertising would not be at Galperti’s expense unless
Galperti too competes in the market for U.S.-sourced flanges. Yet, it is not
until the instant appeal that Galperti explicitly avers that it competes in such
a market. In support, Galperti points to the declaration of Andrea Galperti, a
Director for the company, wherein he states that some of the steel Galperti
uses is of United States origin. He also states that although Galperti does not
have any commercial advertisements touting that its flanges are American-
made, “Galperti has the ability to and does manufacture large numbers of
carbon steel flanges entirely from U.S. sourced materials, and those flanges
qualify as [American-made].”
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But at summary judgment, Galperti’s only allusion to Andrea Galperti’s
declaration is in a footnote. And instead of citing the above statements, as it
now does on appeal, Galperti cited Andrea Galperti’s declaration for the
proposition that “Galperti is at a material disadvantage against [Plaintiffs]
who commercially advertise that flanges are [‘]Made in the USA[’] or the like
without actually using U.S.-sourced steel and forgings because Galperti does
not falsely advertise its non-U.S. steel and flange-sourced products as [‘]Made
in America[’] or the like.” Galperti’s contention that it is likely injured because
Plaintiffs falsely advertise their flanges while Galperti does not is
unpersuasive. Galperti cannot demonstrate injury or likely injury simply
because they too could falsely advertise their foreign-sourced flanges as being
U.S.-sourced, but they do not. Rather, Galperti was required to demonstrate
that because it competes in the same market as Plaintiffs—the market for
U.S.-sourced flanges—when Plaintiffs falsely advertised their flanges as being
American-made, Galperti was likely injured.
Because Galperti produced insufficient summary judgment evidence
which would allow a factfinder to infer that the parties are competitors in the
market for U.S.-sourced flanges, we affirm the district court’s grant of
summary judgment as to Galperti’s Lanham Act claims for false designation of
origin and false advertising.
Galperti’s counterclaims for unfair competition likewise fail. Unfair
competition requires that the “plaintiff show an illegal act by the defendant
which interfered with the plaintiff’s ability to conduct business.” Taylor Pub.
Co. v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000). “Although the illegal act
need not necessarily violate criminal law, it must be an independent tort.” Id.Galperti alleged unfair competition in three ways. First, Galperti
alleged unfair competition based on its Lanham Act claims. As previously
stated, we analyze Lanham Act false advertising claims and common law
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unfair competition claims together. See, e.g., King, 179 F.3d at 374–75. We
therefore affirm the court’s grant of summary judgment as to Galperti’s unfair
competition claims that rely on its Lanham Act claims. See id. Galperti also
alleged unfair competition when Weldbend underreported the yield strength of
its flanges, and when Boltex “misrepresented itself as having expertise in the
field of carbon steel flanges and misrepresenting to consumers what the
technical standards are for ASTM A105 carbon steel flanges.” The district
court, finding that Galperti had not provided any summary judgment evidence
that these acts “interfered with their ability to conduct business,” granted
summary judgment on all of Galperti’s unfair competition claims. Seeing no
error in the district court’s analysis and a lack of evidence to support Galperti’s
contentions, we affirm summary judgment on these unfair competition claims,
as well.
For these reasons, we AFFIRM the district court’s summary judgment
order disposing of all of the parties’ claims.
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