Southland Sod Farms v. Stover Seed Co.

• Citation: 108 F.3d 1134
• Decision Date: 11 March 1997
• Docket Number: No. 94-56137,94-56137
• Parties: 1997-1 Trade Cases P 71,742, 42 U.S.P.Q.2d 1097, 46 Fed. R. Evid. Serv. 797, 97 Cal. Daily Op. Serv. 1804, 97 Daily Journal D.A.R. 3368 SOUTHLAND SOD FARMS; Pickseed West Inc., Plaintiffs-Appellants, v. STOVER SEED CO.; Warrens Turf Nursery, Defendants-Appellees. Turf Merchants Inc.; Genesis Group; TMI Acquisition Inc.; KWS Seeds, Inc.; Frederick B. Ledeboer, Defendants-Cross-Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1134

108 F.3d 1134

1997-1 Trade Cases P 71,742, 42 U.S.P.Q.2d 1097,

46 Fed. R. Evid. Serv. 797,

97 Cal. Daily Op. Serv. 1804,

97 Daily Journal D.A.R. 3368

SOUTHLAND SOD FARMS; Pickseed West Inc., Plaintiffs-Appellants, v. STOVER SEED CO.; Warrens Turf Nursery, Defendants-Appellees Turf Merchants Inc.; Genesis Group; TMI Acquisition Inc. KWS Seeds, Inc.; Frederick B. Ledeboer Defendants-Cross-Defendants-Appellees.

No. 94-56137.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 6, 1996.

Decided March 11, 1997.

Louis P. Petrich, David Aronoff, Leopold, Petrich & Smith, Los Angeles, California; Robert L. Compton, Susan M. Seemiller, Nordman, Cormany, Hair & Compton, Oxnard, California, for plaintiffs-appellants Southland Sod Farms and Pickseed West Inc.

Craig Donahue, Christian E. Sanne, Kevin M. McCormick, Thomas & Price, Glendale, California, for defendant-cross-defendant-appellee KWS Seeds, Inc.

Leslie E. Criswell, David Berry, Hornberger & Criswell, Los Angeles, California, for defendant-appellee Stover Seed Company.

Theresa M. Marchlewski, William E. Ireland, Tamara Equals Holmes, Haight, Brown & Bonesteel, Santa Monica, California, for defendants-appellees Turf Merchants, Inc. and The Genesis Group.

Timothy J. Hughes, Heidi S. Hart, Daniels, Baratta & Fine, Los Angeles, California, for defendant-appellee TMI Acquisition, Inc.

Appeal from the United States District Court for the Central District of California; James M. Ideman, District Judge, Presiding, D.C. No. CV-92-04894-JMI.

Before: BEEZER, BRUNETTI, and JOHN T. NOONAN, Jr., Circuit Judges.

OPINION

BRUNETTI, Circuit Judge:

Plaintiffs and Defendants are competing producers of turfgrass seed and sod. After Defendants ran advertisements claiming that their turfgrass was better than Plaintiffs' in certain key characteristics, Plaintiffs brought this lawsuit alleging false advertising under the Lanham Act and related state laws. The district court granted Defendants' motion for summary judgment, ruling that Plaintiffs had failed to raise a triable issue of fact on the key issues of falsity, causation, and damages. We have jurisdiction pursuant to 28 U.S.C. § 1291 and reverse in part the district court's judgment.

FACTS AND PROCEEDINGS BELOW

I. The Parties and the Turfgrass Business

The parties to this dispute are competing producers of turfgrass seed and sod. Each of the parties produces and sells a "dwarf tall fescue" turfgrass under a separate brand name: Plaintiff-Appellant Southland Sod Farms produces and sells "Marathon IIe"; Plaintiff-Appellant Pickseed West, Inc. produces and sells "Shortstop"; and Defendants-Appellees Turf Merchants, Inc., The Genesis Group, TMI Acquisition, Inc., KWS Seeds, Inc., and Frederick B. Ledeboer produce and sell "Bonsai."

II. The Allegedly Offending Advertisements

Plaintiffs allege that, beginning in 1990, Defendants distributed comparative advertisements claiming that Bonsai grows much slower (a desirable turfgrass characteristic because it results in less mowing and maintenance costs) than other dwarf tall fescues, including those produced by Plaintiffs. The allegedly offending advertisements consisted of three types: (1) "bar chart" advertisements graphically comparing clipping weights of several tall fescues, including Pickseed's Shortstop; (2) a "two-pot" advertisement, which contains a table and photograph comparing Bonsai and Southland's Marathon IIe and claiming that in an "independent comparison test" "Bonsai tested best" in "major turf characteristics"; and (3) a claim on Defendants' Bonsai seed containers and elsewhere that Bonsai requires "50% less mowing" based on "tests conducted by our research farm."

III. Plaintiffs' Allegations of Falsity

Plaintiffs allege that Defendants' product superiority claims contained in their comparison advertisements are false. In fact, argue Plaintiffs, there are no significant differences between Bonsai, Marathon IIe, and Shortstop in the turfgrass characteristics emphasized by Defendants, including growth, density, and maintenance costs.

According to Plaintiffs, the tests upon which Defendants based their product-comparison advertisements were faulty because they were undertaken in the first spring following a fall planting. For some reason, juvenile Bonsai planted in the fall has unusually slow establishment as a seedling and starts spring growth in late March or early April, about a month later than other dwarf tall fescues. The test underlying the bar-chart advertisements, conducted by Frederick Ledeboer, was undertaken from March through May 1990 following a September 1989 planting date. ¹ The test underlying the two-pot advertisement was conducted by Stan Spaulding from November 23, 1991 through April 2, 1992 on grass that had just been planted. Because both of these tests collected data only during those months during which Bonsai experienced its unique juvenile growth characteristics, neither could form a reliable basis for claims regarding the year-round growth characteristics of mature turfgrass. According to Plaintiffs, when they conducted their own comparison tests on mature turfgrass, they discovered that mature Bonsai does not have any of the advantages claimed by Defendants.

IV. Procedural History

Plaintiffs commenced this action on August 14, 1992, alleging violations of § 43(a) of the Lanham Act, California Business & Professions Code §§ 17200 and 17500, and California common law. After the district court denied Plaintiffs' motion for a preliminary injunction, Defendants filed a motion for summary judgment. On April 5, 1994, the district court granted the motion as to all defendants, finding: (1) that the advertisements were not literally false as a matter of law; (2) that Plaintiffs failed to raise a genuine issue of fact as to whether the advertisements deceived consumers; (3) that Plaintiffs failed to raise a triable issue of fact as to causation and damages; and (4) that for the same reasons that Plaintiffs' Lanham Act claims failed, so did their state-law causes of action. On July 6, 1994, the district court denied Plaintiffs' motion for reconsideration.

Plaintiffs appeal from the district court's grant of summary judgment and denial of their motion for reconsideration.

DISCUSSION

I. Summary Judgment Standard

The district court's grant of summary judgment is reviewed de novo. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert denied, --- U.S. ----, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). This Court must determine whether the evidence, "viewed in the light most favorable to the non-moving party, presents any genuine issues of material fact and whether the district court correctly applied the law." Id. "The court must not weigh the evidence or determine the truth of the matters asserted but only determine whether there is a genuine issue for trial." Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1131 (9th Cir.1994).

II. Lanham Act Standards

The elements of a Lanham Act § 43(a) ² false advertising claim are: (1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; ³ and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products. Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir.1990); accord ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 964 (D.C.Cir.1990). To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers. Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943, 946 (3d Cir.1993) ("Castrol ").

A. Literal Falsity

To prove that an advertisement claim based on product testing is literally false, "a plaintiff must do more than show that the tests supporting the challenged claim are unpersuasive." McNeil-P.C.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544, 1549 (2d Cir.1991); Procter & Gamble Co. v. Chesebrough-Pond's, Inc., 747 F.2d 114, 119 (2d Cir.1984). "Rather, the plaintiff must demonstrate that such tests 'are not sufficiently reliable to permit one to conclude with reasonable certainty that they established' the claim made." McNeil-P.C.C., 938 F.2d at 1549 (quoting Procter & Gamble, 747 F.2d at 119). A plaintiff may meet this burden either by attacking the validity of the defendant's tests directly or by showing that the defendant's tests are contradicted or unsupported by other scientific tests. Id.; see also Castrol, Inc. v. Quaker State Corp., 977 F.2d 57, 62-63 (2d Cir.1992) ("Quaker State ") (distinguishing product superiority claim not based on testing, which must be proven false by affirmative evidence, from product superiority claim explicitly or implicitly based on tests or studies, which may be proven false by showing that the tests did not establish the proposition for which they were cited). Moreover, "[i]f the plaintiff can show that the tests, even if reliable, do not establish the proposition asserted by the defendant, the plaintiff has obviously met its burden" of demonstrating literal falsity. Quaker State, 977 F.2d at 63.

When evaluating whether an advertising claim is literally false, the claim must always be analyzed in its full context. Castrol, 987 F.2d at 946; American Home Products Corp. v. F.T.C., 695 F.2d 681, 687 (3d Cir.1982); see Cuisinarts, Inc. v. Robot-Coupe Int'l Corp., No. 81 CIV 731(CSH), 1982 WL 121559, * 2 (S.D.N.Y....