American Rockwool, Inc. v. Owens-Corning Fiberglas Corp.
| Decision Date | 18 June 1986 |
| Docket Number | No. 83-39-CIV-8.,83-39-CIV-8. |
| Citation | 640 F. Supp. 1411 |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | AMERICAN ROCKWOOL, INC., Plaintiff, v. OWENS-CORNING FIBERGLAS CORPORATION, Defendant. |
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Robert W. Spearman, Catherine B. Arrowood, Sanford, Adams, McCullough & Beard, Raleigh, N.C., Michael J. Anderson, Anderson & Clayton, Rocky Mount, N.C., for plaintiff.
Edward S. Finley, Jr., Hunton & Williams, Raleigh, N.C., for defendant.
This case was instituted on May 4, 1983, as a federal antitrust action brought by Spring Hope Rockwool, Inc., (Spring Hope) a manufacturer of rockwool fiber insulation. One month and ten days later, a sister corporation, Casa Grande Rockwool, Inc. (Casa Grande) filed a second antitrust action against Owens-Corning Fiberglas Corporation (Owens-Corning OR OCF).1 Casa Grande was merged into Spring Hope on July 1, 1983. Spring Hope changed its name to American Rockwool, Inc. (American Rockwool) on September 20, 1983. In the two initial complaints, as well as the First Amended and Consolidated Complaint filed in January, 1984, plaintiff alleged a wide variety of both federal and state antitrust and unfair trade actions, nine separate counts in all.2 Plaintiff also asserted three common law claims: defamation, disparagement, and unfair competition. On December 9, 1985, plaintiff filed a motion for leave to file its Second Amended and Consolidated Complaint; subsequently, the court granted plaintiff's motion and this complaint was filed on January 21, 1986. By virtue thereof and stipulations of the parties, plaintiff has eliminated all claims except those hereafter discussed.3 Defendant has also filed a counterclaim.4
After certain preliminary motions were resolved, broad discovery was undertaken by both sides. This discovery included interrogatories, production and review of voluminous business records, and the depositions of numerous party and non-party witnesses. The discovery in this case has been thorough and exhaustive. Accordingly, the extensive factual record on which plaintiff's claims and defendant's counterclaim are premised has been fully developed. The parties have filed cross-motions for summary judgment and have filed extensive briefs in support thereof. In addition, the court heard oral argument on these motions for two days — January 9-10, 1986. The motions are ripe for disposition, and the court enters this order in response thereto.
The plaintiff's claims attack the sales and marketing practices of Owens-Corning during the years 1981 to the end of 1985. These claims are predicated upon Owens-Corning's advertising, technical bulletin, and promotional practices with respect to both plaintiff's products and Owens-Corning's products.
In essence, plaintiff's case has been reduced to causes of action for unfair competition under North Carolina's antitrust statutes; false advertising under the Lanham Act; and disparagement, and unfair competition under the applicable common law. Owens-Corning seeks summary judgment or at least partial summary judgment as to each of these claims.
Owens-Corning argues that the controlling law and undisputed facts support summary judgment on each claim in the following respects:
First Claim for Relief.
(1) North Carolina General Statute § 75-1.1 (§ 75-1.1) only applies to conduct occurring within the state of North Carolina. The statute has no application to publications, statements, prices or other conduct that plaintiff attributes to Owens-Corning in states such as Arizona, Texas, Florida, Tennessee, Georgia, etc. Accordingly, Owens-Corning seeks partial summary judgment on the grounds that § 75-1.1 does not apply to its alleged misconduct that occurred in states other than North Carolina.
(2) As to conduct occurring within the state of North Carolina, Owens-Corning argues that in order to establish a violation of § 75-1.1 plaintiff must prove that Owens-Corning's alleged misconduct had an adverse effect on competition in the relevant market, and that there is no evidence of such effect.
(3) As to conduct occurring within the state of North Carolina, Owens-Corning argues there is no evidence that Owens-Corning's alleged misconduct proximately caused plaintiff to be damaged in an amount that can be established with a reasonable degree of certainty.
Second Claim for Relief.
(1) North Carolina General Statute § 75-5(b)(3) (§ 75-5(b)(3)) only applies to conduct occurring within the State of North Carolina. Said statute has no application to publications, statements, prices or other conduct that plaintiff attributes to Owens-Corning in states such as Arizona, Texas, Florida, Tennessee, Georgia, etc. Accordingly, Owens-Corning seeks partial summary judgment on the grounds that § 75-5(b)(3) does not apply to its alleged misconduct that occurred in states other than North Carolina.
(2) As to conduct occurring within the state of North Carolina, there is no evidence that Owens-Corning engaged in conduct in North Carolina that was designed willfully to destroy or injure the plaintiff for the purpose of "attempting to fix the price" of insulation once plaintiff is out of business as prohibited by § 75-5(b)(3), nor of any damage to plaintiff caused thereby.
Third Claim for Relief.
Plaintiff's claim under the Lanham Act, 15 U.S.C. § 1125(a), fails because plaintiff has not identified any evidence that Owens-Corning (a) made a false statement about its own product that (b) actually deceived or had the tendency to deceive a substantial number of customers and (c) plaintiff was or is likely to be injured as a result of such statements.
Fourth Claim for Relief.
As to the disparagement claim Owens-Corning takes the position that there is no evidence of a causal connection between Owens-Corning's alleged misconduct and any damage to plaintiff.
Fifth Claim for Relief.
There is no evidence of unfair competition other than the alleged disparagement of plaintiff's product.
The defendant's counterclaim is predicated upon false advertising under the Lanham Act, and unfair competition under the applicable common law. In Count One of its counterclaim, defendant asserts that plaintiff has made false and misleading statements about the performance characteristics of its "Spring Brand" and "American" rockwool insulation, which have deceived and are likely to continue to deceive customers in their purchasing decisions. These statements allegedly have been made on the product labels themselves, as well as orally and in writing to various customers of plaintiff and defendant, in violation of Section 43(a) of the Lanham Trademark Act, 15 U.S.C. § 1125(a). Defendant alleges that the statements have injured it and are likely to continue to do so, in that its sales have been diverted to the plaintiff and there has been a lessening of the good will that defendant and its fiberglass insulation product enjoy with its customers.
In Count Two, defendant asserts that this same alleged conduct by plaintiff is unreasonable, unfair, illegitimate and unjustified, and as such constitutes unfair competition in violation of the common law.
With respect to defendant's Lanham Act claim, plaintiff asserts two bases for its motion for summary judgment: first, plaintiff contends that defendant cannot prove that plaintiff's bag labels are false with respect to the performance characteristics of its loosefill insulation; second, plaintiff argues that even assuming the falsity of its bag labels, defendant cannot prove that it was injured thereby. These same arguments apply to plaintiff's motion for summary judgment with respect to defendant's claim of unfair competition, in that the factual basis for both of defendant's claims is the same.
Owens-Corning is a Delaware corporation with its principal place of business in Toledo, Ohio. The principal business of Owens-Corning involves the manufacture of glass fiber products in two basic forms: (1) a wool-like material used for thermal and acoustical insulation and other construction products, and (2) textile filaments which are combined into strands, yarns or mats and used for weaving fabrics and for reinforcing plastic, rubber and paper products. For example, Owens-Corning manufactures residential, industrial and commercial insulations, ceiling and roofing materials, and shingles which are purchased by all segments of the building construction industry.
American Rockwool traces its roots back to 1977 when it was formed by Oliver M. Gould, a resident of Dallas, Texas. Gould first became involved in the manufacture and sale of rockwool fiber insulation products in 1951 when he went to work for Rockwool Insulating in Pueblo, Colorado. Approximately four years later, Gould became president of Texas Rockwool, a successor to Rockwool Insulating of Colorado. Gould continued as president of Texas Rockwool until 1972. Thereafter, the name of the company was changed to Rockwool Industries, and Gould remained president until 1974. In 1974, Rockwool Industries terminated Gould's employment.
After a two year hiatus from the insulation industry, Gould decided to build his own rockwool factory in a section of the country where there were no other producers. He located his first rockwool plant in Spring Hope, North Carolina. Construction on the production line was begun in 1977 and completed by July of 1978. Gould and his wife are the sole stockholders of Spring Hope and its successor, American Rockwool. When Spring Hope first entered the insulation industry, it concentrated on selling to insulation contractors within a 400 mile radius of Rocky Mount, North Carolina.
During the first two years of operation, the company was substantially...
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