Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc.

• Decision Date: 30 December 1998
• Docket Number: No. 98-5136,STATE-SLICK,98-5136
• Citation: 49 USPQ2d 1321,165 F.3d 221
• Parties: 1999-1 Trade Cases P 72,383, 49 U.S.P.Q.2d 1321 CONTE BROS. AUTOMOTIVE, INC. and Hi/Tor Automotive, Individually and on Behalf of all Others Similarly Situated, Appellants, v. QUAKER50, INC., Slick 50 Management, Inc., Slick 50 Products Corp., Slick 50 Corp., Blue Coral-Slick 50, Inc., Blue Coral, Inc., Blue Coral-Slick 50, Ltd.
• Court: U.S. Court of Appeals — Third Circuit

Page 221

165 F.3d 221

1999-1 Trade Cases P 72,383, 49 U.S.P.Q.2d 1321

CONTE BROS. AUTOMOTIVE, INC. and Hi/Tor Automotive,

Individually and on Behalf of all Others Similarly

Situated, Appellants, v. QUAKER STATE-SLICK 50, INC., Slick 50 Management, Inc.,

Slick 50 Products Corp., Slick 50 Corp., Blue

Coral-Slick 50, Inc., Blue Coral, Inc.,

Blue Coral-Slick 50, Ltd.

No. 98-5136.

United States Court of Appeals, Third Circuit.

Argued Nov. 4, 1998.

Decided Dec. 30, 1998.

Jay W. Eisenhofer (Argued), Megan D. McIntyre, Grant & Eisenhofer, P.A., Wilmington, DE, Peter L. Masnik, Kalikman & Masnik, Haddonfield, NJ, Lee Squitieri, Abbey, Gardy & Squitieri, LLP, New York, N.Y., for Appellants.

Irving Scher, Bruce A. Colbath (Argued), Garry A. Berger, Weil, Gotshal & Manges LLP, New York, N.Y., Edward T. Kole, Willentz, Goldman & Spitzer, Woodbridge, NJ, for Appellees.

Before: SCIRICA and ALITO, Circuit Judges, and GREEN, District Judge. ^*

OPINION OF THE COURT

ALITO, Circuit Judge:

The issue in this appeal is whether retailers have standing under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1994), to bring false advertising claims against manufacturers of products that compete with those the retailers sell. The District Court answered this question in the negative and dismissed the Complaint. Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 992 F.Supp. 709, 711 (D.N.J.1998). Based on the facts alleged in the Complaint, we conclude that the retailer plaintiffs do not satisfy the prudential standing requirements implicit in § 43(a) of the Lanham Act. We therefore affirm.

I.

Appellants are a putative nationwide class of retail sellers of motor oil and other engine lubricants that purportedly compete with Slick 50, a Teflon-based engine lubricant manufactured by Appellees. According to the Complaint, Slick 50 features a formula of Teflon suspended in particle form in motor oil. Compl. p 17; App. 16. Appellees' marketing materials state that one quart of Slick 50 substitutes for one quart of regular motor oil at the time of an oil change. Compl. p 18; App. 16. The Complaint alleges that the Appellees falsely advertised that the addition of Slick 50 would reduce the friction of moving parts, decrease engine wear, and improve engine performance and efficiency. See, e.g., Compl.pp 24-29.

In 1996, the Federal Trade Commission ("FTC") brought an action under 15 U.S.C. § 45(a) challenging the veracity of and substantiation for the claimed benefits of Slick 50. Compl. p 31; App. 20. The parties settled. Compl. p 33; App. 21. Under the terms of the settlement, the Appellees were enjoined from disseminating false or unsubstantiated claims regarding Slick 50 and agreed to provide $10 million in discounts, cash rebates and free products to affected consumers by January 1998. 5 Trade Reg. Rep. p 24,301.

Subsequent to the settlement of the FTC suit, Appellants raised the same allegations in this action for damages under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1994), and certain state consumer protection statutes that are not at issue in this appeal. The Appellants propose to represent:

[a]ll persons in the United States who, at any time between the time Slick 50 was first marketed to the public and the present, have offered for sale, either as retailers or wholesalers, motor oil products that compete directly with Slick 50.

Compl. p 15; App. 13. "Motor oil products," as Appellants use the term in the Complaint, include "engine additive, engine treatment products, motor oil or motor oil additives (sometimes referred to as engine treatments) that compete with" Slick 50. Compl. p 1; App. 9. In addition to the allegations regarding Appellees' asserted misrepresentations, which largely mirror the allegations in the FTC suit, the Complaint alleges that Appellees' false advertisements increased Slick 50's sales and concomitantly decreased sales of the competing products sold by the class members. The harm the Appellants allege they suffered is the loss of sales of products they sell, such as regular motor oil, that compete with Slick 50.

Appellees moved to dismiss the Complaint for lack of standing or, in the alternative, to strike the Appellants' class allegations. The District Court dismissed the Complaint on the ground that retailers like Appellants lacked standing under the Lanham Act to pursue false advertising claims against manufacturers of competing products. Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 992 F.Supp. 709, 712-14 (D.N.J.1998). More specifically, the District Court held that only "direct commercial competitors" or "surrogates" for direct commercial competitors have standing to pursue claims under § 43(a). The District Court also held that the Complaint failed to allege facts sufficient to infer that the requisite direct competitive relationship existed. This appeal followed.

II.

Our review of matters of standing and statutory construction is plenary. Davis v. Philadelphia Hous. Auth., 121 F.3d 92, 94 n. 4 (3d Cir.1997); UPS Worldwide Forwarding, Inc. v. United States Postal Serv., 66 F.3d 621, 624 (3d Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 210 (1996). When reviewing an order of dismissal for lack of standing, we accept as true all material allegations of the complaint and construe them in favor of the plaintiff. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 118 S.Ct. 1003, 1017, 140 L.Ed.2d 210 (1998); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 482 (3d Cir.1998).

A.

Section 43(a) of the Lanham Act, pursuant to which this suit was brought, provides:

(1) Any person who, on 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--

(A) 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

(B) in a 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.

15 U.S.C. § 1125(a) (emphasis added). The question in this suit is whether, in enacting the Lanham Act, which includes the quoted language, Congress intended to confer standing on plaintiffs in Appellants' position. For the reasons set forth below, we hold that Congress did not so intend, and we therefore affirm.

Standing is comprised of both constitutional and prudential components. Bennett v. Spear, 520 U.S. 154, 117 S.Ct. 1154, 1161, 137 L.Ed.2d 281 (1997) (citing Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975)). The constitutional component, derived from the Art. III "case" or "controversy" requirement, requires a plaintiff to demonstrate that he or she suffered "injury in fact," that the injury is "fairly traceable" to the actions of the defendant, and that the injury will likely be redressed by a favorable decision. Bennett, 117 S.Ct. at 1161; Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 118 S.Ct. 1003, 1016-17, 140 L.Ed.2d 210 (1998).

The parties do not dispute that the allegations in the Complaint satisfy these constitutional standing requirements. Because this issue is jurisdictional, however, we address it here. See Steel Co., 118 S.Ct. at 1011 (question of Art. III standing is threshold issue that should be addressed before issues of prudential and statutory standing). The Complaint alleges that the plaintiff class has lost sales of motor oil products as a result of Appellees' false advertising. Compl. p 43; App. 22. These allegations satisfy the first two components of Art. III standing, injury in fact and causation. Appellants seek, among other things, "monetary damages sufficient to compensate Plaintiffs and the Class members for their lost profits as a result of the Defendants' conduct." Compl. p 51(C); App. 25. The requested relief, if granted, would redress Appellants' alleged injuries and therefore satisfies the redressability requirement. Based on the allegations in the Complaint, we perceive no constitutional obstacle to our consideration of this case.

Under certain circumstances, prudential, as opposed to constitutional, standing considerations limit a plaintiff's ability to bring suit. These prudential considerations are a set of judge-made rules forming an integral part of "judicial self-government." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992). The aim of this form of judicial self-governance is to determine whether the plaintiff is "a proper party to invoke judicial resolution of the dispute and the exercise of the court's remedial powers." Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 546 n. 8, 106 S.Ct. 1326, 1334 n. 8, 89 L.Ed.2d 501 (1986); see also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 804, 105 S.Ct. 2965, 2970, 86 L.Ed.2d 628 (1985) (federal courts adopt prudential limits on standing "to avoid deciding questions of broad social import where no individual rights would be vindicated and to limit access to the federal courts to those litigants best suited to assert a particular claim") (quoting Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S.Ct. 1601, 1607-08, 60 L.Ed.2d 66 (1979)).

No single formula is capable of answering every prudential standing question. Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 400 n. 16, 107 S.Ct. 750, 757 n. 16, 93 L.Ed.2d 757 (1987) ("Generalizations about standing to...