Newborn Bros. Co. v. Albion Eng'g Co.

• Decision Date: 22 August 2020
• Docket Number: Civil No. 12-2999 (NLH/KMW)
• Citation: 481 F.Supp.3d 312
• Parties: NEWBORN BROS. CO., INC., Plaintiff, v. ALBION ENGINEERING COMPANY, Defendant.
• Court: U.S. District Court — District of New Jersey

481 F.Supp.3d 312

NEWBORN BROS. CO., INC., Plaintiff,

v.ALBION ENGINEERING COMPANY, Defendant.

Civil No. 12-2999 (NLH/KMW)

United States District Court, D. New Jersey.

Signed August 22, 2020

Filed August 25, 2020

JOHN-PAUL MADDEN, TIMOTHY R. BIEG, MADDEN & MADDEN, 108 KINGS HIGHWAY EAST, SUITE 200, P.O. BOX 210, HADDONFIELD, NJ 08033-0389, MICHAEL K. TOMENGA, JOHN M. PETERSON, NEVILLE PETERSON, LLP, 1400 16^TH STREET, N.W., SUITE 350, WASHINGTON, DC 20036, Attorneys Plaintiff Newborn Bros. Co., Inc.

KERRI E. CHEWNING, ARCHER & GREINER, PC, ONE CENTENNIAL SQUARE, PO BOX 3000, HADDONFIELD, NJ 08033-0968, MICHAEL J. BERKOWITZ, VOLPE AND KOENIG, P.C., 30 SOUTH 17^TH STREET, 18^TH FLOOR, PHILADELPHIA, PA 19103, Attorneys for Defendant Albion Engineering Company.

HILLMAN, District Judge

This is a false advertising case brought under Section 43(a) of the Lanham Act and New Jersey unfair competition common law. For the reasons stated below, the Court finds that Defendant Albion Engineering Company is liable for false advertising and unfair competition.

BACKGROUND

On May 18, 2012, Plaintiff brought this action in the District of New Jersey. Between June 5, 2017 and September 11, 2017, the Court conducted a multi-day bench trial. The case was temporarily stayed on November 9, 2017. After the parties advised the Court that efforts to resolve this case by mediation were unsuccessful, the Court reopened this case on July 6, 2018. Following an additional day of hearings on July 9, 2019, the parties submitted post-trial briefs on July 30 and August 20, 2019. Over the course of two-dozen days of trial and hearings, the Court heard testimony from sixteen witnesses, including two experts. This matter is ripe for adjudication on the issue for liability with hearings on affirmative defenses and, if those defenses do not dispose of the matter, remedies to follow.

Dispensing guns can be either manual or pneumatic/air powered. This case concerns manual dispensing guns. There are three broad types of manual dispensing gun:

bulk, cartridge, and what are called "sausage" guns. The popularity of each type of dispensing guns varies depending on the sophistication of the user and the task being completed. Typically, manual dispensing guns contain two vital components: a material containment unit ("MCU") and a handle assembly. Certain construction and industrial projects and tasks may require additional features or accessories, including caulking knives or spatulas.

A. The Parties and Their Principals

1. Newborn Bros. Co., Inc.

Newborn Bros. Co., Inc. ("Newborn") is a Virginia corporation, with its principal place of business in Jessup, Maryland. Newborn maintains warehouses in Jessup, Maryland, Dallas, Texas, and Reno, Nevada. Newborn was founded in 1974 by Peter Chang. Since its founding, Newborn has imported and distributed dispensing guns and accessories, relying on contract manufacturers in China and Taiwan to supply products for sale in the United States. These imported dispensing guns, parts, and accessories arrive from China and Taiwan in finished condition.

Chang began producing caulking guns in his factory in Korea in the early 1970s. Chang created Newborn shortly after to distribute his caulking guns in the United States. As the president and founder of Newborn, Chang regularly monitored Newborn's competitors and their products to remain informed about the market.

Between 2005 and 2007, Chang reduced his hours, only working at Newborn part time. Though Chang has retained a fifty-one percent ownership interest in Newborn, his son-in-law, Albert Lee, has taken over as president. Lee began working at Newborn in 2002 and now owns around eighteen percent of Newborn. Lee continues to seek Chang's advice on matters relating to Newborn from time to time, including the decision to bring this suit.

Lee testified that when he began working at Newborn, Newborn already "dominated" the paint and hardware market. According to Lee, Chang encouraged him to "break into the industrial/professional caulking gun market." During his trial testimony, Lee described the differences between these two markets. Lee observed that the industrial/professional market tends to purchase more "heavy duty caulking guns," including bulk and sausage guns, while the paint and hardware market tends to focus on less durable products like "inexpensive cartridge guns."

Chang and Newborn had previously entered the industrial/professional market for dispensing guns in 1990 with the introduction of two new manual bulk dispensing guns: Newborn 224 and 232. These models were designed to compete with Defendant Albion Engineering Company's ("Albion") Model 45 and 59 bulk guns. Lee testified that in creating these two new products, Newborn was attempting to create "something as similar to the Albion gun as possible." Newborn priced its bulk guns at $32, $6 less than Albion's models. Despite the lower prices and what Lee considered to be a superior product, Newborn enjoyed limited success competing against Albion in this market. Lee testified that between 2002 and 2012, Newborn's sales fluctuated between $5.5 million and $6.5 million (U.S.D.).

To understand this limited success and expand Newborn's share of the market, Lee testified that he "took a long hard assessment of the company." As part of this assessment, Lee testified that he began asking sales representatives and customers why Newborn's bulk guns were not more competitive and how much competing products cost. Lee also explained that he keeps records of communications with various overseas manufacturers, so he could "have an idea of the competitive landscape to know what different Taiwanese and Chinese manufacturers are charging for their guns." Lee testified that a salesperson told him that while the salesman believed Newborn created a superior and less expensive product, Newborn had trouble competing in the industrial/professional market because Albion, Newborn's competitor, manufactured its products in America.

Lee testified that one of Newborn's independent sales representatives, Mike Dekker, confirmed that many customers had inquired whether Newborn products were made in America like Albion products. In an email to Lee, Dekker stated that "ever since the legislation of American Recovery and Reinvestment Act (ARRA)¹ the ‘Buy American’ concept has become popular and Albion has benefited from this."

During his research, Lee testified that he received a quote from Brilliant Engineering, an overseas manufacturer, containing pictures of products Lee identified as belonging to Albion. Lee asked his contact at Brilliant Engineering, Jackson Sung, to send more pictures of the dispensing guns Brilliant Engineering produced as a means of verifying if these products belonged to Albion. These pictures prompted Lee to undertake an inquiry into where Albion's products, specifically its Special Deluxe guns, were produced.

As part of this inquiry, Lee testified that he signed up for a service called "ImportGenius." ImportGenius allows its users to locate and read U.S. Customs’ records for imported products. Lee testified that he searched for Albion's import records and found that "Albion was importing a tremendous amount of goods from Taiwan, including Special Deluxe guns, Deluxe guns, Special Deluxe cartridge guns, accessories, spatulas, caulk knives, cones, nozzles, parts, barrels, handles, [and] rods" from Taiwan.

To continue his inquiry into Albion's products, Lee testified that he also began to purchase Albion dispensing guns, observing the statement of origin markings on various Albion products. Lee also began examining Albion's website at various points in time using the "Wayback Machine," a website that allows users to look at historical snapshots of different websites. During his trial testimony, Lee discussed several iterations of Albion's website: one from April 7, 2004, June 7, 2007, and June 12, 2010, all of which contained various descriptions of Albion's background. These websites and their content will be discussed in further detail below.

Lee also began to visit distributor locations in person. During these visits, Lee documented the Albion displays he encountered by taking pictures and collecting Albion's advertising materials. In some instances, Lee was not able to recall the date of certain photographs or materials that he collected during his inquiry. Lee also admitted that he could not tell the manufacture date of the Albion guns he photographed during his investigation. Lee visited a number of distributors² in a number of states,³ observing Albion's products and displays, some of which stated that Albion's products were made in America.

Lee also testified about a comment from an internet forum dated July 25, 2010. In this comment, the author discusses purchasing a $30 Albion caulking gun and finding a hang tag that says, "Made in Taiwan." The author then states that they "called Albion on February 2, 2010 and asked them about the tag." According to this comment, Albion stated that "the page on their website is incorrect. They import most of their guns from Taiwan." The post encouraged others to "be wary of anyone claiming to make products in the U.S." According to this post, "Albion refused to update their website and they are still actively deceiving customers into buying foreign made products with a Made in U.S.A. label."

Lee testified that by the end of 2011, he concluded that Albion was importing many more products than he had previously thought. In the summer of 2011, Lee testified that he went to the U.S. Customs and Border Patrol Agency to ask if there was any action they could take with regards to Albion's misrepresentations. Lee testified that he spoke with a customs agent who explained that the agency was overextended and short staffed. According to Lee, the customs agent recommended that Newborn pursue a private lawsuit.

Lee testified that following this conversation, he continued to buy more dispensing guns and...