Oil Heat Institute of Oregon v. Northwest Natural Gas, Civil No. 87-853-FR

• Decision Date: 23 September 1988
• Docket Number: 88-825-FR.,Civil No. 87-853-FR
• Citation: 708 F. Supp. 1118
• Parties: OIL HEAT INSTITUTE OF OREGON, an Oregon Nonprofit Corporation, Plaintiff, v. NORTHWEST NATURAL GAS, an Oregon corporation, Defendant.
• Court: U.S. District Court — District of Oregon

708 F. Supp. 1118

OIL HEAT INSTITUTE OF OREGON, an Oregon Nonprofit Corporation, Plaintiff, v. NORTHWEST NATURAL GAS, an Oregon corporation, Defendant.

Civil Nos. 87-853-FR, 88-825-FR.

United States District Court, D. Oregon.

September 23, 1988.

John W. Stephens, Kim T. Buckley, Esler, Stephens & Buckley, Portland, Or., for plaintiff.

Barnes K. Ellis, Leslie K. Bonney, Stoel, Rives, Boley, Jones & Grey, Portland, Or., Kirk H. Gibson, Northwest Natural Gas Co., Portland, Or., for defendant.

OPINION

FRYE, District Judge:

The matter before the court is the motion of defendant Northwest Natural Gas Co. (Northwest) for summary judgment or partial summary judgment of the federal claims in each of these consolidated cases. Northwest also moves to dismiss the pendent state claims if summary judgment is granted.

In each of these consolidated cases plaintiff Oil Heat Institute of Oregon (Oil Heat) seeks injunctive relief and/or damages against Northwest for violations of the Lanham Act of 1946, 15 U.S.C. § 1125(a). Oil Heat claims that promotional materials distributed by Northwest contain false descriptions and representations comparing the use of home heating oil and natural gas.

UNDISPUTED FACTS

Oil Heat is an Oregon nonprofit corporation whose members are located in the States of Oregon and Washington. Northwest is an Oregon corporation and a public utility providing gas utility service in western Oregon and portions of southwestern Washington. Northwest causes its natural gas to enter interstate commerce.

Oil Heat filed CV87-853-FR in July 1987, alleging that two pieces of sales literature used by Northwest, "Gas vs. Oil Comparison" (Exhibit A) and "Natural Gas vs. Oil — You Decide," (Exhibit B) violated the Lanham Act. Northwest does not dispute that it distributed Exhibits A and B. Northwest ceased using or distributing Exhibits A and B in January of 1988.¹

On May 26, 1988 Oil Heat was granted leave to file an amended complaint which alleged that two new pieces of sales literature distributed by Northwest violated the Lanham Act. Those advertisements are titled ""What to Ask About Gas, Oil and Electric Heat" (Exhibit C) and "Natural Gas vs. Oil — You Decide" (Exhibit D). Exhibit D is a revised version of the discontinued Exhibit B. Northwest does not dispute that it distributed Exhibits C and D.

Oil Heat filed CV88-825-FR on July 22, 1988. In CV88-825-FR, which has been consolidated with CV87-853-FR, Oil Heat alleges that an additional piece of promotional literature distributed by Northwest violates the Lanham Act. This material consists of a letter and reply card (Exhibit E) which were sent to recent purchasers of houses, beginning in the summer of 1987. Northwest does not dispute that it distributes Exhibit E.

In its various complaints Oil Heat also alleges pendent state law claims for unfair competition as to each of the described promotional materials. Trial of the consolidated cases is set to begin on October 4, 1988.

APPLICABLE LAW

Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R. Civ.P. 56(c). The initial burden is on the moving party to point out the absence of any genuine issues of material fact. Once this initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

CONTENTIONS OF THE PARTIES

Northwest contends that Oil Heat's claims regarding the two pieces of promotional literature described in the original complaint (Exhibits A and B) are moot, because Oil Heat asks only for injunctive relief as to those materials and Northwest has stopped distributing those materials. Oil Heat does not appear to contest the mootness of the claims relating to Exhibits A and B.

Regarding Exhibits C and D (the subject of the Amended Complaint), Northwest contends that Oil Heat does not allege the first of five essential elements of a false advertising claim under the Lanham Act, which is that Northwest made false statements of fact about its own product. Northwest contends that the only statements which Oil Heat claims are false are statements that Northwest made about Oil Heat's product. Northwest also contends that the omissions claimed by Oil Heat do not constitute false representations.

Oil Heat responds that Northwest's definition of false representations is incorrect, and that when Northwest's statements and omissions in Exhibits C and D are considered in context they constitute false advertising.

Northwest also contends that Oil Heat has no evidence to support the second, third and fifth elements of its prima facie case as to Exhibits C and D. Oil Heat contends that it has produced sufficient evidence to support each of those elements.

Regarding Exhibit E, Northwest contends that when viewed as a whole the letter is not false or deceptive, so that Oil Heat cannot establish the first element of its prima facie case. Oil Heat responds that the letter can reasonably be interpreted as making a false representation about natural gas.

Northwest also contends that Oil Heat has no evidence that the letter actually deceived or has a tendency to deceive a substantial segment of the audience; that the deception is material; or that Oil Heat or its members have been injured as a result of the letter. Oil Heat contends that it has produced sufficient evidence as to each of these elements.

Northwest contends that if the court grants its motion for summary judgment the pendent state law claims should be dismissed. Oil Heat responds that dismissal is inappropriate at this stage of the actions.

In the alternative, if the court declines to grant full summary judgment, Northwest asks the court to grant to Northwest partial summary judgment regarding Exhibits C and D "as to all statements contained in its comparative advertising that do not concern natural gas, Northwest's own product, and all statements that are indisputably true." (Defendant's Reply Memorandum at 16.) Northwest also asks for partial summary judgment as to all statements in Exhibit E "that are indisputably true when read in the context of the letter as a whole." (Memorandum in Support of Defendant's Amended Motion at 7.)

DISCUSSION

The elements of a Lanham Act claim regarding comparative advertising are set out in Skil Corporation v. Rockwell International Corp., 375 F.Supp. 777, 783 (N.D.Ill.1974):

1) in its comparison advertisements, defendant made false statements of fact about its own product;11

2) those advertisements actually deceived or have the tendency to deceive a substantial segment of their audience;

3) such deception is material, in that it is likely to influence the purchasing decision;

4) defendant caused its falsely advertised goods to enter interstate commerce; and

5) plaintiff has been or is likely to be injured as a result of the foregoing either by direct diversion of sales from itself to defendant, or by lessening of the good will which its products enjoy with the buying public.

(Footnote omitted).

With the exception of the fourth element, each element of Oil Heat's claim is at issue. Northwest contends that Oil Heat has not alleged the first element with respect to Exhibits C and D, and that there is no issue of fact regarding the first element with respect to Exhibit E. Northwest contends that there is no issue of fact regarding the second, third, and fifth elements with respect to Exhibits C, D and E.

The court will consider each of the promotional materials in turn.

1. Exhibits A and B

Northwest contends that Oil Heat's claims as to these documents are moot, because it is undisputed that Northwest ceased distributing them in January, 1988. Oil Heat's complaint asks only for injunctive relief as to these materials. Therefore, the claims relating to Exhibits A and B are deemed moot.

2. Exhibit C

Exhibit C is a three page brochure entitled "What to Ask About Gas, Oil and Electric Heat." Oil Heat contends that three statements in a "Conversion Comparison Chart" contained in the brochure constitute false advertising. The chart compares various home heating methods, including natural gas forced air furnace, electric baseboard, electric forced air furnace, electric heat pump, and oil forced air furnace.

Oil Heat's Amended Complaint alleges that Exhibit C contains "a Conversion Comparison Chart' for natural gas forced air furnaces and oil forced air furnaces that contains false descriptions or representations, including words or other symbols tending falsely to describe or represent the same." Northwest argues that in each of these comparisons the statement regarding natural gas furnaces is literally true, and the only alleged falsehood is in the statement regarding oil furnaces.

Oil Heat argues that false representations about Oil Heat's product as well as Northwest's product may violate the Lanham Act. However, Oil Heat fails to cite persuasive authority for this position. The Second and the Seventh Circuits have held that the Lanham Act applies only to false representations regarding the defendant's product. Fur Information & Fash. Coun., Inc. v. E.F. Timme & Son, 501 F.2d 1048, 1051-52 (2d Cir.), cert. denied, 419 U.S. 1022, 95 S.Ct. 498, 42 L.Ed.2d 296 (1974); Bernard Food Industries, Inc. v. Dietene Co., 415 F.2d 1279, 1284 (7th Cir. 1969), cert. denied, 397 U.S. 912, 90 S.Ct. 911, 25 L.Ed.2d 92 (1970).

The Ninth Circuit has indicated that the Lanham Act applies only to false descriptions or representations of the defendant's product. SSP Agricultural Equipment, Inc. v. Orchard-Rite Ltd., 592 F.2d 1096, 1103 n. 6 (9th Cir.1979). Oil Heat relies upon the district court opinion in U-Haul International, Inc. v. Jartran, Inc., 522 F.Supp. 1238, 1247 (D.Ariz.1981), which states that the false...