Sanborn Mfg. v. Campbell Hausfeld/Scott Fetzer Co., Civ. 4-92-50.

• Decision Date: 03 June 1992
• Docket Number: No. Civ. 4-92-50.,Civ. 4-92-50.
• Citation: 828 F. Supp. 652
• Parties: SANBORN MANUFACTURING COMPANY, Plaintiff, v. CAMPBELL-HAUSFELD/SCOTT FETZER COMPANY, Defendant.
• Court: U.S. District Court — District of Minnesota

828 F. Supp. 652

SANBORN MANUFACTURING COMPANY, Plaintiff, v. CAMPBELL-HAUSFELD/SCOTT FETZER COMPANY, Defendant.

No. Civ. 4-92-50.

United States District Court, D. Minnesota.

June 3, 1992.

Jerome B. Pederson, Daniel J. Maertens, Fredrikson & Byron, Minneapolis, MN, for plaintiff.

Mark Gregory Schroeder, Alan Hall Maclin, Briggs & Morgan, St. Paul, MN, for defendant.

MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, Chief Judge.

Sanborn Manufacturing Company, Inc. (Sanborn) brought this action against Campbell Hausfeld/Scott Fetzer Company (Campbell) alleging deceptive advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a), violation of the Minnesota Deceptive Trade Practices Act, Minn.Stat. § 325D.45, and unfair competition. Now before the court is the motion by Sanborn for a preliminary injunction.

I.

This is the third motion brought in this case commenced on January 15, 1992. On March 10, the court denied Sanborn's motion for a temporary restraining order which sought essentially the same relief requested here. On April 8, the court denied Campbell's motion to dismiss for failure to state a claim upon which relief can be granted, and Sanborn's motion for Rule 11 sanctions. Subsequently, the parties have conducted additional discovery.

The statement of facts in the prior two orders is incorporated herein by reference. Briefly, both Sanborn and Campbell manufacture air compressors and sell them to retail outlets throughout the United States. Campbell sells two models, one identified as Model HL702300AJ (the HL7023) and the other as Model WL600700AJ (the WL6007). The HL7023 is labeled as "5 Air Compressor HP Rating." The WL6007 is labeled as "3.5 Air Compressor Horsepower Rating." Campbell affixes a tag to both models indicating that they have been inspected and approved by Underwriters Laboratories (UL).

According to UL standards, an air compressor labeled as having a horsepower greater than three and manufactured after August 30, 1991 must use an air tank certified by the American Society of Mechanical Engineers (ASME). Sanborn alleges that the two Campbell air compressor models do not comply with this UL standard since they are labeled as having a horsepower greater than three and were manufactured after August 30, 1991, yet do not use an ASME certified air tank. Campbell admits that the two models do not use ASME certified air tanks, but contends that UL has expressly approved use of its mark on the models as labeled and sold by Campbell.

The parties have now conducted discovery of documents and witnesses at UL and one witness at Campbell. According to Sanborn, this discovery shows that Campbell did not have UL approval for the labeling it has been using. Sanborn contends that Campbell's apparent reliance on verbal approval from UL concerning its labeling is belied by the documentary record and deposition testimony. The verbal approval purportedly occurred at a meeting in December 1990 and over the telephone in January 1991. Sanborn argues that the subsequent written record shows that UL approved only the label, "3.5 Air Compressor," not the label actually used, "3.5 Air Compressor Horsepower Rating." On March 9, 1991, after the purported oral approval, UL wrote to Campbell that the phrase, "3.5 Air Compressor Horsepower" would not be acceptable. On May 24, 1991, Keilholz at Campbell wrote to UL requesting approval for the label "3.5 Air Compressor" only and stated that Campbell would "not be wording 3 + horsepower models using non-ASME tanks with the word `horsepower' in any way, shape or form on the actual model or its packaging, manual or sales literature." That same day, UL wrote back to Keilholz that units "marked 3.5 Air Compressor with no inference to a 3 horsepower or greater rating" would be acceptable. Michael Tetzlaff of UL testified that the phrase, "3.5 Air Compressor Horsepower Rating," would not have been approved and did not comply with the relevant standards.

It is undisputed that on August 27, 1991, UL issued a Variation Notice to Campbell indicating that the units in question did not comply with its standards. On November 27, 1992, UL "closed out" or cleared this variation notice. According to Sanborn, Jeffrey Dorhmann at UL testified that this clearance did not indicate approval of the label Campbell was using. The label was actually unacceptable. Another UL engineer, Anthony Bell, testified that the two phrases, "3.5 Air Compressor Horsepower Rating," and, "3.5 Air Compressor," do not convey exactly the same information. He also testified that oral approval of a label would not make it eligible for UL listing; all approvals must be reviewed by two engineers, both of whom must indicate their approval by their signature.

Sanborn has submitted an advertisement by Menards, one of Campbell's customers, offering for sale one of the models in question as a "3.5 H.P. Compressor." According to Sanborn, Tetzlaff at UL testified that such mislabeling may affect how a customer uses the unit. A customer may use a unit in commercial (rather than light duty) situations for which UL has not evaluated it, with reasonably foreseeable risks from shock, fire, or mechanical hazards.

Campbell presents a largely different version of these facts. Of central significance, however, is Campbell's decision, effective April 28, 1992, to remove the UL listing mark from further production of the air compressor models at issue. Campbell states that it is removing the words "horsepower" and/or "hp" from the two models at issue and from any other place where those words appear on these models, any instruction manual provided with these modes, and their shipping cartons. After these labeling changes are completed, Campbell may seek UL approval to reapply the UL mark to these models. Sanborn acknowledges this decision, but continues with its motion.

According to Campbell, UL provided oral approval of its proposed labelling in December 1990 and January 1991. Campbell's director of engineering, Mike Yacobi, has handwritten notes of the December meeting confirming this. UL officials do not deny this approval, but do not specifically recall it. Keilholz believed that subsequent correspondence with UL permitted use of the word "horsepower" in the label so long as it did not immediately follow any number, such as 3.5.

Campbell notes that the August 27, 1992 variation notice stated the precise language at issue here: "(Item 1 marking is 3.5 air compressor horsepower rating.)" Campbell agreed to delete the word "horsepower" or "HP" from the cartons containing the model where this word immediately followed the number 3.5; Campbell did not discuss changing the label on the unit. UL then wrote back: "We understand that two markings state `3.5 air compressor' and one marking states `3.5 hp Air Compressor.' You have agreed to obliterate the `hp' in the latter case. Therefore, based upon the position stated in UL's May 24, 1991 letter to you, we are agreeable to our Mark appearing on units marked `3.5 Air Compressor' for this lot only." UL also stated it planned to reevaluate its May 24 position. Campbell believed this meant that its label, "3.5 Air Compressor Horsepower Rating," of which UL was aware, was acceptable at least until the May 24 position was reevaluated.

According to UL witnesses, there was no such reevaluation. Instead, on November 27, 1991, UL closed out the variation notice by stating: "Item 1 was acceptable. No revisions to the Follow-Up Services Procedure were considered necessary. The Variation Notice has been resolved." The author of this letter from UL testified that this meant the language reported in Item 1 (including the label at issue here) was acceptable to UL. Two other UL engineers testified that this letter meant that the language at issue here was acceptable.

Campbell notes that the relevant standard, UL Standard 1450, expressly excludes "household air compressors" of the type it is manufacturing. Campbell also has submitted documents from UL which it contends reflect the submission by Sanborn of an air compressor to UL for evaluation in March 1992 which violated UL Standard 1450.

II.

Sanborn argues that it is entitled to a preliminary injunction under the Lanham Act, 15 U.S.C. § 1125(a).¹ It contends that it is likely to succeed on the merits of its claims, since the evidence shows that UL did not approve the labeling Campbell used on the two models at issue, so that Campbell's application of the UL mark was a false representation of fact likely to cause confusion or mistake, or to deceive purchasers. Sanborn argues that irreparable harm is shown in that the false representations have a tendency to deceive, and in the actual confusion exhibited by the Menards' advertisement. The balance of harms favors Sanborn, it contends, because Sanborn and the public are harmed by Campbell's misleading labeling while Campbell has no protectable interest in being able to continue distributing these products. The public interest would be served by a preliminary injunction, since the mislabeled products pose a safety risk.

Sanborn requests an injunction prohibiting any further sale or distribution of the two models which have been manufactured after August 30, 1991, and bearing the UL label, which do not contain an ASME certified air tank. Sanborn contends that Campbell's voluntary cessation does not negate the need for this relief. Sanborn also requests that the injunction require Campbell to advise all of its customers who have purchased the air compressors that they were not approved for UL listing, to recall all affected compressors so the UL mark may be removed, and to provide Sanborn with an immediate accounting of the number and type of such compressors it has sold.

Campbell argues that there is no practical need for injunctive relief because of its recent corrective measures. There is no evidence of any likelihood of recurrence of the alleged mislabeling as would be required to...