Board-Tech Electronic Co. v. Eaton Corp. ( 2018 )

17-3829-cv
Board-Tech Electronic Co. v. Eaton Corp.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC
DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall
United States Courthouse, 40 Foley Square, in the City of
New York, on the 11th day of June, two thousand eighteen.
PRESENT: DENNIS JACOBS,
DENNY CHIN,
RAYMOND J. LOHIER, JR.,
Circuit Judges.
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Board-Tech Electronic Co., Ltd.,
Plaintiff-Appellant,
-v.- 17-3829-cv
Eaton Corporation, Cooper Wiring
Devices, Inc.,
Defendants-Appellees,
Eaton Electric Holdings LLC, Cooper
Lighting LLC,
Defendants.
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FOR PLAINTIFF-APPELLANT: R. Alexander Pilmer
(Allison Ozurovich, on the
brief), Kirkland & Ellis
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LLP, New York, NY & Los
Angeles, CA.
FOR DEFENDANTS-APPELLEES: Serrin Turner (James E.
Brandt, Jooyoung Yeu,
Matthew Valenti, on the
brief), Latham & Watkins
LLP, New York, NY.
Appeal from the judgment of the United States District
Court for the Southern District of New York (Forrest, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
AND DECREED that that the judgment of the district court is
AFFIRMED.
Board-Tech Electronic Co., Ltd. (“Board-Tech”) appeals
the judgment of the United States District Court for the
Southern District of New York dismissing its Second Amended
Complaint (the “Complaint”) against Eaton Corporation and
Cooper Wiring Devices, Inc. (collectively “Eaton”),
alleging violations of the Lanham Act for false advertising
in connection with the compliance of certain of Defendants’
light switch products with common industry safety standards
and violations of state law. We assume the parties’
familiarity with the underlying facts, the procedural
history, and the issues presented for review.
Board-Tech and Eaton are competing manufacturers of
decorative light switches. To be commercially viable,
light switches in the United States must undergo
certification by Underwriters Laboratories, Inc. (“UL”), an
independent entity that tests, verifies, and endorses the
safety of various electronic products. UL owns and has the
exclusive power to license the “UL 20” certification mark
to products that meet safety standards contained in a
booklet known as the “UL Standard for Safety for General-
Use Snap Switches.” Manufacturers seeking the UL
imprimatur must submit “representative samples” of their
product to UL, whose engineers test the product against the
applicable standard. If the samples pass, UL authorizes
the manufacturer to advertise and label its products as “UL
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20” compliant. Eaton is a manufacturer that markets its
decorator light switches as UL 20 compliant.
Board-Tech alleges that its in-house engineers
independently tested UL 20 compliance of eight sets of six
light switches drawn from Eaton’s 7500, 7600, and 7700
series, and that each of the 48 light switch units failed.
It asserts that the defendants’ use of the UL 20 mark for
those product series in advertisements and labeling is
therefore false and misleading. It is undisputed that
Eaton has authorization from UL to use “UL 20,” and that
Board-Tech did not refer its own test results to UL, the
mark owner. And there is no allegation that UL itself has
taken any action to retest, decertify, or change the
classification of any of the challenged light switches.
Board-Tech claims false advertising under the Lanham
Act, 15 U.S.C. § 1125(a), and under various parallel state
laws, as well as unjust enrichment. The district court
dismissed the Complaint on the grounds that it failed to
comply with Rule 8(a) pleading standards, and in any event
did not state a claim upon which relief can be granted.
“We review de novo a district court’s grant of a motion to
dismiss pursuant to Rule 12(b)(6), accepting all factual
allegations in the complaint as true and drawing all
inferences in the plaintiff’s favor.” Walker v. Schult,
717 F.3d 119, 124 (2d Cir. 2013). To withstand dismissal,
“a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citation omitted).
I. False Advertising
“First (and obviously), a plaintiff bringing a false
advertising claim” under Section 1125(a) “must show
falsity.” Apotex Inc. v. Acorda Therapeutics, Inc., 823
F.3d 51, 63 (2d Cir. 2016); see also S.C. Johnson & Son,
Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir. 2001) (to
establish a claim for false advertising under the Lanham
Act, a plaintiff must first allege that the defendant has
made a false or misleading statement); 15 U.S.C.
§ 1125(a)(1)(B).
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Falsity can be established in two different ways. See
Church & Dwight Co. v. SPD Swiss Precision Diagnostics,
GmbH, 843 F.3d 48, 65 (2d Cir. 2016). A plaintiff can
demonstrate that the challenged advertisement is literally
false by showing that it is “false on its face,” Time
Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 153 (2d
Cir. 2006), or that the advertisement’s “words or images,
considered in context, necessarily imply a false message,”
id. at 158. If an advertising message is literally false,
“consumer deception is presumed, and the court may grant
relief without reference to the advertisement’s [actual]
impact on the buying public.” Id. at 153 (internal
quotation marks omitted). Alternatively, “a plaintiff can
show that the advertisement, while not literally false, is
nevertheless likely to mislead or confuse consumers.” Id.;
see also Church & Dwight Co., 843 F.3d at 65 (falsity may
be demonstrated “if the message leaves an impression on the
listener or viewer that conflicts with reality” (citation
and internal quotation marks omitted)).
The single statement alleged to be false is the text
“UL 20” on Eaton’s product labels and advertisements.
Board-Tech argues primarily that this statement is
literally false because the Eaton decorator switches did
not comply with the UL 20 safety standards as advertised
and (in the alternative) that even if the labels are
technically accurate, the statement of UL 20 certification
is likely to mislead consumers into believing the switches
are safe.
A. Literal Falsity
Accepting the allegations in the Complaint as true,
four dozen select 7500, 7600, and 7700 series light
switches did not pass a test that approximated or
replicated the UL 20 certification process. We conclude
that even assuming the complaint had identified the
challenged light switches with the requisite particularity
under Rule 8, these allegations are insufficient to
establish literal falsity.
The UL 20 mark on a product’s label or advertisement
signifies only that the product has been (and continues to
be) certified by UL. Board-Tech concedes that Eaton has
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permission to display the mark. And the Complaint does not
allege that UL has since found that the light switches are
no longer compliant, or that the products have materially
changed since UL’s last battery of tests. The
representation that Eaton’s light switches are UL-approved
is not “false on its face.” Time Warner, 497 F.3d at 153.
Board-Tech argues the use of the UL 20 mark may still
be literally false “by necessary implication” because UL 20
certification necessarily implies that the product
purchased will hold up to the UL 20 standard. Chobani, LLC
v. Dannon Co., 157 F. Supp. 3d 190, 199-200 (N.D.N.Y. 2016)
(citing Pamlab, LLC v. Macoven Pharms., LLC, 881 F. Supp.
2d 470, 476 (S.D.N.Y. 2012)); see also Time Warner, 497
F.3d at 153-54. The use of the UL 20 mark on Eaton’s
products represents that a sampling of those products
complied with UL standards when UL tested the products. It
does not represent that every single unit will perform the
same way when tested by different entities.1 To satisfy
literal falsity under a theory of necessary implication,
Board-Tech needs to allege sufficient facts to show that
Underwriters Laboratories considers Eaton’s products non-
compliant--not just that someone else does. A third party
could have found that several dozen light switches failed a
test modeled after the UL certification process without
invalidating the approval to use the mark, or making it
untrue that some other representative sampling of identical
units met UL’s requirements. In other words, Board-Tech’s
testing, absent additional indicia of non-compliance, does
not render Eaton’s use of the UL 20 mark literally false.
Board-Tech relies on Burndy Corp. v. Teledyne
Industries, Inc. for the proposition that advertising a
product as UL compliant is false if that product does not
in fact comply. 584 F. Supp. 656 (D. Conn. 1984), aff’d by
1 Board-Tech makes the related argument that Eaton made
representations of its products’ compliance with the UL
standards “separate and apart from” its use of the UL mark.
Appellant’s Br. at 20. But, as explained above, Eaton’s
representations of its products’ compliance with “UL 20”
mean only that UL verified the switches’ performance along
certain merits, a representation that is not “false on its
face.” Time Warner, 497 F.3d at 153.
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748 F.2d 767 (2d Cir. 1984). If anything, Burndy militates
in favor of dismissal. In that case, the competitor’s
connectors were altered, and were found on retesting by UL
to be non-compliant. Id. at 660-61. Once UL, as mark-
owner, withdrew approval, the plaintiffs sued for false
advertising. The district court allowed the lawsuit to
proceed on these specific facts because “[h]olding [a
product] out to be UL approved” after materially changing
it “constituted a false representation.” Id. at 662.
Board-Tech overreads Burndy. Without any indication that
UL decertified the defendant’s product--or (perhaps) that
the defendant’s product had materially changed since
certification--there would be no plausible allegation of a
false statement.
Board-Tech protests that such a rule imposes an
impossible pleading standard because discovery is needed to
reveal the changes a manufacturer may have made to trigger
non-compliance. But nothing stops this plaintiff from
inviting reconsideration or retesting by Underwriters
Laboratories (as was done in Burndy). In any event, it is
axiomatic that a plaintiff must make a plausible
allegation--here, of a false statement--to survive a motion
to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544,
556-57 (2007); see, e.g., Associated Press v. All Headline
News Corp., 608 F. Supp. 2d 454, 463-64 (S.D.N.Y. 2009).
To merit discovery into its competitor’s product lines and
tradecraft, Board-Tech must “raise a reasonable expectation
that discovery will reveal evidence” tending to show UL
would find Eaton’s products non-compliant. Twombly, 550
U.S. at 556. However, Board-Tech concedes that UL
continues to endorse Eaton’s use of its mark, and that
there is no good faith basis to allege that UL’s
certification has become invalid by material changes in the
challenged products.2 Board-Tech therefore fails to plead
2Board-Tech analogizes UL certification to FDA approval in
Church & Dwight Co. But the issue there was whether the
FDA precludes any challenge to an advertisement’s label,
not whether the statement of FDA approval is literally
false. Church & Dwight Co., 843 F.3d at 64 (“[T]his
dispute involves the question whether the application of a
federal agency’s regulation, promulgated under one federal
statute, precludes a private action under another federal
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any facts to support a plausible inference of literal
falsity along the lines of Burndy.
B. Likely to Mislead
The Complaint also fails to show that the use of the UL
20 mark, if literally true, is nonetheless likely to
mislead consumers. Time Warner, 497 F.3d at 153; see
Stokely-Van Camp, Inc. v. Coca-Cola Co., 646 F. Supp. 2d
510, 525 (S.D.N.Y. 2009). “[W]here the statement at issue
is not literally false,” a plaintiff alleging a Lanham Act
violation “must demonstrate, by extrinsic evidence, that
the challenged [content] tend[s] to mislead or confuse
consumers, and must demonstrate that a statistically
significant part of the commercial audience holds the false
belief allegedly communicated by the challenged
advertisement.” Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d
93, 112-13 (2d Cir. 2010) (citation and internal quotation
marks omitted); see Time Warner, 497 F.3d at 153 (“[A]
district court must rely on extrinsic evidence to support a
finding of an implicitly false message.” (alterations and
citations omitted)). The Complaint offers no non-
conclusory allegations or facts to support the claim that
consumers have been misled or confused.
II. Leave to Amend
Finally, Board-Tech challenges the refusal to grant
leave for a further amendment of the Complaint. We review
a district court’s decision on leave to amend for abuse of
discretion. See Ruffolo v. Oppenheimer & Co., 987 F.2d
129, 131 (2d Cir. 1993). Board-Tech never asked the
statute.”). Board-Tech’s claim fails because it fails to
allege a false statement, not because it is precluded from
challenging the content of its competitor’s ads. Moreover,
this Court rejected the argument that a fact about the
pharmacological effects of a drug, which the FDA had
determined to be true, could nonetheless be challenged as
literally false. Apotex, 823 F.3d at 58, 64 (holding that
advertising that “is consistent with the directive of the
regulatory body having oversight of product labels” cannot
be literally false); Church & Dwight Co., 843 F.3d at 73
n.13.
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district court for leave to amend, and we have made clear
that we will not deem it an abuse of the district court’s
discretion “to order a case closed when leave to amend has
not been sought.” See Anatian v. Coutts Bank (Switz.)
Ltd., 193 F.3d 85, 89 (2d Cir. 1999) (quotation marks and
citation omitted); see also In re Am. Express Co.
Shareholder Litig., 39 F.3d 395, 402 (2d Cir. 1994) (no
abuse of discretion in denying leave to amend where
“[a]ppellants amended their complaint twice before it was
dismissed [and] did not seek leave to replead in the
district court in their opposition papers to defendants’
motion to dismiss”).
For the foregoing reasons, and finding no merit in
Board-Tech’s other arguments, we hereby AFFIRM the judgment
of the district court.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, CLERK
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