Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Franklin Fueling Systems, Inc. v. Veeder-Root Co.

August 11, 2009

FRANKLIN FUELING SYSTEMS, INC., PLAINTIFF,
v.
VEEDER-ROOT COMPANY AND DOES 1 THROUGH 20, DEFENDANTS.



The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

MEMORANDUM AND ORDER

This matter is before the court on defendant Veeder-Root Co.'s ("Veeder-Root" or "defendant") motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff Franklin Fueling Systems, Inc. ("Franklin" or "plaintiff") opposes the motion. For the reasons set forth below, defendant's motion to dismiss is DENIED.*fn1

BACKGROUND*fn2

In March 2000, the California Air Resources Board ("ARB") adopted regulations requiring most gas stations to upgrade vapor recovery systems over a period of ten years. (Pl.'s First Am. Compl. [Docket # 20], filed May 26, 2009, ¶ 15.) These regulations included a requirement that gas stations upgrade vapor recovery systems with Enhanced Vapor Recovery ("EVR") systems by April 1, 2009, and that they install in-station diagnostics ("ISD") systems by September 1, 2009. (Id.) In order to comply with the ARB regulations, EVR systems must be ARB-certified. (Id. at ¶ 17.)

The Healy Phase II Enhanced Vapor Recovery System ("Healy System"), initially owned by the inventor, Jim Healy, was ARB-certified on April 8, 2005. (Id.) The Veedor Root ISD, certified on August 31, 2005, was the first ISD system to be ARB-certified. (Id. at ¶ 18.) In September 2006, Franklin bought and obtained rights to the Healy System. (Id. at ¶ 20.) On November 5, 2007, Vapor System Technologies, Inc. ("VST") obtained certification for an EVR System. (Id. at ¶ 21.) Sometime thereafter, Veeder-Root designed the Veeder-Root Carbon Canister, a component which replaced the VST vapor processor of the VST System. (Id.) On October 17, 2008, ARB certified the use of the Veeder-Root Carbon Canister with the VST Sytem ("VR/VST System"). (Id.) Plaintiff alleges that the VR/VST System was substantially less expensive than the VST System. (Id.)

Plaintiff contends that prior to the certification of the VST System, the Healy System controlled 100% of the market, but nevertheless maintained 95% of the market after the introduction of the competing system through early 2009. (Id. at ¶ 23.) Plaintiff claims that Veeder-Root began distributing marketing materials that made false factual statements about the Healy System, allegedly stating that (1) one in four Healy Systems failed, and (2) that an ARB investigation had concluded that problems with the Healy System were triggering alarms on the Veeder-Root ISD, causing the Veeder-Root ISD to shut down dispensers. (Id. at ¶ 24.) Plaintiff claims that Veeder-Root's allegedly false statements were largely based upon problems with false alarms that gas station owners began reporting in late 2008 when using Veeder Root ISDs in conjunction with the Healy System. (Id. at ¶ 25.) Plaintiff alleges that the problem with false alarms did not arise when the Healy System was used in conjunction with the Incon ISD. (Id.) Plaintiff claims that when false alarms occurred frequently, the Veeder-Root ISD shut down all of the station's fueling dispensers, requiring a technician to reset the system. (Id.) By contrast, plaintiff claims, the Incon ISD shuts down only the fueling dispenser responsible for triggering the alarms. (Id.)

After receiving a number of complaints, plaintiff alleges the ARB instituted an investigation into the cause of the false alarms. (Id. at ¶ 26.) Plaintiff claims that the ARB advised Franklin and Veeder-Root not to publicize statements regarding the cause of the false alarms until it completed its investigation. (Id.) Plaintiff alleges that though ARB has not yet reached a formal conclusion as to the cause of the false alarms, it released a PowerPoint presentation to the California Pollution Control Officers' Association ("CAPCOA") concerning its tentative findings. (Id.)

Plaintiff claims that around February 12, 2009, Veeder-Root began circulating certain materials containing false statements, using the CAPCOA presentation to make it appear as if ARB endorsed the allegedly false statements. (Id. at ¶ 27.) Specifically, plaintiff asserts that defendant circulated an email containing the allegedly false statements, with ARB's PowerPoint presentation and a Veeder-Root marketing document attached (hereinafter, the "Marketing Materials"). (Id.) Plaintiff contends that the statements were false in the following ways: (1) ARB did not find a 22% failure rate for the Healy System, nor did it find that one in four Healy Systems needed to be replaced; (2) the contention that Healy Systems "contribute to site maintenance costs" is factually incorrect, as it is the conjunction of the Veeder-Root ISD System with the Healy System that leads to increased maintenance costs; (3) ARB has not reached a conclusion that the Healy System is the cause of the false alarms, and Veeder-Root's contention otherwise is in violation of ARB's advisory that Veeder-Root and Franklin refrain from issuing public announcements regarding the cause of the false alarms. (Id. at ¶¶ 29-31.) Plaintiff alleges that these false statements, among others, have been distributed to the public in California and other states, including potential purchasers of the Healy System. (Id. at ¶ 32.) Plaintiff further contends that the dissemination of the false statements in the Marketing Materials have damaged Franklin through significant losses in its market share for EVR Systems, evidenced by a reduction in its market share from 95% to 75%-50%, resulting in the loss of millions of dollars. (Id. at ¶ 33.)

STANDARD

On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.

Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). Indeed, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201.

See Mir v. Little Co. of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).

Ultimately, the court may not dismiss a complaint in which the plaintiff alleged enough facts to "state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. at 570August 8, 2009). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. When there are well-pleaded factual allegations, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 1950.

ANALYSIS*fn3

A. Lanham Act

Plaintiff's first cause of action is for false and misleading advertising pursuant to the Lanham Act, 15 U.S.C. § 1125(a).*fn4 Specifically, plaintiff contends that defendant caused the Marketing Materials, containing material, false and misleading statements likely to deceive those who see or hear them, to enter interstate commerce, leading to a direct diversion of sales from plaintiff to defendant and a lessening of the goodwill associated with plaintiff's products. Plaintiff alleges that the Marketing Materials contained the following false and misleading statements, among others: (1) "ARB indicates... 22% failure rate found contributing to degradation ISD alarms"; (2) "Customer Options: Option 1: Replace 1 in 4 nozzles to maintain assist site performance"; (3) "Assist nozzles contribute to site maintenance costs"; (4) "the problem in the overwhelming majority of cases are in the Nozzles, not the ISD System or its protocol/software. Attached are two documents supporting this position; 1) CARB ppt presentation to Capcoa...." (FAC ¶ 28.)

Defendant contends that plaintiff has not stated a claim under the Lanham Act because: (1) plaintiff inadequately pled false or misleading statements; (2) plaintiff identified statements of opinion rather than fact; (3) defendant's statements are at most puffery; ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.