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Caltex Plastics, Inc. v. Elkay Plastics Co., Inc.

United States District Court, C.D. California

February 4, 2015

CALTEX PLASTICS, INC., Plaintiff,
v.
ELKAY PLASTICS COMPANY, INC., Defendant.

RULING & ORDER re: BENCH TRIAL

RONALD S.W. LEW, Senior District Judge.

On November 18, 2014, the above matter commenced in a bench trial before this Court. Plaintiff Caltex Plastics, Inc. ("Plaintiff" or "Caltex") brings this Action against Defendant Elkay Plastics Co. ("Defendant" or "Elkay") for false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a), and California's Business & Professions Code §§ 17200 and 17500. Compl. ¶ 1. Plaintiff alleges that Defendant has falsely represented that Defendant's StratoGrey product line "meet[s]" a certain military specification. Id. Plaintiff seeks actual damages in the amount of $3, 030, 911.33. Pl.'s Closing Trial Br. ¶¶ 7-8. Plaintiff also seeks treble damages, Id. at 32:17-25, and attorneys' fees, id. at 34:24-35:2. Defendant seeks judgment in its favor and attorneys' fees. Def.'s Closing Trial Br. 27:1-19.

Having received, reviewed, and considered the evidence presented, as well as the Parties' arguments at trial, the Court makes the following ruling:

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Judgment be entered in favor of Defendant Elkay Plastics Company, Inc., and the parties shall bear their own costs and fees.

FINDINGS OF FACT

1. Plaintiff Caltex is a California corporation that manufactures, markets, and distributes polyethylene bags and laminated products for military and electronics. Compl. ¶¶ 2-3; Trial Tr. 150:14-15.

2. Plaintiff's packaging products include "flexible military packaging material" that is qualified by the Department of the Navy as meeting the Department of Defense's ("DOD") MIL 81705 Type III specification for "flexible barrier materials, often supplied as bags." Pretrial Conference Order 3:4-22 (undisputed fact).

3. The term "MIL-PRF-81705" (formerly "MIL-B-81705") is a military specification defined by the DOD that establishes qualification requirements for certain types of military packaging for electronic components. Pretrial Conference Order 3:4-22 (undisputed fact); Magnifico Dep. 12:6-21, ECF No. 56.

4. The DOD maintains a Qualified Products List (QPL) for products that have been submitted to the DOD for qualification and have met the military specification's qualification requirements after government testing. Magnifico Dep. 12:6-14:11; 20:12-16.

5. If an entity wants to submit a product for qualification, the entity must contact the DOD to begin the process of qualification. Magnifico Dep. 20:12-22:21.

6. The only way an entity can be placed on the QPL is if the entity's product has been tested by the government and approved by the government for qualification. Magnifico Dep. 28:7-19. No entity can self-qualify; for qualification and placement on the QPL, the product must be qualified by the government. Id. at 47:4-20.

7. Prior to submitting a product to the DOD for qualification, an entity can find the specific testing requirements in the military specification, and the entity must test its product to ensure that the product passes the tests before the DOD will begin testing the product for qualification. Magnifico Dep. 22:4-23:1, 27:15-28:6.

8. When a military specification has a qualification requirement, products with that military specification may be purchased by the military from only "qualified" manufacturers listed on the QPL. Magnifico Dep. 15:10-16:18.

9. Anyone can access the QPL on the Internet. Magnifico Dep. 50:8-51:3.

10. The Department of the Navy (DON) is the only entity that can qualify products under the MIL-PRF-81705 specification. Pretrial Conference Order 3:4-22 (undisputed facts).

11. Plaintiff's MIL-PRF-81705 Type III products have been approved by the DON and were placed on the DOD's QPL in February 2010. Pretrial Conference Order 3:4-22 (undisputed facts); Magnifico Dep. Ex. 1.

12. At present, Plaintiff Caltex is the only manufacturer that has been qualified by the DON and placed on the QPL for MIL-PRF-81705 Type III product. Pretrial Conference Order 3:4-22 (undisputed facts).

13. There had not been a qualified manufacturer for MIL 81705 Type III product for approximately ten years prior to Caltex's qualification in February 2010. Trial Tr. 154:7-155:2, 223:4-8, 225:3-15; Magnifico Dep. 41:4-48:24, 54:12-57:5, 77:9-21, Exs. 2-3.

14. Mr. Magnifico of the DON sent out a problem advisory, dated May 8, 2012, to the Government Industry Data Exchange Program (GIDEP) to alert GIDEP members that if defense contracts required qualified product for MIL-PRF-81705 Type III product, such products needed to be purchased only from qualified manufacturers on the QPL and not from non-qualified manufacturers who were claiming their product met the MIL 81705 Type III requirements. Magnifico Dep. 41:4-47:20, Ex. 2. Mr. Magnifico sent a similar letter, dated July 23, 2012, to the DOD. Magnifico Dep. 59:3-66:15, Ex. 3.

15. Defendant Elkay, a California corporation, Def.'s Ans. ¶ 4, is a "master distributor of polyethylene products" that sells its products solely through distributors and has no direct sales. Trial Tr. 15:18-23, 16:2-3.

16. Elkay advertises its products to its customer-distributors via Elkay's catalogs and brochures, web site, specification sheets, and Elkay-employed consultants. Trial Tr. 16:1-20. Elkay has approximately 4300 distributors. Id. at 36:16-37:4.

17. Elkay does not manufacture the StratoGrey static shielding bags it sells. 5:19-20 (Trial Tr. 18:19-25, 21:13-16, 254:17-20). Elkay's suppliers for its StratoGrey static shielding bags are ...


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