IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

SUN WATER SYSTEMS, INC. §

§

VS. § CIVIL ACTION NO.4:05-CV-574-Y

 §

VITASALUS, INC., ET AL. §

ORDER DENYING CROSS-MOTION FOR PRELIMINARY INJUNCTION

The Court has before it a cross-motion for a preliminary

injunction filed by defendants Vitasalus, Incorporated, et al (doc.

#65). After review of the motion, response, and reply, the Court

concludes that it should be DENIED because Defendants have failed to

establish irreparable harm.

I. Factual Background

This cause of action arises out of a bitter dispute between

competitors in the commercial sale of a water-filtration system

commonly referred to as a whole-house water treatment system (“wholehouse system”). Plaintiffs allege that Defendants are infringing on

their trademarks and trade dress used in the marketing and sale of the

system. Defendants counter with claims that Plaintiffs have engaged

in anti-competitive behavior through defamation, business disparagement, and tortious interference with contracts and prospective

business relations. The Court’s February 28, 2007, order denying

Plaintiffs’ motion for a preliminary injunction sets out in detail the

history of this dispute between the parties and will not be repeated

here. 

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 1 of 13 PageID 6433
2

Defendants’ motion seeks to have the Court enjoin Plaintiffs from

making certain statements aimed at defaming and disparaging Defendants’ business and calculated to interfere with their current and

prospective customer relations. Specifically, Defendants complain

that Plaintiffs have instructed their dealers and distributors to

relay the following message in response to any customer inquiries that

mention Defendants:

Vitasalus (Equinox-Products.com) is not an authorized Aquasana or Equinox distributor. We are

currently in litigation with them for illegal use

of our trademarks (Equinox and Rhino) and selling

counterfeit products.

They buy old and used units off the street and

refurbish them. No one has made a new Equinox or

Rhino in over ten (10) years. We purchased the

manufacturing rights, patent and trademark for

their product in 1999 and produce it as the Sun

Water EQ-300.

Buying this product from Vitasalus is risky and

will most likely result in owning a product

without a warranty, and of questionable quality.

The EQ-300 sold by Vitasalus is not certified and

the company is selling them fraudulently.

Defendants also complain of the following statements that were placed

on Plaintiffs’ website and on the internet:

1. We are the only licensed manufacturer of this

product, BEWARE OF UNCERTIFIED IMITATIONS sold as

Vitasalis [sic] EQ-300 . . . .”

2. Be wary of uncertified imitations sold as

Vitasalis [sic], WE ARE THE ONLY CERTIFIED MANUFACTURER OF THIS PRODUCT!”

3. Equinox Water Filtration products are only

sold through Aquasana.com. All products are

certified and covered by factory warranty. Beware

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 2 of 13 PageID 6434
3

of counterfit [sic] copies sold by Equinox-Products.com.

4. We’re the only licensed manufacturer of the

Rhino EQ-300 Whole House Water Filter. Be weary

[sic] of imitations sold at Equinox-Products.com.

Call us before you purchase.

Defendants also complain that Plaintiffs contacted Ebay.com and

Google.com and persuaded them to restrict Defendants’ ability to

market and sell their whole-house system using the marks “Equinox,”

“Rhino,” and “EQ-300.” In particular, Ebay.com removed two of

Defendants’ listings on the Ebay.com site because Plaintiffs had

notified them, “under penalty of perjury,” that Defendants’ listing

infringes on Plaintiffs rights under copyright, trademark, and other

laws. Defendants’ Ebay.com listing had customers bidding to purchase

a whole-house system.

II. Analysis

To obtain a preliminary injunction, Defendants must clearly

establish: (1) a substantial likelihood of success on the merits; (2)

a substantial threat of irreparable harm if the injunction is not

granted; (3) that the threatened injury to Defendants outweighs any

harm to Plaintiffs that may result from the injunction; and, (4) that

the injunction will not undermine the public interest. See Roho, Inc.

v. Marquis, 902 F.2d 356, 358 (5th Cir. 1990); Allied Mktg. Group, Inc.

v. CDL Mktg., Inc., 878 F.2d 806, 809 (5th Cir. 1989). A preliminary

injunction is an extraordinary remedy, and it is well-settled law that

it will only be granted if Plaintiffs clearly carry their burden of

persuasion on all four factors. Allied Mktg. Group, Inc., 878 F.2d at

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 3 of 13 PageID 6435
4

809. If the Court concludes that Plaintiffs have failed to carry

their burden on any one of the four factors, then the Court must deny

the motion for a preliminary injunction. “The decision whether to

grant a preliminary injunction is within the discretion of the

district court.” Id.

Plaintiffs argue,

Defendants have filed the instant “cross-motion”

in an attempt to offset and cloud [Plaintiffs’]

pending request for preliminary relief based on

clear claims of trademark infringement, trade

dress infringement and unfair competition. The

damages Defendants claim are de minimis.

The Court strongly disagrees. Defendants filed this instant motion

because they believe, apparently with good reason, that many of

Plaintiffs’ statements are blatantly false. First, Plaintiffs stated

that Defendants are not authorized to sell Equinox products and that

“Equinox water filtration products are only sold through Aquasana.com-

.” Defendants, however, have presented the Court with evidence that

establishes their substantial likelihood of proving at trial that this

is clearly not true and that Plaintiffs were fully aware that this is

not true. 

The evidence Plaintiffs submitted in support of their own motion

for a preliminary injunction included a copy of the official distributorship agreement Defendants signed with Equinox International

Corporation (“EIC”). This agreement gave Defendants the right to sell

and distribute Equinox products. Also, Plaintiffs were fully aware

that the EIC receiver had placed the following advisement on the

receiver’s official internet webpage:

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 4 of 13 PageID 6436
5

Equinox Products

If you are interested in purchasing or selling

products or accessories previously sold by Equinox

International, please visit website

http://www.equinox-products.com/ [Defendants’

website]. . . . 

As stated in the notice of Receivership, products

do not need to be returned to Equinox International in order to participate in the claims

process. Therefore, all products that are in a

Representative’s possession are his/her property

and can be consumed, distributed, and/or disposed

at their discretion. (Emphasis added.)

That advisement not only informs that Defendants are authorized to

sell Equinox products, but any other former distributer in possession

of Equinox products previously purchased from EIC has the right to

sell those products. Furthermore, the EIC receiver was free to sell

any and all remaining inventory of Equinox products to any distributor

who wished to purchase them and then resell them to the public. See

FTC, et al. v. Equinox International Corp., et al., No. CV-S-99-0969-

JBR (RLH), Order Preliminarily Approving Stipulated Final Judgment and

Class Action Settlement and Setting Fairness Hearing, at pgs. 16 & 17,

¶¶ D & G. (D.Nev. April 20, 2000). Moreover, for close to two years,

Plaintiffs sold liquidated Equinox inventory they had purchased from

the EIC receiver to Defendants—knowing Defendants operated a web-based

business that adver- tised: 

 

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 5 of 13 PageID 6437
6

Second, Plaintiffs stated that Defendants were selling fraudulent

and counterfeit products. Here too, Defendants have presented the

Court with evidence establishing their substantial likelihood of

proving at trial that this is blatantly untrue. For the reasons just

stated above, Defendants do not appear to be fraudulently selling

Equinox products, they appear to have every right and authorization to

sell them. Furthermore, the evidence presented apparently shows that

Defendants are not selling counterfeit whole-house systems. The

Supreme Court has explained that

in many instances there is no prohibition against

copying goods and products. In general, unless an

intellectual property right such as a patent or

copyright protects an item, it will be subject to

copying. As the Court has explained, copying is

not always discouraged or disfavored by the laws

which preserve our competitive economy. Allowing

competitors to copy will have salutary effects in

many instances. 

Traffix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 29

(2001). Plaintiffs’ cause of action against Defendants does not

include any claim for patent infringement. Thus, Defendants have

every right, as our free-market economy premised on competition fully

encourages, to manufacture the same or a substantially similar product

as Plaintiffs and sell it as their own. Defendants’ “only obligation”

is “to identify its own product lest it be mistaken for that of the

plaintiff.” Kellogg Company v. National Biscuit Company, 305 U.S.

111, 119 (1938)(holding two companies had the right to manufacture,

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 6 of 13 PageID 6438
7

market, and sell the exact same pillow-shaped breakfast cereal as

shredded wheat). 

The term “counterfeiting” is used almost exclusively in connection with illegal activity that includes elements of deception,

defrauding, and dishonesty. When the average person hears the term

“counterfeit,” he will almost invariably relate that to the fraudulent

and criminal printing of imitation paper money. Undoubtedly, the

message conveyed by Plaintiffs is that Defendants’ product is a

fraudulent imitation. But Defendants’ evidence demonstrates to the

Court their substantial likelihood of proving that they have not

perpetrated any fraud in selling their own whole-house system because,

and as more fully explained in the Court’s February 28 order, their

website clearly distinguishes their product from that of Plaintiffs.

Third, Plaintiffs’ statements that (1) Defendants buy old and

used systems off the street and refurbish them; (2) no one has made a

new Equinox or Rhino whole-house system in over ten years; and, (3)

Plaintiffs had purchased the manufacturing rights, patent, and

trademarks for Defendants’ product also appear to be false. The best

piece of evidence refuting Plaintiffs’ first two statements is

Plaintiffs’ own concession that they built new systems for Defendants

out of component parts Plaintiffs had purchased from the EIC receiver.

These were not old and used systems that came off the street, they

were brand new, and they were labeled with the marks Rhino, Equinox,

and EQ-300. This was a contractual relationship that began in 2001

and ended in 2004 where Plaintiffs agreed to be a hidden manufacturing

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 7 of 13 PageID 6439
8

resource for Defendants’ new whole-house systems. Thus, the evidence

strongly suggests that Plaintiffs knew that their claim—that no one

had made a new Equinox or Rhino system in over ten years—was patently

false. 

Plaintiffs’ claim that they purchased the patent for the wholehouse system is almost surely false because there is no proof of any

patent on the system. If there were, the Court is certain Plaintiffs

would have brought a patent-infringement claim along with their

trademark-infringement claims. And surely Plaintiffs knew that they

didn’t purchase the trademarks Equinox or EQ-300 because the Court

prohibited the EIC receiver from conveying any proprietary rights in

marks that are associated with the goodwill of EIC. See FTC, et al.

v. Equinox International Corp., et al., No. CV-S-99-0969-JBR (RLH),

Order Preliminarily Approving Stipulated Final Judgment and Class

Action Settlement and Setting Fairness Hearing, at pg. 17, ¶ G.

(D.Nev. April 20, 2000). 

Finally, Plaintiffs must know that their statement that buying

Defendants’ product “will most likely result in owning a product

without a warranty” was false. Defendants’ website specifically

mentions the warranty that comes with their product. 

Based on the forgoing, the Court is convinced that Defendants

have demonstrated a substantial likelihood of establishing defamation

and business disparagement by Plaintiffs at trial. To establish

defamation, Defendants must show that (1) Plaintiffs published a false

statement; (2) the false statement was defamatory; and, (3) Plaintiffs

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 8 of 13 PageID 6440
9

made the statement with negligence as to its truth. See Green v. CBS,

Inc., 286 F.3d 281, 283 (5th Cir. 2002); WFAA-TV v. McLemore, 978

S.W.2d 568, 571 (Tex. 1998). 

As shown above, there is little doubt that Defendants will prove

at trial that Plaintiffs published false statements. And there is

little doubt that Defendants will prove that Plaintiffs were fully

aware of the falsity of those statements when they made them. But the

Court is also convinced that Defendants will prove that the statements

were defamatory.

A statement is defamatory when it tends to injure the reputation

or to impeach characteristics of honesty, integrity, or virtue thereby

exposing one to public hatred, contempt, ridicule, or financial

injury. See Tex. Civ. Prac. & Rem. Code Ann. § 73.001; Cain v. Hearst

Corporation, 878 S.W.2d 577, 580 (Tex. 1994). Defendants’ have

presented the Court with compelling evidence that Plaintiffs’

statements injure Defendants’ reputation, impugn their honesty and

integrity, and exposed them to contempt and financial injury. In

fact, the Court suspects that was Plaintiffs’ exact intent. 

Defendants have presented evidence establishing that as a result

of Plaintiffs’ statements, they lost potential customers. One

customer inquired as to Plaintiffs’ statements and, even after

receiving Defendants’ explanation, he withdrew his order. Another

customer, even after receiving Defendants’ response, never placed an

order. And Ebay.com withdrew Defendants’ listing, causing them to

lose customers that were bidding on their products. The Court is

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 9 of 13 PageID 6441
10

persuaded that Defendants will likely prove that Plaintiffs’ statements impugned the integrity of the individual Defendants, casting

them as shysters and thereby causing consumers to question whether

they could trust any of Defendants’ statements regarding their

product. 

To establish business disparagement, Defendants must demonstrate

that (1) Plaintiffs published false and disparaging information about

them; (2) Plaintiffs acted with malice; (3) Plaintiffs acted without

privilege; and, (4) Defendants suffered special damages. Forbes, Inc.

v. Granada Biosciences, Inc., 124 S.W.3d 167, 170 (Tex. 2003). While

similar in many respects to defamation, business disparagement differs

in that it protects economic interests against pecuniary loss. Id.

To prove malice, Defendants have to show Plaintiffs knew their

statements were false, acted with reckless disregard concerning the

falsity of their statements, or acted with ill will or intended to

interfere in Defendants’ economic interests in an unprivileged

fashion. Hurlbut v. Gulf Atlantic Life Insurance Company, 749 S.W.2d

762, 766 (Tex. 1987). Special damages are proved when Defendants 

establish pecuniary loss that has been realized or

liquidated as in the case of specific lost sales.

. . . The communication must play a substantial

part in inducing others not to deal with [Defendants] with the result that special damage, in the

form of the loss of trade or other dealings, is

established.

Id. at 767. Defendants have shown a substantial likelihood of proving

these elements as well. Their evidence shows Plaintiffs published

false and disparaging statements about Defendants. It shows Plain-

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 10 of 13 PageID 6442
11

tiffs knew that their statements were false, that they acted with ill

will in making these false statements, and that Plaintiffs intended

for the statements to interfere with Defendants’ ability to consummate

sales of their product by scaring off any potential customers.

Furthermore, Defendants have demonstrated lost sales and loss of trade

directly caused by Plaintiffs’ remarks. 

Defendants have also established that the threatened injury to

them outweighs any harm to Plaintiffs that may result from the

injunction. Clearly Plaintiffs would not be harmed by an order that

directs them to stop engaging in apparently anti-competitive behavior

through the making of false statements that maliciously align

Defendants’ reputation, honesty, and integrity. And an injunction

would not undermine the public interest. If in fact Plaintiffs are

engaging in anti-competitive behavior—as Defendants’ evidence strongly

suggests—an injunction would further the public interest by preventing

consumers from being mislead by blatantly false statements made by a

market competitor.

The shortcoming lies, however, in Defendants’ failure to persuade

the Court that they will suffer irreparable harm. In their motion,

Defendants state only that

[Defendants are] suffering and will continue to

suffer irreparable harm if [Plaintiffs are] not

enjoined from continuing [their] anti-competitive

campaign to impugn the quality and reputation of

[Defendants] and [their] products. [Plaintiffs

have] engaged in a pattern of accusations and

disparagement of [Defendants] and [their] products

through the internet, through email communications, and through communications with e-commerce

businesses. Among other things, [Plaintiffs have]

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 11 of 13 PageID 6443
12

directly accused [Defendants] of committing

fraudulent business practices and of selling

products that are health and safety risks.

Remarkably, [Plaintiffs have] attempted to turn

the safety issue on its head by claiming that

[their] reputation may be harmed; in fact, it is

[Plaintiffs] [who are] harming [Dependants’]

reputation by making baseless, false allegations

directly accusing [Defendants] of selling unsafe

products.

At its core, the intent of [Plaintiffs] is clear—-

to cause irreparable harm to [Defendants] in an

attempt to gain leverage in its anti-competitive

attack. While [Defendants have] already suffered

irreparable harm, the scope of this harm will

continue to expand until [Plaintiffs are] enjoined. 

 

Simply stating that Defendants will suffer irreparable harm, and

simply restating the wrongful acts of Plaintiffs is insufficient to

establish irreparable harm. And simply stating that Plaintiffs intend

to cause irreparable is insufficient as well. While the evidence

strongly suggests that Plaintiffs intend to cause Defendants irreparable harm, the test is not whether Plaintiffs intend to cause irreparable harm, but whether they are succeeding. 

In this circuit the law is clear, “only those injuries that

cannot be redressed by the application of a judicial remedy after a

hearing on the merits can properly justify a preliminary injunction.”

Canal Authority of Florida v. Callaway, 489 F.2d 567, 573 (5th Cir.

1974). As such, Defendants are required “to show that the loss cannot

be measured in money damages.” Millennium Restaurants Group,

Incorporated v. City of Dallas, 181 F.Supp.2d 659, 666 (N.D.Tex.

2001)(Fish, J.). Simply arguing that they are losing customers and

goodwill without showing that monetary damages are an inadequate

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 12 of 13 PageID 6444
13

remedy is insufficient to establish irreparable harm. See Id. This

is true even if “the pecuniary injury [is] difficult to calculate . .

. .” Id. The loss of goodwill of a business “is usually compensable

in money damages.” DFW Metro Line Services v. Southwestern Bell

Telephone Company, 901 F.2d 1267, 1269 (5th Cir. 1990). Thus, the

Court concludes that “a total failure of proof as to why money damages

are not measurable or adequate cannot be excused . . . .” Pate, et

al. v. The Houston Chronicle Publishing Company, et al., 462 F.Supp.

1114, 1118 (S.D.Tex. 1977), aff’d, 572 F.2d 1106 (5th Cir. 1978). 

III. Conclusion

The Court concludes that, as to the statements addressed above,

Defendants have demonstrated a substantial likelihood of proving their

claims of defamation and business disparagement at trial. The Court

also concludes that Defendants have established that their injury

significantly outweighs any harm that may come to Plaintiffs from an

injunction. And the Court concludes that an injunction would further

the public interest. But because Defendants have wholly failed to

prove irreparable harm, the Court DENIES their motion for a preliminary injunction. Further, in all other aspects not addressed in this

order, the Court DENIES Defendants’ request for an injunction. 

SIGNED March 8, 2007.

 

 Case 4:05-cv-00574-Y Document 214 Filed 03/08/07 Page 13 of 13 PageID 6445