Opinion ID: 3049595
Heading Depth: 5
Heading Rank: 1

Heading: Testing of Fence Posts and Stakes

Text: Viance first attacks the district court’s reliance on the fact that Viance tested only fence posts and stakes, but not structures. Viance does not dispute that it did not test structures built with MCQ-treated wood, but does dispute the conclusion (which it attributes to the district court) that tests on stakes and fence posts are not sufficient to form conclusions as to the safety of structures built with MCQ-treated wood. In support of its argument, Viance cites to testimony establishing that the posts tested in the in-service survey are the exact type of posts used to build structures and that what matters is testing wood in ground contact, not the specific use of the wood prior to the testing. Viance also points to testimony establishing that field stake testing is a standard industry method for testing the efficacy of wood preservatives. The district court did not fully explain why Viance’s testing of fence posts and stakes could not support safety concerns regarding structures built with MCQtreated wood. We see two possible interpretations of this first rationale of the 26 district court. The district court may have meant that the particular tests performed did not purport to indicate that the decay revealed was indicative of the structural weakness and safety concerns expressed in Viance’s advertisements. As the district court said in this regard: “Viance did not test the effect of the alleged decay on the integrity of structures built with MCQ treated wood.” To the extent this was the reasoning of the district court, it is not clearly erroneous.8 In fact, evidence indicates that Viance’s tests did not assess the effect of the alleged decay on the structural integrity of the wood. As thus understood, the district court appropriately relied on the fact that Viance’s tests did not support the broad conclusions regarding the structural integrity and safety of MCQ-treated wood expressed in Viance’s advertisements. We adopt the foregoing construction of the district court’s reasoning and conclude that the district court did not clearly err in 8 The district court’s reasoning on this point is supported by certain evidence in the record. Chris Barber, laboratory manager at Timber Products, testified in his deposition that there is an AWPA standard test for the structural strength of a post, that he was never asked to perform that test on the posts in question, and that the rating of decay at a particular moment on a post does not indicate the structural strength of a post. And Todd Greer, Vice-President of Timber Products, stated in his declaration that “[a] claim or suggestion that properly treated outdoor structures built with micronized copper wood may be unsafe or may prematurely fail in service is not warranted by any of the findings contained in either of these reports.” This testimony does support the district court’s finding that Viance’s tests did not support the broad conclusions about structural integrity and safety asserted in Viance’s advertisements. 27 finding that the tests performed did not support Viance’s conclusions regarding the safety and efficacy of MCQ.9 ii. District Court’s Analysis of the Results of the In-Service Survey The district court found thirteen of the 530 posts examined showed decay at a rating of 9.0 or below. The district court thus found that only 2.45% of the posts showed significant decay, a percentage the district court found was too low to support serious concerns regarding the structural integrity and safety of MCQtreated wood. Viance attacks the district court’s calculations as to the percentage of posts that showed decay and its conclusion that such a low percentage did not support serious safety concerns. Viance contends that although it saw roughly 530 MCQ-treated posts in its in-service survey, it did not analyze all 530 of them. Thus, Viance argues that using 530 as the baseline for the percentage that showed decay was error. It also claims that the district court’s finding that thirteen of the posts were rated 9.0 or less also is not supported by the record. That being the case, Viance argues that the district court’s conclusion that 2.45% of the posts 9 The other possible interpretation of the district court’s language is that the district court may have concluded that tests on fence posts and stakes could not support Viance’s concerns about the safety of structures built with MCQ-treated wood because tests on stakes or in-service fence posts can never contribute to a conclusion as to the safety of structures built with MCQ-treated wood. Viance cites testimony indicating that such reasoning may well be clearly erroneous. However, as we do not interpret the district court as having adopted that reasoning, we need not decide that question. In any event, the other two bases cited by the district court provide strong support for its ultimate conclusion as to literal falsity. 28 showed decay is not supported by the record. Viance suggests that an appropriate analysis shows that of the fifty-six total posts analyzed by Timber Products, nineteen of the Georgia posts analyzed rated 9.5 or lower and eleven of the Louisiana posts rated 9.5 or lower; therefore, roughly 54% of the posts showed decay, a percentage sufficient to support serious safety concerns. The district court’s reasoning on this point has four components: the threshold rating at which a post should be counted as having significant decay, the number of posts decayed under that standard, the number of posts comprising the total sample, and whether the resulting percentage of decayed posts supports a conclusion of serious safety concerns. Although Viance never clearly challenges the district court’s use of 9.0 as the threshold rating for countable decay, Viance does suggest in its own calculation that any post rated 9.5 or lower should count as decayed. However, Viance cites no dispositive evidence in this record to support its apparent conclusion that any rating below a perfect 10 denotes decay indicative of serious safety concerns. To the extent that Viance challenges the district court’s use of 9.0 as the threshold rating, the district court was not clearly erroneous. In Timber Products’ release clarifying its role in the Reports, it noted that the decay ratings in the Reports were based on a subjective determination and that others might have 29 assigned slightly different ratings. And Chris Barber testified that although a rating of 10 denoted sound wood, he would not classify anything with less than a 10 as “less than sound.” The district court could have reasonably concluded there was not a clear line of demarcation between posts rated 9.5 and posts rated 10. In light of the evidence in this record, the district court did not clearly err in choosing a rating of 9.0 as the threshold level of countable decay for its calculations. Given that threshold rating, the next component of the district court’s basis is the number of posts inspected that had a rating of 9.0 or lower. The district court counted thirteen posts with a 9.0 or lower, but did not explain how it arrived at that number. Our independent review of the record suggests the district court’s number may be incorrect. The January 2009 Report shows that eight of the fortyfive posts from the Alpharetta site that Timber Products visually inspected rated 9.0 or lower. The November 2008 Report shows that all eleven posts inspected from the Baton Rouge site rated a 9.5 or 9.0, but does not distinguish between the two ratings. Assuming, to the benefit of Viance, that ten of those posts rated a 9.0 and only one rated a 9.5, eighteen of the posts from both the Alpharetta and Baton Rouge sites visually inspected by Timber Products rated a 9.0 or lower.10 10 In light of our generous assumption in favor of Viance that ten of the Baton Rouge posts rated 9.0, the district court’s count of thirteen total posts rating 9.0 or lower, rather than our assumption of eighteen, may in fact be more accurate. As our discussion below indicates, 30 The next component is the total sample size of posts. The district court made several factual findings in this regard. It found that Viance spent substantial time and resources in an effort to find MCQ-treated posts showing decay, that Viance searched numerous sites for MCQ-treated posts, and that Viance inspected roughly 530 MCQ-treated posts. In light of those findings, the district court concluded that 530 was the appropriate sample size. Record evidence supports these findings. Viance’s initial efforts uncovered no signs of decayed posts. Despite visiting eighteen sites and talking to numerous retailers and builders, the private investigator hired by Viance could find no problems suggesting premature decay in MCQ-treated wood. Viance nevertheless continued its search for signs of decay. Dr. Preston, Viance’s Director of Research, testified that Viance sent groups to numerous sites looking for MCQ-treated posts, and multiple documents corroborate that testimony. And Dr. Archer, also of Viance, testified that Viance inspected roughly 800 posts and estimated that two-thirds were treated with MCQ. Viance argues that some of those 530 posts were encased in concrete or otherwise not amenable to further testing and thus should not be counted in the total sample size. Viance, however, produced no evidence indicating what percentage of those posts were in concrete or otherwise inaccessible, nor did it indicate what however, this difference is not significant in any event. 31 percentage of the accessible posts that were not tested by Timber Products showed signs of decay based on Viance’s own inspection. Given that Viance spent substantial time and effort to find MCQ-treated posts showing decay, that it only called Timber Products in to inspect posts from the Baton Rouge and Alpharetta sites, and that it failed to produce evidence quantifying decay on the other posts it inspected, the district court could have reasonably concluded that it was appropriate to use all 530 MCQ-treated posts that Viance inspected as the total sample size.11 That being the case, we calculate the appropriate percentage of decayed posts as eighteen out of 530, or 3.4%.12 The final, and key, link in the district court’s chain of reasoning on this point is whether the percentage of decayed posts found in the study supports the conclusions drawn in Viance’s advertising statements regarding serious safety and 11 Using 530 as the total sample size basically assumes that a negligible percentage of MCQ-treated posts outside of the Baton Rouge and Alpharetta sites would have shown a decay rating of 9.0 or less. Given that this record indicates that Viance was searching diligently for MCQ-treated posts showing decay and that it only called Timber Products in to inspect posts from the Baton Rouge and Alpharetta sites, the district court did not clearly err in making that assumption. Given Viance’s failure to produce evidence characterizing the bulk of those 530 posts, we fail to see what other number the district court might have used. On this record, the district court was certainly not obligated to use the fifty-six posts that Viance specifically identified as showing sufficient signs of decay to warrant further testing as the total sample size for the survey. 12 As noted above, the district court’s finding of 2.45% may well be more accurate, but as will be developed below, the difference is inconsequential. 32 structural integrity concerns in relation to MCQ-treated posts. The district court found the percentage of decayed posts to be 2.45%. Although this calculation may be in error, as long as the higher percentage, 3.4%, still satisfies the conclusion that the percentage of decayed posts does not raise serious safety concerns, then the district court’s ultimate finding that the results of the studies do not support the conclusions in the advertisements is not clearly erroneous. Although the district court did not cite any testimony supporting the conclusion that 2.45% was not sufficient to support the serious concerns raised in the advertisements, Dr. Kamden, a professor of wood science and technology at Michigan State University, testified that in his own survey of MCQ, 2.9% of the posts had “issues.” Given that number, he concluded that MCQ was a “robust, very good wood preservative.” In light of that testimony, the district court did not clearly err in finding that the percentage of samples showing decay in Viance’s studies, be it 2.45% or up to 3.4%, was not sufficient to support the safety concerns raised in the advertisements. iii. District Court’s Reliance on Qualifying Language in the Test Reports Lastly, Viance attacks the district court’s reliance on qualifying language in the Timber Products Reports and Dr. Nicholas’ report on the field stake tests. In 33 its Reports, Timber Products noted that the Reports did not provide any basis for any conclusion as to the “grade, treatment, or physical quality” of the posts tested. Likewise, in his field stake test reports, Dr. Nicholas noted that “additional field stake test data will be required to confirm this concern about the performance of MCQ in ground contact applications.” The district court found that those limitations lowered the support the reports provided for Viance’s broad claims about safety concerns. Viance points out that Todd Greer, Vice-President of Timber Products, testified that he had no problem with Viance drawing conclusions regarding micronized copper based on the Timber Products Reports. It also contends that Dr. Nicholas’ qualification did not suggest Viance’s conclusions were wrong. The district court’s reliance on the limiting qualifications in the Viance tests was not clearly erroneous. Although neither of the qualifications explicitly state that Viance’s conclusions are wrong, they both certainly undermine the breadth of the conclusions that Viance seeks to draw from the studies. Moreover, other statements, such as the statement by Todd Greer in his declaration that “[a] claim or suggestion that properly treated outdoor structures built with micronized copper wood may be unsafe or may prematurely fail in service is not warranted by any of 34 the findings contained in either of these reports,” further undermine the broad conclusions that Viance attempts to attribute to its studies.13 In sum, the district court did not clearly err in determining that Viance’s statements regarding MCQ were literally false. We interpret its first basis as focusing on whether the particular tests performed supported the broad conclusions regarding structural integrity and safety expressed in the Viance advertisements. Given that interpretation and the record support for the district court’s finding in that regard, and in light of the other two strong bases relied on by the district court – i.e., the results of the in-service survey and the limiting qualifications in the several reports – the district court did not clearly err in finding that the tests cited do not support the conclusions drawn in the advertisements regarding the safety and efficacy of MCQ. 2. Literal Falsity of Statements Regarding Timber Products In Point 5 of the injunction, the district court enjoined Viance as follows: 5. Defendants may not indicate or imply that any conclusions or opinions stated in their advertisements concerning the effectiveness of micronized copper preservatives or the safety of structures built with micronized copper-treated wood are verified or endorsed by Timber Products. 13 In addition, Osmose adduced considerable evidence of other tests suggesting that MCQ-treated wood performed as well as ACQ. 35 The district court found that statements in the advertisements referencing Timber Products asserted that Timber Products shared Viance’s concerns about MCQ. The district court specifically referenced the statement: “The decay, verified by Timber Products Inspection (TP), is considered unacceptable for providing longterm structural integrity for residential and commercial uses.” Viance contends that statement is literally true. Viance assigns the following meaning to that sentence: Timber Products verified the decay found in the posts, and in Viance’s opinion, the decay supports concerns with long-term structural integrity. It then argues that the assertion that Timber Products verified the decay found in the posts is literally true; thus, the statement is at most misleading. The line between literally false and misleading is not always a clear one, “but it is a fine line, and we will only reverse the district court if its findings are clearly erroneous.” Axiom Worldwide, 522 F.3d at 1225. We do not believe the district court clearly erred. The advertisements relied heavily and repeatedly on Timber Products and its independence and reputation. Significantly, several assertions in the advertisements unambiguously stated that Timber Product’s findings raised serious concerns about structural integrity and safety. Bearing in mind that the decay findings, Timber Products, and safety and structural integrity concerns regarding MCQ are repeatedly linked in context, we 36 cannot conclude that the district court clearly erred in determining that Viance’s advertisements unambiguously asserted that Timber Products verified or endorsed Viance’s conclusions regarding the safety of MCQ. Also the district court did not clearly err in finding that any statement that indicated that Timber Products verified or endorsed any conclusions or opinions regarding the efficacy of MCQ or the safety of structures built with MCQ-treated wood is literally false. Both Timber Products Reports state that “[t]his inspection report should not be considered as acceptance or rejection for the grade, treatment, or physical quality of the above-referenced material.” The Reports simply catalog Timber Products’ visual inspection rating of the posts tested. The Reports do not draw any conclusion as to what those ratings indicate about the performance or safety of MCQ. Moreover, Todd Greer stated in his declaration that the “reports do not provide the basis for a conclusion that wood treated with a micronized copper preservative or using a micronized copper wood treating system is unsafe or will fail prematurely in service.” He also stated that “[b]ased on the scientific data to which Timber Products Inspection, Inc. has access, including its own inspections, [it] cannot conclude and has not concluded that micronized copper treated wood treating systems, including MCQ, are not as effective and reliable as any other major wood preservative treating system.” Finally, he noted that had 37 Timber Products been aware of Viance’s intended use of reports in Viance’s press releases, Timber Products would not have performed the services referenced therein. In light of the evidence, we are not left with the definite and firm conviction that the district court clearly erred in concluding that Viance’s statements asserting that Timber Products endorsed or verified its safety concerns were literally false. 3. The Remaining Elements Regarding a Substantial Likelihood of Success As noted above, a movant must establish the following elements in order to establish the requisite likelihood of success on a false advertising claim: “(1) the ads of the opposing party were false or misleading, (2) the ads deceived, or had the capacity to deceive, consumers, (3) the deception had a material effect on purchasing decisions, (4) the misrepresented product or service affects interstate commerce, and (5) the movant has been-or is likely to be-injured as a result of the false advertising.” Axiom Worldwide, 522 F.3d at 1224 (internal quotation marks omitted). Having dealt with literal falsity, we turn to Viance’s challenges to the second, third and fifth elements.14 14 Viance does not challenge the fourth element – that the product or service affects interstate commerce. 38 a. Consumer Deception The classification of an advertisement as literally false or true but misleading affects the movant’s burden with respect to the element of consumer deception. If the court deems an advertisement to be literally false, then the movant is not required to present evidence of consumer deception. 1-800 Contacts, 299 F.3d at 1247. If, on the other hand, the court deems the advertisement to be true but misleading, then the movant is required to present evidence of deception. Id. Because the district court did not clearly err in determining the statements at issue were literally false, it correctly found that evidence of consumer deception was not required.