Court Opinion

ID: 2708541
Source: CourtListenerOpinion
Date Created: 2014-08-05 15:01:10.24204+00
Date Added: 2024-06-11T10:01:19.655919
License: Public Domain

In the

        United States Court of Appeals
                      For the Seventh Circuit
No. 13-2519

THERMAL DESIGN, INCORPORATED,
                                                        Plaintiff-Appellant,

                                       v.

AMERICAN SOCIETY OF HEATING, RE-
FRIGERATING AND AIR-CONDITIONING
ENGINEERS, INCORPORATED,
                                                        Defendant-Appellee.

            Appeal from the United States District Court for the
                       Eastern District of Wisconsin.
       No. 2:07-cv-00765 — William E. Callahan, Jr., Magistrate Judge.

        ARGUED DECEMBER 6, 2013 — DECIDED JUNE 18, 2014

   Before KANNE AND ROVNER, Circuit Judges, AND DURKIN,
District Judge.*
   KANNE, Circuit Judge. Thermal Design alleged that the
American Society of Heating, Refrigerating and Air-Condition-
ing Engineers, Incorporated (“ASHRAE”) violated Wisconsin

*
    Of the Northern District of Illinois, sitting by designation.
2                                                         No. 13-2519

common law as well as the Wisconsin Deceptive Trade
Practices Act.1 Thermal Design claims that ASHRAE
intentionally published a false and misleading thermal perfor-
mance standard, which induced consumers to purchase
Thermal’s competitors’ products in lieu of its own. The district
court granted ASHRAE’s motion to dismiss Thermal’s Wiscon-
sin Deceptive Trade Practices Act claim with prejudice. It then
granted summary judgment to ASHRAE on Thermal’s
remaining claims, including the common law claim for unfair
competition. For the following reasons, we affirm.
                            I. BACKGROUND
    ASHRAE is a standards development organization com-
posed of hundreds of industry members, academicians, design
professionals, and government officials. The standards provide
guidelines for refrigeration processes and the design and
maintenance of energy efficient buildings. Although some of
ASHRAE’s committee members are employed by businesses
that sell products designed to meet the standards, the organi-
zation itself does not manufacture or sell any products.
   Thermal Design is a manufacturer of insulation systems,
known as “liner systems,” for nonresidential metal buildings.
Thermal’s liner systems compete primarily with “over-the-
purlin systems,” which comprise about 90% of the current
market for metal building roof insulation systems.

1
  Thermal asserted five causes of action against ASHRAE, including claims
under the Lanham and Sherman Acts, but only challenges the district
court’s findings regarding the unfair competition and Wisconsin Deceptive
Trade Practices Act.
No. 13-2519                                                    3

    Since 1999, ASHRAE has published Standard 90.1, titled
“Energy Standard for Buildings Except Low-Rise Residential
Buildings.” Standard 90.1 describes how buildings ought to be
constructed to increase energy efficiency. The issue in this case
concerns the “building envelope,” which consists of the
building’s roof, walls, floors, and fenestration. Appendix A to
Standard 90.1 rates the energy efficiency of insulation assem-
blies through the use of U-factors, which measure heat trans-
mission through a building part, i.e., a wall or a window; this
in turn reflects the overall thermal efficiency of a particular
structure.
    Standard 90.1 has considerable influence in the commercial
building industry and has been incorporated into federal and
state law. In 2011, the Department of Energy determined that
Standard 90.1 would be the national commercial building
reference standard, which meant that within two years every
state had to certify that it had adopted a commercial building
code that is at least as stringent as Standard 90.1.
    Until 2010, Standard 90.1 treated non-laminated metal
building insulation assemblies, like Thermal’s liner systems,
differently from laminated metal building insulation assem-
blies, such as over-the-purlin systems. The latter systems were
enumerated in the standard and therefore presumed to comply
with the standard, whereas owners had to obtain special
permission to install liner systems. Thermal alleges that
representatives of the North American Insulation Manufac-
turer’s Association (“NAIMA”) and the Metal Building
Manufacturers Association (“MBMA”), both of which have
voting members on ASHRAE’s Envelope Subcommittee that is
instrumental in the development of the U-factors, procured
4                                                  No. 13-2519

this result by providing inaccurate data that was used to
calculate the U-factors. MBMA and NAIMA represent many of
Thermal’s competitors that produce over-the-purlin systems
that compete directly with Thermal’s liner systems. Thermal
also claims that a NAIMA representative was aware that one
of the U-factors in Appendix A was incorrect, but nonetheless
voted in its favor.
   In 2005 and 2006, Thermal engaged Oak Ridge National
Labs to test the U-factors in Appendix A and discovered that
they were incorrect. It reported these findings to ASHRAE, but
ASHRAE disagreed and published Standard 90.1 as it origi-
nally appeared.
    Thermal filed its first complaint against ASHRAE on
August 24, 2007, alleging unfair competition and a violation of
Wisconsin’s Deceptive Trade Practices Act. Thermal contends
that it was harmed by the inaccurate information in Standard
90.1 as metal building owners opted to purchase its competi-
tors’ over-the-purlin systems, which were presumed to be
compliant under the standard, in lieu of its liner systems.
    The district court dismissed the first complaint without
prejudice, finding that, in regard to the Deceptive Trade
Practices Act, Thermal had failed to allege that ASHRAE acted
with the requisite intent under the statute to induce the public
to buy the publication containing Standard 90.1. The court also
dismissed the unfair competition claim for lacking the required
specificity, finding that Thermal failed to articulate facts or
practices that established ASHRAE as a competitor of Thermal.
   Thermal then filed its first amended complaint, followed
shortly by a second amended complaint to fix a non-substan-
No. 13-2519                                                    5

tive error, on May 9, 2008, renewing its original claims and for
the first time seeking redress under the Lanham Act. Thermal
alleged that ASHRAE’s publication purposefully mislead
consumers with the intent to induce consumers to purchase the
assemblies of its competitors. All three of these claims survived
a motion to dismiss.
    After a stay in proceedings during which the parties
unsuccessfully attempted to settle the dispute, Thermal filed its
third amended complaint, which added antitrust claims under
federal and state law to its earlier causes of action. On
ASHRAE’s motion, the court dismissed the Wisconsin Decept-
ive Practice Act claim with prejudice. The court found that: (1)
Thermal failed to allege that ASHRAE made any of the
statements or representations “in connection with any
commercial transaction”; (2) the Act does not provide a cause
of action for non-parties; and (3) Thermal failed to plead
causation because it did not allege that it relied on the alleg-
edly false statements to its own detriment. The court also
dismissed Thermal’s Lanham Act claim, finding that ASHRAE
does not compete with Thermal. The antitrust and unfair
competition claims survived the 12(b)(6) motion to dismiss.
   During discovery, Thermal filed a motion to compel the
production of responsive documents within the possession,
custody, or control of any member of ASHRAE’s committees,
subcommittees, or task groups. The court denied the motion
and found that ASHRAE did not have sufficient control over
the documents to warrant ASHRAE’s being ordered to seek
out and obtain the documents from its volunteer members,
none of whom were employed by ASHRAE.
6                                                   No. 13-2519

   Following discovery, the district court dismissed the
remaining claims on cross-motions for summary judgment.
The court found that Thermal did not present any direct
evidence of a conspiracy to restrain trade by any members of
ASHRAE responsible for drafting Standard 90.1. It then found
that ASHRAE could not be held liable “for unfair competition
when it is not a competitor” and Thermal’s claim was therefore
“not a cognizable claim at common law.”
    Thermal now appeals the district court’s ruling on its unfair
competition and Wisconsin Deceptive Practices Act claims. It
also appeals the decision to deny its motion to compel discov-
ery. We will examine each in turn.
                            II. ANALYSIS
    A. Standard of Review
    We review a district court’s decision to grant a motion to
dismiss de novo. Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th
Cir. 2010). In order to survive a 12(b)(6) motion to dismiss, a
complaint must allege facts that “state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). In resolving a motion to dismiss, we take all well-
pled facts as true and then determine whether those factual
assertions “plausibly give rise to an entitlement to relief.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
    We also review a grant of summary judgment de novo.
Wilson v. Cook County, 742 F.3d 775, 779 (7th Cir. 2014). We will
examine the record and all facts therein in the light most
favorable to the non-moving party. Spurling v. C & M Fine Pack,
Inc., 739 F.3d 1055, 1060 (7th Cir. 2014).
No. 13-2519                                                     7

   Finally, a district court has broad discretion over pretrial
discovery rulings, which we will review for an abuse of
discretion. Spiegla v. Hull, 371 F.3d 928, 944 (7th Cir. 2004).
   B. Wisconsin Deceptive Trade Practices Claim
    Thermal Design alleges that ASHRAE violated the Wiscon-
sin Deceptive Trade Practices Act, Wis. Stat. § 100.18, by
publishing faulty performance U-factors in Standard 90.1 and
that this conduct was intended to induce consumers to buy
Thermal’s competitors’ products. To assert a claim under the
act, Thermal must allege three elements: “(1) the defendant
made a representation to the public with the intent to induce
an obligation, (2) that the representation was untrue, deceptive
or misleading, and (3) that the representation caused the
plaintiff a pecuniary loss.” Novell v. Migliaccio, 749 N.W.2d 544,
552 (Wis. 2008) (internal quotation marks omitted).
    Thermal’s complaint alleges that two of the six members of
the Envelope Subcommittee—who were acting as agents of
ASHRAE rather than for their own employers—intentionally
skewed the U-factors in order to benefit over-the-purlin
systems. This in turn caused Thermal to suffer a pecuniary loss.
Yet the purpose of section 100.18 is to “protect the residents of
Wisconsin from any untrue, deceptive or misleading represen-
tations made to promote the sale of a product.” K&S Tool & Die
Corp. v. Perfection Mach. Sales, Inc., 720 N.W.2d 507, 516 (Wis.
Ct. App. 2006) (emphasis added) (quoting State v. Automatic
Merch’rs of Am., Inc., 221 N.W.2d 683, 686 (Wis. 1974)); see also
Novell, 720 N.W.2d at 550 (“This court and the court of appeals
have made clear that the purpose of § 100.18 is to deter sellers
from making false and misleading representations in order to
8                                                    No. 13-2519

protect the public.”). More simply put, section 100.18 “applies
by its terms to commercial transactions.” Slane v. Emoto, 582 F.
Supp. 2d 1067, 1083 (W.D. Wis. 2008) (emphasis added).
ASHRAE is not in the business of selling insulation systems
such that it would benefit from Standard 90.1; it is merely a
standards-setting organization comprised of numerous
members that have an interest in the standards themselves.
Moreover, nowhere in the 200 pages published by ASHRAE is
it suggested that consumers choose one product over another.
ASHRAE’s actions were not part of a commercial transaction.
    Thermal’s interpretation of the act would render liable any
standards-setting organization so long as a manufacturer could
show that it lost sales as a result of allegedly inaccurate
technical data. Nothing in the act supports such a broad
understanding. Accordingly, its Deceptive Trade Practices Act
claim must fail.
    C. Unfair Competition
    Interestingly, Thermal chose to sue ASHRAE rather than
the alleged culprits of the misrepresentation, i.e., the represen-
tatives of NAIMA and MBMA that influenced and benefitted
from any wrongdoing. Thermal contends that the representa-
tives acted as agents of ASHRAE in misrepresenting and
distorting the figures promulgated in Standard 90.1. This in
turn interfered with Thermal’s prospective contracts with
customers. Thus, Thermal’s complaint depends on the assump-
tion that the NAIMA and MBMA representatives were acting
as agents of ASHRAE while working on Standard 90.1.
  In support of its proposition, Thermal cites the Supreme
Court’s decision in Am. Soc. of Mech. Eng’rs, Inc. v. Hydrolevel
No. 13-2519                                                     9

Corp., 456 U.S. 556, 565–66 (1982), which held that a standards-
setting organization, the American Society of Mechanical
Engineers (“ASME”), could be liable “when their agents act
with apparent authority” and commit tortious conduct.
Apparent authority is “the power to affect the legal relations of
another person by transactions with third persons, professedly
as agent for the other, arising from and in accordance with the
other’s manifestations to such third persons.” Id. at 566, n. 5
(citing Restatement (Second) of Agency § 8 (1957)). One of
ASME’s secretaries had written a letter that in effect declared
Hydrolevel’s product unsafe. This letter was disseminated
throughout the market by Hydrolevel’s competitors who were
able to deter potential customers from choosing Hydrolevel’s
product by using the ASME letter to show that it was unsafe.
The Court found ASME liable because it cloaked its mem-
bers—Hydrolevel’s competitors—with apparent authority and
enabled them to hinder Hydrolevel’s competitive threat. Id. at
570–71 (“When it cloaks its subcommittee officials with the
authority of its reputation, ASME permits those agents to affect
the destinies of businesses and thus gives them the power to
frustrate competition in the marketplace.”).
     Hydrolevel is markedly different than the case here, as there
is no indication that the NAIMA and MBMA committee
members were acting with apparent authority from ASHRAE.
Apparent authority binds “a principal to acts of another who
reasonably appears to a third person to be authorized to act as
the principal’s agent, because of acts of the principal or agent
if the principal had knowledge of those acts and acquiesced to
them.” Mared Indus., Inc. v. Mansfield, 690 N.W.2d 835, 844
(Wis. 2005). But nothing here suggests that ASHRAE conferred
10                                                  No. 13-2519

any sort of authority on its committee members. Quite the
contrary. Thermal has not alleged, nor presented any facts that
might suggest, that ASHRAE exercised any control or dele-
gated any degree of authority to these members such that a
reasonable person would believe that an agency relationship
existed. The NAIMA and MBMA representatives were simply
voting members on ASHRAE’s subcommittee that helped
develop Standard 90.1. Moreover, nowhere does Thermal
argue that the committee members undertook these actions
with the consent or knowledge of ASHRAE. Accordingly,
ASHRAE cannot be held liable for the alleged acts of its
committee members and Thermal’s unfair competition claim
must fail.
     D. Motion to Compel
    Thermal also challenges the district court’s decision to deny
its motion to compel discovery. Our review of a district court’s
handling of a discovery matter is “necessarily deferential” and
we will only overturn if we find an abuse of discretion. Corley
v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1052 (7th Cir. 1998).
    Thermal sought discovery of numerous records from
ASHRAE committee members. It contends that the documents,
though not in ASHRAE’s possession, were nonetheless in its
control and were therefore discoverable under Federal Rule of
Civil Procedure 34(a). Thermal believes that ASHRAE had
control over the documents of its agents to compel discovery.
We disagree. The district court found that Thermal’s eviden-
tiary submissions failed to prove ASHRAE had sufficient
control over the documents so as to warrant the motion to
compel discovery. See Dexia Credit Local v. Rogan, 231 F.R.D.
No. 13-2519                                                   11

538, 542 (N.D. Ill. 2004) (On the issue of control, “the test is
whether the party has a legal right to obtain [the evidence].”
(quotation marks omitted)). The court considered Thermal’s
request to produce the documents but found that Thermal did
not show that ASHRAE had adequate control over the docu-
ments to compel discovery. Moreover, after more than five
years of discovery, the court found that discovery had reached
its logical end, a finding that we give substantial discretion.
Corley, 142 F.3d at 1052 (“District judges enjoy broad discretion
in settling discovery disputes and in delimiting the scope of
discovery in a given case.”). We find no abuse of discretion.
                         III. CONCLUSION
   For the foregoing reasons, we AFFIRM the district court’s
decision on all three of Thermal Design’s claims.