Colorado Federal Court Confirms Bona Law’s Client, Thermal Pipe Shields, has Sufficiently Alleged Federal Antitrust and False Advertising Claims Against Johns Manville
April 4, 2020
On March 23, 2020, a federal court in Colorado denied the defendant’s motion to dismiss, confirming that Bona Law’s client Thermal Pipe Shields sufficiently alleged federal antitrust and Lanham Act claims against Defendant Johns Manville Corporation for anticompetitive conduct and false advertising.
Factual Background
Bona Law initially filed this lawsuit in March 2019. After an initial round of briefing and hearing with the Court, Thermal Pipe Shields filed an amended complaint on July 24, 2019. The amended complaint alleged two federal antitrust claims for tying and monopolization in violation of the Sherman act and one federal claim of false advertising in violation of the Lanham Act.
According to the amended complaint, Johns Manville illegally attempted to maintain its monopoly in the calsil market by: (i) attempting to destroy competition in that market by exclusionary tactics; (ii) threatening to refuse to sell to any company that buys competing calsil products from Thermal Pipe Shields; (iii) tying sales of insulation products to other Johns Manville industry-standard products that distributors need; and (iv) falsely disparaging the quality of Thermal Pipe Shields’ products, even though Thermal Pipe Shields’ products were of equal or superior quality and produced at the exact same calsil factor that Johns Manville utilized for over a decade.
Federal Antitrust Claim—Tying
Plaintiff Thermal Pipe Shields first alleged a federal antitrust claim for tying, whereby Johns Manville unlawfully tied sales of calsil to sales of two other products: fiberglass pipe insulation and expanded perlite. The Court summarized the key allegations, noting that:
- Johns Manville “unlawfully tied sales of calsil to sales of fiberglass pipe insulation and expanded perlite.”
- “fiberglass pipe insulation and expanded perlite are “must-have” products for distributors”
- Johns Manville “uses its economic power in those product markets to ‘coerce’ customers to buy its calsil by threatening to cut off sales and actually refusing to sell those “must-have” products to customers who bought calsil from [Thermal Pipe Shields].”
The Court held that Thermal Pipe Shields “plausibly allege[d]” a tying claim by describing “three specific instances in which [Johns Manville] threated to refuse, or did in fact refuse, to sell fiberglass pipe insulation or expanded perlite to distributors that purchased from [Thermal Pipe Shields]” and that “these instances are exemplary of a broader pattern of conduct,” and “that such threats were made to any distributor that bought calsil from [Thermal Pipe Shields].”
The Court also found it to be “entirely plausible” that Johns Manville “has either power to control price, power to exclude competition, or both,” meaning that Johns Manville “has the ability to force distributors to do something they would not do in a competitive market.”
The Court concluded that Johns Manville’s anticompetitive tying conduct, as alleged, affected “a not insubstantial amount of interstate commerce in the tied product,” noting that the alleged anticompetitive conduct “foreclosed nearly 100% of the market for calsil, alleged to be $50 million per year.” Federal Antitrust Claim—Monopolization
Next, the Court found that Thermal Pipe Shields alleged “a plausible monopolization claim based on tying, refusal to supply, exclusive dealing, and product disparagement” and cited the following allegations:
- Johns Manville’s “course of dealing with 4 State Supply” which suggests that Johns Manville “discontinued selling expanded perlite and calsil to that distributor to prevent future sales of [Thermal Pipe Shields’] calsil.”
- “216 of the five largest distributors’ combined 218 locations nationwide do not purchase calsil from [Thermal Pipe Shields]” and a similar pattern of “conduct with respect to the smaller, independent distributors.”
- Four specific statements made by Johns Manville personnel that allegedly disparaged Thermal Pipe Shields’ products, including that they were “unproven,” “may not meet specifications,” “were poor quality,” and “may have asbestos and may put your customers and employees at risk.”
The Court also agreed Thermal Pipe Shields had sufficiently pleaded harm to competition (antitrust injury), noting its “numerous allegations of injury to competition,” including “limitation of customer choice of suppliers, increased prices, and reduction in calsil output” as well as “consequences for distributors’ ability to compete.”
Federal Lanham Act claim
Finally, the Court found that five misrepresentations alleged by Thermal Pipe Shields plausibly stated a Lanham Act claim:
- A Johns Manville sales representative telling two Wyoming contractors that Thermal Pipe Shields’ calsil “may have asbestos”
- A Johns Manville sales manager told a customer that Thermal Pipe Shields’ calsil was “poor quality and cannot be trusted to meet specifications”
- A Johns Manville sales manager told a different customer that Thermal Pipe Shields’ calsil was “Chinese” and asked why the customer “would want to risk buying more unproven product that may not meet the specifications”
- Johns Manville stated that Thermal Pipe Shields’ TPSX-12® was “substandard.”
Further, the Court agreed that “it can reasonably infer that the alleged misrepresentations attributed to [Johns Manville personnel] were sufficiently disseminated to the relevant purchasing public to constitute commercial advertising or promotion in the calsil market.”
Next Steps
Following the denial of Johns Manville’s motion to dismiss, the case proceeds into the next phase, discovery. Ultimately, Thermal Pipe Shields seeks damages exceeding $20 million, those damages trebled, an injunction barring Johns Manville from continuing its anticompetitive and defamatory conduct, and attorneys’ fees and costs.