Underground Solutions, Inc. v. Palermo

188 F. Supp. 3d 717, 2016 U.S. Dist. LEXIS 64962, 2016 WL 2866099
CourtDistrict Court, N.D. Illinois
DecidedMay 17, 2016
DocketCase No. 13 C 8407
StatusPublished
Cited by1 cases

This text of 188 F. Supp. 3d 717 (Underground Solutions, Inc. v. Palermo) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Underground Solutions, Inc. v. Palermo, 188 F. Supp. 3d 717, 2016 U.S. Dist. LEXIS 64962, 2016 WL 2866099 (N.D. Ill. 2016).

Opinion

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge

Underground Solutions, Inc. (UGSI) sued Eugene Palermo, asserting claims of trade libel (count 1), intentional interference with prospective economic advantage (count 2), false advertising under California law, Cal. Bus. & Prof. Code § 17500 (count 3), and false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(1) (count 4). UGSI alleged that Palermo, as a paid spokesperson for one of UGSI’s competitors, made false or misleading statements about UGSI’s products in order to disrupt its business and divert prospective clients to that competitor. After discovery, UGSI voluntarily dismissed count 2. Palermo has now moved for summary judgment on all of UGSI’s remaining claims. UGSI has moved for summary judgment on the issue of liability on its Lanham Act claim and its request for an injunction and attorneys’ fees on that claim.

For the reasons stated below, the Court grants partial summary judgment on the issue of liability in favor of UGSI on its Lanham Act claim, grants summary judgment in favor of Palermo on UGSI’s trade libel claim, and otherwise denies both sides’ motions.

Background

Except where otherwise noted, the following facts are undisputed. This case is about subterranean pipes used for municipal and industrial water transmission. Different types of pipe are used for this purpose, including ductile iron pipe, high-density polyethylene (HDPE) pipe, and polyvinyl chloride (PVC) pipé. Different types of pipe have different physical properties. For example, HDPE pipe tends to be more bendable than PVC; PVC pipe tends to be lighter weight than ductile iron pipe; and each type of pipe exhibits varying degrees of resistance to puncture, cracking, and other types of pipe failure.

This last point is particularly important in light of a phenomenon known as rapid crack propagation, or “RCP.” RCP is a type of pipe failure in which a puncture, break, or rupture in a pipe causes a crack to progress rapidly from the point of failure—as quickly as several hundred feet per second. Whether RCP transpires upon the occurrence of an initiating event depends on a variety of factors, including the pipe’s diameter and wall thickness, the internal operating pressure of the pipe, and the pipe’s chemical makeup. There is no industry-wide standard that dictates how long a crack must be in order to be considered to be RCP, but cracks longer than forty feet are typically considered to be RCP in light of the unlikelihood that an initiating event will create a single puncture more than forty feet long. RCP can occur in any type of pipe when the pipe is exposed to some type of rupturing event, such as a contractor bending or pressurizing a pipe in contravention of industry standards or an external object striking the pipe.

Scientists and engineers have spent the last half-century developing test methods to measure the degree to which different pipe materials are prone to RCP. Because full-scale testing is difficult, time-consuming, and costly, two researchers in the United Kingdom, Chris Greenshield and Patrick Leévers, developed a small-scale test method in the 1990s. This testing method, known as the Small-Scale Steady State (S4) test method, used smaller pipes to test crack propensity in a controlled environment and then multiplied the resulting pressures by a correlation factor to [722]*722convert results to full scale, Greenshield and Leevers determined that although RCP could not occur in 100% water pressurized pipe, the inclusion of a small amount of air in a pipe could enable RCP failure.

When municipalities seek to install water or wastewater .pipes, they typically require more than one pipe to create their pipe network. HDPE pipe sections are often “butt fused,” which means that they are connected end-to-end by thermal fusion techniques. To connect hundreds or thousands of feet of ductile iron or PVC pipe, the standard practice has long been to use “bell-and-spigot” joints to latch each pipe to the next. UGSI is the sole producer of what is known as Fusible PVC pipe. Unlike traditional PVC pipe, Fusible PVC thermally fuses pipe sections together at their endá, eliminating the need for bell- and-spigot junctures. Some Fusible PVC pipes stretch seamlessly for miles, which simplifies and ' speeds up installation, avoids" the potential for corrosion and seepage intrinsic to bell-and-spigot joints, and eliminates associated maintenance requirements and costs.

Palermo is a scientist who has been involved in the pipe industry for roughly forty years. Since 2004, Palermo has operated a consulting firm that provides litigation consulting and failure analysis services. During the relevant period, Palermo had a consulting agreement with Performance Pipe, a division of Chevron Phillips Chemical Company LP that manufactures HDPÉ water and wastewater pipe and does not manufacture or sell PVC pipe. Along with two HDPE pipe interest groups (the Plastics Pipe Institute and the Alliance for PE Pipe), Performance Pipe paid Palermo to attend trade shows and give presentations about Fusible PVC pipe.

This case is primarily focused on the PowerPoint slideshow Palermo designed for these presentations and uploaded to his website. The slideshow, titled “Plastic Pipe for Water Distribution—What You Need to Know About RCP and Butt Fusion Integrity”, appeared to be designed to alert utilities, engineers, contractors, and other prospective pipe purchasers and purchasing advisors to the possibility that butt-fused pipe of all types might pose a higher RCP risk than pipe connected by other means. In reality, however, the presentation was primarily focused on illustrating the high RCP risk associated with butt-fused PVC pipe. In the presentation, Palermo pointed out that PVC pipe has a greater propensity for RCP than does HDPE and that butt-fused PVC pipe’s RCP risk is even higher because without bell-and-spigot joints to relieve pressure, cracks can spread farther and faster without meeting resistance.

The slide show began with a list of all known Fusible PVC RCP failures in the field. ‘ Palermo identified twenty failures throughout the country, ranging in length from 43 feet in Greencastle, Indiana, to 3,300 feet in Salt Lake City, Utah. He showed pictures of massive cracks in the butt-fused PVC pipe at some failure sites, and he provided "details of the damage done and replacement requirements for some of the RCP events described. For example, one slide explained that the “Salt Lake City, Utah Water Company experienced RCP failures on two occasions.” Pl.’s Ex. F, dkt. no. 87-3, at 2. “The first RCP failure occurred earlier this year when 16 [inch] DR 31 butt fused PVC pipe was being leak pressure tested—the crack ran 350 feet.” Id. “They also had another RCP failure when they were cleaning this pipe. The crack ran 3300 feet. This is the longest known RCP failure in butt fused PVC pipe. They will replace all 13 miles of fused PVC pipe.” Id, .

[723]*723Palermo then moved on to discussing test results from laboratory experiments conducted on PVC and HDPE pipe. He began by explaining that the goal of RCP testing is to determine the “critical pressure” of a pipe: “Critical Pressure (P0) is the pressure above which RCP can be sustained. As long as G (driving force) is greater than GD (material’s dynamic fracture resistance), the crack will continue to propagate.” Id. at 6.

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188 F. Supp. 3d 717, 2016 U.S. Dist. LEXIS 64962, 2016 WL 2866099, Counsel Stack Legal Research, https://law.counselstack.com/opinion/underground-solutions-inc-v-palermo-ilnd-2016.