A federal jury in Houston Friday awarded $31 million to two manufacturing companies in the oil and gas pipeline space after ruling that a Spain-based competitor and its U.S. subsidiary engaged in false advertising and unfair competition.
In a unanimous ruling, the jury determined that Ulma Forja S. Coop and Ulma Piping USA Corp. made false advertisements to U.S. consumers when they said their carbon steel flanges — critical components used in oil and gas pipelines — were “normalized,” or heat-treated. The jury also ruled that they engaged in unfair competition, finding that Ulma’s too-good-to-be-true products hurt the businesses of the plaintiffs in the case, Houston-based Boltex Manufacturing Company and Illinois-based Weldbend Corp.
With the help of a group of Texas lawyers from Norton Rose Fulbright and Washington, D.C. lawyers from Mayer Brown, Boltex and Weldbend brought the lawsuit in 2017. They became suspicious of Ulma’s supposedly normalized flanges offered at prices well below the competition.
The plaintiffs decided to file suit after metallurgical testing suggested that Ulma’s flanges had not been normalized and did not comform to industry standards as claimed in Ulma’s advertising.
Ulma denied these allegations and fired back false advertising counterclaims against the plaintiffs, alleging they falsely advertised that their products are “made in the USA” and that Weldbend falsely advertised that its flanges are made with “questionable traceability,” court documents say.
U.S. District Judge Andrew Hanen, who presided over the case, denied Ulma’s counterclaims in a summary judgment ruling in June. He also preserved Boltex and Weldbend’s claims for trial, which began Sept. 16. The jury returned its verdict Friday in favor of the plaintiffs on all counts.
“Most false advertising cases involve consumer products. This verdict demonstrates the vital importance of truth in advertising for industrial products like flanges,” San Antonio-based Norton Rose Fulbright partner Saul Perloff, lead attorney for the plaintiffs, told The Texas Lawbook.
“It was significant that after telling their customers they would prove the allegations of the lawsuit wrong, defendants eventually admitted that for years, if not decades, they had not in fact heat treated their flanges in accordance with … industry standards,” he added.
Perloff said the plaintiffs’ team anticipates it will ask Judge Hanen to issue a permanent injunction against Ulma in addition to moving for entry of the judgment. He said they will also likely ask for attorneys’ fees.
Ulma’s lead attorney, David Gerger of Gerger Khalil & Hennessy in Houston, did not immediately respond to a request for comment.
The Norton Rose Fulbright trial team also included Austin-based partner Marc Collier and associate Nathan Damweber, San Antonio-based counsel Kathy Grant and Bob Rouder, Houston-based associate Andrea Shannon, and Minneapolis-based senior counsel Leaf McGregor and Andre Hanson.
The Mayer Brown team also representing the plaintiffs included Washington, D.C. partner Carmine Zarlenga and associate Michael Lindinger.
Other attorneys on the defense’s trial team included Houston lawyer Ashlee McFarlane of Gerger Khahil & Hennessy and Mauricio Espana, Hector Gonzalez, Emlyn Mandel, Andrew Levander and Mariel Bronen from Dechert’s New York and San Francisco offices.