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M & W Gear Co. v. Aw Dynamometer

OPINION FILED JULY 17, 1981.

M & W GEAR COMPANY, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

AW DYNAMOMETER, INC., ET AL., DEFENDANTS-APPELLANTS AND CROSS-APPELLEES.



APPEAL from the Circuit Court of McLean County; the Hon. JAMES A. KNECHT, Judge, presiding.

MR. JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:

Rehearing denied August 7, 1981.

False and misleading advertising.

Jury verdict and an injunction for the injured plaintiff.

We affirm.

M & W Gear Company filed suit against the defendants, AW Dynamometer, Inc., and Fred L. Friend, alleging that defendants intentionally and maliciously made false and misleading representations as to plaintiff's product in published advertisements. Plaintiff prayed for compensatory and punitive damages as well as an injunction and attorney's fees.

Following a jury trial, plaintiff was awarded the sum of $45,750. The trial court entered judgment, finding that plaintiff was entitled to injunctive relief and ordered the defendants to be permanently enjoined from disparaging in any manner, and by any false or misleading representation of fact, the dynamometers manufactured by the plaintiff. The court also found that the plaintiff was entitled to reasonable attorney's fees and ordered the defendants to pay $23,046 in fees to the plaintiff.

Defendants filed a notice of appeal from the trial court's judgment order. Plaintiff cross-appeal for remandment of the cause to the trial court for a determination and allowance of the reasonable attorney's fees and costs the plaintiff has incurred in the course of this appeal.

FACTS

The evidence produced at trial indicated that plaintiff and defendants were the major manufacturers of agricultural dynamometers in the United States. In 1976, defendants published an advertisement in the Implement and Tractor magazine. The magazine had a circulation at the time of approximately 16,000 and was primarily sold to agricultural equipment dealers. Most, if not all, agricultural dynamometers are sold to dealers of farm equipment, rather than to farmers. In 1977, defendants started advertising in a second publication, Farm and Power Implement. This publication was also circulated to farm equipment dealers and had circulation comparable to Implement and Tractor. Reprints of the advertisements were carried by defendants' manufacturer representatives to be displayed in shows and to be used as handout literature to prospective customers. The advertisements were admitted as plaintiff's exhibit Nos. 1 and 2, and were as follows:

Defendant Fred Friend, sales manager for defendant AW, stated that the references to "competition" and "twin oil pump" were intended to refer to plaintiff M & W's dynamometers. He further stated that the diagram used in the advertisement for comparative purposes and labeled as "gearbox and oil pump" was intended to make the reader identify with the M & W dynamometer. Friend stated that he was never personally involved in a steam explosion with an M & W dynamometer although he had witnessed the aftermath of such an explosion on two occasions. He stated he had no way of knowing, however, whether the dynamometers he had observed after the explosion were being operated in accordance with the procedure manuals of M & W at the time of the explosion.

Friend admitted that plaintiff's exhibit No. 1 implied that M & W's dynamometer overheated in only three to five minutes at 50% of its advertised capacity. He stated he obtained this figure from a piece of paper that he carried around relating to a demonstration in which two large tractors were put side by side with two dynamometers, one an AW and the other an M & W P-2000. He made no memoranda concerning the observations of M & W's overheating but rather that information in the advertisement was the result of his observation of comparative demonstrations conducted over a period of a year to 1 1/2 years.

Friend stated that the maximum noise level permitted in any shop under OSHA regulations was 115 decibels. This figure applied to the maximum level for the entire shop and not solely to the maximum for agricultural dynamometers. Friend further testified that he determined that M & W's dynamometer was in violation of OSHA regulations through an experiment involving a used M & W P-2000 model. The dynamometer was tested in an isolated room, and he observed readings in excess of 115 decibels. He did not know if the meter used to measure the sound was an official meter for OSHA or an approved meter or anything of that nature.

Arthur Warsaw, the owner of AW Dynamometer, stated that he executed the final approval of the advertisements represented in plaintiff's exhibit Nos. 1 and 2 and that it was an attempt to effect the comparison between the AW dynamometer and the M & W dynamometer. The claim in the advertisement that AW dynamometers met OSHA level of 115 decibels was based upon his own observation, and he had no statement from OSHA to that effect nor did he ever ask the personnel of OSHA to make an inspection of the machine.

In making the claim that the M & W dynamometer was 150 to 200 horsepower short of the advertised capacity, Warsaw depended upon information supplied to him orally from people in the field. Warsaw stated that in 1975 both the AW and M & W machines were designed to be operated at a maximum temperature of 180 or 190 degrees. If the machines were operated in that temperature range, as instructed in the manuals, there would be no steam explosion hazard.

In addition to plaintiff's exhibits Nos. 1 and 2, defendants presented to the court a list compiled from information received from manufacturer representatives who had been traveling throughout the United States. The list was prepared by the defendants and handed out to defendants' sales personnel. It was exhibited to potential dynamometer customers and represented people who had difficulties with M & W explosions, burnups, upsets, pumpouts, and "you name it." It was to be shown to prospective purchasers who questioned the sales personnel as to why they should not buy an M & W dynamometer. The sales personnel were instructed to have the purchaser call the people on the list and verify that the people did have trouble with M & W dynamometers. Friend stated that the category "you name it" didn't really mean anything and was meaningless.

Friend stated that in his opinion the statements made in the advertisements and in the list would not mislead potential purchasers as to the qualities and character of the M & W dynamometer, although he did state that he felt it would be his responsibility to advise the person that accidents occurred either by design or human failure.

Warsaw stated that in preparing the list he intended to provide information to the customers as to exactly what the customer was buying and what he could anticipate in the way of performance. It was also very possible that it was his intention that any potential customer would have to concern himself that he might be hurt or people might be hurt if they bought an M & W dynamometer. Of the 13 persons on the list, Warsaw stated he contacted 3.

Defendants presented the testimony of one person whose name appeared on the list. It was the testimony of that person that the M & W P-400A dynamometer had caught fire. He stated, however, that although the dynamometer was hooked up to a water hose which was to supply the coolant, one tire of a tractor was on the hose.

The vice president in charge of finance for the plaintiff M & W Gear, Harry Rakers, stated that his department was responsible for all of the accounting of the company. He further stated that he determined sales and revenue projections for the years 1976-1979. He did these projections by examining the percentage of sales to the number of distributors and dealers. Additionally, he looked at the history of the marketability of the various sizes of dynamometers.

On cross-examination, Rakers stated that his company projected the profit on each product line and that on occasion the projections were wrong. He further stated that a decline in sales was sometimes due to market saturation or because the products became obsolete or the company's research and development didn't keep up with the demands of the market. Furthermore, he stated that a decline sometimes occurs because the engineering and marketing priorities are directed toward different products as opposed to concentrating on a particular product where there has been emphasis in an earlier year. He stated that he knew of no particular client who failed to buy an M & W dynamometer because of the advertising ...


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