March/April 2002

AGRReports    breaking news

GOLIATH VS. GOLIATH

Diamond Triumph Sues Safelite for Alleged Customer Steering

Kingston, Pa.-based Diamond Triumph has filed a lawsuit against Columbus, Ohio-based Safelite Auto Glass Corp. alleging that Safelite is “failing to refer work to Diamond Triumph and is in fact actively steering work away from Diamond Triumph when Diamond Triumph is the vendor of choice by the insured/consumer.” In its official complaint filed in U.S. District Court in Scranton, Pa., Diamond Triumph claims that Safelite’s conduct has violated the Lanham Act, 15 U.S.C. 1125(a)(1). In addition, it brings forth five other claims against the company, from breach-of-contract to disparagement.

Diamond Triumph says it has received a number of complaints, many of which are cited in the case, from consumers about problems they’ve had with Safelite’s call centers and shops. A steady flow of these complaints stirred the company to bring forth the suit.

“Diamond Triumph has learned that Safelite, utilizing its national call center and retail installation staff, has engaged in an ongoing series of practices designed to divert customers away from Diamond Triumph to Safelite-owned shops and/or Safelite-employed mobile installers,” writes Diamond Triumph in the court document. “Diamond Triumph has also learned that Safelite has used its considerable resources to pirate jobs away from Diamond Triumph that would have been performed by Diamond Triumph but for the improper conduct of Safelite.”

Six Claims
The plaintiff’s first claim in the suit is that Safelite has breached its contract of the network by steering customers to Safelite shops—despite the network agreement that the network would provide Diamond Triumph with referrals. Diamond Triumph’s network participation agreement was to expire on March 31, 2002. This agreement provides that Safelite “operates a network of independent automotive glass replacement and/or repair shops to which Safelite, from time to time, may refer work.” With many of the insurance companies with which Diamond Triumph works, including Nationwide, participation on the Safelite network is required in order to be part of the company’s glass program, according to the court document filed by Diamond Triumph.

Likewise, Diamond Triumph has filed a second claim that Safelite has committed a breach of duty of good faith and fair dealing by “making representations and disparaging remarks to customers about Diamond Triumph’s installers, [its] warranties, [its] pricing and [its] ability to perform the glass repair or replacement services” and “by deliberately delaying the confirmation of insurance coverage and the providing of required reference numbers to Diamond Triumph.”

In its third claim, the plaintiff alleges that Safelite has committed deceptive trade practices by “intentionally disparag[ing] the services of Diamond Triumph by making false or misleading representations of fact about Diamond Triumph and otherwise engaging in conduct which creates a likelihood of confusion or misunderstanding on the part of Diamond Triumph’s customers …” The company cites a number of states that have laws prohibiting such deceptive trade practices. Among these are Ohio, Connecticut, Maryland, North Carolina, South Carolina and Virginia. Diamond Triumph cites examples of alleged wrongdoings in each of these states.

Diamond Triumph presents a fourth claim of “Tortious Interference” on the part of the defendant. The company says that Safelite and its employees have “designed to have Safelite perform work that customers wished to have performed by Diamond Triumph and that would in fact have been done by Diamond Triumph but for the conduct of Safelite … without justification.” The Pennsylvania company asserts that even when Safelite has allowed a customer to schedule work at one of its shops, Safelite has then pirated the work, scheduling Safelite installers to perform the work prior to the time Diamond Triumph is scheduled to do the work.

Diamond Triumph also presents claims of disparagement on the part of Safelite by making false or misleading representations of the company, and a sixth claim alleging that the national glass chain has violated the aforementioned Lanham Act. The Lanham Act is a federal statute signed into law by Harry S Truman in 1946, also known as the Trademark Law of 1946. The law was designed to encourage competition, provide trademark protection to businesses and to protect consumers from deceit and confusion.

"If the insured states a preference for a shop other than a Safelite shop, such as Diamond Triumph, the Safelite employee will often tell the insured, among other things, that the selected shop is not ‘approved’ or ‘recommended’ by the glass program, that the insured may have to pay an amount out of pocket over and above the deductible if he or she uses a shop other than Safelite, that there may not be a guarantee for the work if the job is performed by someone other than Safelite, that the installation technicians employed by shops other than Safelite are not qualified or certified and that there is a Safelite shop available to perform the work … ” reads the statement. “These statements, and other similar statements that are commonly made by Safelite, are false and highly misleading in that they suggest to the insured, among other things, that the insured has no real choice in the matter if he or she wishes to have the claim covered by insurance.”
                                                                                                                                                                        
Specific Examples Cited
According to the complaint, the statement that Safelite cannot guarantee other shops on the network is also misleading, “given the fact that the parties’ network participation agreement includes specific warranty provisions requiring Diamond Triumph to offer a lifetime warranty and provide for coverage in the event Diamond Triumph fails to abide by its warranty obligations.”

The plaintiff also recalls a previous unnamed case against Safelite, in which the glass company/network/ glass claims administrator admitted that “its call center operation was successful in convincing eight out of ten consumers to switch to Safelite after the consumers had expressed a preference for other vendors.”

Diamond Triumph cites several instances in which customers have called Safelite (which provides glass claims services to several large automotive insurance companies, including Fredericksburg, Va.-based GEICO Insurance and Cleveland-based Progressive Insurance) and have witnessed one of the above claims.

One case brought forth as an example in the suit is that of Timothy Monn, a Nationwide insured who needed to have the glass replaced in his vehicle. He reported the claim to his insurer and scheduled Diamond Triumph to do the work, according to the plaintiff.

The Mysterious “Blue Ribbon”
“He received a follow up call from ‘Blue Ribbon’ (actually Safelite) misrepresenting to Mr. Monn that Diamond Triumph was not a Blue Ribbon preferred shop. He was told that the job would be rescheduled with a Safelite shop in Bedford, Pa. Mr. Monn explained that he had already scheduled the job with Diamond and that he wanted to use Diamond because he had used them in the past and had received excellent service from them,” writes the plaintiff.

Diamond Triumph learned of the problem when Monn called to complain, explaining what had happened.

Another example cited is that of the Parkersburg, W.Va.-based McCullough/Jackson Insurance Agency, which called Diamond Triumph to inform it of a recent encounter with Safelite on behalf of one of its customers who is insured by Nationwide.

“The agency called Safelite to report the claim on behalf of its client and obtain a referral number. At that time, Safelite was told that Triumph had been selected to perform the work. The insurer later called the agency to report that Safelite had called and inquired whether Triumph was the vendor selected for the work,” the complaint continues. “When the insured informed the caller that Triumph had been selected, the Safelite representative informed the insured that Safelite had its own network of shops and that someone would be calling her back to reschedule the job.”

“Trained to Re-Route”
When the agency called Safelite to complain about what had happened to its customer, a Safelite representative said that she had been trained to reschedule the work “in every instance where the customer is not at the glass shop or having the work done at that time,” according to court documents.

Other examples cited involve Progressive. According to Diamond Triumph, John Barney, a Progressive policyholder in North Carolina, called Safelite to report his claim—at the direction of his insurance company.

“When he requested Triumph as the shop to perform the work, he was told that there was a bad connection and that the Safelite representative could not hear him and would have to call back,” writes Diamond Triumph. “When the person called Mr. Barney back, the Safelite representative tried very hard to get Mr. Barney to use Safelite rather than Triumph, notwithstanding the fact that Triumph is a member of Safelite’s network of affiliated shops.”

While insurance companies have the ability to monitor their calls from policyholders—and those transferred to claims administrators such as Safelite—they do not have the ability to monitor Safelite’s outgoing calls. Diamond Triumph also makes note of this in the suit.

“As a consequence, steering activity that may be contrary to Safelite’s first notice of loss agreement can be done without detection after feigning a bad connection or, as is shown in other examples, by follow-up calls to customers who have expressed a preference for a shop other than Safelite,” reads the document.

Bryon Rye’s case follows. The complaint alleges that Rye, a resident of South Carolina, called Diamond Triumph to schedule his windshield replacement, Diamond Triumph informed him that he needed to call Safelite to get a claim number, as provided by the terms of his Progressive insurance policy.

“When Mr. Rye called Safelite as instructed, he had to repeatedly tell the Safelite representative that Triumph had been selected for the work,” reads the suit. “Undeterred by the number of times Mr. Rye expressed his preference, the Safelite representative continued to push Safelite for the work. Mr. Rye finally had to state bluntly that only Triumph would be doing his work.”

The case continues, “When Triumph did not receive the customary confirming paperwork from Safelite, Triumph called Safelite to make an inquiry. Triumph was told by Chris Dietz, a Safelite representative, that a shop had not yet been assigned to this work, even though Mr. Rye had been explicit in his selection of a shop.”

Damages and Court Costs
These are just a few of the 20 such examples to which Diamond Triumph refers in the suit. In retribution for these offenses, Diamond Triumph has requested that the court order Safelite: to pay it for actual damages incurred (an amount to be determined during the trial); discontinue the conduct described in the complaint; and award Diamond Triumph for its costs and disbursements, including the cost of the investigation and attorney fees.
The complaint, filed on March 29, 2002, requested a jury trial. However, no dates for such a trial had been set in the Middle District of Pennsylvania, where the suit was filed. Richard Bishop of Scranton, Pa., and Chuck Lloyd, an attorney in the Minneapolis firm of Livgard & Rabuse, P.L.L.P., are representing the plaintiff.

A Landmark Case
“We expect this to be a landmark case in the area,” Lloyd said, speaking to a crowd of 300 at the Independent Glass Association’s National Glass Show and Convention in Orlando, Fla., on April 5.

Safelite, the defendant, was unavailable for comment. The Columbus-based company recently emerged from a bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Codes.

Diamond Triumph is based in Kingston, Pa., and has more than 200 locations nationwide. Associates from Diamond-Triumph were not available for comment either, despite several attempts to reach them by phone.


ITC Imposes AntiDumping Duties on Chinese Windshield Manufacturers
The International Trade Commission (ITC) has decided to impose tariffs on replacement auto glass windshields from China, effective in April. The ITC finally made its ruling on Tuesday, March 19—13 months after the original petition was filed by Pittsburgh-based PPG Industries, Columbus, Ohio-based Safelite Corp. and Minneapolis-based Apogee Enterprises.

The ITC's 3-2 decision came after the Commerce Department ruled in February that seven Chinese companies sold their products to U.S. distributors at below-market value. The duties will range from 3 percent to 124 percent, depending on the company.

"The imposition of anti-dumping duties on these imports will serve to restore a competitive market balance in the United States," said David Sharick, vice president of PPG's automotive replacement glass division. "[The] decision confirms what we have said for more than a year—that unfairly priced replacement windshields from China are causing harm to the U.S. automotive replacement glass windshield industry."

Apogee also applauded the decision. "This is very good news for Apogee and our ARG windshield subsidiary, Viracon/Curvlite, as well as the entire domestic industry," said Patricia A. Beithon, Apogee's general counsel. "Chinese imports have more than tripled their share of the domestic market since 1998. The only way they have been able to do that is by selling at very low, dumped prices. The ITC's record showed that comparisons of U.S. producer and importer prices revealed underselling in more than 95 percent of the comparisons. Imposition of an anti-dumping duty order will help restore fair pricing to the U.S. market."

Safelite's spokesperson Dee Uttermohlen echoed Beithon. "We do expect to see a real difference in the market from this," Uttermohlen said. "We're hoping for the best but we won't know until it really happens."

Uttermohlen also said that in part, this led to Safelite's decision to file for Chapter 11 in June of 2000 (see May/June 2000 AGRR, page 6, for related story). "We were up against unfair competition from a product that was being dumped at below-market prices," she said. "The bottom had fallen out of the market and that was one of the things that had pulled the bottom out."

Among those that will be affected by the tariff are Pilkington plc, which has several joint ventures in China, including companies in Shanghai, Changchun, Guilin and Wuhan The companies in Changchun, Guilin and Wuhan will be hit by an anti-dumping duty of 9.84 percent while the one in Shanghai will face a 124.5-percent tariff because it did not export products to the United States during the period under investigation. The Department of Commerce set this duty for any companies not specifically mentioned in the investigation. (See chart for complete listing of imposed duties.)

The Fuyao Glass Industry Group Co. Ltd. (FYG), which faces a 11.8-percent duty, is appealing the decision.

"We will appeal to the World Trade Organization against the U.S. Department of Commerce's idea to impose anti-dumping duties on automotive replacement glass windshields exported to the United States by Fuyao Group," said Cho Tak-wong, chairman of the company. "We decided to bring the action in order to clarify facts and protect our legitimate rights."

Tak-wong said the petition was wrongly brought forth and maintains that his company has not taken part in any wrongdoing.

"We completely follow the rules of the market, which mean standardization and transparency," he added.

Likewise, Tak-wong said that as a privately-owned, foreign company, the duty could present the company with a great setback. FYG imports its float glass as well, so it claims its prices for windshields are low because it purchases its float glass from low-price sources.

"More than 65 percent of the float glass that we use for production of windshields is imported from Indonesia, Thailand and South Korea, which are all market-economy nations," he said. "However, the department refuses to adopt data on the real purchasing cost from these countries on the grounds that the department has reason to believe or suspect the market prices in these countries are subsidized."

FYG is based in Fuqing in East China's Fujian Province.

Pilkington is also considering an appeal in the future, according to the company's China manager, Richard Holt. "Pilkington is disappointed in the result as it affects our four companies, since the United States did not investigate our company's exports in detail," he said.

However, Holt said he expects the effect of the tariff to be minimal. "This ruling only affects one specific product category that forms only a small part of our exports from our Chinese plants. So, the impact overall on our business in China is expected to be small," Holt said.

According to the Department of Commerce, China exported 1.8 million automotive replacement glass windshields to the United States in 2001, worth $52.4 million (U.S. dollars), 14.3 percent of all the auto glass replacement windshields used throughout the year.

MEDIA
Fox News Brings Industry Under More Scrutiny from Public
Almost three years after the infamous ABC News 20/20 special on auto glass safety aired, Fox News Channel followed up with its own undercover investigation into auto glass installations in the Boston area in early March. Those conducting the 9-minute special visited three shops undercover in the area of Boston and had their windshields replaced and then had some in the industry study the installations to see if they were conducted properly. Like the 20/20 special, the program focused on the repercussions of unsafe auto glass installations, such as the case of John Fransway, whose sister, Jeanne, died in a fatal crash in 1999 when her aftermarket windshield popped out, allowing her to fly from the vehicle.
Fox News's Mike Beaudet visited three shops anonymously and secretly videotaped each incident. Each was found cutting corners and using improper practices, such as touching the edges of the glass while installing it-thus covering it with oil from the fingers, which can decrease the effectiveness of the adhesive. One company even admitted it hadn't primed the windshield being installed because it was having a busy day and hadn't found the time. Likewise, one shop told Beaudet it was fine to drive his vehicle within an hour and fifteen minutes-despite a manufacturer's warning on the urethane, suggesting that the car not be driven for two and a half hours.

Vincent Salluzo served as “expert” for Fox News and inspected the newly installed windshields, along with the videos of the installations, and explained to Fox News what had he thought gone wrong with each installation.

ACQUISITIONS
Key Communications Inc. Purchases Three New Publications
Key Communications Inc., publishers of AGRR magazine and its sister publications, USGlass, Window Film and Door & Window Maker, has purchased certain assets of Associations Publications Inc. of Cordova, Tenn., including Shelter, Building Components Manufacturing (BCM) and Plastics Fabricating & Forming magazines."We are very excited to announce the welcome addition to our family of publications," said president Debra A. Levy.

RESEARCH
IIHS Studies Side-Impact Crashes
The Insurance Institute for Highway Safety (IIHS), which is based in Arlington, Va., is planning to conduct tests on side-impact protection later in the year, particularly in the case of an SUV striking into the side of a smaller car.

The test will then rate vehicles by how well they react to the crash, with the SUV traveling at approximately 30 miles per hour. Through this research, the IIHS aims to encourage car manufacturers to install more side-crash protection, such as laminated sidelites and side airbags (see the January/April 2001 and May/June 2001 issues of AGRR magazine, pages 24 and 42, respectively, for related stories).

"There's a lot of work that we and others have done on frontal crashes," said Brian O'Neill, president of IIHS. "The next logical step seemed to be to go into side crashes."

The National Highway Traffic Safety Administration (NHTSA) has been conducting side-impact crash tests since 1997, but according to IIHS, its tests will focus more on how the person inside the vehicle is affected (particularly in regard to head injuries).

The IIHS has the tests slated for later this year.
   
A MINUTE WITH …

Frank Archinaco
PPG Industries Inc.

Pittsburgh-based PPG Industries Inc. recently announced that executive vice president of glass and chemicals, Frank A. Archinaco, will retire July 1. Charles E. Bunch, executive vice president, will become president and chief operating officer of the company, effective the same day. Despite Archinaco's busy schedule in his last months as executive vice president, he recently took the time to sit down with AGRR and answer a few questions on his time at PPG, his future plans and his decision to retire now.

Why did you choose now to retire?

I've been thinking about this for a couple of years. I've been working at PPG since I got out of college and I didn't see my two sons grow up. I have two grandkids now that I want to see grow up. I have a home in Hilton Head and I've probably spent less than three weeks there and my wife I have a lot of things we want to do. The time is right. It's my 37th anniversary. My wife wanted me to retire at 35.

Many say that you're one of the strongest proponents of the LYNX Services and PPG PROSTARS programs. Do you think your retirement will affect these programs?

I was there at the creation of LYNX as the most senior guy at the company and I have a long history of running our auto glass replacement business back in the 1980s. We've built a strong organization and our company has created a strong insurance services business, so I have no concern about the viability of these business going forward. And, to tell you the truth, I have very little day-to-day involvement in those businesses now. They are run by their general managers and it's really not me driving them anymore.

What would you say the auto glass industry's fatal flaw is-if it has one?

The auto glass replacement market is a business that offers the absolute highest level of service and convenience to the customers, but I don't think, for the most part, that we properly value that service. How many service industries in this country provide same-day service and have an entire inventory of parts on-hand? I don't think we properly value the service we provide.

Some in the industry have said recently, "PPG doesn't have a lot of people left running it now who aren't accountants-except for Frank Archinaco." How do you expect the company to fare without you?

My ego's not big enough to really endorse that, but I would say this, we have very capable people in this company. The guy who will become president when I retire, Chuck Bunch, he's been a close associate of mine for some time. He's a bright guy and a talented business leader and I think the company, on the operations side, will be in very good hands with him. We also have very good managers. On the [ARG} side we've had a number of changes in that business since I ran it and what I hear from customers is that they're always impressed when PPG makes a management change, we replace people with a guy who's just as good, if not better.

What are your plans for retirement?

I'm going to spend more time down south, especially in the winter. I'm going to work on my golf game, and I'm a semi-professional cook. I'm confined to making big meals around the Christmas holidays, but now I'll have more time for that. There are a lot of places my wife and I want to travel, too, and I have a stack of books I want to get through. The thing I'm guarding against is not getting over-committed in the early months of retirement, but I've been running hard for 30 years, so it's not going to be an easy transition.

AGRR