Counterfeit Lubes Draw Citgos Wrath

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Citgo sued distributor Mid-State Energy and subsidiary Highland Oil, alleging they sold poor quality, non-Citgo bulk lubricants falsely labeled with Citgo marks, violating distributor and packaging agreements and harming Citgos reputation.

Citgo Petroleum Corp. filed its lawsuit in April in the U.S. District Courts Tampa, Fla. Division. Mid-State Energy (MSE) and Highland Oil are both based in Lake Wales, Fla.

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The lawsuits counts include trademark infringement; false designation of origin, false advertising and unfair competition; trademark counterfeiting; breach of contract; and, under Florida law, unfair and deceptive trade practices. Among other things, it seeks treble (triple) the actual damages suffered by Citgo, and statutory damages of $1 million per counterfeit mark per type of goods or services sold, offered for sale or distributed. It also seeks to require MSE to order a recall of infringing products sold during the last two years.

Citgos policy is not to comment on pending litigation, a company spokesman told Lube Report.

By deadline, Mid-State had not responded to Lube Reports requests for comment.

The court granted a preliminary injunction on May 4, noting it would help insure that consumers are not deceived by the improper branding of products.

Among other things, it prohibits MSE, Highlands Oil and anyone affiliated with them from selling or offering for sale lubricants in five-gallon buckets or 55-gallon drums bearing a label with any Citgo trademark or the Citgo name. It also prohibits them from using Citgos marks in connection with the sale of lubricants sold in such buckets or drums. The injunction also requires MSE to deliver to Citgo for destruction all counterfeit and infringing products, goods, labels, packaging, signs, advertisements or other printed materials bearing the Citgo mark or imitations of them. MSE will be required to file with the court and provide to Citgo a report in writing under oath setting forth how it has complied with the preliminary injunctions terms.

Mid-State first signed a lubricant distributor agreement with Citgo in September 1994. Terms and conditions included Mid-States promises not to change or alter Citgos marks and products, or to use or allow to be used Citgos marks in connection with non-Citgo products.

Under a packaging agreement executed in February 1996, Mid-State was granted the right to purchase from Citgo lubricants in bulk and to package those Citgo lubricants for resale in smaller containers, including primarily 5-gallon buckets and 55-gallon drums, using the Citgo marks. The agreement stipulated Mid-State would only package and brand lubricants purchased directly from Citgo.

According to the lawsuit, an Independent Lubricant Manufacturers Association representative informed Citgo on March 13, 2012, that a sample of Transgard tractor hydraulic fluid lubricant randomly purchased from Mid-State on Sept. 30, 2011, and bearing a Citgo mark, had failed to meet Citgos stated performance representations and industry specifications for product quality.

ILMA sent Citgo laboratory data from the sampled lubricant, and a photograph of the sampled product. The lawsuit said the test data received from ILMA showed the sampled product didnt match the chemical profile of the Transgard product that Citgo manufactures.

According to the lawsuit, Mid-State had not purchased any Transgard tractor hydraulic fluid from Citgo since 2008, when it purchased 2,500 gallons in bulk. MSE obtained Citgo packaging labels for the Transgard product from a Citgo vendor as recently as February 2012, and since 2008 had acquired enough packaging labels to brand almost 10,935 gallons of product.

Citgo hired Intertek USA Inc. – an independent, ASTM-accredited product testing firm – to purchase and test additional samples of the full range of Citgo products sold by Mid-State. Intertek arranged for anonymous secret shoppers to visit Mid-States retail store on two occasions, to purchase 10 different products that had been repackaged and labeled with the Citgo marks.

The product samples were sent to Citgos laboratory in Cicerco, Ill., for chemical analysis, and Intertek performed additional confirmatory testing at its independent laboratory.

The results of those two sets of tests showed that at least five of the 10 products repackaged and sold by MSE under the Citgo brand were not Citgo products, the lawsuit stated. The five products that failed to match Citgos specifications and chemical formulation were Citgard 600 SAE 15W-40 motor oil, Superguard 10W-30 motor oil, Citgo EP Compound 220, A/W-32 hydraulic oil and Transgard tractor hydraulic fluid. Thus, since some time before Sept. 30, 2011, MSE has been using Citgos marks in connection with the sale of non-Citgo products to the public.

According to Citgo, in most cases MSE had not purchased any of the bulk product since 2008, or in the case of its 15W-40 engine oil, since 2005, yet in all cases MSE had printed packaging labels for the product as recently as the first quarter of 2012.