Moltan Co. v. Eagle-Picher Industries, Inc., EAGLE-PICHER

• Citation: 55 F.3d 1171
• Decision Date: 02 June 1995
• Docket Number: EAGLE-PICHER,Nos. 94-5345,94-6472,s. 94-5345
• Parties: MOLTAN COMPANY, Plaintiff/Counter-Defendant-Appellant, v.INDUSTRIES, INC.; Eagle-Picher Minerals, Inc., Defendants/Counter-Plaintiffs/Third-Party Plaintiffs-Appellees, William M. Gurley, B.J. Gurley, individually and d/b/a Moltan Company, Third-Party Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1171

55 F.3d 1171

34 U.S.P.Q.2d 1840

MOLTAN COMPANY, Plaintiff/Counter-Defendant-Appellant, v. EAGLE-PICHER INDUSTRIES, INC.; Eagle-Picher Minerals, Inc.,

Defendants/Counter-Plaintiffs/Third-Party

Plaintiffs-Appellees,

William M. Gurley, B.J. Gurley, individually and d/b/a

Moltan Company, Third-Party Defendants-Appellants.

Nos. 94-5345, 94-6472.

United States Court of Appeals, Sixth Circuit.

Argued March 16, 1995.

Decided June 2, 1995.

John D. Horne (argued and briefed), Memphis, TN, for plaintiff-appellant.

Michael Richards (briefed), Sam B. Blair, Jr. (argued), Baker, Donelson, Bearman & Caldwell, Memphis, TN, for Eagle-Picher Industries, Inc., Eagle-Picher Minerals, Inc.

John D. Horne, Memphis, TN, for William M. Gurley, B.J. Gurley.

Before: KENNEDY and DAUGHTREY, Circuit Judges; CLELAND, District Judge. ^*

KENNEDY, Circuit Judge.

Both Moltan and Eagle-Picher manufacture diatomaceous earth oil absorbent products ("DE products"). In September 1993, Moltan filed suit against Eagle-Picher, accusing it of defamation and commercial disparagement, among other things. Eagle-Picher denied these allegations and filed a counter-claim against Moltan, accusing Moltan of engaging in false advertising and labelling. Eagle-Picher requested that the District Court issue a preliminary injunction ordering Moltan to cease making its allegedly false claims. The District Court issued the injunction, and Moltan appealed.

While the appeal was pending, the District Court proceeded with the merits of the litigation, dismissing Moltan's complaint and granting summary judgment in favor of Eagle-Picher on one of the three counts of the counter-claim. The District Court then converted the preliminary injunction into a permanent injunction and scheduled trial on the two remaining counts of the counter-claim. Moltan has also appealed this decision, alleging that the District Court did not have jurisdiction to enter these orders. We vacate the permanent injunction, but affirm the preliminary injunction and the District Court's refusal to require Eagle-Picher to post security.

I.

The Occupational Safety and Health Administration requires that manufacturers and importers of hazardous substances supply information about the dangers associated with a particular product. 29 C.F.R. Sec. 1910.1200. Specifically, manufacturers of products that contain more than .1% of a possible carcinogen must complete Material Safety Data Sheets ("MSDS") and label their products accordingly. Both Eagle-Picher's and Moltan's DE products contain crystalline silica ("CS"). Respirable crystalline silica has been designated a possible carcinogen. Until January 1992, both Moltan and Eagle-Picher determined that they were subject to OSHA's requirements and complied with the procedures.

In November 1991, Moltan hired Martin Jensen from the MacKay School of Mines at the University of Nevada, Reno, to evaluate several samples of Moltan's products in an effort to determine whether Moltan still needed to comply with OSHA's requirements. Jensen sent Moltan a report concluding:

My personal interpretation of the data is that both your Natural D.E. and Dried D.E. samples contain very little, if any "crystalline silica," either quartz or cristobalite. If they do, the detection limits for these minerals in these low concentrations are below the quantifiable limits of the standard x-ray diffractometer which I operate.

Relying on this report, Moltan changed its MSDS, its labelling, and its advertising in January 1992. The new MSDS declared that "X-ray diffraction tests show no measurable amounts of crystalline silica as either quartz or crystobalite." The new labels stated that "Scientific testing of this product has proven that it contains no CRYSTALLINE SILICA, THUS IT IS NOT regulated as an acute or chronic health hazard." Moltan also sent out a letter to its customers stating

We are pleased to announce to you that Moltan's Ultrasorb products and now our new Optisorb products have no measurable crystalline silica. Consequently, we believe that these two products, Ultrasorb and Optisorb, are the only two mineral products in our industry that can make this statement. Our MSDS has been revised to reflect this change and the printing on packages now points out the advantage/benefit to the user.

Eagle-Picher learned of Moltan's changes soon after they were implemented. Eagle-Picher conducted tests on Moltan's products and discovered that Moltan's products contained more than .1% CS. Eagle-Picher then began an extended campaign of contacting Moltan, OSHA, various state agencies, and Moltan's customers about the allegedly false advertising.

In July 1993, Moltan contacted Jensen again and requested further clarification of his results. Jensen apparently conducted new tests and issued a new report to Moltan on July 22. The new report concluded:

The results show that all samples do have quartz and cristobalite, that are detectable within the limits of the operation of this apparatus. XRD is not truly a quantitative method, however, we can only state that these minerals are present in each sample. As a very crude approximation, it may be possible to suggest that each of these samples contains perhaps one percent or less of both quartz and crystobalite.

In August, Moltan hired Dr. William Miles of Industrial Mineral Research to review Jensen's test results and reports. On August 30, Miles informed Moltan that Jensen's tests were qualitative in nature and were not adequate to distinguish between the presence or absence of CS at a threshold of .1%. Moltan then asked Miles to conduct his own tests. On September 1, 1993, Miles sent Moltan a report stating that CS was present in Moltan's products in quantities ranging from .74% to .93%. Miles also conducted tests to determine the quantity of respirable CS in Moltan's DE products.

On September 3, 1993, Moltan filed a complaint in the District Court, accusing Eagle-Picher of defamation, commercial disparagement, interference with contract, and interference with prospective economic advantage. These charges all stem from Eagle-Picher's activities in notifying various companies and agencies about Moltan's alleged mislabelling. Eagle-Picher denied the allegations and counter-claimed, accusing Moltan of false advertising under the Lanham Act, of violating the Tennessee Consumer Protection Act, and of common law unfair competition. Eagle-Picher sought a preliminary injunction, which was issued by the District Court, and Moltan appealed.

While that appeal was pending, the District Court continued with the merits of the litigation. In response to motions filed by Eagle-Picher, the District Court dismissed one count of Moltan's complaint and granted summary judgment in favor of Eagle-Picher on the other counts. The court then granted summary judgment in favor of Eagle-Picher on its allegation that Moltan had violated the Lanham Act and scheduled trial on the remaining two counts of the counter-claim. The District Court also converted the preliminary injunction to a permanent one. Moltan also appealed these decisions, and we consolidated the two appeals.

II.

A. Permanent Injunction

Moltan appeals the District Court's decision to convert the preliminary injunction into a permanent one, contending that its appeal of the preliminary injunction deprived the District Court of jurisdiction to enter that order. We disagree.

It is well established that "an appeal from an order granting or denying a preliminary injunction does not divest the district court of jurisdiction to proceed with the action on the merits." 9 M. Moore, B. Ward & J. Lucas, MOORE'S FEDERAL PRACTICE p 203.11, at 3-54 (2d ed. 1989). We recognized this authority in Weaver v. University of Cincinnati where we stated:

Ordinarily, the district court is divested of jurisdiction in a case when one or more of the parties files a notice of appeal. There is authority, however, which holds that an appeal from an interlocutory order does not divest the trial court of jurisdiction to continue deciding other issues in the case.

970 F.2d 1523, 1528-29 (6th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1274, 122 L.Ed.2d 668 (1993); see also Branham v. Spurgis, 720 F.Supp. 605, 607 n. 2 (W.D.Mich.1989), appeal dismissed, 889 F.2d 1086 (6th Cir.1989).

The District Court thus had jurisdiction to continue with the merits of the litigation while the appeal from the preliminary injunction was pending. It did not, however, have authority to enter the permanent injunction prior to trial. An evidentiary hearing is ordinarily required prior to the issuance of a permanent injunction. United States v. McGee, 714 F.2d 607, 613 (6th Cir.1983). We have held that no such hearing is required if no factual issues remain for trial, id., and on first glance that ruling would appear to be applicable here, since the District Court issued the permanent injunction after granting summary judgment in favor of Eagle-Picher. This summary judgment was not complete, however. Two counts remained in the counter-claim, counts on which Eagle-Picher sought legal, as opposed to equitable, relief. Accordingly, these issues were to be resolved by a jury.

These remaining claims involved factual issues that overlapped with Eagle-Picher's Lanham Act claim. When both legal and equitable issues are presented in a single case, a jury should determine the issues common to both claims. Perez-Serrano v. DeLeon-Velez, 868 F.2d 30 (1st Cir.1989); Moore v. Sun Oil Co., 636 F.2d 154 (6th Cir.1980). "It is well settled that where claims at law and in equity are joined and the legal claims are tried separately by a jury, the jury's verdict operates as a finding of fact binding on the trial court in its determination of the equitable claims." Dybczak v. Tuskegee Institute, 737 F.2d 1524, 1526-27 (11th Cir.1984), cert. denied, 469 U.S. 1211, 105 S.Ct. 1180, ...