Diamond Triumph Auto Glass, Inc. v. Safelite Glass Cor.

• Decision Date: 31 July 2006
• Docket Number: No. 3:02cv514.,3:02cv514.
• Parties: DIAMOND TRIUMPH AUTO GLASS, INC., Plaintiff v. SAFELITE GLASS CORPORATION, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

Page 695

441 F.Supp.2d 695

DIAMOND TRIUMPH AUTO GLASS, INC., Plaintiff v. SAFELITE GLASS CORPORATION, Defendant.

No. 3:02cv514.

United States District Court, M.D. Pennsylvania.

July 31, 2006.

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Charles J. Lloyd, Michael A. Hellwich, Livgard & Rabuse, P.L.L.P., Dwight G. Rabuse, Minneapolis, MN, David W. Saba, Joseph P. Mellody, Jr., James T. Shoemaker, Hourigan, Kluger & Quinn, P.C., Kingston, PA, Richard S. Bishop, Hourigan, Kluger & Quinn, P.C., Scranton, PA, for Plaintiff.

Adam W. Wiers, Amy E. Dias, Ana Maria Mieles, Donald M. Lund, Erik C. Naft, Jason A. Spak, John E. Iole, Laura E. Ellsworth, Rebekah Byers Kcehowski, Thomas S. Jones, Jones Day, Pittsburgh, PA, Charles A. Shea, III, Wetzel, Caverly, Shea, Phillips and Rodgers, Wilkes—Barre, PA, for Defendant.

MEMORANDUM

MUNLEY, District Judge.

Presently before the court for disposition is Defendant Safelite Glass Corporation' motion for summary judgment. Additionally, Plaintiff Diamond Triumph Auto Glass, Inc. has moved for summary judgment on Safelite' counterclaims. These matters have been fully briefed and are ripe for disposition. For the reasons that follow, we will grant each motion in part and deny each in part.

I. Background

Diamond and Safelite are competing glass companies. They each repair and replace damaged vehicle glass. A significant portion of the glass business involves providing services for insured individuals. This case involves the arrangements between Diamond, Safelite, and the insurance. companies.

In addition to repairing and replacing damaged automobile glass, Safelite acted as the automobile glass claims administrator for more than 100 insurance companies from January 1, 1999 through June 30, 2004. (Def. Ex. 89 in Supp. Summ. J., Taghvai Aff. ¶¶ 3-4; Ex. 132 in Supp. Summ. J., O'Mara Aff. ¶¶ 4.) These companies entered into service agreements with Safelite to outline and control the scope of Safelite's services. (Def. Ex. 89 in Supp. Summ. J., Taghvai Aff. ¶¶ 4-5.) These services included:

a) leasing and maintaining a telephone number or numbers dedicated to the insurance company's auto glass claims;

b) maintaining call centers staffed with operators to answer agent, policyholder, and insurance company calls to the line maintained for the client, usually on a 24 hour per day, seven day per week basis;

c) answering questions regarding coverage and confirming coverage for agents and policyholders;

d) taking information regarding the auto glass claim, including the name and contact details for the policyholder, the details of the vehicle and glass part involved, and other relevant information;

e) answering policy questions;

f) administering a pre-established and pre-approved script to guide the call center employee's conversations with policyholders;

g) assisting the policyholder in scheduling his vehicle with a glass provider; and

h) handling and paying the invoice submitted by the auto-glass company, including a review of the amounts charged to reconcile them with the amounts authorized for payment by the insurance company.

(Def. Ex. 132 in Supp. Summ. J., O'Mara Aff. ¶ 4.)

In the service agreements, each insurance company and Safelite agreed to a maximum price for each glass claim. (Def. Ex. 89.1 in Supp. Summ J., SAFE 31 G000007 ¶ 1.5.) This price is referred to as the "reasonable and customary price" or "fair market value" price. (Def. Ex. 89.1 in Supp. Summ J., SAFE 31 G000040 ¶ 4.) In addition to guaranteeing its pricing, Safelite agreed to warranty its products and service. (Def. Ex. 89.1 in Supp. Summ J., SAFE31G000012 ¶ 2.8.) The service agreements also required that Safelite and the insurance companies jointly develop scripts to guide the call center employees who handled policyholders' initial calls, known as first notice of loss (FNOL) calls. (Def. Ex. 89.1 in Supp. Summ J., SAFE31G000009 ¶ 2.2(b).)

The service agreements did not require that Safelite shops replace the glass for every claimant, but provided that Safelite would refer some claims to other shops. (Def. Ex. 89.1 in Supp. Summ. J., SAFE31G000040 ¶ 2; Def. Ex. 89.1 in Supp. Summ J., SAFE27B000105 ¶ 2.6.) Thus, Safelite developed a referral network of third party glass providers ("the network."). (Def. Ex. 131 in Supp. Summ. J, Kipker Aff. ¶ 4-5.) Glass companies wishing to join Safelite's network signed contracts called Network Affiliate Participation Agreements, which required that the shops perform work at or below the reasonable and customary prices and meet certain quality standards, such as providing a lifetime warranty. (Def. Ex. 131 in Supp. Summ. J., Kipker Aff. ¶ 8,13; Def Ex. 131.1 in Supp Summ J. § 1.7, 1.9.) Safelite's network included 200 Safelite shops, 400 Safelite mobile units, and 10,500 network affiliate shops. (Def. Ex. 131 in Supp. Summ. J., Kipker Aff. ¶ 5.) The glass shops paid no charge to join the network and Safelite did not guarantee that it would refer any volume of claims from its call center. (Def. Ex. 131 in Supp. Summ. J., Kipker Aff. ¶ 7,9.) Diamond entered into a Network Affiliate Participation Agreement ("Network Agreement") and was a member of the network from April 1, 2000 until it voluntarily terminated the relationship on April 1, 2002.

Policyholders needing glass repair would dial a toll-free number provided by their insurance companies, which connected them to one of Safelite's call centers. The scripts developed pursuant to the service agreements guided the ensuing conversation with the customer service representatives (CSRs). The initial greeting was tailored for each insurance company. If, for example, the policyholder was insured with ABC Insurance Co., the greeting would be, "Thank you for calling the ABC Insurance Glass program. This is [name]. How may I help you?" (See Safelite Ex. 132.1 in Supp. Summ. J.; Hellwich Decl., 10/7/2005, Ex. 2, Tr. Phone Call 6/5/03; Hellwich Decl. 10/7/05, Ex. 3, Tr. Phone Call 4/24/03.) Another possible greeting was, "Thank you for calling the ABC Insurance Glass program with services provided by Safelite." (Def. Ex. In Supp. Summ. J. 132. 1.) The CSR would then request basic information about the insured and the damage to the vehicle. (See Safelite Ex. in Supp. Summ. J. 132.1; Hellwich Decl., 10/7/2005, Ex. 2, Tr. Phone Call 6/5/03; Hellwich Decl. 10/7/05, Ex. 3, Tr. Phone Call 4/24/03.) If the policyholder expressed a preference for a glass company that was not part of the Safelite network, the CSR would warn him that the price may exceed his coverage, the insurer could not guarantee the work, and the service may not equal that of the network shops. (Hellwich Decl., 10/5/05, Ex. 13, Sample Script ¶ 24; Pl.Ex. 127 in Opp. Summ. J., Sample Script ¶ 21.) One script, for example, provides, "You have the right to have the work performed at any glass shop you choose, but they may charge you more than what [ABC Insurance] is willing to pay and may not provide the total service offerings of the [ABC Insurance] glass program."¹ (Pl.Ex. 127 in Opp. Summ J., Sample Script ¶ 21.)

After Diamond terminated its participation in the network in April 2002, it sent a series of letters to insurance companies complaining about Safelite's claims administration practices. From April 20 to April 26, 2002, Diamond sent letters to at least fifteen different insurance companies. (Def. Ex. 7-21 in Opp. Pl. Mot. Summ. J. ("Def.Opp.Ex.").) These letters accused Safelite of making false statements about Diamond's products and services and using the claims administration program to direct customers to Safelite's glass shops. (See, e.g., Def. Opp. Ex. 7.) On June 6, 2002, Diamond sent another round of letters accusing Safelite of stealing jobs. (Def. Opp. Ex.28-42.)

In addition, from 2002 to 2005, in an effort to increase business, Diamond provided financial rewards, such as gift certificates or free gasoline cards, to insurance agents when they referred policyholders. (Def. Opp. Ex. 115, Joob Dep. 25; Def. Opp. Ex. 116, Chakales Dep. 35.) Diamond spent more than $ 4.5 million on gift cards to insurance agents from 2002 to 2005. (Def. Opp. Ex. 114, Harris Dep. Ex. 4(g).)

II. Procedural History

On March 29, 2002, Diamond filed a complaint initiating the instant case. Diamond filed its First Amended Complaint on May 7, 2002. Following a partial motion for summary judgment, Diamond filed its Second Amended Complaint on February 18, 2004, which is presently before this Court. Therein, Diamond advances five counts stemming from Safelite's claims administration. In Count I, Diamond alleges that Safelite breached the Network Agreement. In Count II, Diamond maintains that Safelite violated various state consumer protection statutes by using the claims administration business to improperly influence policyholders. In Count III, Diamond claims that Safelite tortiously interfered with its business relationships with policyholders. Count IV is a common-law disparagement claim. Finally, Count V alleges that the CSRs' representations to callers constituted false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(1).

On March 8, 2004, Safelite filed seven counterclaims stemming from Diamond's letters to insurance companies and its gift card program. Following a motion to dismiss, Safelite filed seven amended counterclaims on November 29, 2004.²

III. Jurisdiction

The Court exercises jurisdiction over this dispute pursuant to its federal question jurisdiction, 28 U.S.C. § 1331, and supplemental jurisdiction, 28 U.S.C. § 1367. State law applies to those claims considered pursuant to supplemental jurisdiction. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)).

IV. Standard

Granting summary judgment is proper if the pleadings,...