Flotech, Inc. v. EI Du Pont de Nemours Co.

• Citation: 627 F. Supp. 358
• Decision Date: 31 December 1985
• Docket Number: Civ. A. No. 83-3395-Y.
• Court: U.S. District Court — District of Massachusetts
• Parties: FLOTECH, INC. and Fluoramics Inc., Plaintiffs, v. E.I. DU PONT de NEMOURS COMPANY, Defendant.

627 F. Supp. 358

FLOTECH, INC. and Fluoramics Inc., Plaintiffs, v. E.I. DU PONT de NEMOURS COMPANY, Defendant.

Civ. A. No. 83-3395-Y.

United States District Court, D. Massachusetts.

December 31, 1985.

COPYRIGHT MATERIAL OMITTED

Lawrence G. Cetrulo, David P. Rosenblatt, Burns & Levinson, Boston, Mass., for plaintiffs.

Pierce O. Cray, Jerome M. Leonard, Ropes & Gray, Boston, Mass., for defendant.

MEMORANDUM AND ORDER

YOUNG, District Judge.

On November 1, 1983, FTI Flotech, Inc. ("Flotech") and Fluoramics, Inc. ("Fluoramics")¹ instituted this action against E.I. Du Pont de Nemours & Company ("Du Pont"). The plaintiffs, Fluoramics and Flotech, are, respectively, the manufacturer and the former principal distributor and marketing agent of a motor oil additive product called "Tufoil" (pronounced "tough-oil"). By their complaint, exhibits and documents, Flotech and Fluoramics assert that Du Pont disparaged or defamed their product, Tufoil, by a Du Pont press release issued February 1, 1980, and by the subsequent republication of the form or substance of this press release. In the allegedly offending press release, Du Pont announced that it would no longer sell certain Du Pont products, including its trademarked TEFLON products and its untrademarked fluorocarbon micropowder, polytetrafluoroethylene ("PTFE"), for use as ingredients in oil additives or oils for lubricating internal combustion engines. The complaint asserts claims for common law product defamation and product disparagement by Fluoramics, Count I, and by Flotech, Count II, and for unfair and deceptive trade practices in violation of the Massachusetts Consumer Protection Act, Mass.Gen.Laws ch. 93A, §§ 2 and 11, by Fluoramics, Count III, and by Flotech, Count IV. For each count Flotech alleges damages in the amount of $15 million, plus interest and costs.

Jurisdiction is pleaded on the basis of diversity of citizenship pursuant to 28 U.S.C. § 1332, with an amount in controversy exceeding $10,000 exclusive of interest and costs. Flotech is a Massachusetts corporation with a principal place of business in Framingham, Massachusetts. Fluoramics is a New Jersey corporation with a principal place of business in Upper Saddle, New Jersey. Du Pont is a Delaware corporation with a principal place of business in Wilmington, Delaware. Jurisdiction over Du Pont is properly exercised pursuant to the Massachusetts Long-Arm statute, Mass.Gen.Laws ch. 23A, § 3(a)-(d).

Pursuant to Fed.R.Civ.P. 56, Du Pont now moves for summary judgment or, in the alternative, for partial summary judgment on the grounds that (a) the First Amendment bars the action in its entirety, (b) Flotech's claims for lost profits fail as a matter of law absent evidence in the present record that satisfies the causation standards for proof of special damages, and (c) former Mass.Gen.Laws ch. 93A, § 3(1)(b) precludes Flotech's "consumer protection" claims.

I. Background

Fluoramics manufactures and sells the motor oil additive Tufoil. The invention of Fluoramics' President, Franklin Reick, Tufoil is a blend of polytetrafluoroethylene particles. Du Pont manufactures and sells PTFE. TEFLON is Du Pont's registered trademark for several of its products, including PTFE. In addition to its trademarked TEFLON PTFE, Du Pont also sells untrademarked PTFE micropowders. Prior to February 1, 1980, Fluoramics purchased TEFLON for use in Tufoil from Du Pont and also acknowledged the TEFLON trademark on the Tufoil label.

Incorporated in 1978, Flotech serves as one of Fluoramics exclusive distributors for Tufoil. Flotech had been engaged in the promotion, distribution and sale of Tufoil to retailers, as well as to commercial and industrial users. Flotech and Fluoramics assert that Tufoil improves engine performance, increases fuel economy, reduces pollutant emissions, reduces internal engine friction and facilitates cold weather starts.

On February 1, 1980, Du Pont issued a press release which stated in its entirety:

WILMINGTON, Del., Feb. 1—The Du Pont Company today announced it will immediately discontinue supplying its "Teflon" fluorocarbon resins or untrademarked fluorocarbon micropowder for use as ingredients in oil additives or oils for lubricating internal combustion engines.

The decision was reached after a review of data available within the Company and from outside sources showed, in Du Pont's opinion, that these resins are not useful in such products.

During the past several years, numerous oil additives or engine treatment products have been introduced in the United States and abroad. Promotion for some of these products claims improved engine performance, increased fuel economy and reduced emissions, citing Du Pont's "Teflon" fluorocarbon resin as the active agent.

As the number of oil additives products has increased, so have the inquiries Du Pont has received as to the utility of "Teflon" resins in such applications. The Company gathered data from within the Company and outside sources to assess the claims regarding "Teflon" fluorocarbon resins.

"Teflon" is Du Pont's trademark for its polytetrafluoroethylene (PTFE) products.

The press release was widely disseminated to the automotive press as well as to the automobile editors of various newspapers. Flotech contends that Du Pont repeated the press release or its substance to a variety of consumers, governmental agencies, corporations and media representatives, initially in 1980 but also continuing for several years. Flotech further contends that after a meeting with protesting Fluoramics representatives on March 5, 1980, Du Pont issued a private letter to Fluoramics purporting to exempt Tufoil from the scope of the press release. Apparently, Du Pont declined to issue the letter publicly or forward it to the recipients of the original press release.

Until February, 1980, Flotech had utilized both Du Pont's name and Du Pont's TEFLON trademark in the marketing of Tufoil. As a consequence of the issuance and republication of the press release, Flotech alleges a loss of business, sales, and opportunities to expand.

Specifically, Flotech charges that Du Pont "meant, intended to mean and was understood to mean by persons reading the statement that all oil additives or lubricants made with `Teflon' (PTFE) for use in internal combustion engines, of which Tufoil is one, are useless products in that they do not improve engine performance, increase fuel economy, reduce emissions, reduce friction, or facilitate cold weather starts." The allegations of defamation or disparagement of product rest on this assertion.

II. Summary Judgment

In deciding whether summary judgment is appropriate in this case, the Court first looks to Fed.R.Civ.P. 56 which requires a showing that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Moreover, the Court must view the record "in the light most favorable to ... the party opposing the motion" and "indulge all inferences favorable to the party opposing the motion." Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). See Poller v. Columbia Broadcasting System, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Voutour v. Vitale, 761 F.2d 812, 817 (1st Cir.1985). A factual dispute is genuine when there is "substantial evidence" going beyond the allegations in the complaint and the denials of the answer to demonstrate that a material issue is controverted. Pignons S.A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 486 (1st Cir. 1981). In the present case, the Court imposed a comprehensive pre-trial order pursuant to Fed.R.Civ.P. 16 which required each party to request the admission of each and every demonstrable fact (as opposed to inferences) which it intended to prove at trial. All parties have done so. The Court treats these several requests as affidavits for the purpose of determining whether a genuine issue of material fact exists herein.

A. Choice of Law

As a preliminary matter, it is necessary to make a choice of law. Sitting in diversity, this Court looks to the choice-of-law doctrine of the forum state. Klaxon Co. v. Stentor Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The Supreme Judicial Court of the Commonwealth of Massachusetts has recently addressed this issue. Bushkin Associates, Inc. v. Raytheon, 393 Mass. 622, 632-635, 473 N.E.2d 662 (1985). Guided by the Restatement (Second) of Conflicts of Laws (1971), § 6(2), the Bushkin Court details a process which will identify the state with the "most significant relationship to the transaction and the parties." Id. at 632, 473 N.E.2d 662.

Under Section 6 of the Restatement, the factors relevant to the choice of the applicable rule of law include: (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of the interested states and the relative interests of these states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability, and uniformity of result, and (g) ease in the determination of the law to be applied. Bushkin at 632, 473 N.E.2d 662.

The process of determining which state has the "most significant relationship" to the issue at hand is more than simply adding up various contacts. Bushkin at 632, 473 N.E.2d 662. Arguably, at least three states have some interest in the matter before the Court: Massachusetts, New Jersey, and Delaware. Flotech is incorporated and has its primary place of business in Massachusetts. Fluoramics is incorporated and has its primary place of business in New Jersey. Du Pont is incorporated in and has its primary place of business in Delaware. Further, the press release...