Hipsaver Co., Inc. v. J.T. Posey Co.
| Decision Date | 15 May 2007 |
| Docket Number | Civil Action No. 05-10917-PBS. |
| Citation | 490 F.Supp.2d 55 |
| Parties | The HIPSAVER COMPANY, INC., Plaintiff, v. J.T. POSEY COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Aaron V. O'Donnell, Edward Cosmo Ho, Mark T. Palin, Scott K. Dauscher, Atkinson Andelson Loya Ruud & Romo, Cerritos, CA, Edward J. Dailey, Lee C. Bromberg, Peter J. Karol, Courtney M. Quish, Bromberg Sunstein LLP, Boston, MA, for Plaintiff.
Anthony J. Fitzpatrick, Katherine Young Fergus, Daniel B. Winslow, Duane Morris LLP, Boston, MA, Douglas G. Morseburg, Jeffrey G. Sheldon, Shannon S. Sheldon, Sheldon Mak Rose & Anderson PC, Pasadena, CA, for Defendant.
This is the next contentious chapter of a long-running dispute between HipSaver, Inc. ("HipSaver") and J.T. Posey Company ("Posey") over the marketing of hip protectors, padded garments used to prevent hip and femur fractures in the elderly. The parties have each brought accusations of literally false advertising under the Lanham Act, 15 U.S.C. §§ 1117 & 1125; and deceptive business practices under state law. In the first iteration of this lawsuit, in 2004, the parties entered into a settlement agreement to dispose of similar claims. The parties now bring new allegations of falsehood and deceptive conduct, rehash geriatric claims, and assert breach of the prior settlement agreement. Both seek summary judgment. After hearing and review of the briefs, the Court:
• ALLOWS IN PART and DENIES IN PART HipSaver's motion for partial summary judgment on counts II and III of the complaint;
• ALLOWS HipSaver's motion for summary judgment on Posey's crossclaims;
• DENIES Posey's motion for partial summary judgment on its cross-claims;
• DENIES Posey's motion for summary judgment on count I of the complaint;
• ALLOWS Posey's motion for summary judgment on count IV of the complaint;
• ALLOWS IN PART and DENIES IN PART Posey's motion for summary judgment on counts II and III of the complaint; and
• ALLOWS HipSaver's motion to dismiss Edward Goodwin.
The record supports the following facts, which are undisputed, except where noted.
Plaintiff HipSaver is a small, closely-held Massachusetts corporation that develops, manufactures and distributes hip protector garments ("HipSavers"). These garments consist of an open-cell foam pad enclosed in an expandable air pouch, which absorbs energy associated with the impact from a fall and provides fracture protection to the hip/femur in the elderly and disabled. The device is washable, sewn into clothing, and positioned over the hip. HipSaver's president, Edward Goodwin, invented the product in 1995.
Defendant and cross-claimant Posey is a family-owned California corporation and nationwide distributor of patient safety and support services, including since 2001 a line of hip protectors ("Hipsters") which compete directly with HipSaver's garments. Together, HipSaver and Posey dominate the hip protector market in the United States.
In 2001, Posey hired Garwood Laboratories, an independent testing company, to perform impact-absorption testing on foam materials used in hip protector garments. The next year Posey began distributing advertising materials that referenced this testing ("the Garwood advertising") in support of its Hipster product line. These materials included catalogs, flyers, and brochures that Posey distributed at trade shows and sent to health care facilities requesting product information. The advertising claimed, among other things, that an independent laboratory had subjected various hip protectors to testing which simulated a fall and measured impact-absorption, and that Posey products proved not only effective at reducing fractures but showed "the best results of any hip protector available."
HipSaver alleges that Posey launched a large scale public advertising campaign in 2002 using the Garwood ads which made false representations about the effectiveness and launderability of the Hipster product as established by testing, and that in the fall of 2003, Posey halted its Garwood ads and replaced them with ads that referenced other testing. (See HipSaver's Opp. to Posey's Mot. for Summ. J. on the Compl., at 34, Docket No. 179). The president of HipSaver, Edward Goodwin, admits that he knew about the Garwood advertisements in 2002 and 2003, but believed they had been discontinued. (See Goodwin Dep. Vol. I, at 43:5-9; Goodwin Decl. ¶¶ 23-24.) HipSaver offers no evidence in support of its assertion that the Garwood ads were withdrawn in 2003.
Posey contends that the Garwood ads were not abandoned. Posey's product manager, Victoria Gay Lewis, has submitted a declaration in which she states, from personal knowledge, that the Garwood testing results appeared in various forms, including a Posey promotional video, continuously from 2002 through 2005. (See Lewis Decl. ¶ 8.)
In late 2003 or early 2004, Posey began to distribute promotional materials that referenced the results of different hip protector testing reported in a so-called "White Paper" written by a UCLA graduate student. References to this White Paper testing also appeared on the company's website. Posey's White Paper advertisements claimed that the testing included both Posey and HipSaver products, among others, and demonstrated that Posey's products "outperformed all competitive hip protectors tested" with regard to their capacity to absorb energy associated with a fall. (See 2004 Complaint, Posey Exh. 1.)
In June 2004, in response to these White Paper ads, HipSaver filed suit against Posey for false advertising under the Lanham Act, 15 U.S.C. §§ 1117 & 1125, and violations of Mass. Gen. L. ch. 93A, §§ 2 & 11 ("Chapter 93A"). HipSaver claimed that the testing was flawed in several respects, including that the student had not actually tested HipSaver products and had misrepresented questionable testing results, such that the White Paper could not support the claims in Posey's advertising.
Posey counterclaimed, alleging that HipSaver was engaged in a false and deceptive advertising campaign to tarnish Posey's reputation, also in violation of the Lanham Act's false advertising provisions and Chapter 93A. Specifically, Posey identified certain representations regarding garment launderability and durability on HipSaver's website, as well as statements that HipSaver products had been tested and proven effective in various studies, as literally false and deceptive. Posey argued that the studies cited by HipSaver in support of these representations did not support the website's claims.
On August 24, 2004 the parties entered into a settlement agreement "to settle all disputes among them concerning or in any way related" to the lawsuit. Posey agreed, among other things, to pay HipSaver $360,000; to stop distributing the White Paper and any advertisements referencing the results of that testing; and to issue a corrective "Special Announcement" disclaiming the reliability of the White Paper ads. The parties also agreed to refrain from using the results of any further comparative testing of Posey and HipSaver products without giving the other advanced (30 days) written notice, and broadly released each other from liability for
all causes of action, known or unknown, fixed or contingent, which arise from or are related to the false advertising claims under [the Lanham Act or Chapter 93A] which were asserted or could have been asserted in the Action for conduct which occurred prior to the date of this Agreement.
(emphasis added.) Neither the 2004 complaint nor the settlement agreement mention the Garwood advertising.
No reference is made in the agreement to any obligations with respect to the allegedly offending materials posted on HipSaver's website. The agreement was drafted jointly by the parties, and includes an integration clause. Both parties, in conjunction with the present lawsuit, admit that they understood the agreement to permit the continued publication of known promotional materials in existence during the dispute which the settlement agreement did not otherwise obligate them to alter or withdraw. (See, e.g., Tr. of Motion Hearing 5:3-6 (Oct. 11, 2005) (counsel for HipSaver stating: "So I think both parties move forward under the assumption that the advertisements as they existed at the time [of the agreement] were agreed to by both parties and were acceptable"); Posey's Statement of Uncontroverted Facts, ¶ 21 ()). However, HipSaver contends that it did not agree to the continued use of the Garwood ads post-settlement, because it believed they had been discontinued prior to the litigation and were no longer at issue.
Following execution of the settlement agreement and withdrawal of the White Paper advertisements, Posey ran more Garwood ads. The Garwood testing was supplemented in 2004-2005 to include new products, but used the same guided drop procedure employed in the 2001 tests. Otherwise, the representations based on the testing were the same, or materially similar, to those contained in the first run of Garwood ads. Posey did not provide HipSaver with advanced notice of its intent to disseminate these materials. (The ads were withdrawn in May 2005 in response to HipSaver's complaint.)
HipSaver, in turn, did not remove or alter the challenged statements on its website following the settlement agreement. The representations as to durability and launderability remain the same, but for the addition of a single new HipSaver product and comparative references to a single new Posey product.
On May 4, 2005, only...
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