Santana Products, Inc. v. Sylvester & Associates

• Decision Date: 29 December 1999
• Docket Number: No. 98 CV 6721.,98 CV 6721.
• Citation: 121 F.Supp.2d 729
• Parties: SANTANA PRODUCTS, INC., Plaintiff, v. SYLVESTER & ASSOCIATES, LTD. and Frederick E. Sylvester, Defendants.
• Court: U.S. District Court — Eastern District of New York

121 F.Supp.2d 729

SANTANA PRODUCTS, INC., Plaintiff, v. SYLVESTER & ASSOCIATES, LTD. and Frederick E. Sylvester, Defendants.

No. 98 CV 6721.

United States District Court, E.D. New York.

December 29, 1999.

Order Denying Reconsideration March 3, 2000.

COPYRIGHT MATERIAL OMITTED

Frederick A. Nicoll, Law Offices of Frederick A. Nicol, New York City, for defendants.

Paul J. Esatto Jr., Peter I. Bernstein, Scully, Scott, Murphy & Presser, Garden City, NY, for plaintiff.

Memorandum of Decision and Order

MISHLER, District Judge.

This action was brought pursuant to Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2, the Lanham Act, 15 U.S.C. § 1125 et seq. and the Donnelly Antitrust Act, New York Gen.Bus.L. § 340. Plaintiff Santana Products, Inc. ("Santana") alleges that Defendants Sylvester & Associates and Frederick E. Sylvester ("Sylvester") (collectively, "Defendants") have contracted and conspired to unreasonably restrain trade in and monopolize a portion of the toilet partition market. Plaintiff further alleges that Defendants have published, distributed and disseminated advertising brochures and other advertising statements which include false and/or misleading representations and disparaging accusations regarding Plaintiff's product.

Defendants move for judgment on the pleadings or, in the alternative, for partial judgment on the pleadings or, in the alternative, for a more definite statement. For the reasons below, we grant Defendants' motion for partial judgment on the pleadings and deny the remainder of Defendants' motions.

BACKGROUND

Santana manufactures and sells restroom and toilet partitions made of high density polyethylene ("HDPE"). According to the Complaint, HDPE is more durable and cost-effective than conventional materials such as metal, marble and solid phenolic. Plaintiff claims that as demand for HDPE grew, efforts were initiated to exclude HDPE from the field of materials used for toilet partitions. Specifically, "Sylvester, Sylvester & Associates, and the non-party co-conspirators conspired to use scare tactics to discourage specification and acceptance of Santana's HDPE partitions in lieu of or as a replacement material for conventional materials by falsely alleging that Santana's partitions posed a dangerous fire hazard." (Complaint ¶ 23.) As a result of these allegedly false allegations, HDPE toilet partitions were often misclassified by specifiers and building code officials as "interior wall finish" which are required to meet additional fire safety standards.

In late 1989, several alleged non-party co-conspirators formed the Toilet Partitions Manufacturer's Council ("TPMC") but excluded Plaintiff from membership. According to a memorandum from the Formica Corporation, a TPMC member, the TPMC met in November 1989 to "address the competitive threat of HD Polyethylene (Santana) against our thick stock for construction of toilet partitions". (Ex. B to Complaint.) Plaintiff alleges that Sylvester, while employed by Metpar Corporation in 1989, assisted in the creation of a videotape for the Formica Corporation wherein small samples of Santana's HDPE product were ignited and burned. (Complaint ¶ 32.)

The Complaint further alleges, inter alia:

• In November 1989, Sylvester, while employed by Metpar, exhibited a portion of what was later incorporated into the Formica videotape at a meeting held at the New York Office of General Services ("OGS") in an effort to have the OGS switch from HDPE to phenolic partitions. (Complaint ¶ 34.)

• In November 1989, Sylvester sent a letter to the Nassau County Fire Marshall stating that HDPE toilet partitions previously provided at the Nassau Coliseum did not meet the proper fire code standards. (Complaint ¶ 37.)

In 1992, Sylvester & Associates was formed. Between 1992 and 1994, Defendants were local architectural representatives of Bobrick Corporation and Bobrick Washroom Equipment, Inc. (collectively, "Bobrick"). During that time, Defendants allegedly sold Bobrick's plastic laminate toilet partitions without obtaining the required approval for such sales from the Materials and Equipment Acceptance Division of the City of New York Department of Buildings. (Complaint ¶¶ 44, 45.) The Complaint specifically alleges:

49. "On information and belief, since at least 1992, [Defendants] have received and distributed Bobrick's `Advisory Bulletin TB-73' to specifiers and architects providing a comparison of the results of an ASTM E-84 test performed on its 1080 Duraline Series toilet partitions and on HDPE toilet partitions without fire retardant additives. Advisory Bulletin TB-73 falsely and/or misleadingly states among other things: `Polyethylene paneling without fire retardant additives should not be used in buildings where Class B Interior Wall and Ceiling Finish is required.'

50. On information and belief, [Defendants] distributed a "Fact Sheet" (containing false and/or misleading statements relating to Santana's product) to prospective purchasers of Bobrick toilet partitions within the time period of November 1992 to present.... The "Fact Sheet" compared characteristics of solid phenolic toilet partitions to Santana's HDPE toilet partitions. On information and belief, the "Fact Sheet" falsely and/or misleadingly stated that HDPE had a smoke developed rating `greatly exceeding National Fire Protection limit ...'

...

51. On information and belief, [Defendants] conducted "box-lunch presentations" between 1992 and 1997 [which included the showing of a slide which] falsely and/or misleadingly illustrates the characteristics of Santana's HDPE toilet partitions."

(Complaint ¶¶ 49-51.)

Aside from the Formica videotape, Plaintiffs allege that Bobrick created a videotape comparing its phenolic toilet partitions with the polyethylene partitions made by Santana. The narrator on the tape states that the polyethylene partitions generate excessive smoke when lit and conducts a flame exposure test presented in time-lapse photography, giving the impression that the polyethylene partitions burn quickly. Plaintiffs allege that Defendants and non-party co-conspirators have shown the Bobrick videotape to building code officials and other administrative officers on numerous occasions to prevent contractors from specifying use of Santana's HDPE partitions. (Complaint ¶ 62.)

In support of its antitrust claim, Plaintiff alleges that beginning in the 1980's and continuing to the present time, Defendants and non-party co-conspirators have, "contracted, combined and conspired to unreasonably restrain trade in the relevant market for toilet partitions in interstate commerce in violation of Section 1 of the Sherman Act." (Complaint ¶ 67.) The alleged illegal conduct includes:

• Knowingly acting in concert with co-conspirators to exclude HDPE toilet partition manufacturers and sellers from the toilet partition market;

• Knowingly making false statements regarding the flammability of Plaintiff's product;

• Knowingly making false statements regarding the flame and smoke protection standards HDPE must meet, thereby frightening and misleading architects and other specifiers for toilet partitions and discouraging the inclusion of Santana in the competitive bidding process;

• Knowingly making false and/or misleading statements to municipalities and other governmental agencies in an effort to influence them to adopt or modify regulations relating to HDPE partitions and to preclude use of HDPE partitions in government contracts.

(Complaint ¶ 67(a-d).)

Plaintiff further alleges that based on conduct from 1992 to the present time, Defendants and non-party co-conspirators have "conspired to monopolize at least a part of the trade in interstate commerce for toilet partitions and to maintain power to exclude or restrain manufacturers of HDPE partitions from marketing and selling their goods in interstate commerce in violation of Section 2 of the Sherman Act." (Complaint ¶ 72.) The alleged illegal conduct is similar to that underlying the claims under Section 1 of the Sherman Act.

Finally, Plaintiff alleges that Defendants violated the Lanham Act by publishing videotapes and distributing advertising brochures and other materials which included false and/or misleading representations and disparaging accusations with regard to the alleged flammability of Santana's HDPE product. These promotional materials are alleged to have been designed to deceive potential purchasers and discourage them from purchasing Santana's HDPE product. (Complaint ¶ 77.)

PROCEDURAL HISTORY

This is the third action filed by Plaintiff alleging antitrust and Lanham Act violations by its competitors in the toilet partition industry. In November 1994, Plaintiff filed an action against the TPMC, eleven toilet compartment manufacturers and the Formica Corporation in the Middle District of Pennsylvania (the "1994 Litigation"). The 1994 litigation was settled with a confidential release and covenant not to sue dated January 27, 1995 which released and forever discharged the signatory entities and their respective officers, directors, parents, subsidiaries, employees, agents and attorneys from any, and all claims up to that date.

On October 1, 1996, Plaintiff filed another complaint in the Middle District of Pennsylvania with the caption Santana Products, Inc. v. Bobrick Washroom Equipment. Inc., 3:CV:96-1794 (the "Pennsylvania action"). The complaint in that action alleged, inter alia, a conspiracy among Plaintiff's competitors in violation of the antitrust laws. Among those named in the suit were Sylvester & Associates and Frederick E. Sylvester, Defendants here. On July 24, 1998, the court in that action dismissed Plaintiff's claims against Sylvester & Associates and Frederick E. Sylvester for lack of personal jurisdiction. The remaining parties to the Pennsylvania action are still engaged in extensive discovery.

On October 30, 1998, Plaintiff filed the instant Complaint against Defendants only,...