Santana Products v. Bobrick Washroom Equipment
| Decision Date | 09 February 2005 |
| Docket Number | No. 03-1845.,No. 03-2481.,No. 03-2283.,03-1845.,03-2283.,03-2481. |
| Parties | SANTANA PRODUCTS INC., Appellant — No. 03-1845, v. BOBRICK WASHROOM EQUIPMENT, INC.; Bobrick Corporation; The Hornyak Group Inc.; Vogel Sales Company; Sylvester & Associates, Ltd.; Fred Sylvester. Santana Products Inc., Appellant — No. 2283, v. Bobrick Washroom Equipment, Inc.; Bobrick Corporation; The Hornyak Group Inc.; Vogel Sales Company; Sylvester & Associates, Ltd.; Fred Sylvester. Santana Products Inc. v. Bobrick Washroom Equipment, Inc.; Bobrick Corporation; The Hornyak Group Inc.; Vogel Sales Company; Sylvester & Associates, Ltd.; Fred Sylvester. Bobrick Washroom Equipment, Inc.; Bobrick Corporation, Appellants — Nos. 03-2481. |
| Court | U.S. Court of Appeals — Third Circuit |
William E. Jackson (Argued), B. Aaron Schulman, Stites & Harbison, Alexandria, VA, Gerald J. Butler, Scranton, PA, for Appellants.
Carl W. Hittinger (Argued), Stevens & Lee, Philadelphia, PA, Walter F. Casper, Jr., Carbondale, PA, for Appellees.
Before ROTH, AMBRO and CHERTOFF, Circuit Judges.
In order to persuade government architects to specify Bobrick's toilet partitions for use in government projects, Bobrick Washroom Equipment, Inc.,1 its architectural representative, the Hornyak Group, Inc., and its sales representative, Vogel Sales Co., were telling architects that the partitions of Santana Products, Inc., posed a fire hazard under fire safety codes. As a result, Santana brought claims against Bobrick, Hornyak, and Vogel for anti-trust violations of §§ 1 and 2 of the Sherman Act, for false advertising under the Lanham Act, and for state law tortious interference with prospective contract. The defendants allegedly violated the Sherman Act by conspiring to induce government architects to specify Bobrick's product, which in turn created a restraint of trade. They allegedly violated the Lanham Act by giving the government architects false information about the fire hazards of Santana's product. They allegedly tortiously interfered with a prospective contract of Santana's by inducing an architect to specify Bobrick's product and remove Santana's product from a specification.
The defendants asserted numerous defenses. For example, they contended that they could not be held liable for Santana's claims because they were merely petitioning the government about a safety matter, an action which was protected by the First Amendment of the U.S. Constitution. They also challenged the timeliness of Santana's claims, arguing that the claims were barred either by the statute of limitations or the doctrine of laches. The District Court granted summary judgment in favor of the defendants on the Sherman Act claims and the tortious interference with prospective contract claim and denied defendants' motion for summary judgment on Santana's Lanham Act claim. Santana Products, Inc. v. Bobrick Washroom Equipment, Inc., 249 F.Supp.2d 463 (M.D.Pa.2003). We will affirm the District Court's entry of summary judgment in favor of the defendants on Santana's Sherman Act § 1 claim and its tortious interference with prospective contract claim.2 However, because we conclude that the Lanham Act claim is barred by the doctrine of laches, we will reverse the granting of summary judgment on that claim.
The following facts are taken primarily from the District Court's very thorough opinion.3
Santana and Bobrick manufacture toilet partitions.4 Toilet partitions are made of different materials, including metal, stainless steel, plastic laminate, solid phenolic, and high density polyethylene (HDPE). The partitions are installed in public buildings, such as government offices, schools and arenas, as well as in private commercial buildings. The competitors in the toilet partition industry must engage in competitive bidding for government contracts. Before competitors bid for contracts, the architect or "specifier" for the project specifies the materials to be used in the government project. Only the companies that manufacture materials that match those specified may bid on the contract. A manufacturer will lobby architects and specifiers to persuade them to specify its product instead of its competitors' products. Once the material for an element of a contract has been specified, the companies that manufacture the specified material then compete on price.
Santana makes toilet partitions composed of HDPE. As of mid-1989, Santana and four other companies offered HDPE partitions. Bobrick makes a partition composed of solid phenolic and a partition composed of plastic laminate.
The American Standard Test Methods (ASTM) E-84 test is commonly used in the construction industry to test materials for flammability. The two characteristics that the ASTM E-84 test analyzes are "flame spread," which is the speed at which a flame spreads across the test material, and "smoke developed," which is the rate at which smoke develops once the material starts to burn. The E-84 test generates indices that compare the "flame spread" and "smoke developed" characteristics of the test material to those of red oak and inorganic reinforced cement surfaces under the same fire exposure conditions.
Building codes and the National Fire Protection Association's (NFPA) Life Safety Code 101 use the ASTM E-84 test indices to generate fire ratings for materials. A Class A fire rating is the best, Class B is second best, and Class C is third best. Any material that does not fit into one of these ratings is considered unrated. The flame spread value for each class differs, but all classes require a "smoke developed" value of less than 450. The NFPA Life Safety Code 101 requires the material to meet a specific fire rating depending on the manner in which the material is used. For example, "interior finish" or "wall finish" materials are required to have a Class B rating whereas material that is considered a "furnishing" or "fixture" can be unrated.5
In the early 1980's Santana developed the "FR" partition and used the ASTM E-84 test to assess the partition's fire rating. Santana advertised the FR partition in the Sweet's Catalogue6 as having a Class A rating. The same advertisement claimed that Santana's HDPE partition had a Class B "flame spread." By the 1990's, Santana was phasing out the FR partition in favor of its HDPE partition. The HDPE partition, however, even though its "flame spread" value fit into the Class B rating, was precluded from being rated because of its high "smoke developed" value.
Formica, one of the largest plastic laminate suppliers in the United States, along with its customers in the toilet compartment industry, all non-parties to this litigation, formed the Toilet Partitions Manufacturers Council (TPMC). According to Santana, the TPMC was concerned about the success Santana was having with sales of its HDPE partitions. The TPMC allegedly agreed to tell project specifiers that Santana's HDPE compartments were properly characterized as wall finishes but did not meet the NFPA's fire rating for wall finishes because of the high "smoke developed" value. Formica and Metpar, also a member of the TPMC, made a videotape that, according to Santana, falsely depicted the flammability of Santana's HDPE partitions. The sales representatives of companies belonging to the TPMC showed the videotapes during sales presentations to architects.
Bobrick was not a member of the TPMC but did discuss with members of the TPMC the fire characteristics of HDPE. In July 1989, Bobrick received a copy of a Metpar fact sheet comparing HDPE to phenolic and stating that HDPE had a "smoke developed" rating exceeding fire standards. Alan Gettleman and Bob Gillis, both Bobrick employees, went on a plant tour of Formica and watched the videotape. Formica gave Bobrick a copy of the videotape in early 1990, and Bobrick forwarded the videotape to its architectural representatives.
In November 1994, Santana brought suit against Formica, Metpar, ten other toilet partition manufacturers, and the TPMC. The defendants in the present case were not named as defendants in the 1994 action. The 1994 action essentially alleged a conspiracy to use scare tactics to discourage the specification of HDPE partitions by falsely alleging that HDPE partitions posed a fire hazard. The parties to the 1994 action settled it in 1995.
Santana contends that Bobrick conducted an unlawful marketing campaign to persuade architects and specifiers that HDPE partitions did not meet building code requirements and posed a fire hazard. In addition to distributing the Formica videotape in 1990, Bobrick distributed to its sales representatives a "Technical Bulletin" (TB-73) which provided a comparison of ASTM E-84 tests performed on Bobrick's partitions and on HDPE partitions. Bobrick included the TB-73 Bulletin in its Architectural Manual from 1990 to at least 1994 and allegedly beyond. In 1992, Bobrick produced a videotape entitled "You Be The Judge," which also included comparison tests of solid phenolic partitions and HDPE partitions. Some Bobrick representatives conducted live demonstrations during which they burned HDPE for architects. Bobrick placed an advertisement in the American School & University magazine in the early 1990's that described HDPE as a fire hazard and as far exceeding fire standards of the NFPA Life Safety Code. Bobrick also made comparison statements in its advertisements in the Sweet's Catalogue. Finally, Bobrick created slide presentations and sales scripts for use by its representatives that portrayed HDPE as a fire hazard compared to Bobrick's partitions.
Santana filed a complaint in the United States District Court for the Middle District of Pennsylvania against Bobrick, Hornyak,...
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