Scott Paper Company v. Fort Howard Paper Company

• Citation: 343 F. Supp. 229
• Decision Date: 25 May 1972
• Docket Number: No. 60-C-156.,60-C-156.
• Parties: SCOTT PAPER COMPANY, a corporation, Plaintiff, v. FORT HOWARD PAPER COMPANY, a corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

343 F. Supp. 229

SCOTT PAPER COMPANY, a corporation, Plaintiff, v. FORT HOWARD PAPER COMPANY, a corporation, Defendant.

No. 60-C-156.

United States District Court, E. D. Wisconsin.

May 25, 1972.

James P. Brody, Milwaukee, Wis., Arthur G. Connolly, Wilmington, Delaware, Wm. R. Scott, Philadelphia, Pa., for plaintiff.

Morsell & Morsell, Milwaukee, Wis., George McAndrews, Chicago, Ill., for defendant.

OPINION AND ORDER.

TEHAN, District Judge.

The plaintiff, Scott Paper Company, has moved for summary judgment dismissing the third counterclaim filed by the defendant, Fort Howard Paper Company, which counterclaim, after alleging diversity jurisdiction provides:

"23. In or about 1957 plaintiff distributed to its sales representatives a substantial number of `Scott Towl-Tables' and Scott Towl' Table identification keys, which towl-tables contained erroneous comparative information as to Fort Howard-identified Brands F and G.

24. The preparation and distribution of the Towl-Tables as set forth in paragraph 23 above was maliciously calculated to harm and be derogatory of defendant and amount to unfair trade practices and unfair competition in that they enabled and still enable plaintiff's sales representatives to make use of the false information when comparing plaintiff's products with defendant's products by use of the table, all to the serious damage of defendant in its relationship with its distributors and customers with resulting loss of reputation and standing adversely affecting defendant's entire trade, business and profits.

25. For the reasons hereinabove alleged in paragraph 24 and as a direct result and consequence thereof defendant has sustained loss and damage to its reputation, with the result that it has been and will be damaged through the actions set forth in the third counterclaim in an amount of at least ONE HUNDRED THOUSAND DOLLARS ($100,000.00)."

An injunction, destruction of the allegedly offensive material, and damages are sought. The reply to the counterclaim denies that the amount in controversy exceeds $10,000, admits distribution of the erroneous comparative information, alleging that it was done without knowledge of any errors, and denies the allegations in Paragraphs 24 and 25. It alleges that when the errors were discovered Scott took steps to discontinue the use of the erroneous information, notified Fort Howard of its action in November, 1957, and received no further complaint from Fort Howard until the counterclaim was filed on October 19, 1960. It also asserts that the claim set forth in the third counterclaim is barred by laches, estoppel and the Wisconsin statute of limitations, § 330.21(2), now § 893.21(2).

Scott's motion for summary judgment sets forth the following three grounds:

"(1) Fort Howard's counterclaim is founded on a form of trade libel, i.e. product disparagement, and therefore should be dismissed for failure to allege and show special damages; (2) the counterclaim should be dismissed because there is a complete absence of malicious intent in Scott's publication of the Towl-table; and (3) it should be dismissed because of the two year Wisconsin Statute of Limitations applicable to libel actions."

The three grounds present a common basic question: What is the nature of the cause of action alleged by Fort Howard? In resolving that question we must look to the allegations of the third counterclaim and cannot rely on the parties' or even the pleader's characterization of the nature of the action. As stated in Wesolowski v. Erickson, 5 Wis.2d 335 (1958), at p. 339, 92 N.W.2d 898, at p. 901:

"Whether an action is one brought in an individual capacity or in a representative capacity is sometimes difficult to determine. The mere labeling of a complaint does not determine its nature. The nature of an action is to be determined as a whole and all allegations in the complaint must be considered." (Emphasis ours.)

In Chimekas v. Marvin, 25 Wis.2d 630, 131 N.W.2d 297 (1964), the plaintiffs' cause of action was held to be one in tort for fraud despite use of the words "warranted" and "breach of warranty" in the pleading. The holding was based on examination of the entire complaint. And in National Discount Corp. v. O'Mell, 194 F.2d 452, 454, 455 (6th Cir. 1952,) the court said:

"The nature of the cause of action depends upon the allegations in the complaint considered as a whole. If the complaint states facts showing that the action is upon a contract, it will be considered as an action ex contractu even though the complaint alleges a conversion and seeks remedies ex delicto. Parker State Bank v. Pennington, 8 Cir., 9 F.2d 966, 970; Minez v. Merrill, D.C.S.D.N.Y., 43 F.2d 201; Genuine Panama Hat Works, Inc. v. Webb, D.C.S.D.N.Y., 36 F.2d 265, 267.

Although the complaint may state that it is an action in tort, as it did in the present case, such an allegation is not controlling, and the Court will determine from the complaint whether the action is one in tort or one in contract. Dallas v. Garras, 306 Mich 313, 316, 10 N.W.2d 897; Thrift v. Haner, 286 Mich. 495, 497, 282 N.W. 219."

The court there noted that the inherent nature of the claim, as opposed to the name accorded it by the pleader, governed the selection of the applicable statute of limitations.

Scott's basic contention is that the cause of action set forth in Fort Howard's third counterclaim is for trade libel. Fort Howard contends that its cause of action is for unfair trade practices and unfair competition. After considering the allegations of the third counterclaim, it is our conclusion that the cause of action alleged is for a form of trade libel, that is, product disparagement, despite the allegation by Fort Howard, in Paragraph 24, that Scott's actions "amount to unfair trade practices and unfair competition." The only type of unfair competition claimed is preparation and distribution of disparaging information, i.e., erroneous comparative information, concerning Fort Howard's product. That claim, the gist of the counterclaim, amounts to trade libel. Because Fort Howard's business or competitive position may have been affected by the wrong alleged does not change the nature of the claim. We therefore must determine Scott's motion under the law applicable to trade libel.

We agree with Scott that one seeking relief for product disparagement, which, as in this case, does not involve libel per se, must allege and prove special damages. Erick Bowman Remedy Co. v. Jensen Salsbery Laboratories, 17 F.2d 255 (8 Cir. 1926);¹ Eversharp, Inc. v. Pal Blade Co., 182 F.2d 779 (2d Cir. 1950); Testing Systems, Inc. v. Magnaflux Corporation, 251 F.Supp. 286 (E.D.Pa. 1966). We also agree that Fort Howard has failed to comply with that requirement. That failure, however, does not warrant the relief sought by Scott, that is, dismissal of the counterclaim at this stage of the proceedings.

In effect, Scott claims that there is no genuine issue of material fact with respect to its position that it is impossible for Fort Howard to prove special damages. It offers support for this claim in the form of evidence adduced during discovery proceedings thus far. We are not satisfied that this evidence establishes absence of special damages as a matter of law when Fort Howard has not had an opportunity to present its evidence or to complete its discovery.

The third counterclaim clearly does not allege special damages to the extent required in this Circuit and is therefore defective under the above cited authorities. We believe and hold, however, that Fort Howard should be afforded an opportunity to replead, and that a dismissal without permitting it to attempt to correct that pleading omission would be improper.

In support of the second ground for its motion, Scott argues, and Fort Howard apparently agrees, that malicious intent is an essential element of a cause of action for product disparagement. Again citing evidence adduced during discovery proceedings thus far, Scott contends that the record establishes the absence of malice and that the third counterclaim must therefore be dismissed. Just as we concluded with respect to special damages that it is not possible on the basis of the record developed to date to rule that no genuine issue of material fact exists as a matter of law, we must hold that the absence of malice, alleged by Fort Howard to have motivated Scott, has not been established as a matter of law. Summary judgment on that basis would be premature.

Our determination that Fort Howard has alleged a cause of action for trade libel does not settle the question of whether that cause of action is barred by the applicable statute of limitations, since disagreement exists as to which Wisconsin statute of limitations is applicable.² Scott claims that the pertinent statute is § 893.21(2) which sets a two year limitation period on "An action to recover damages for libel, slander, assault, battery or false imprisonment." Fort Howard urges that the governing statute is § 893.19(5) which sets a six year limitation on "An action to recover damages for an injury to property, or for an injury to the character or rights of another, not arising on contract, except in case where a different period is expressly prescribed." No Wisconsin case has been cited or found ruling on the matter and we must therefore attempt to predict the decision of Wisconsin courts, looking to relevant decisions in other jurisdictions.

The following cases dealing with the precise question of which statute of limitations governs an action for trade libel³ have been cited by the parties:

1. Buehrer v. Provident Mut. Life Ins. Co., 123 Ohio St. 264, 175 N.E. 25 (1931), an action involving slander of title. The court held that a one year statute of limitations for libel and slander, and not a four year statute of limitations for injury to property or for trespass upon real property, was applicable. It stated that the one year statute applied to all actions...