The Bobrick Corp. v. Santana Prod.S Inc

• Decision Date: 22 March 2010
• Docket Number: No. 3:CV-07-1521.,3:CV-07-1521.
• Citation: 698 F.Supp.2d 479
• Parties: The BOBRICK CORPORATION, Bobrick Washroom Equipment, Inc. the Hornyak Group, Inc., Plaintiffsv.SANTANA PRODUCTS, INC., Santana Products Liquidating Trust, Michael T. Lynch, SR., Michael T. Lynch, JR., John A. Carney, James M. Gavigan, William E. Jackson, Esq., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

698 F.Supp.2d 479

The BOBRICK CORPORATION, Bobrick Washroom Equipment, Inc. the Hornyak Group, Inc., Plaintiffsv.SANTANA PRODUCTS, INC., Santana Products Liquidating Trust, Michael T. Lynch, SR., Michael T. Lynch, JR., John A. Carney, James M. Gavigan, William E. Jackson, Esq., Defendants.

No. 3:CV-07-1521.

United States District Court,

M.D. Pennsylvania.

March 22, 2010.

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Carl W. Hittinger, Lesli C. Esposito, Nicholas T. Solosky, Dla Piper US LLP, Philadelphia, PA, Walter F. Casper, Jr., Carbondale, PA, for Plaintiffs.

Erin Ann Brennan, Joseph A. O'Brien, Karoline Mehalchick, Oliver, Price & Rhoads, Clarks Summit, PA, Gerald J. Butler, Scranton, PA, for Defendants.

MEMORANDUM

THOMAS I. VANASKIE, District Judge.

The Bobrick Corporation and its sales agencies have assiduously sought to seek compensatory and punitive relief from Santana Products, Inc., (“Santana”), its officers, and attorneys for having brought unfair competition litigation against them in the mid-1990s. One of those efforts played out in the federal courts in New York, with the Eastern District of New York concluding that claims brought against Sylvester & Assoc., Ltd., (“Sylvester”), a Bobrick captive sales representative, were neither frivolous nor brought in bad faith. The New York litigation culminated with a finding by the Court of Appeals for the Second Circuit that Sylvester's appeal from the denial of its request for counsel fees, pursued by the same attorney who has represented Bobrick throughout the entire course of this saga, was not only frivolous, but also replete with misrepresentations so as to merit an award of double costs and reasonable counsel fees to Santana. See Santana Prods., Inc. v. Sylvester & Assoc., Ltd., 98-CV-6721, 2006 U.S. Dist. LEXIS, 98045 (E.D.N.Y. Nov. 8, 2006) aff'd., 279 Fed.Appx. 42 (2d Cir.2008).¹

The second effort to recoup the fees incurred in defending against Santana's unfair competition action was brought by counsel representing Bobrick in this matter on behalf of another captive sales representative, Vogel Sales Company (“Vogel”), in the Pennsylvania state court system. That case resulted in the dismissal of claims identical to those presented here on preliminary objections, a result summarily affirmed by the Pennsylvania Superior Court, with the Supreme Court of Pennsylvania denying allowance of appeal. See Vogel Sales Co. v. Santana Prods., Inc., 2005 CV 5085 (Lackawanna County, May 23, 2007) aff'd mem., 963 A.2d 581 (Pa.Super.2008) app. denied, 973 A.2d 412 (Pa.2009).

This is the third effort by Bobrick and another of its captive sales agencies, The Hornyak Group, Inc. (“Hornyak”), to obtain redress for having been sued by Santana. The statutory malicious use of civil proceedings and common law abuse of process claims asserted in this case, the same causes of action dismissed by the Pennsylvania courts in the Vogel case, are equally without legal foundation. Accordingly, the Motion to Dismiss the First Amended Complaint (Dkt. Entry 112) will be granted.²

I. BACKGROUNDA. The Parties

Plaintiffs Bobrick and Bobrick Washroom Equipment, Inc. (collectively “Bobrick”) are California corporations engaged in the business of manufacturing and selling toilet partitions from solid phenolic materials as well as from laminated plastic over particle board core. (Amended Complaint, Dkt. Entry 96, at ¶ 9). Hornyak is a Delaware Corporation that worked as a sales representative for Bobrick in marketing Bobrick's toilet partitions in Pennsylvania, New Jersey and Delaware.³ ( Id. at ¶ 6)

Santana, a Virginia corporation with its headquarters in Scranton, Pennsylvania, was a competitor of Bobrick in the toilet partition market. Santana's toilet partitions were manufactured from a material different than the materials used by Bobrick. Specifically, Santana sold high density polyethylene (“HDPE”) toilet partitions. ( Id. at ¶¶ 9-11.)

During most of the relevant time frame, Santana was owned and operated by Defendant Michael T. Lynch, Sr. ( Id. at ¶¶ 16-20.) Mr. Lynch's son, Defendant Michael T. Lynch, Jr., is alleged to have been “a member of the management control group responsible for continuing the underlying baseless litigation.” (“ Id. at ¶ 22.”) Defendants John A. Carney and James M. Gavigan are also alleged to have been members of the Santana “management control group” responsible for initiating and continuing the underlying litigation. Those Defendants who are members of the “Santana management control group” are citizens of Pennsylvania.⁴ Defendant William E. Jackson was the lead attorney for Santana in the litigation that serves as the predicate for this action.⁵ ( Id. at ¶¶ 28-30.)

B. Santana's 1994 Litigation

On November 30, 1994, Santana commenced an action against the Toilet Partition Manufacturer's Council (“TPMC”) and eleven TPMC members who manufactured and sold toilet partitions. (Amended Complaint, Dkt. Entry 96, at ¶ 40.) The TPMC members sued in the 1994 litigation made toilet partitions from sold phenolic core and plastic laminate. Formica Corporation (“Formica”), then the world's largest manufacturer of solid phenolic core and plastic laminate, was also a member of the TPMC and a defendant in the 1994 action. Santana alleged that Formica, the TPMC, and its members named in the 1994 lawsuit had engaged in a concerted false advertising campaign that sought to depict toilet partitions made of HDPE, like Santana's products, to be a fire hazard. Formica and another member of the TPMC had produced a videotape, which, according to Santana, falsely depicted Santana's HDPE partitions as flammable. See Santana Prods., Inc. v. Bobrick Corp., 249 F.Supp.2d, 463, 475 (M.D.Pa.2003) aff'd in part and rev'd in part, 401 F.3d 123 (3d Cir.), cert. denied, 546 U.S. 1031, 126 S.Ct. 734, 163 L.Ed.2d 569 (2005). The Formica videotape was used by members of the TPMC to dissuade architects and others responsible for preparing building specifications from sanctioning HDPE toilet partitions. Santana asserted violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2 and Section 43 of the Lanham Act, 15 U.S.C. § 1125, as well as tortious interference with prospective contractual relationships. Neither Bobrick nor any of its captive sales agencies were named as defendants in the 1994 litigation.

On January 27, 1995, less than two months after the 1994 TPMC litigation was brought, the parties reached a settlement. (Amended Complaint, Dkt. Entry 96, at ¶ 42.) Santana received a payment in excess of $800,000 plus an agreement by the named defendants to discontinue use of the Formica videotape.⁶

C. The Underlying Litigation

On October 1, 1996, Santana filed its unfair competition action against Bobrick along with three of its architectural sales representatives, Hornyak, Vogel, and Sylvester (the “Underlying Litigation”). The 1996 litigation advanced the same four causes of action that had been presented two years earlier in the TPMC case: violations of sections 1 and 2 of the Sherman Antitrust Act and section 43(a) of the Lanham Act, plus tortious interference with prospective contractual advantage.⁷ (Amended Complaint, Dkt. Entry 96, at ¶ 47.)

The Underlying Litigation was docketed to No. 3:CV-96-1794, and assigned to the undersigned.⁸ With the concurrence of the parties, a Special Master was appointed to preside over discovery, which proved to be contentious, protracted, and expensive. After the deposition of nearly 200 witnesses in 22 states, review of hundreds of thousands of pages of documents, exchanges of massive amounts of electronically stored information, and expert witness discovery, all parties moved for summary judgment.⁹

In a comprehensive opinion that spans more than 75 pages in the Federal Supplement Second, I addressed what I described as “several important and difficult issues for which there is no controlling precedent in this Circuit.” 249 F.Supp.2d at 470. One of those “important and difficult issues” was whether Santana's Lanham Act claims were subject to the Noerr/ Pennington doctrine.¹⁰ Application of the Noerr/Pennington doctrine to the Lanham Act claims was recognized to have a substantial impact on the scope of Santana's Lanham Act claims because it was evident that “the overwhelming bulk of the toilet partition market is directed at public construction....” ¹¹Id. at 470. I ultimately concluded that Noerr/Pennington was indeed applicable to the Lanham Act claims, thereby restricting any recovery in this matter to lost sales in the private sector. ¹² I rejected, however, Bobrick's contention that the Lanham Act claims were barred by laches, finding that Santana had sustained its burden of showing that Bobrick had not been prejudiced by the delay in filing this action. Id. at 501. Thus, I found that Santana had presented a cognizable Lanham Act claim.

Addressing the substantive question of whether Bobrick's marketing campaign included false representations pertaining to Santana's products, I found instances where Bobrick's marketing materials were literally false, instances when there was a genuine question of material fact as to the falsity of the marketing materials, and some instances where, as a matter of law, the representations were not false. Id. at 526-39. Summary judgment on the Lanham Act claim was, accordingly, not granted in Bobrick's favor as to those marketing materials for which there was sufficient evidence of falsity and causation of damages. Id. at 542. Although recognizing that Santana would be entitled to injunctive relief with respect to marketing materials found to be literally false, I declined to enter such relief at that time in light of the fact that there were genuine issues of fact material as to the falsity of certain other promotional materials and it appeared that Bobrick had already discontinued use of the materials found to be literally false. Id. at 542 n. 66.

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