Zerpol Corp. v. DMP Corp.

• Decision Date: 15 April 1983
• Docket Number: Civ. A. No. 82-3757.
• Parties: ZERPOL CORPORATION v. DMP CORPORATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

561 F. Supp. 404

ZERPOL CORPORATION v. DMP CORPORATION.

Civ. A. No. 82-3757.

United States District Court, E.D. Pennsylvania.

April 15, 1983.

COPYRIGHT MATERIAL OMITTED

Mark Alan Corchin, Philadelphia, Pa., for plaintiff.

Wilson M. Brown, III, Drinker, Biddle & Reath, Philadelphia, Pa., David A. White, Roddey, Carpenter & White, P.A., Rock Hill, S.C., for defendant.

OPINION

LUONGO, Chief Judge.

Plaintiff, Zerpol Corporation (Zerpol), is a Pennsylvania corporation engaged in the manufacture and sale of pollution control systems used in the metal plating industry. Defendant, DMP Corporation (DMP), is a North Carolina corporation with its principal place of business in South Carolina, and a competitor of Zerpol. Zerpol instituted this civil action alleging causes of action arising under federal and state law based upon alleged defamatory and misleading statements contained in advertisements published by DMP in various trade journals. Jurisdiction over the state-law claims is alleged to exist by reason of diversity of citizenship. 28 U.S.C. § 1332. DMP now moves to dismiss the amended complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6).

The eleven advertisements which form the basis of this action (annexed to the amended complaint as exhibits A-K) were published by DMP over a 16-month period in three different journals subscribed to predominantly by members of the metal plating industry. Only five of the eleven publications complained of were different in content since some of the ads were run more than once. Exhibits A-B depict a queue of non-professional looking individuals holding numbers while standing in front of a dilapidated storefront, called "Sid's Waste Water Treatment Emporium." A "Now Being Served" sign is displayed prominently on the door. Inscribed in large bold letters over the photograph are the words: "DEADLINE, SCHMEDLINE; THESE GUYS ALL GOT A DEADLINE. JUST GET IN LINE ...." The copy accompanying the photograph states that Sid is "only sort of in the waste water treatment business;" that Sid doesn't know much about the business; and that Sid is not concerned about "compliance deadlines" because he knows that sooner or later companies will come to him due to a shortage of manufacturers of waste water treatment systems. The ad then states in bold letters: "Your number will be `ONE', if you call DMP now." The copy continues, stating that DMP is an expert in the waste water treatment business, and that DMP will provide a quick and efficient solution, designed especially to meet the customer's waste water treatment problems. Finally, DMP represents in the ad that, "DMP designs your system, installs your system, trains your operators and provides the most thorough follow-up services in the field."

The second ad, Exhibit C to the amended complaint, continues with the same theme. Sid is depicted with a snide grin showing a potential customer his "SPECIAL OF THE WEEK." While Sid is shown pointing to a schematic drawing of his "Z-RO-TEC" system, a chuckling employee is shown in a back room with the actual system which is much akin to a Rube Goldberg contraption. In large bold letters inscribed over the photograph are the words: "SURE WE CAN DELIVER THIS LITTLE NUMBER IN 12-20 WEEKS...." The accompanying copy states that Sid's "infamous Z-Ro-Tec didn't get its name for nothing" since Sid specializes in "zero technology engineering." The copy continues, raising questions about whether Sid's system will work if it is delivered in 12-20 weeks, whether Sid will install it, whether Sid will train the operators, and whether Sid will guarantee that the system is "minimally adequate" to meet the customer's needs. Then, like the first ad, the copy turns to DMP's product, making the same representations made in the first ad.

The third ad, annexed to the amended complaint as Exhibit E, shows Sid talking on the telephone while standing in front of the schematic of his Z-Ro-Tec system. Just above his head, in large bold letters, are the words: "I DIDN'T SAY OUR SYSTEM WOULD GROW WITH YOU, PAL, I SAID IT'D GROW ON YOU!!!" The copy then describes the many complaints Sid has been receiving about his system and its lack of flexibility. DMP then describes the flexibility of its systems which utilize a "modular concept" that allows for growth of a system by adding modules as the customer's demands grow.

In the fourth ad, annexed as Exhibits F and G to the amended complaint, Sid is shown gesturing to a group of customers from behind the make-shift counter of his small storefront establishment. Protruding from Sid's back-pocket is an airline ticket, and several pieces of luggage and two tennis rackets are shown resting near his feet out of the view of the customers. Then, just above Sid's head in large bold letters are the words: "SURE I'LL BE RIGHT HERE IF YOU GOT ANY STUPID COMPLIANCE PROBLEMS." The accompanying copy begins: "Sid doesn't worry about EPA compliance ... he never understood it anyway. So if Sid's `zero technology' contraption results in `zero compliance,' just give him a call ... in Acapulco." The text continues, raising questions as to Sid's "compliance track record" and his understanding of local, state and federal regulations. Finally, DMP represents that it gives a written guarantee and has "the best follow-up services in the business."

The fifth and final ad, annexed as Exhibits H-K to the amended complaint, depicts the front of Sid's Waste Water Treatment Emporium with Sid standing in the doorway below the words "GRAND OPENING. ..." The copy accompanying the photograph states that Sid "specializes in zero-technology engineering," and that Sid knows little about waste water treatment. The text then states that Sid "and others like him" are opening up around the country because they know that there is a shortage of qualified water treatment manufacturers. Finally, the ad warns in bold print: "Don't help put Sid in business. Call us now...."

Although Zerpol is nowhere named in any of DMP's advertisements, Zerpol alleges in its amended complaint that "the circumstances of its business and product are such that the advertisements published by DMP were intended to, and did identify Zerpol as the object of the libelous and defamatory remarks and depictions contained in those advertisements." Amended Complaint (Document 6), ¶ 14. Specifically, Zerpol alleges that it is the only company in the pollution control industry that manufactures a "zero discharge system" designed for use in the metal plating industry. Zerpol further alleges that its corporate name is a contraction of the words "zero" and "pollution," and that Zerpol's name and "zero discharge system" are clearly identifiable by members of the metal plating industry. Hence, Zerpol alleges that it was clearly understandable by members of the metal plating industry that "Sid's Z-Ro-Tec, zero technology engineering" referred to Zerpol's "zero discharge system."

The amended complaint contains four counts. Count I, under the heading trade libel, alleges that DMP published the advertisements knowing that they contained false and defamatory statements concerning Zerpol, its product, personnel and ancillary services. Count II, labelled unfair competition, charges that the advertisements contained false and misleading claims about Zerpol's goods and services in violation of § 43(a) of the Lanham Trade-Mark Act, 15 U.S.C. § 1125(a), and in violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law, 73 Pa. Cons.Stat.Ann. §§ 201-1 to -9.2. In Count III, labelled tortious interference with business, Zerpol alleges that DMP, without justification or privilege, published the libelous advertisements with the intention of purposefully interfering with Zerpol's prospective and existing business relationships. Finally, in Count IV, denoted "anti-trust violations," Zerpol charges that DMP published the misleading and defamatory advertisements in an attempt to monopolize the market for pollution control devices used in the metal plating industry in violation of § 2 of the Sherman Act, 15 U.S.C. § 2.

THE MOTION TO DISMISS

Attached to DMP's motion to dismiss are two affidavits and several exhibits which are intended primarily to show that the advertisements could not reasonably be understood as referring to Zerpol or its products. If I am unable to conclude on the basis of the pleadings alone that dismissal is appropriate, DMP suggests that I treat its motion as one for summary judgment and consider the supplementary materials. See Fed.R.Civ.P. 12(b). I will for reasons hereafter stated grant the motion to dismiss. I do not consider matters outside the pleadings.

Count I: Trade Libel

The first count of the amended complaint bears the heading "trade libel." But, in addition to charging trade libel, more commonly known as commercial disparagement, the allegations in that count can also be read as charging defamation of the corporate plaintiff. Defamation and disparagement are two distinct torts. See generally Developments in the Law — Competitive Torts, 77 Harv.L.Rev. 888, 892-905 (1964); Note, The Law of Commercial Disparagement: Business Defamation's Impotent Ally, 63 Yale L.J. 65 (1953). While alike in many respects, there are important differences between the two. Menefee v. Columbia Broadcasting Systems, Inc., 458 Pa. 46, 52-53, 329 A.2d 216, 219-20 (1974); Restatement (Second) of Torts § 623A, Comment g (1977); E. Kintner, A Primer on the Law of Deceptive Practices 174-77 (1978). These differences are largely explained by the interests the two torts are intended to protect. The action for defamation serves to protect one's interest in character and reputation. The cause of action for disparagement, on the other hand, protects economic interests by providing a remedy to one who suffers pecuniary loss from slurs affecting the marketability of his goods. Restatement (Second) of Torts § 623A,...