ROBERT D. MARIANI, District Judge.
Presently before the Court is Defendant Scranton Products, Inc.'s ("SP" or "Scranton Products") Partial Motion to Dismiss with Prejudice. (Doc. 324). For the reasons that follow, SP's Motion will be denied in its entirety.
In May 2014 SP filed a complaint against Bobrick Washroom Equipment Inc. ("Bobrick") alleging, among other things, that Bobrick "carefully orchestrated a campaign to scare architects, product specifiers, procurement representatives, building owners, and others in the construction industry into believing that Scranton Products' toilet partitions are fire hazards, are unsafe and pose health and safety risks if used in building projects across the country." (Doc. 1 at ¶ 1). SP asserted two claims under the Lanham Act, 15 U.S.C. § 1125(a), alleging "literally false advertising," and "deceptive and misleading advertising" and sought both monetary damages and equitable relief. (Id. at ¶¶ 61-76). SP also brought claims under Pennsylvania law, alleging common law unfair competition, commercial disparagement, and tortious interference with existing or prospective business relations. (Id. at ¶¶ 77-92). Bobrick filed its Answer on June 25, 2014. (Doc. 21).
On November 10, 2016, Bobrick filed a Motion for Leave to file an Amended Answer with Counterclaims.
Bobrick's Complaint alleges the following facts, which the Court accepts as true for the purpose of this Motion:
Bobrick's Lanham Act and unfair competition claims "arise from Scranton Products systematic misrepresentation of its own products in the marketplace." (Doc. 318, at ¶ 2). Specifically, SP "has falsely represented thousands of its high density polyethylene (`HDPE') toilet partitions sold for installation in schools and other public and private buildings as being compliant with applicable fire, life safety, and building code requirements." (Id.). More specifically, SP has falsely represented that its HOPE toilet partitions comply with the requirements of the NFPA 286 room-corner test ("NFPA 286"), afire performance test promulgated by the National Fire Protection Association. (Id. at ¶ 3).
According to the Complaint, SP's claims that certain of its HOPE toilet partitions comply with NFPA 286 are false for three reasons:
(Id. at ¶¶ 4(a)-(c)).
SP has alleged, both in the marketplace and throughout this litigation, that its HOPE toilet partition materials have passed the unmodified NFPA 286 test on two separate occasions: (1) on May 3, 2011 (the "2011 Test"); and (2) on August 7, 2013 (the "2013 Test").
The text of the NFPA 286 standards include asection entitled "Specimen Mounting." (Id. at ¶ 18). That section provides, in relevant part:
(Id.). According to the Complaint, the horizontal placement of the metal furring strips to create afire block "was an intentional manipulation by Scranton Products of the NFPA 286 test methodology to produce amore favorable result by enabling Scranton Products' HOPE material to barely pass the modified NFPA 286 test." (Id. at ¶ 19). Indeed, "[m]ounting the HOPE toilet partition using non-combustible, horizontal metal furring strips to create afire block below the resulting air gap was not `appropriate to the intended application,' because a HOPE toilet partition is not mounted in the field in amanner that blocks access by heat, flame, and hot gases to one side of the panel." (Id. at ¶ 20). In addition, Western Fire did not include in its test reports for the 2011 Test and 2013 Test a "`detailed description of the mounting method used' that revealed how it installed the horizontal furring strips, and, although Western Fire-at Scranton Products' behest-used a'special mounting technique · . . in order to improve the physical behavior of the specimen during the test,' it did not so state in any form in its test report." (Id. at ¶ 21). Accordingly, this "modification and manipulation of the NFPA 286 test methodology rendered the results inaccurate, invalidated Scranton Products' NFPA 286 testing for all purposes, and made it improper for Scranton Products to rely on the doctored test results to represent to the public . . . that any of its HOPE toilet partitions are NFPA 286-compliant based on an unmodified NFPA 286 test." (Id. at ¶ 23).
SP has alleged, both in the marketplace and this litigation, that two different formulations of its HOPE toilet partition material have passed the unmodi'fied NFPA 286 test. (Id. at ¶ 24), SP, either through its parent company CPG International, or its sister company VYCOnl, "produced both formulations of HOPE material in-house, using the company's own extrusion eqUipment, for NFPA 286 testing at Western Fire." (Id. at ¶ 25). Oespite the in-house production of the materials at issue, SP "has never produced any primary documentation-such as awork order or bill of materials listing the ingredients and their weights-establishing the chemical composition of the HOPE materials actually used in the 2011 Test or the 2013 Test."
(Id. at ¶ 50).
Putting aside the issue of whether the HOPE material tested by Western Fire in May 2011 and August 2013 in fact had the chemical composition and characteristics that SP claims, SP's "own manufacturing records show that the HOPE toilet partitions that Scranton Products has actually sold to the public as NFPA 286-compliant have chemical compositions and physical characteristics that are substantially different from the alleged chemical compositions and physical characteristics of the Scranton Products HOPE materials purportedly tested successfully under NFPA 286." (Id. at ¶ 51). Specifically, SP has claimed that the HOPE material tested by Western Fire in the 2011 Test "formed the basis of Scranton Products' `first generation' of NFPA 286-compliant HOPE toilet partitions, which Scranton Products claims to have offered for sale from rnid-2011 until May 2014." (Id. at ¶ 52). However, "analysis of Scranton Products' manufacturing records show that the chemical composition and physical properties" of these toilet partitions "do not match the alleged chemical composition and physical properties of the toilet partitions tested by Western Fire in May 2011." (Id. at ¶ 57).
SP has also claimed that the HOPE material tested by Western Fire in August 2013 "formed the basis of Scranton Products' `second generation' of NFPA 286-compliant HOPE toilet partitions, which Scranton Products purports to have offered for sale from `Iate 2013' through the present." (Id. at ¶ 58). But "analysis of Scranton Products' manufacturing records show that the chemical composition and physical properties" of these toilet partitions materials "do not match the alleged chemical composition and physical properties of the toilet partitions tested by Western Fire in August 2013." (Id. at ¶ 62). Scranton Products has represented "that it has marketed and sold two, and only two, formulations of allegedly NFPA 286-compliant HOPE toilet partitions." (Id. at ¶ 64). "However, Scranton Products' manufacturing records reveal that, out of 557 orders for NFPA 286-compliant HOPE toilet partitions for which Scranton Products quoted prices between March 1, 2012 and November 4, 2015, 218 of those orders involved HOPE toilet partitions whose structure and composition bear no relationship to the HOPE materials allegedly tested in May 2011 and August 2013." (Id. at ¶ 65). Therefore, "as to asignificant proportion of its sales of purportedly NFPA 286-compliant HOPE toilet partitions nationwide, Scranton Products sold its customers partitions that were substantially different from any HDPE material it claims to have tested under NFPA 286."
Because SP's toilet partitions allegedly do not comply with NFPA 286, SP "has repeatedly made literally false and/or false and misleading representations to purchasers and other market participants nationwide concerning its allegedly NFPA 286-compliant HDPE toilet partitions." (Id. at ¶ 74). In support, Bobrick points to the multiple statements in the Complaint, including:
According to Bobrick, these statements were false, and Scranton Products knew them to be false at the time they were made. (Id. at ¶ 76).
Next, Bobrick alleges that in a December 1, 2012 letter printed on SP's letterhead and signed by SP's director of national sales and marketing David Casal, Mr. Casal noted "[t]his letter is in response to your request for information on the fire ratings for Scranton Product's HOPE Bathroom Partitions." (Id. at ¶ 79). The letter contained the following statements: (1) "Scranton Products manufactures HOPE bathroom partitions that conform with the requirements of the NFPA 286 fire test, including the International Building Code," (Id.); (2) "Independent fire testing centers have tested our material, including with respect to NFPA 286 (2011)," (Id.); and (3) "Our Hiny Hinders solid plastic bathroom partitions conform to NFPA 286." (Id.). Bobrick alleges that the above-quoted statements in Mr. Casal's letter were false, and both Mr. Casal and Scranton Products knew them to be false at the time they were made.
Bobrick next points to a June 27, 2013 statement by Kelly Oester, a Scranton Products sales employee, sent to Stumbaugh &Associates, an independent dealer of bathroom hardware and accessories, to be passed on to the architect and general contractor for a project to renovate Dodger Stadium in Los Angeles.
On July 3, 2013, in response to a request from the general contractor for the Dodger Stadium renovation project, Ms. Oester forwarded awritten confirmation from SP's David Casal, attesting to the NFPA 286 compliance of the specific toilet partitions being supplied by SP for the project. (Id. at ¶ 87). Mr. Casal's written confirmation, dated June 27, 2013 and printed on SP's letterhead, stated the following with respect to SP's sales orders 848923 and 850511:
(Id. at ¶ 88). According to Bobrick, all of the above-quoted statements (with the exception of the statement "We do not test each lot") were false, and both SP and Mr. Casal knew them to be false at the time they were made. (Id. at ¶ 89).
The false statements alleged by Bobrick do not end there. On October 18, 2013, Mr. Casal sent an email to recipients, including Randy Abercrombie, a representative of New South Specialties, LLC. (Id. at ¶ 90). In the e-mail.Mr. Casal stated, among other things:
Bobrick's claims for wrongful use of civil proceedings and abuse of legal process "arise from Scranton Products' predatory conduct in initiating and subsequently using proceedings before this Court." (Id. at ¶ 9). More specifically, the Complaint alleges that:
(Id. at ¶ 10).
After Bobrick had raised concerns within the marketplace "about Scranton Products' false claims that its HDPE toilet partitions complied with NFPA 286, Scranton Products initiated these proceedings by filing its Complaint on May 2, 2014." (Id. at ¶ 116). According to the Complaint:
(Id.). "Despite knowing that it could not prove its asserted claims, Scranton Products filed its Complaint against Bobrick because Scranton Products intended to use this litigation to exert financial pressure on Bobrick so that Bobrick would stop questioning Scranton Products' false statements in the marketplace." (Id. at ¶ 117).
Nearly three years of costly and time-consuming litigation ensued and "Bobrick eventually learned through discovery the facts demonstrating the fatal flaws in Scranton Products' Complaint" and subsequently filed a Motion to Amend its Answer and to assert counterclaims. (Id. at ¶ 118). SP promptly moved to volu ntary dismiss its complaint with prejudice "because Bobrick had discovered what Scranton Products knew, but had misused the proceedings in an attempt to conceal: that its HDPE toilet partitions did not comply with the NFPA 286 testing standard." (Id. at ¶ 119). After the Court granted SP's Motion for Voluntary Dismissal, SP initiated a "commercial action," writing to its customers "to inform them that Scranton Products `can no longer maintain with 100% assurance that all of the current generation of 286 HDPE bathroom partitions [it] sold were NFPA 286 compliant and [it] will provide replacement options.'" (Id. at ¶ 121). Bobrick alleges that SP's voluntary dismissal of its complaint and commencement of the commercial action "demonstrate that Scranton Products knows it cannot credibly assert, as it did in its complaint for nearly three years during this litigation, that all of its HDPE toilet partitions sold as NFPA 286-compliant actually comply with NFPA 286." (Id. at ¶ 122). Because SP knew that its claims against Bobrick were baseless, Bobrick alleges that throughout the pendency of this litigation SP "has improperly used the legal process for predatory purposes for which it was not intended-namely, to inflict financial harm on Bobrick and to prevent Bobrick from competing fairly and effectively in the marketplace by making truthful statements of facts and legitimate statements of opinion." (Id. at ¶ 123).
Bobrick next points to certain conduct engaged in by SP throughout the course of this litigation that it alleges demonstrate SP's abuse of legal process, including:
In sum, Bobrick alleges that "it is evident that Scranton Products initiated these proceedings, then misused them, for purposes other than those for which the legal process is intended: namely, to try to silence Bobrick in the marketplace and to in'mct financial harm on Bobrick by driving up its litigation costs, and to drag out the litigation as long as possible to achieve both of those improper goals." (Id. at ¶ 133).
Acomplaint must be dismissed under FED. R. CIV. P. 12(b)(6), if it does not allege "enough facts to state aclaim to relief that is plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L. Ed. 2d 929 (2007). The plaintiff must aver "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937,1949,173 L. Ed. 2d 868 (2009).
"Though acomplaint `does not need detailed factual allegations, . . . aformulaic recitation of the elements of acause of action will not do.'" DelRio-Mocci v. Connolly Prop. Inc., 672 F.3d 241,245 (3d Cir. 2012) (citing Twombly, 550 U.S. at 555). In other words, "[nactual allegations must be enough to raise aright to relief above the speculative level." Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir. 2013) (internal citations and quotation marks omitted). Acourt "take[s] as true all the factual allegations in the Complaint and the reasonable inferences that can be drawn from those facts, but . . . disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 231, n.14 (3d Cir. 2013) (internal citations and quotation marks omitted).
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013).
"[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not show[n] — that the pleader is entitled to relief." Iqbal, 556 U.S. at 679 (internal citations and quotation marks omitted). This "plausibility" determination will be a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.
In its Motion to Dismiss, SP asks this Court to dismiss with prejudice Bobrick's common law unfair competition and abuse of process claims, as well as Bobrick's request for punitive damages. The Court will address each in turn.
SP asks this Court to dismiss Bobrick's unfair competition claim with prejudice. The crux of SP's Motion is that the conduct alleged in the Complaint-in essence false advertising-is not cognizable under Pennsylvania unfair competition law. Specifically, SP argues that "[i]n light of longstanding Pennsylvania authority supporting anarrow interpretation of unfair competition . . . this Court should decline to expand the scope of the tort, and should dismiss with prejudice Bobrick's unfair competition claim accordingly."
"Pennsylvania law defines unfair competition as the passing off of rivals' goods as one's own, which creates confusion as to the authenticity of the goods in question." Elsevier, Inc. v. Comprehensive Microfilm &Scanning Servs., Inc., No. 3:10-cv-2513, 2013 WL 1497946, at *12 (M.D. Pa. Apr. 10, 2013) (internal citation and quotation marks omitted). However, "Pennsylvania courts have also recognized unfair competition `where there is evidence of, among other things, trademark, trade name, and patent rights infringement, misrepresentation, tortious interference with contract, improper inducement of another's employees, and unlawful use of confidential information.'" Id. (emphasis added) (quoting Synthes (U.S.A.) v. Globus Med. Inc., No. 04-1235, 2005 WL 2233441, at *8 (E.D. Pa. Sept. 14, 2005)). More recently, Courts in this Circuit "have examined unfair competition in light of the Restatement (Third) of Unfair Competition § 1(1995)." Baier v. Jersey Shore State Bank, No. 4:07-CV-2236, 2009 WL 2843325, at *13 (M.D. Pa. Aug. 31, 2009).
The Restatement (Third) of Unfair Competition § 1does not limit the tort of unfair competition merely to the passing off of rivals' goods as one's own.
In its Motion, SP also seeks dismissal of Bobrick's abuse of process claim on the theory that permitting Bobrick's claim to proceed "raises a dangerous specter" because, under Bobrick's theory, "discovery disputes can be transformed into abuse of process simply by adding aconclusory allegation that litigation positions were taken for `improper purposes.'" (Doc. 325, at 6). The Court rejects SP's arguments.
"The Supreme Court of Pennsylvania has said that [t]he gist of an action for abuse of process is the improper use of process after it has been issued, that is, aperversion of it.'" Gen. Refractories Co. v. Fireman's Fund Ins. Co., 337 F.3d 297, 304 (3d Cir. 2003) (quoting McGee v. Feege, 517 Pa. 247, 535 A.2d 1020, 1023 (1987)). "A `perversion' of legal process occurs when a party uses the process `primarily to accomplish a purpose for which the process was not designed.'" Id. (quoting Dumont Television &Radio Corp. v. Franklin Elec. Co. of Philadelphia, 397 Pa. 274, 154 A.2d 585, 587 (1959)). "Generally speaking, to recover under atheory of abuse of process, a plaintiff must show that the defendant used legal process against the plaintiff in a way that constituted a perversion of that process and caused harm to the plaintiff." Id. Courts must "look at the legal process used and decide whether it was primarily to benefit someone in achieving a purpose which is not the authorized goal of the procedure in question." Id. at 305 (internal citation and quotation marks omitted). As the Third Circuit has recognized, the Supreme Court of Pennsylvania "has interpreted the tort broadly, making it clear that it `will not countenance the use of the legal process as atactical weapon to coerce adesired result that is not the legitimate object of the process.'" Id. (quoting McGee, 535 A.2d at 1026).
The Court finds that Bobrick has alleged sufficient facts raising a plausible inference that SP engaged in an abuse of process by knowingly continuing to prosecute a baseless lawsuit for the purpose of stifling competition, increasing Bobrick's legal costs, and silencing Bobrick's legitimate activities in the marketplace. The Complaint further alleges that SP engaged in deliberate and continuous discovery misconduct, including the filing of false affidavits, destruction of documents, and affirmatively misleading Bobrick and the Court, all for the specific purpose of harming Bobrick by driving up its legal costs. Although the Court agrees with SP that run-of-the-mill discovery disputes cannot constitute an abuse of process under Pennsylvania law, Bobrick alleges facts far more detailed and nefarious: that SP knew that some or all of its
For the foregoing reasons, the Court will deny SP's Motion in its entirety. Aseparate Order follows.
(Doc. 318, at ¶ 17).
(Doc. 318, at ¶ 124). Bobrick also notes that SP "redacted numerous documents based on its unilateral decisions about relevance, in spite of clear authority in this judicial district prohibiting such redactions and in spite of the fact that the redacted information was plainly relevant and discoverable." (Id. at ¶ 132).
One who causes harm to the commercial relations of another by engaging in a business or trade is not subject to liability to the other for such harm unless:
Restatement (Third) Unfair Competition § 1(1995).
