Santana Products Inc. v. Bobrick Washroom Equipment, Inc. ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
2-9-2005
Santana Prod Inc v. Bobrick Washroom
Precedential or Non-Precedential: Precedential
Docket No. 03-1845
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos: 03-1845/2283/2481
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. 03-2283
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 CORPATION,
Appellants - No: 03-2481
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 96-cv-01794 )
District Judge: Thomas I. Vanaskie, Chief Judge
Argued March 23, 2004
Before: ROTH, AMBRO and CHERTOFF, Circuit Judges
(Opinion filed: February 9, 2005 )
William E. Jackson, Esquire (Argued)
B. Aaron Schulman, Esquire
Stites & Harbison
1199 North Fairfax Street
TransPotomac Plaza, Suite 900
Alexandria, VA 22314
Gerald J. Butler, Esquire
142 North Washington, Suite 800
Scranton, PA 18503
Counsel for Appellants
Carl W. Hittinger, Esquire (Argued)
Stevens & Lee
1818 Market Street, 29th Floor
Philadelphia, PA 19103
Walter F. Casper, Jr., Esquire
35 South Church Street & &th Avenue
Carbondale, PA 18403
Counsel for Appellees
OPINION
ROTH, Circuit Judge:
In order to persuade government architects to specify
Bobrick’s toilet partitions for use in government projects,
3
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
1
Bobrick Corporation is the parent company of Bobrick
Washroom Equipment. We will refer to them collectively as
Bobrick.
4
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.
I. FACTUAL BACKGROUND
The following facts are taken primarily from the
District Court’s very thorough opinion.3
A. The Toilet Partition Industry
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
2
Santana does not appeal the § 2 claim, so we do not address
it.
3
The parties’ appeals – Nos. 03-1845, 03-2283, and 03-2481
– were consolidated. 03-1845.
4
Toilet partitions are also referred to as toilet compartments.
5
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.
B. The ASTM E-84 Test and Santana’s HDPE Partition
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
6
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.
C. The 1994 TPM C Litigation
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
5
One issue in the present litigation is whether toilet partitions
are finishes or furnishings/fixtures.
6
The Sweet’s Catalogue is a collection of catalogues of
manufacturers’ building products. Manufacturers pay to place
their catalogues in the Sweet’s Catalogue, and architects
subscribe to and refer to the Sweet’s Catalolgue before
specifying materials to be used in construction projects. One
section of the Sweet’s Catalogue is devoted to toilet partitions.
7
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.
D. Bobrick’s Marketing Campaign
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
8
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.
II. PROCEDURAL HISTORY
Santana filed a complaint in the United States District
Court for the Middle District of Pennsylvania against
Bobrick, Hornyak, Vogel, Sylvester & Associates, Ltd., and
Fred Sylvester. 7 Santana asserted claims under §§ 1 and 2 of
the Sherman Act, 15 U.S.C. §§ 1-2, the false advertising
provisions of the Lanham Act, 15 U.S.C. § 1125(a), and
Pennsylvania state law for tortious intererence with
prospective contract. After three years of discovery, the
parties filed cross-motions for summary judgment.
7
Santana’s claims against Sylvester & Associates, Ltd., and
Fred Sylvester were dismissed for lack of personal jurisdiction.
Santana subsequently filed an action against them in the District
Court for the Eastern District of New York. The decision in that
case is reported at Santana Products, Inc. v. Sylvester & Assoc.,
Ltd., 121 F. Supp. 2d 729 (E.D.N.Y. 1999).
Bobrick filed a Third-Party Complaint against Formica
on June 1, 1998, bringing claims for contribution,
indemnification, fraud, and negligent misrepresentation, but that
complaint was dismissed for reasons unimportant to this appeal.
9
The defendants argued to the District Court that they
were immune from liability for all of Santana’s claims by
reason of the Noerr/Pennington doctrine. The District Court
agreed, holding that “the Noerr/Pennington doctrine is indeed
applicable to all of Santana’s claims.” Santana, 249 F. Supp.
2d at 470. The court stated that “to the extent that Santana
premises its damages on decisions made by public officials or
their agents . . . who approved specifications for phenolic
toilet partitions or disapproved specifications for HDPE toilet
partition, defendants are immune from liability” Id. at 487.
The court held that any recovery Santana might be entitled to
would be limited to the effects on the private sector of
defendants’ marketing campaign. Id. at 470.
The District Court, however, ultimately granted
summary judgment in favor of all defendants on Santana’s
Sherman Act § 1 claim. As to Hornyak and Vogel, the court
held that they could not be liable for a § 1 violation as a
matter of law because they were “captive sales representatives
of Bobrick.” 8 Id. As to Bobrick, even though the court found
the requisite element of concerted action between Bobrick and
the members of the TPMC, id. at 507-08, the court
nevertheless held that Bobrick’s marketing campaign was not
an unreasonable restraint on trade and that, even if it were,
Santana had only showed a de minimus effect on competition.
Id. at 470. The court also granted summary judgment on
Santana’s Sherman Act § 2 claim in favor of defendants. Id.
8
The court also found that, because there was no evidence
that Hornyak and Vogel were marketing to the private sector,
they were entitled to summary judgment on all claims based on
their Noerr/Pennington defense. Santana Products, Inc.,, 249
F. Supp. 2d at 494 n. 24.
10
at 470, 505-06.9
Turning to Santana’s false advertising claim under the
Lanham Act, the District Court rejected Bobrick’s timeliness
defenses. Id. at 500-01. The court concluded that the claim
was not barred by either the statute of limitations or the
doctrine of laches but then held that Santana’s recovery under
the Lanham Act, if at all, would be limited to violations
occurring within the applicable statute of limitations period,
which the court held to be the six year “catch-all” limitations
period under Pennsylvania’s Unfair Trade Practices and
Consumer Protection Law (UTPCPL). Id. at 500. The court
concluded that summary judgment was not appropriate on the
Lanham Act claim as to Bobrick because there were fact
issues as to the literal falsity of statements made in videos,
advertisements, and other marketing material. Id. at 471, 525-
39.
Finally, the District Court granted summary judgment
in favor of the defendants on Santana’s tortious interference
with prospective contract claim. The court held that the
Noerr/Pennington doctrine shielded the defendants from
liability, id. at 542, and alternatively found that Santana did
not “present evidence of the loss of a prospective contract
with a non-public customer within the one-year limitations
period.” Id. at 470-71.
III. JURISDICTION AND STANDARD OF REVIEW
The District Court certified its order for immediate
9
The District Court relied on the analysis in Santana
Products, Inc. v. Sylvester & Assoc., Ltd., 121 F. Supp. 2d 729(E.D.N.Y. 1999) and held that Santana’s “shared monopoly”
claim was not a cognizable § 2 claim. Santana Products, 249 F.
Supp. 2d at 470. Santana does not appeal this ruling.
11
appeal pursuant to 28 U.S.C. § 1292(b). 10 We granted
Santana’s and Bobrick’s petitions for permission to appeal on
April 17, 2003.
Bobrick appeals the District Court’s finding that
Santana’s Lanham Act claim is not barred by the statute of
limitations or the doctrine of laches, and Santana appeals the
District Court’s holding that the Noerr/Pennington doctrine is
applicable to Lanham Act claims. 11 We raised the question of
our jurisdiction of Bobrick’s appeal pursuant to § 1292(b) and
asked the parties to provide supplemental briefing on this
issue even though a different panel of this Court had already
granted Bobrick’s petition for permission to appeal.12
We conclude that we have appellate jurisdiction to
consider Bobrick’s appeal. “[A]ppellate jurisdiction applies
to the order certified to the court of appeals, and is not tied to
10
28 U.S.C. § 1292(b) gives the courts of appeals
discretionary jurisdiction over a district court order “[w]hen a
district judge . . . shall be of the opinion that such order involves
a controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal
from the order may materially advance the ultimate termination
of the litigation.”
11
We have jurisdiction over Santana’s appeal in No. 03-1845
pursuant to 28 U.S.C. § 1291 because the District Court entered
a final judgment pursuant to Federal Rule of Civil Procedure
54(b) on Santana’s Sherman Act claims and its claim for
tortious interference with prospective contract.
12
Even though “other factors [may] counsel in favor of
deferring to the motions panel,” “[t]he merits panel is certainly
entitled to reexamine the decision of the motions panel.” In re
Healthcare Compare Corp. Sec. Litig., 75 F.3d 276, 279-80 (3d
Cir. 1996).
12
the particular question formulated by the district court.”
Yamaha Motor Corporation, U.S.A. v. Calhoun, 516 U.S.
199, 205 (1996). We can “address any issue fairly included
within the certified order” because the order is appealable, not
the controlling question of law. Id.; see also Morris v. Hoffa,
361 F.3d 177, 197 (3d Cir. 2004).
The District Court’s order outlined the manner in
which it was handling each of Santana’s claims, including
Santana’s Lanham Act claim. The court’s opinion explains
the reason it chose to certify the order. It stated that “[t]he
motions present several important and difficult issues for
which there is not controlling precedent in this Circuit.”
Santana, 249 F. Supp. at 470. The District Court was
referring to its decision that the Noerr/Pennington immunity
defense applied not only to Santana’s Sherman Act and state
law claims, but also to Santana’s Lanham Act claim. The
District Court also believed that Bobrick’s timeliness
challenge to Santana’s claims, “especially its Lanham Act
cause of action, to which the doctrine of laches applies and
for which there is no controlling precedent in this
jurisdiction” was “substantial.” Id.
The issue of the timeliness of Santana’s Lanham Act
claim is clearly included in the District Court’s order, and we
are satisfied that we have appellate jurisdiction to entertain
Bobrick’s appeal. Moreover, by addressing the laches issue
now, we avoid deciding a constitutional issue. For the
reasons we will articulate, it will not be necessary for us to
consider the Noerr/Pennington doctrine’s applicability to
Lanham Act claims. See Spicer v. Hilton, 618 F.2d 232, 239
(3d Cir. 1980). (“[I]t is well established that courts have a
duty to avoid passing upon a constitutional question if the
case may be disposed of on some other ground.”).
We exercise plenary review over the District Court’s
decision to grant summary judgment and will use the same
test applied below. Belitskus v. Pizzingrilli, 343 F.3d 632-
13
639 (3d Cir. 2003). Summary judgment is appropriate where
“the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c). “Summary judgment is not appropriate,
however, ‘if a disputed fact exists which might affect the
outcome of the suit under the controlling substantive law.’”
Belitskus, 343 F.3d at 639 (quoting Josey v. John R.
Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir. 1993)). The
moving party bears the burden to show an absence of any
genuine issues of material fact and can meet this burden by
showing that the non-moving party “has failed to product
evidence sufficient to establish the existence of an element
essential to its case.” Alvord-Polk, Inc. v. F. Schumacher &
Co., 37 F.3d 996, 1000 (3d Cir. 1994).
IV. DISCUSSION
A. Sherman Act § 1 Claim
Santana contends that the District Court erred when it
held that the Noerr/Pennington doctrine 13 shielded Bobrick,
13
The Noerr/Pennington doctrine protects “the right of the
people . . . to petition the government for a redress of
grievances.” U.S. C ONST. amend. I. Defendants in antitrust
cases are immune from liability when they are exercising their
First Amendment right to petition. Actions aimed at
“influenc[ing] the passage or enforcement of laws” are immune
from Sherman Act liability even if the antitrust defendant
intends to restrain trade or to monopolize, so long as the
“restraint on trade or monopolization is the result of valid
government action.” Eastern Railroad Presidents Conference
v. Noerr Motor Freight, Inc., 365 U.S. 127, 135-36 (1961).
14
Hornyak, and Vogel from liability under § 1 of the Sherman
Act. As to this claim, however, there is no need to decide
whether Bobrick, Hornyak, and Vogel are entitled to
immunity under the Noerr/Pennington doctrine. Even if they
were entitled to immunity, Santana’s § 1 claim fails because
we conclude that there has been no restraint of trade.
Section 1 provides that “[e]very contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of
trade or commerce among the several States . . . is declared to
be illegal.” 15 U.S.C. § 1. An antitrust plaintiff must first
prove concerted action by the defendants.14 Petruzzi’s IGA
Noerr/Pennington immunity extends beyond attempts to
influence the passage and enforcement of laws and applies
equally to efforts to influence administrative agency action, see
United Mine Workers of America v. Pennington, 381 U.S. 657(1965), and efforts to access the court system, see California
Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508(1972). The Noerr/Pennington doctrine protects antitrust
defendants’ rights to “freely inform the government of their
wishes” and “to seek action on laws in the hope that they may
bring about an advantage to themselves and a disadvantage to
their competitors,” Noerr, 365 U.S. at 138-39.
Santana argues that the defendants’ marketing campaign
is not petitioning activity and is therefore not protected by the
doctrine. Santana argues that, even if the marketing campaign
is considered petitioning activity, the defendants are not entitled
to Noerr/Pennington immunity because of the alleged fraudulent
nature of the defendants’ campaign. Finally, Santana argues that
Noerr/Pennington immunity does not extend to situations where,
as here, the government is the purchaser of the products at issue.
14
The District Court held that Santana proved the concerted
action element as to Bobrick, and Bobrick does not challenge
15
Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d
1224, 1229 (3d Cir. 1993). A plaintiff must next prove that
there is a restraint on trade and that the restraint is
unreasonable. Northern Pacific Railway Co. v. United States,
356 U.S. 1, 5 (1958).
Santana argues that the defendants created a restraint
on trade by engaging in a group boycott. Santana’s theory is
as follows: Bobrick and the other members of the TPMC
conspired to agree upon and enforce against business rivals a
single product standard that excluded HDPE technology.”
Because of a TPMC agreement to stop supplying HDPE
partitions, three TPMC members left the HDPE market,
leaving only two HDPE suppliers. This agreement was an
unreasonable restraint of trade because it restricted the output
of HDPE partitions. The defendants’ concerted action
reduced the number of HDPE compartment specifications that
Santana could bid for. In addition, the conspiracy’s emphasis
this finding. Santana, however, does appeal the District Court’s
conclusion that it did not prove concerted action as to Hornyak
and Vogel. Santana seeks to hold Hornyak and Vogel liable
under § 1 based on their relationship and interaction with
Bobrick. Hornyak and Vogel argued to the District Court that
they were incapable of conspiring with Bobrick as a matter of
law because they sold Bobrick’s products exclusively. The
court, relying on the Supreme Court’s decision in Copperweld
Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), and
our decision in Siegel Transfer, Inc. v. Carrier Express, Inc., 54
F.3d 1125 (3d Cir. 1995), held that, as a matter of law, Hornyak
and Vogel were incapable of conspiring. 249 F. Supp. 2d at
505-06.
As with the Noerr/Pennington issue, we do not need to
resolve this question because, even if we were to hold Santana
did prove concerted action as to Hornyak and Vogel, Santana’s
§ claim would still fail.
16
on the failure of HDPE compartments to comply with the
NFPA/ASTM standards had a tendency to “persuade” or
“coerce” specifiers because such private codes are published
and are used by various segments of the construction industry.
The conspiracy resulted in excluding HDPE compartments
from the market and depriving consumers of a superior
product.
We fail, however, to find “restraint” in this alleged
activity – and without a “restraint,” there is “no restraint of
trade.” Schachar v. American Academy of Ophthalmology,
Inc., 870 F.2d 397 (7 th Cir. 1989). Here, Santana’s antitrust
claim is built on allegations that the defendants criticized the
safety of HDPE partitions. It is undisputed that the
defendants informed potential customers that Santana’s
product presented safety hazards. Santana has not, however,
demonstrated that Bobrick imposed any restraints on trade.
Santana does not allege that Bobrick engaged in coercive
measures that prevented Santana from selling its products to
any willing buyer or prevented others from dealing with
Santana. Moreover, Santana’s allegations of fraud in the
manner in which the hazards of HDPE were portrayed are
irrelevant because “deception, reprehensible as it is, can be of
no consequence so far as the Sherman Act is concerned.”
Noerr, 365 U.S. at 145; cf. Schachar, 870 F.2d at 399(“antitrust law does not compel your competitor to praise your
product or sponsor your work.”).
The court’s description in Stearns Airport Equipment
Co. v. FMC Corp., 170 F.3d 518 (5 th Cir. 1999), of this type
of product promotion is instructive:
All of these arguments made by FM C to its
potential customers may have been wrong,
misleading, or debatable. But they are all
arguments on the merits, indicative of
competition on the merits. To the extent they
were successful, they were successful because
17
the consumer was convinced by either FM C’s
product or FMC’s salesmanship. FMC –
unsurprisingly – wanted to be picked over
Stearns on a contract . . . Without a showing of
some other factor, we can assume that a
consumer will make his decision only on the
merits. To the extent a competitor loses out in
such a debate, the natural remedy would seem to
be an increase in the losing party’s sales efforts
on future potential bids, not an antitrust suit.
170 F.3d at 524-25
Here, the defendants’ marketing campaign was aimed
primarily at persuading government architects to specify
Bobrick’s materials instead of materials made from HDPE. It
was the architects who would make the ultimate decision of
which product to specify for use in a particular project. This
is classic competition on the merits of a product. In no real
sense is Santana excluded from the toilet partition market.
Santana remains free to tout its product to the specifiers and
remains equally free to reassure them that its partitions are
superior to Bobrick’s partitions and to prove Bobrick wrong
with respect to the flammability of HDPE partitions. Toilet
partition buyers are in no way constrained from buying HDPE
toilet partitions. “The central insight . . . is that jockeying
over specifications . . . is a valid form of competition . . ..
This behavior was ‘simple salesmanship’ that enhanced rather
than subverted competition on the merits. If . . . [Santana]
was ‘excluded,’ it was excluded by . . . [Bobrick’s] superior
product or business acumen.” Stearns, 170 F.3d at 526.
In Stearns, under very similar facts, the court rejected
the plaintiff’s claim that the defendant’s “attempts to
convince independent government purchasers to adopt
specifications in their favor prior to bidding are a violation of
the antitrust laws.” 170 F.3d at 522. The court reasoned that
18
“the alleged exclusionary conduct required the active approval
of the consumer.” Id. at 525. Unlike cases where the alleged
exclusionary conduct leaves the consumer with no input
whatever, the decision to specify “was always ultimately in
the hands of the consumer.” Id. There was no evidence that
the defendant prevented the plaintiff from “pushing its
arguments at the specifications phase.” Id. at 526.
Accordingly, the plaintiff was not excluded from competition.
In an earlier Fifth Circuit case, Consolidated Metal
Products, Inc. v. American Petroleum Institute, 846 F.2d 284,
286 (5 th Cir. 1988), the court came to the same conclusion
under a different set of facts. Plaintiff sued the American
Petroleum Institute (API), alleging the API excluded it from
the market by delaying trade standard certification to its
equipment. API was a standard-setting body that granted the
manufacturer a license to display its monogram on the
manufacturer’s equipment if the API found that the equipment
satisfied its standards. The plaintiff applied for, and was
denied, a license to use APE’s monogram. The court held
that “a trade association that evaluates products and issues
opinions, without constraining others to follow its
recommendations,” does not violate the Sherman Act by
unfavorably evaluating a manufacturer’s product. Id. at 292.
The court noted that API approval was not required by law,
equipment was sold frequently without it, and consumers
were in no way constrained from buying the plaintiff’s
products. The plaintiff was not excluded “in a real sense”
from the market because it was still free to sell its products
and consumers were free to buy them. Id. at 292. The court
stressed that manufacturers of equipment still had the ability,
even without an API monogram, to market the quality of their
products. Id. at 296.
The Seventh Circuit Court of Appeals in Schachar
similarly found no restraint of trade. The plaintiffs were
ophthalmologists who performed a surgical procedure labeled
19
“experimental” by the National Advisory Eye Council. 870
F.2d at 397. The American Academy of Ophthalmology
endorsed the Council’s position and issued a press release
advising physicians and patients not to use the procedure until
more research had been completed. The plaintiffs alleged that
the press release was part of a conspiracy to restrain trade.
The court held that there was no violation of the Sherman Act
because there was no enforcement device that operated to
restrain trade. None of the plaintiffs was prevented from
doing the procedure and none was sanctioned for performing
it. The court characterized the challenged action as “warfare
among suppliers and their different products,” not as restraint,
but as competition. Id. at 399. The court cited Consolidated
Metal Products with approval:
If such statements should be false or misleading
or incomplete or just plain mistaken, the remedy
is not antitrust litigation, but more speech – the
marketplace of ideas.
Id. at 400.
Santana, on the other hand, relies on Allied Tube &
Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1998), to
argue that the defendants “acted like a private standard-setting
organization in adopting an anti-HDPE campaign, using false
advertising videotapes to cause all types of customers . . . to
refrain from purchasing HDPE compartments and to ensure
that HDPE compartments were excluded from purchase
specifications.” Contrary to Santana’s assertions, however,
the TPM C is not a standard-setting body. It does not set,
adopt, or enforce any industry standards for safety or other
product characteristics. The NFPA is the relevant standard-
setting organization, but Santana has not alleged that Bobrick
and the TPMC members had any contact with the NFPA.
Bobrick, Hornyak, Vogel, and the members of the TPMC
20
interpreted NFPA standards to their advantage. Santana has
the right to do the same. What is lacking in these facts is
some enforcement device that operates to restrain trade. The
District Court properly distinguished Allied Tube:
Allied Tube . . . involved the manipulation of the
process of establishing an influential body’s
standards to exclude rival technology from the
market . . .. [T]his case does not involve efforts
to influence standard-setting or enforcement by
a body with a cachet of influence. A campaign
of persuasion of architects and specifiers that
toilet partitions are subject to fire and smoke
development standards for interior wall finishes
does not constitute standard setting or
enforcement . . ..
Santana Products, 249 F. Supp. 2d at 509-10.
Unlike Allied Tube, Bobrick’s activity did not take
place ‘within the confines of a private standard-setting
process.” 486 U.S. at 506. Bobrick “confine[d] itself to
efforts to persuade an independent decisionmaker” and did
not “organize[] . . . [or] orchestrate[] the actual exercise of . . .
decisionmaking authority in setting a standard.” Id. at 507.
The government officials making the decision to specify
materials were disinterested, conducted their own fire safety
tests before making decisions, and were susceptible to
lobbying from all competitors in the toilet partition industry.
For the above reasons, we conclude that there was no
restraint of trade.
B. Lanham Act § 43(a) Claim
The defendants also claimed that they could not be
21
held liable for a violation of the false advertising provision of
§ 43(a) of the Lanham Act because of Noerr/Pennington
immunity. The District court, after careful consideration,
concluded that the Noerr/Pennington doctrine shields the
defendants from liability under the Lanham Act. Santana,
249 F. Supp. 2d at 493. Santana appeals the District Court’s
holding, arguing that the court should not have extended the
applicability of the Noerr/Pennington doctrine to false
advertising claims brought under the Lanham Act. We will
not address at this time the Noerr/Pennington doctrine’s
applicability to Lanham Act claims because we conclude that
Santana’s Lanham Act claim is barred by laches.
Santana brought this action on October 1, 1996. The
Lanham Act does not contain a statute of limitations. Instead,
the Act subjects all claims to “the principles of equity.” 15
U.S.C.§1117(a). Bobrick challenged the timeliness of
Santana’s Lanham Act claim, asserting that Santana was
complaining of conduct that occurred seven years before it
filed the action and that Santana had settled its 1994 lawsuit
against the TPMC and Bobrick was not a party to that
litigation. Bobrick raised two timeliness defenses to
Santana’s Lanham Act claim – statute of limitations and
laches.
It was proper for the District Court to use the most
analogous statute of limitation as a guideline for determining
whether the laches doctrine bars Santana’s claim instead of
focusing solely on whether Santana brought its claims within
the applicable statute of limitations period. Courts commonly
use the appropriate statute of limitations as a guideline in
claims for false advertising under §43(a) of the Lanham Act.
See Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187 (2d
Cir.1996); Hot Wax, Inc. v. Turtle Wax, Inc., 191 F. 3d 813(7 th Cir. 1999); Jarrow Formulas, Inc. v. Nutrition Now, Inc.,
304 F. 3d 829 (9 th Cir. 2002). We also used the statute of
limitations as a guideline. See, e.g., University of Pittsburgh
22
v. Champion Products, Inc., 686 F.2d 1040 (3d Cir. 1982)
(discussing relationship between statute of limitations and
inexcusable delay element of laches in claim for false
designation of origin of goods under § 43(a) of the Lanham
Act).
Because the Lanham Act does not specify a statute of
limitation, courts must
“adopt a local time limitation as federal law if it is not
inconsistent with federal law or policy to do so.” Wilson v.
Garcia, 471 U.S. 261, 266-67 (1985). To do this, a court
“must characterize the essence of the claim in the pending
case, and decide which statute provides the most appropriate
limiting principle.” Id. at 268; See also Malley-Duff & Assocs,
Inc. v. Crown Life Ins., 792 F.2d 341 (1986). The court must
decide which state claim is the “most appropriate” or “most
analogous” to all claims that may be brought under § 43(a) of
the Lanham Act. Wilson, 471 U.S. at 268. Courts must
“choose the best out of the available candidates.” Malley-
Duff, 792 F.2d at 349. Bobrick urges us to conclude that the
best choice is Pennsylvania’s action for fraud, which has a
two-year statute of limitation. Santana maintains, and the
District Court determined that the UTPCPL, which has a six-
year “catch-all” statute of limitation, is the best choice. We
agree with the District Court.
To assert a claim for false advertising under § 43(a) of
the Lanham Act, the plaintiff must prove that the defendant
use[d] in commerce any word, term, name, symbol, or
device, or any
combination thereof, or any false designation of origin,
false or misleading description of fact, or false or
misleading representation of fact, which . . .
in commercial advertising or promotion, misrepresents
the nature,
characteristics, qualities, or geographic origin of his or
her or another
23
person’s goods, services, or commercial activities . . .
15 U.S.C. 1125(a). The plaintiff must prove that the
commercial message is either literally false or, if not literally
false, literally true or ambiguous with the tendency to deceive
consumers. Novartis Consumer Health, Inc. v. Johnson &
Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3d
Cir. 2002). If the plaintiff proves literal falsity, there is no
need to show that the buying public was misled. Johnson &
Johnson-Merck Consumer v. Rhone-Poulenc Rorer Pharm.,
Inc., 19 F3d 125, 129-30 (3d Cir. 1994). Otherwise, the
plaintiff must prove “that there is actual deception or at least a
tendency to deceive a substantial portion of the intended
audience.” Id. at 129.
To prove fraud in Pennsylvania, a plaintiff must prove
six elements: 1) a misrepresentation, 2) material to the
transaction, 3) made falsely, 4) with the intent of misleading
another to rely on it, 5) justifiable reliance resulted, and 6)
injury was proximately caused by the reliance. Viguers v.
Philip Morris USA, Inc., 837 A.2d 534 (Pa. Super. Ct. 2003).
On the other hand, to prove “unfair methods of
competition” and “unfair or deceptive acts or practices” under
the UTPCPL , a plaintiff must demonstrate
(i) Passing off goods or services as those of another;
(ii) Causing likeliness of confusion or of
misunderstanding as to the source, sponsorship,
approval, or certification of goods or services;
...
(iv) Using deceptive representations or designations of
geographic origin in connection with the goods or
services;
(viii) Disparaging the goods, services or business of
another by false or
misleading representation of fact;
(ix) Advertising goods or services with intent not to
sell them as advertised;
24
...
(xi) Making false or misleading statements of fact
concerning the reasons for,
existence of, or amounts of price reductions;
...
(xxi) Engaging in any other fraudulent or deceptive
conduct which creates a
likelihood of confusion or of misunderstanding.
73 P.S. § 201-2(4) (emphasis added). The Supreme Court of
Pennsylvania has held that a plaintiff bringing an action
under the UTPCPL must prove the common law fraud
elements of reliance and causation with respect to all
subsections of the UTPCPL.
Weinberg v. Sun Co., Inc., 777 A. 2d 442, 446 (Pa. 2001).
This Court in Island Insteel, Inc. v. Waters decided
that, even though a Virgin Islands action for fraud was
analogous to a trademark infringement claim brought under §
43(a) of the Lanham Act15 , the most analogous action in the
Virgin Islands was one for
15
To establish a trademark infringement claim under § 43(a),
the plaintiff must prove that the defendant:
use[d] in commerce any word, term, name, symbol, or
device, or any
combination thereof, or any false designation of origin,
false or misleading
description of fact, or false or misleading representation
of fact, which . . .
is likely to cause confusion, or to cause mistake, or to
deceive as to the
affiliation, connection, or association of such person with
another person, or as to
the origin, sponsorship, or approval of his or her goods,
services, or commercial activities by another person . . .
15 U.S.C. § 43(a) (emphasis added).
25
deceptive trade practices. 296 F.3d 200, 204 (3d Cir. 2002).
We noted that an
action for fraud requires proof of scienter, whereas an action
for deceptive trade practices and an action for trade
infringement do not. Id. We also noted that “a common law
fraud claim requires a plaintiff to prove actual reliance,”
whereas “an action for deceptive trade practices simply
requires proof that the practice at issue has the ‘tendency or
effect of deceiving or misleading consumers,’ which more
closely resembles the ‘likelihood of confusion’ element that
is the touchstone of a § 43(a) claim.” Id.
An action for fraud always requires the plaintiff to
prove scienter, whereas the Lanham Act does not. The
UTPCPL is in the middle. It encompasses causes of action in
which the plaintiff must prove intent and causes of action in
which the plaintiff need not prove intent. Furthermore, a
false advertising claim under Lanham Act is different both
from an action brought under the UTPCPL and from a fraud
action in Pennsylvania
because it does not always require the plaintiff to prove that
consumers have been misled. Analogies to state statutes or
common law “are bound to be imperfect.” Wilson, 471 U.S.
at 272. As the District Court noted, the Lanham Act and the
UTPCPL “‘ supplement[] rather than supplant[] traditional
common law remedies with per se liability for a variety of
unfair trade practices.”’ Santana, 249 F. Supp. 2d at 499(quoting Gabriel v. O’Hara, 534 A.2d 488, 491 (Pa. Super.
Ct. 1987)). Section 43(a) has multiple claims, as does the
UTPCPL, while an action for fraud is narrower. The
UTPCPL is the most analogous state cause of action that
would encompass all claims brought under § 43(a) of the
Lanham Act. See Malley-Duff, 792 F.2d at 347 (noting the
need to “look[] to the federally created cause of action for a
broader analogy that could encompass all claims brought
thereunder in a given statute”).
26
Bobrick cites our opinion in Beauty Time, Inc. v. VU
Sys., Inc. 118 F.3d
140 (3d Cir. 1997), and argues that we have already held that
Pennsylvania’s fraud cause
of action was most analogous to claims under the Lanham
Act. However, Beauty Time involved a claim for fraudulent
procurement of a trademark registration in violation of § 38
of the Lanham Act. Its holding is not, therefore, controlling
because this case involves an action under § 43 (a). See
Island Insteel, 296 F.3d at 208.
Bobrick also argues that the District Court erred by
picking the UTPCPL six-year “catch-all” statute of
limitations because in Island Insteel we rejected the
plaintiff’s argument there that a similar catch-all limitations
period applied to a Lanham Act trademark infringement
action. In Island Insteel, however, the plaintiffs did not
“identify a specific statutory cause of action under Virgin
Islands law that is analogous to their
Lanham Act claim and is subject to the catch-all six year
limitations period for actions upon a liability created by a
statute that lacks a statute of limitations.” Id. at 204 (emphasis
added). In Island Insteel, we explained that the catch-all
statute of
limitations could have applied if the plaintiff had identified
an analogous cause of action
governed by that period. Id. at 209. Here, on the other hand,
the most analogous cause of action – an action under the
UTPCPL – is governed by the six-year “catch-all” limitations
period. See Gabriel v. O’Hara, 534 A.2d 488, 495-96 (Pa.
Super. Ct 1987); Algrant v. Evergreen Valley Nurseries, Ltd.,
941 F. Supp. 495, 499 (E.D. Pa 1996).
Regardless, however, of which statute of limitations is
applicable, Bobrick argues that the doctrine of laches
operates to bar Santana’s Lanham Act claim. The District
Court used the six-year statute of limitations as a guide for
27
determining whether the doctrine of laches applied here.
Noting that Santana was aware of Bobrick’s allegedly
wrongful conduct in 1989, more than seven years before
Santana brought the action, the
court held that there was a presumption of laches. Santana,
249 F. Supp. 2d at 501. The court first held that Santana’s
proffered excuse – that “it repeatedly provided
notice to Bobrick that Santana considered the alleged ‘fire
scare’ tactics to be wrongful” – could not justify the delay in
bringing the action. Id. The court nevertheless held that
laches did not bar Santana from bringing its claim because
Santana proved that Bobrick did not suffer material prejudice
as a result of the delay. Id.Laches consists of two elements: (1) inexcusable
delay in bringing suit, and (2) prejudice to the defendant as a
result of the delay. Pittsburgh, 686 F.2d at 1044. Bobrick
contends that the District Court erred because it did not
require Santana to disprove both elements of laches. Santana
responds that the District Court did not err because Santana
had to disprove only one element, and it successfully did so
by proving that Bobrick did not suffer prejudice as a result of
the delay.16
16
The District Court made a finding that Santana was aware
of Bobrick’s allegedly wrongful conduct in 1989. Santana, 249
F.Supp. 2d at 501. Santana argues that there are fact issues as
to when Santana knew or should have known about Bobrick’s
marketing activities to fix the beginning of the delay period
prior to suit. Santana points out that the TPMC was not formed
until late 1989 and that Bobrick received a copy of the Formica
videotape in early 1990. Santana argues that it did not
distribute the Formica videotape to its sales representatives until
1990, it did not produce the “You Be The Judge” videotape until
1992, and it placed other advertisements throughout the 1990's.
The length of the delay is a question of fact which is
28
We conclude that the District Court erred because it
did not use the appropriate legal standard to assess Bobrick’s
laches defense. Once the statute of limitations has expired,
the defendant “enjoys the benefit of a presumption of
inexcusable delay and prejudice. EEOC v. The Great Atlantic
& Pacific Tea Co., 735 F.2d 69, 80 (3d Cir. 1984). The
District Court correctly found that there was a presumption of
laches as a result of Santana filing the claim after the
applicable statute of limitations – 6 years under the UTPCPL
– had run. Santana, therefore, carried the burden of proving
that its delay was excusable and that it did not prejudice
Bobrick. Gruca v.United States Steel Corp., 495 F.2d 1252,
1258-59 (3d Cir. 1974) (noting that the length of the delay
reviewed under the clearly erroneous standard. Churma
v.United States Steel Corp., 514 F.2d 589, 593 (3d Cir. 1975).
The District Court’s finding as to when Santana was aware of
Bobrick’s conduct is not clearly erroneous. As early as March,
1989, Santana was aware of Bobrick’s “fire scare” campaign.
On March 5, 1989, Lynch of Santana approached Bob Gillis at
the American Association of School Administrators Convention,
identified himself as the president of Santana, and informed
Gillis that he objected “to what he considered an unfair attack
on the physical properties of the polyethylene material used in
the manufacture of Bobrick’s toilet compartments.” Lynch
asked Gillis for the names of Bobrick’s attorneys so that
Santana’s attorneys could contact them. Patrick McGartland,
Santana’s regional sales manager, stated in his deposition that in
“either 1988 or 1989 . . . [he] was aware of that there was an
effort to create this impression on the part of the potential buyer
in the marketplace or the specifier that solid plastic was a fire
issue.”
29
controls burdens of proof). 17
Santana argues, however, that, despite the running of
the statute of limitations, a presumption of laches can be
rebutted by showing only an absence of prejudice. Santana
cites Anaconda Co. v. Metric Tool & Die Co., in which the
District Court, while recognizing that a defendant is entitled
to a rebuttable presumption of both elements of laches, held
that the plaintiff can rebut the presumption by negating “one
or both” of the elements. 485 F.Supp. 410, 427-28 (E.D. Pa
1980) (Becker, J.). The court reasoned:
[R]equiring the plaintiff to carry
this double burden would be
inconsistent with the conceptual
structure of the laches doctrine,
which requires the court to find
both inexcusable delay on the part
of the plaintiff and prejudice to
the defendant. If a plaintiff
rebuts the presumption as to either
of the two elements, the court
cannot find that both elements
exist, and therefore cannot uphold
the defense of laches.
Id. at 428 n.14.
Nevertheless, despite the reasoning of the District
17
This added presumption that both inexcusable delay and
prejudice exist is enjoyed by a defendant once the statute of
limitations has run. See EEOC v. The Great Atlantic & Pacific
Tea Co., 735 F.2d at 80. It is because of this presumption that
we do not agree with the position of the dissent that Santana had
only to demonstrate that prejudice to Bobrick did not exist.
Once the statute of limitations has run, the defendant’s burden
doubles.
30
Court in Anaconda, we have consistently held that a plaintiff
must prove that laches does not exist by showing that its delay
was excusable and that its delay did not prejudice the
defendant. See Great Atlantic & Pacific Tea Co., 735 F.2d at
80 (“If a statutory limitations period that would bar legal
relief has expired . . . the burden shifts to the plaintiff to
justify its delay and negate prejudice.”); Churma v. United
States Steel Corp., 514 F.2d 589, 593 (3d Cir. 1975) (“Prior to
the running of the statute, the defendant has to prove laches,
but thereafter the plaintiff has to disprove laches.”); Gruca v.
United States Steel Corp.., 495 F.2d 1252, 1259 (3d Cir.
1974) (“If a plaintiff sleeps on his rights for a period of time
greater than the applicable statute of limitations, then ‘the
plaintiff (must) . . . come forward and prove that his delay
was excusable and that it did not . . . prejudice the
defendant.’”) (citation omitted); Burke v. Gateway Clipper,
Inc., 441 F.2d 946, 949-50 (3d Cir. 1971) (“We are aware that
other circuits place the burden of proving inexcusable delay
and prejudice on the defendant. We see no new and
compelling reason to reverse the well-established principle
and thoroughly considered line of decisions of this Circuit
requiring the plaintiff to disprove inexcusable delay and lack
of prejudice to the defendant when, as here, . . . [the statute of
limitations period has run].”); Mroz v. Dravo Corp., 429 F.2d
1156, 1160 (3d Cir. 1970) (never addressing whether plaintiff
rebutted presumption of prejudice because plaintiff did not
rebut presumption of inexcusable delay); Lipfird v.
Mississippi Valley Barge Line, 310 F.2d 639, 642 (3d Cir.
1962) (holding that delay beyond the applicable statute of
limitations period bars plaintiff’s claim “unless he overcomes
the presumption of inexcusable delay and detriment to the
defendant resulting from the delay by pleading and proving
facts which do excuse the delay and show that it has been in
no way detrimental to the defendant”); Kane v. Union of
Soviet Socialist Republics, 189 F.2d 303, 307 (3d Cir. 1951)
31
(affirming district court’s dismissal of plaintiff’s claim based
on laches because it did not “plead[] facts negativing
prejudice and excusing his delay.”).
In all of our cases addressing this issue, we have held
that the plaintiff’s burden to rebut the presumption of laches
is conjunctive. Not once have we used the word “or.” The
District Court concluded that Santana’s delay in filing its
Lanham Act claim was inexcusable. The proper conclusion
then is that Santana’s Lanham Act claim is barred by laches.
C. Tortious Interference With Prospective
Contract Claim
Even though we have held that the Noerr/Pennington
doctrine shields petitioning activity from liability for claims
of tortious interference with contract and tortious interference
with prospective economic advantage, see Cheminor Drugs,
Ltd. v. Ethyl Corp., 168 F.3d 119, 128 (3d Cir. 1999), we do
not need to decide whether the marketing campaign at issue
here is petitioning activity which the doctrine immunizes.
For even if the defendants are not shielded from liability, we
agree with the District Court that Santana did not prove the
existence of a prospective contractual relation.18
There is only one prospective contract with which
Santana claims Bobrick interfered. Specifically, Santana
tried to bid on a contract at the Rio Hondo Community
College in California. The architect for the project originally
specified HDPE toilet partitions. However, the architect
changed the specification to phenolic after watching a
18
Aside from proving the existence of a prospective
contractual relation, a plaintiff must prove the defendant had the
purpose or intent to harm the plaintiff by preventing the relation
from occurring, the absence of privilege or justification on the
part of the defendant, and actual damage resulting from the
defendant’s conduct. Thompson Coal Co. v. Pike Coal Co., 412
A.2d 466, 471 (Pa 1979).
32
videotape and conducting a fire test on samples of HDPE,
which Santana had provided, and samples of phenolic, which
Bobrick had provided. Penner Partitions, a supplier of
phenolic partitions, ultimately won the contract. Santana
argues that it lost this contract as a result of Bobrick’s “fire
scare” tactics.
A prospective contractual relation “is something less
than a contractual right, something more than a mere hope.”
Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 471 (Pa
1979). To determine whether Santana had a prospective
contractual relation with Rio Hondo, “Santana must show that
an issue of fact exists as to whether, but for Bobrick’s ‘fire
scare’ campaign, there was a reasonable probability that
Santana would secure a contract from Rio Hondo.” Santana,
249 F.Supp.2d at 543. It need not be certain that Santana
would have obtained the contract, only reasonably probable.
Alvord-Polk, 37 F.2d at 1015.
Santana argues it was reasonably probable that it
would have obtained the contract but for the defendant’s
marketing campaign because it had approximately 60% of the
HDPE market segment, had a favorable track record with the
customer, and had actually been specified.
Despite the specification of HDPE for the Rio Hondo
project, we cannot say, however, that it was reasonably
probable that Rio Hondo was going to award the contract to
Santana. Even though Santana had convinced Rio Hondo to
specify its partitions, Santana did not have a “reasonable
probability of obtaining the contract” for the work. General
Sound Telephone Co. v. AT&T Communications, Inc., 654
F.Supp. 1562, 1565 (E.D. Pa 1987). Because Bobrick
persuaded Rio Hondo to change the specification to phenolic
instead of HDPE, Santana was simply denied an opportunity
to bid. However, even if Santana had had the opportunity to
bid, one of the two other suppliers of HDPE partitions –
33
Capital Partitions or Comtec19 – could still have obtained the
contract. There is no evidence that Santana would be the
winning bidder. The problems with obtaining a government
contract in this situation is demonstrated by the fact that Rio
Hondo did not in fact award the contract to Bobrick .
V. Conclusion.
For the foregoing reasons, we will affirm the District
Court’s grant of summary judgment in favor of the defendants
on Santana’s § 1 Sherman Act claim and tortious interference
with prospective contract claim. Because we conclude,
however, that the Lanham Act claim is barred by the doctrine
of laches, we will vacate the order granting Noerr/Pennington
immunity to defendants insofar as the § 43(a) claim applied to
government contracts and we will vacate the order denying
summary judgment to defendants insofar as the § 43(a) claim
applied to private contracts. We will remand the Lanham Act
claim to the District Court to dismiss it as barred by laches.
19
Comtec, which had supplied HDPE partitions to the three
companies that had stopped selling the HDPE partitions, entered
the toilet partition market to sell HDPE partitions in their place.
34
Chertoff, Circuit Judge, dissenting in part.
I join the majority insofar as it affirms summary
judgment on Santana’s claims under Section One of the
Sherman Act. I do not agree, however, that laches bars
Santana’s Lanham Act claim. Specifically, I do not believe
that either logic or this Court’s jurisprudence requires a
plaintiff who bears the burden of showing that laches does not
apply to show that both conditions necessary for the
application of laches do not exist. And since the District
Court determined that Bobrick had not suffered
prejudice—and the Court’s determination was not an abuse of
discretion—the doctrine of laches should not bar Santana’s
claim.
“The doctrine of laches consists of two essential
elements: (1) inexcusable delay in instituting suit; and (2)
prejudice resulting to the defendant from such delay.” Central
Pennsylvania Teamsters Pension Fund v. McCormick Dray
Line, Inc., 85 F.3d 1098, 1108 (3d Cir. 1996). If a plaintiff
filed suit before the analogous state statute of limitations had
run, the defendant bears the burden of showing that plaintiff’s
delay in instituting suit was inexcusable and the defendant
suffered prejudice from the inexcusable delay. Conversely, if
a plaintiff filed suit after the analogous state statute of
limitations had run, a presumption arises that plaintiff’s delay
in instituting suit was inexcusable and defendant suffered
prejudice from the delay. The plaintiff then bears the burden
of rebutting this presumption. See, e.g., Equal Employment
Opportunity Commission v. Great Atlantic & Pacific Tea Co.,
735 F.2d 69, 80-81 (3d Cir. 1984).
The majority today holds that a plaintiff who bears the
burden of rebutting such a presumption must show that his
delay in instituting suit was not inexcusable and that the
35
defendant did not suffer prejudice from the delay. The
majority concludes that our precedent compels this
conclusion.
To be sure, language in our prior decisions tends to
support the majority’s holding. As cited by the majority, we
wrote in Burke v. Gateway Clipper, 441 F.3d 946, 949 (3d
Cir. 1971), in language we quoted in Churma v. United States
Steel Corp., 514 F.2d 589, 593 (3d Cir. 1975) and Gruca v.
United States Steel Corp., 495 F.2d 1252, 1259 (3d Cir.
1974), that a plaintiff who bears the burden of proof must
“come forward and prove that his delay was excusable and
that it did not unduly prejudice the defendant.” Likewise, in
Lipfird v. Mississippi Valley Barge Line Co., 310 F.2d 639,
642 (3d Cir. 1962), and Kane v. Union of Soviet Socialist
Republics, 189 F.2d 303, 307 (3d Cir. 1951), we affirmed
dismissals where the plaintiff failed to allege “any facts
excusing his delay and showing lack of prejudice to the
defendant.”
We are “bound by holdings,” however, “not language.”
Alexander v. Sandoval, 532 U.S. 275, 282 (2001). On this
point, I agree with the District Court’s conclusion in Baczor v.
Atlantic Richfield Co., 424 F. Supp. 1370 (E.D. Pa. 1976),
that the references to rebutting both prongs of the test are
dicta in these cases, rather than holdings which bind the
Court. Id. at 1380 n.5; see also Anaconda Co. v. Metric Tool
& Die Co., 485 F. Supp. 410, 428 n.14 (E.D. Pa. 1980)
(agreeing with Baczor). In each case -- Churma, Gruca,
Burke, Lipfird and Kane -- the plaintiff did not rebut either
the delay or the prejudice prong, meaning that the Court did
not need to determine the issue that is before the Court today.
Even if one could read our prior cases as requiring the
plaintiff to rebut both prongs of the laches test, see, e.g. Mroz
v. Dravo Corp., 429 F.2d 1156, 1161 (3d Cir. 1970) (not
considering prejudice prong when, but not necessarily
because, plaintiff had not rebutted delay prong), such a
36
reading would be logically inconsistent with the Court’s
subsequent holding in Central Pennsylvania Teamsters that
each prong is an “essential element[]” of the doctrine of
laches, 85 F.3d at 1108. It simply defies elementary logic to
require a plaintiff bearing the burden of proof on rebuttal to
show that the defendant cannot invoke the laches doctrine
because both essential elements are missing, when one
missing element would negate the doctrine. As Judge Becker
explained in Anaconda:
[R]equiring the plaintiff to carry this double
burden would be inconsistent with the
conceptual structure of the laches doctrine,
which requires the court to find both
inexcusable delay on the part of the plaintiff and
prejudice to the defendant. If a plaintiff rebuts
the presumption as to either of the two
elements, the court cannot find that both
elements exist, and therefore cannot uphold the
defense of laches.
485 F. Supp. at 428 n.14. Put differently, if two conditions
must be satisfied for a rule to apply, then (even if we presume
both to be satisfied) negation of either of those conditions (by
rebutting that presumption) defeats application of the rule.
Therefore, because the majority has concluded that the
older cases require the plaintiff to rebut both prongs of the
laches test, I recommend that the Court consider en banc
whether the older cases can be reconciled with our decision in
Central Pennsylvania Teamsters.
Here, the District Court concluded that Santana
“proffered sufficient evidence that Bobrick did not suffer
material prejudice as a result of the delay.” (App. 79.) I do
not believe that in reaching that conclusion the District Court
abused its discretion, which is the standard of review we must
apply. See Churma, 514 F.2d at 593.
37
Having concluded that laches does not bar Santana’s
Lanham Act claim, I would address the merits of Santana’s
appeal on the application of the Noerr-Pennington doctrine to
the Lanham Act claim.
I
38