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SANTANA PRODUCTS v. BOBRICK WASHROOM EQUIPMENT

August 30, 1999

SANTANA PRODUCTS, INC., PLAINTIFF,
v.
BOBRICK WASHROOM EQUIPMENT, INC., BOBRICK WASHROOM CORP., THE HORNYAK GROUP, INC., AND VOGEL SALES CO., DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. FORMICA CORP., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Vanaskie, District Judge.

  MEMORANDUM

I. BACKGROUND

On October 1, 1996, plaintiff Santana Products, Inc. (Santana) instituted this action against defendants Bobrick Washroom Equipment, Bobrick Corporation, The Hornyak Group, Inc., Vogel Sales Company, Sylvester & Associates, Ltd., and Fred Sylvester.*fn1 Santana alleges that Bobrick and other toilet compartment manufacturers conspired to enforce a product standard that had the effect of excluding Santana's high density polyethylene ("HDPE") compartments from the relevant market. Specifically, Santana contends that Bobrick and others falsely represented that toilet compartments were subject to flame and smoke standards applicable to a "wall finish," rather than the standard for furniture and fixtures. According to Santana, Bobrick (and its alleged co-conspirators) then informed prospective purchasers that Santana's HDPE product did not meet the wall finish standard to dissuade the prospective purchasers from selecting Santana's product. Santana seeks to recover under §§ 1 and 2 of the Sherman Act, 15 U.S.C. § 1 and 2, § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the common law of tortious interference with prospective contractual relationships.

Santana's lawsuit against Bobrick was preceded by a lawsuit filed in this Court by Santana against eleven other toilet compartment manufacturers and the Formica Corporation, referred to collectively by Santana as the Toilet Partition Manufacturer's Council ("TPMC").*fn2 As in this case, Santana's claims in the TPMC action included alleged violations of §§ 1 and 2 of the Sherman Act, and § 43(a) of the Lanham Act, as well as tortious interference with prospective contractual relations. As does this case, the TPMC action focused on an alleged conspiracy "to use scare tactics to discourage specification and acceptance of Santana's HDPE partitions in lieu of or as a replacement material for conventional [toilet partition] materials by falsely alleging that Santana's partitions posed a dangerous fire hazard." (TPMC Complaint, ¶ 21 Attached as Ex. "F" to Bobrick's Third-Party Complaint (Dkt. Entry 174).) Santana alleges in both actions that Formica, a manufacturer of phenolic sheets used by toilet partition manufacturers other than Santana, induced its customers to use a Formica videotape that falsely depicted the flammability of Santana's HDPE partitions.

In early 1995, Formica and other TPMC members sued in the TPMC action settled with Santana and that lawsuit was dismissed. The "Release and Covenant Not to Sue" executed in connection with the settlement specified that it was governed by New York law.

On June 1, 1998, Bobrick filed a Third-Party Complaint against Formica, asserting counts for (1) contribution, (2) indemnification, (3) fraud, and (4) negligent misrepresentation. (Dkt. Entry 174.) Bobrick's Third-Party Complaint focuses on the Formica videotape purporting to depict the flammability of Santana's product. The Formica videotape showed one of Santana's HDPE toilet partitions actually being set on fire with a lighter. Bobrick alleges that Formica encouraged Bobrick to use the videotape in its marketing efforts. (Third-Party Complaint (Dkt. Entry 174) ¶ 19.) Bobrick alleges that Formica failed to inform it that the videotape contained false representations and information. (Id. ¶ 20.) Bobrick contends that it reasonably relied upon the Formica videotape and that, as a result of that reliance, Bobrick has been sued by Santana.

Formica has moved to dismiss the Third-Party Complaint. (Dkt. Entry 191.) Formica asserts that Bobrick may not maintain an action for contribution for alleged violations of the Sherman Act and the Lanham Act. Formica also contends that any claim for contribution is barred by the release it executed to settle its liability in the TPMC action. Formica further argues that Bobrick has failed to allege a proper claim for indemnification in that (1) Bobrick was not a passive tortfeasor, and (2) any indemnification claim is premature. Finally, Formica contends that the state law claims of fraud and negligent misrepresentation are not proper third-party claims.

II. DISCUSSION

A. Contribution

1. Anti-Trust Claim

Bobrick concedes that the Sherman Act does not permit a third-party claim for contribution. (Bobrick's Opp.Br. (Dkt. Entry 213) at 5.)

2. Lanham Act Claim

There is a dearth of case law concerning whether a claim for contribution is permitted under the Lanham Act. In Getty Petroleum Corp. v. Island Transp. Corp., 862 F.2d 10 (2d Cir. 1988), cert. denied, 490 U.S. 1006, 109 S.Ct. 1642, 104 L.Ed.2d 157 (1989), upon which Formica relies, the Second Circuit determined that no express or implied right to contribution existed under the Lanham Act. Id. at 16 (citing Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) (refusing to imply a right to contribution under antitrust laws); Northwest Airlines, Inc. v. Transport Workers Union of Am., 451 U.S. 77, 93-94, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981) (refusing to imply a right to contribution under the Equal Pay Act and Title VII)).*fn3 On the other hand, in Allen Organ Co. v. Galanti Organ Builders, Inc., 798 F. Supp. 1162, 1171 (E.D.Pa. 1992), aff'd mem., 995 F.2d 215 (3d Cir. 1993), a case upon which Bobrick places sole reliance, Judge Bartle of the Eastern District of Pennsylvania recognized joint tortfeasor principles under the Lanham Act.*fn4 Subsequent to Allen Organ, Judge Bartle noted that the cases were "not in agreement on whether the Lanham Act allows for such contribution." Transdermal Prods., Inc. v. Performance Contract Packaging, Inc., 943 F. Supp. 551, 554 (E.D.Pa. 1996). Because the plaintiff in Transdermal Products had also asserted a claim under the Pennsylvania Trademark Act, Judge Bartle determined that the defendant could assert a third-party claim for contribution under state law against a contributory infringer. Id. at 554. Judge Bartle thus pretermitted the question of whether there was a right to contribution under Lanham Act.*fn5

It appears that the only case to squarely address the availability of a contribution claim under the Lanham Act is Getty. David Hricik, "Remedies of the Infringer: The Use by the Infringer of Implied and Common Law Federal Rights, State Law Claims, and Contract to Shift Liability for Infringement of Patents Copyrights and Trademarks," 28 Tex.Tech.L.Rev. 1027, 1058-59 (1997). Getty is consistent with Texas Industries and Northwest Airlines in rejecting a claim for contribution under the Lanham Act.

Some commentators have argued that there should be a right to contribution in the context of "contributory infringement." Id.*fn6 This argument is based on the Supreme Court's holding that there is a right to contribution with respect to actions under Rule 10b-5 of the Securities and Exchange Commission. Musick, Peeler & Garrett v. Employers Ins. of Wausau, 508 U.S. 286, 113 S.Ct. 2085, 124 L.Ed.2d 194 (1993). As Hricik explains:

    After Getty Petroleum was decided . . . the
  Supreme Court recognized a distinction in the
  statutory schemes at issue in Texas Industries and
  Northwest Airlines cases, indicating that Getty
  Oil was incorrectly decided. In Musick, Peeler &
  Garrett v. Employers Ins. of Wausau, the Court held
  that there was an implied right to contribution in an
  action under Rule 10b-5 of the Securities and
  Exchange Commission. In distinguishing Texas
  Industries and Northwest Airlines, the Musick,
  Peeler & Garrett Court emphasized that liability
  under the statutory scheme at issue in those cases
  was expressly created by Congress, whereas liability
  for violating Rule 10b-5 had been implied by the
  courts. Because Rule 10b-5 liability was implied by
  the courts, the Court reasoned that "[h]aving implied
  the underlying liability in the first place, to now
  disavow any authority to allocate it on the theory
  that Congress had not addressed the issue would be
  most unfair to those against whom damages are
  assessed."
    Thus, the argument exists that because liability
  for inducing or contributing to trademark
  infringement is entirely of judicial creation, an
  implied right of contribution should be permitted
  under the Lanham Act. The judiciary implied a private
  right of action for secondary trademark infringement,
  and

  as a result courts have a responsibility to
  elaborate upon that right. Just as with Rule 10b-5,
  the right of action against a party who has not
  itself committed trademark infringement is wholly
  judicial in origin. Having found a power to create
  secondary liability, courts should likewise have the
  power to allocate that liability fairly.

David Hricik, "Remedies of the Infringer: The Use by the Infringer of Implied and Common Law Federal Rights, State Law Claims, and Contract to Shift Liability for Infringement of Patents Copyrights and Trademarks," 28 Tex.Tech.L.Rev. 1027, 1058-59 ...


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