Monday, January 23, 2017

Mass. anti-SLAPP law/litigation privilege doesn't cover p's nasty statements about competitor to customers

Riverdale Mills Corporation v. Cavatorta North America, Inc., 189 F.Supp.3d 317 (D. Mass. 2016)

Previous decision—denying a recall when the falsely advertising competitor had already notified consumers—discussed here.  The parties compete in the market for wire mesh used to make marine traps.  Riverdale makes “Aquamesh.” Metallurgica makes “SEAPLAX,” sold in the US by Cavatorta. Both brands are purportedly “galvanized after welded” (GAW), which is allegedly better than “galvanized before welded” (GBW). In 2015, Riverdale learned of a production error at Metallurgica that caused a non-SEAPLAX, non-GAW product to be delivered to certain customers in the United States and Canada.

Riverdale sued for false advertising.  The court enjoined defendants (1) from manufacturing and selling mesh labeled as GAW if it was not actually GAW; (2) from making false statements in advertising that SEAPLAX was GAW if it was not in fact GAW; and (3) to immediately properly label all SEAPLAX product that was not GAW. 

Larry Walsh, vice president of sales and marketing at Riverdale, sent emails to twelve customers of Cavatorta with a 3-page excerpt from defendants’ memorandum in opposition to the motion for preliminary injunction and two affidavits from defendants. The emails varied; “all referenced the attached materials and stated that Plaintiff’s attorney would contact the customers and request additional information.” One email also stated: “If you did get GBW that was labeled GAW you should have received a notice from [Cavatorta] and some sort of monetary compensation .... For a full year [Defendants] were selling mislabeled product and traps are falling apart very quickly.” Another email characterized Cavatorta’s product as “defective wire.”

Metallurgica and Cavatorta counterclaimed for tortious interference with business relations and violations of Chapter 93A, based on communications that Riverdale had made to some of Cavatorta’s customers during the pendency of this lawsuit.

Riverdale argued that Riverdale’s communications with Defendants’ customers were protected by the litigation privilege, which “protects statements made in the institution or conduct of litigation or in conferences and other communications preliminary to litigation.” “[T]he relevant inquiry is not who made the statement, or to whom it was made, but whether the statement is pertinent to the supervening litigation,” even if the statements were uttered maliciously.  However, the privilege does not protect “unnecessary or unreasonable publication to parties outside the litigation ....”

Defendants argued that Riverdale knew before sending the emails that all of the customer-recipients had already been made aware of the issues with the SEAPLAX mesh, and that Walsh wasn’t seeking any information from them.  The court agreed that the privilege didn’t apply.  “The recipients were outside of the litigation, and it did not serve Riverdale’s prosecution of the case to reiterate its claims and forward the selected pleadings to Defendants’ customers, many—if not all—of whom already knew about the lawsuit.…The purpose of the privilege is not served by giving Riverdale immunity to send gratuitous communications to the customers of its competitors.”

However, defendants still failed to state a (counter)claim.  Though they sufficiently alleged the existence of specific relationships and Riverdale’s intent to harm them, they made no specific allegations of harm, such as customers who ended their relationships or bought less as a result.

Riverdale also moved to dismiss the counterclaims pursuant to Mass. Gen. Laws ch. 231, § 59H (the anti-SLAPP statute), which covers claims based on the targeted party’s “exercise of its right of petition.” The courts have construed “petitioning activity” as including all “statements made to influence, inform, or at the very least, reach governmental bodies—either directly or indirectly.” Riverdale argued that its emails were petitioning activity because the statements mirrored the allegations contained in the pleadings.  However, “the mere replication of protected statements sent to governmental entities is not alone dispositive.”  Given the context—direct competition, careful selection of what to send, and the fact that only two customers were later subpoenaed—“the emails have a distinctly commercial flavor.” Thus, the emails were not petitioning activity, and the anti-SLAPP statute didn’t apply.

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