Barrette Outdoor Living, Inc. v. Integrity Composites, LLC

666 F.Supp.3d 18

BARRETTE OUTDOOR LIVING, INC., Plaintiff, v. INTEGRITY COMPOSITES, LLC, et al., Defendants.

Integrity Composites, LLC, et al., Third-Party Plaintiffs, v. Eaton Peabody, P.A. et al., Third-Party Defendants.

2:20-cv-00213-JDL

United States District Court, D. Maine

Signed March 31, 2023

Eviana Englert, Daniel J. Mitchell, Bernstein Shur, Portland, ME, for Plaintiff.

Christopher M. Candon, Pro Hac Vice, Sheehan Phinney Bass & Green, PA, Manchester, NH, James S. Lamontagne, Sheehan Phinney, Manchester, NH, Michael J. Lambert, Pro Hac Vice, Sheehan Phinney Bass & Green, PA, Boston, MA, for Defendants/Third-Party Plaintiffs.

Martha C. Gaythwaite, Verrill Dana LLP, Portland, ME, for Third-Party Defendants.

ORDER ON MOTION FOR SUMMARY JUDGMENT AND MOTION IN LIMINE

Jon D. Levy, CHIEF UNITED STATES DISTRICT JUDGE

Plaintiff Barrette Outdoor Living, Inc. ("Barrette") filed this action on June 17, 2020, against Integrity Composites, LLC ("Integrity Composites"), Integrity Holdings, LLC ("Integrity Holdings"), and Jeffrey True, the Manager of Integrity Holdings and President of Integrity Composites.¹ In its Complaint, Barrette asserts claims for breach of contract, intentional misrepresentation, and negligent misrepresentation arising out of a transaction in which Barrette purchased Integrity Composites' intellectual property assets (ECF No. 1).

Integrity has brought a Third-Party Complaint against Eaton Peabody, P.A. and Alfred C. Frawley III, Esq. (ECF No. 12).² Integrity alleges that at the time it conveyed its intellectual property assets to Barrette, it hired Frawley and reasonably relied on him to oversee the intellectual property aspects of the deal with Barrette. Integrity contends that had it known that Frawley had misrepresented the status of two patent applications that were included in the transaction, it would not have included inaccurate information about the applications in the Asset Purchase Agreement. Integrity's Third-Party Complaint asserts claims for legal malpractice, negligent misrepresentation, and breach of fiduciary duty, and seeks (1) indemnification for any damages that Barrette may be awarded against Integrity, (2) an award of all fees and costs incurred in defending against Barrette's action, (3) an award of its fees and costs associated with bringing its Third-Party Complaint, (4) an award of its fees and costs associated with opposing this motion, and (5) an award of punitive damages.

Eaton Peabody has filed a Motion for Summary Judgment (ECF No. 95) on all counts of Barrette's Complaint, arguing that it is entitled to summary judgment because Barrette will be unable to sustain its burden of proof as to damages. Eaton Peabody also moves for summary judgment on Integrity's Third-Party Complaint, conceding that Integrity may be able to recover fees and costs reasonably expended as a result of defending against Barrette's action, but arguing that Integrity is not entitled to additional attorney fees, costs, or punitive damages related to its Third-Party Complaint. Eaton Peabody also concedes liability for Frawley's misconduct and requests that the Court grant summary judgment against it as to liability on all Counts of Integrity's Third-Party Complaint.

Eaton Peabody has also filed a Motion in Limine (ECF No. 79), which seeks to exclude the testimony of Barrette's President Jean desAutels, arguing that he should not be permitted to offer lay opinions as to the value of the patent applications because he is not an expert and because his opinions are conjectural and speculative. Oral argument on the Motion for Summary Judgment and Motion in Limine was held on January 19, 2023 (ECF No. 111).

I. FACTUAL BACKGROUND

The parties have submitted stipulated facts to the Court (ECF No. 93), as well as separate supporting statements of material facts (ECF Nos. 95-2, 100-2, 101-1, 107-1, 108-1).³ The following undisputed facts are drawn from these documents.

Barrette is a corporation that manufactures, assembles, and sells various types of fencing, railing products, decking, and "other outdoor products." ECF No. 93 at 2, ¶ 1. Jean desAutels has been the President of Barrette since 2010. Integrity Composites is a limited liability company that manufactures and sells decking products under the brand name "DuraLife." Integrity Holdings is a limited liability company that invests in a variety of businesses, including operating companies, real estate, and timberland holdings. Jeffrey True is the Manager of Integrity Holdings and the President of Integrity Composites. Eaton Peabody is a Maine law firm organized as a professional association, and Frawley was employed and affiliated with Eaton Peabody as an attorney between 2012 and 2021.

In November 2017, Integrity began to manufacture and sell a component of a deck installation system known as the "DuraLife Step-Clip," which was advertised as patent-pending. ECF No. 101-1 at 10, ¶ 3. Integrity also owned a "Competitor Step-Clip" product, which was functionally similar to the DuraLife Step-Clip but also worked on competitors' deck installation systems. Integrity had not taken steps to produce or sell the Competitor-Step Clip product.

A. Frawley's Preparation and Filing of Integrity's Patent Applications

Eaton Peabody, in or around 2016, represented to the public on its website that it was capable of preparing and prosecuting patent applications for clients and listed Frawley as a "[r]elated professional" on that page. ECF No. 100-2 at 11-12, ¶ 1. None of the professionals listed, including Frawley, were registered to prosecute patent applications before the U.S. Patent and Trademark Office ("USPTO"), and Frawley was never a member of the patent bar. Historically, Frawley would refer utility patent work to counsel at another law firm, and prior to the patent applications at issue in this case, Frawley had never prepared or filed a patent application with the USPTO.

In late 2016, Integrity asked Frawley—who regularly worked with the company on intellectual property matters—to file a patent application for the DuraLife Step-Clip (the "D206 patent application") with the USPTO. Although Frawley had not previously prepared or filed patent applications, Frawley advised True in November 2016 that Integrity should file for a design patent, rather than a utility patent, on the company's DuraLife step-clip technology and stated that "we [Frawley] are preparing a design patent." ECF No. 100-2 at 14, ¶ 15 (alteration in original). Frawley did not consult with any other practitioners prior to preparing or filing the application, and he hired someone from the Internet to prepare the drawings for the application. Frawley attempted to file the first application on April 20, 2017, by registering as a guest user on the USPTO Electronic Filing System. After doing so, Frawley did not take any steps to follow-up on the status of the application. The USPTO subsequently sent two notices addressed to Frawley at his office, the first on April 21, 2017, the second on June 13, 2017, indicating that the application had not been given a filing date because it was incomplete. On August 18, 2017, the USPTO sent a third notice to Frawley, indicating that the proceedings for the application had been terminated. Frawley testified that he never received any communication from the USPTO concerning the D206 application, and he specifically denied ever receiving the June 13th and August 18th notices.

In June and July of 2017, Frawley communicated with True and another Integrity employee about the possibility of filing a second patent application that would apply to a new step-clip technology design "for use by competitors" that would "block competitors from getting around the first patent [application]" that was filed. ECF No. 100-2 at 17, ¶¶ 33, 36. On July 18, 2017, Frawley received an email from the Integrity employee, which he understood to be an instruction to begin preparing the second patent design application. On August 8, 2017, Frawley sent an email to True confirming that he had filed two design patent applications.⁴ ECF No. 100-2 at 17, ¶ 39. However, when Frawley represented to True that he had filed a second design patent application for the Competitor Step-Clip, he had not filed that application. In May of 2018, Frawley again represented to Integrity that he had filed two design patent applications the previous year, one in April and one in June. He also told True that the DuraLife Step-Clip design patent application had a one-year shelf life, even though he did not believe or know that that was true.

In early 2018, Frawley learned that True was considering selling some of Integrity Composites' assets. At Integrity's request, Frawley prepared an Intellectual Property Agreement Schedule, an Asset Purchase Agreement, and a Purchase Price Allocation Agreement. Frawley was also responsible for communicating with Barrette's counsel, Attorney Deborah McGowan, about intellectual-property-related matters during the negotiations.⁵

B. Negotiations Between Barrette and Integrity

In the fall of 2017, Barrette learned from a private capital investment firm, NextGen Capital, that Integrity Composites was open to being acquired. By early April 2018, desAutels and True were involved in negotiations regarding Barrette's potential acquisition of Integrity Composites.⁶ In May 2018, Barrette sent a Letter of Intent to Integrity indicating that it was interested in purchasing "all or substantially all" of Integrity Composites' assets. ECF No. 101-1 at 11, ¶ 9. The Letter of Intent provided that Barrette would acquire all of Integrity Composites' intellectual property, including the design patent application for the DuraLife Step-Clip, but it did not reference a second pending patent application for the Competitor Step-Clip.

Originally, of the two patent applications, Barrette only intended to purchase the DuraLife application, but in June 2018, Integrity offered to add the Competitor Step-Clip...