Empire Today Llc v. Nat'l Floors Direct Inc.

788 F.Supp.2d 7

EMPIRE TODAY, LLC, Plaintiff,

v.NATIONAL FLOORS DIRECT, INC., et al., Defendants.

Civil Action No. 08–11999–JLT.

United States District Court, D. Massachusetts.

June 2, 2011.

John C. Blessington, David J. Byer, David M. Glynn, Mark E. Haddad, K & L Gates LLP, Eric D. Levin, Hinckley Allen & Snyder, LLP, Boston, MA, for Counter Claimant.Matthew J. Caccamo, John Letchinger, Wildman, Harrold, Allen & Dixon LLP, Chicago, IL, Courtney Worcester, Foley & Lardner, LLP, Boston, MA, for Counter Defendant.Michael DeMarco, K & L Gates LLP, Boston, MA, for Defendant.Koreen Ryan, Empire Today, LLC, Northlake, IL, for Plaintiff.

MEMORANDUM

TAURO, District Judge.I. Introduction

This case involves a dispute primarily between Empire Today, LLC (“Plaintiff”) and National Floors Direct, Inc. (“NFD”), two at-home (or on-site) carpet and flooring providers. Plaintiff brought various claims against NFD, including tortious interference, Lanham Act violations (trademark infringement as well as false or misleading advertisement), and alter ego liability. NFD counterclaimed for defamation, tortious interference, false or misleading advertisement under the Lanham Act, and abuse of process.

During a thirteen-day trial, the jury heard most of Plaintiff's and NFD's claims, excluding those claims under Massachusetts General Laws chapter 93A, which this court has reserved.¹ The jury found against Plaintiff on all of its claims and in favor of NFD on its abuse of process counterclaim. Following this adverse jury verdict, Plaintiff filed a Motion for Judgment as a Matter of Law, Pursuant to Fed.R.Civ.P. 50(b) [# 303]. Additionally, both Plaintiff and NFD filed the following motions asserting claims under Chapter 93A: NFD's Motion for Judgment on Its Counterclaim Under M.G.L. Chapter 93A [# 312], Plaintiff's Motion to Strike Defendant's Motion for Judgment on Its Chapter 93A Counterclaim [# 324], Plaintiff's Motion for Judgment on Its Chapter 93A Claim [# 327], and NFD's (1) Opposition to Empire's Motion to Strike NFD's Chapter 93A Counterclaim; (2) Opposition to Empire's Motion to Strike NFD's Fee Petition, or in the Alternative, (3) NFD's Motion to Amend Counterclaim [# 333].

Presently at issue are the aforementioned motions as well as NFD's request for attorneys' fees: NFD's Application for Attorney's Fees and Costs Under Mass. Gen. L. Ch. 93A [# 316], NFD's Motion for Attorneys' Fees Pursuant to 15 U.S.C. § 1117(a) [# 321], and Plaintiff's Motion to Strike Defendant's Application for Attorney's Fees and Costs Under Mass. Gen. L. Ch. 93A [# 331]. For the following reasons, Plaintiff's Motions and NFD's Motions are DENIED.²

II. Background

Plaintiff brought this suit against NFD on December 2, 2008.³ After filing an Answer on March 3, 2009,⁴ NFD submitted an Amended Answer and Counterclaim on October 12, 2009.⁵ Eventually Plaintiff filed a Third Amended Complaint,⁶ which contained ten counts. Seven of those counts were directed against NFD, five of which were as follows ⁷: tortious interference with Plaintiff's contractual relationships, tortious interference with Plaintiff's advantageous business relationships, Lanham Act violations for trademark infringement ⁸ and false or misleading advertisement,⁹ and alter ego liability.¹⁰

Plaintiff also alleged three counts against former sales representatives and employees for breaching their sales agreements, confidentiality agreements, and duties of loyalty.¹¹ Plaintiff reached settlement agreements with these individuals before the end of trial.¹²

NFD filed its Answer and Counterclaim,¹³ including a Chapter 9A claim that this court reserved for its own judgment. NFD's Counterclaim alleged five counts: defamation, tortious interference with NFD's advantageous business relationships, a Lanham Act violation for false and misleading advertising, and abuse of process.

Plaintiff brought two Chapter 93A claims against NFD. One Chapter 93A claim alleged that NFD engaged in unfair or deceptive business practices by interfering with Plaintiff's contractual relationships, inducing Plaintiff's employees to violate their duties of loyalty, and using Plaintiff's trade secrets and other confidential and proprietary information.¹⁴ Plaintiff's other Chapter 93A claim alleged that NFD engaged in unfair methods of competition and unfair or deceptive business practices in trade or commerce by NFD's use of certain advertising statements that Plaintiff alleged NFD could not substantiate.¹⁵

In its Chapter 93A claim, NFD alleged that Plaintiff engaged in unfair or deceptive acts in the conduct of trade or commerce by its advertising, its defamation of NFD, and its interference with NFD's business relationships. ¹⁶

After a thirteen-day trial that excluded the Chapter 93A claims, the jury found against Plaintiff on all of its claims, in favor of NFD solely on its abuse of process counterclaim, and awarded NFD $500,000.00.¹⁷

A. Findings of Fact ¹⁸

Based upon the evidence, the jury could have found the following facts. ¹⁹ Plaintiff is a shop-at-home, home improvement company that sells and installs carpet and flooring in, among other places, the Boston and Hartford areas.²⁰ NFD is a direct competitor of Plaintiff in the Boston and Hartford markets.²¹ Unlike other companies, neither Plaintiff nor NFD utilizes storefronts, and both have a comparatively limited selection of inventory.²² Both Plaintiff and NFD emphasize next-day installation,²³ focus on television advertising,²⁴ and rely on effective salespeople.²⁵

Plaintiff's former employees and sales representatives entered into agreements that included confidentiality, non-compete, and non-solicitation provisions. ²⁶ Some of those employees had been managers.²⁷ Roughly ten managers and thirty sales representatives left Plaintiff to work for NFD, ²⁸ some under acrimonious conditions.²⁹

Plaintiff argued that NFD, through its employees and management, had solicited Plaintiff's employees to leave Plaintiff and join NFD.³⁰ One former sales representative for both Plaintiff and NFD testified as such.³¹ This former representative also testified that NFD had Plaintiff's flooring samples and documentation, including (allegedly) confidential par sheets ³² and a “pre-installation checklist.” ³³ Her testimony, however, was sharply disputed by various individuals' testimony ³⁴ and at times contradicted by her cross-examination.³⁵

In fact, both Parties may have had each others' old par sheets and commission structure.³⁶ But it is unclear whether this material was proven as confidential and the Parties do not press the matter post-trial on the 50(b) or 93A claims.

Since April 2006, NFD has advertised commercials that referenced a “15% or its [sic] free” campaign (“15% Promotion”).³⁷ These television commercials promise to beat “anyone's price by 15% or it's free.” ³⁸

Plaintiff alleged that NFD was not providing the discount advertised in its 15% Promotion.³⁹ Plaintiff pointed to (1) a customer order filled out by a sales representative that contained a discount of less than 15% and (2) customer orders in which NFD, namely Dan Rosenberg, reduced the prices by only 13%, despite claiming that he was offering a 15% discount.⁴⁰

In both instances, however, customers were only entitled to receive 15% off of their orders if certain conditions were met. Customers, for instance, had to present a written quote from another company for the same quality and quantity of flooring that they were seeking from NFD.⁴¹ The aforementioned order filled out by the sales representative did not receive 15% off because it did not demonstrate the necessary prerequisites.⁴²

As for the second point, Dan Rosenberg explained that he sometimes took 15% off a competitor's price by dividing the competitor's price by 1.15.⁴³ This price calculation indeed results in only 13% off of the competitor's price, whereas multiplying by 0.85 would result in a 15% price reduction. Of the 10% of NFD's orders that beat competitor's prices, this calculation by Dan Rosenberg was used in about 10% of those orders.⁴⁴ Otherwise, NFD beat its competitors' prices by 15%.⁴⁵ Moreover, when the conditions of the 15% Promotion were met, the sales representatives calculated the 15% discount in the field by multiplying by 0.85.⁴⁶ NFD also cast Dan Rosenberg's calculations both as an issue of internal disagreement ⁴⁷ and a method used by NFD's own management software.⁴⁸

NFD asserted various counterclaims against Plaintiff. The only two relevant here are Count IV, abuse of process,⁴⁹ and Count V, Chapter 93A. ⁵⁰ A chronicling of the evidence paints the following story. Plaintiff had identified NFD as an aggressive challenger in the Boston market by April 2007.⁵¹ By September of 2007, Plaintiff expressed that its most significant challenge came from NFD.⁵² As a marketing tactic, Plaintiff performed at least eight “secret shops.” ⁵³

Plaintiff's fortunes worsened as NFD's market share grew and Plaintiff's market share decreased.⁵⁴ The causes behind the Parties' changes in market positions were hotly contested at trial. NFD's growing market share in Boston was, at least in large part, attributable to NFD's low prices.⁵⁵

Although some of Plaintiff's employees were calling for Plaintiff to lower its prices by October 30, 2007 (and likely by June 2007),⁵⁶ Plaintiff did not decide to cut its prices until April 14, 2008.⁵⁷ Meanwhile, from 2006 to 2009, Plaintiff cut its spending on advertising in the Boston market in half,⁵⁸ which was more than it had reduced its spending on advertising in other markets.⁵⁹

Plaintiff also had management problems in its Boston office.⁶⁰ Plaintiff had planned to close its Boston office in spring of 2008.⁶¹ But Plaintiff eventually cancelled this plan partly because it did not want to leave NFD without direct competition, which would ease NFD's expansion into other areas.⁶²

Plaintiff also felt that NFD was poaching Plaintiff's representatives. ⁶³ In response, Plaintiff began sending...