Leading Tech. Composites v. MV2, LLC., Civil Action No. CCB-19-1256

LEADING TECHNOLOGY COMPOSITES, INC., v. MV2, LLC.

Civil Action No. CCB-19-1256

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

October 8, 2019

MEMORANDUM

Leading Technology Composites ("LTC") and MV2 are two companies that make and sell protective equipment. LTC sued MV2 alleging patent infringement, and MV2 countersued, requesting declaratory relief and alleging tortious interference with prospective advantage. LTC filed a motion to dismiss the tortious interference claim (ECF 18). It has been fully briefed. For the reasons set forth below, it will be granted.

FACTS

LTC is a Kansas company that sells products that protect personnel and vehicles. Compl. ¶¶ 2, 3. It holds a patent (the "'598 patent") for an improved armoring panel. Id. ¶ 9. MV2 is a Maryland company that provides armor systems for personnel and vehicles. Id. ¶¶ 12, 15. On April 29, 2019, LTC filed a complaint against MV2 alleging infringement of its '598 patent. Id. ¶¶ 18, 19. On May 23, 2019, MV2 filed a counterclaim against LTC, requesting declaratory judgment relating to the validity and infringement of the patent, and alleging tortious interference with prospective advantage. See Counterclaim, ECF 16.

In regard to the tortious interference claim, MV2 alleges the following: On or about October 2017, LTC suggested that MV2 purchase armor panels from LTC in order to fulfill a government contract, but MV2 declined. Id. ¶ 55, 57. LTC then communicated its intention to interfere with or obstruct MV2's business, and, as part of that, filed the complaint in this case. Id. ¶ 58. The complaint, however, is baseless because LTC knows or should know that the '598 patent is invalid and MV2 is not infringing the patent. The patent is invalid because, in its application for the patent, LTC failed to disclose prior art and the sale of non-LTC products that were material to the patentability of the claims. Id. ¶¶ 14-20. Additionally, LTC filed this complaint after being advised by Mr. Bockbrader, an inventor of the patent and now a consultant for MV2, that the MV2 products used the "C"-shaped edge protector, id. ¶ 27; LTC also actually or constructively knew that armor panels with a "C"-shaped or "U"-shaped edge protector channel were already being sold prior to its application for the patent.¹ Id. ¶¶ 22-24. Further, prior to filing the complaint, LTC did not inspect the interior cross-section of any allegedly infringing MV2 product. Id. ¶ 25.

According to MV2, in addition to filing the complaint, LTC interfered with MV2's business in two other ways. First, they sent a letter to ITEN, a company that provides certain armor panel materials to MV2, through counsel, advising them of the lawsuit and requesting they retain certain documents. Id. ¶¶ 63-67. MV2 alleges that this litigation hold was overly broad, unduly burdensome, and vexatious; that LTC has previously allowed ITEN to supply the armor materials to other companies without objection and without a license under the '598 patent; and that LTC sent the letter to ITEN with no intent to file suit against ITEN, no intent to request discovery from ITEN, and with the primary purpose to interfere with the business relationship between MV2 and ITEN. Id. ¶¶ 70-74. Second, LTC communicated with Mr. Bockbrader, an inventor of the patent and consultant to MV2, through counsel, inquiring about the relationship between Mr. Bockbrader and MV2. Id. ¶¶ 77-81. MV2 alleges LTC's actions have caused it to limit essential communications with suppliers, business partners and consultants; required it todisclose the lawsuit to current and prospective business partners and prospective financiers; disrupted its ability to fulfill existing and prospective government contracts; damaged its reputation; and compromised its relationships with ITEN, with whom it had an existing open-ended "verbal" contract, and Mr. Bockbrader. Id. ¶¶ 76, 83-97.

On June 13, 2019, LTC filed this motion to dismiss, arguing that the underlying conduct is protected by the absolute litigation privilege and/or the Noerr-Pennington doctrine, and, alternatively, that MV2 fails to state a claim for tortious interference.²

STANDARD OF REVIEW

To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "To satisfy this standard, a plaintiff need not 'forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). "Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is 'probable,' the complaint must advance the plaintiff's claim 'across the line from conceivable to plausible.'" Id. (quoting Twombly, 550 U.S. at 570). Additionally, although courts "must view the facts alleged in the light most favorable to the plaintiff," they "will not accept 'legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments'" in deciding whether a case should survive a motion to dismiss. U.S. ex rel. Nathan v. Takeda Pharm. North Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013) (quoting Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012)).

ANALYSIS

Absolute Litigation Privilege:

Maryland has long recognized an absolute litigation privilege in defamation suits, immunizing judges, witnesses, parties, and counsel from liability for "defamatory statements uttered in the course of a trial or contained in pleadings, affidavits, depositions, and other documents directly related to the case." Di Blasio v. Kolodner, 233 Md. 512, 522 (1964). The privilege applies not just to statements made in judicial proceedings, but also to certain out-of-court statements that are "connected to some pending or ongoing proceeding." Norman v. Borison, 418 Md. 630, 650, 656 (2011). An out-of-court statement made by witnesses, parties, or judges is privileged if it satisfies two prongs: 1) the proceeding with which it is connected has an important public function and adequate procedural safeguards, and 2) the context of the statement indicates it "was made during the course of the proceeding." Id. at 652, 657-58. The second prong requires considering the purpose of the statement, the individual's actions when making the statement, and to whom the statement was made. Id. at 658.

Beginning in 2013 in Mixter v. Farmer, Maryland courts began suggesting or assuming, without so holding, that the privilege applies not just to defamation claims but to other torts. Mixter v. Farmer involved a dispute between two lawyers, wherein one (Farmer) sent letters "to various Maryland attorneys discussing [Mixter's] 'unprofessional behavior'" and "seeking information about other lawyers' negative experiences with Mixter for a potential complaint with the Attorney Grievance Commission of Maryland." 215 Md. App. 536, 541-42 (2013). Farmer also sent a letter to one of Mixter's clients. Id. at 542. Mixter sued Farmer for various torts, including tortious interference with prospective advantage. Id.

The court first addressed the absolute litigation privilege in the context of defamation, noting that "even a meritless complaint is privileged and the complainant's motive is immaterial." Id. at 545. The Mixter court then addressed whether the privilege also applied to the other allegations, including the alleged tortious interference with prospective advantage. The court found that precedent and policy considerations suggested that the privilege should be extended to other torts when they "arise from the same conduct as the defamation claim." Id. at 546-47. The court, however, based its holding on two separate rationales: either that the letters were covered by absolute privilege, or that the defendant was entitled to summary judgment regardless. Id. at 549-50.

Subsequently, in O'Brien & Gere Engineers, Inc. v. Salisbury, a case applying the litigation privilege to contract claims, the court observed that the litigation privilege "is not confined in the law of torts to matters of defamation." 447 Md. 394, 410 (2016) (internal citation omitted). See Attny Grievance Comm'n of Md. v. Frost, 437 Md. 245, 268 n.14 (2014) (The absolute litigation privilege "is a broad defense to tort claims[.]"); see also State Farm Mut. Auto. Ins. Co. v. Slade Healthcare, Inc., 381 F. Supp. 3d 536, 570 (D. Md. 2019) ("Maryland courts have only recently concluded that the absolute litigation privilege applies to claims of tortious interference with prospective business advantage."). The Maryland Court of Special Appeals, however, recently noted, quoting Mixter, that "Maryland law is not settled on the extent to which absolute privilege results in immunity outside of defamation cases." Md. Bd. of Physicians v. Geier, 241 Md. App. 429, 506 n.21 (2019).

Tortious interference with prospective advantage:

The elements of a claim for tortious interference with prospective advantage are:

(1) intentional and wilful acts; (2) calculated to cause damage to the plaintiffs in their lawful business; (3) done with the unlawful purpose to cause such damage and loss,without right or justifiable cause on the part of the defendants (which constitutes malice); and (4) actual damage and loss resulting.

Audio Visual Assocs., Inc. v. Sharp Elec. Corp., 210 F.3d 254, 261 (4th Cir. 2000) (quoting Alexander & Alexander, Inc. v. B. Dixon Evander & Assocs., Inc., 336 Md. 635, 652 (1994)). The third element requires that the acts be independently wrongful. Maryland courts have stated that "violence or intimidation, defamation, injurious falsehood or other fraud, violation of criminal law, and the institution or threat of groundless civil suits or criminal prosecutions in bad...