Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Pa.: Former employee’s false advertising claims against casket manufacturer fail, (Mar 7, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by a casket manufacturer against a former employee for breach of contract following the acquisition of the employee’s family casket business, the employee failed to allege sufficient facts to pursue counterclaims against the manufacturer for false and misleading advertising in violation of the Lanham Act and the New York Deceptive Acts and Practices Law, the federal district court in Pittsburgh has ruled (The York Group, Inc. v. Pontone, March 6, 2014, Conti, J.).

Harry Pontone and his son, Scott, were engaged in the business of manufacturing and distributing caskets for many years. In 2005, the York Group, through a subsidiary, acquired all of the company’s assets. After the acquisition, Harry and Scott served as members of York Group’s board of directors and executed “key employee” employment agreements with York. The agreements prohibited Harry and Scott from (1) engaging in a competing business during their terms of employment and for an additional three years; (2) disclosing confidential information with York’s written consent; and (3) appropriating York business opportunities for their own benefit. In 2007, Scott voluntarily resigned his position from York, receiving severance compensation for a period of three years. His employment agreement was amended to extend the prohibition on soliciting York customers until 2010 and soliciting York employees until 2011. In 2010, Scott became a sales consultant for the Batesville Casket Company, the main competitor of York. Two York employees also left their positions and went to work for Batesville. York filed suit against Scott and Batesville, alleging breaches of the amended employment agreement. Scott filed a series of counterclaims against York for false and misleading advertising, among other claims. York moved for summary judgment of the counterclaims.

The court found that Scott failed to sufficient allege counterclaims of false and misleading advertising under the Lanham Act. To proceed with claims under the Lanham Act, Scott must demonstrate that York made false statements in connection with any goods or services, or conveyed misrepresentations in commercial advertising or promotion. Scott claimed that York falsely stated, in a press release announcing Harry’s retirement from York in 2010 and discussing the Pontone family’s contributions to the funeral service industry, that customers were served at the same location at which Harry started the business 80 years earlier, even though the facility was no longer being utilized. The court noted that no reasonable finder of fact would conclude that the statements were made in “commercial competition with” other businesses or with the intention of influencing customers, given the context and purpose of the press release.

Additionally, Scott failed to show the literal falsity of York’s advertisements or promotions of certain price increases. Scott’s evidence of York’s internal emails suggesting that prices may have to be adjusted in response to Batesville’s price list was insufficient to show that any particular statement by York was literally false.

Finally, Scott failed to establish a claim for false advertising under the New York General Business Law. He failed to demonstrate that York engaged in an act or practice that was deceptive or misleading in a material way since he provided no evidence of specific communications that would deceive or mislead an objectively reasonable person.

The case is No. 10-1078.

Attorneys: Brian T. Himmel (Reed Smith) for The York Group, Inc., Milso Industries Corp, And Matthews International Corporation. Mindy J. Shreve (Deforest Koscelnik Yokitis Skinner & Berardinelli) for Scott Pontone. A. Patricia Diulus-Myers (Jackson Lewis P.C.) for Batesville Casket Company, Inc.

Companies: The York Group, Inc.; Milso Industries Corporation; Matthews International Corporation; Batesville Casket Company, Inc.; Pontone Casket Company, LLC

Cases: Advertising StateUnfairTradePractices PennsylvaniaNews