PA Federal Business Decisions Volume 14, No. 3

Business Litigation Update

Pennsylvania Federal Business Decisions Bridget M. Gillespie and Henry M. Sneath, Business Decisions Editors (Originally published in the Summer 2009 edition of the Pennsylvania Bar Association's Civil Litigation Update)

Third Circuit Affirms Dismissal and Sanctions against Pro Se Plaintiff's Copyright Infringement Case Against Televangelist Joel Osteen

In Douglas v. Osteen et al., No. 08-3097, 2009 U.S. App. LEXIS 5879 (3d Cir. Mar. 13, 2009) ( per curiam), the Third Circuit affirmed the Eastern District's decision to dismiss with prejudice a copyright claim filed by a serial pro se plaintiff. The Third Circuit also affirmed the district court's decision to impose sanctions against that plaintiff.

Plaintiff Herman Douglas wrote a book ("Prayer Power in the Eyes of Faith"), trademarked its title, and copyrighted its contents. In his complaint, Douglas alleged that Joel Osteen, a popular televangelist and author of the bestseller "Your Best Life Now," infringed on the copyright and the trademark. Osteen's book allegedly violated the copyright by borrowing phrases from Douglas's book; it allegedly infringed on the trademark by repeatedly using the phrase "eyes of faith." Douglas further alleged that Osteen's lawyer interfered with Douglas's contractual relationship with an unnamed legal adviser. Defendants included Osteen, Osteen's publisher, and its distributors and retailers.

The Third Circuit held that the Eastern District's decision to dismiss Douglas's claims against all Defendants was proper. First, federal copyright law does not prohibit two authors from "employing similar literary methods to write books on similar themes," which was what Douglas had accused Osteen of doing. Second, federal trademark law requires a "likelihood of confusion" as a basis for an infringement claim, and Osteen's use of the phrase "eyes of faith" was not likely to cause confusion. Finally, Douglas did not allege that he had a contractual relationship with his legal adviser or explain how Osteen's lawyer - who allegedly told the adviser only that he would be filing a motion to dismiss - interfered with it.

The Third Circuit then noted that while Douglas had been previously sanctioned for filing frivolous lawsuits, he had nevertheless filed a number of meritless motions with the district court ( e.g., seeking a default judgment against Osteen after Osteen entered an appearance) and filed swiftly-rejected complaints against counsel for Osteen and the publisher with the Pennsylvania State Bar. The Third Circuit therefore affirmed the district court's decision to impose a $5,000 sanction against Douglas.

-- Contributed by Jason A. Spak, Esq. of Picadio Sneath Miller & Norton, P.C., Pittsburgh; jspak@psmn.com

Motion to Dismiss Granted Against Pro Se Plaintiff in the Seduction Advice Business for Claims of Violations of the Lanham Act, Fair Housing Act and Antitrust Law

In Parker v. Viacom International, Inc. et al., 605 F. Supp.2d 659 (E.D. Pa. March 11, 2009) (opinion by Robreno, J.), pro se Plaintiff Gordon Parker, an individual in the business of providing seduction advice, initiated an action against Defendants Viacom International, Inc., Venusian Arts Corp. ("VAC"), and Erik Von Markovik. VAC is a corporation that provides information and live seminars on dating-related advice and Markovik is an owner/operator of VAC. Parker alleged that Viacom's reality television program, "The Pickup Artist" ("TPUA"), which debuted on August 5, 2007, resulted in violations of the Lanham Act, Fair Housing Act and Antitrust Law.

With respect to Lanham Act violations, Parker first alleged, as part of a claim for misleading advertising, that Viacom lied about whether certain women in a dance club scene were paid actors, Viacom faked an entire particular scene, and Viacom overstated the social awkwardness of male contestants. In response, Defendants moved to dismiss the claim on the grounds that Parker lacked standing, the alleged false statements did not constitute commercial advertising or promotion, and Parker's alleged injuries were speculative in nature. The court held that to have standing to assert a false and misleading advertising claim under the Lanham Act, a plaintiff must show that he has a reasonable interest to be protected against false advertising. In comparing factors identified by the Third Circuit to determine whether a plaintiff has a reasonable interest, including (1) the nature of the alleged injury, (2) the directness or indirectness of the asserted injury, (3) the proximity or remoteness of the party to the alleged injurious conduct, (4) the speculativeness of the claim, and (5) the risk of duplicative damages or complexity in apportioning claims, the court determined that Parker's claim failed. Specifically, the court concluded that Parker alleged a commercial interest in the seduction education industry but failed to allege a competitive harm. Additionally, Parker's injuries were remote because he failed to state a direct connection between Defendants' false statements and his injuries. Finally, the court found that Defendants would face multiple liability for the same conduct if it allowed Parker to establish standing on these facts.

Also, in regard to Lanham Act violations, Parker claimed that because he was in the business of providing seduction advice, he had a first use trademark to use of the term "pivot," which describes a seduction technique, that he first used in his 1999 book entitled "29 Reasons Not to Be a Nice Guy." Parker contended that Defendants' use of the term constituted false designations of the origin. To establish a false designation of origin claim under the Lanham Act, a plaintiff must show: (1) defendant uses a false designation of origin; (2) that such use of a false designation occurs in interstate commerce in connection with goods and services; (3) that such false designation is likely to cause confusion, mistake, or deception as to origin, sponsorship, or approval of plaintiff's goods or services by another person; and (4) that plaintiff has been or is likely to be damaged. In response to Defendants' argument that Parker failed to allege the essential elements of the claim, the court determined that, because Defendant was the producer or "origin of" TPUA, the false designation of origin element was unsatisfied. The court concluded that because Defendants' production of TPUA was the origin of the good at issue, rather than Parker's term "pivot," Parker failed to satisfy the false designation of origin element. Moreover, with respect to Parker's claim that he had a first use trademark, the court determined that Parker's allegations, in fact, weakened his claim that he used the term as a trademark or that the term acquired a secondary meaning.

With respect to the Fair Housing violations, Parker claimed that Markovik attempted to harass him by posting messages on the Internet so that Parker would move from his residence and, as a result, Parker would lose his Internet access. According to the court, to assert a violation under the Fair Housing Act, a plaintiff must show that (1) he is the victim of a discriminatory housing practice, (2) which makes unavailable or denies housing on account of a protected classification. Here, the court held that Parker made no such claim and merely described Defendants' behavior as harassment, designed to make him lose access to the Internet.

Parker also alleged that, as a violation of the Antitrust Law, the seduction community migrated from a newsgroup on USENET to another website, which caused a shift in the balance of power to Markovik. Section 2 of the Sherman Act makes it unlawful to monopolize, or conspire to monopolize, interstate or international commerce. The courts have defined anti-competitive conduct as conduct to obtain or maintain monopoly power as a result of competition on some basis other than the merits. Parker contended that Defendants attempted to divert Internet traffic from his website. However, because Parker failed to allege harm to the competitive process as a whole, the court dismissed his claim.

-- Contributed by Picadio Sneath Miller & Norton, P.C., Pittsburgh;

SEC Fails to Satisfy Burden to Show That Chairman Unlawfully Tipped Material, Nonpublic Information to Outsider

In Securities and Exchange Commission v. Anton, Civil Action No. 06-2274, 2009 U.S. Dist. LEXIS 34889 (E.D. Pa. April 23, 2009) (opinion by Sanchez, J.), the Securities and Exchange Commission ("SEC") alleged that Frederick W. Anton, III, violated securities laws by disclosing material, nonpublic information to David L. Johnson. Anton served as Chairman of the Board of Directors for PMA Capital Corporation, which was a publicly-traded insurance holding company. Johnson was a retired former PMA executive who regularly followed PMA's stock price, reviewed PMA's financial reports and attended PMA's annual meetings. PMA's two main businesses included PMA Insurance Group, which was the primary commercial insurance business, and PMA Re, which was the reinsurance business.

From the period between 2000 and 2003, PMA Re increased the amount of its loss reserves, which is an estimate of future amounts needed to pay reported and unreported insurance claims, several times as a result of experiencing a higher volume of reported claims from its insured companies. In late October 2003, Johnson read an analyst report, which had reduced PMA's classification from "Neutral" to "Underperform." Subsequently, Johnson spoke with John Smithson, the President and CEO of PMA, who informed Johnson that the report was factual but that PMA would be reporting its third quarter earnings in the normal course and more information would be available at that time.

On October 31, 2003, Johnson contacted Anton, and following their conversation, Johnson sold 20,000 shares of PMA stock. Johnson sold another 20,000 shares on November 3, 2003, and in the interim, he advised his children to sell their shares of PMA stock. At that time, PMA's shares sold at an average price of $13.17. On November 4, 2003, PMA announced it would be increasing its loss reserves by approximately $150 million and planned to suspend dividends. When the market closed on November 4, 2003, PMA's stock closed at $5.03 per share. In 2005, the SEC commenced an action against Johnson for allegedly committing insider trading. Johnson settled the action by paying the amount of losses he and his son avoided, prejudgment interest and a civil penalty for a total amount of $786,449. Subsequently, the SEC commenced this action against Anton for alleged tipper liability for disclosing information to Johnson.

According to the court, liability under the classical theory of insider trading will be imposed on corporate insiders who trade on the basis of confidential information obtained by reason of their position with the corporation. This legal theory applies to officers, directors and other permanent insiders of a corporation, and also to attorneys, accountants, consultants, and others who temporarily become fiduciaries of a corporation. The court determined that for the SEC to prove its case, the SEC had to demonstrate by a preponderance of the evidence that Anton, with scienter, disclosed material, nonpublic information to Johnson, an outsider of PMA, in breach of a fiduciary duty to PMA shareholders. Furthermore, the SEC had to establish the following facts: (1) Johnson sold PMA stock while in possession of the inside information; (2) Johnson knew or should have known that Anton violated a relationship of trust by relaying the inside information; and (3) Anton benefitted from the disclosure.

The SEC's case against Anton relied heavily on the conversation between Anton and Johnson on October 31, 2003. The court determined, however, that the individuals were not credible in their testimony regarding the conversation. Anton's testimony was discredited based on, inter alia, his inconsistency in recollection of the conversation; Johnson's testimony was discredited based on, inter alia, his inconsistencies in his stated reasons for calling Anton. Because the accounts of the conversation could not be credited, the court then considered circumstantial evidence to determine whether Anton made such a disclosure to Johnson. With respect to the dividend elimination, the court concluded that the record failed to show that Anton knew about the dividend elimination when he spoke to Johnson on October 31, 2003, and thus, no conclusive evidence existed to prove that Anton disclosed the information to Johnson in their conversation. Furthermore, the court determined that the record lacked any evidence to demonstrate that any discussions were held regarding the dividend elimination prior to the meeting on November 2, 2003, at which time the Board decided to suspend the dividend. Also, with respect to the reserve increase, the court concluded that although Anton could have been aware of the potential reserve increase based on his experience, the record failed to confirm that he was involved in any discussions regarding the increase subsequent to September 30, 2003, which was the date when Anton attended his last meeting of the Executive Committee of the Board of Directors. In fact, the minutes from the last meeting Anton attended revealed that at that time PMA anticipated a $50-60 million reserve increase, which was a stark contrast to the $150 million increase announced on November 4, 2003.

In addition to determining that Anton did not make a disclosure to Johnson, the court concluded that the SEC failed to prove that the information regarding the increase in loss reserves was material. According to the court, materiality relates to whether the tipped information, if divulged to the public, would have been likely to affect the decision of potential buyers and sellers. Furthermore, assuming that the evidence showed Anton had disclosed material, nonpublic information, the court concluded that the SEC failed to establish that Anton had personally benefitted, either directly or indirectly, from any disclosure. As to the remaining elements, the court determined that there could be no finding of scienter or breach of a fiduciary duty because the SEC failed to meet its burden of establishing by a preponderance of the evidence that Anton disclosed material, nonpublic information.

-- Contributed by Picadio Sneath Miller & Norton, P.C., Pittsburgh;

Dismissed Derivative Filing Failed Properly to Plead Futility

In the case of In re Adolor Corp. Deriv. Litig., No. 04-3649, 2009 U.S. Dist. LEXIS 40360 (E.D. Pa. May 12, 2009) (opinion by, Surrick, J.), the Eastern District dismissed a derivative suit by shareholders against Adolor Corporation's officers and directors. The shareholders never made a pre-complaint demand, which is normally a precondition for a derivative suit, and the court found that they did not properly allege that a demand would have been futile.

Adolor was a Delaware biopharmaceutical company, and the shareholders alleged that it should have sued its officers and directors for misleading shareholders. Shareholders alleged that Adolor's board members misrepresented the results from FDA trials of a pain reliever that Adolor hoped to sell as a treatment for post-operative ileus, a complication following abdominal surgery.

The court applied Fed. R. Civ. P. 23.1 and ruled that to proceed without making a pre-complaint demand, the shareholders who filed the action had to plead with particularity that the demand would have been futile under Delaware law. To meet that standard, the shareholders had to allege that the officers and directors: a) systematically failed to exercise appropriate oversight over Adolor; or b) received benefits from Adolor that, in light of the circumstances, made them so beholden to Adolor as to render them incapable of independent oversight. Because the shareholders only alleged that the officers and directors received benefits from Adolor, the court ruled that the shareholders had not met Rule 23.1's heightened pleading standard and dismissed the complaint.

The court first found that the shareholders made no allegations that Adolor's board as a whole systematically failed to exercise appropriate oversight. The shareholders had alleged that members of the board's compensation and audit committees had conflicts which made it impossible for them to fulfill their duties. But the court found that these allegations were insufficient to meet the relevant pleading standard. Alleging that the audit committee failed to meet at all might be enough to plead a systematic failure of oversight, but merely alleging the members of that committee had ethical conflicts was insufficient.

The court then found that while the shareholders had alleged that various officers and directors had received benefits from Adolor, the shareholders had not alleged that the benefits were sufficient, in light of the circumstances, to render the officers and directors incapable of independent oversight.

The shareholders' allegations about the benefits that Adolor's President and CEO received did suggest that he might have been incapable of completely independent oversight. But the allegations as to other board members - who were respectively alleged to have owned a company that sold Adolor stock; to have been friendly with another director outside the boardroom; to have served as an outside consultant to Adolor; and to have paid indirect royalties to Adolor and purchased Adolor stock in a public offering -did not meet the standard. These latter allegations showed that several officers and directors received some benefits from Adolor, but they did not show that the benefits were substantial enough to compromise these individuals' judgment.

Because the shareholders did not particularly plead enough facts to suggest that a pre-complaint demand on Adolor to sue its officers and directors would have been futile, the court dismissed the shareholders' derivative suit for failure to make such a demand.

-- Contributed by Jason A. Spak, Esq. of Picadio Sneath Miller & Norton, P.C., Pittsburgh;  jspak@psmn.com

Facebook "Friends" Status and Other Circumstantial Evidence Insufficient to Show Membership in Group Under Section 13(d) of Securities and Exchange Act of 1934

In Quigley Corp. v. Karkus, Civil Action No. 09-1725, 2009 U.S. Dist. LEXIS 41296 (E.D. Pa. May 15, 2009) (opinion by J. Pratter), the court was asked to issue a preliminary injunction against a group involved in a proxy contest. The Plaintiff, Quigley Corporation ("Quigley), alleged that a group of investors (the "Karkus Defendants") violated Sections 13(d) and 14(a) of the Securities and Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§ 78m(d) and 78n(a), when it failed to make certain disclosures. Quigley alleged that Defendants were acting in concert to replace the board of directors of Quigley at an upcoming shareholders meeting and that the Karkus Defendants had concealed the membership of Defendant John Edmund Ligums, Sr. in the Karkus Defendants' group. Quigley asked the court to enjoin the Karkus Defendants from continuing to violate Sections 13(d) and 14(a) of the Exchange Act, from participating in the proxy contest, and the counting of the proxies solicited by any Defendant or those acting in concert or participation with them on the basis of misleading proxy materials.

Quigley first asserted that the Karkus Defendants violated Section 13(d) of the Exchange Act by failing to disclose that Mr. Ligums was part of the group intending to solicit proxies for the replacement of the current board of directors of Quigley. According to the court, Section 13(d) requires any group which acquires "beneficial ownership" of more than five percent of equity securities to file disclosures with the SEC within 10 days of the acquisition. A "group" is defined by Section 13(d) as "two or more persons act[ing] as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securities of an issuer." Quigley asserted that Mr. Ligums's extensive personal and professional connections with many of the Karkus Defendants, combined with past criticisms of the Quigley management made by Mr. Ligums, demonstrated that Mr. Ligums had an agreement with the Karkus Defendants to act together to solicit proxies in order to change the management of the company.

Among the relationships that Quigley cited in support of their claims, most notable was Quigley's assertion that Mr. Ligums was Facebook "friends" with another defendant, Mr. DeShavo, and one or more of Mr. DeShavo's children. However, the court found no significance in this relationship, noting that Facebook has more than 200 million active users, and the average user has 120 "friends" on the site. Despite Quigley's assertions of these extensive relationships, however, the court found that there was no evidence that Mr. Ligums was in fact a member of the Karkus Defendants' group, and accordingly there was no requirement for the Karkus Defendants to include Mr. Ligums on their disclosure to the SEC under Section 13(d).

Quigley's claims under Section 14(a) of the Exchange Act also related to the status of Mr. Ligums as a member in the Karkus Defendants' group. Quigley alleged that the Karkus Defendants violated Section 14(a) by omitting Mr. Ligums's involvement in the group intending to solicit proxies from the other shareholders. The court ruled that based upon its ruling that Mr. Ligums was not a member of the group for purposes of Section 13(d), there was no misrepresentation made under Section 14(a). Accordingly the court denied Quigley's motion for preliminary injunction.

In addition to Quigley's motion, the Karkus Defendants filed a motion asking the court to exercise its equitable powers to force Quigley to turn over its full list of shareholders prior to the statutory date of two days prior to the meeting. The court decided to grant the motion as a pseudo-sanction based upon Quigley's actions in bringing the Karkus Defendants to court on the eve of the annual meeting and falling very short of its evidentiary burden in the preliminary injunction hearing.

Violation of Settlement Agreement Not Grounds for Contempt Where Agreement Was Not Incorporated Into Court Order

In Gallup, Inc. v. Kenexa Corp., Civil Action No. 00-5523, 2009 U.S. Dist. LEXIS 41304 (E.D. Pa. May 15, 2009) (opinion by J. Stengel), the Plaintiff, Gallup, Inc. ("Gallup"), asked the court to sanction the defendant, Kenexa Corporation ("Kenexa"), for violation of a settlement agreement. Gallup had previously brought a copyright infringement action against Kenexa, a competitor of Gallup, alleging unlawful use of Gallup's employee engagement survey instrument. On January 30, 2006, the parties entered into a settlement agreement over which the court retained jurisdiction.

Gallup filed a motion for sanctions alleging that Kenexa breached the settlement agreement when it failed to stop using prohibited items on some surveys and failed to inform some clients that they were discontinuing those items. Kenexa admitted that it breached the agreement as alleged by Gallup, but contended that the breaches were a result of human error and that it had acted in good faith.

The court declined to sanction Kenexa for its admitted violations. In doing so, the court distinguished an order that retained jurisdiction with one that expressly incorporates the substance of the agreement. The court held that a contempt proceeding is only appropriate for violation of a court order, and because the court did not incorporate any of the terms of the agreement into its order when it retained jurisdiction, the violation of the settlement agreement could not give rise to contempt. As a remedy, however, the court ordered Kenexa to abide by the terms of the agreement that it had admitted to breaching, so that in the case of further breaches, Kenexa would be subject to the contempt powers of the court.

Claim Construction Reveals that Product Did Not Infringe Patents Literally or Under Doctrine of Equivalents

Arlington Industries, Inc. v. Bridgeport Fittings, Inc., No. 3:06-CV-1105, 2009 U.S. Dist. LEXIS 39170 (M.D. Pa. May 8, 2009) (opinion by J. Caputo), involved a patent infringement action filed by Arlington Industries, Inc. ("Arlington") against Bridgeport Fittings, Inc. ("Bridgeport"). In the action, Arlington claimed that Bridgeport's electrical connector adaptor infringed two of Arlington's patents, designated by U.S. Patent Numbers: 5,266,050 (the "'050 Patent") and 6,521,831 (the "'831 Patent"). The court ultimately held that Bridgeport's adaptors did not infringe Arlington's Patents.

After a lengthy procedural history, Bridgeport filed four motions for summary judgment. Two of the summary judgment motions separately requested the court to enter judgments finding that Bridgeport's adaptor did not infringe either the '831 or the '050 Patents. Bridgeport's other summary judgment motions requested the court to find non-willingness as to both patents and to determine the issue of damages. The court subsequently ordered a stay of proceedings on the '831 Patent, pending the U.S. Patent and Trademark Office's ("USPTO") final determination of its inter partes reexamination of the '831 Patent. In the meantime, the court granted all of Bridgeport's summary judgment motions as to the '050 Patent and found that Bridgeport's adaptor did not infringe the '050 Patent. Eventually, the court granted Bridgeport's motion to lift the stay on the '831 Patent and considered the motion for summary judgment on the '831 Patent.

Prior to Bridgeport's motions for summary judgment and the USPTO's reexamination of the '831 Patent, the court conducted its claim construction hearing for certain terms in both patents. The parties disagreed over whether the construction of the claims required a complete split in the ring. Arlington specifically claimed that Bridgeport's product infringed claim 1 of the '831 Patent. The '831 Patent is for "an invention which relates to cable terminations and more particular to duplex or two-wire cable terminations that snap into place and include snap-on cable retainers which do not require twisting to lock." It found that the term "spring metal adaptor" in claim 8 of the '050 Patent meant "a split ring or split spring metal adaptor so as to allow the diameter to easily change," and that the limitation of the "spring steel adaptor" in claim 1 of the '831 Patent followed the same analysis. Bridgeport distinguished its adaptor by demonstrating that its adaptors are not split. In opposition, Arlington argued that its patented products did not require a complete split.

Patent infringement involves a two-step analysis. The court must first construe the asserted claims to determine their proper meaning and scope. Then, the court compares the claims with the accused device. Claim construction is a question of law, while infringement is a question of fact. Infringement occurs when either the accused device infringes the construed claims literally or under the doctrine of equivalents. To establish infringement, every limitation set forth in the patent claim must be found in an accused product exactly or by a substantial equivalent. A finding of literal infringement occurs when each limitation of the claim is present in the accused device. Under the doctrine of equivalents, infringement is found when the accused device contains each limitation of a claim or its equivalent; however, there is no requirement for each component of the accused and claimed products to correspond directly. Instead, there may be infringement if a combination of the accused product's components performs a function performed by a single element in the claimed invention. The test for infringement under the doctrine of equivalents is that the difference between the accused device and the claimed invention must be insubstantial to one of ordinary skill in the art or the accused device must "perform the substantially same function in substantially the same way with substantially the same result as each claim limitation."

The court's determination that Bridgeport's adaptor did not infringe the '831 Patent paralleled its decision of non-infringement of the '050 Patent. In its infringement analysis of the '050 Patent, the court found that Bridgeport's adaptor did not infringe literally or under the doctrine of equivalents. When addressing the issue of literal infringement, the court referred to its claim construction ruling where it found that the term "spring metal adaptor" in claim 8 of the '050 Patent meant "[a]n adaptor which is circular or round and has circular cross sections. A spring metal adaptor is a split right or split spring metal adaptor so as to allow the diameter to easily change." The court compared the claim construction with Bridgeport's adaptor, which it found to mean "a piece of continuous metal with no gaps. The metal of the adaptor on the leading end creates a complete circle." When comparing the claims, the court found that Bridgeport's product was not "split" as required by the claim construction limitation for infringement of the "spring metal adaptor." Therefore, the court found that there was no literal infringement because the failure to meet a single limitation is sufficient to negate literal infringement of a claim. Similarly, the court found during claim construction that the "spring steel adaptor" in the '831 Patent also required the adaptor to be split and was therefore subject to the same analysis of the '050 Patent. Accordingly, the court applied the same reasoning to the term "spring steel adapter" and found that Bridgeport's adaptor does not literally infringe the '831 Patent.

The court further determined that Bridgeport's adaptor did not infringe the '831 or '050 Patents under the doctrine of equivalents. In its analysis of the '050 Patent, the court observed that Arlington and Bridgeport's adapters "achieved substantially the same function of being placed in the junction box and achieved substantially the same result;" however, "the function and result was not achieved in substantially the same way." The court observed that while Bridgeport's adaptor did not change in its entirety, Arlington's "spring metal adaptor" consisted of a diameter that changed in its entirety in order to fit within the junction box. Therefore, the court found that Bridgeport's adaptor did not infringe the '050 adaptor under the doctrine of equivalents.

In the analysis of the '831 Patent under the doctrine of equivalents, the court found that the purpose of the split ring in the '831 Patent was to allow the diameter of the adaptor to easily change. On the contrary, Bridgeport's adaptor did not include a split and did not change in totality. Therefore, Bridgeport's adaptor worked in a different way to achieve the substantially same result. Further, the court found that Bridgeport's adaptor did not contain every limitation of the '831 Patent and therefore, did not infringe the '831 Patent under the Doctrine of Equivalents.

Summary Judgment Granted on Breach of Contract Claim for Failure to Establish Actual or Apparent Authority

In General Motors Corp. v. Sable Motor Co. Inc., No. 07-CV-1493, 2009 U.S. Dist. LEXIS 42490 (M.D. Pa. May 19, 2009) (opinion by J. Jones), General Motors Corp. ("GM") brought this action against Defendants by filing a one-count complaint seeking "specific performance and enforcement" of a contract. Defendants filed counterclaims including breach of contract, bad faith, unjust enrichment and intentional/negligent misrepresentation. Plaintiff filed a motion for summary judgment on the counterclaims, which the court granted.

Defendant Jack Sable owned and operated a Chevrolet dealership pursuant to an agreement with GM. This agreement required GM's approval of any change in ownership in the dealership. Sable entered into an asset purchase agreement with a corporation known as HERC, which was subject to GM's approval. GM denied the change in ownership due to the lack of experience of the potential purchaser. A representative of the potential purchaser contacted a GM zone manager, William Fleck, and claimed that the manager assured him the transfer would be approved upon certain conditions. Based on this representation, the potential purchaser acted in reliance on these assurances to his monetary detriment, but GM denied the transfer again.

The parties all engaged in a proceeding before the Pennsylvania State Board of Vehicle Manufacturing Dealers and Salespersons. As a result, GM claimed an oral settlement was reached. GM filed this suit to enforce this alleged settlement agreement.

The court first analyzed Defendants' breach of contract counterclaim. Defendants claimed that Fleck's assurances of approval upon certain conditions established an oral contract between GM and the potential purchaser, HERC. Defendants based the oral contract allegation upon the assertion that Fleck was an authorized agent of GM with either actual or apparent authority to act on behalf of GM. The court held that "actual authority" can be expressed or implied. "Expressed actual authority" exists when a principal directly states that an agent has the authority to perform a particular act on the principal's behalf. Further, "implied actual authority" is to do all that is proper, necessary and ordinary in exercising the express actual authority delegated to it." "Apparent authority" is based upon the principal's acts or omissions which "lead a reasonably prudent person to believe such authority had been given to the agent."

The court found that Fleck did not have either actual or implied actual authority. Documents proved that GM did not vest its representatives or agents with actual authority to approve a modification to the terms of an application. Defendants also failed to demonstrate that GM vested Fleck with apparent authority. Defendants did not present any evidence to reveal that GM knew of Fleck's alleged assurances to Defendants or that GM was aware of the manager's assistance to help Defendants complete the second asset agreement. Finally, Defendants did not present any evidence indicating that GM was negligent in supervising Fleck. Therefore, GM could not be bound by agency by estoppel. Accordingly, GM was not a party to the oral contract; and therefore, could not be liable for breaching the contract.

Building upon the analysis for determining Fleck's authority, the court also held that Defendants could not satisfy the first element of promissory estoppel: a promise by GM that it should have reasonably expected would induce action or forbearance on part of the Defendants. Because Fleck's conduct did not result from actual or apparent authority, GM could not expect that Defendants would rely upon the representation of its employee.

Defendants also failed to provide evidence to support a claim for intentional or negligent misrepresentation. Fleck acted ultra vires, therefore his actions were not attributable to GM. Thus, Defendants could not support a claim for misrepresentation, and the court granted GM's motion for summary judgment in its entirety.