PPG Industries, Inc. et al v. Payne et al

Filing 267

MEMORANDUM AND OPINION as set forth in following order.Signed by District Judge R Leon Jordan on 5/21/12. (ABF)

IN THE UNITED STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF TENNESSEE
KNOXVILLE DIVISION
PPG INDUSTRIES, INC., et al.,
Plaintiffs,

v.
LEE PAYNE, et al.,
Defendants.

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No. 3:10-CV-73

MEMORANDUM OPINION
This civil action is before the court on “Plaintiffs’ Motion for Summary
Judgment on Defendants’ Counterclaims” [doc. 207]. Defendants1 have responded [doc.
215], and plaintiffs have submitted a reply [doc. 216]. Oral argument is unnecessary, and the
motion is ripe for the court’s consideration and determination.
Defendants filed counterclaims for intentional interference with prospective
business relationships, outrageous conduct, abuse of process/malicious prosecution,
malicious prosecution, and violation of the Lanham Act. For the reasons that follow, the
motion will be granted, and defendants’ counterclaims will be dismissed.

1

Individual defendants, Lee Payne, Mark Payne, Joey Payne, and Christian Crumley were
the original defendants. Plaintiffs added Mil-Spec Coatings & Supply, LLC as a defendant in the
amended complaint [doc. 25]. Depending upon context, use of the term “defendants” herein may
at times refer only to the individual defendants.

I.
Background
In 2003, David Payne, the father of defendants Lee Payne, Joey Payne, and
Mark Payne, sold his paint business in Knoxville, Tennessee to PPG.2 The Payne brothers
all worked in David Payne’s business. After the sale, the brothers went to work for PPG.
Two of the Payne Brothers, Mark and Joey, worked as sales reps for PPG while Lee Payne
worked in sales and eventually became PPG’s Regional Sales Manager. Lee Payne hired
Chris Crumley for his sales team. The new business sold paint and paint related products to
contractors, painters, builders, and other commercial buyers. All of the defendants entered
into employment agreements with PPG, but the agreements with Joey Payne and Crumley
included non-compete provisions.
For a variety of reasons, the defendants decided to leave their employment with
PPG. Defendants planned to open a paint business, Mil-Spec Coatings & Supply, in
Knoxville. The company’s paint supplier would be Color Wheel. Mark Payne, Joey Payne,
and Crumley resigned on the afternoon of Friday, February 19, 2010, and gave two-weeks
notice. A sales representative in Alabama who had been meeting with Lee Payne, Joe
Mitchell, also resigned on February 19th. Mitchell planned to join the Payne Brothers in the
new Mil-Spec business. On Saturday, February 20, 2010, Bud Moses, the district manager
and defendants’ direct supervisor, sent an email to Cliff Carlson, the Central and East Zone

2

Plaintiffs herein will be referred to as “PPG.”
2

Director in which he stated, “I want to crush these guys now.” On Sunday morning, February
21, 2010, Lee Payne resigned his position with PPG.
Prior to their resigning, defendants emailed to their homes hundreds of pages
of documents containing information sensitive to PPG such as budgets, operating expenses,
prices, and finances. Defendants’ position is that PPG knew defendants had this information
and failed to conduct exit interviews in which the information could have been requested by
PPG and returned by defendants. Their contention is that by not conducting exit interviews
and debriefing as PPG policy requires, PPG was able to set in motion its plan to destroy
defendants and their new business. PPG’s position is that sending the emails with the
information they contained constituted misconduct, which resulted in their notifying law
enforcement, filing this lawsuit, and notifying customers of the employee departures while
reassuring the customers of continued service.
In letters to the Payne Brothers and Crumley dated February 24, 2010, counsel
for PPG informed them that they had confidential information that had not been returned and
he instructed them to contact Moses immediately to make arrangements for the return of the
information. The defendants attended a trade show in Florida from February 25, 2010, to
March 1, 2010. On March 2, 2010, defendants met with Moses and returned the materials
in their possession.
PPG sent a letter to its major customers dated March 1, 2010, and signed by
Cliff Carlson, Zone Sales Director, and Kurt Christian, Zone Operations Director, that stated

3

in relevant part:
Dear Valued PPG Customer:
The purpose of this letter is to inform you of PPG personnel
changes in the Tennessee Valley area, and assure you that these
changes will have absolutely no impact on PPG’s commitment
and ability to service your business.
In late February several members of the PPG sales and service
team abruptly resigned, and immediately began a working
relationship with a PPG competitor. While it is not uncommon
in today’s business environment for employees to change
organizational loyalties, the circumstances of this particular
situation and the manner in which it transpired are a cause of
great concern at PPG.
Mike Walker, a paint company owner, has testified that PPG employees told
him that PPG was never going to let Lee Payne open a competing business and that PPG
would shut him down. The PPG employees told Walker that the information came from
Moses. Walker also stated that he received the same information directly from Moses.
According to Walker, Moses also told him that PPG had deeper pockets than the defendants
and they would shut the defendants down by keeping them tied up in court.
In early March 2010, Dave Hinds, PPG’s Risk Manager, investigated the
defendants’ departures and became aware of the documents defendants had sent to
themselves. After consulting with Regis Becker, PPG’s Chief Compliance Officer, Becker
recommended that the document situation be reported to the FBI.
On March 1, 2010, PPG filed this lawsuit seeking injunctive relief and damages
against defendants. PPG filed an amended complaint adding as a defendant Mil-Spec
4

Coatings & Supply LLC, which it says was formed by Lee Payne on October 16, 2009. In
April 2010, PPG sought a TRO against defendants based on its contention that defendants
were about to open or were already operating their competing business. The court denied the
TRO. Defendants filed a series of counterclaims which are now before the court on PPG’s
motion for summary judgment.

II.
Standard of Review
Plaintiffs’ motion is brought pursuant to Federal Rule of Civil Procedure 56,
which governs summary judgment.3 Rule 56(a) sets forth the standard for summary
judgment and provides in pertinent part: “The court shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” The procedure set out in Rule 56(c) requires that
“[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion.”
This can be done by citation to materials in the record, which include depositions,
documents, affidavits, stipulations, and electronically stored information. Fed. R. Civ. P.
56(c)(1)(A). Rule 56(c)(1)(B) allows a party to “show[] that the materials cited do not

3

Federal Rule of Civil Procedure 56 was amended effective December 1, 2010. The
Advisory Committee Notes to the 2010 amendments reflect that the standard for granting summary
judgment “remains unchanged,” and “[t]he amendments will not affect continuing development of
the decisional law construing and applying [that standard].” Fed. R. Civ. P. 56 advisory committee’s
note.
5

establish the absence or presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.”
After the moving party has carried its initial burden of showing that there are
no genuine issues of material fact in dispute, the burden shifts to the non-moving party to
present specific facts demonstrating that there is a genuine issue for trial. Matsushita Elec.
Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). “The ‘mere possibility’ of
a factual dispute is not enough.” Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992)
(citing Gregg v. Allen-Bradley Co., 801 F.2d 859, 863 (6th Cir. 1986)).
In order to defeat the motion for summary judgment, the non-moving party
must present probative evidence that supports its complaint. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986). The non-moving party’s evidence is to be believed, and all
justifiable inferences are to be drawn in that party’s favor. Id. at 255. The court determines
whether the evidence requires submission to a jury or whether one party must prevail as a
matter of law because the issue is so one-sided. Id. at 251-52.

III.
Analysis
Intentional Interference with
Prospective Business Relationships
In order to establish a claim for intentional interference with business
relationships, a plaintiff must demonstrate the following:
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(1) an existing business relationship with specific third parties
or a prospective relationship with an identifiable class of third
persons; (2) the defendant’s knowledge of that relationship and
not a mere awareness of the plaintiff’s business dealings with
others in general; (3) the defendant’s intent to cause the breach
or termination of the business relationship; (4) the defendant’s
improper motive or improper means; and finally, (5) damages
resulting from the tortious interference.
Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002) (internal citation
and footnotes omitted).
The fourth element of the tort requires either improper motive or improper
means. The court in Trau-Med held that in order for the plaintiff to demonstrate an improper
motive by the defendant, the plaintiff has to prove that the defendant’s “predominant purpose
was to injure plaintiff.” Id. at 701 n.5. Trau-Med was not in the context of competitors
seeking the same business nor was the competitor’s privilege at issue. However, Watson’s
Carpet & Floor Coverings, Inc. v. McCormick, 247 S.W.3d 169 (Tenn. Ct. App. 2007)
involved tortious interference with business relationships among competitors. In that case,
the Court of Appeals concluded that “the Tennessee Supreme Court, faced with the direct
question, would hold that a competitor enjoys a privilege as to the improper motive
requirement of the fourth element of the tort of intentional interference with business
relationships.” Id. at 184. Nevertheless,“even if a competitor enjoys a privilege that negates
the improper motive requirement, it is not insulated from liability if the other requirement is
present, i.e., improper means.” Id.

Some examples of improper means include the

following:
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means that are illegal or independently tortious, such as
violations of statutes, regulations, or recognized common-law
rules; violence, threats or intimidation, bribery, unfounded
litigation, fraud, misrepresentation or deceit, defamation, duress,
undue influence, misuse of inside or confidential information,
or breach of a fiduciary relationship; and those methods that
violate an established standard of a trade or profession, or
otherwise involve unethical conduct, such as sharp dealing,
overreaching, or unfair competition.
Id. (citations omitted).
Defendants base their intentional interference with prospective business
relationships on PPG’s plan to crush them; the letter sent to PPG’s customers; PPG’s alleged
misrepresentations to the FBI; the pricing scheme related to and spying on customers of MilSpec; and the loss of numerous customers. PPG argues inter alia that defendants have not
established the loss of numerous customers by any improper motive or action by it, and thus
defendants cannot establish the element of damages. PPG also contends that defendants have
not established an identifiable class of third persons with whom they had a prospective
business relationship.
Initially, the court observes that defendants sufficiently identified the class of
prospective third persons. “The Tennessee Supreme Court’s use of the word ‘identifiable’
is an attempt to place some limits on the tortious interference with prospective business
relations claim.” Assist-2-Sell, Inc. v. Assist-2-Build, LLC, No. 1:05-CV-193, 2005 WL
3333276, at *6 (E.D. Tenn. Dec. 6, 2005). “[A] plaintiff in Tennessee needs to identify
specific third parties for an existing business relationship but only a class of third persons for

8

prospective business relationships. This difference suggests Tennessee does not require a
plaintiff to identify specific individuals when making a tortious interference with prospective
business relations claim.” Id. at *7 (internal quotation marks and citations omitted).
Defendants have identified potential customers, many of whom they knew as paint-buying
customers prior to defendants’ employment with PPG as a class of third persons. Defendants
know the local paint business and no doubt would have had an identifiable base of customers
for their new business. The difficulty for defendants, however, is that even if defendants can
show improper means, or raise a question of fact regarding that element, they do not have
proof of damages in relation to this customer base to establish the fifth element of the tort
and defeat summary judgment.
This case involves direct competitors, and PPG would be subject to the
competitor’s privilege regarding the showing of a bad motive for element four of the tort.
Watson’s Carpet, 247 S.W.3d at 184. Defendants can still demonstrate this element by
showing improper means. Id.
Defendants argue that the customer letter sent by PPG interfered with their
business. The letter itself, however, does not demonstrate improper means. The content,
which does not identify the defendants by name, reflects PPG’s effort to reassure its
customers of continued service in spite of the abrupt departure of its sales force. While
defendants take umbrage with the language used by PPG that the circumstances caused it
“great concern,” such was undoubtedly the case for PPG at that time. The letter on its face

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does not demonstrate an improper means of interfering with defendants’ business prospects.
Defendants refer to PPG’s “predatory pricing” scheme as part of their plan to
shut them down. Predatory pricing is a concept that can be found in the context of antitrust
actions and “means pricing below some appropriate measure of cost.” Matsushita Elec.
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 584 n.8 (1986).4 The record does not
show that PPG sold its products below cost, but rather greatly reduced its profit margin in
aggressively competing for the same business Mil-Spec sought. Defendants have not shown
that PPG engaged in a “predatory” pricing scheme as that concept is defined under the law.
Nevertheless, the testimony of Terry Matthews, a former PPG sales
representative who worked under Moses, arguably raises questions concerning the propriety
of the means employed by PPG to get business from Mil-Spec. Moses instructed his sales
staff go to defendants’ place of business, watch for customers and then follow the customers
to beat Mil-Spec’s price. Moses told the sales staff to beat Mil-Spec’s prices no matter what
as they intended to shut their doors. Matthews was instructed to beat Mil-Spec’s price even
if PPG lost money. The aggressive price reduction to sell the paint at far below the normal

4

Predatory pricing is not a simple concept as there is debate over what “cost” is relevant.
Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 117 n.12 (1986). Only below cost prices
will suffice in the context of the antitrust laws. Advo, Inc. v. Philadelphia Newspaper, Inc., 51 F.3d
1191, 1198 (3rd Cir. 1995) (The Supreme Court recently reaffirmed that “the reasoning in both
[Matsushita and Cargill] suggests that only below-cost prices should suffice, and [that it has]
rejected elsewhere the notion that above-cost prices that are below general market levels or the costs
of a firm’s competitors inflict injury to competition cognizable under the antitrust laws.” (citing
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223 (1993)). The other
required showing is that there is a “reasonable prospect” . . . “a dangerous probability, of recouping
[the] investment in below-cost prices.” Id. at 224 (citations omitted).
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profit margin of 40 or 50 percent was employed with customers only if Mil-Spec was also
bidding for the business. Thus, a company one time might get paint at greatly reduced price
because Mil-Spec was involved, but the same company would be subject to PPG’s standard
price margins on any job if Mil-Spec was not involved. Matthews testified in his deposition
as follows:
Q.

In the sense that the price that you’ve successfully
chosen for these customers who Color-Wheel is
competing against PPG they’re getting a break, aren’t
they?

A.

Yes, sir.

Q.

And if Color-Wheel were not in the bidding - competitive bid process you would have sold that
customer at the normal profit margin - -

A.

Correct.

Q.

- - within 40 or 50 percent profit margin?

A.

Correct.

Q.

So what that customer is getting is really two things; he’s
getting a break because someone at Color-Wheel is
trying to get their business; is that correct?

A.

Yes, sir.

Q.

And, secondly, they’re being lied to by PPG?

Q.

In the sense that PPG is not doing what they normally
would do?

A.

Yes, sir.

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...
Q.

. . . Let’s just use Buchanan Paint as an example. If
Color-Wheel is in the bid process and you put that in the
comments, you can sell to Buchanan at a 25-percent
profit margin, for example?

A.

Yes, sir.

Q.

Okay. And that would have been approved by Bud
Moses?

A.

Yes, sir.

Q.

The next day you’re trying to sell Buchanan on a
different job and Color-Wheel is not in the picture,
you’re going to sell them at the normal profit margin
rate, aren’t you?

A.

Yes, sir.

Q.

And if you try to go as low as 25 percent, Color-Wheel
is not in the bid, you’re not going to get approved?

A.

Correct.

Arguably, there is a question concerning the manner employed by PPG to obtain business
defendants were also engaged in trying to obtain through competitive bidding.
With that having been noted, however, defendants have to demonstrate
damages to establish this tort. At this late juncture of the litigation,5 defendants have offered
as proof of damages the loss of one customer, Danny Ledford, the owner of D.T.’s
Refurbishing, a company that paints apartments and does commercial painting as well.
5

This case has been ongoing for two years and is set for trial on June 11, 2012. The
discovery by both sides has been voluminous as evidenced by the record.
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Ledford testified in deposition that he was no longer doing business with Lee Payne as MilSpec because of Payne’s involvement with this ongoing lawsuit. His concern is that he
orders tinted paints in high volume and if Lee Payne and his company did not survive
financially from this lawsuit, he would be scrambling to change paint with another paint
company. Ledford also testified that he did not see the letter PPG sent to its customers,
though a letter might have been sent to his office manager. In addition, Ledford stated he did
not hear anyone at PPG say anything negative about the defendants or make reference to PPG
putting the defendants out of business.
Nothing in Ledford’s testimony shows that PPG acted in a way that improperly
damaged defendants. His reasons for not doing business with Lee Payne and Mil-Spec are
not connected with any alleged improper means used by PPG. The fact that Ledford chose
not to do business with Lee Payne because of his involvement with a “big” and “costly”
lawsuit is not a basis for establishing damages for the tort of interference with business
relationships. Such a decision was made based on Ledford’s business needs and those needs
potentially not being met because the supplier is in litigation. Ledford was not influenced
by the customer letter nor any negative comments about the defendants. In short, the loss of
this customer’s business does not sustain a claim for damages regarding this tort.
In addition, Ledford is the only customer whose business is used by
defendants’ financial witness to calculate damages for the claim based on intentional
interference with prospective business relationships. The financial witness, Glenn Perdue,

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prepared a report dated February 10, 2012, a time well into this litigation and well after
considerable discovery has been undertaken. However, with regard to the damages for this
claim, other than Ledford’s D.T. Refurbishing, his references to damages are vague,
speculative, and not sufficient to survive summary judgment. Perdue states that he reviewed
“over 30 customer declarations” which deal with the customers’ history and relationship with
the various defendants. He then concludes that “it is possible that various Milspec customer
relationships have been affected by actions of PPG in a manner that caused economic harm.”
(emphasis added).
At the summary judgment stage, the nonmoving party must present probative
evidence to support its claim to defeat summary judgment. The “possibility” that there might
have been economic harm at this stage is not probative evidence nor does it raise a question
of fact as to the existence of such damages. “The ‘mere possibility’ of a factual dispute is
not enough” to defeat summary judgment. Mitchell, 964 F.2d at 582. In their brief,
defendants argue in support of their damages the loss of Ledford’s business and additionally
that their “expert has provided economic damages calculations based upon the Lanham Act
violations.” A calculation of damages under the Lanham Act does not translate into a
showing of damages based upon PPG’s intentional interference with defendants’ business
relationships by improper means. The elements of the two claims are different, and damages
are sustained by different means. Defendants are required to show that they were damaged
by PPG’s intentional interference with their potential business relationships, and they simply

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have not presented probative proof that they sustained such damages. The fifth element of
the tort has not been demonstrated, and that fact entitles PPG to summary judgment on the
claim.

Outrageous Conduct/Intentional
Infliction of Emotional Distress
Defendants have asserted a claim for outrageous conduct based on their
contention that PPG plotted to crush defendants and do whatever was necessary to drive them
out of business, including trying to bankrupt them with attorneys’ fees. Defendants also
contend that PPG employed unfair litigation tactics, predatory pricing, and misinformation
to the FBI.
Outrageous conduct and intentional infliction of emotional distress are the
same cause of action. Bain v. Wells, 936 S.W.2d 618, 622 n.3 (Tenn. 1997). There are three
elements to this cause of action under Tennessee law: “(1) the conduct complained of must
be intentional or reckless; (2) the conduct must be so outrageous that it is not tolerated by
civilized society; and (3) the conduct complained of must result in serious mental injury.”
Id. at 622 (citations omitted). In Bain, the Tennessee Supreme Court also noted that it has
“adopted and applied the high threshold standard described in the Restatement (Second) of
Torts” for determining when particular conduct is tortious. Id. at 622-23. The Court stated:

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The cases thus far decided have found liability
only where the defendant’s conduct has been
extreme and outrageous. It has not been enough
that the defendant has acted with an intent which
is tortious or even criminal, or that he has
intended to inflict emotional distress, or even that
his conduct has been characterized by “malice,”
or a degree of aggravation which would entitle
the plaintiff to punitive damages for another tort.
Liability has been found only where the
conduct has been so outrageous in character,
and so extreme in degree, as to go beyond all
bounds of decency, and to be regarded as
atrocious and utterly intolerable in a civilized
community. Generally, the case is one in which
the recitation of the facts to an average member
of the community would arouse his resentment
against the actor, and lead him to exclaim,
“Outrageous.”
Id. at 623 (emphasis added). “[T]he outrageousness requirement is an ‘exacting standard’
which provides the primary ‘safeguard’ against fraudulent and trivial claims.” Doe I v.
Roman Catholic Diocese of Nashville, 154 S.W.3d 22, 39 (Tenn. 2005) (quoting Miller v.
Willbanks, 8 S.W.3d 607, 614 (Tenn. 1999)).
“It is for the trial court to determine, in the first instance, whether a defendant’s
conduct may reasonably be regarded as so extreme and outrageous as to permit recovery.
Thus, the trial court may reasonably dismiss this legal theory as a matter of law.” Lane v.
Becker, 334 S.W.3d 756, 763 (Tenn. Ct. App. 2010) (internal citation omitted); see also
Vanderbilt Univ. v. Pesak, No. 3:08-cv-1132, 2011 WL 4001115, at *13 (M.D. Tenn. Sept.
8, 2011) (“It is the Court’s duty in the first instance to apply the standard and make a

16

preliminary determination as to ‘whether the defendant’s conduct may reasonably be
regarded as so extreme and outrageous as to permit recovery.’”) (citing Bain, 936 S.W.2d at
623).
PPG contends that the conduct cited by defendants does not meet the high and
exacting standard required to establish this claim, nor does it compare to the conduct
described in the cases cited by defendants. PPG argues that its actions of sending a letter to
its customers and making a complaint to the FBI for “suspected theft”were in response to
defendants’ misconduct of transferring documents. PPG contends that it was within its
rights to report defendants’ conduct concerning the documents to the FBI and that there is
nothing “outrageous” about the letter itself. PPG also argues that there is no evidentiary
basis for defendants’ statement that PPG lied to the FBI and no showing by defendants how
the amount it has spent on attorneys’ fees constitutes outrageous conduct unacceptable to
society. In addition, PPG points out that the comments regarding “crushing” the defendants
and “shutting them down” is language and hyperbole of business competition.
The standard that must be met to establish the tort of intentional infliction of
emotional distress or outrageous conduct is indeed a high and exacting one. In the court’s
opinion, the conduct attributed to PPG does not meet this standard. The cases cited by
defendants illustrate conduct and a factual circumstances unlike those in this case. In
Johnson v. Woman’s Hospital, 527 S.W.2d 133 (Tenn. Ct. App. 1975), a hospital employee
showed grieving parents the shriveled body of their premature infant in a jar of

17

formaldehyde. Lourcey v. Estate of Scarlett, 146 S.W.3d 48 (Tenn. 2004) involved a
husband who saw his wife shot in the head and the shooter then kill himself. Defendants also
rely on Moorhead v. J.C. Penney Co., 555 S.W.2d 713 (Tenn. 1977) in support of their claim.
That case also involves facts and conduct distinguishable from that attributable to PPG.
In Moorhead, the plaintiffs, a married couple, maintained a credit card account
with Penneys. They made a return for $16.78; however, the following month their account
showed a charge for that amount rather than reflecting a credit. In spite of repeated calls to
Penneys to correct the error, the plaintiffs continued to receive almost daily threatening
letters from Penney’s collection agency. The plaintiffs received abusive phones calls as well
as a total of forty-two threatening letters. The phone calls threatened a lawsuit and
impugned the financial reputation of the husband of the couple. The Tennessee Supreme
Court found that Penney’s conduct constituted outrageous conduct, and also found
significance in the fact that the letters and phone calls had “continued long after defendant
had acknowledged that its accounts were in error and that plaintiffs owed it nothing.” Id. at
717. The Court additionally found noteworthy that the conduct extended over a one-year
period and the significant volume of the threatening letters. Id.
Defendants argue that if Penney’s conduct constitutes outrageous conduct then
surely PPG’s conduct in this case does. Again, the conduct and factual context in Moorhead
are different than this case. Moorhead involved innocent customers who had clearly been
wrongly threatened and subject to abusive behavior as a result of Penney’s mistake. The

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situation involved threatening and abusive conduct that persisted over a year, with a
significant volume of letters. The instant case involves business competitors, although the
defendants are individuals. PPG reacted when the defendants all resigned at the same time
and prior to their leaving emailed PPG information to themselves. That situation rapidly
turned into an acrimonious lawsuit. PPG’s conduct does not equate with Penney’s treatment
of the plaintiffs in Moorhead.
In addition, the amount PPG has spent on attorneys’ fees, the letter sent to its
customers, and PPG’s complaint to the FBI are not themselves evidence of outrageous
conduct nor do they support the claim. Many litigants, both corporate and individual, spend
large sums in attorneys’ fees, but such conduct is not outside the bounds of civilized society.
While defendants take exception to the letter PPG sent to its customers, the content of the
letter and the language used by PPG are not on their face atrocious or beyond the bounds of
decency. Defendants are not even identified by name in the letter. Defendants’ view of
PPG’s complaint to the FBI clearly differs from PPG’s. Yet the record does no reflect that
PPG’s contact with the FBI is sufficient to meet the high and exacting standard of this tort.
Likewise with regard to the statements that PPG wanted to “crush” the
defendants and “shut the doors” of Mil-Spec, the court does not believe that these statements
rise to the outrageous conduct/intentional infliction of emotional distress standard. The
context of this conduct is the highly competitive arena of corporate America. Business
competitors use strong language and hyperbole when referring to competitors. Several courts

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have noted such language.
In an action for alleged violation of the Sherman Act for predatory pricing, the
Third Circuit noted the following in the context of intent:
Advo officials themselves have used aggressive-sounding
language. Its CEO, Robert Kamershcen, once directed his
managers “to seize the OPPORTUNITY inherent in the
stumbling PROBLEMS of the newspaper industry,” and quoted
McDonald’s founder Ray Kroc for the advice that “[w]hen [you]
see the competition drowning, . . . stick a water hose down their
throats.”
The antitrust statutes do not condemn, without more, such
colorful, vigorous hyperbole; there is nothing to gain by using
the law to mandate “commercially correct” speech within
corporate memoranda and business plans. Isolated and
unrelated snippets of such language provide no help in deciding
whether a defendant has crossed the elusive line separating
aggressive competition from unfair competition.
Advo, Inc. v. Philadelphia Newspaper, Inc., 51 F.3d 1191, 1199 (3rd Cir. 1995) (internal
quotation marks and citation omitted). In another case dealing with alleged predatory
pricing, the Seventh Circuit observed the following regarding the issue of intent in such
cases:
Firms “intend” to do all the business they can, to crush their
rivals if they can. [I]ntent to harm without more offers too
vague a standard in a world where executives may think no
further than “Let’s get more business.”
...
Almost all evidence bearing on “intent” tends to show both
greed-driven desire to succeed and glee at a rival’s predicament.
Take, for example, the statement David Rust made to Phillip
Gressell: “We are going to run you out of the egg business.
Your days are numbered.” Undoubtedly Rust wanted to leave
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Gressell scratching in the dust, but drive to succeed lies at the
core of a rivalrous economy. Firms need not like their
competitors; they need not cheer them on to success; a desire to
extinguish one’s rivals is entirely consistent with, often is the
motive behind, competition.
A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1401-02 (7th Cir. 1989)
(internal quotation marks and citation omitted).
In this case, the statements attributable to PPG of the desire or intent to “crush”
the defendants and “close their doors” need to be viewed in the context of the business
culture of competition and rivalry. In the court’s opinion, the language and hyperbole of the
competitive corporate arena, at least in this case, do not rise to the high standard required to
establish a claim for intentional infliction of emotional distress/outrageous conduct under
Tennessee law. Accordingly, summary judgment as to this claim is appropriate.

Abuse of Process6
Defendants base their abuse of process claim on PPG’s alleged attempts to shut
down Mil-Spec and prevent competition from the Paynes in spite of not having evidence that
the Paynes were using proprietary information belonging to PPG. Defendants also base their
claim on alleged excessive litigation tactics by PPG.

6

In the amended counterclaim, defendants list this claim as “Abuse of Process/Malicious
Prosecution.” Under Tennessee law, these are two distinct torts with different elements that must
be demonstrated in order to establish liability. Therefore, the court has considered the claims
separately as argued by PPG.
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In order to prevail on a claim for abuse of process, a plaintiff must establish
two elements: “(1) the existence of an ulterior motive; and (2) an act in the use of process
other than such as would be proper in the regular prosecution of the charge.” Givens v.
Mullikin, 75 S.W.3d 383, 400 (Tenn. 2002) (internal quotation marks and citations omitted).
“Within the context of a tortious abuse of process, process refers to times when the authority
of the court is used.” Vanderbilt Univ., 2011 WL 4001115, at *11(quoting Rentea v. Rose,
No. M2006-02076-COA-R3-CV, 2008 WL 1850911, at *4 (Tenn. Ct. App. Apr. 25, 2008)).
“‘Process’ is defined as ‘that which emanates from or rests upon court authority and which
constitutes a direction or demand that the person to whom it is addressed perform or refrain
from doing some prescribed act.’” Id. (citing Bell v. Icard, Merrill, Cullis, Timm, Furen &
Ginsburg, P.A., No. 03A01-9707-CV-00292, 1998 WL 24414, at *2 (Tenn. Ct. App. Jan. 20,
1998)).
“[T]he gist of the tort is not commencing an action or causing process to issue
without justification, but misusing, or misapplying process justified in itself for an end other
than that which it was designed to accomplish.” Givens, 75 S.W.3d at 400 (internal quotation
marks and citations omitted). “The test as to whether process has been abused is ‘whether
the process has been used to accomplish some end which is without the regular purview of
the process, or which compels the party against whom it is used to do some collateral thing
which he could not legally and regularly be compelled to do.’” Id. at 401 (quoting Priest v.
Union Agency, 125 S.W.2d 142, 143-44 (Tenn. 1939)). The intended goal of an action for

22

abuse of process is to keep parties through the use of litigation from pursuing objectives
other than those stated in the lawsuit, for example, using the court’s process as a weapon to
obtain a collateral goal. Id. “[T]he mere existence of an ulterior motive in doing an act,
proper in itself, does not suffice; there must be such a use of it as in itself is without the scope
of the process, and hence improper.” Bell, 1998 WL 24414, at *2 (quoting Priest, 125
S.W.2d at 143).
In the discovery context, the Tennessee Supreme Court in Givens held that
abuse of process will lie when:
(1) the party who employs the process of a court specifically and
primarily intends to increase the burden and expense of
litigation to the other side; and (2) the use of that process cannot
otherwise be said to be for the legitimate or reasonably
justifiable purposes of advancing [the party’s] interests in the
ongoing litigation.
Givens, 75 S.W.3d at 402.
The litigation in this case has been contentious since its inception. However,
contentious litigation does not automatically translate into an abuse of process case. Both
sides have engaged in extensive use of discovery, and both sides have sought relief from the
court related to that discovery. Defendants complain about a “document dump” made by
PPG of thousands of pages of documents not properly segregated, for which they obtained
relief from the court. Yet defendants issued a third set of interrogatories and a seventh
request for production of documents. Defendants also noticed out-of-state depositions [docs.
226, 227] that PPG moved for a protective order to prevent [doc. 228], and PPG was
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successful in obtaining relief from the court [doc. 237]. PPG points out that defendants have
made multiple e-discovery requests that have required its counsel to review tens of thousands
of e-documents at considerable expense. PPG also argues that defendants have identified 56
witnesses and seek two weeks to try this case, as opposed to PPG’s contention that it can be
tried in one week. PPG further points out that defendants filed a 46 page brief in response
to their 16 page memorandum concerning the pending motion for summary judgment. In
short, PPG contends that a lot of the money it has spent in this case about which defendants
complain has been necessary to respond to defendants’ tactics.
This case involves an amended complaint asserting seven claims for relief and
an amended counterclaim with a total of five claims for relief. The court has considered the
history of this case regarding the filings with the court and the discovery record. Again, the
litigants are contentious and clearly do not like each other. Such is the circumstance with
many cases. Furthermore, many cases involve a large corporate entity opposing one or more
individuals, with both sides generating considerable discovery requests and other filings with
the court. The case history and discovery record in this case do not indicate that the court’s
process has been abused by PPG. Therefore, summary judgment on that claim is appropriate.

Malicious Prosecution
Defendants also assert a claim for malicious prosecution based on PPG’s filing
of a criminal complaint with the FBI and their seeking a temporary restraining order (“TRO”)

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in this case.
To establish a claim for malicious prosecution, a plaintiff must demonstrate the
following: “(a) that a prior lawsuit or judicial proceeding was brought against the plaintiff
without probable cause, (b) that the prior lawsuit or judicial proceeding was brought against
the plaintiff with malice, and (c) that the prior lawsuit or judicial proceeding terminated in
the plaintiff’s favor.” Lane, 334 S.W.3d at 761 (quoting Parrish v. Marquis, 172 S.W.3d
526, 530 (Tenn. 2005)). “[N]ot just any . . . outcome favorable to the original defendant will
support the favorable termination element.” Anderson v. Wal-Mart Stores, Inc., No. 1:0700024, 2008 WL 1994822, at *4 (M.D. Tenn. May 2, 2008) (quoting Parrish, 172 S.W.3d
at 533) (internal quotation marks omitted).
Rather, the termination must also reflect the merits and not
merely a procedural victory. If a court concludes that the
termination does not relate to the merits-reflecting on neither
innocence of nor responsibility for the alleged misconduct- the
termination is not favorable in the sense that it would support a
subsequent action for malicious prosecution.
Id. (citing Parrish, 172 S.W.3d at 531) (internal citations and quotation marks omitted); see
also Sewell v. Par Cable, Inc., 1988 WL 112915, at *3 (Tenn. Ct. App. Oct. 26, 1988) (“For
the purposes of a malicious prosecution action, a favorable termination must be one
indicating that the accused is innocent. . . . A disposition that does not indicate the plaintiff’s
innocence is not considered a favorable termination . . . .” (citations omitted)).

When

making a determination whether a result was a favorable termination, “a court must examine
the circumstances of the underlying proceeding.” Parrish, 172 S.W.3d at 531.
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As to the first element, “probable cause exists when there are such facts and
circumstances sufficient to create in a reasonable mind the belief that the accused is guilty
of the crime charged.” Coleman v. Lauderdale Cnty., No. W2011-00602-COA-R3-CV, 2012
WL 475606, at *5 (Tenn. Ct. App. Feb. 15, 2012) (internal quotation marks and citations
omitted). “A party asserting a claim of malicious prosecution bears a heavy burden of proof
in establishing the element of lack of probable cause. . . .” Id. (internal quotation marks and
citations omitted). “Probable cause is determined from an objective examination of the
surrounding facts and circumstances at the time the underlying prosecution was initiated.”
Id. (internal quotation marks and citations omitted). Further, “[probable cause exists where
the party who instituted the underlying legal proceedings had a reasonable belief in both the
existence of facts supporting his or her claim and that those facts made out a legally valid
claim.” Id. (citation omitted).
Defendants’ malicious prosecution claim fails because they cannot demonstrate
two of the required elements. Initially, defendants cannot bear the “heavy burden of proof”
to show the lack of probable cause. The record clearly reflects that when they left their
employment with PPG defendants emailed themselves hundreds if not thousands of pages
of documents with company information concerning pricing, costs, customers, etc. Further,
the complaint that Hinds made to the FBI concerning the taking of these documents moved
through the process at the FBI to the point it was considered by an agent or agents.

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Nevertheless, the probable cause element aside, defendants cannot establish
the third required element for a malicious prosecution claim, that the prior lawsuit or judicial
proceeding was terminated in their favor. Defendants contend that bringing the TRO in this
case was a prior action that was concluded in their favor. Seeking the TRO was a procedure
in this lawsuit, which obviously has not been terminated. That contention fails.
With regard to the referral to the FBI for possible violation of the Economic
Espionage Act (“EEA”), that prior proceeding has not been sufficiently “terminated” to meet
the requisite criteria for a favorable termination.
[The] termination must reflect on the merits of the underlying
action. That is, the termination must not only be favorable to the
[defendant in the underlying proceeding], but must also reflect
the merits and not merely [be] a procedural victory. In short, if
the reason for dismissal is not inconsistent with a defendant’s
wrongdoing, it will not be considered a favorable termination.
Anderson, 2008 WL 1994822, at *5 (internal quotation marks and citations omitted).
Defendants’ criminal counsel Deno Cole testified that during his last conversation with
Agent Houghton of the FBI it seemed clear to him that the FBI was not going to pursue the
case. However, Cole remains under a retainer contract with these defendants should
something arise since the statute of limitations has not run on a charge under the EEA. In
addition, the reasons Cole related as those given by the FBI for not pursing the case do not
reflect the merits of the case or the innocence of the defendants. Cole testified that the FBI
agent told him there were certain thresholds they look at, and in that context he mentioned
resources and time. Cole also opined regarding the resources issue that the computer crimes
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unit of the local FBI was particularly taxed after the Sarah Palin trial. Nothing in the record
regarding the FBI’s decision not to pursue an indictment of the defendants reflects their
innocence or the merits of the case. Cf. Anderson, 2008 WL 1994822, at 6 (“The decision
to divert the charges was not inconsistent with the defendant’s having actually committed the
charged offense, and it did not reflect on the merits of the underlying action.”). Thus, the
“termination” of the FBI inquiry is a procedural victory at best and does not meet the
favorable termination element for a malicious prosecution claim. Accordingly, defendants
are unable to establish a malicious prosecution claim, and summary judgment as to that claim
is appropriate.

Lanham Act
Defendants base their Lanham Act claim on § 1125 which provides in pertinent
part as follows:
(a)(1) Any person who, on or in connection with any goods or
services, or any container for goods, uses in commerce any
word, term, name, symbol, or device, or any combination
thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact,
which –

....
(B) in commercial advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or
her or another person’s goods, services, or commercial
activities, shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged by such act.

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15 U.S.C. §§ 1125(a)(1), (a)(1)(B). The foregoing provision creates a cause of action for
false or misleading advertising under the Lanham Act. Am. Council of Certified Podiatric
Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, 185 F.3d 606, 613 (6th Cir. 1999).
To demonstrate a cause of action for misleading advertising, a plaintiff must
establish the following:
1) the defendant has made false or misleading statements of fact
concerning his own product or another’s; 2) the statement
actually or tends to deceive a substantial portion of the intended
audience; 3) the statement is material in that it will likely
influence the deceived consumer’s purchasing decisions; 4) the
advertisements were introduced into interstate commerce; and
5) there is some causal link between the challenged statements
and harm to the plaintiff.
Id. (citation omitted). A claim under the Lanham Act must be based upon a statement of fact,
not an opinion. Id. at 614.
Defendants are seeking monetary damages from PPG based on this claim.
“When a plaintiff seeks an award of monetary damages for false or misleading advertisement
under the Lanham Act, he may show either that the defendant’s advertisement is literally
false or that it is true yet misleading or confusing.” Id. at 614. When statements are literally
false, actual deception is presumed, so evidence that statements actually mislead consumers
is not required. Id.
Where statements are literally true, yet deceptive, or too
ambiguous to support a finding of literal falsity, a violation can
only be established by proof of actual deception (i.e., evidence
that individual consumers perceived the advertisement in a way
that misled them about the plaintiff’s product). A plaintiff
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relying upon statements that are true yet misleading cannot
obtain relief by arguing how consumers could react; it must
show how consumers actually do react.
Id. (internal quotation marks and citation omitted). Whether a statement is ambiguous is a
question of law. Id. at 615 n.2. “Proof of actual deception requires demonstrating that
consumers were actually deceived by the defendant’s ambiguous or true-but-misleading
statements. Successful plaintiffs usually present evidence of the public’s reaction through
consumer surveys. There must be evidence that a ‘significant portion’ of the consumer
population was deceived.” Id. at 616 (citations omitted).
Defendants base their Lanham Act claim on the PPG’s customer letter,
comments made to Mike Walker by PPG employees about shutting down Mil-Spec and
putting defendants in bankruptcy, and PPG’s pricing scheme to take business from Mil-Spec.
PPG counters that there is nothing false or misleading in the customer letter; that the
statements to Walker are one-on-one statements to a customer that do not give rise to a
Lanham Act claim along with the fact that Walker continued doing business with defendants;
and that there is no evidence of statements by PPG regarding pricing made to customers, let
alone any false statements, and there is no evidence that PPG’s pricing constituted
commercial advertising, promotion, or a predatory pricing scheme. PPG also argues that
defendants have not established a causal link between any alleged improper statements and
harm to defendants as required to establish a Lanham Act claim. The court will address these
arguments in order.

30

Defendants contend that the customer letter falsely states that the defendants
left “abruptly” and under circumstances causing PPG “great concern” and falls within the
“commercial activities” language of § 1125. According to defendants, the letter impugns
their integrity regarding their business conduct, i.e., their “commercial activities.” There is
nothing false in the letter. Initially, the court notes that the defendants are not identified by
name in the letter. Further, the record reflects that all of the defendants did in fact suddenly
leave their employment with PPG, a situation which PPG characterized as “abrupt.” Three
defendants resigned at the same time on a Friday afternoon, and the fourth individual, Lee
Payne, resigned two days later, the Sunday morning following the initial resignations. The
circumstances of defendants having emailed sensitive PPG documents to themselves prior
to leaving no doubt did cause PPG “great concern” at the time. Defendants’ characterization
of the letter as being false is misplaced.
At most the statements in the letter are true yet misleading or confusing, or
ambiguous, since a customer reading the letter is left to discern what is meant by “great
concern.” This characterization of the statements does not, however, benefit defendants or
enable their claim to survive. As referenced above, a claimant relying on true but misleading
or ambiguous statements must show how consumers actually reacted, not how they could
have reacted. Id. at 614-16. Defendants are seeking monetary damages, and to do so they
must show actual deception, i.e., that the alleged misleading statements in the letter actually
deceived consumers about defendants and their commercial activities.

31

Defendants have presented no consumer surveys or any other evidence of
actual deception. They merely argue in conclusory fashion that they have been damaged as
evidenced by the testimony of Ledford regarding lost sales and the calculations of their
damages witness, Perdue. The testimony of Ledford clearly fails to establish any actual
deception since he cannot even recall seeing or reading the letter. Ledford also testified that
his failure to do business with Mil-Spec is not based on anything negative PPG said about
defendants but rather on his fear that their business might not survive this large lawsuit. He
does not want to be left with orders for tinted paint that cannot be filled by defendants.
Ledford’s testimony in no way demonstrates that a “significant portion” of consumers were
deceived about defendants by the letter. The calculations by defendants’ witness Perdue for
damages under the Lanham Act also do not reflect the use any customer surveys or other
evidence that demonstrates actual deception in a “significant portion” of consumers.
A similar problem exists with the causal connection requirement for this claim.
There is no market research or consumer testimony or other evidence to establish causation
of harm to the defendants. Again, Ledford’s testimony does not advance defendants’ claim
since he did not see the letter nor did he refuse to do business with Mil-Spec because of
statements by PPG. Defendants have not shown that their business lost sales or had sales
diverted because of the statements in the letter, a letter that does not reference defendants by
name. “Without evidence of a causal link, any damages would be purely speculative and
prohibited by the Lanham Act.” Sheridan Furniture, Inc. v. Kincaid Furniture Co., Inc., No.

32

3:98-CV-16-R, 1999 WL 33603128, at *5 (W.D.Ky. Nov. 24, 1999).
Defendants also contend that the statements made to Mike Walker, a paint
company owner, by PPG personnel are a basis for a Lanham Act claim. Initially, the court
observes that the statements regarding shutting down Mil-Spec and putting the defendants
in bankruptcy are statements reflecting PPG’s intention rather than statements of fact. PPG
argues that the statements are opinions and thus not actionable under the Lanham Act.
Arguably these statements are mere opinion in that they express PPG’s thoughts or
sentiments regarding the defendants.
In any event, the statements were made to a single customer and under the
circumstances of this case do not constitute advertising or promotion. “A particular
communication constitutes commercial advertising or promotion only if it is disseminated
sufficiently to the relevant purchasing public to constitute “advertising” or “promotion”
within that industry. The extent of the required dissemination varies depending on the size
of the market.” Dow Corning Corp. v. Jie Xiao, No. 11-10008-BC, 2011 WL 2015517, at
*10 (E.D. Mich. May 20, 2011) (internal quotation marks and citation omitted). A single
communication can be sufficient if the size of the market is very small. See Champion Labs.,
Inc. v. Parker-Hannifin Corp., 616 F. Supp. 2d 684, 695-96 (E.D. Mich. 2009) (market
consisted of a single client, so single communication sufficient). The market in this case is
estimated by defendants to be as many as 10,000 customers, hardly a uniquely small market.
Thus, the statements to Walker do not constitute advertising or promotion. Further, the

33

statements were not sufficiently widespread to be introduced into interstate commerce as
required to make a Lanham Act claim.
In addition, no causal connection to any harm exists in relation to the
statements made to Walker. Defendants have not demonstrated harm generated by the
statements to Walker, primarily since he testified that he still buys paint from Mil-Spec.
Accordingly, defendants’ Lanham Act claim cannot be established based on the statements
to Walker.
Defendants also base their Lanham Act claim on the statements made by PPG
about the price of its paints as part of an alleged predatory pricing scheme. The court has
already addressed the issue of defendants’ allegations regarding a predatory pricing scheme
by PPG. The record does not support predatory pricing by PPG as that term is defined and
used in the case law.
As to PPG’s quoting lower prices when bidding against Mil-Spec for business,
defendants have not shown that PPG failed to sell paint to a customer at the reduced price
it quoted. PPG apparently did in fact sell paint for a reduced price to out bid Mil-Spec, so
the price was not false in that respect. If PPG sold the paint at the quoted price, it was not
presenting a false representation regarding that specific sale. The argument can be made that
the pricing statements are true but misleading or ambiguous under the facts described by
Matthews. Even so, however, defendants must show actual deception to obtain monetary
damages and also must still show a causal connection to harm. Defendants have not made

34

these showings specifically regarding these pricing statements. As discussed above,
defendants have not presented customer surveys or other evidence to show actual deception,
i.e., that customers perceived the pricing statements in such a way that they were misled
about PPG’s product and its price. Again, defendants’ contention that the testimony of
Ledford establishes harm or monetary damages is misplaced. His not doing business with
defendants is not based upon pricing statements made by PPG sales personnel but a personal
decision not to buy from a company embroiled in a large lawsuit.
Therefore, defendants have not established the necessary elements to maintain
a Lanham Act claim. Summary judgment is thus appropriate.

IV.
Conclusion
Accordingly, for the reasons stated above, plaintiffs’ motion for summary
judgment will be granted, and the counterclaims will be dismissed. An order consistent with
this opinion will be entered.

ENTER:

s/ Leon Jordan
United States District Judge

35