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JOHNSON CONTROLS INC. v. EXIDE CORPORATION

July 25, 2001

JOHNSON CONTROLS, INC., ET AL., PLAINTIFFS,
v.
EXIDE CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Milton I. Shadur, Senior U.S. District Judge.

MEMORANDUM OPINION AND ORDER

Johnson Controls, Inc. and Johnson Controls Battery Group, Inc. (collectively "Johnson Controls," treated after this sentence as a singular noun) have asserted a number of claims against Exide Corporation ("Exide") and three of its former officers: Arthur Hawkins, Alan Gauthier and Douglas Pearson. Each of Johnson Controls' original Complaint and First Amended Complaint targeted Exide with a claim under the Robinson-Patman Act (15 U.S.C. § 13 (c)) and with a state common law claim of tortious interference with prospective business opportunity.*fn1 Johnson Controls' Second Amended Complaint ("SAC") has added several claims against Exide: Defamation (Count V), Trade Libel/Product Disparagement (Count VI) and violation of Lanham Act § 43(a), 15 U.S.C. § 1125 (a) (Count VII)

Exide has responded with a Fed. R. Civ. P. ("Rule") 12(b)(6) motion to dismiss those newly-raised counts, and the motion is now fully briefed. For the reasons stated in this memorandum opinion and order, Exide's motion is granted and all of Counts V, VI and VII are dismissed.

Rule 12(b)(6) Standard

For present purposes this Court accepts the SAC's well-pleaded factual allegations as true and draws all reasonable inferences in Johnson Controls' favor (Sherwin Manor Nursing Ctr., Inc. v. McAuliffe, 37 F.3d 1216, 1219 (7th Cir. 1994)). And under Rule 12(b)(6) no claim will be dismissed unless "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations" (Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957))

Background*fn2

In 1994 Johnson Controls and its competitors Exide and AC Delco ("Delco") bid for a battery supply contract offered by Sears, Roebuck & Co. ("Sears") (¶¶ 1, 32, 36). As in its earlier pleadings, Johnson Controls says that several of Exide's agents bribed Gary Marks ("Marks"), an agent of Sears, to procure that contract.*fn3 To that conduct the SAC has now added the assertion that besides bribing Marks, during the bidding process Exide made several false representations about its products' capabilities in relation to those of its competitors (SAC ¶¶ 58-69)

Johnson Controls also adds an unrelated set of claims that arise out of an article in the October 1995 edition of Consumer Reports magazine (published in September 1995) (¶ 235). That article, entitled "Best Buys in Auto Batteries," rated the batteries of several manufacturers, including Exide and Johnson Controls (J. Mem. App. A; ¶¶ 235-36). It ascribed superior performance to Exide batteries, a reversal from a 1991 Consumer Reports article that had rated Johnson Controls and Delco batteries more favorably (¶¶ 228-29, 235-36). Automotive battery customers and consumers — including Penske Auto Centers, which in October 1995 announced its decision to buy Exide batteries based on that month's article — considered and relied on the article in deciding which automotive batteries to purchase (¶¶ 239-40).

On September 20, 1995 Exide issued a press release, entitled "Consumer Reports Rates Exide Batteries as Best of the Buys," that reported the favorable results of the Consumer Reports article (¶ 237) Exide said there that "Consumer Reports gave its highest ratings to batteries manufactured by the Exide Corporation" (E. Mem. Ex. A). Nothing was said in the press release about Johnson Controls or any of Exide's other competitors in the manufacture of batteries (h.)

Because Johnson Controls was suspicious of the results reported in the October 1995 article, it undertook an investigation into the credibility of Kan Laboratories, which had performed the tests that provided the data for that article (¶ 241). All of the information unearthed during the investigation "led Johnson Controls to suspect that the testing by Kan Laboratories may have been biased" (¶ 243). But at some point during 1996 Johnson Controls "suspended its investigation of Kan Laboratories' potential bias, having experienced the rejection by Consumer Reports of the evidence of bias in favor of Exide that had been gathered, and the refusal by Exide employees with potential knowledge of the bias of Kan Laboratories to speak to investigators" (¶ 249).*fn4

On March 27, 2001, when Johnson Controls reviewed the Stipulation of Facts filed a few days earlier in a related criminal proceeding, it learned of the information that has provided the basis of its new claims (¶¶ 57, 251). That included Exide's misrepresentations to Sears during the bidding process as well as information "that Kan Laboratories acted as an agent, co-conspirator with, or `front' for Exide to submit intentionally falsified test data to the publishers of Consumer Reports for the October 1995 article" (¶ 251).

Defamation and Trade Libel Claims

SAC Counts V and VI assert defamation and trade libel claims against Exide. Those claims rest on two communications: the October 1995 Consumer Reports article and Exide's September 20, 1995 press release. Exide has moved to dismiss both claims on a variety of grounds, including their being time-barred. Because Exide proves to be correct in that respect, this opinion need not address its numerous other contentions, such as the "of and concerning" issue about which this Court recently queried counsel for the parties.*fn5

Both parties concur that the issue of timeliness of both claims looks to Illinois law (E. Mem. 8; J. Mem. 14).*fn6 That means a defamation action*fn7 must be commenced within one year after the plaintiff's cause of action accrues (735 ILCS 5/13-201). In general the accrual date is the date of publication of the defamatory communication (Schweihs v. Burdick, 96 F.3d 917, 920 (7th Cir. 1996), describing the Illinois rule). Illinois law extends that timetable by applying a discovery rule only in instances (unlike the present situation) where the ...


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