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BUILDING MATERIALS CORPORATION OF AMERICA v. CERTAINTEED CORP.

April 1, 2003

BUILDING MATERIALS CORPORATION OF AMERICA, D/B/A/ GAF MATERIALS CORPORATION, PLAINTIFF,
v.
CERTAINTEED CORPORATION AND AIR VENT, INC., DEFENDANTS.



The opinion of the court was delivered by: William Bassler, District Judge

O P I N I O N

On this motion to enforce a settlement agreement, the Court must decide whether certain statements posted on a website operated by the defendants constitute a breach of a settlement agreement entered into by the parties in June, 1999. The parties market attic ventilation products, and the agreement prohibits the defendants from making, in words or substance, four specific claims about the plaintiff's attic vent. The plaintiff had sued the defendant alleging false and misleading advertisements in violation of the Lanham Act, 15 U.S.C. § 1125(a), and related New Jersey laws.

The Court held oral argument on March 27, 2003, and the parties agree that this motion can be decided on the basis of that argument and the papers without an evidentiary hearing. For the following reasons, the Court finds that the statements on the Air Vent web-site breach the Settlement Agreement. The plaintiff's motion is granted.

I. Jurisdiction & Applicable Law

The Court has jurisdiction over this matter. The parties incorporated the Settlement Agreement into a Stipulation and Order of Dismissal signed by both parties and the Court and entered pursuant to Federal Rule of Civil Procedure 41(a) on June 22, 1999. The Stipulation and Order expressly provides that the Court retains jurisdiction to enforce the Settlement Agreement. See In re Phar-Mor, Inc. Sec. Litig., 172 F.3d 270, 274 (3d Cir. 1999) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381-82 (1994)) (explaining that a provision "retaining jurisdiction" over the settlement agreement makes compliance with the settlement agreement part of the dismissal order and thus a breach of the agreement a violation of the order).

The Court applies basic contract principles to its review of settlement agreements. Fleming ex rel Estate of Fleming v. Air Sunshine, Inc., 311 F.3d 282, 289 (3d Cir. 2002); In re Cendant Corp. Prides Litig., 233 F.3d 188, 192 (3d Cir. 2000). In this matter, the principles of New Jersey contract law govern the Court's analysis, as expressly provided in the Settlement Agreement. (Hanneman Decl. Ex. 1, Settlement Agreement ¶ 11.) Under New Jersey law, "the polestar of construction of a contract is to discover the intention of the parties." Jacobs v. Great Pacific Century Corp., 104 N.J. 580, 582, 518 A.2d 223, 224 (1986) (per curiam) (citation and quotation omitted); Bar on the Pier, Inc. v. Bassinder, ___ A.2d ___, 2003 WL 1025027 (Sup.Ct.App. Div. March 12, 2003) (citing Jacobs). The parties agree that it is the objective, not subjective, intent of the parties "manifested in the language of the contract in light of the circumstances surrounding the transaction" that the Court must discern. Dome Petroleum Ltd. v. Employers Liability Ins. Co. of Wisc., 767 F.2d 43, 47 (3d Cir. 1985); SmithKline Beecham Corp. v. Rohm and Haas Co., 89 F.3d 154, 159 (3d Cir. 1999). Accordingly, evidence of the circumstances surrounding the making of the contract at issue, i.e., extrinsic evidence, is admissible to aid the Court in interpreting the contract language, even when that language is free from ambiguity. See Halper v. Halper, 164 F.3d 830, 840 (3d Cir. 1999); see also Biovail Corp. Int'l v. Hoechst AG, 49 F. Supp.2d 750, 774 (D.N.J. 1999) (citing SmithKline and Halper).

II. Factual & Procedural Background

A. Ridge Vents & Attic Ventilation

Plaintiff Building Materials Corporation of America d/b/a GAF Materials Corporation ("GAFMC" or "plaintiff") and defendants CertainTeed Corporation and Air Vent, Inc. ("CertainTeed" or "defendant") market ridge vents, a means of providing attic ventilation. Air Vent is a subsidiary of CertainTeed.

The GAFMC Cobra® ridge vent and the CertainTeed Shingle Vent II products are intended to function similarly, though they differ in design. Each sits atop the roof of a house, at the peak, covering an open slot cut along the roof. This slot allows warm air to escape from the attic, thereby preventing the temperature inside the attic from becoming significantly warmer than the air outside the attic. (Hanneman Decl., Ex. 7, Sherman Decl. in Support of GAF's Application for Preliminary Injunction ¶¶ 4-7.) Thus, ridge vents function by creating, or at least permitting, airflow through an attic so warm air may escape and cool air may enter. Without proper ventilation, the heat built-up in an attic can cause snow and ice on the roof to melt and then re-freeze, thereby causing water and ice damage to the roof. (Id. ¶ 7.) The need for proper attic ventilation is well recognized in the roofing industry. (Id. ¶ 9, Exs. A & B.)

CertainTeed's Shingle Vent II is a rigid plastic cap with external baffles designed to prevent rain and snow from entering the attic and to direct airflow out of the attic. (Keller Decl. ¶ 3, Ex. 2 at 3.) GAFMC's Cobra® ridge vent, on the other hand, is a highly air-permeable, synthetic mesh that is unrolled along the open slot in the roof and left open at the edges to allow warm air out of the attic. (Hanneman Decl., Ex. 7, Sherman Decl. ¶ 16.)

B. The 1999 Settlement Agreement & Alleged Breach

As noted above and discussed in greater detail below, GAFMC sued CertainTeed in 1999 alleging that the defendant had made false and misleading claims about the Cobra® ridge vent. The purpose of the 1999 Settlement Agreement now at issue, as described in the agreement itself, was "to settle all claims that were or could have been asserted in the Action without any admission of liability. . . ." (Hanneman Decl. Ex.1, Settlement Agreement at 2.) Under the terms of the agreement:

CertainTeed will not, in any future marketing communication, written or oral, make the following claims, whether in words or substance: a) Cobra® ridge vent `is not a vent at all, but really an air-trapping `blanket'.' b) Cobra® ridge vent `allows rain to leak into an attic.' c) Cobra® ridge vent `simply doesn't work.' d) Cobra® ridge vent was never `properly tested.

(Id. ¶ 1 (emphasis added).)

GAFMC alleges that CertainTeed breached the Settlement Agreement by posting certain statements on the Air Vent Internet website on a web-page entitled "Performance Testing." According to GAF, the statements on the "Performance Testing" page of the Air Vent website make, in substance, at least two of the four claims prohibited by the Settlement Agreement: that the Cobra® ridge vent "doesn't work" and that it "allows rain to leak into an attic." Specifically, GAF complains of three statements that allegedly make the claim, in substance, that the Cobra® ridge vent does not work:

1)"No airflow could be measured at any wind speeds for Roll Vent, Coravent, Cobra® Vent or Vent Sure."
2)"The most significant predictor of ridge vent performance was the external baffle."
3)"Ridge vents without external baffles were unable to create airflow from the attic exhausting through the ridge vent."
(Hanneman Cert. Ex. 2, Performance Testing Web-page, available at www.airvent.com/pro/ventilation/specifications/specperftest.html.) GAF identifies two sentences that allegedly make, in substance, the claim that the Cobra® ridge vent allows rain to leak into an attic:

Furthermore, this reading actually increased as winds increased. Therefore, as winds increase, more air and (potentially) rain and ...


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