Rival death care companies reach $18.75M settlement on client poaching dispute

A four-year lawsuit over a funeral products manufacturer and distributor's claim that former executives violated a severance contract by attempting to poach clients has concluded at the U.S. District Court for the Western District of Pennsylvania after the defendants agreed to an $18.75 million settlement.

Pittsburgh-based Matthews International Corporation will receive a settlement award valued at $18.75 million from litigation initiated against Harry Pontone, Scott Pontone, Pontone Casket Company and Batesville Casket Company.

Under the terms of the settlement, Batesville will pay Matthews $17 million in one lump sum payment and will also pay an additional $1.75 million for attorney fees of Harry and Scott Pontone, for a total settlement value of $18.75 million.

The settlement successfully concludes litigation arising out of allegations that the defendants unlawfully poached customers of Matthews' subsidiaries, The York Group, Inc. and Milso Industries Corporation, that Harry and Scott Pontone breached their employment covenants, and that Batesville improperly interfered with business relations of Matthews, York and Milso. All of the settlement proceeds shall be paid by Batesville on behalf of the multiple co-defendants.

Matthews initiated the suit in 2010, claiming that Scott Pontone had been soliciting customers that Matthews acquired after purchasing Pontone's assets and inducing Matthews employees to join him at Batesville.

According to the original complaint, Matthews, which specializes in manufacturing memorialization products, purchased York in 2001 and made it a wholly owned subsidiary that produced wooden and metal caskets. As part of its strategy to strengthen its share of the death care industry, York made a move in 2005 to acquire Milso, a distribution firm owned by Harry Pontone in Brooklyn, N.Y.

The suit says that the deal included purchasing Milso's customer base and capitalizing on Milso's long-established client relationships with a sale agreement of $95 million, plus an additional $15 million for contingency consideration. Through his share of the company and the family trust, Scott Pontone stands to earn a substantial amount from the asset sale, the complaint says.

The transaction also included the signing of non-compete, confidentiality clauses for the salespeople, preventing them from using inside information to unfairly market to current and potential customers.

In April 2007, Pontone sued York in federal court. claiming that York breached several components of the employment agreements. As part of the $8 million settlement, Pontone agreed to resign from the company and signed an agreement that prevented him from soliciting other York employees to join him in future business ventures until 2011.

However, less than one month after his non-compete clause expired in 2010, Batesville announced the hiring of Pontone as an independent sales consultant and two York employees who had worked with Pontone before and after the acquisition.

Matthews claimed that the actions violated the clauses in the severance agreement and gave Batesville an unfair advantage in the competitive industry. The company sought a preliminary and permanent injunction preventing Pontone and his colleagues from providing work or services to former or current customers and Batesville from using proprietary information that York acquired from the purchase of Milso.

The plaintiffs were represented by Brian Himmel and attorneys from Reed Smith LLP.

The federal case ID is 2:10-cv-01078-JFC.