Ameritox, LTD. v. Millennium Laboratories, Inc.
Filing
398
ORDER granting in part, denying in part, and deferring in part 328 Millennium's Motion for summary judgment; denying 356 Motion to Strike. Signed by Judge Susan C Bucklew on 4/14/2014. (JD)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
AMERITOX, LTD.,
Plaintiff,
v.
Case No.: 8:11-cv-775-T-24-TBM
MILLENNIUM LABORATORIES, INC.,
Defendant.
_________________________________/
ORDER
This cause comes before the Court on two motions: (1) Millennium Laboratories, Inc.’s
Motion for Summary Judgment (Doc. No. 328), which Ameritox, Ltd. opposes (Doc. No. S366); and (2) Ameritox’s Motion to Strike (Doc. No. 356), which Millennium opposes (Doc. No.
372). As explained below, Millennium’s motion for summary judgment is granted in part,
denied in part, and deferred in part. Ameritox’s motion to strike is denied.
I. Standard of Review
Summary judgment is appropriate “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.” Fed. R. Civ. P.
56(a). The Court must draw all inferences from the evidence in the light most favorable to the
non-movant and resolve all reasonable doubts in that party's favor. See Porter v. Ray, 461 F.3d
1315, 1320 (11th Cir. 2006)(citation omitted). The moving party bears the initial burden of
showing the Court, by reference to materials on file, that there are no genuine issues of material
fact that should be decided at trial. See id. (citation omitted). When a moving party has
discharged its burden, the non-moving party must then go beyond the pleadings, and by its own
affidavits, or by depositions, answers to interrogatories, and admissions on file, designate
specific facts showing there is a genuine issue for trial. See id. (citation omitted).
II. Background
Ameritox and Millennium are clinical laboratories that screen urine specimens for the
presence of drugs. They are competitors in the industry and have been engaged in extensive
litigation for several years.
Currently, Ameritox has seven claims pending against Millennium: (1) Lanham Act false advertising (Count I), (2) violation of Florida’s Deceptive and Unfair Trade Practices Act
(Counts II and III), (3) unfair competition under California law (Count IV), (4) unfair
competition under New Hampshire law (Count V), (5) common law tortious interference with
business relationships in Arizona, Florida, California, New Hampshire, Tennessee, and Texas
(Count VI), and (6) common law unfair competition in Arizona, Florida, New Hampshire, and
Texas (Count VII).1 (Doc. No. 92). In response, Millennium has the following counterclaims
pending against Ameritox: (1) violation of Florida’s Deceptive and Unfair Trade Practices Act
(Count I), (2) violation of California’s Unfair Competition Law (Count II), (3) violation of New
York’s Consumer Protection from Deceptive Acts and Practices Law (Count V),2 (4) common
law unfair competition in Florida, Texas, and Washington (Count VI), and (5) common law
tortious interference with business relationships in Florida, California, New York, Tennessee,
1
The Court dismissed Ameritox’s common law unfair competition claim to the extent that
it was based on unfair competition in California and Tennessee. (Doc. No. 132).
2
This claim has been limited by this Court’s order on Ameritox’s Motion to Dismiss.
(Doc. No. 178).
2
Texas, Washington, and Oregon (Count VII).3 (Doc. No. 133). Relevant to this motion are
Ameritox’s claims that Millennium violated the Lanham Act and engaged in tortious interference
and unfair competition.
A. Lanham Act Claim
Ameritox’s Lanham Act false advertising claim is based on the following seven alleged
representations: (1) the billing letter representation, (2) the press release, (3) the billing manual,
(4) the gross revenue chart, (5) the encouragement regarding billing modifiers, (6) the
encouragement regarding testing, and (7) the representations that certain business practices were
legal.4 Below is a brief summary of each alleged representation.5
First, Millennium allegedly sent billing letters to physicians to distribute to patients
stating a policy: (1) not to collect the difference between the amount Millennium billed for its
services and the amount the patients' insurance companies agreed to pay, and (2) not to require
patients to pay deductible or co-pays. (Doc. No. S-366, Ex. B, ¶ 4, 15; Doc. No. 359-30, ¶ 8-10).
Ameritox alleges that these advertisements were false, deceptive, and misleading to three classes
of patients: those enrolled in Medicare who are not required to pay any co-pay or deductible;
those enrolled in Florida Medicaid who are required to pay only a $1 co-payment; and those
3
Millennium has withdrawn its counterclaim for violation of Texas’ Deceptive Trade
Practices Act - Consumer Protection Act, which was contained in Count IV. (Doc. No. 157).
The Court has dismissed Millennium’s counterclaim for a violation of California’s Unfair
Practices Act, which was contained in Count III. (Doc. No. 178).
4
Ameritox is no longer pursuing an eighth representation regarding the alleged promotion
of fractional ownership arrangements. (Doc. No. S-366, p. 12, n.10).
5
The parties do not include a description of many of these representations in their
summary judgment briefs, and the Court refers to its order on Millennium’s motion to dismiss
for a description of representations #2 through #6. (Doc. No. 132).
3
enrolled in private insurance programs that include the services that Millennium provides within
a patient’s annual deductible. Therefore, Ameritox alleges that: (1) Millennium advertised an
illusory benefit to Medicare patients; and (2) because waiving these payments is illegal under
Medicare, Medicaid, and under some states’ laws, Millennium garnered business by falsely
representing to potential customers that these actions were proper. (Doc. No. S-366, Ex. B, ¶
15).
Second, Millennium allegedly created a press release advocating for Medicare to
reimburse physicians at a higher rate for drug screening and representing that Millennium had no
vested interest in advocating for this change. However, Ameritox asserts that presenting the
press release from a purportedly neutral standpoint is misleading, because Millennium’s business
model depends upon generating as much revenue as possible for healthcare providers, so long as
they agree to contract with Millennium. Thus, Ameritox contends that Millennium is falsely
representing its motive as altruistic and that such a misrepresentation would induce healthcare
providers to choose Millennium as their laboratory.
Third, Millennium allegedly gave billing manuals to physicians using its services that
included unnecessary, duplicative, and improperly coded billing methods. Ameritox contends
that the billing manual deceptively represented that Millennium’s billing scheme was proper.
Fourth, Millennium allegedly created a gross revenue chart that promoted an improper
billing practice whereby physicians could bill Medicare multiple times for screening a single
urine sample for multiple classes of drugs. Ameritox contends that this constitutes false
advertising because the chart deceptively implied that Millennium’s billing and coding method
was proper and could be instituted in good faith.
4
Fifth, Millennium allegedly encouraged physicians to un-bundle global fees for urine
drug screen testing by utilizing billing modifiers. Ameritox contends that these representations
deceived healthcare providers into believing that Millennium’s revenue-generating schemes
were proper.
Sixth, Millennium allegedly encouraged physicians to reduce the number of individual
component point-of-care (“POC”) tests performed in the physician’s office, but to send the
samples to Millennium for more expensive comprehensive testing that would be billed to third
party payers.
Seventh, Millennium allegedly stated and implied that certain business practices (giving
products and services to physicians at below-market prices) were legal when, according to
Ameritox, they are not. Specifically, Ameritox contends that these business practices include: (1)
providing free POC testing cups (“POCT cups”), (2) providing free assistance for obtaining
CLIA waivers, and (3) offering chemical analyzers at preferential pricing. (Doc. No. S-366, Ex.
A, ¶ 2).
Ameritox challenges Millennium’s provision of free POCT cups, which contain POC test
strips inside the cups that detect the presence of certain drugs in the patient’s urine and provide
immediate preliminary results to the doctors while the patient is in the doctor’s office. The
doctors receiving the free POCT cups from Millennium execute “Cup Agreements” in which
they agree that: (1) they will not bill their patients (or their insurance companies) for the POC
tests; (2) they will not use the free POCT cups for any reason other than to collect the urine
samples, obtain the preliminary results, and then transport the urine samples to Millennium for
confirmatory testing; and (3) they will work with Millennium to account for the cups to ensure
5
that none of the cups are used for billable POC testing. The Cup Agreements contain the
following statement: “To ensure compliance with requirements imposed by the federal ‘Stark’
physician self-referral and anti-kickback laws, we cannot provide these specimen collection cups
to your practice without charge unless they are used for collecting and transporting specimens
for
testing by our laboratory.” (Doc. No. 330-6)(emphasis in original).
Millennium entered into approximately 1,000 Cup Agreements. (Doc. No. S-366, Ex.
NN, p. 50-51) Millennium’s sales representatives told doctors that the Cup Agreements were
legal. (Doc. No. S-366, Ex. A, ¶ 15; Doc. No. S-366, Ex. B, ¶ 10). Millennium was able to
convert accounts from Ameritox to Millennium as a result of the Cup Agreements. (Doc. No. S366, Ex. B, ¶ 13).
Ameritox also challenges Millennium’s provision of assistance for obtaining CLIA
waivers. In order to conduct POC testing, physicians must obtain a certificate of waiver under
the Clinical Laboratory Improvement Amendments (“CLIA”). Millennium offered physicians
assistance with obtaining the CLIA waiver and stated that the physician would be charged $50
for this service. (Doc. No. S-366, Ex. H). The form that physicians filled out to obtain
Millennium’s assistance stated: “Compliance with applicable laws and regulations is important
to us and to you and we believe your acknowledgment below serves to protect both parties.
Pursuant to federal laws and regulations, . . . Millennium cannot provide services to your
practice unless we agree in advance and your practice pays fair market value. (Doc. No. S-366,
Ex. H).
Millennium assisted approximately 200 physicians obtain CLIA waivers. (Doc. No. 328-
6
39, ¶ 5). However, Millennium did not enforce the collection of the $50 fee until after this
lawsuit was filed. (Doc. No. S-366, Ex. B, ¶ 18; Doc. No. S-366, Ex. K; Doc. No. S-366, Ex. Q;
Doc. No. 359-30, ¶ 11). Millennium was able to convert accounts from Ameritox to Millennium
as a result of the CLIA waiver assistance. (Doc. No. S-366, Ex. A, ¶ 6; Doc. No. S-366, Ex. B,
¶ 17).
Ameritox also challenges Millennium’s offers of chemical analyzers at preferential
pricing. Millennium made arrangements with third-parties to offer analyzers at below-market
pricing to Millennium’s customers, and these offers were communicated to Millennium’s
customers by Millennium’s sales representatives. (Doc. No. S-366, Ex. A, ¶ 8-12; Doc. No. S366, Ex. A: Ex. B1; Doc. No. S-366, Ex. B, ¶ 20-22; Doc. No. S-366, Ex. R; Doc. No. S-366, Ex.
U; Doc. No. 359-30, ¶ 12; Doc. No. S-366, Ex. HH; Doc. No. S-366, Ex. LL). Millennium’s
sales representatives told doctors that the arrangements were legal. (Doc. No. S-366, Ex. A, ¶ 910; Doc. No. S-366, Ex. B, ¶ 4, 20).
B. Tortious Interference and Unfair Competition Claims
Ameritox also asserts claims for tortious interference and unfair competition. The
alleged representations and business practices described above provide the basis for Ameritox’s
tortious interference and unfair competition claims.
III. Motion for Summary Judgment
Millennium moves for summary judgment on Ameritox’s Lanham Act, tortious
interference, and unfair competition claims. In support of its motion, Millennium makes the
following arguments: (1) Ameritox cannot establish Lanham Act liability; (2) Ameritox’s
attempt to obtain Lanham Act damages or disgorgement fails; (3) Ameritox’s tortious
7
interference and unfair competition claims fail; and (4) Ameritox’s claims are barred by its own
unclean hands. Accordingly, the Court will address each argument.
A. Lanham Act Liability
Millennium argues that Ameritox cannot establish Lanham Act liability for false
advertising in violation of 15 U.S.C. § 1125(a). Section 43(a) of the Lanham Act provides in
relevant part:
Any person who . . . 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.
15 U.S.C.A. § 1125(a)(1)(B). Furthermore, a successful false advertising claim under the
Lanham Act must establish:
(1) the advertisements of the opposing party were false or misleading;
(2) the advertisements deceived, or had the capacity to deceive,
consumers; (3) the deception had a material effect on purchasing
decisions; (4) the misrepresented product or service affects interstate
commerce; and (5) the movant has been-or is likely to be-injured as
a result of the false advertising.
Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004). Millennium
makes several arguments with respect to its contention that Ameritox cannot establish Lanham
Act liability, and the Court will address each argument below.
1. Cup Agreements
Ameritox contends that the Cup Agreements are violations of the Anti-Kickback Statute
(“AKS”) and/or the Stark Law. Millennium argues that its representations regarding the legality
of its Cup Agreements cannot provide a basis for a Lanham Act claim, because the arrangement
described in the Cup Agreements has not been held to be illegal by a court or agency of
8
competent jurisdiction. As this Court stated in its order on Millennium’s motion to dismiss:
Statements by laypersons that purport to interpret the meaning of a
statute or regulation are opinion statements, and not statements of
fact, unless “a court or agency of competent jurisdiction” has clearly
and unambiguously ruled on the matter. [Gen. Cigar Holdings, Inc.
v. Altadis, S.A., 205 F. Supp. 2d 1335, 1357 (S.D. Fla. 2002)](citing
Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725,
731 (9th Cir. 1999)). Additionally, “the proper inquiry is whether the
law was unambiguous at the time [the] alleged misstatements were
made.” Dial A Car, Inc. v. Transp., Inc., 82 F.3d 484, 489 (D.C. Cir.
1996).
(Doc. No. 132, p. 17).
The Court agrees with Millennium on this issue. As the Court explained in connection
with Ameritox’s motion for summary judgment, there is no clear case law on this issue. The
only relevant authority comes from Florida’s Agency for Health Care Administration
(“AHCA”). In June of 2012, Millennium received a letter from AHCA regarding its provision of
free POCT cups, which AHCA asserted was a kickback for patient referrals. (Doc No. 328-36).
The AHCA letter required Millennium to respond with its plan of correction, and Millennium
responded in June of 2012 that the provision of free POCT cups was not a kickback because the
doctors agreed not to bill for the POC testing. (Doc. No. 328-36). By early October of 2012,
Millennium did not receive any response from AHCA, and on October 9, 2012, Millennium
called AHCA to find out AHCA’s response to Millennium’s plan. (Doc. No. 328-36). The
AHCA representative stated that it had received Millennium’s plan and that Millennium should
proceed with the assumption that the plan had been accepted by AHCA in the absence of further
communication indicating otherwise. (Doc. No. 328-36). Millennium has not received any
further communications from AHCA. (Doc. No. 328-36).
Accordingly, because a court or agency of competent jurisdiction has not clearly and
9
unambiguously ruled on the matter of the legality of the Cup Agreements, the Court agrees with
Millennium that its representations regarding the legality of the Cup Agreements cannot be the
basis for a Lanham Act false advertising claim. Accordingly, the Court grants summary
judgment to Millennium on this issue.
2. Chemical Analyzers
Next, Millennium argues that there is no evidence that it offered chemical analyzers at
below market rates to its customers; instead, the chemical analyzers were provided by thirdparties. The Court rejects this argument, as Ameritox has presented evidence that Millennium
sought out the third-party vendors, negotiated preferential pricing for Millennium customers, and
would benefit from the transactions between the third-party vendors and the customers.
Accordingly, the Court denies Millennium summary judgment on this issue.
3. Representations Regarding Billing and CLIA Waiver Assistance
Next, Millennium argues that its billing representations6 are not actionable, because the
method of billing it described was legal prior to April of 2010. The Court is unable to analyze
this argument, because the parties did not sufficiently identify the specific billing representations
that were made or show how such billing practices were proper or improper. For example,
Ameritox has provided evidence that Millennium’s sales representatives would tell customers:
(1) how the customers and Millennium could both bill for testing the same urine specimen; and
6
The three billing representations at issue are: (1) the billing manuals that included
unnecessary, duplicative, and improperly coded billing methods, (2) the gross revenue chart that
promoted an improper billing practice whereby physicians could bill Medicare multiple times for
screening a single urine sample for multiple classes of drugs, and (3) Millennium’s
encouragement of physicians to un-bundle global fees for urine drug screen testing by utilizing
billing modifiers.
10
(2) how the customers could bill multiple units of CPT 80101QW. (Doc. No. 359-30, ¶ 6-7).
However, neither party has addressed the specifics of these billing practices or addressed their
propriety. Accordingly, the Court denies Millennium’s motion for summary judgment on this
issue.
Millennium also argues that its marketing of its assistance for obtaining CLIA waivers
was not improper, because it told doctors that in order to comply with federal law, it would have
to charge them fair market value ($50) for its services. Ameritox responds that Millennium did
not enforce the collection of the $50 fee until after this lawsuit was filed. (Doc. No. S-366, Ex.
B, ¶ 18; Doc. No. S-366, Ex. K; Doc. No. S-366, Ex. Q; Doc. No. 359-30, ¶ 11). Thus,
according to Ameritox, Millennium falsely represented the legality of providing its assistance for
obtaining CLIA waivers, because Millennium essentially provided the service for free.
The Court concludes that Ameritox’s argument is flawed to the extent that there is no
allegation that Millennium advertised that it could provide assistance in obtaining a CLIA waiver
for free; Millennium advertised that it could do so in exchange for $50. Thus, Millennium did
not falsely advertise the legality of providing its assistance for $50, and as such, Ameritox’s
Lanham Act claim based on Millennium’s representations regarding CLIA waiver assistance
fails. Accordingly, the Court grants Millennium’s motion for summary judgment to the extent
that Ameritox’s Lanham Act claim is based on Millennium’s advertising its provision of
assistance in obtaining a CLIA waiver. However, Ameritox can still pursue Millennium’s
conduct of not collecting the $50 fee via its unfair competition claims based on its argument that
Millennium improperly provided CLIA waiver assistance for free.
11
4. Commercial Advertising or Promotion
Next, Millennium argues that Ameritox cannot identify any representations that
Millennium made about the legality of the chemical analyzer arrangements, nor can Ameritox
identify how and to whom the representations were made.7 This argument has no merit, as
Ameritox has made such identifications. Ameritox has provided evidence that: (1) Millennium
made arrangements with third-parties to offer analyzers at below-market pricing to Millennium’s
customers, and these offers were communicated to Millennium’s customers by Millennium’s
sales representatives (Doc. No. S-366, Ex. A, ¶ 8-12; Doc. No. S-366, Ex. A: Ex. B1; Doc. No.
S-366, Ex. B, ¶ 20-22; Doc. No. S-366, Ex. R; Doc. No. S-366, Ex. U; Doc. No. 359-30, ¶ 12;
Doc. No. S-366, Ex. HH; Doc. No. S-366, Ex. LL); and (2) Millennium’s sales representatives
told doctors that the arrangements were legal (Doc. No. S-366, Ex. A, ¶ 9-10; Doc. No. S-366,
Ex. B, ¶ 4, 20).
Millennium also argues that Ameritox has not shown that the gross revenue chart at issue
in this case was authenticated as a Millennium document or that it was sufficiently disseminated.
Ameritox responds that Millennium has not shown that no genuine issues of fact exist regarding
authentication and dissemination, and as the moving party, the burden is on Millennium to show
the absence of a genuine issue of fact. The Court agrees with Ameritox. Accordingly, the Court
denies Millennium’s motion for summary judgment on these issues.
7
Millennium made this same argument with respect to the Cup Agreements and the CLIA
waiver assistance, but the Court has already granted Millennium’s motion for summary judgment
to the extent Ameritox’s Lanham Act claim is based on the Cup Agreements and the CLIA
waiver assistance.
12
5. Abandoned Representations
Next, Millennium makes a one-sentence argument, with no citation to authority, that
Ameritox has abandoned its pursuit of Millennium’s billing letter representation, Millennium’s
press release, and Millennium’s encouragement regarding testing, because Ameritox does not
have any expert testimony regarding damages from such representations. Ameritox responds
that expert testimony is not required to prove damages and that it is also seeking injunctive relief
with respect to those representations. Given Millennium’s failure to provide sufficient argument
or authority, the Court denies Millennium’s motion on the issue.
B. Lanham Act Damages and Disgorgement
Next, Millennium argues that Ameritox’s attempt to obtain Lanham Act damages or
disgorgement fails because Ameritox cannot establish that the alleged false advertising caused an
injury. As previously stated, a successful false advertising claim under the 15 U.S.C. § 1125(a)
of the Lanham Act must establish:
(1) the advertisements of the opposing party were false or misleading;
(2) the advertisements deceived, or had the capacity to deceive,
consumers; (3) the deception had a material effect on purchasing
decisions; (4) the misrepresented product or service affects interstate
commerce; and (5) the movant has been-or is likely to be-injured as
a result of the false advertising.
Hickson, 357 F.3d at1260. Once those elements are established, 15 U.S.C. § 1117(a) provides
the following regarding the plaintiff’s recovery:
[T]he plaintiff shall be entitled . . . , subject to the principles of
equity, to recover (1) defendant’s profits, (2) any damages sustained
by the plaintiff, and (3) the costs of the action. The court shall assess
such profits and damages or cause the same to be assessed under its
direction. In assessing profits the plaintiff shall be required to prove
defendant's sales only; defendant must prove all elements of cost or
deduction claimed. In assessing damages the court may enter
13
judgment, according to the circumstances of the case, for any sum
above the amount found as actual damages, not exceeding three times
such amount. If the court shall find that the amount of the recovery
based on profits is either inadequate or excessive the court may in its
discretion enter judgment for such sum as the court shall find to be
just, according to the circumstances of the case. Such sum in either
of the above circumstances shall constitute compensation and not a
penalty. The court in exceptional cases may award reasonable
attorney fees to the prevailing party.
15 U.S.C. § 1117(a). Thus, Ameritox’s potential recovery could include both its own damages
and disgorgement of Millennium’s profits, as discussed below.
1. Damages
In order to recover damages, Ameritox must establish that it has been injured by the
alleged false advertising. See Trilink Saw Chain, LLC v. Blount, Inc., 583 F. Supp.2d 1293,
1320 (N.D. Ga. 2008). As explained by the Trilink court:
[In order to establish an injury from the false advertising,] the
plaintiff must demonstrate that the false advertisement actually
deceived or misled consumers, which in turn caused injury to the
plaintiff. However, “the court must ensure that the record adequately
supports all items of damages claimed and establishes a causal link
between the damages and the defendant's conduct, lest the award
become speculative or violate [Lanham Act] section 35(a)'s
prohibition against punishment.”
Courts have noted that “marketplace damages and actual confusion
are notoriously difficult and expensive to prove.” Thus, many
courts—including the Eleventh Circuit—routinely presume that
literally false advertising actually deceives consumers. Moreover, a
growing number of courts have also adopted a presumption, in cases
where money damages are sought, that willfully deceptive,
comparative advertisements cause financial injury to the party whose
product the advertisement targets.
Id. (internal citations omitted). Thus, based on Trilink, to the extent that the challenged
representations are shown to be literally false, there is a presumption of actual deception.
14
However, because none of the challenged representations involve comparative advertisements
(i.e., representations comparing Millennium to Ameritox), there will not be a presumption of
causation.
Millennium contends that Ameritox cannot show that Ameritox suffered any actual
damages as a result of its alleged false advertising. Ameritox’s response largely focuses on
Millennium’s representations regarding its Cup Agreements and CLIA assistance, both of which
this Court has held cannot support a Lanham Act false advertising claim. Furthermore,
Ameritox points to the fact that Ameritox began missing its financial projections in 2011 while
Millennium was exceeding its projections, which Ameritox contends coincides with the
explosion of the Cup Agreements at that time. Again, the Cup Agreements cannot be the basis
for Ameritox’s Lanham Act claim. Additionally, causation of actual damages cannot be shown
simply by evidence that Ameritox began missing its financial projections in 2011 while
Millennium was exceeding its projections. A change in the parties’ sales positions without a
showing that the change was caused by a specific advertising representation is not sufficient
evidence of causation. See 3M Innovative Properties Co. v. Dupont Dow Elastomers LLC, 361
F. Supp.2d 958, 973 (D. Minn. 2005); Aviva Sports, Inc. v. Fingerhut Direct Marketing, Inc.,
829 F. Supp.2d 802, 816 (D. Minn. 2011). This is because such evidence does not account for
customer purchasing decisions that were made for reasons other than the challenged advertising.
See 3M, 361 F. Supp.2d at 973.
Ameritox also relies on an analysis of its customers’ proffered reasons for switching to
Millennium. However, Ameritox does not provide any evidence directly from the customers
themselves. As such, the analysis of its customers’ proffered reasons for switching is tainted by
15
hearsay, as the customers’ statements are hearsay. See Air Turbine Technology, Inc. v. Atlas
Copco AB, 295 F. Supp.2d 1334, 1344-45 (S.D. Fla. 2003).
Finally, Ameritox relies on the opinions of its expert, Dr. Robin Cantor, to provide
evidence of causation. However, via a separate motion, Millennium has moved to exclude the
opinion of Dr. Cantor. (Doc. No. 334). The Court intends to hold a hearing on the motion to
exclude the opinion of Dr. Cantor, and the Court will address this portion of Millennium’s
summary judgment motion at that time. Accordingly, the Court defers ruling on whether
Ameritox can prove causation, and consequently, its entitlement to damages.
2. Disgorgement of Profits
Ameritox also seeks disgorgement of Millennium’s profits. Ameritox does not need to
show actual damages in order to obtain a disgorgement of Millennium’s profits resulting from its
alleged false advertising. See Burger King Corp. v. Mason, 855 F.2d 779, 781 (11th Cir. 1988).
“[A]n accounting of defendant’s profits is appropriate where: (1) the defendant’s conduct was
willful and deliberate, (2) the defendant was unjustly enriched, or (3) it is necessary to deter
future conduct.” Optimum Technologies, Inc. v. Home Depot U.S.A., Inc., 217 Fed. Appx. 899,
902 (11th Cir. 2007).
The Eleventh Circuit has not spoken on the specific issue of the method for proving
profits for false advertising claims, but other courts have. For example, in Rexall Sundown, Inc.
v. Perrigo Co., 707 F. Supp.2d 357 (E.D.N.Y. 2010), the court stated:
[The defendant] argued that, under § 1117(a), [the plaintiff] bore the
burden of establishing what portion of [the defendant’s] profits were
due to the allegedly false [advertising], as opposed to other aspects
of the packaging and promotion of the [defendant’s] products. [The
plaintiff] disagreed and argued that it was only required to prove [the
defendant’s] sales and that [the defendant] had to establish any
16
apportionment. . . . [T]he Court agrees with [the plaintiff].
Both the plain text of the statute and case law support the proposition
that, when a plaintiff seeks a defendant's profits in a Lanham Act
false advertising case, the plaintiff must establish only the defendant's
sales of the product at issue; the defendant bears the burden of
showing all costs and deductions, including any portion of sales that
was not due to the allegedly false advertising.
The Court's analysis begins with the plain text of the statute at issue,
Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a). That statute
provides, in relevant part, that “[i]n assessing profits the plaintiff
shall be required to prove defendant's sales only; defendant must
prove all elements of cost or deduction claimed.” By its plain terms
then, the statute requires the plaintiff to prove “sales only.” It does
not say that it is plaintiff's burden to prove, for example, “sales due
to the false advertising” or “sales due to the violative conduct.”
Id. at 359 (internal citations omitted). Relying on Rexall, another court stated:
The Court finds the reasoning in Rexall Sundown to be persuasive.
To be entitled to recover profits, [the plaintiff] must only prove [the
defendant’s] sales of the allegedly falsely advertised products. If [the
defendant] fails to prove the sales not due to the allegedly violative
conduct, [the plaintiff] may be entitled to all of [the defendant’s]
profits from the allegedly falsely advertised products—subject only
to the principles of equity.
[The plaintiff] has sufficient evidence of a likelihood of injury caused
by [the defendant’s] allegedly false advertising. [The plaintiff’s]
damages expert presented evidence of [the defendant’s] sales of and
profits from the allegedly violative products. . . . [The plaintiff] has
presented sufficient evidence to allow a recovery of [the defendant’s]
profits.
Aviva Sports, Inc. v. Fingerhut Direct Marketing, Inc., 829 F. Supp.2d 802, 819 (D. Minn.
2011).
While Millennium may argue that such a method of proving profits could provide a
windfall to Ameritox, the Court notes three things: First, as noted by the court in Rexall:
“[I]f the defendant can apportion its profits, then the plaintiff is given
the appropriate amount and not a windfall. If the defendant cannot
17
apportion its profits, equity supports the view that, having already
been held liable for [violating the Lanham Act], it is the defendant
who should suffer the consequences of its own failure to apportion its
profits.”
Rexall, 707 F. Supp.2d at 361, n.2 (quoting David S. Almeling, The Infringement–Plus–Equity
Model: A Better Way to Award Monetary Relief in Trademark Cases, 14 J. Intell. Prop. L. 205,
224–25 (2007)).
Second, Ameritox still would have to prove causation (i.e., that the false advertising
caused injury), and Ameritox would still have to prove the sales of the allegedly falsely
advertised products. See Aviva, 829 F. Supp.2d at 819; Rexall, 707 F. Supp.2d at 362 (noting
the distinction between proving causation and apportioning profits).
Third, this method is consistent with the Eleventh Circuit’s statement regarding
determining an appropriate remedy under § 1117(a):
The Lanham Act . . . confers broad discretion upon the district court
to fashion the assessment of damages “according to the circumstances
of the case,” 15 U.S.C.A. § 1117, and it is the character of the
conduct surrounding the [violation] that is relevant. Thus, it is the
district court's assessment of the particular conduct involved that
governs the exercise of its discretion in fixing an appropriate remedy.
The district court has the statutory authority to “enter judgment for
such sum as the court shall find to be just, according to the
circumstances of the case.” 15 U.S.C.A. § 1117. . . . “[A]ll monetary
awards under Section 1117 are ‘subject to the principles of equity,’
[and] . . . no hard and fast rules dictate the form or quantum of relief.”
Burger King, 855 F.2d at 782-83.
In its motion for summary judgment, Millennium argues that Ameritox cannot obtain the
remedy of disgorgement, because Ameritox has not proven that the false advertising caused an
injury. As previously stated with respect to the expert opinion of Dr. Cantor regarding causation,
18
the Court will address this portion of the Millennium’s summary judgment motion when the
Court holds its hearing on Millennium’s motion to exclude the opinion of Dr. Cantor.
Accordingly, the Court defers ruling on whether Ameritox can prove causation, and
consequently, its entitlement to Millennium’s profits.
C. Tortious Interference and Unfair Competition Claims
Next, Millennium argues that Ameritox’s tortious interference and unfair competition
claims fail. In support of this contention, Millennium asserts four arguments, which the Court
will address in turn.
First, Millennium argues that because the representations at issue do not support a
Lanham Act claim, they cannot support a tortious interference or unfair competition claim. The
Court has found that Ameritox cannot assert Lanham Act false advertising claims based on
Millennium’s Cup Agreements or CLIA waiver assistance.
To the extent that Millennium makes the argument that the CLIA waiver assistance
representation cannot support a tortious interference or unfair competition claim, the Court
grants Millennium’s motion. However, the Court notes that it has stated that Ameritox may
pursue a claim regarding Millennium’s conduct after making the CLIA waiver assistance
representation; specifically, Millennium’s failure to collect the $50 CLIA waiver assistance fee.
As such, to the extent of Millennium’s conduct in failing to collect the $50 CLIA waiver
assistance fee, the Court rejects Millennium’s argument that such conduct cannot form the basis
of a tortious interference or unfair competition claim.
Likewise, with respect to the Cup Agreements, Ameritox is challenging the underlying
19
conduct of providing free POCT cups. As such, the Court’s conclusion that Ameritox cannot
pursue a Lanham Act claim based on Millennium’s representations regarding the provision of
free POCT cups does not bar Ameritox from pursuing a claim based on Millennium’s conduct.
Second, Millennium argues that conduct that the Court has found not to be illegal under
the Stark Law or AKS cannot provide a basis for a tortious interference or unfair competition
claim. Ameritox responds that “illegal” conduct is not required for these claims, as deceptive
conduct could support tortious interference and unfair competition claims. Thus, Ameritox
argues that even if Millennium shows an ambiguity under the Stark Law or AKS with respect to
its conduct, Ameritox can still pursue its tortious interference and unfair competition claims
regarding such conduct.
The Court notes that it has deferred ruling on Ameritox’s motion for partial summary
judgment regarding the legality of the Cup Agreements under the AKS and Stark Law.
Therefore, the Court will also defer ruling on Millennium’s argument that if the Cup Agreements
are found not to violate the AKS and Stark Law, whether the Cup Agreements could still provide
a basis for an unfair competition or tortious interference claim. The Court will address this issue
at the hearing that the Court sets with respect to Ameritox’s motion for partial summary
judgment.
Third, Millennium argues that Ameritox’s tortious interference and unfair competition
claims fail because Ameritox cannot show that it was damaged by the conduct. Millennium
points out the lack of evidence directly from any doctors showing that they chose Millennium
due to any of the challenged practices. As previously stated with respect to Ameritox’s evidence
of causation regarding its Lanham Act claim, the Court will hold a hearing on the issue of
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damages arising from Ameritox’s tortious interference and unfair competition claims.
Fourth, Millennium argues that Ameritox cannot seek the remedy of disgorgement of
Millennium’s profits in connection with its tortious interference and unfair competition claims.8
In support of this argument, Millennium simply cites to one case applying Texas law that
concluded that disgorgement of profits is not a proper remedy for a tortious interference claim.9
See Marcus, Stonewall & Beye Government Securities, Inc. v. Jefferson Investment Corp., 797
F.2d 227, 231-32 (5th Cir. 1986). However, the court in Marcus stated that because the jury was
able to determine the amount of the plaintiff’s loss, the court did not need to determine whether
Texas courts would allow recovery based on the defendant’s profits when the plaintiff’s loss was
not readily ascertainable. See id. at 231 n.5. Furthermore, Ameritox cites a case applying Texas
law that concluded that the plaintiff was entitled to the defendant’s profits in connection with a
tortious interference claim where the plaintiff’s lost profits were not readily ascertainable. See
Sandare Chemical Co., Inc. v. WAKO International, Inc., 820 S.W.2d 21, 23 (Tx. App. 1991).
Additionally, Ameritox cites a case applying Florida law that concluded that the plaintiff was
entitled to an accounting of the defendant’s profits with respect to its unfair competition claim.10
See Spray-Bilt, Inc. v. Ingersoll-Rand World Trade, Ltd., 350 F.2d 99, 108 (5th Cir. 1965).
Based on the parties’ briefing, the Court concludes that disgorgement of profits is an
8
The tortious interference claims are brought under the laws of Arizona, Florida,
California, New Hampshire, Tennessee, and Texas. The unfair competition claims are brought
under the laws of Arizona, Florida, New Hampshire, and Texas.
9
In footnotes, Millennium cites to two other cases applying the laws of jurisdictions not
implicated in this case.
10
In a footnote, Ameritox cites other cases that discuss that disgorgement of profits is an
appropriate remedy under the Lanham Act.
21
available remedy for a tortious interference claim under Texas law and for an unfair competition
claim under Florida law. The parties, however, have failed to cite sufficient case law from each
state to support their arguments regarding the remedy of disgorgement of profits in connection
with tortious interference and unfair competition claims under the other state laws, and the Court
is not inclined to do their work for them. When the parties complete their pretrial statement,
they are directed to include a section regarding the available remedies for each claim with
citations to relevant case law to support their assertions.
Additionally, Millennium argues that even if disgorgement of profits is an available
remedy when the plaintiff’s lost profits are not readily ascertainable, disgorgement is not an
appropriate remedy in this case, because Plaintiff has identified its lost profits through the expert
opinion of Dr. Cantor. However, because there is a pending motion to exclude Dr. Cantor’s
opinion, the Court defers ruling on this argument at this time and will address it in connection
with the hearing on Millennium’s motion to exclude Dr. Cantor’s opinion.
D. Unclean Hands
Next, Millennium argues that Ameritox’s claims are barred by its own unclean hands.
Both parties cite to Calloway v. Partners National Health Plans, 986 F.2d 446 (11th Cir. 1993),
for the elements of the equitable defense of unclean hands. In Calloway, the court stated:
For a defendant to successfully avail itself of the doctrine of unclean
hands, it must satisfy two requirements. First, the defendant must
demonstrate that the plaintiff's wrongdoing is directly related to the
claim against which it is asserted. Second, even if directly related,
the plaintiff's wrongdoing does not bar relief unless the defendant can
show that it was personally injured by her conduct.
Id. at 450-51 (internal citations omitted).
22
Millennium bases its unclean hands argument on the following conduct allegedly
committed by Ameritox: (1) Ameritox advertises the money that can be made from POC testing
by the doctors, (2) Ameritox refers customers to the same vendors for chemical analyzers and
those customers receive the same price as Millennium’s customers, (3) Ameritox provides
billing and coding information for its customers. In response, Ameritox argues that Millennium
was not injured by the alleged conduct, because Millennium has not asserted counterclaims
against Ameritox for such conduct or otherwise shown how it was injured by Ameritox’s alleged
conduct.
The parties each devoted two pages to this argument and have not sufficiently fleshed out
the factual allegations or briefed the legal issue. Accordingly, the Court concludes that this issue
is not ripe for summary judgment, and as such, the Court denies Millennium’s motion on this
issue.
IV. Motion to Strike
Ameritox moves to strike various declarations that Millennium submitted to the Court in
support of its motion for summary judgment. The Court, however, did not rely on any of the
declarations, with the exception of the declaration of Robert West regarding the AHCA
investigation. As such, the Court denies the motion as moot to the extent that it is based on the
declarations of anyone other than West.
The basis for the motion to strike West’s declaration is that Millennium did not identify
West in its Rule 26 disclosures. Federal Rule of Civil Procedure 37(c)(1) provides: “If a party
fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not
allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a
23
trial, unless the failure was substantially justified or is harmless.” The burden is on Millennium
to show that the failure to disclose was substantially justified or harmless. See Mitchell v. Ford
Motor Co., 318 Fed. Appx. 821, 824 (11th Cir. 2009).
Millennium responds that West’s declaration (Doc. No. 328-36) should not be stricken,
because West was identified 263 times in documents produced to Ameritox11 (Doc. No. 327-28,
¶ 8) and Ameritox’s counsel questioned Millennium’s president, Howard Appel, at length
regarding an email that Appel sent to West (Doc. No. 372-4; Doc. No. 372-16). Accordingly,
Millennium argues that West was made known to Ameritox during the discovery process and
Ameritox is not prejudiced by the Court’s consideration of West’s declaration.
Upon consideration, the Court concludes that the failure to disclose West was harmless
and Ameritox was not prejudiced. In his declaration, West describes the AHCA’s investigation
regarding Millennium’s provision of free POCT cups. Most of the information relied on by the
Court came from the documents sent from and submitted to AHCA, and Ameritox has not
argued that the documents, themselves, are not admissible. The only evidence directly from
West that the Court relied on relates to his conversations with AHCA after Millennium’s
response to AHCA that its provision of free POCT cups was not a kickback. Specifically, West
states: (1) by October of 2012, Millennium did not receive any response from AHCA, and on
October 9, 2012, Millennium called AHCA to find out AHCA’s response to Millennium’s plan;
(2) the AHCA representative stated that it had received Millennium’s plan and that Millennium
should proceed with the assumption that the plan had been accepted by AHCA in the absence of
further communication indicating otherwise; and (3) Millennium has not received any further
11
Examples of a few of such documents can be found at Doc. No. 372-10 through 372-14.
24
communications from AHCA. Even if the Court were to strike West’s direct testimony, the
Court would still be persuaded that AHCA implicitly accepted and approved of Millennium’s
response given the absence of any evidence of any penalty issued by AHCA against Millennium.
Accordingly, the Court denies Ameritox’s motion to strike West’s declaration.
V. Conclusion
Based on the above, it is ORDERED AND ADJUDGED that:
(1)
Millennium Laboratories, Inc.’s Motion for Summary Judgment (Doc. No. 328) is
GRANTED IN PART, DENIED IN PART, and DEFERRED IN PART:
(a)
The motion is GRANTED to the extent that Millennium moves for
summary judgment on the Lanham Act false advertising claim based on
the Cup Agreements and the CLIA waiver assistance; the motion is
DENIED to the extent that the Lanham Act claim is based on other
representations.
(b)
The Court DEFERS ruling on the issues of causation, damages, and
disgorgement of Millennium’s profits with respect to the Lanham Act
claim, tortious interference, and unfair competition claims. Additionally,
the Court DEFERS ruling on the issue of whether the Cup Agreements
can provide a basis for an unfair competition or tortious interference claim
if the Court concludes that the Cup Agreements do not violate the AKS
and Stark Law.
(2)
Ameritox’s Motion to Strike (Doc. No. 356) is DENIED.
(3)
The Court will, by separate order, set oral argument on this motion to the extent
25
that the Court deferred ruling on the issues identified above.
(4)
When the parties complete the pretrial statement, they are directed to include a
section regarding the available remedies for each claim with citations to relevant
case law to support their assertions.
DONE AND ORDERED at Tampa, Florida, this 14th day of April, 2014.
Copies to: All parties and Counsel of Record
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