Watkins Incorporated v. McCormick and Company, Incorporated
Filing
112
ORDER denying 68 Motion for Summary Judgment; denying 70 Motion to Exclude Expert Testimony. (Written Opinion) Signed by Judge David S. Doty on 12/7/2021. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
CIVIL NO. 15-2688(DSD/BRT)
Watkins Incorporated,
Plaintiff,
ORDER
v.
McCormick and Company,
Incorporated,
Defendant.
Charles G. Frohman, Esq., James J. Long, Esq. and Maslon
LLP, 90 South Seventh Street, Suite 3300, Minneapolis, MN
55402, counsel for plaintiff.
David H. Bamberger, Esq. and DLA Piper US LLP, 500 Eighth
Street NW, Washington DC 20004, counsel for defendant.
This matter is before the court upon defendant McCormick and
Company, Inc.’s motions to exclude plaintiff’s expert and for
summary judgment.
Based on a review of the file, record, and
proceedings herein, and for the following reasons, the defendant’s
motions are denied.
BACKGROUND
This
dispute
arises
out
of
plaintiff
Watkins
Inc.’s
allegation that McCormick deceived consumers about the price of
its black pepper and diverted sales from Watkins’s competing
products.
McCormick historically has been the industry leader in
the consumer market for black pepper.
Nelson Decl. Ex. 5, at 7.
For decades, it sold its black pepper in distinctive red and white
metal tins of three sizes – a small tin with two ounces, a medium
tin with four ounces, and a large tin with eight ounces. 1
Dep. at 27:6-28:25, 29:25-31:3, 31:4-32:5.
Rochford
Because the tins are
made of metal, consumers cannot see the product inside.
Id.
Watkins also sells black pepper and competes with McCormick
in the consumer market.
Rigley Decl. Ex. 1, at 2:6.
other
modeled
sellers,
McCormick’s
Watkins
because
consumers
its
are
black
pepper
accustomed
to
Along with
tins
after
buying
black
pepper with this packaging, appearance, size, and shape.
Rigley
Dep. at 39:2-7.
In 2015, Watkins began a test of its ground black pepper at
approximately 500 Walmart stores. Rigley Decl. Ex. 1, at 5; Nelson
Decl. Ex. 30.
During the test, the selected stores carried
Watkins’s black pepper to assess its sales performance.
Rigley
Dep. at 30:18-31:15. Walmart regularly tests products to determine
its interest in carrying the products long-term, and Watkins
previously
products.
participated
in
tests
with
Id. at 28:1-29:11; 27:21-30:11.
several
of
its
other
For example, Watkins’s
vanilla extract performed well in its 2005 test, and in response,
McCormick also sells black peppercorn grinders. Although
McCormick allegedly engaged in the same behavior with its grinders,
those products are not directly at issue in this litigation.
1
2
Walmart elected to continue selling the product beyond the test
period and to expand its distribution to 3,000 stores.
Decl.
Ex.
34,
at
28:1-12;
30:8-11.
Based
in
part
Nelson
on
this
experience, Watkins expected Walmart to expand its black pepper
distribution chain-wide if its test was similarly successful.
Id.
Watkins internally projected that it would sell 6.9 units per
store per week of its small tins and 5.8 units per store per week
of its medium tins during the test period.
Nelson Decl. Ex. 33.
Walmart independently projected that Watkins would sell four units
per store per week of both the small and medium tins.
Neither
Walmart
nor
Watkins,
however,
clarified
Id. Ex. 34.
whether
such
performance would be deemed a “success” or established other
metrics or parameters to define what qualified as a successful
test.
Rigley Dep. at 31:15-32:9.
In the test, Watkins’s black pepper competed primarily with
McCormick’s ground pepper, and the two products appeared side by
side on Walmart’s shelves.
at 17:19-18:2, 41:2-6.
Rigley Dep. at 34:8-18; O’Leary Dep.
Before the test began, Walmart expressed
concern that Watkins’s products were priced too high and told
Watkins that its prices would likely impact sales numbers. O’Leary
Dep. at 41:7-14; Nelson Decl. Ex. 32.
Watkins, however, downplayed these concerns.
The commodity
price of black pepper had significantly increased in recent years,
and Watkins believed that all suppliers would soon raise wholesale
3
and retail prices in response.
Nelson Decl. Ex. 10; O’Leary Dep.
at 41:12-17, 43:2-5; Nelson Decl. Ex. 32.
Thus, Watkins assured
Walmart that its prices would soon be more competitive.
O’Leary
Dep. at 41:12-17, 43:2-5; Nelson Decl. Ex. 32.
Despite Watkins’s confidence, McCormick chose to manage the
commodity price increase differently.
Knowing that black pepper
consumers were price sensitive, McCormick sought to “[p]reserve
shelf
price”
while
simultaneously
Nelson Decl. Ex. 5, at 8; Ex. 28.
managing
its
higher
costs.
To achieve this goal, McCormick
maintained its tin price but reduced the volume of pepper in each
tin.
Nelson Decl. Ex. 29, at 15.
Specifically, McCormick reduced
the volume of black pepper in its small tin from two ounces to 1.5
ounces, its medium tin from four ounces to three ounces, and its
large tin from eight ounces to six ounces.
Id. at 6.
McCormick
did not alter the dimensions of the tins themselves but did print
the reduced volume on the label.
Id.; Nelson Decl. Ex. 35.
McCormick launched the reduced-volume tins the month before
Watkins’s Walmart test began. Nelson Decl. Ex. 29. Several months
into the test, Watkins learned of McCormick’s volume change when
a Walmart employee told them to “look at what’s happening at shelf
in our stores in regards to pepper and the competition.”
Dep. at 43:11-44:4.
Rigley
Watkins interpreted this comment to mean that
it should investigate pricing of black pepper products at Walmart.
4
Rigley Decl. Ex. 1, at 10.
Watkins did so and discovered the
reduced-volume, and subsequently lower-price, McCormick tins.
Id.
Watkins alleges that McCormick’s reduced-volume tins amounted
to false advertising. 2
2d Am. Compl., ECF No. 61-22, at 10-12.
According to Watkins, consumers relied on McCormick’s tin size to
advertise the amount of pepper they were purchasing.
Id. at 4.
Thus,
without
Watkins
corresponding
contends
change
in
confusion and deception.
Specifically,
that
tin
the
change
dimensions
in
volume
resulted
in
a
consumer
Id.
Watkins
alleges
that
consumers
mistakenly
believed that Watkins’s and McCormick’s tins contained the same
volume of black pepper and, as a result, that McCormick’s black
pepper was significantly cheaper.
Id. at 10.
For example,
McCormick’s small tin sold for an average retail price of $2.10
while Watkins’s small tin had an average retail price of $3.17.
Nelson Decl. Ex 37.
McCormick’s per-ounce price, however, was
$1.40 while Watkins’s was $1.58 per ounce – a much smaller gap.
Id.
For the medium tin, McCormick’s was priced at $3.22 while
Watkins alleges that the volume reduction resulted in
“nonfunctional slack-fill.” Federal regulations define slack-fill
as “the difference between the actual capacity of a container and
the volume of the product contained therein.” 21 C.F.R. 100.100.
The United States Food and Drug Administration, which promulgated
the regulation, defines food containers containing non-functional
slack-fill as “misleading.” Id.
2
5
Watkins’s carried a $4.11 price tag, but McCormick’s per-ounce
cost was $1.07 while Watkins’s was $1.03.
Id.
At the end of the test, Walmart dropped Watkins’s black pepper
from its shelves.
Keeter Dep. at 41:2-4.
Walmart cited below
expectation sales numbers as the reason for its decision.
Id. at
41:8-11; Rigley Dep. at 32:10-33:4. Watkins acknowledges its black
pepper
performed
below
expectations,
but
it
argues
that
McCormick’s pricing scheme impacted its sales and contributed to
its poor performance.
Based
bringing
on
these
claims
2d Am. Compl. at 11.
allegations,
under
the
Watkins
Lanham
Act,
filed
three
this
lawsuit,
state
statutes
punishing unfair trade practices, and the common law tort of unfair
competition.
Id. at 2.
Watkins’s unfair competition claim was
dismissed, but its Lanham Act and state law claims remain.
No.
61-34.
Watkins
seeks
money
damages,
McCormick’s profits, and injunctive relief.
disgorgement
ECF
of
2d Am. Compl. at 35-
36.
McCormick now moves to exclude one of Watkins’s experts,
arguing that there is no reliable basis or evidence in the record
to
support
his
opinions.
McCormick
also
moves
for
summary
judgment, arguing that Watkins has failed to show that it suffered
any injury proximately caused by McCormick’s reduced-volume black
pepper tins.
6
DISCUSSION
I.
Lanham Act 3
In relevant part, the Lanham Act seeks to “protect persons
engaged
in
competition.”
commerce
against
false
advertising
and
unfair
Am. Italian Pasta Co. v. New World Pasta Co., 371
F.3d 387, 390 (8th Cir. 2004) (citation and internal quotation
marks
omitted).
Specifically,
the
Lanham
Act
“prohibits
commercial advertising or promotion that misrepresents the nature,
characteristics,
qualities,
or
geographic
origin
of
the
advertiser’s or another person’s goods, services, or commercial
activities.”
United Indus. Corp. v. Clorox Co., 140 F.3d 1175,
1179-80 (8th Cir. 1998) (citation omitted).
include
injunctive
relief,
plaintiff’s
Remedies available
damages,
defendant’s
profits, and costs of the action, subject to the principles of
equity.
15 U.S.C. §§ 1116(a), 1117(a); see also Aviva Sports,
Inc. v. Fingerhut Direct Mktg., Inc., 829 F. Supp. 2d 802, 814 (D.
Minn. 2011).
To
prevail
on
a
Lanham
Act
false-advertising
claim,
a
plaintiff must prove five elements:
(1) a false statement of fact by the defendant in a
commercial advertisement about its own or another’s
product; (2) the statement actually deceived or has the
Watkins’ state law claims mirror its Lanham Act claim, and
resolution of the factual and legal questions under the Lanham Act
will resolve the corresponding issues under the state law claims.
See Wing Enters., Inc. v. Tricam Indus., Inc., 511 F. Supp. 3d
957, 964 (D. Minn. 2021).
3
7
tendency to deceive a substantial segment of its
audience; (3) the deception is material, in that it is
likely to influence the purchasing decision; (4) the
defendant caused its false statement to enter interstate
commerce; and (5) the plaintiff has been or is likely to
be injured as a result of the false statement, either by
direct diversion of sales from itself to defendant or by
a loss of goodwill associated with its products.
United Indus. Corp., 140 F.3d at 1180.
one
element”
defeats
a
plaintiff’s
“Failure to establish any
claim.
Allsup,
Inc.
v.
Advantage 2000 Consultants Inc., 428 F.3d 1135, 1138 (8th Cir.
2005).
For purposes of McCormick’s motions, the parties focus on the
fifth element – that the plaintiff “has been or is likely to be
injured as a result of the [defendant’s] false statement.”
Indus. Corp., 140 F.3d at 1180.
United
McCormick argues that Watkins’s
expert testimony on damages should be excluded and thus that
Watkins has not established injury or causation for any of the
forms of relief it seeks.
Watkins counters that its experts
provide reliable, admissible evidence of both.
The court begins
with McCormick’s motion to exclude one of Watkins’s experts, as
its resolution affects the analysis of the summary judgment issues.
II.
McCormick’s Motion to Exclude Expert Testimony
McCormick first seeks to exclude Watkins’s damages expert,
Donald Alan Gorowsky.
McCormick does not challenge Gorowsky’s
qualifications but argues that his opinions are speculative and
unsupported by facts in the record.
8
Federal Rule of Evidence 702 provides that “[a] witness who
is qualified as an expert by knowledge, skill experience, training
or education may testify in the form of an opinion or otherwise.”
An expert may testify if:
[T]he
expert’s
scientific,
technical,
or
other
specialized will help the trier of fact to understand
the evidence or to determine a fact in issue; the
testimony is based on sufficient facts or data; the
testimony is the product of reliable principles and
methods; and the expert has reliably applied the
principles and methods to the facts of the case.
Fed. R. Evid. 702(a)-(d).
Under Rule 702, the court acts as a gatekeeper to determine
“whether the witness is qualified to offer expert testimony.”
Schmidt v. City of Bella Villa, 557 F.3d 564, 570 (8th Cir. 2009)
(citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589
(1993)). An expert must possess the “knowledge, skill, experience,
training, or education sufficient to assist the trier of fact ....”
Robinson v. GEICO Gen. Ins. Co., 447 F.3d 1096, 1100 (8th Cir.
2006) (citation and internal quotation marks omitted).
This
standard is satisfied when the expert’s testimony “advances the
trier of fact’s understanding to any degree.”
Id. (citation and
internal quotation marks omitted).
Rule 702 also “require[s] that the area of the witness’s
competence matches the subject matter of the witness’s testimony.”
Id. at 1101 (citation and internal quotation marks omitted). “Gaps
in an expert witness’s qualifications or knowledge generally go to
9
the weight of the witness’s testimony, not its admissibility.”
Id. at 1100 (citations and internal quotation marks omitted).
Further, the court must “ensure that any and all scientific
testimony or evidence admitted is not only relevant, but reliable.”
Schmidt, 557 F.3d at 570 (citing Daubert, 509 U.S. at 589).
The
court considers several nonexclusive factors when determining the
reliability of an expert’s opinion, including:
(1) whether the theory or technique can be (and has been)
tested; (2) whether the theory or technique has been
subjected to peer review and publication; (3) the known
or potential rate of error; (4) whether the theory has
been generally accepted; ... [(5)] whether the expertise
was developed for litigation or naturally flowed from
the expert’s research; [(6)] whether the proposed expert
ruled out other alternative explanations; and [(7)]
whether the proposed expert sufficiently connected the
proposed testimony with the facts of the case.
Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686-87 (8th Cir. 2001)
(citations and internal quotation marks omitted).
This “flexible
and fact specific” inquiry allows the court to “use, adapt, or
reject [the] factors as the particular case demands.”
Unrein v.
Timesavers, Inc., 394 F.3d 1008, 1011 (8th Cir. 2005).
The
proponent of the expert testimony bears the burden of proving its
admissibility by a preponderance of the evidence.
See Lauzon, 270
F.3d at 686.
Gorowsky offers three opinions regarding Watkins’s damages in
his expert report.
First, Gorowsky calculated Watkins’s lost
profits during the Walmart test.
10
Second, Gorowsky calculated the
profits Watkins would have realized between 2015 and 2020 if the
test had been successful and Walmart had expanded the distribution
of Watkins’s black pepper to 3,000 stores.
Watkins’s
disgorgement
claim,
Gorowsky
Third, in support of
calculated
McCormick’s
profits from its reduced-volume tins.
A. Lost Profits During the Walmart Test Period
For
the
first
opinion,
McCormick
argues
that
Gorowsky
improperly based his calculation of lost profits during the test
period on Walmart’s and Watkins’s sales forecasts.
McCormick
contends that these forecasts are speculative and unreliable.
Watkins
counters
that
pre-litigation
projections
appropriate method to determine lost profits.
are
an
Watkins also notes
that Gorowsky reviewed a substantial number of documents and
conducted interviews with multiple Watkins employees to evaluate
the
validity
of
the
sales
forecasts.
According
to
Watkins,
reliable pre-litigation projections provide sufficient factual
basis to support Gorowsky’s conclusions.
The
court
agrees
with
Watkins.
The
use
of
internal
projections does not automatically mean an expert opinion is
unreliable.
Cf. Supervalu, Inc. v. Assoc. Grocers, Inc., No. 04-
2936, 2007 WL 624342, at *6 (D. Minn. Jan. 3, 2007).
But “reliance
on internal estimates or projections may not be reasonable where
the underlying projections are suspect or the expert does not make
an effort to consider their reliability.”
11
Scoular Co. v. Ceres
Global Ag. Corp., No. 14-1881, 2017 WL 3535210, at *15 (D. Minn.
Aug. 16, 2017) (citation omitted).
Thus, a court must evaluate
whether the expert’s use of internal projections was reasonable.
US Salt, Inc. v. Broken Arrow, Inc., No. 07-1988, 2008 WL 2277602,
at *1 (D. Minn. May 30, 2008).
Here, Watkins’s and Walmart’s sales projections provided a
reasonable basis for determining lost profits.
The companies
established their projections independently and in the ordinary
course of business.
The projections served internal purposes –
inventory management for Watkins and profit and loss forecasting
for Walmart – that incentivized realistic projections.
Finally,
Gorowsky analyzed market conditions, reviewed relevant information
and
documents,
and
interviewed
employees
to
verify
the
reasonableness of the forecasts.
Therefore,
the
court
finds
that
Gorowsky’s
reliance
on
Watkins’s and Walmart’s internal projections was not unreasonable
and does not render his opinion unreliable.
McCormick may still
raise challenges to the factual basis of Gorowsky’s opinion on
cross-examination, as those challenges go to credibility rather
than admissibility.
B. Lost Profits During the Post-Test Period
Regarding
Gorowsky’s
the
projection
second
of
speculative and unreliable.
opinion,
lost
profits
McCormick
from
2015
argues
to
that
2020
is
McCormick contends that there is no
12
basis for Watkins, and Gorowsky, to assume that the Walmart test
would have been successful absent McCormick’s conduct.
Further,
McCormick argues that there is no evidence in the record that,
even if the test had been successful, Walmart would have expanded
Watkins’s black pepper to 3,000 stores.
Thus, McCormick argues
that any calculation of profits flowing from those events is
speculative.
Watkins counters that Gorowsky calculated lost profits for
this “post-test” period using another long-accepted approach - the
yardstick method.
Gorowsky used Watkins’s vanilla extract as a
yardstick and calculated the profits Watkins would have realized
if Walmart had expanded its black pepper distribution as it had
its vanilla extract.
Expert Report of Donald A. Gorowsky at 14.
The yardstick method uses a comparable product, company, or
industry
to
determine
lost
profits
resulting
from
unfair
competitive practices. Loeffel Steel Prods., Inc. v. Delta Brands,
Inc., 387 F. Supp. 2d 794, 812 (N.D. Ill. 2005); Insignia Sys.,
Inc. v. News Am. Mktg. In-Store, Inc., 661 F. Supp. 2d 1039, 105455 (D. Minn 2009).
“[T]he businesses used as a standard must be
as nearly identical to the plaintiff’s as possible.”
Gulf Oil Corp., 500 F.2d 659, 667 (5th Cir. 1974).
Lehrman v.
“[E]xact
correlation is not necessary,” but if the comparison product is
not adequately similar, “the comparison is manifestly unreliable
and cannot logically advance a material aspect of the proposing
13
party’s case.”
Loeffel Steel Prods., Inc., 387 F. Supp. 2d at 812
(citations and internal quotation marks omitted).
Gorowsky
and
Watkins
assert
that
vanilla
appropriate yardstick for several reasons.
extract
is
an
First, both products
fall into the batters and seasonings category and are purchased by
the same Walmart buyer.
Second, both products function as staple
products for consumers.
Third, both products participated in
equivalent Walmart tests and competed against McCormick as the
dominant
brand
in
the
market
in
those
tests.
In
contrast,
McCormick argues that vanilla extract is not sufficiently similar
and that there is no basis for Gorowsky’s calculation of profits
using the comparison.
The court again agrees with Watkins.
Although the comparison
between vanilla extract and black pepper is not perfect, the court
finds that there are enough similarities to defeat McCormick’s
motion to exclude the expert testimony.
Again, McCormick may
challenge the credibility of this comparison on cross-examination.
C. Disgorgement of Profits
Finally,
McCormick’s
McCormick
profits
for
argues
the
that
Gorowsky’s
disgorgement
calculation
claim
is
of
flawed.
Specifically, McCormick argues that Gorowsky failed to establish
or even analyze whether McCormick’s profits were attributable to
its allegedly deceptive packaging.
Further, McCormick argues that
Gorowsky’s calculation failed to consider or incorporate evidence
14
suggesting
that
Watkins
suffered
no
injury
from
McCormick’s
conduct.
Watkins offers a different interpretation of the requirements
for disgorgement of profits under the Lanham Act.
Watkins argues
that once it established that it suffered injury in fact, it need
not prove attribution or diversion of sales in order to bring a
disgorgement claim.
According to Watkins, it need only establish
McCormick’s sales during the relevant time period, and then the
burden shifts to McCormick to prove that any of those sales were
not due to the allegedly unfair competitive practices. 4
The court again agrees with Watkins. The key to this question
is distinguishing “Lanham Act violations and Lanham Act remedies.”
Wing Enters., Inc., 511 F. Supp. 3d at 973.
There are “elements
necessary to prove a breach of the law,” and there are “elements
necessary to justify a certain remedy for that breach.”
Web
Printing Controls Co. v. Oxy-Dry Corp., 906 F.2d 1202, 1204 (7th
Cir. 1990).
These inquiries “should be kept separate because a
violation of the Lanham Act can be remedied in more ways than one.”
Id.
Both parties cite extensively to case law supporting their
positions.
The court acknowledges that there are conflicting
approaches to this issue, and there is no binding Eighth Circuit
precedent on point. The court, however, finds cases from within
the District of Minnesota to be persuasive in their reasoning and
follows the same approach. See Aviva Sports, Inc., 829 F. Supp.
2d at 802; Wing Enters., Inc., 511 F. Supp. 3d at 957.
4
15
In the first stage of inquiry, a court considers whether a
plaintiff possesses statutory standing.
“The Supreme Court has
adopted a two-part test for determining ‘statutory’ standing in
Lanham Act cases.”
Snac Lite, LLC v. Nuts ‘N More, LLC, No. 2:14-
cv-01695-RDP, 2016 WL 6778268, at *14 (N.D. Ala. Nov. 16, 2016)
(citing Lexmark Intern., Inc. v. Static Control Components, Inc.,
572 U.S. 118, 129-32 (2014)). “First, a plaintiff must demonstrate
that his interests ‘fall within the zone of interests protected by
the law invoked.’”
at 129).
Id. (quoting Lexmark Intern., Inc., 572 U.S.
Thus, a plaintiff “must allege an injury to a commercial
interest in reputation or sales.” Lexmark Intern., Inc., 572 U.S.
at 131-32. Second, “a plaintiff must demonstrate that its injuries
were proximately caused by violations of the Lanham Act,” meaning
that “the harm alleged has a sufficiently close connection to the
conduct the statute prohibits.”
Snac Lite, LLC, 2016 WL 6778268
at *14 (citing Lexmark Intern., Inc., 572 U.S. at 132-34).
Once a plaintiff establishes standing, the second stage of
inquiry considers remedies.
At this stage, the court assesses
whether a plaintiff has met the burden for the specific remedy
sought.
Aviva
Sports,
Inc.,
829
F.
Supp.
2d
at
814
(“The
plaintiff’s burden for this element depends on what type of relief
is sought.”).
For money damages, “a plaintiff must prove both actual damages
and a causal link between defendant’s violation and those damages.”
16
Id. at 815 (citations and internal quotation marks omitted).
For
injunctive relief, a plaintiff need not show specific damages but
“must prove injury, or likelihood of injury, and a causal link
between that injury and the defendant’s conduct.”
Id.; see also
Wing Enters., Inc. v. Tricam Indus., Inc., 511 F. Supp. 3d 957,
973 (D. Minn. 2021).
For disgorgement of profits, a plaintiff
need only show the defendant’s “sales of the allegedly falsely
advertised
products,”
after
which
the
burden
defendant to prove “any costs or deductions.”
shifts
to
the
Aviva Sports, Inc.,
829 F. Supp. 2d at 819.
Disgorgement imposes a lower burden than money damages and
injunctive
relief
because
it
serves
a
different
purpose.
Disgorgement, an equitable remedy, targets the wrongdoer and seeks
to deter improper conduct and prevent unjust enrichment.
Enters., Inc., 511 F. Supp. 3d at 974.
Wing
To achieve these purposes,
any plaintiff with standing may seek to eliminate defendant’s illgotten gains by pursuing disgorgement of its profits.
Id.
McCormick, however, argues that the United States Supreme
Court decision in Lexmark International, Inc. v. Static Control
Components altered this analytical framework. 572 U.S. 118 (2014).
According to McCormick, Lexmark stands for the proposition that
any form of relief under the Lanham Act must be tied to harm
suffered by the plaintiff.
17
This interpretation, however, focuses on the wrong stage of
the two-part inquiry.
Lexmark addresses the first stage and
clarifies the standard plaintiffs must meet to establish standing
to bring a claim at all. Id. at 128; see also Web Printing Controls
Co., 906 F.2d at 1204.
To be sure, Lexmark requires plaintiffs to
establish that they suffered an “injury flowing directly from the
deception
wrought
by
the
defendant’s
Intern., Inc., 572 U.S. at 133.
advertising.”
Lexmark
Once a plaintiff establishes
standing, however, Lexmark does not limit the remedies available
or alter plaintiffs’ burden in seeking different forms of relief.
Id. at 135-36.
Thus, Lexmark explains which plaintiff can bring
a claim, not which relief a proper plaintiff can seek.
Accordingly, the court finds that Gorowsky’s third opinion
should
not
be
excluded.
In
his
report,
Gorowsky
properly
calculated McCormick’s sales during the time of its allegedly
deceptive packaging.
In response, McCormick may contest the
calculation through cross-examination or prove that any portion of
these sales was not due to its allegedly deceptive conduct.
D. Rule 403
McCormick also argues that Gorowsky’s opinions should be
excluded under Rule 403. Rule 403 allows the exclusion of evidence
if its probative value is substantially outweighed by the danger
of unfair prejudice, confusion of the issues, or misleading the
jury.
McCormick argues that Gorowsky’s opinions are likely to
18
result in prejudice and confusion because his calculations could
be understood as compensation for harm to Watkins despite a lack
of evidence of such harm.
The court, however, finds no basis to
exclude Gorowsky’s opinions under Rule 403.
III. McCormick’s Motion for Summary Judgment
Next, McCormick moves for summary judgment, arguing that
Watkins has not created a triable issue on the injury and causation
element of its Lanham Act claim.
that
Watkins
has
not
In particular, McCormick argues
established
that
it
suffered
an
injury
proximately caused by McCormick’s alleged false advertising.
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.”
56(a).
Fed. R. Civ. P.
A fact is material only when its resolution affects the
outcome of the case.
242, 248 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S.
A dispute is genuine if the evidence is such
that it could cause a reasonable jury to return a verdict for
either party. See id. at 252.
The court views all evidence and inferences in a light most
favorable to the nonmoving party.
See id. at 255.
The nonmoving
party must set forth specific facts sufficient to raise a genuine
issue for trial; that is, the nonmoving party “must do more than
simply show that there is some metaphysical doubt as to the
material facts.”
Reeves v. Sanderson Plumbing Prods., Inc., 530
19
U.S. 133, 150 (2000); see Anderson, 477 U.S. at 249B50; Celotex v.
Catrett, 477 U.S. 317, 324 (1986). Moreover, if a plaintiff cannot
support each essential element of its claim, the court must grant
summary judgment, because a complete failure of proof regarding an
essential element necessarily renders all other facts immaterial.
Celotex, 477 U.S. at 322-23.
As already noted, Watkins’s burden varies for the different
remedies
it
seeks.
Thus,
the
court
considers
each
remedy
separately.
B.
Money Damages
For money damages, a plaintiff “must prove both actual damages
and a causal link between defendant’s violation and those damages.”
Rhone-Poulenc Rorer Pharm., Inc. v. Marion Merrell Dow, Inc., 93
F.3d 511, 515 (8th Cir. 1996).
The record must “adequately
support[] all items of damages claimed,” but “courts may consider
‘the difficulty of proving an exact amount of damages from false
advertising.’” Aviva Sports, Inc., 829 F. Supp. 2d at 816 (quoting
Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1336 (8th Cir.
1997)).
Further, a plaintiff, need only prove “the fact of damage
with certainty, it need not prove the amount of damage with
certainty.”
Id. (emphasis in original).
The record must also “establish[] a causal link between the
damages
and
speculative.”
the
defendant’s
Id.
conduct,
(citation
and
20
lest
internal
the
award
quotation
become
marks
omitted).
This causation requirement ensures that “[a]ny award of
damages ... serve[s] as compensation, not a penalty.”
Id. at 815-
16 (citing 15 U.S.C. § 1117(a)).
1. Watkins’s Actual Damages
Watkins advances two theories to establish that it suffered
injury.
First, it argues that the consumer survey conducted by
its expert establishes competitive injury. 5
Watkins points to the
survey’s two conclusions: 1) that McCormick’s reduced-volume tins
likely deceived consumers; and 2) that the deception was material
to consumer buying decisions. According to Watkins, these findings
establish that it suffered injury.
Second, Watkins contends that the evidence of its lost sales
during and after the Walmart test also demonstrate that it suffered
injury.
Watkins argues that it lost sales during the test period
because its primary competitor, McCormick, falsely advertised its
rival products.
Further, Watkins contends that because McCormick
diverted sales during the test period, Walmart did not expand
Watkins’s black pepper to 3,000 stores.
According to Watkins,
this failure to expand resulted in an additional set of lost sales.
McCormick counters that Watkins offers no reliable evidence
to support its claimed lost sales.
For lost sales during the test
Dr. Larry Chiagouris designed and conducted the consumer
study, and McCormick did not move to exclude Dr. Chiagouris’s
report or any of his opinions.
5
21
period, McCormick argues that Watkins’s, and Walmart’s, sales
projections were speculative and not grounded in historical sales
data.
For lost sales in the post-test period, McCormick argues
that Watkins’s hopes of expansion to 3,000 stores lacked any
objective basis.
McCormick highlights that Walmart never set
metrics to determine whether the test was successful and never
discussed expansion with Watkins even if the test was successful.
The court finds that a factual dispute exists on the issue of
injury.
The court finds that the expert’s findings of deception
and materiality in the consumer survey create a triable issue as
to whether Watkins suffered injury.
See adidas-Am., Inc. v.
Payless Shoesource, Inc., 546 F. Supp. 2d 1029, 1087 (D. Or. 2008).
Further, Watkins’s expert testimony supports its argument that it
lost sales both during and after the test period.
For the reasons
discussed previously, this testimony is admissible and creates a
factual dispute as to whether Watkins suffered injury.
2. Causation
Next,
McCormick
argues
that
Watkins
offers
no
competent
evidence that McCormick’s packaging had any effect on Watkins’s
sales – that is, that McCormick’s conduct caused harm to Watkins.
McCormick
argues
that
Walmart
did
not
pinpoint
McCormick’s
packaging as the reason for Watkins’s failed test and instead
attributed it to disappointing sales numbers. McCormick also notes
22
that Walmart expressed concerns before the test period about the
high price of Watkins’s black pepper. 6
The court finds that a factual dispute exists on this issue.
To McCormick’s arguments, although Walmart indicated the test
failed due to lower than expected sales, that does not mean that
McCormick’s conduct did not impact Watkins’s sales.
Further, even
though Walmart indicated that Watkins’s black pepper was priced
too high, McCormick’s conduct likely only exacerbated this concern
by making Watkins’s tins appear even more expensive comparatively.
On the other hand, Watkins introduced evidence showing that
its primary competitor during the Walmart test was McCormick.
Rigley
Dep.
at
34:8-18;
O’Leary
Dep.
at
17:19-18:2,
41:2-6.
Watkins’s evidence also shows that McCormick’s tins contained less
volume of black pepper than Watkins’s and cost less per tin as a
result.
Nelson Decl. Ex. 29, at 15.
Expert evidence proffered by
Watkins suggests that consumers may have been misled by the two
products’ comparative prices and that such confusion may have
impacted their buying decisions.
Id. Ex. 46.
This evidence
supports causation and creates a factual dispute.
McCormick also flags that Walmart terminated another Watkins
product line at the same time as the black pepper test, which
McCormick suggests indicates that Walmart was simply changing its
product assortment.
Even if Walmart was adjusting its product
offerings, however, Watkins’s performance in the pepper test
likely affected Walmart’s decision-making given Walmart’s comments
to that effect.
6
23
C.
Disgorgement
Watkins
also
seeks
disgorgement
of
McCormick’s
profits.
McCormick’s primary argument 7 is that Watkins failed to establish
a causal link between McCormick’s conduct and the profits Watkins
seeks to disgorge.
According to McCormick, a plaintiff seeking
disgorgement under the Lanham Act must establish that the profits
were diverted from the plaintiff’s own sales.
McCormick also
argues that Watkins must show that the profits are attributable to
the false advertising.
Watkins counters, arguing that the Lanham
Act does not require proof of diversion or attribution.
The court finds that the Lanham Act requires neither proof of
diversion nor attribution for disgorgement of profits.
reasons already
discussed,
a
plaintiff
that
can
show
For the
it
was
injured, in some form, by the defendant’s conduct may recover the
defendant’s profits.
To do so, a plaintiff need only prove
defendant’s sales of the falsely advertised product.
The Lanham
Act then permits a defendant to deduct profits that it can prove
were not earned due to its violative conduct. 8
See 15 U.S.C.
McCormick also argues that its sales during the relevant
timeframe declined, and thus, it did not realize any gains from
its reduced-volume tins.
The court finds that this assertion
simply creates a factual dispute on which summary judgment is
inappropriate.
7
Additionally, other limitations prevent windfalls to
plaintiffs. First, “a plaintiff’s recovery may include both actual
damages and the defendant’s profits,” but “a party is not entitled
to recover [] profits to the extent that they duplicate [] actual
damages.” Safco Prods. Co. v. Welcome Prods., Inc., 799 F. Supp.
8
24
§ 1117(a); Aviva Sports, Inc., 829 F. Supp. 2d at 818-19 (citing
Rexall Sundown, Inc. v. Perrigo Co., 707 F. Supp. 2d 357, 359-62
(E.D.N.Y. 2010)).
Here, Watkins seeks disgorgement, and to do so, needs only to
establish McCormick’s profits from its allegedly improper conduct.
Watkins has carried that burden.
Accordingly, the court denies
McCormick’s motion for summary judgment on Watkins’s disgorgement
theory.
E. Injunctive Relief
Finally,
McCormick
did
not
address
Watkins’s
claim
for
injunctive relief in its argument but appears to include it in its
motion for summary judgment on “all of Watkins’s claims.”
68, at 1.
ECF No.
To obtain an injunction, “a plaintiff must prove injury,
or likelihood of injury, and a causal link between that injury and
the defendant’s conduct.”
Aviva Sports, Inc., 829 F. Supp. 2d at
815; Wing Enters., Inc., 511 F. Supp. 3d at 973.
The court finds
that Watkins has met its burden for injunctive relief, and those
claims will go forward.
2d 967, 994 (D. Minn. 2011) (citation and internal quotation marks
omitted).
Second, any award of profits is subject to the
principles of equity. Wildlife Rsch. Ctr. v. Robinson Outdoors,
Inc., 409 F. Supp. 2d 1131, 1135 (D. Minn. 2005).
25
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.
Defendant’s motion to exclude expert Donald Alan
Gorowsky [ECF No. 70] is denied; and
2.
Defendant’s motion for summary judgment [ECF No. 68]
is denied.
Dated: December 7, 2021
s/David S. Doty
David S. Doty, Judge
United States District Court
26
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