FEDERAL TRADE COMM v. LANE LABS-USA, INC., et al

Filing 192

OPINION. Signed by Judge Dennis M. Cavanaugh on 1/17/14. (DD, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

FEDERAL TRADE COMMISSION,
Plaintiff,

:

Hon. Dennis M. Cavanaugh

:

OPINION

V.

Civil Action No, 2:00-cv-03 174 (DMC) (JAD)

LANE LABS-USA. INC.. CARTILAGE
CONSULTANTS, INC., corporations, and:
I. WILLIAM LANE and ANDREW J.
LANE, individuals,

Defendants.

DENNIS M. CAVANAUGH, U.S.D.J.:
This matter comes before the Court for a decision on the proper measurement of
damages, following this Court’s entry of an Opinion and Order granting Plaintiff Federal Trade
Commission’s (‘Plaintiff’ or ‘FTC”) Motion for a Finding of Contempt (November 1 8. 2011.
ECF Nos. 137-13 8). This Opinion will also address the following relevant motions filed by
Plaintiff: (1) Motion in Limine to Exclude the Expert Testimony of Robert Weinberg, Linda
Gilbert, and Josefina Tranfa-Abboud (November 8, 2013, ECF No. 178); and (2) Motion to
Strike Exhibits H-J to the Declaration of Theodora McCormick (ECF No. 183) and all
References thereto in Defendants’ Supplemental Damages Brief (ECF No. 181) (December 20.
2013, ECF No. 1 89). Pursuant to Fed. R. Civ. P. 78, no oral argument was heard, E3ased on the
following and for the reasons expressed herein, Defendants are ordered to pay $803,072 in
damages for contempt; and Plaintiffs Motion in Limine to Exclude Expert Testimony (ECF No.
178) and Motion to Strike Exhibits and all Reference thereto (ECF No. 189) are both denied.

I.

BACKGROUND
This case concerns a contempt motion arising out of marketing claims about dietary

supplements. Plaintiff is the Federal Trade Commission (“FTC”). Defendants are Lane LabsUSA. inc.. (“Lane Labs”) and Andrew Lane (collectively, “Defendants”). Lane Labs. founded
1
by Andrew Lane, is a supplier of dietary supplements. The underlying facts of this case are set
forth more fully in FTC v. Lane Labs-USA, Inc., 624 F.3d 575 (3d Cir. 2010), and will not be
repeated here except as required to set a foundation for the questions presently before this Court,
In June of 2000, the FTC charged Defendants with deceptive acts in violation of 5 of the
§
Federal Trade Commission Act (the “FTC Act”).

Lane Labs, 624 F.3d at 578.

During the

litigation, Defendants agreed to the terms of a consent decree, which was entered by the District
Court as the Final Order, imposing a permanent

injunction.

Id. The provisions of the Final Order

relevant to this litigation are Section III and Section IV. Section III of the Final Order requires
Defendants, in making claims about the health benefits of a product, to possess competent and
reliable scientific evidence that substantiates their claims. Section IV of the Final Order bars
Defendants from misrepresenting “the
interpretations of any

existence, contents,

validity, results. conclusions, or

test, study or research.”

On January 12, 2007 the FTC filed a motion with this Court to hold the Defendants in
contempt for violating Sections III and IV of the Final Order through their marketing of two
products: (1) AdvaCal, a calcium supplement, and (2) Fertil Male, a male fertility supplement.
FTC v. Lane Labs-USA, Inc., No. 00-3 174, 2009 U.S. Dist. LEXIS 70146 at *3 (D.N.J. August
I 1. 2009). Following a five day evidentiary hearing, this Court denied the FTC’s motion for
contempt. Id. at *29. This Court based its opinion in large part on the relative credibility of the

Dr. William Lane, originall’ a defendant in this action, passed away on April 29,2011.

2

parties’ expert witnesses, and on the reasonableness of the defense witnesses’ approach to the
subject matter in light of the Final Order’s requirements. Id. at *2125. This Court was also
concerned with issues of fundamental fairness, and found that the FTC’s failure to timely consider
compliance reports filed by Defendants, along with facts presented at the hearing, suggested that
Defendants took all reasonable steps to substantially comply with the Final Order.
On October 26. 2010. the Third Circuit reversed and remanded for reconsideration. Lane
Labs, 624 F.3d at 592, Specifically, the Third Circuit held that the following claims violated the
Final Order: (1) Only AdvaCal can increase Bone Density/Mass, and (2) AdvaCal works as well
or better than leading prescription osteoporosis drugs and without the substantial side effects and
risks. Id. at 5 83-4, 5 86-7. The Third Circuit remanded the case to this Court to reconsider whether
other specific claims and actions by Defendants violated the Final Order. in an Opinion dated
November 18, 2011, this Court granted FTC’s motion for a finding of contempt and held that (1
the claim that AdvaCal is three to four times more absorbable than other calcium supplements
violated Section III of the Final Order; (2) Defendants’ Two Year Spinal Bone Density Changes
Graph violated Section IV of the Final Order; and (3) Defendants’ Bone Density Increase with
AdvaCal Chart also violated Section IV of the Final Order. FTC v. Lane Labs-USA, Inc., No. 003174, 2011 U.S. Dist. LEXIS 133144 (D.N.J. November 18, 2011).
The primary issue presently before this Court is the amount of damages to award Plaintiff
based on the Court’s finding of contempt. The parties initially briefed the damages issue in early
20 i 2. However, the Court found these submissions insufficient for rendering a complete decision
and ordered a second round of briefing. (Order, July 19, 2012, ECF No. 153). In that Opinion.
the Court made it clear that it maintained “significant discretion” in determining how to
compensate consumers for Defendants’ violations and was not constrained, as argued by the FTC,

3

to award $l5,O50581, the amount of Defendants’ total AdvaCal revenues during the relevant
period. Id. at 2. The Court suggested other possible remedies it would consider, including an
award of the premium Defendants charged for the product over comparable products during the
relevant time period as well as Defendants’ profits traced to only the offending advertisements.
jj at 2-3. The Court requested sufficient data to support these potential remedies and also noted

that the FTC’s proposed award of gross revenues could still prove to be the only appropriate
remedy.

Id.

The Court also expressed concern that a massive damages award would force

Defendants into bankruptcy and would act more as a penalty on Defendants than a compensation
to consumers. Id. at 3. The Court then asked the parties to suggest safeguards that could be
implemented to prevent such a result and requested that the FTC demonstrate the manner in which
it planned to distribute damages.

4. at 3-4.

In this Opinion, the Court will also address two related motions filed by the FTC. On
November 8, 2013, the FTC filed a Motion in Limine to Exclude the Expert Testimony of Robert
Weinberg. Linda Gilbert, and Josefina Tranfa-Abboud. (ECF No. 178). Plaintiff argues that the
opinions expressed by Defendants’ experts do not meet the standards of Federal Rules of
Evidence 702 and 703 and are therefore inadmissible. On December 20, 2013. the FTC tiled an

additional Motion to Strike Exhibits H-J to the Declaration of Theodora McCormick (ECF No.
183) and all references thereto in Defendants’ Supplemental Memorandum on Damages (ECF
No. 181). (ECF No. 189). Plaintiff asserts that these exhibits, which consist of three academic
journal articles, are inadmissible hearsay under Fed. R. Evid. 801.

U.

MOTION IN LIMINE TO EXCLUDE EXPERT TESTIMONY OF ROBERT
WEINBERG, LINDA GILBERT, AND JOSEFINA TRANFA-ABBOUD
a. The Standard for the Admissibility of Expert Testimony

4

‘Rule 702 has three major requirements: (1) the proffered witness must be an expert.
i.e..
must be qualified; (2) the expert must testify about matters requiring scientific. technical or
specialized knowledge; and (3) the expert’s testimony must assist the trier of fact.” Id. at 244.
The second factor contains a reliability” component and requires that the ‘reasoning or
methodology underlying the testimony is scientifically valid and [that] the reasoning or
methodology properly can be applied to the facts in issue.” Daubert v. Merrell Dow Pharms.. 509
U.S. 579, 592-93 (1993). Reliability is a question of sufficiency. not absolutism. See Poust v.
Huntleigh Healthcare, 998 F. Supp. 478, 491 (D.N.J. 1998). In other words, an opinion is
reliable if the expert has “good grounds for his opinions

.

.

.

.“

Id.; see also in re Jacohy Airplane

cslijiti., 2007 U.S. Dist. LEXIS 71012, at *41 (D.N.J. Aug. 27, 2007) C’[Ajn expert’s
testimony need not be flawless •for it to be reliable and admissible.”).
Rule 703 states that the expert may base his opinion on “facts or data” that he or she “has
been made aware of or personally observed” so long as they are of the type that “experts in the
particular field would reasonably rely on.

.

.

in forming an opinion on the subject.” “Rule 703’s

reliability standard is similar to Rule 702’s reliability requirement,” and only calls for expert
testimony to be excluded ‘when the data underlying the expert’s opinion are so unreliable that no
reasonable expert could base an opinion on them

.

.

.

.“

In re TMI Litig.. 193 F.3d 613, 697 (3d

Cir. 1999) (citing In re Paoli R.R. Yard Pcb Litig., 35 F.3d 717. 748 (3d Cir. 1994)).
b. Discussion
To support their proposed damages calculations, Defendants provided declarations from
three experts. Robert Weinberg (“Weinberg”) is an independent consultant in direct and
database marketing with decades of experience in market research. Weinberg Dccl.

¶J

1, 8-9,

ECF No. 1 64. Weinberg was retained by Defendants to estimate the likely additional retail sales

that could be attributed to the offending claims and charts. Linda Gilbert (“Gilbert”) is a
recognized expert in consumer marketing and market research with 30 years of experience.
including specific experience in consumer research regarding calcium products. Gilbert Dccl.
2, ECF No. 163. Gilbert was retained by Defendants to determine (1) AdvaCal’s “Competitive
Set” from the consumer

point of

view and (2) the percentage of dissatisfied AdvaCal purchasers.

Dr. Josefina Tranfa-Abboud (“Tranfa-Abboud”) is a Director in the Litigation and Corporation
Financial Advisory Services Group of Marks, Paenth & Shron, LLP, an accounting and
consulting firm that provides audit services, economic damages analysis, and other financial and
analytical services. Tranfa-Abboud Dccl.

¶

1, ECF No. 162. Tranfa-Abboud was retained to

calculate potential damages using a price premium analysis and, alternatively, profits tied to the
offending advertisements. Id. at

¶

11.

Plaintiff asserts that these experts provide opinions about damages that do not meet the
standards of Federal Rules of Evidence 702 and 703. Specifically, Plaintiff asserts that
Weinberg’s opinions lack a sufficient evidentiary basis because they 1) are based on incorrect
factual data “spoonfed” to him by Defendants that Weinberg failed to independently verify and
2) incorrectly ignore sales tied to the AdvaCal label. As to Gilbert, Plaintiff attacks the
satisfaction survey she conducted for having an overly restrictive sample and low response rate.
Plaintiff also asserts that consumers cannot gauge their own bone loss and are therefore
incapable of answering the fundamental question asked by the survey: Did AdvaCal perform as
advertised. Plaintiff also challenges the Competitive Set compiled by Gilbert for failing to
include cheaper mass-market competitors of AdvaCal. Finally. Plaintiff argues that Tranfa
Abboud’s estimated damages are unreliable because she relied entirely on Weinberg, Gilbert,
and Defendants’ flawed data. Plaintiff does not challenge the qualifications or expertise of

6

Defendants’ experts. Plaintiff has not conducted any independent analysis of Defendants’ sales
or financial records and has not presented any competing expert testimony from its own financial
or marketing experts.
Under Fed, R. Evid. 702, a judge acts as “gatekeeper” in determining the reliability.
relevance and admissibility of expert testimony. Daubert. 509 U.S. at 597. Where, as in the
instant matter, the Court, not a jury, is the trier of fact, that gate keeping function is relaxed.
Warner Chilcott Labs. Jr., Ltd. v. Impax Labs.. Inc., 2012 U.S. Dist. LEXIS 60386, at *69..70
(D.N.J. Apr. 30, 2012) (citation omitted); see also Magistrini v. One Hour Martinizing Dry
Cleag, 180 F. Supp. 2d 584, 596 n. 10 (D.N.J. 2002),

gfi

68 F. App’x 356 (3d Cir, 2003).

In addition, motions seeking to bar expert testimony may be denied on the ground that the
movant’s arguments are more appropriately considered attacks on the weight to be given such
evidence, as opposed to its baseline admissibility. See Howmedica Osteonics Corp. v. Zimmer.
Inc., 2013 U.S. Dist. LEXIS 132889, at *3 (D.N.J. Sept. 16, 2013) (“Here, Defendants’
arguments are better suited for the weight of the evidence rather than its admissibility under
Daubert.”). Given this more lenient standard, the Court finds that it would be appropriate to
consider Plaintiffs arguments when determining the weight to be given this testimony in its
damages analysis rather than its admissibility altogether. Accordingly, Plaintiff’s Motion in
Limine to Exclude the Expert Testimony of Weinberg, Gilbert. and Tranfa-Abboud is denied.
Ill,

MOTION TO STRIKE EXHIBITS H-J OF THE DECLARATION OF
THEODORA MCCORMICK AND ALL REFERNCES THERETO
The dissatisfaction survey orchestrated by Defendants’ expert Gilbert asked AdvaCal

consumers whether the product performed as advertised. Plaintiff asserts that AdvaCal
purchasers would be unable to accurately gauge whether the product led to an increase in bone

density as claimed. Defendants counter that consumers could intelligently address the survey
7

question about product performance by referring to their personal bone density scans or
experience with fractures. To support this contention, Defendants introduced three academic
journal articles (exhibits H-J of the Declaration of Theodora McCormick) to demonstrate that
2
AdvaCal consumers commonly have access to bone density scans and are aware of their bone
health. Plaintiff has moved to strike these articles and all references to them in Defendants’ brief
as inadmissible hearsay under Fed. R. Evid. 801. As will be clear in the Court’s Damages

analysis, the Court did not consider or rely on Defendants’ dissatisfaction survey in making its
damages determination. As such, Plaintiffs Motion to Strike Exhibits H-J of the Declaration of
Theodora McCormick is dismissed as moot.
IV.

DAMAGES ANALYSIS AND AWARD
a. Standard
A District Court has great and sound discretion in fashioning an appropriate sanction for

contempt.” Robin Woods, Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994). See also Delaware
Val1e Citizens Council foi Clean Air v Pennsylvania, 678 F 2d 470 478 (3d Cii 1982)

(

Ihc

standard for our review of a district court sanction for civil contempt is whether the district Court
abused its wide discretion in fashioning a remedy.”). One defined limitation to the Court’s wide
discretion is that compensatory sanctions ‘must not exceed the actual loss suffered by the party
that was wronged.” Elkin v. Fauver, 969 F.2d 48, 52 (3d Cir. 1992), cert. denied, 121 L. Ed. 2d
379, 113 S. Ct. 473 (1992) (citing U.S. v. United Mine Workers, 330 U.S. 258, 303). “While
good faith is not a defense to civil contempt, it may affect the court’s calculation of sanctions.”

2 The three articles are: 1) J. Foote, et al., Factors Associated with Dietary Supplement Ure Among

Healthy /IdUits
of Five Ethnic/ties: The Multiethnic Cohort Study, 157 American Journal of Epidemiology 888 (2003): Di Shi. et al..
Associations of Education Level and Bone Density Tests among Cognitively Intact Elderly White Women in
Managed Medicare, Current Gerontology and Geriatrics Research, Volume 2012 (2012), Article ID 1791 50; R.L.
Prentice, et al., Health Risks and Benefits from Calcium and Vitamin D Supplementation: Women ‘s Health Initiative
Clinical Trial and Cohort Study, 24 Osteoporosis International 567 (2013).

8

Essex County Jail Inmates et al.. v. Treffinger. et al., 18 F. Supp. 2d 445. 452 (D.N.J. 1998)
(citing Robin Woods, inc., 28 F.3d at 148). Further, in determining the extent of the sanction,
a
party’s intent and willfulness are relevant, Bunzl Distribution Northeast v. Boren, 2008 U.S.
Dist. LEXIS 43, at

*

15 (D.N.J. January 2, 2008) (citing Harley-Davidson. Inc. v. Morris. 19

F.3d 142, 148-49 (3d Cii’. 1994)).
b. Discussion
The Court has found Defendants in civil contempt for violation of a prior court order.
Specifically, the Court found that Defendants, in advertising the product AdvaCal. presented
three unsubstantiated claims and two misrepresentative graphs to consumers. The Court must
now determine the appropriate amount of damages to award as a result of this violation, making
sure not to “exceed the actual loss suffered by the party that was wronged.” Flkin, 969 F.2d at
52. Despite the Court’s request for both parties to consider alternate remedies. Plaintiff has only
presented arguments in favor of an award of total net AdvaCal revenues for the relevant time
period ($1 5,050,578) and against all of Defendants’ proposed alternatives. Plaintiff bases its
position on the proposition that such an award is the only amount that would provide the FTC
with “full remedial relief’ for the violation on behalf of consumers. See McComb v.
Jacksonville Paper Co., 336 U.S. 187, 193 (1949) (“The measure of the court’s power in civil
contempt proceedings is determined by the requirements of fit/i remedial relief’) (emphasis
added). However, Plaintiff never makes clear precisely why this extreme calculation is the
appropriate measure of “full remedial relief’ as opposed to Defendants alternative approaches
which appear to the Court to be more tailored to the actual violation and take precaution not to
“exceed the actual loss suffered by the party that was wronged.” Elkin, 969 F.2d at 52.
In determining the damage measurement in this case, the Court has considered the

9

following: (1) Defendants’ good faith as demonstrated by the significant efforts taken to comply

with the Final Order; (2) the accumulation of unnecessary consumer loss and potential damages
resulting from Plaintifrs over five-year delay in informing Defendants of any issues with their
advertisements; (3) the fact that imposing sanctions of the magnitude requested by the FTC
would bankrupt Lane Labs and Andrew Lane; (4) testimony from the FTC’s own expert, Dr.
Robert Heaney, that AdvaCal was a good form of calcium which would be expected to
substantially reduce the risk of bone fractures (Tr. 412-13, 426-27); and (5) testimony from
another of FTC’s experts, Kenneth Kelly, that the consumer injury will he the difference
between what consumers paid for AdvaCal and its true value,” or “what they would have had to
pay for a competing equivalent product.” McCormick Decl. Exh. B. Kelly Expert Report at ¶
6,12. As the Third Circuit opined in National Drying Machinery, Co. v. Ackoff:
Whether an award in civil contempt be measured in terms of a plaintiffs loss or a
defendant’s profit. such an award, by very definition, must he an attempt to compensate
plaintiff for the amount he is out-of-pocket or for what defendant by his wrong may he
said to have diverted from the plaintiff or gained at plaintiffs expense, Unless this
limitation is recognized, a requirement that one party turn his profits over to his adversary
itself becomes a punitive rather than a compensatory imposition.
245 F.2d 192, 194 (3d Cir. 1957), cert denied, 355 U.S. 832 (1957). Given this standard and the
above-mentioned facts, the Court finds it would be inappropriate to award an overtly punitive
damage amount like the one suggested by Plaintiff.

As the Third Circuit makes clear in Elkin and National Drying Machinery Co.. the

primary goal in fashioning a damage remedy for civil contempt is to calculate the loss suffered
by the wronged party. Here, those wronged by Defendants’ violation are the consumers who
relied on the offending advertising claims in purchasing AdvaCal. Therefore. the most
appropriate measure of relief is one that is tied to sales from the offending claims. Although
AdvaCal did not live up to those unsubstantiated and misrepresentative claims presented by
10

Defendants, it was still an
effective calcium suppleme
nt, as was conceded to by
the FTC’s own
Expert. Dr. Robert Heane
y. See Tr. 412-13, 426-27
. Given that consumers rec
eived a valid
product, the Court finds tha
t awarding all revenues dur
ing the relevant period, as
suggested by
the FTC. would dramatica
lly overstate the consumers
’ loss. See McDowell v.
Philadelphia
Housing Authority, 423 F.3
d 240 (3d Cir. 2005) C’T san
ction imposed on a civil con
he
temnor
may not exceed the actual
damages caused by his violati
on of the Court’s order.”).
A more
accurate calculation of the
harm suffered is the price pre
mium paid by consumers in
selecting
AdvaCal over other calcium
products.
c.

Damages Calculation
i. Direct Sales Revenues

—

Defendants’ Data and Trac
ing Analysis

To determine compensatory
damages based on a price pre
mium approach, Defendants
first calculated the total am
ount of “Consumer Direct Sal
es Revenues” from AdvaCal
attributed
to the offending advertiseme
nts. This total is estimated
to be $2,568,994. Tranfa-Abbo
ud Dccl.
6 ¶ 11(b). Plaintiff challenges
the integrity of Defendants’
underlying data and recordkee
ping.
Specifically. Plaintiff assert
s that Defendants improperly
relied on an incomplete sys
tem of key
codes to track sales and arb
itrarily excluded sales from
numerous purchasers.
Essentially, the FTC is attemp
ting to impose an evidentiar
y standard of 100% certain
ty
on Defendants without any
legal support for doing so.
The FTC’s criticisms of De
fendants’
tracing analysis are also uns
upported by any expert ana
lysis or opinion and ignore evi
dence in
the record regarding the reliab
ility, accuracy and completen
ess of the data and methodol
ogy
used. For instance, Andrew
Lane and Beatrice QuereL the
manager of Lane Labs’ in-hou
se
customer service/telephone
sales representatives, were fam
iliar with the ads and had the
expertise to do the tracing ana
lysis. McCormick Dccl. Ex
. C (Lane Dep. 15:11 -16:9)
and Lx. B

11

(Querel Dep. 3 1:20-32:1). Both testified as to their extensive efforts to ensure that they were
capturing all sales related to offending ads, using not only source/key codes but telephone
numbers, special offers and other indications that a sale might be tied to an offending ad.
McCormick Deci. Ex. B (Querel Dep. 44:646:16; 51:10-53:24; 57:6-58:9; 61 :0-62:8) and Ex. C
(Lane Dep. 21:5-25:8). Where necessary, they reached out to Research and Response, Inc.. a
direct response data management company, to obtain information that might lead to more
offending sales.

Ii Both Lane and Querel testified that the consumer-direct sales for every

offending ad between 2001 and 2006 were identified and included in the tracing analysis.
McCormick Decl. Ex. B (Querel Dep. 38:25-39:13; 43:243:5; 44:645:7; 53:6-53:24; 57:1557:17; 68:15-69:3) and Ex. C (Lane Dep. 24:18-25:8; 28:18-28:20; 33:24-34:17). Further,
Weinberg, a direct sales and marketing expert with 40 years of experience noted that steps taken
by Lane Labs to capture and record the source codes of buyers placing an order with the
company equal or exceed industry best practices.” Weinberg Decl. 7, ECF No. 164. Based on
the extensive support presented by Defendants in defense of their calculations, the Court finds
that Defendants’ sales data and tracing methodology are sufficiently reliable.
ii. Retail Revenues Weinberg Analysis
—

Next, Defendants estimate the total “Retail Revenues” attributed to the offending ads to
be $1,336,997. Tranfa-Abboud Dccl. 6 ¶ 11(c). This is based on Weinberg’s estimate that the
additional sales at retail would be equal to 50% of the tracked direct sales as well as a calculation
that two additional brochures would have yielded an additional $52,500 in retail sales
($l,284,497(50% of direct sales) + $52,500(sales from 2 brochures) = $1,336,997). Weinberg

Dccl. 9 ¶11. Weinberg is an independent consultant in direct and database marketing with
decades of research experience. Essentially, Plaintiffs issue with Weinberg’s testimony is that it

12

is based on allegedly faulty data “spoonfed” to him by Lane Labs without any independent
verification. The Court has already addressed Defendant’s data and held that it is sufficiently
reliable for purposes of its damages analysis. Since the FTC does not challenge Weinberg’s
qualifications or expertise or the methodology used to calculate the percentage of retail sales

traceable to the offending ads, the Court finds no reason not to accept Weinberg’s 50% retail
sales estimate. The Court thus finds that the total consumer direct and retail sales from the
offending ads is $3,905,991 ($2,568,994(direct sales)
iii. Price Premium

—

+

$l,336,997(retail sales).

Gilbert’s Competitive Set

In order to establish the price premium between AdvaCal and other comparable products.
Gilbert, Defendants’ expert, determined AdvaCal’s “Competitive Set.” Gilbert, a recognized
expert in consumer marketing and market research with 30 years of experience, including
specific experience in consumer research regarding calcium products, engaged in a series of
analytical exercises and research to determine which products consumers would reasonably be
expected to say “belong together.” This yielded a Competitive Set of 16 products. Gilbert then
compared the prices of these products and determined that AdvaCal was priced 1 .26 times higher
than comparable calcium products. Plaintiffs primary issue with Gilbert’s Competitive Set is
that it ignores much cheaper, mass-market calcium supplements. Plaintiff asserts Gilbert
“blindly relied on data spoonfed to her by Defendants that only included high-end calcium
products.” P1. Expert Br. 3 1.
However, as Defendants explain, the lists of potential calcium products used by Gilbert
were from both Lane Labs’ and the FTC’s prior experts. Defs.’ Expert Br. 23. In addition. even
though AdvaCal is not marketed in mass market channels, the lists did include such products,
including Turns, Rite Aid Calcium and Nature’s Bounty. Gilbert Dccl. Ex. 5. Moreover, several

13

potential calcium products in the list that were priced higher than AdvaCal did

not

make it into

the Competitive Set. Given these facts, the Court finds that Gilbert’s Competitive Set is based
upon sound reasoning and reliable evidence. As such, the Court will use Gilbert’s Competitive
Set analysis in its price premium damages calculation.
iv. Price Premium Damages Calculation

—

Tranfa-Abboud Analysis

Using data from Gilbert’s Competitive Set, Tranfa-Abboud determined that the ratio of

the average price of comparable products to the average price of a daily dose of AdvaCal is
20.56%. Tranfa-Abboud Dccl. 8-9,

¶

14. Tranfa-Abboud thus concluded that had AdvaCal been

sold at the same average price as its comparable calcium products, the revenues to Lane Labs
resulting from sales to Advacal would have been approximately 20.56% lower than actual
AdvaCal sales revenues. Id. at ¶ 15. Applying this percentage to the total AdvaCal revenues
from offending ads ($3,905,991 x 20.56%), Tranfa-Abboud determined that the damages

resulting from the “premium” charged for AdvaCal would be approximately $803,072.
The FTC argues that ‘Tranfa-Abboud’s estimated damages are unreliable because she
relied entirely on Weinberg, Gilbert, and Defendants’ flawed data.” FTC Expert Br. 1 7. As the
Court has determined, Defendants’ sales data and tracing methodology are sufficiently reliable
and Weinberg and Gilbert’s opinions are sound and based upon reliable facts. Accordingly, the
Court accepts Tranfa-Abboud’s damages calculations and holds that Defendants’ must pay
$803.072 in damages for violating a prior court order and being found in civil contempt.
v. Distribution of Damages
As for the distribution of damages, Defendants are to pay the entire damages amount to
the Court Registry. The funds may then be withdrawn by the FTC with leave from the Court.
Defendants are to provide a mailing list of customers who purchased AdvaCal directly from

14

Lane Labs as a result of an offending ad. Plaintiff and Defendants are to work cooperatively to
provide notice to consumers about the refund and to ensure that as many customers are refunded
as possible. Defendants are to bear the costs of the notification and reimbursement process.
V.

CONCLUSION
For the foregoing reasons, Defendants are ordered to pay $803,072 in damages for civil

contempt; and Plaintiffs Motion in Limine to Exclude Expert Testimony (ECF No. 178) and
Motion to Strike Exhibits and all Reference thereto (ECF No. 189) are both denied.

Cavanaugh.

Date:
Original:
cc:

January /2oI4
Clerk’s Of cc
I-Ion. Joseph A. Dickson, U.S.M.J.
All Counsel of Record
File

15