PBM Products, LLC v. Mead Johnson Nutrition Company et al

Filing 263

MEMORANDUM AND OPINION. Signed by District Judge James R. Spencer on 3/12/10. (jtho, )

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION PBM PRODUCTS, LLC and PBM NUTRITIONALS, LLC v. MEAD JOHNSON & COMPANY, Defendant. MEMORANDUM OPINION THIS MATTER is before the Court on several motions related to the injunction entered by this Court on December 1, 2009 (Docket No. 226). Mead Johnson has filed (1) a Motion To V a c a t e t h e O r d e r G r a n t i n g t h e I n junction, To Stay the Injunctio n P e n d i n g R e s o l u t i o n o f t h e M o t i o n s t o V a c a t e o r A m e n d t h e I njunction, and To Set a Schedul e f o r B r i e f i n g a n d H e a r i n g on the Propriety and Scope of the Injunctive Relief (Docket Nos. 232, 234, 235)1 and (2) a M o t i o n t o A m e n d O r d e r G r a n t i n g I n j u n c t i o n ( D o c k e t N o . 2 2 7 ) . P BM has filed (1) a Motion f o r A w a r d o f E n h a n c e d D a m a g e s , A t t o r n e y s ' F e e s , a n d M o d i f i e d I nj u n c t i o n ( D o c k e t N o . 2 2 9 ) and (2) a Motion to Enforce Injunction (Docket No. 246).2 For the reasons stated below, the Court GRANTS in part PBM's Motion for Modified Injunction and DENIES all other motions. Plaintiffs, Action No. 3:09­CV­269

The Court granted Mead Johnson's request for a stay on January 19, 2010, thus that issue is no longer before the Court.
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This memo only addresses the portion of PBM's motion seeking to modify the injunction. The other issues are addressed in a separate opinion (Docket No. 261). Also, because the i n j u n c t i o n h a s b e e n s t a y e d , P B M ' s M o t i o n t o E n f o r c e t h e i n j u n c t ion is moot. 1

I. BACKGROUND I n A p r i l 2 0 0 9 , s t o r e b r a n d i n f a n t f o r m u l a p r o d u c e r P B M P r o d u c t s , LLC and PBM Nutritionals, LLC (collectively "P B M " ) s u e d " n a m e b r a n d " i n f a n t formula producer Mead Johnson & Co. over a Mead Johnson advertisement that PBM asserted violated the Lanham Act. During a seven day jury trial, held on November 210, 2009, the jury was asked to evaluate whether four specific claims made in the Mead Johnson mailer communicated certain false or misleading messages concerning storebrand infant formulas, such as PBM's. Two of the four claims were express claims--the Mailer stated that (1) "mothers who buy store brand infant formula to sa ve baby expenses are cutting ba ck on nutrition compared to [Mead Johnson's] Enfamil" and (2) "only Enfamil has been clinically proven to improve i n f a n t s ' s m e n t a l a n d v i s u a l d e v e l o p m e n t . " ( T r i a l T r . v o l V I I , 126061, Nov. 10, 2009 (jury instructions).) Relying on cons u m e r s u r v e y e v i d e n c e , P B M c o n t e n d e d t h a t t h e M a i l e r a l s o impliedly communicated two false and misleading claims: that (1 ) " E n f a m i l c o n t a i n s t w o important fatty acids, DHA and ARA, and that PBM's store brand infant formulas do not" and (2) "Enfamil has been clinically tested against and shown to be superior to PBM's formula with respect to brain and eye development in infants." (Id.) T h e J u r y V e r d i c t S h e e t a s k e d " H a s PBM established, by a prepond e r a n c e o f t h e e v i d e n c e , t h a t M e a d J o h n s o n e n g a g e d i n f a l s e a d v e r t i s i n g i n v i ol a t i o n o f t h e L a n h a m A c t ? " (Docket No. 213). The jury answered in the affirmative and awarded PBM $13.5 million in damages. On December 1, 2009, this Court granted the injunctive relief sought by PBM (Dock. No. 226). The Order stated, in relevant part:

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(1) Mead Johnson is immediately enjoined and restrained, directly and i n d i r e c t l y , a n d w h e t h e r a l o n e o r in concert with others, includ i n g a n y a g e n t , e m p l o y e e , r e p r e s e n t a t i v e , s u b s i d i a r y , o r a f f i l i a t e o f M e ad Johnson, from doing any of the following: (A) publishing or circulating a n y a d v e r t i s e m e n t , p r o m o t i o n a l material, or other literature that bears any designation, description, o r r e p r e s e n t a t i o n c o n c e r n i n g P B M' s i n f a n t f o r m u l a t h a t i s f a l s e , including that, "It may be tempting to try a less expensive sto r e brand, but only Enfamil LIPIL is clinically proven to improve brain a n d e y e d e v e l o p m e n t , " o r " T h e r e a r e p l e n t y o f o t h e r w a y s t o s a v e on b a b y e x p e n s e s w i t h o u t c u t t i n g b a c k on nutrition," or from imply i n g the same. (B) making any false statement or representation concerning PBM's i n f a n t f o r m u l a t h a t i s f a l s e , i n cluding that, "It may be tempti n g t o t r y a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development," or "There are p l e n t y o f o t h e r w a y s t o s a v e o n baby expenses without cutting b ack on nutrition," or from implying the same. (2) Mead Johnson is DIRECTED to retrieve any and all advertisements, promotional materials or other literature containing the aforementioned assertions, claims, or allegations regarding PBM's store brand formula from the public forum. (3) This Order shall remain in full force until such time as th i s C o u r t specifically orders otherwise. Over the weeks since that injunct ion was issued, the parties have wrangled over the validity, scope, and effect of the injunction and have filed a number of motions now before the Court. While the Court consi d e r e d t h e s e m o t i o n s , t h e i n j u n c t i o n p r e v i o u s l y e n t e r e d w a s stayed (Dock. No. 257). II. DISCUSSION Mead Johnson seeks to vacate and amend the injunction because (1) the Court failed to articulate the reasons for issuing the injunction, as is required by eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), and (2) the scope of the injunction exceeds the bounds of the jury's verdict and the record. For its part, PBM h a s f i l e d m o t i o n s t o m o d i f y a n d enforce the injunction. These motions create two issues the Court must now address: (1) 3

whether an injunction should be entered at all and (2) if an injunction is entered, what should be its scope. Each issue is addressed below. A. Propriety of Entering an Injunction Federal courts have the power to enjoin behavior that is found to be false or misleading under the Lanham Act. 15 U.S.C. § 1116(a). Before an injunction may be issued, the party seeking the injunction must demonstrate that (1) it has suffered an irreparable injury; (2) remedies available at law are inadequate; (3) the balance of the hardships favors t h e p a r t y s e e k i n g t h e i n j u n c t i o n ; a n d ( 4 ) t h e p u b l i c i n t e r e s t w ould not be disserved by the i n j u n c t i o n . e B a y , I n c . , 5 4 7 U . S . a t 3 9 1 . A d e c i s i o n t o g r a n t o r d e n y a p e r m a n e n t i n j u n c t i o n i s reviewed for abuse of discretion. Id. Here, each of the required elements favors PBM. First, the Court observes that "the irreparable harm prong can be satisfied `upon a d e m o n s t r a t i o n t h a t t h e c o m p e t i t o r ' s a d v e r t i s i n g t e n d s t o m i s l e a d consumers.'" PBM Prods., LLC v. Mead Johnson Nutrition Co., No. 09cv269, 2009 WL 1684471, at * 5 (E.D. Va. May 7, 2009) (quoting Black & Decker (U.S.) Inc. v. ProTech Power Inc., 26 F. Supp. 2d 834, 861 (E.D. Va. 1988)). Consequently, the jury's verdict in favor of PBM presumptively satisfies the irreparable injury requirement. Moreover, trial testimony by representatives of both parties e s t a b l i s h e d t h a t i n a d d i t i o n t o l o s t s a l e s , f a l s e a d v e r t i s i n g a lso inflicts substantial harm on a company's reputation and goodwill. Second, "[d]amages to reputation and goodwill are not items tha t a r e e a s i l y m e a s u r e d b y a l e g a l c a l c u l a t i o n o f d a m a g e s . " S e e T o o l c h e x , I n c . v . T r a i n o r , No. 08cv236, 2009 WL 2244486, at *2 (E.D. Va. July 24, 2009). Thus, while Mead John s o n i s c o r r e c t t h a t i t a p p e a r s t h e j u r y a w a r d e d P B M s o m e f u t u r e d a m a g e s , t h e C o u r t d i s a g r e e s w ith Mead Johnson's

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conclusion that an award of future damages indicates that monetary damages are an adequate and sufficient award in this case. The monetary judgment against Mead Johnson compensates PBM for harm that flowed from the Mailer, an injunction properly prevents Mead Johnson from infecting the marketplace with the same or similar claims in different advertisements in the future. Mead Johnson asserts, though, that the Mailer is no longer in circulation and it has not made any indication that it will continue to make those claims in f u t u r e a d v e r t i s e m e n t s . I t i s t h a t u n c e r t a i n t y , h o w e v e r , t h a t m akes an injunction all the more appropriate as preventing the necessity of multiple suits is a classic justification for finding common law remedies inadequate. Matthews v. Rodgers, 284 U.S. 521, 529 (recognizing that equity jurisdiction may be invok ed to avoid a multiplicity of s uits); Potomac Elec. Power Co. v . W a s h i n g t o n C h a p t e r o f C o n g r e s s o f R a c i a l E q u a l i t y , 210 F. Supp. 418, 419, 420 (D.D.C. 1962); C.J.S. Equity § 36 (multiplicity of suits as grounds for e q u i t y j u r i s d i c t i o n ) ; 5 P o m e r o y ' s Equity Jurisprudence § 1 9 5 9 ( " I t i s t h e e l e m e n t o f c o n t i n u a n c e o r p e r m a n e n c e t h a t c a u s e s repeated and harassing litigation, to prevent which is the purpo s e o f e q u i t y i n e n j o i n i n g because of multiplicity of suits."); see also Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 801 (4th Cir. 2001) (stating that defendants carry a heavy burden to establish mootness when they claim voluntary discontinuance of challenged acts because otherwise they would simply be free to return to their old ways after the threat of a lawsuit has passed). T h i r d , w h e n f a c e d w i t h t h e q u e s t i o n o f w h e t h e r a n i n j u n c t i o n s hould be entered at all,

an evaluation of the resulting hardships favors PBM. Mead Johnson simply has no equitable interest in perpetuating the false and misleading claims in the Mailer. See Castrol, Inc. v.

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Pennzoil Co., 799 F. Supp. 424, 440 (D.N.J. 1992), aff'd, 987 F.2d 939 (3d Cir. 1993). Mead J o h n s o n ' s m a i n c o n t e n t i o n s c o n c e r n t h e n a t u r e o f i n j u n c t i v e r e li e f , n o t w h e t h e r t h a t r e l i e f should be granted in the first instance, and therefore do not mandate a different conclusion. Lastly, the public interest heav i l y f a v o r s i n j u n c t i v e r e l i e f i n t h i s c a s e . I t i s s e l f e v i d e n t that preventing false or mislead ing advertising is in the publi c interest in general. Scotts Co. v. United Indus. Corp., 315 F.3d 264, 286 (4th Cir. 2002). False or misleading messages c o n c e r n i n g a m a t t e r o f p u b l i c h e a l t h , s u c h a s t h e n u t r i t i o n a l qu a l i t i e s o f i n f a n t f o r m u l a , makes that conclusion especially true in this case. Moreover, allowing false or misleading advertising to continue to seep into the public's discourse on the relative benefits of name b r a n d v e r s u s s t o r e b r a n d f o r m u l a w o u l d u n d e r m i n e , r a t h e r t h a n p romote, the Lanham Act's goal of protecting consumers. See Wojnarowicz v. American Family Ass'n, 745 F. Supp. 130, 141 (S.D.N.Y. 1990). Accordingly, the Court finds that the eBa y f a c t o r s e a c h w e i g h i n f a v o r o f PBM and therefore an injunction is appropriate in this case. B. Scope of an Injunction The parties also disagree over the scope of any available injun c t i v e r e l i e f . M e a d Johnson claims that because the general verdict entered by the jury did not specify which of t h e f o u r s t a t e m e n t s i n t h e M a i l e r t h e j u r y f o u n d f a l s e o r m i s l ea d i n g , t h e i n j u n c t i o n m u s t b e limited to the entire Mailer or "other advertisements not colorably different from the Mailer." P B M r e s p o n d s b y c l a i m i n g t h a t t h e C o u r t s h o u l d e n j o i n t h e t w o e x p r e s s a s w e l l a s t h e t w o implied claims in the Mailer because such a ruling would be supported by the record and not inconsistent with the jury's general verdict.

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Rule 65(d) of the Federal Rules of Civil Procedure requires that an injunction "state its terms specifically" and "describe in reasonable detail . . . the act or acts restrained or r e q u i r e d . " T h e t y p e o f i n j u n c t i v e r e l i e f g r a n t e d " r e s t s w i t h i n the equitable discretion" of the district court. eBay, Inc. 547 U.S. at 394. While that discretion is constrained by a jury's general verdict under the doctrine of collateral estoppel, dist rict courts can nevertheless make factual findings to support equitable relief so long as those findings are not inconsistent with factual findings essential to the jury's verdict. Fed. R. Civ. P. 54(c); Ohio Sealy Mattress Mfg. Co. v. Sealy, Inc. , 585 F.2d 821, 844 (7th Cir. 1978). Based on the parties' arguments and a review of the pleadings a nd trial transcripts, the Court will enjoin Mead Johnson from distributing the Mailer or any advertisement not colorably different from the Mailer. Although PBM would like the Court to specifically enjoin the implied claims, the Court f i n d s t h a t a n i n j u n c t i o n a p p l i c a b l e t o t h e M a i l e r o r a n y t h i n g similar sufficiently encompasses the implied claims made in the Mailer. As was done in the original injunction, the Court will also specifically enjoin the two e x p r e s s c l a i m s m a d e i n t h e M a i l e r. Mead Johnson is correct tha t t h e g e n e r a l v e r d i c t d i d n o t specify if the jury concluded that the express claims that (1) store bought brands represent a cut back on nutrition and (2) on l y E n f a m i l i s c l i n i c a l l y p r o v e n t o i m p r o v e b r a i n a n d e y e d e v e l o p m e n t i n i n f a n t s a r e f a l s e or misleading. But the Court now concludes that the record s u p p o r t s a n i n j u n c t i o n i n c l u d i n g t h e e x p r e s s c l a i m s a n d t h a t s u ch an injunction would not be inconsistent with the jury's verdict.

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Of the two express claims in the Mailer, Mead Johnson only seriously disputes the injunction applying to the "only Enfamil is clinically proven" claim.3 In its view, neither the record nor the jury verdict supports a finding that this claim is false or misleading. The Court disagrees. To make its claim tha t only Enfamil has been clinically proven to promote infant development, Mead Johnson primarily relied on a group of government funded clinical s t u d i e s , w h i c h t h e p a r t i e s r e f e r t o a s t h e " B i r c h s t u d i e s , " s o n a m e d a f t e r o n e o f t h e s t u d i e s ' authors. Mead Johnson's reliance is, however, not justified for several reasons. Although Mead Johnson's formula supplemented with DHA and ARA was the formula used in the Birch studies, trial testimony established that the studies' conclusi on that DHA and ARA promote infant development is not limited to Mead Johnson's formula, but to any infant formula that makes the same or similar amounts of DHA and ARA bioavailable to an infant. This conclusion is drawn from testimony elicited from PBM as well as Mead Johnson witnesses. P B M ' s D r . P e t e r s e n t e s t i f i e d t h a t t h e b e n e f i t s s h o w n i n t h e B i rc h s t u d i e s w e r e n o t l i m i t e d t o t h e e x a c t f o r m u l a m a t r i x u s e d i n t h e s t u d i e s . ( T r i a l T r . v o l . I , 1 4 3 4 4 , N o v . 2 , 2 0 0 9 . ) M e a d J o h n s o n ' s B r e n n a a n d T u c k e r a g r e e d . ( T r i a l T r . v o l . I V , 6 2 0 2 1 , N o v . 5 , 2 0 0 9 ( B r e n n a ) ; T r i a l Tr. vol. III, 54950, Nov. 4, 2009 (Tucker).) To claim otherwi se would have placed Mead Johnson's own ability to rely on t h e B i r c h s t u d i e s i n p e r i l . T h e m a n u f a c t u r i n g s p e c i f i c a t i o n s for Mead Johnson's formula actually allow Mead Johnson to vary the ratio of DHA and ARA and still claim that it is Enfamil Lipil. (Trial Tr. 64667 (Brenna); Trial Exh. 171.) Moreover, since the Birch studies, Mead Johnson's formula has undergone a t l e a s t 1 9 c h a n g e s . ( T r i a l T r .
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To the extent Mead Johnson does dispute the injunction applying to the second literal claim that store brands are a cutback on nutrition, the same evidence cited below that s u p p o r t s e n j o i n i n g t h e " o n l y E n f a m i l i s c l i n i c a l l y p r o v e n " c l a i m also supports enjoining the "cutback on nutrition" claim. 8

14649 (Petersen); 554 (Tucker).) Thus, Mead Johnson must necessarily agree that small differences in the ratio of DHA and ARA will not diminish the benefits of those nutrients. Instead, trial testimony reasonably supports the conclusion tha t the issue is whether a sufficient amount of DHA and ARA in the formula is bioavailable to an infant. (Trial Tr. 135 (Petersen); 641 (Brenna).) And indeed, Mead Johnson's Dr. Brenna and PBM's Dr. Petersen agreed that PBM's Quintiles study established that the amount o f DHA and ARA in PBM's formula--an amount actually slightly higher than in Enfamil--is bioavailable to infants. (Trial Tr. 13637, 14546 (Petersen); 59697, 63839 (Brenna).) Thus, the Court finds that the "only clinically proven" cla i m i s m i s l e a d i n g , t h a t s u c h a c o n c l u s i o n i s c o n s i s t e n t w i t h t h e record and the jury's verdict, and that therefore the claim will be enjoined. The parties have also raised several other issues that need to be briefly addressed. First, Mead Johnson suggests that an evidentiary hearing is required to resolve all of the i s s u e s r a i s e d b y a r e q u e s t f o r i n j u n c t i v e r e l i e f . N e i t h e r t h e law nor the current posture of this case support that request. T he Court has held a sevenday j u r y t r i a l a n d t h e p a r t i e s h a v e submitted a mound of posttrial motions during which each side has had a full and fair o p p o r t u n i t y t o a p p r i s e t h e C o u r t o f t h e l a w a n d e v i d e n c e . C o n t rary to Mead Johnson's claims, an injunction including the express claims does not expand the issues in this case or affect how the case would have been negotiated or litigated in any manner that substantially prejudices Mead Johnson. See Robinson v. Lorillard Corp., 444 F.2d 791, 803 (4th Cir. 1971). A n a d d i t i o n a l h e a r i n g i s s i m p l y u n n e c e s s a r y . S e e Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc. , 4 3 F . 3 d 9 2 2 , 9 3 9 ( 4 t h C i r . 1 9 9 5 ) .

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N e x t , M e a d J o h n s o n o b j e c t e d t o t h e o r i g i n a l i n j u n c t i o n a p p l y i n g t o a l l f a l s e c l a i m s m a d e i n c o n n e c t i o n w i t h P B M , a s s e rting that such language is ov e r l y b r o a d a n d d i f f i c u l t t o enforce. At oral argument on the injunction, PBM agreed that t his language need not be in t h e p e r m a n e n t i n j u n c t i o n . T h e C ourt will oblige the parties on t h i s i s s u e . The original injunction also included a requirement that Mead Johnson retrieve the offending Mailer from the "public forum." PBM and Mead Johnson agree that the Mailer was sent to consumers' homes and thus such a requirement would be futile. PBM, however, requests that the injunction appl y to the four claims made in th e M a i l e r a n d t h a t t h e r e t r i e v a l r e q u i r e m e n t a p p l y t o a n y a d v e r t i sing or promotional material co ntaining those claims. PBM adds that if retrieval is not possible, a sticker should be pla c e d o v e r t h e o f f e n d i n g p o r t i o n s o f any label. Mead Johnson has stated the Mailer is no longer dis t r i b u t e d a n d t h a t i t i s n o t making three of the claims in the Mailer at all, however, it ha s continued to make the "only E n f a m i l L i p i l i s c l i n i c a l l y p r o v en" claim. Mead Johnson, via a n a f f i d a v i t , a l s o n o t e s t h a t t h i s claim is on all of its labels and that retrieving them would cost millions of dollars and would disrupt the entire supply of infant formula in the United States. Placing a sticker, Mead Johnson states, would also cost millions of dollars. A retrieval or stickering requirement w o u l d s i g n i f i c a n t l y a l t e r t h e b a lance of the hardships and thus t h e C o u r t d e c l i n e s t o i m p o s e those conditions on Mead Johnson. The injunction does apply, h o w e v e r , t o a l l a d v e r t i s i n g o r promotional material or statements going forward. L a s t l y , P B M w a n t s t h e C o u r t t o r e q u i r e M e a d J o h n s o n t o s e n d c o rr e c t i v e a d v e r t i s i n g t o a l l i n d i v i d u a l s i n M e a d J o h n s on ' s E n f a m i l F a m i l y B e g i n n i n g s d a t a b a s e s t a t i n g t h a t t h e f o u r claims stated in the Mailer are false or misleading. Although the Court acknowledges the

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r e p u t a t i o n a l h a r m t h a t f a l s e m e s s a g e s c a n i n f l i c t , P B M i s n o t e n t i t l e d t o a n o r d e r r e q u i r i n g Mead Johnson to issue corrective advertising because it did not s e e k t h a t r e m e d y i n i t s c o m p l a i n t a n d h a s n o t d o n e a n y p r o s p e c t i v e c o r r e c t i v e a d v e r t i s in g o f i t s o w n , s u g g e s t i n g that the desire for this remedy arose only after it obtained a favorable verdict. See Robinson, 4 4 4 F . 2 d a t 8 0 3 . M o r e o v e r , t h e j u r y ' s a w a r d i n c l u d e d d a m a g e s f or future harm from the Mailer, which encompasses the effect the Mailer had on those that received it. Thus, the request for corrective advertising is denied. III. CONCLUSION For the foregoing reasons, the parties' motions are resolved as follows: (1) Mead Johnson's Motion To Vacate the O r d e r G r a n t i n g t h e I n j u n c t i o n , T o Stay the Injunction P e n d i n g R e s o l u t i o n o f t h e M o t i o n s t o V a c a t e o r A m e n d t h e I n j u n c tion, and To Set a Schedule for Briefing and Hearing on the Propriety and Scope of the Injunctive Relief is DENIED in part on the merits and DENIED in part as MOOT; (2) Mead Johnson ' s M o t i o n t o A m e n d O r d e r Granting Injunction is DENIED; (3) PBM's Motion for Award of En hanced Damages, Attorneys' Fees, and Modified Injunction is GRANTED in part and DENIED in part; and (4) PBM's Motion to Enforce Injunction is DENIED as MOOT. An appropriate Order will issue. Let the Clerk send a copy of this memorandum to all counsel of record.

/s/ James R. Spencer Chief United States District Judge

ENTERED this 12th day March 2010

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