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The maker of Enfamil brand baby formula failed to establish error or abuse of discretion on a series of rulings that led up to a jury's verdict that it had run afoul of the false advertising provisions of the Lanham Act in sending out a consumer mailer claiming that storebrand formula was nutritionally inferior, the U.S. Court of Appeals for the Fourth Circuit ruled April 20 ( PBM Products LLC v. Mead Johnson & Co., 4th Cir., No. 10-1421, 4/20/11).
Affirming the issuance of an injunction against a defendant that had tussled with the plaintiff numerous times in the past over nutritional claims, the court also found that the generic formula maker had not itself engaged in false advertising by issuing a press release declaring that the Enfamil maker that “lie[d] … again” in its latest marketing campaign.
PBM Products LLC of Gordonsville, Va., makes baby formula for distribution under the house brands of large retailers. Mead Johnson & Co. is a competitor that distributes baby formula under the “Enfamil” brand name. The two companies have frequently been locked in litigation. In 2001, PBM brought a claim against Mead Johnson for distributing brochures and notepads claiming that storebrand baby formula was nutritionally deficient. In 2002, PBM sued when Mead distributed information to physicians again ascribing deficiencies to storebrand formula. Both those claims were eventually settled.
In 2008, Mead Johnson distributed direct-mail advertisements to 1.6 million consumers again making claims about the inferiority of storebrand formula. PBM filed a claim pursuant to the Lanham Act, 15 U.S.C. §1125(a)(1)(A) and (B). Mead Johnson counterclaimed for breach of contract, defamation, false advertising, and civil contempt.
Chief Judge James R. Spencer of the U.S. District Court for the Eastern District of Virginia granted summary judgment to PBM on the defamation counterclaim and denied Mead Johnson's motion for summary judgment on PBM's claims. Following a trial, a jury found Mead Johnson liable for false advertising and awarded $13.5 million in damages to PBM. The court issued an injunction barring Mead Johnson from further use of the statements found to be false in its mailer.
Mead Johnson appealed, arguing that the district court had erred in dismissing its counterclaims and issuing the injunction. Mead Johnson also objected to certain evidentiary rulings made during the trial.
Judge Andre M. Davis first addressed the issue of Mead Johnson's counterclaim of defamation under Virginia state law. This claim was based on a press statement by PBM's CEO stating “Mead Johnson Lies About Baby Formula … Again.” The district court had ruled that the finding of false advertising amounted to a finding that Mead Johnson had indeed lied and thus PBM was protected by a defense of truth.
Mead Johnson argued that a finding of false advertising did not necessarily constitute a finding that the defendant had deliberately sought to deceive. The court rejected this argument, ruling that the distribution of false statements amounts to telling an untruth and thus PBM's assertion that Mead Johnson had “lied” was substantially true.
Next, the court rejected Mead Johnson's argument that its false advertising claim had been erroneously dismissed under the doctrine of laches. Mead Johnson's claim was based on the use the statement “Compare to Enfamil” on PBM's baby formula label. According to the court, to the extent that Mead Johnson had a valid claim here, it had accrued no later than 2003 for PBM's basic formula and no later than 2006 for its “gentle” formula. The court agreed with the district court that the laches doctrine estopped any such claim accruing prior to May 2007. The court said:
Here, Mead Johnson's delay was unreasonable because Mead Johnson knew about the “compare to” claim since at least 2006 when the parties were involved in trademark litigation over a label that contained the exact same claim. … [T]he unreasonable delay prejudiced PBM because of PBM's continued use of the advertisement on all of its formulas in over a dozen retail stores for years.
Other PBM “compare to” statements complained of by Mead Johnson were either not supported by evidence or were not demonstrably false. Furthermore, the court said, even if any “compare to” statements could be considered false, Mead Johnson had failed to established any harm as a result.
Next, the court upheld the lower court's decision to admit PBM's expert testimony, including testimony about a consumer survey. The court found no abuse of discretion in the district court's ruling that to the extent that the survey was vulnerable to criticisms about its methodology, such criticisms would be relevant to the trier of fact in judging how much weight to give the testimony, but they did not make it inadmissible.
The court also found no merit in Mead Johnson's argument that evidence of the 2001 and 2002 actions should have been found inadmissible as irrelevant. The court disagreed with Mead Johnson's claim that this information did nothing but “paint Mead Johnson as a serial lawbreaker.” According to the court, this evidence was relevant to the question of Mead Johnson's intent in distributing false statements about PBM's products. To the extent that there was a risk of unfair prejudice, the court said that this had been limited by the lower court's decision to exclude evidence about the nature of the settlements of the prior claims.
Finally, the court rejected Mead Johnson's argument that the injunction should not have been issued because the accused mailings had ended before the trial and PBM had failed to establish a risk of recurrence. The court found no abuse of discretion in the lower court's findings that PBM had suffered irreparable harm, that there were inadequate remedies at law, that the balance of hardships favored PBM, and that the injunction was in the public interest. Thus, there was no error as to the issuance of the injunction.
Regarding the scope of the injunction, the court rejected Mead Johnson's argument that it was overbroad because it not only enjoined the specific mailer that had triggered the lawsuit, but generally barred Mead Johnson's use of the claims about PBM's formula that had been found false in any context. The court said:
If the injunction were limited to the mailer and did not enjoin the false claims made therein, Mead Johnson would be free to use false statements in future advertisements, contrary to the very purpose of injunctive relief under the circumstances shown here.
The court's opinion was joined by Judges Paul V. Niemeyer and Barbara Milano Keenan.
Mead Johnson was represented by Stephen Blake Kinnaird of Paul Hastings Janofsky & Walker, Washington, D.C. PBM was represented by Harold Paul Weinberger of Kramer, Levin, Naftalis & Frankel, New York.
Opinion at http://pub.bna.com/ptcj/101421Apr20.pdf
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