Sunday, September 28, 2008

Pay wonderful: extraordinary false advertising case leads to fee award

POM Wonderful, LLC v. Purely Juice, Inc., 2008 WL 4351842 (C.D. Cal.)

POM Wonderful won its false advertising case against Purely Juice and sought attorneys’ fees, on top of the $1.5 million award it had received as compensatory damages. Fees are available, though not required, in “exceptional” Lanham Act cases, which generally requires conduct that’s malicious, fraudulent, deliberate, or willful. California false advertising law allows a fee award when a lawsuit results in enforcing “an important right affecting the public interest,” if (1) the suit conferred a significant benefit on the general public or a large class; (2) the costs of litigation make an award appropriate; and (3) the fees aren’t paid out of the recovery.

The court had already found that defendants knew or should have known in 2006 that there were “serious issues of adulteration” in imported pomegranate juice, including the juice they imported. Defendants advertised “100% pomegranate juice” without testing, and indeed in defiance of plaintiffs’ tests, about which they were notified, and ultimately their own tests. Defendants argued that they weren’t aware of problems until they tested the juice themselves, in February 2007, and anyway other competitors were selling adulterated juice. Despite the test results showing added sucrose, they believed, and still believe, that their product was within the range for “pure” pomegranate juice. Negligence alone, they argued, isn’t exceptional.

The court found a fee award justified. Defendants continued to sell the product for over a month after they knew of the problem, which was willful/deliberate misconduct. Moreover, the Lanham Act and state-law false advertising claims were inextricably intertwined, so plaintiffs were entitled to fees for all the false advertising work, even though they wouldn’t be independently entitled to a fee award under California law because the benefit to the public was coincidental.

The court also found plaintiffs’ outside counsel’s fees reasonable (they ranged from $750/hour for the most expensive partner to $275/hour for the cheapest associate) and awarded over $600,000, though it declined to increase the award for in-house counsel’s efforts because those didn’t cost plaintiff anything extra.

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