Tuesday, November 30, 2010

False advertising without harm: no new trial, no disgorgement, no injunction

Pom Wonderful LLC v. Welch Foods, Inc., 2010 WL 4794235 (C.D. Cal.)

Clever trial management by Welch saved it from a big loss. Pom sued Welch for false advertising. The court bifurcated liability and damages, and a jury found that Pom (1) proved Welch's 100% Juice White Grape Pomegranate product was deceptive or had a tendency to deceive a substantial number of customers; (2) proved Welch intended the name, label, packaging, or advertising to deceive consumers; and (3) failed to prove that Pom suffered injury, consisting of lost sales or lessening of goodwill as a result.

Pom moved for a new trial, arguing that the question of whether Pom suffered injury, was inappropriate in the initial phase. A trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice. Basically, Pom argued that the court misled Pom about the evidence it needed to submit, then wrongly instructed the jury to determine injury in the liability phase.

The court disagreed. The jury was properly instructed as to the elements of a false advertising claim, which included the element that "Pom Wonderful has been or is likely to be injured as a result of the deception, either by lost sales or by a lessening of the goodwill associated with its products." This was also included in Pom’s own proposed set of jury instructions, showing that Pom’s claim that it didn’t understand proof of liability to encompass proof of injury lacked merit. Pom conflated issues of liability with issues of damages in dollars and cents.

At the pretrial conference, the court invited a stipulation that if falsity and materiality and impact on the audience were proven, the element of injury would thereby be inherently established without further need in the first phase to quantify it through evidence of damages. However, ultimately Welch never executed a stipulation. Welch’s failure to do so did not excuse Pom from having to prove some injury, and indeed showed that Pom “had plenty of reason to realize that it would have to prove some form of injury.” Its failure to follow through couldn’t be the basis for a new trial.

The court also pointed out that Pom did provide evidence of direct competition between the parties’ products and of lost sales. Even if it didn’t put on its best evidence of lost sales, that’s not enough to grant a new trial. “[S]ome evidence was proffered, corroborating the Court's conclusion that Plaintiff understood the nature of the bifurcation all along and tailored its case accordingly.” While there may have been overlap between the amount of lost sales and the actual fact of such lost sales, the court made clear that it was separating proof of damages and liability. Pom didn’t object to bifurcation, only to the special verdict question specifically directed at whether it had suffered injury.

The court also denied Pom’s motion for equitable relief of an injunction or disgorgement of profits. First, Pom didn’t prove a violation of the Lanham Act because the jury found that it didn’t prove injury. Pom argued that there was no injury requirement for injunctive relief, but plaintiffs aren’t entitled to a windfall. Under principles of equity, which also take willfulness into account (one would think the jury’s finding on intent is relevant here), Pom wouldn’t be entitled to disgorgement of Welch’s profits.

Nor was it entitled to an injunction. Among other things, the issue was moot. “Welch is out of the market and to the extent that there still may be some bottles on some shelves somewhere, the impact is de minimis. The balance of hardships does not favor subjecting the parties to the risk of endless litigation about the nature, scope, duration and compliance with the requested injunction.”

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