Pbm Products Llc v. Mead Johnson & Co.

• Decision Date: 20 April 2011
• Docket Number: No. 10–1421.,10–1421.
• Parties: PBM PRODUCTS, LLC; PBM Nutritionals, LLC, Plaintiffs–Appellees,v.MEAD JOHNSON & COMPANY, Defendant–Appellant,andPaul Manning; Mead Johnson Nutrition Company, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

639 F.3d 111

2011-1 Trade Cases P 77,454

98 U.S.P.Q.2d 1377

85 Fed. R. Evid. Serv. 211

PBM PRODUCTS, LLC; PBM Nutritionals, LLC, Plaintiffs–Appellees,

v.MEAD JOHNSON & COMPANY, Defendant–Appellant,andPaul Manning; Mead Johnson Nutrition Company, Defendants.

No. 10–1421.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 27, 2011.Decided: April 20, 2011.

ARGUED: Stephen Blake Kinnaird, Paul Hastings Janofsky & Walker, LLP, Washington, D.C., for Appellant. Harold Paul Weinberger, Kramer, Levin, Naftalis & Frankel, LLP, New York, New York, for Appellees. ON BRIEF: Behnam Dayanim, Candice S. McPhillips, Paul Hastings Janofsky & Walker, LLP, Washington, D.C., for Appellant. Jonathan M. Wagner, Tobias B. Jacoby, Kramer, Levin, Naftalis & Frankel, LLP, New York, New York; Robert Redmond, Jr., Williams Mullen, Richmond, Virginia, for Appellees.Before NIEMEYER, DAVIS, and KEENAN, Circuit Judges.Affirmed by published opinion. Judge DAVIS wrote the opinion, in which Judge NIEMEYER and Judge KEENAN joined.

OPINION

DAVIS, Circuit Judge:

Appellee PBM Products, LLC (PBM) filed this action pursuant to the Lanham Act, 15 U.S.C. § 1125(a), against Appellant Mead Johnson & Company, LLC (Mead Johnson) alleging that Mead Johnson distributed more than 1.5 million direct-to-consumer mailers that falsely claimed PBM's baby formula products were inferior to Mead Johnson's baby formula products. After a jury found that Mead Johnson had engaged in false advertising, the district court issued an injunction prohibiting Mead Johnson from making similar claims. On appeal, Mead Johnson presents three clusters of issues: (1) whether the district court erred in its dismissal of Mead Johnson's counterclaims; (2) whether the district court abused its discretion in its admission of expert opinion testimony and evidence of prior litigation between the parties; and (3) whether the district court erred or abused its discretion in issuing the injunction. We have fully considered all of the issues presented, and we reject Appellant's contentions. Accordingly, we affirm.

I.

A.

PBM produces store-brand, “generic,” infant formula. Mead Johnson produces baby formula products under the brand name Enfamil, including a standard formula, a formula with broken-down proteins, and a formula with added rice starch. Both companies use the same supplier for two key nutrients—docosahexaenoic acid (DHA) and arachidonic acid (ARA)—which are important to an infant's brain and eye development. Mead Johnson calls these nutrients by their brand name “Lipil,” while PBM uses their generic label “lipids.” Both companies use the same level of the lipids. As a result, PBM includes a comparative advertising label on their formula that states, “Compare to Enfamil.”

The parties are familiar combatants on the Lanham Act battlefield. For example, in 2001, Mead Johnson distributed brochures and tear-off notepads to patients in pediatricians' offices stating that store-brand formula did not have sufficient calcium or folic acid. PBM sued and obtained a restraining order prohibiting Mead Johnson from making similar statements. PBM Products, Inc. v. Mead Johnson & Co., 2001 WL 841047 (E.D.Va. April 4, 2001). The parties settled that dispute. See PBM Products, LLC v. Mead Johnson & Co., 678 F.Supp.2d 390, 396 (E.D.Va.2009). Then, in 2002, Mead Johnson distributed a chart to physicians stating that store-brand formula did not contain beneficial nucleotides. PBM sued and, again, the parties settled. Id. at 396–97.

The instant engagement began in 2008, when Mead Johnson distributed a mailer directly to consumers as part of a new advertising campaign. The mailer focused on Mead Johnson's Enfamil LIPIL infant formula and expressly compared it to store brands. The mailer was distributed to 1.6 million consumers across the country between June 2008 and April 2009. The target audience consisted of parents of two- to three-month old infants. The mailer cited studies that compared Mead Johnson's current formula with an older version of the same formula and concluded that the addition of the lipids resulted in improved eye and brain development. Specifically, the mailer contained the following statements:

• “It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development.”

• “... before you try a store brand of formula, remember that a full year of Enfamil LIPIL goes a long way to nourishing the dreams you have for your little one.”

• “All infant formulas are not the same ... Enfamil LIPIL formulas offer expert recommended levels of DHA and ARA.”

• “Enfamil LIPIL's unique formulation is not available in any store brand.”

• “There are plenty of other ways to save on baby expenses without cutting back on nutrition.”

• “Store brands may cost less, but Enfamil gives your baby more. When it comes to nutrition and development, you want a product you can rely on.”

In addition, the mailer displayed a checklist stating that Enfamil LIPIL is “[p]roven to result in IQ scores similar to breastfed babies” and “[p]roven to enhance visual development,” while indicating that the “Store Brand” does not. Finally, the mailer provided a graphic of a duck showing a comparison of visual sharpness where one half of the graphic, captioned “with LIPIL,” was clear and the other half of the graphic, captioned “without LIPIL,” was blurry.

B.

In April 2009, PBM sued Mead Johnson alleging false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) and (B), and commercial disparagement. The district court denied PBM's request for a temporary restraining order. PBM Products v. Mead Johnson, 2009 WL 1684471 (E.D.Va. May 7, 2009). Mead Johnson filed counterclaims against PBM alleging breach of contract, defamation, false advertising, and civil contempt. Mead Johnson's defamation counterclaim was based primarily on a press release issued by PBM CEO Paul Manning declaring that “Mead Johnson Lies About Baby Formula ... Again.” Mead Johnson's false advertising counterclaim alleged that labels on PBM's products conveyed several implied messages comparing PBM and Mead Johnson's formulas. Mead Johnson's breach of contract and civil contempt counterclaims related to the prior litigation between the parties.

Prior to trial, the district court granted PBM summary judgment on Mead Johnson's defamation counterclaim. PBM Products v. Mead Johnson, 678 F.Supp.2d 390, 401–02 (E.D.Va.2009). The district court reasoned that false advertising is substantially synonymous with lying. As such, the district court found the statement in the press release to be substantially true and therefore a bar to the defamation counterclaim. Id.

The district court also denied Mead Johnson's motion for summary judgment on PBM's claims. PBM Products v. Mead Johnson, 2009 WL 5090862 at *4 (E.D.Va. Dec. 24, 2009). The court reasoned that laches did not apply because the 2008 mailer was significantly different from Mead Johnson's prior advertising. The court reasoned that because the 2008 mailer “made stronger and more direct arguments related to the efficacy of store bought infant formula than prior ads” and “had a new tone and point that was absent from prior campaigns,” it was sufficiently different so that laches did not apply. Id. at *3–4.

Also prior to trial, the district court denied Mead Johnson's motion to exclude the testimony of two PBM experts, Joseph Ridgway and Douglas Schoen. PBM Products v. Mead Johnson, 2010 WL 56072 (E.D.Va. Jan. 4, 2010). Ridgway conducted a survey showing consumers received two implied but false messages from the mailer. Similarly, Schoen conducted a survey showing that the mailer would dissuade consumers from purchasing store brand formula. For both surveys, Mead Johnson argued that the methods used were unreliable and that the surveys failed to sample the proper group because they included parents of infants older than the targeted two- to three-month olds. The district court rejected both arguments and concluded that “while the survey sample may not exactly match the audience that received the disputed advertisement, it is a sufficiently close approximation of the recipient pool.” Id. at *11.

During discovery, PBM limited its case to the literal and implied false claims communicated by the mailer. Specifically, the claims in question by the time of trial were two express statements contained in the mailer and two implied statements. The two express statements were: (1) “mothers who buy store brand infant formula to save baby expenses are cutting back on nutrition compared to [Mead Johnson's] Enfamil” and (2) “only Enfamil has been clinically proven to improve infants' mental and visual development.” The two messages implied by the mailer were: (1) Enfamil contains two important fatty acids, DHA and ARA, and PBM's store brand formulas do not; and (2) Enfamil has been clinically tested and shown to be superior to PBM's formula with respect to brain and eye development in infants.

At trial, the district court permitted PBM to introduce evidence concerning the parties' prior litigation. Specifically, the court admitted testimony about the prior false and misleading advertisements and the fact the parties settled the prior litigation. However, the court excluded evidence regarding the settlement amounts.

At the close of Mead Johnson's case on its Lanham Act counterclaims, the district court granted PBM's motion for judgment as a matter of law and dismissed the claims based on statute of limitations, laches, and deficiencies in the merits. PBM Products v. Mead Johnson, 2010 WL 723750 (E.D.Va. March 2, 2010). The district court concluded that the statute of limitations barred Mead Johnson's false advertising claim concerning PBM's routine and gentle formula for all ads prior to May 18, 2007. PBM Products v. Mead Johnson, 2010 WL 723750, at *2. For allegations concerning ads for routine and gentle formula products issued...