Clarion Brands, LLC v. Llorens Pharm. Int'l Div.
| Decision Date | 05 June 2018 |
| Docket Number | CIVIL ACTION NO. 14-6592 |
| Parties | CLARION BRANDS, LLC v. LLORENS PHARMACEUTICAL INTERNATIONAL DIVISION, INC.., et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Trademark owners sue in federal court to ensure their trademarks are not used in deceptive or misleading ways under Congress's mandates in the Lanham Act. Our citizens properly rely upon us enforcing the Lanham Act through our judgment orders. We hold persons in civil contempt upon clear and convincing evidence of persons violating specific terms of our judgment orders including skirting our judgment order protecting trademarks.
But we cannot find contempt without clear and convincing evidence of violating our order. Suspecting misconduct, even when fueled by the alleged wrongdoer's incomplete or ambiguous explanations, is not enough. And we cannot transform conduct which may state another claim into civil contempt. Following briefing, oral argument, and evaluating credibility of witnesses and the 86 exhibits admitted at our evidentiary hearing, we cannot find the requisite clear and convincing evidence Defendants and non-parties violated our July 30, 2015 Consent Judgment enforcing the Plaintiff's rights under the Lanham Act. The challenged conduct may state a claim under state law but not for violating the terms of our July 30, 2015 Consent Judgment. We deny Plaintiff's Motion to enforce or for contempt in the accompanying Order.
Clarion Brands, LLC ("Clarion") distributes over-the-counter dietary products including "Lipo-Flavonoid Plus" designed to enhance ear health and functionality. In November 2014, Clarion sued Llorens Pharmaceutical International Division, Inc. and Llorens Pharmaceutical Corp. (collectively "Llorens") alleging they infringed on Lipo-Flavonoid Plus by distributing and selling "Lipoflavovit," as a dietary supplement for ear health. Clarion sought to permanently enjoin Llorens from, inter alia, manufacturing, distributing, advertising, marketing, promoting, or selling its Lipoflavovit product. Clarion seeks relief under the Lanham Act; it is not complaining about theft of trade secrets or patent infringement.
Clarion and Llorens signed a Settlement Agreement on July 15, 2015 which included agreeing to a Consent Judgment and Permanent Injunction entered on July 30, 2015 ("Permanent Injunction"). The Permanent Injunction enjoined Llorens, Jose Llorens and Thusnelda Ruiz from manufacturing, selling, distributing, marketing, advertising, or promoting any dietary supplement designed to enhance inner ear health for a period of five years.
Nearly two years later, Clarion moved for leave to take discovery in aid of enforcing the Permanent Injunction. After discovery, Clarion moved to enforce the Permanent Injunction against Llorens, Mr. Llorens, and non-parties Alternative Pharmacal Corporation and Jose Hernandez under Federal Rules of Civil Procedure 70 and 71. Clarion contends Llorens, Mr. Llorens, Alternative Pharmacal, and Mr. Hernandez violated the Permanent Injunction in three specific ways: lying about remaining inventory of bottled and bulk Lipoflavovit product during the execution of the Permanent Injunction and receiving payments for at least a portion of the product after entry of the Permanent Injunction; "clandestinely" transferring Lipoflavovitinventory stored in Puerto Rico to Llorens Puerto Rico sales representatives for later commercial use; and, by selling "Altiflav" through Alternative Pharmacal.
Arguing it has proven at least one of the three acts, Clarion asks we hold Llorens, Mr. Llorens, Alternative Pharmacal, and Mr. Hernandez in contempt of the Permanent Injunction and impose sanctions on them. Clarion cites specific facts to support its request for civil contempt including backdating of invoices to show disposition of Lipoflavovit before the date of the Settlement Agreement; sales of Altiflav by Mr. Hernandez while employed by Llorens Florida; Lipoflavovit and Altiflav are the same product; and, Llorens Florida, Llorens Puerto Rico, Alternative Pharmacal, and Advanced Generic Corporation, an entity owned by Mr. Hernandez and his wife Karen Llorens, all operate as one entity or are alter egos of each other. To further support its requests, Clarion asks we apply a spoliation inference for the alleged failure of Llorens, Alternative Pharmacal, and Mr. Hernandez to produce documents "explaining" the disposition of 5,190 bottles of Lipoflavovit Clarion contends Defendants sold or used instead of destroying it.
After considering the credibility of testimony and admitted exhibits, we find Clarion failed to present clear and convincing evidence of conduct violating the Permanent Injunction and deny Clarion's Motion in the accompanying Order.
1. Clarion distributes over-the-counter dietary products including a dietary supplement called "Lipo-Flavonoid® Plus" designed to enhance ear health and functionality.1
2. Clarion does not own patent rights or ownership interest in the chemical formulary for "Lipo-Flavonoid Plus."
3. Clarion is the assignee of the entire interest and goodwill in the Lipo-Flavonoid trademark. Clarion alleged its interest is continuing in the dual packaging and design through Sale Packaging and Use Packaging. Clarion's Lipo-Flavonoid product references "Ringing in the Ears?" with a semi-abstract drawing of a left-facing human ear with multiple curved line to the right of the ear to mimic sound waves.2 The packaging also represented it is "The only product clinically proven to improve circulation in the inner ear" . . . under a "Unique Ear Health Formula."3
4. Clarion swears its Lipo-Flavonoid trademark is "well recognized by medical professionals, especially ear, nose and throat ('ENT') specialists and other participants in the ear health dietary supplement industry, including manufacturers, distributors and consumers."4
5. Llorens Pharmaceutical International Division, Inc. ("Llorens Florida") is a Florida corporation with its principal place of business in Miami, Florida.5
6. Llorens Pharmaceutical Corp. ("Llorens Puerto Rico") has a principal place of business in San Juan, Puerto Rico.6
7. Jose Llorens is the owner, President, and Chief Executive Officer of Llorens Florida and Llorens Puerto Rico.7 Mr. Llorens testified at our evidentiary hearing. We find his testimony to be confusing at best but we cannot find he lacks credibility as to the disposition of Clarion's product in July 2015.
8. Thusnelda Ruiz, the wife of Mr. Llorens, is a co-owner of Llorens Florida and Llorens Puerto Rico.8
9. The 2017 annual report for Llorens Puerto Rico lists Mr. Llorens as President and Ms. Ruiz as Vice President.9
10. Annual reports filed for Llorens Florida identifies only Mr. Llorens and Ms. Ruiz as officers or directors.10
11. Llorens Puerto Rico began selling its "Lipoflavovit" product, marketed as a dietary supplement for inner ear health, in 2002 and Llorens Florida began selling Lipoflavovit in 2013.11
12. Llorens hired Nutri-Force Nutrition to manufacture the Lipoflavovit product.12
13. Non-party Jose Hernandez, the son-in-law of Jose Llorens, is currently the Vice President of Sales and Marketing for Llorens Florida.13 Mr. Llorens became the Vice President of Sales and Vice President of Operations for Llorens Florida in 2015.14
14. As Llorens Florida's Vice President of Sales, Mr. Hernandez has authority to enter into sales contracts on its behalf.15 In 2015, Mr. Hernandez's duties for Llorens Florida included managing Llorens Florida sales operations and online sales of Lipoflavovit in the United States. His responsibility for online sales included maintaining Llorens Florida's website and developing relationships between United States distributors.16
15. In a February 4, 2013 email, Mr. Hernandez asked Nutri-Force Nutrition if the language "Supports Ear Health" could be put on the front panel of the Lipoflavovit label.17
16. Mr. Hernandez has no ownership interest in Llorens Florida and does not participate in board meetings of either Llorens entity.18
17. Following an August - September 2010 Food and Drug Administration inspection of Llorens Florida, the FDA characterized Mr. Hernandez as "Director of Sales and Operations."19
18. In responses to discovery in this matter, Llorens Florida identified Mr. Hernandez as managing sales operations.20
19. Mr. Hernandez is the sole owner, President, Treasurer, Secretary, and Registered Agent of non-party Alternative Pharmacal Corp. which maintains its principal place of business at the same facility as Llorens Florida's principal place of business.21
20. Mr. Hernandez is the President of Advanced Generic Corp. which he co-owns with his wife, Karen Llorens, the daughter of Jose Llorens.22 Advanced Generic is a private label distributor of generic over-the-counter drugs and dietary supplements.23
21. Alternative Pharmacal, among other activities, markets, sells, and distributes the dietary supplement "Altiflav."24
22. Llorens Florida maintains its principal place of business at a facility located in Miami, Florida (the "Facility"). Advanced Generic leases warehouse space from Llorens Florida, and both Advanced Generic and Alternative Pharmacal use warehouse space and employees of Llorens Florida at the Facility.25
23. Advanced Generic pays Llorens Florida $1,000 month in rent for use of the Facility, despite a lease agreeing to $2,000 a month in rent.26
24. Neither Alternative Pharmacal nor Advanced Generic share bank accounts with Mr. Llorens, Llorens Puerto Rico, or Llorens Florida.27
25. Mr. Llorens has no ownership interest in Alternative Pharmacal or Advanced Generic.28
26. In November 2014, Clarion sued Llorens Florida and Llorens Puerto Rico...
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