ExeGi Pharma, LLC v. Brookfield Pharm.

• Docket Number: 20-CV-192-JPS
• Decision Date: 05 July 2023
• Parties: EXEGI PHARMA, LLC, Plaintiff, v. BROOKFIELD PHARMACEUTICALS, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

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EXEGI PHARMA, LLC, Plaintiff, v. BROOKFIELD PHARMACEUTICALS, LLC, Defendant.

No. 20-CV-192-JPS

United States District Court, E.D. Wisconsin

July 5, 2023

ORDER

J.P Stadtmueller U.S. District Judge

On March 21, 2023, the Court granted in part and denied in part each of Plaintiff ExeGi Pharma, LLC's (“Plaintiff”) partial motion for summary judgment and Defendant Brookfield Pharmaceuticals, LLC's (“Defendant”) motion for summary judgment. ECF No. 101. In pertinent part, the Court concluded that

[Defendant] is entitled to summary judgment in its favor that a determination of literal falsity of any “medical foods” claims is precluded by the [Food, Drug &amp Cosmetic Act], and accordingly any Lanham Act claim as to the “medical foods” representations is dismissed without prejudice; . . . [and] [Plaintiff] is entitled to summary judgment in its favor as to liability on its Lanham Act false advertising and common law unfair competition claims with regard to the “same probiotic bacteria,” “same strains,” and “generic equivalent” statements, and a permanent injunction will be entered accordingly by separate order[.]

Id. at 43. The same day, the Court entered a permanent injunction enjoining Defendant from “stating or suggesting in any communications directed at or readily accessible to” consumers or intermediaries that Defendant's High Potency Probiotic (“HPP”) product is the “generic equivalent of,” “contains the same strains as,” or “contains the same probiotic bacteria” as Plaintiff's Visbiome product. ECF No. 102. The injunction also included a provision ordering Defendant to send corrective letters to all consumers or intermediaries informing them of the same within fourteen days of entry of the injunction. Id.

Now before the Court are (1) Defendant's motion to stay the corrective letters portion of the permanent injunction pending Defendant's motion for reconsideration and appeal of the corrective letters portion of the permanent injunction, ECF No. 103; (2) Defendant's motion for reconsideration, ECF No. 106; and (3) Defendant's motion to dismiss any claim for “unfair competition” other than false advertising under 15 U.S.C. § 1125(a) (the “Lanham Act”), ECF No. 110. At this juncture, Defendant's motion to stay the corrective letters portion of the permanent injunction pending the motion for reconsideration is moot. Defendant has already filed the motion for reconsideration and has not sent any corrective letters in the interim. For this reason, and because the standard for a stay pending appeal requires consideration of likelihood of success on the merits, see infra p. 14-and the motion to stay raises the same legal challenges to the merits as the motion for reconsideration-the Court analyzes the motion for reconsideration first.

For the reasons set forth herein, the Court will deny Defendant's motion for reconsideration and motion to stay the corrective letters portion of the permanent injunction, but will grant Defendant's motion to dismiss.

1. DEFENDANT'S MOTION FOR RECONSIDERATION

Defendant moves for reconsideration under Federal Rule of Civil Procedure 59. ECF No. 106. The applicable provision, Rule 59(e), applies only in limited circumstances. “Altering or amending a judgment under Rule 59(e) is permissible when there is newly discovered evidence or there has been a manifest error of law or of fact.” Harrington v. City of Chicago, 433 F.3d 542, 546 (7th Cir. 2006). “A ‘manifest error' is not demonstrated by the disappointment of the losing party.” Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (quoting Sedrak v. Callahan, 987 F.Supp. 1063, 1069 (N.D. Ill. 1997)). Nor is it a forum for “for rehashing previously rejected arguments.” Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th Cir. 1996). Instead, “[i]t is the wholesale disregard, misapplication, or failure to recognize controlling precedent.” Oto, 224 F.3d at 606 (quoting Sedrak, 987 F.Supp. at 1069).

Defendant raises three main challenges to the Court's March 21, 2023 order. First, Defendant contends that the Court erred by analyzing the literal falsity of Defendant's statements without considering the context in which the statements were made. ECF No. 107 at 6. Specifically, the “context” Defendant urges (and urged) the Court to consider in determining the literal falsity of its statements that HPP contains the “same” probiotic bacteria and the “same” strains as Visbiome-both in the instant motion for reconsideration and the underlying summary judgment briefing-is (1) that some (not all) of the strains in HPP and Visbiome are identical, (2) that species are colloquially called strains and HPP's label lists only species and not strains, and (3) that HPP contains “all the same genus” and “nearly the same species” as Visbiome. ECF No. 107 at 12; see also ECF No. 88 at 7-13 (Defendant's summary judgment opposition brief).

Second, Defendant argues that the Court erred by interpreting the term “generic equivalent” because that analysis is precluded by the Food, Drug & Cosmetic Act (“FDCA”). ECF No. 107 at 7. Finally, Defendant asserts that the Court erred by taking the issue of materiality from the jury by “failing to take the facts most favorably to [Defendant].” Id. at 15. Other than the second argument, which Defendant did not raise at all on summary judgment, these arguments are inappropriate “rehashing” of previously raised arguments. Caisse Nationale, 90 F.3d at 1270.

Defendant's first, context-based argument hinges on the Court's reading of Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., 586 F.3d 500 (7th Cir. 2009). In that case, the plaintiff argued that the defendant's products' labels and package inserts were false because they “obscure[d] the existence of [the plaintiff's] over-the-counter equivalent” products. Id. at 505. The Seventh Circuit analyzed the statements at issue-for example the symbol “Rx only” on the defendant's products' label and the sentence “[p]olyethylene Glycol 3350 NF Powder for Oral Solution is a prescription only laxative which has been prescribed by your physician to treat constipation” on the defendant's products' package insert-by reference only to the label and package insert. Id. at 513 (“There is the manufacturer's name at the top, the name of the active ingredient, the symbol ‘Rx only,' and some other information. Obviously this product, the product of the named manufacturer, is prescription only, but it is not obvious, as [the plaintiff] contends . . . that every other product containing polyethylene glycol 3350 is prescription only.”). The Seventh Circuit concluded that the challenged statements were not literally false. Id. at 512. As to “the doctrine of ‘literal falsity,'” the Seventh Circuit stated that

“literal” must be understood in the common colloquial sense in which Americans . . . say things like “I am literally out of my mind.” A “literal” falsehood is bald-faced, egregious, undeniable, over the top.

We know this is what the cases are driving at because they add to “literal falsity” such qualifiers as that the meaning of the alleged literal falsehood must be considered in context and with reference to the audience to which the statement is addressed . . . . That is how one obtains an understanding of the real meaning of “2 + 2 = 5” in Soviet propaganda.

The proper domain of “literal falsity” as a doctrine that dispenses with proof that anyone was misled or likely to be misled is the patently false statement that means what it says to any linguistically competent person, unlike the examples we have given [such as the Soviet propaganda 2 + 2 = 5]. So suppose the labels on the defendants' products stated: “All polyethylene glycol 3350, by whomever made, can be sold only by prescription; there is no over-the-counter version of this drug.” That would be false and misleading per se; there would be no need to consider context or audience.

Id. at 512-13 (emphases added) (citations omitted). Thus, with respect to the doctrine of literal falsity, the notion of “context” can come into play at two steps of the analysis.

First, a statement can be considered “in context and with reference to the audience to which the statement is addressed” in determining in the first instance whether the statement is literally false. Id. Context is considered at this stage when, within the umbrella doctrine of literal falsity, a statement is found to be “false by necessary implication.” Eli Lilly & Co. v. Arla Foods, Inc., 893 F.3d 375, 383 n.3 (7th Cir. 2018). However, as the Schering-Plough court explains, and as the Court noted in its March 21, 2023 order, ECF No. 101 at 26-27, if, again within the umbrella doctrine of literal falsity, the statement is “false and misleading per se,” considering context at this stage is not necessary. 586 F.3d at 513. See also Eli Lilly & Co. v. Arla Foods Inc., No. 17-C-703, 2017 WL 4570547, at *9 (E.D. Wis. June 15, 2017) (finding statements “neither literally false nor literally false by necessary implication” because, as to literal falsity per se, the statement on its face does not indicate that a supplement “is actually a monster with razor sharp horns and electric fur,” and, as to literal falsity by necessary implication, “[p[lacing [the] statement in context” does not transform the claim into an actionable one); accord Eli Lilly, 893 F.3d at 382 (“The inquiry asks whether the defendant made an explicit representation of fact that on its face conflicts with reality.”) (emphasis added).

Second, if the statement is not literally false, context may come into play a second time to determine whether a person is likely to be misled by the statement. Schering-Plough, 586 F.3d at 512-13.

In Schering-Plough, the Seventh...