Grove Fresh Distributors, Inc. v. New England Apple Products Co., Inc., 91-3226

• Decision Date: 22 September 1992
• Docket Number: No. 91-3226,91-3226
• Citation: 969 F.2d 552
• Parties: GROVE FRESH DISTRIBUTORS, INCORPORATED, Plaintiff-Appellee, v. NEW ENGLAND APPLE PRODUCTS COMPANY, INCORPORATED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 552

969 F.2d 552

23 U.S.P.Q.2d 1854

GROVE FRESH DISTRIBUTORS, INCORPORATED, Plaintiff-Appellee, v. NEW ENGLAND APPLE PRODUCTS COMPANY, INCORPORATED, Defendant-Appellant.

No. 91-3226.

United States Court of Appeals, Seventh Circuit.

Argued April 16, 1992.

Decided Aug. 4, 1992.

Rehearing and Rehearing En Banc

Denied Sept. 22, 1992.

John P. Messina, Dorothy B. Zimbrakos, Dale R. Crider, Warren S. Radler (argued), Rivkin, Radler, Bayh, Hart & Kremer, Robert A. Langendorf, Chicago, Ill., for plaintiff-appellant.

Mitchell H. Frazen, Burditt & Radzius, Chicago, Ill., Robert L. Ciociola (argued), Casner & Edwards, Boston, Mass., for defendant-appellant.

Before BAUER, Chief Judge, FLAUM, Circuit Judge, and WOOD, Jr., Senior Circuit Judge.

HARLINGTON WOOD, Jr., Senior Circuit Judge.

This case is about the marketing of orange juice from concentrate packed in ten-ounce, single-serve glass bottles. Grove Fresh Distributors, Incorporated ("Grove Fresh") brought a suit in federal district court against New England Apple Products Company, Incorporated ("New England Apple") based in part on the Lanham Act. Grove Fresh claimed that although the product labels on New England Apple's juice carry the Florida Seal of Approval and state that the product is "100% Florida," the juice was adulterated with sugar and "pulpwash." ¹ Grove Fresh also contended

                it was injured by New England Apple's acts.   Grove Fresh prevailed at trial on its Lanham Act claim, and the jury awarded Grove Fresh $100,000 of New England Apple's profits.   New England Apple timely filed a motion for judgment notwithstanding the verdict or in the alternative for a new trial.   The trial court denied this motion.   New England Apple appeals the final judgment entered against it, raising two issues.   The first is whether Grove Fresh demonstrated by admissible evidence a causal link between New England Apple's false advertising and Grove Fresh's loss of business.   New England Apple contends that if Grove Fresh did not offer admissible evidence to prove this point the trial court erred in not directing a verdict in New England Apple's favor and in denying to enter in New England Apple's favor judgment notwithstanding the verdict.   The second issue is whether the trial court properly allowed Betsy Woodward, Chief of the Bureau of Food Laboratory of the Florida Department of Agriculture and Consumer Services, to testify as a rebuttal witness.   New England Apple claims Betsy Woodward was an undisclosed expert witness in violation of local rules, that her testimony was rehabilitative rather than rebuttal, and that her testimony substantially prejudiced New England Apple resulting in an unfair trial.   For the following reasons, we affirm
                

FACTUAL BACKGROUND

Grove Fresh is a distributor of a variety of brands of fruit juices, drinks and food products such as salads, cole slaws and cereals. Grove Fresh's primary market is the south and west sides of the city of Chicago, Illinois. Orange juice, sold primarily in ten-ounce, glass bottles, is the most significant of Grove Fresh's products. Grove Fresh competes in the market of ten-ounce, single-serve bottles of orange juice against several manufacturers. One of these manufacturers is New England Apple. New England Apple is a closely-held Massachusetts corporation. New England Apple's only products are its "Veryfine" brand fruit juices and drinks. New England Apple is the leading seller in the ten-ounce, glass-bottle drink market. As to this particular case, the parties have stipulated that the relevant market they competed in was 100% pure orange juice from concentrate packed in ten-ounce, glass bottles and sold in the metropolitan Chicago area between 1983 and 1988.

Grove Fresh and New England Apple distributed their orange juice in different ways. Grove Fresh bought its juices from packers in cases, usually packed with twenty-four bottles per case. Grove Fresh then sold the cases of orange juice to route drivers. The price at which Grove Fresh sold cases of orange juice to its route drivers reflected a profit for the company. The route drivers then sold cases of juice to retailer-customers. The price at which the route drivers sold to retailers included a profit for themselves. In contrast, New England Apple produced and packed its own juice. Prior to 1986, New England Apple relied on jobbers and wholesalers to service the Chicago market. Beginning in 1986, New England Apple began using its own sales force to sell to distributors. The distributors then sold New England Apple's juice to retailers. Both Grove Fresh and New England Apple enjoyed significant sales of their juices through 1987.

However, when Grove Fresh suffered a decline in sales of its juice subsequent to New England Apple's entrance into the Chicago market, Cecil Troy, the president of Grove Fresh, gathered samples of his competitors' juice and sent them to Dr. Allan Brause, an analytical food chemist recommended by an agent of the Food and Drug Administration, to be tested for adulteration. Cecil Troy was losing customers, according to his route drivers, because his competitors were underpricing Grove Fresh. It was Troy's theory that his competitors could not achieve prices lower than his unless they were selling adulterated juice. That is, 100% from concentrate orange Dr. Brause tested the samples Troy sent to him. Dr. Brause performed several tests on five samples of New England Apple's Veryfine orange juice. Dr. Brause concluded that all five samples were adulterated. Dr. Brause concluded the samples were adulterated for several reasons. First, to be labelled "100% orange juice from concentrate" a juice must contain essentially orange juice and water. The Federal Food and Drug regulations at 21 C.F.R. § 146.145, specify there should be a minimum level of 11.8 Brix in any orange juice labelled "100% orange juice from concentrate." 11.8 Brix represents the percentage by weight of orange juice solids if 100 grams of freshly squeezed orange juice is heated so that when all of the water evaporates the resulting solids (including sugar, proteins, minerals and other compounds that naturally occur in orange juice) would weigh 11.8 grams. Both Dr. Brause, Grove Fresh's expert, and Dana Krueger, New England Apple's expert, tested several samples of New England Apple's juice. Each expert concluded several samples of the juice did not meet the minimum 11.8 Brix standard.

juice could not be produced and sold at a reasonable profit for prices less than those Grove Fresh sold to its customers unless the 100% orange juice concentrate was diluted with cheaper products.

Second, Dr. Brause tested samples of New England Apple's juice using the "Petrus Method," which is the Association of Analytical Chemists ("AOAC") official test for pulpwash. Florida regulations prohibit the addition of pulpwash to orange juice labelled with the Florida Seal of Approval or with the designation "100% Florida." New England Apple's Veryfine juice bottles carried both the seal and designation. Dr. Brause concluded all five samples of New England Apple's juice Mr. Troy sent to him contained pulpwash. New England Apple contends Dr. Brause did not follow exactly the Petrus Method in testing the samples and because of this failure Dr. Brause's test results are subject to doubt. However, New England Apple's expert also performed tests on over 100 samples of New England Apple's juice, discovering evidence of pulpwash in many of the samples. In May of 1989, after testing approximately 100 samples of New England Apple's juice, Dana Krueger initially reached the conclusion that New England Apple systematically adulterated its juice with pulpwash.

Finally, Dr. Brause performed several other tests for detection of pulpwash, added sugar and trace metals. Dr. Brause concluded from these tests that all five samples of Veryfine juice sent to him by Mr. Troy contained pulpwash and three samples contained added beet sugar. The presence of pulpwash and added beet sugar in juice is not permitted in juice labelled "100% Florida" and carrying the Florida Seal of Approval. Dr. Brause testified that New England Apple pervasively adulterated its orange juice from 1983 to 1989. His opinion was based on tests he performed; two adulteration tests of Veryfine juice in 1983 and 1985 run by Donald Petrus, the inventor of the Petrus Method, finding both samples adulterated with pulpwash; and nineteen quality tests run from 1986 to 1989 under Donald Petrus's supervision indicating that all samples of Veryfine juice failed the minimum flavor standards required by regulations for the Florida Seal of Approval. Dr. Brause's conclusions formed the primary basis for Grove Fresh's suit against New England Apple.

The case was tried to a jury from May 6, 1991, to May 23, 1991. The jury found in favor of Grove Fresh on its Lanham Act claim and awarded Grove Fresh $100,000 of New England Apple's profits. After trial both parties filed motions. Grove Fresh filed a motion to alter or amend the judgment and a motion for judgment notwithstanding the verdict on its state law claim. New England Apple filed a motion for judgment notwithstanding the verdict or in the alternative for a new trial. The trial court denied both parties' motions. New England Apple timely filed a notice of appeal to this court. Grove Fresh filed no cross appeal.

ANALYSIS

New England Apple claims the jury's award of damages to Grove Fresh is not The evidence that is the subject of this appeal is the testimony of Grove Fresh's president, Cecil Troy, and three of Grove Fresh's route drivers. These witnesses testified to statements made to them by former customers of Grove Fresh. Essentially the testimony is that the customers switched to Veryfine juice because it was cheaper. The district court admitted the statements for the fact that the customers made the statements, not for the truth of statements. Additionally the trial court...