Merrell-Nat. Laboratories, Inc. v. Zenith Laboratories, Inc.

• Decision Date: 13 June 1978
• Docket Number: MERRELL-NATIONAL,No. 77-2094,77-2094
• Parties: LABORATORIES, INC., a corporation v. ZENITH LABORATORIES, INC., a corporation, Paramount Surgical Supply Corp., a corporation, S. E. Nichols, Inc., a corporation, and David G. Rappaport, d/b/a Danzis Pharmacy, an Individual. Appeal of ZENITH LABORATORIES, INC. and Paramount Surgical Supply Corp.
• Court: U.S. Court of Appeals — Third Circuit

Page 786

579 F.2d 786

204 U.S.P.Q. 527

MERRELL-NATIONAL LABORATORIES, INC., a corporation v. ZENITH LABORATORIES, INC., a corporation, Paramount Surgical Supply Corp., a corporation, S. E. Nichols, Inc. a corporation, and David G. Rappaport d/b/a Danzis Pharmacy, an Individual Appeal of ZENITH LABORATORIES, INC. and Paramount Surgical Supply Corp.

No. 77-2094.

United States Court of Appeals Third Circuit.

Argued March 28, 1978.

Decided June 13, 1978.

Jeffrey B. Cahn, Clive S. Cummis, Sills, Beck, Cummis, Radin & Tischman, Newark, N. J., for appellants.

James B. Swire, Rogers, Hoge & Hills, New York City, Adrian M. Foley, Jr., McElroy, Connell, Foley & Geiser, Newark, N. J., for appellee Merrell-Nat. Lab., Inc.

Allan M. Goldstein, Sobel & Lyon, Newark, N. J., for appellee, S. E. Nichols, Inc.

Before HUNTER, WEIS and GARTH, Circuit Judges.

OPINION

JAMES HUNTER, III, Circuit Judge.

Zenith Laboratories, Inc. and Paramount Surgical Supply Corp. have brought this interlocutory appeal challenging a preliminary injunction issued against them and the denial of a motion requesting redetermination of that injunction. The appeal has been met with a motion to dismiss for untimeliness and for want of an appealable order. We find that our jurisdiction is limited to consideration of the motion denying redetermination of the injunction, and hold that the district court did not abuse its discretion in denying that motion.

I.

Plaintiff below, Merrell-National Laboratories, Inc. brought this diversity action in the District of New Jersey charging defendants with unfair competition and false representations. The case involves two pills manufactured and sold by plaintiff under the trademarks Tenuate and Tenuate Dospan. Both tablets are forms of diethylpropion hydrochloride (DEP).

Defendant Zenith Laboratories, Inc. and its wholly-owned subsidiary, Paramount Surgical Supply Corp., manufacture and distribute generic (non-brand name) drugs, including two forms of DEP tablets. Defendants' DEP tablets are almost identical in appearance to plaintiff's two tablets of equivalent dosage, with the exception of the lettering stamped on the face of the tablets. Zenith and Paramount describe their DEP products in promotional literature as "similar to" and "comparable to" Tenuate and Tenuate Dospan.

Plaintiff alleges in its complaint that defendants Zenith and Paramount, by imitating the appearance of plaintiff's products, placed an instrumentality of fraud in the hands of the pharmaceutical trade. In addition, the complaint contains allegations that two New Jersey pharmacists, also named as defendants, "palmed off" defendants' products in filling prescriptions which specified plaintiff's Tenuate or Tenuate Dospan. Zenith and Paramount are also charged with false advertising. Merrell-National brings its action under New Jersey common law of unfair competition, the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 Et seq., and under false advertising provisions of the Lanham Act, 15 U.S.C. § 1125(a).

Merrell-National sought a preliminary injunction enjoining defendants Zenith and Paramount from manufacturing, distributing and selling of its DEP tablets in a form which simulates the appearance and configuration of its Tenuate and Tenuate Dospan products, from advertising their tablets as "comparable to" or "similar to" plaintiff's, and from passing off their product as plaintiff's. ¹

In support of the preliminary injunction, Merrell-National offered several affidavits. Included in the affidavits were evidence of nine instances, in New Jersey and elsewhere in the country, of pharmacists using defendants' products to fill prescriptions written for plaintiff's. In addition, one incident was recounted in which defendant Paramount filled an order for Tenuate and Tenuate Dospan with Zenith tablets. Affidavits from plaintiff's experts indicated that the passing off was possible only because the ultimate consumer, the patient, was confused by the similar appearance of the two companies' drugs. Defendants filed no counter-affidavits and relied solely on legal argument to oppose entry of the preliminary injunction.

The district court granted the preliminary injunction. The court found that under New Jersey law the allegations and evidence of "passing off" or "palming off" defendants' tablets as plaintiff's was actionable at least against the offending druggists as unfair competition. It further found that the manufacturer and distributor of the drug could be liable for placing into a dealer's hands a product which they could "reasonably anticipate may be easily passed off as the goods of another." Union Carbide Corp. v. Ever-Ready Inc., 531 F.2d 366, 384 (7th Cir.), Cert. denied, 429 U.S. 830, 97 S.Ct. 91, 50 L.Ed.2d 94 (1976); See Stewart Paint Manufacturing Co. v. United Hardware Distributing Co., 253 F.2d 568, 575 (8th Cir. 1958); Coca-Cola Co. v. Snow Crest Beverages, Inc., 64 F.Supp. 980 (D.Mass.1946), Aff'd, 162 F.2d 280 (1st Cir.), Cert. denied, 332 U.S. 809, 68 S.Ct. 110, 92 L.Ed. 386 (1947). Although no New Jersey case had been decided on the latter ground, the judge concluded "the general tenets of New Jersey unfair competition law as well as the principles espoused in the above-cited extra-jurisdictional cases, should serve as an adequate basis for a decision herein."

After balancing the probability of plaintiff's success on merits, the irreparable harm to plaintiff from the alleged unfair competition, the interests of the defendant and of the public, See e. g. A. O. Smith Corp. v. FTC, 530 F.2d 515, 525 (3d Cir. 1976), the court concluded that a preliminary injunction was justified. The order was entered on April 7, 1977.

On May 3, 1977 defendant filed a "Motion for Re-Argument and Re-Determination of Motion for Preliminary Injunction" under Local Rule 12(I) of the District Court for the District of New Jersey. ² Under Rule 12(I), such a motion is to be accompanied by a memorandum setting forth "matters or controlling decisions" which the movant believes the court overlooked. The papers in support of defendant's motions pointed to no new legal material. For the first time in the case, however, defendants submitted factual affidavits opposing the preliminary injunction. The affidavits raised two major factual issues. First, defendants challenged plaintiff's allegations that pharmacists had illegally "passed off" defendant's tablets for plaintiff's. The affidavits contained evidence that the substitutions were authorized by state laws permitting the use of generic equivalents to fill a prescription for a trademarked drug. Second, the color and shape of defendants' tablets was said to have the function of facilitating quick identification of the active component of the tablets in case of emergency. Merrell-National submitted counter-affidavits disputing these factual contentions. The motion was heard on June 13, 1977.

In an opinion filed June 15, the district court denied defendant's motion for redetermination of the injunction. The court stated that the defendants' papers had failed to show any "matters or controlling decisions which . . . the court has overlooked." The court stated: "The 'new' facts in opposition presented by the defendants at this time are facts which should have been available to them at the time of the prior hearing and which they should have utilized therein. No reason was given in their brief or at oral argument as to why these facts are now presented to this Court for the first time." As an alternate basis of decision, the district court concluded that the plaintiff's materials had "successfully disputed the accuracy and completeness of some of defendant's 'new' facts." The court's formal order granting reargument but denying redetermination of the injunction was filed on July 7, 1977. A notice of appeal from the July 7 order was filed on July 13 by defendants Zenith and Paramount.

II.

Merrell-National has challenged our jurisdiction to hear this case at this time by filing a motion to dismiss the appeal. Defendants filed a notice of appeal only from the July 7 denial of the motion for redetermination, but in arguing its appeal attack both the denial of that motion and the original decision to impose the April 7 preliminary injunction. The movant argues that the notice of appeal was untimely with respect to the preliminary injunction, and that a denial of a motion for redetermination is not an appealable order. Appellants counter that the motion for reargument and redetermination tolled the time for filing a notice of appeal from the entry of the preliminary injunction and that, in any event, the denial of redetermination is appealable and gives this Court jurisdiction to review all previous orders.

The entry of the preliminary injunction by the district court on April 7, 1977 was an appealable order under 28 U.S.C. § 1292(a)(1). ³ See e. g., United States v. Commonwealth of Pennsylvania, 533 F.2d 107 (3d Cir. 1976); Graham v. Triangle Publications, Inc., 344 F.2d 775 (3d Cir. 1965). The maximum time for appeal from an interlocutory order is governed by F.R.App.P. 4(a) and is set at thirty days. Donaldson v. Pillsbury Co., 529 F.2d 979, 981 n. 1 (8th Cir. 1976); Cert. denied, 434 U.S. 856, 98 S.Ct. 177, 54 L.Ed.2d 128 (1977); Stiller v. Squeez-A-Purse Corp., 251 F.2d 561 (6th Cir. 1958); See 9 Moore's Federal Practice P 110.21 (2d ed. 1975). Under this rule, defendants' notice of appeal was not timely with respect to the preliminary injunction.

Defendants contend that their motion to reargue and redetermine the injunction even though made explicitly under Local Rule 12(I), should be considered to be one of the motions which would toll the time for filing of a notice of appeal under F.R.App.P. 4(a), E. g., F.R.Civ.P. 59(e). These motions, however, must be made within ten days of the order or judgment to which they relate. We do not reach the question whether a motion under Local Rule 12(I) may...