PBM PRODUCTS, LLC v. MEAD JOHNSON NUTRITION CO.

• Citation: 678 F. Supp.2d 390
• Decision Date: 22 December 2009
• Docket Number: Action No. 3:09-CV-269.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: PBM PRODUCTS, LLC, Plaintiff v. MEAD JOHNSON NUTRITION COMPANY and Mead Johnson & Company, Defendants.

678 F.Supp.2d 390

PBM PRODUCTS, LLC, Plaintiff v. MEAD JOHNSON NUTRITION COMPANY and Mead Johnson & Company, Defendants.

Action No. 3:09-CV-269.

United States District Court, E.D. Virginia, Richmond Division.

December 22, 2009.

Robert Francis Redmond, Jr., Ryan Fitzgerald Furgurson, Williams Mullen, Richmond, VA, David Gregory Greene, Gregory Thomas Casamento, Locke Lord Bissell and Liddell LLP, Harold Paul Weinberger, Jeremy Andrew Cohen, Jonathan Mark Wagner, Tobias Benjamin Jacoby, Kramer Levin Naftalis & Frankel LLP, New York, NY, Terrence Patrick Canade, Locke Lord Bissell & Liddell, Chicago, IL, for Plaintiff.

Edward Everett Bagnell, Jr., Hugh McCoy Fain, III, Maurice Francis Mullins, Spotts Fain PC, Richmond, VA, Behnam

Dayanim, Candice Stacey McPhillips, Scott Mitchell Flicker, Paul Hastings Janofsky & Walker LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

JAMES R. SPENCER, Chief Judge.

THIS MATTER is before the Court on PBM's Motion for Partial Summary Judgment, (Docket No. 96), which seeks judgment as a matter of law on Counts 2, 3, and 4 of Mead Johnson's counterclaims. Mead Johnson has also filed a Motion for Partial Summary Judgment (Docket No. 95), which seeks judgment as a matter of law on Counts 1, 2, and 4 of its counterclaims. For the reasons stated below, PBM's Motion is GRANTED as to Counts 2 and 4 and DENIED as to Count 3. Mead Johnson's Motion is DENIED as to Counts 1, 2, and 4 of its counterclaims.

I. BACKGROUND

Plaintiff, PBM Products, LLC ("PBM") produces store-brand infant formula. Defendant Mead Johnson & Co. ("Mead Johnson") produces "name-brand" infant formula. Although each party maintains a significant market share within their respective niches, they are direct competitors in several product categories.

A. The Parties' Products

Under the brand name Enfamil, Mead Johnson markets a variety of products including a standard formula, a formula with broken down proteins, and a formula with added rice starch. PBM also produces a standard formula, a formula with broken down proteins, and a formula with added rice starch. Both companies use the supplier Martek to get two nutrients—docosahexainoic acid ("DHA") and archidonic acid ("ARA")—which are important to an infant's brain and eye development. Mead Johnson labels these two nutrients using the brand name Lipil. PBM uses the generic term "lipids." PBM often includes a comparative advertising label on their formula which states, "Compare to Enfamil Lipil." (PBM Mot. Partial Summ. J., Ex. 19, at Ex. D.) The parties dispute when PBM began using the comparative advertising claims on its formulas. (Mead Johnson Resp. to PBM Mot. Partial Summ. J. 2; PBM Mot. Partial Summ. J. 16.)

B. Litigation History Between PBM and Mead Johnson

These parties are no strangers in the courtroom. In less than a decade, they have been involved in four Lanham Act actions, not to mention various other claims and counterclaims. In 2001, PBM obtained a restraining order prohibiting Mead Johnson from disseminating further false information about PBM's products. See PBM Products, Inc. v. Mead Johnson & Co., 03:01cv199 (E.D.Va.2001). Mead Johnson was held in contempt during that litigation for not retrieving all of its false ads as directed by a court order. The parties eventually settled that dispute.

In 2002, PBM initiated another Lanham Act false advertising suit against Mead Johnson, this time based on Mead Johnson promotional materials that stated PBM's products did not include the beneficial nucleotide contained in Mead Johnson's formulas. See PBM Products, Inc. v. Mead Johnson & Co., 03:02cv944 (E.D.Va.2002). This Court entered a temporary restraining order on consent of the parties that prevented Mead Johnson from disseminating those ads. In 2003, the parties settled that dispute as well. The Agreement the parties entered into stated that (1) Mead Johnson denied any wrongdoing; (2) neither party was to disclose the fact of the second lawsuit, the entry of the Consent TRO, or the existence or terms of the 2003 Agreement; and (3) the parties would jointly request the Court seal all the pleadings in the case. (Mead Johnson Mot. for Summ. J. 3.) This Court entered an order sealing the pleadings filed in that case, including the Complaint and the Consent TRO.

In 2006, Mead Johnson sued PBM for trade dress infringement and unfair competition under the Lanham Act. See Mead Johnson & Co. v. PBM Nutritionals, LLC, PBM Products, Inc., 1:06cv1246 (S.D.Ind. 2006). The parties settled the dispute in August of 2007. Part of that agreement stated that Mead Johnson promised that it "agrees to the use by the PBM Parties of the packaging shown in Exhibit D." (PBM Mot. for Partial Summ. J., Ex. 19, ¶ 1.) Exhibit D contained a label that included the comparative advertising statement "Compare to Enfamil Lipil." (Id., Ex.D.) The Agreement also stated:

Notwithstanding the foregoing, should the PBM Parties breach this agreement by continuing to sell or resuming sales of products in the packaging shown in Exhibits B and C or in packaging that otherwise infringes the ENFAMIL LIPIL packaging, such breach will constitute a new infringement and Mead Johnson will be entitled to file suit or to address such infringement under the law in any way it sees fit.

(Id., Ex. D.)

PBM initiated the current suit in 2009, alleging Mead Johnson's advertisements are false and misleading under the Lanham Act. The Complaint was not filed under seal and made specific references to the 2002 dispute between these two parties. In connection with this suit, PBM, through its Chief Executive Officer, Paul Manning, issued a press release with the headline "Mead Johnson Lies About Baby Formula ... Again; PBM Products Sues Mead Johnson for Third False Advertising Campaign." (PBM Mot. for Partial Sum. J., Ex. 22.)

Mead Johnson subsequently filed amended counterclaims, alleging breach of contract (Count 1), defamation (Count 2), Lanham Act violations (Count 3), and civil contempt (Count 4). PBM has now filed a Motion seeking summary judgment on Counts 2, 3, and 4 of Mead Johnson's amended counterclaims. Mead Johnson has also filed a Motion seeking summary judgment on Counts 1, 2, and 4 of its amended counterclaims. Thus, there are cross-motions for summary judgment on Mead Johnson's defamation and civil contempt claims.

II. DISCUSSION

A. Legal Standard

A motion for summary judgment lies only where "there is no genuine issue as to any material fact" and where "the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All "factual disputes and any competing, rational inferences are resolved in the light most favorable to the party opposing that motion." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003) (internal quotations marks and citations omitted). In its decision, courts look to the affidavits or other specific facts pled to determine whether a triable issue exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where no genuine issue of material fact exists, it is the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir.1993) (internal quotation marks omitted). Mere unsupported speculation is not sufficient if the undisputed evidence indicates the other party should win as a matter of law. Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir.2008). However, summary judgment should not be granted if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

When faced with cross-motions for summary judgment, the standard is the same as that applied to individual motions for summary judgment. The court must consider each party's motion "separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol, 316 F.3d at 523 (internal quotation marks omitted). If the court finds that there is a genuine issue of material fact, both motions must be denied. 10A Wright, Miller & Kane, Federal Practice & Procedure: Civil 3d § 2720. However, "if there is no genuine issue and one or the other party is entitled to prevail as a matter of law, the court will render judgment." Id.

B. Choice of Law

Virginia's choice of law rules govern this diversity defamation action. See Klaxon v. Stentor, 313 U.S. 487, 497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Virginia applies the lex loci delicti rule, that is, the law of the place of the wrong, to defamation actions. See, e.g., Heishman, Inc. v. Fox Television Stations, Inc., 217 F.Supp.2d 690, 694 n. 5 (E.D.Va.2002). Because Mead Johnson alleges that the defamatory Press Release was issued in Virginia, Virginia law applies. (See Mead Johnson Mot. Summ. J. 11-12); see also Katz v. Odin, Feldman & Pittleman, P.C., 332 F.Supp.2d 909, 915 n. 4 (E.D.Va.2004).

C. Breach of Contract (Count 1)¹

Mead Johnson seeks partial summary judgment on Count 1 of its amended counterclaims, asserting that liability can be established as a matter of law. According to Mead Johnson, the 2003 Agreement between it and PBM was an enforceable confidentiality agreement and the breach of the Agreement has resulted in damages. (Mead Johnson Mot. Partial Summ. J. 9.)

In Virginia, the elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation. Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 671 S.E.2d 132, 134 (2009). To be actionable, the plaintiff must establish that the breach was material. Horton v. Horton, 254 Va. 111, 487 S.E.2d 200, 204 (1997). A material breach is a failure to do something that is so fundamental to the...