RJ Reynolds Tobacco Co. v. Loew's Theatres, Inc.

• Decision Date: 24 October 1980
• Docket Number: No. 80 Civ. 4197 (RWS).,80 Civ. 4197 (RWS).
• Citation: 511 F. Supp. 867
• Parties: R. J. REYNOLDS TOBACCO COMPANY, Plaintiff, v. LOEW'S THEATRES, INC. d.b.a. Lorillard and/or Lorillard U. S. A., Defendant.
• Court: U.S. District Court — Southern District of New York

511 F. Supp. 867

R. J. REYNOLDS TOBACCO COMPANY, Plaintiff, v. LOEW'S THEATRES, INC. d.b.a. Lorillard and/or Lorillard U. S. A., Defendant.

No. 80 Civ. 4197 (RWS).

United States District Court, S. D. New York.

October 24, 1980.

COPYRIGHT MATERIAL OMITTED

Cooper, Dunham, Clark, Griffin & Moran, New York City, for plaintiff; Gerald W. Griffin, R. Bradlee Boal, Norman H. Zivin, Milton Springut, New York City, of counsel.

Weil, Gotshal & Manges, New York City, for defendant; Robert G. Sugarman, Helene D. Jaffe, Jerome C. Pontillo, Surie Rudoff, New York City, of counsel.

OPINION

SWEET, District Judge.

Plaintiff R. J. Reynolds Tobacco Co. ("Reynolds") filed an action in this court alleging a violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),¹ as well as a state law tort committed by defendant Loew's Theatres, Inc., doing business as Lorillard ("Lorillard"). Reynolds' complaint charges that Lorillard has caused to be published, in various print media, comparative advertising for its TRIUMPH brand that is false and deceptive with respect to four Reynolds brands. Testimony was taken and other evidence submitted on August 18-20 at a hearing on plaintiff's motion for a preliminary injunction. The motion projects the court into the midst of hotly contested comparative advertising and the methodology of public opinion studies upon which it is based. For the reasons set forth, Reynolds' motion will be granted in part and denied in part. This opinion constitutes the court's findings of fact and conclusions of law.

Plaintiff initially sought leave to participate in the preliminary injunction hearing in a previously filed related action, Philip Morris, Inc. v. Loew's Theatres, Inc., D.C., 511 F.Supp. 855, No. 80-4082, but elected not to participate in the limited fashion then prescribed by the court. Plaintiff thereafter moved to consolidate the actions, but later voluntarily withdrew the motion without prejudice.

This court's preliminary injunction decision in Philip Morris, Inc. v. Loew's Theatres, Inc., supra, ("Philip Morris"), filed July 26, 1980, outlines the recent history of competition among manufacturers in the low tar cigarette market,² and of Lorillard's introduction of the TRIUMPH brand. Reynolds, for its part, manufactures the following brands relevant to the litigation: SALEM, currently holding 3.1% of the total cigarette market, with 16 mg. of tar; SALEM LIGHTS, 2.2% market share, 11 mg. of tar; WINSTON LIGHTS, 2.2% market share, 14 mg. of tar; and VANTAGE, 2% market share, 9 mg. of tar.³ Lorillard's TRIUMPH currently has a .4-.5% share of the market, and contains 3 mg. of tar.

The expenditure of energy and resources in litigating the issues here and in the Philip Morris case is made understandable in the context of the many millions of dollars regularly spent by the leading tobacco companies on the development, preparation and testing of new brands, and on advertising those brands. Advertising is viewed as critical generally in the tobacco industry, and especially so in the fierce competition to gain acceptance for new brands. For the market consisting of low tar smokers, the surveys, discussed below, and the testimony established two primary considerations which outweigh all others — tar content and taste. The stakes are high. One percent of the total cigarette market is worth approximately $100 million in volume of sales. Reynolds spent a total of $96 million in 1979 in advertising its four brands involved in this litigation. Lorillard has not revealed the dollar amount for the present TRIUMPH campaign, although there was testimony that the company is spending six and one-half times the amount it normally commits to the support of established brands.

This motion concerns the current series of print advertisements favorably comparing TRIUMPH to various competing brands, based on the survey commissioned by Lorillard and conducted by SE Surveys, Inc., (the "Smoker Study") which was considered in the Philip Morris litigation. With those survey results in hand, Lorillard embarked on a campaign advertising TRIUMPH as a "National Taste Test Winner," stating in the ads that TRIUMPH "beats" the other brands tested, and that specific percentages of smokers questioned picked TRIUMPH over the competitors in "overall preference" and in taste. In Philip Morris this court, examining Lorillard's own reported results,⁴ enjoined as false or misleading in the Lorillard ads the use of the phrase "National Taste Test Winner," as well as the statistical claims of taste parity or superiority, with respect to Philip Morris's MERIT and MARLBORO LIGHTS brands. In response to that injunction, Lorillard has altered the offending advertisements to the format described below. Apparently because of the lead time necessary to place or make changes in print media ads, however, as of late August "National Taste Test Winner" ads were still appearing in some national magazines. Point of purchase, billboard, and transit ads proclaiming a taste victory are also undergoing appropriate changes although the process still is not complete.

The Lorillard survey upon which the ads were based included tests pitting TRIUMPH against Reynolds' WINSTON LIGHTS and VANTAGE, and TRIUMPH MENTHOL against Reynolds' SALEM and SALEM LIGHTS. TRIUMPH "National Taste Test Winner" ads have appeared with respect to all those brands except SALEM.⁵ Although in the Lorillard tests TRIUMPH did register "statistically significant" taste wins over WINSTON LIGHTS and SALEM in addition to "overall preference" wins over all four Reynolds' brands, counsel for Lorillard has represented to the court that, pursuant to the Philip Morris decision, the claim "National Taste Test Winner" as well as the statistical taste preference claims, based on the research at issue, will no longer appear on any of the subject TRIUMPH ads — including those addressed to the Reynolds brands.⁶

Therefore, Lorillard suggests that the court should focus rather on the new TRIUMPH ad, which is based on the same survey but headlined "National Smoker Study Winner." The new ads, which have run already with respect to several brands including WINSTON LIGHTS and SALEM LIGHTS, indeed contain no explicit taste superiority claim, but still feature the phrase "TRIUMPH beats Winston Lights," and then "Triumph, at less than one-fourth the tar, preferred over Winston Lights." Directly underneath, the body copy in the earlier "National Taste Test Winner" ads read:

In rating overall product preference, more than twice as many smokers independently chose Triumph over Winston Lights. In fact, an amazing 66% said 3 mg. Triumph tastes as good or better than 14 mg. Winston Lights.

The "National Smoker Study Winner" ads now read:

When tar levels were revealed, more smokers independently chose Triumph over Winston Lights in rating overall product preference. Of those expressing a preference, over 69% preferred 3 mg. Triumph to 14 mg. Winston Lights.

The new ads carry over from the old the invitation to "test for yourself .... You'll taste why we named it Triumph," as well as the close-up picture of a young, attractive person eyeing with great satisfaction the cigarette in his hand, over the caption "Taste the UMPH! in Triumph at only 3 mg. tar."⁷

The Smoker Study recorded results from so-called "unidentified paired comparison tests" of TRIUMPH against the other brands. In these tests individuals in twenty-five shopping malls across the country were stopped and screened to determine membership in the desired class of low tar smokers. Those meeting the criteria were invited to smoke a masked TRIUMPH, drink some water to remove the taste, and then smoke one masked competing cigarette. The participant was then told the tar content of the two cigarettes and asked: 1) "The code representing TRIUMPH has 3 mg. of tar while the code representing the competitor has x mg. of tar. Taking this into consideration, which would you prefer to smoke?"; and 2) "Comparing the taste of the two cigarettes, how would you say the taste of the TRIUMPH you tried compares to the competitor?"⁸ While the questions were phrased so that the number representing TRIUMPH was always mentioned first, the order in which individual participants smoked the two cigarettes was rotated.

It was contended in the Philip Morris hearing that the disclosure of tar content before Question 1 (the "preference question") in the test unfairly biased the answer in favor of lower tar TRIUMPH. However, the court there found that too little evidence had been adduced on that matter, and held only that Lorillard's own test results from Question 2 (the "taste question") did not support the advertising claims of taste parity or superiority vis-a-vis the Philip Morris brands. Id., at 856-857. Here Reynolds mounts a broadside attack upon the test methodology itself, in addition to presenting the same type of claim and evidence which prevailed in Philip Morris addressed to the ads and the message they communicate.

The record constitutes, principally, expert testimony and contains no less than eleven consumer surveys in addition to the challenged Lorillard Smoker Study. Specifically, Reynolds attacks the methodology of the study on the basis of the timing and use of the tar disclosure, the inadequacy of participant exposure to judge the cigarettes, an unrepresentative and biased sample, the probability of interviewer bias, the "order bias" resulting from the consistent mention of the TRIUMPH code first in the questions to the participants, and suppression of important test results.⁹

To demonstrate that in a more thorough, objective test than the Smoker Study TRIUMPH does not rate nearly so well in general terms, Reynolds introduces its own "monadic test" designed to compare VANTAGE and WINSTON LIGHTS with TRIUMPH,¹⁰ and the "EFI paired product test" which Lorillard ran two years ago in the process of developing the TRIUMPH brand. The latter probed...