U.S. v. Alpine Industries, Inc.

Decision Date26 September 2003
Docket NumberNo. 01-5759.,01-5759.
Citation352 F.3d 1017
PartiesUNITED STATES of America, Plaintiff-Appellee, v. ALPINE INDUSTRIES, INC. and William J. Converse, Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

: J. Ronnie Greer, Greeneville, Tennessee, for Appellants.

Peter R. Maier, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

ON BRIEF

: J. Ronnie Greer, Greeneville, Tennessee, William A. Erhart, Gregory B. Davis, ERHART & ASSOCIATES, Anoka, Minnesota, for Appellants.

Peter R. Maier, Douglas N. Letter, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

Before: BOGGS, Chief Judge; GUY, Circuit Judge; and EDMUNDS, District Judge.**

OPINION

BOGGS, Chief Judge.

Alpine Industries, Inc. and William J. Converse, Alpine's President and Chief Executive Officer, (collectively referred to as Alpine) appeal a judgment against the company in an enforcement action brought by the government for violating a Federal Trade Commission Consent Order (the Consent Order). The Consent Order forbade the company, an organization engaged in marketing and distributing air-cleaning devices, from making product claims without the support of competent and reliable scientific evidence. The case was bifurcated into a liability phase, which was tried in front of a jury in the fall of 1999, and a remedy phase, which was tried by the court in January 2001. In November 1999, the jury found that Alpine had violated the Consent Order. In particular, the jury found that Alpine had advertised that its air cleaning products removed over 60 separately titled but in many cases overlapping categories of indoor air pollutants,1 controlled ambient ozone levels, and produced various health benefits, without competent and reliable scientific evidence to support these claims. However, the jury also found that Alpine's product claims regarding the ability of its air cleaning products to remove smoke, tobacco smoke, and cigarette smoke, were supported by competent and reliable scientific evidence. The district court's final judgment against Alpine was entered in April 2001 and included, in addition to injunctive relief, an award of $1,490,000 in civil penalties.

Following the district court's final judgment, Alpine filed motions to amend the district court's judgment, for JNOV, or for a new trial. The district court denied these motions. Alpine appeals the district court's denials of its motions to amend the judgment and for JNOV, arguing that the government did not present sufficient evidence to support the jury's findings. Alpine also appeals the district court's denial of its motion for a new trial, arguing that the jury's verdict is internally inconsistent and that the special verdict form was worded in such a way as to place the burden of proof improperly on Alpine instead of the government. Alpine additionally argues that it was entitled to seek judicial reformation of the underlying Consent Order on the grounds of mutual mistake and that it was prejudiced by the district court's exclusion of parol evidence surrounding the Consent Order. Finally, Alpine argues that the injunctive relief embodied in the Permanent Injunction issued by the district court, intended to prevent further representations by Alpine regarding the efficacy of its air-cleaning machines without competent and reliable scientific evidence, does not accurately reflect the jury's verdict and that furthermore, the penalty imposed by the district court against Alpine is excessive. For the reasons that follow, we affirm the district court's judgment.

I

In the early 1990's, the FTC conducted an investigation of claims made by Alpine in promoting, advertising, and selling its air-cleaning machines. The investigation concluded when Alpine agreed to an FTC Consent Order, effective October 2, 1995, which reads in relevant part:

For the purposes of this Order, the following definitions shall apply:

A. The term "air cleaning product" shall mean any product, equipment, or appliance designed or advertised to remove, treat, or reduce the level of any pollutant(s) in the air.

B. The terms "indoor air pollutant(s)" or "pollutant(s)" shall mean one or more of the following: formaldehyde, sulfur dioxide, ammonia, trichlorethylene, benzene, chloroform, carbon tetrachloride, odors, nitrogen dioxide, mold, mildew, bacteria, dust, cigarette smoke, pollen, and hydrocarbons, or any other gaseous or particulate matter found in indoor air....

I

IT IS ORDERED that [Alpine] in connection with the manufacturing, labelling, advertising, promotion, offering for sale, sale, or distribution of any air cleaning product ... do forthwith cease and desist from representing, in any manner, directly or by implication,

A. such product's ability to eliminate, remove, clear, or clean any indoor air pollutant from a user's environment; or

B. such product's ability to eliminate, remove, clear, or clean any quantity of indoor air pollutants from a user's environment;

II

IT IS FURTHER ORDERED that [Alpine] in connection with the manufacturing labelling, advertising, promotion, offering for sale, sale, or distribution of any air cleaning product ... do forthwith cease and desist from representing, in any manner, directly or by implication, that:

A. The use of ozone is more effective in cleaning or purifying indoor air than other air cleaning methods;

B. The product does not create harmful by-products; or

C. When used as directed, the product prevents or provides relief from any medical or health-related condition;

unless at the time of making such representation, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

III

IT IS FURTHER ORDERED that [Alpine] in connection with the manufacturing, labelling, advertising, promotion, offering for sale, sale, or distribution of any air cleaning product ... do forthwith cease and desist from representing, in any manner, directly or by implication, the efficacy, performance, or health-related benefit of any such product, unless, at the time of making such representation, respondents possess and rely upon competent and reliable evidence, which when appropriate must be competent and reliable scientific evidence, that substantiates the representation.

....

On December 30, 1997, the government initiated an action alleging violations of the Consent Order, requesting injunctive relief, consumer redress, and civil penalties against Alpine. Alpine requested a jury trial, which the district court granted with respect to the issue of liability for civil penalties. On November 1, 1999, after a fourteen-day trial, the jury filled out a special-verdict form containing over 900 questions. The jury found that in all cases but smoke, tobacco smoke, and cigarette smoke, Alpine's claims were not supported by competent and reliable scientific evidence.

II Directed Verdict/JNOV

Alpine moved for a directed verdict at the conclusion of the government's case in chief and again at the close of evidence, and later moved for a judgment notwithstanding the verdict. We review the district court's denial of Alpine's motions for judgment as a matter of law (motions for a directed verdict) and renewed motion for judgment as a matter of law (motion for judgment notwithstanding the verdict) de novo. Moore v. KUKA Welding Sys. & Robot Corp., 171 F.3d 1073, 1078 (6th Cir.1999) (citing K & T Enters. v. Zurich Ins. Co., 97 F.3d 171, 175 (6th Cir.1996) and Wehr v. Ryan's Family Steak Houses, 49 F.3d 1150, 1152 (6th Cir.1995)). In doing so, we use the same standard of review used by the district court. Phelps v. Yale Sec., 986 F.2d 1020, 1023 (6th Cir.1993). In order to prevail, Alpine must demonstrate that "no reasonable juror could have found for the nonmoving party." Moore, 171 F.3d at 1078. In applying this standard, we cannot weigh the credibility of witnesses and cannot substitute our judgment for that of the jury. K & T Enters., 97 F.3d at 175-76. Instead, we are to view the evidence in a light most favorable to the government and give the government the benefit of all reasonable inferences. Ibid.

Alpine contends that the burden was on the government to establish a prima facie case and that the government did not meet this initial burden, so that Alpine is entitled to a judgment as a matter of law, notwithstanding the jury's verdict. The government conceded in a pretrial hearing that it had the burden of proving at trial 1) that Alpine had made claims or representations that fell within the terms of the Consent Order, and 2) that Alpine did not possess and rely upon competent and reliable scientific evidence at the time such claims or representations were made. Alpine takes issue with the second requirement in this appeal. Alpine contends that the government did not present sufficient proof that Alpine did not possess and rely upon competent and reliable scientific evidence at the time it made representations regarding all of the indoor air pollutants listed on the jury form (with the exception of smoke, cigarette smoke, and tobacco smoke), and regarding the health benefits bestowed on users by the product. Alpine does not dispute the sufficiency of the evidence presented by the government regarding the product's ability to maintain indoor ozone concentrations at a particular level.

Alpine, however, misconstrues the level of proof necessary to establish a prima facie case under these circumstances. During the hearing that led to the order establishing the shifting burden of proof in this case, some explanation was offered as to how the government would fulfill this requirement, recognizing that the government was being asked to prove a negative. The government's lawyer stated that she understood the government's burden as being met if expert...

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