US v. Golden Fifty Pharmaceutical Co., Inc.

• Decision Date: 21 September 1976
• Docket Number: No. 74 C 1124.,74 C 1124.
• Citation: 421 F. Supp. 1199
• Parties: UNITED STATES of America, Plaintiff, v. GOLDEN FIFTY PHARMACEUTICAL CO., INC. and Michael Posen, Defendants.
• Court: U.S. District Court — Northern District of Illinois

421 F. Supp. 1199

UNITED STATES of America, Plaintiff, v. GOLDEN FIFTY PHARMACEUTICAL CO., INC. and Michael Posen, Defendants.

No. 74 C 1124.

United States District Court, N. D. Illinois, E. D.

September 21, 1976.

Gregory B. Hovendon, Chief, John R. Fleder, Atty., Consumer Affairs Section, U. S. Dept. of Justice, Washington, D. C., Samuel K. Skinner, U. S. Atty., Jack M. Wesoky, Asst. U. S. Atty., Chicago, Ill., for plaintiff.

William F. Weigel, Rogers, Hoge & Hills, New York City, Daniel W. Vittum, Jr., Kirkland & Ellis, Chicago, Ill., for defendants.

MEMORANDUM DECISION

MARSHALL, District Judge.

The United States has brought this action to collect civil penalties from the defendants Golden Fifty Pharmaceutical Co., Inc. (Golden Fifty), and Michael Posen, Golden Fifty's president, pursuant to 15 U.S.C.A. §§ 45(l), 49, and 52, for violation of a Federal Trade Commission cease and desist order which became final on June 29, 1970. The United States also requests permanent injunctive relief. Jurisdiction is based upon 28 U.S.C. §§ 1337, 1345, and 1355. The plaintiff's motion for summary judgment, Fed.R.Civ.P. 56, is ready for decision on the memoranda, exhibits, and affidavits submitted by the parties.

In material part, the Commission's order provided:

IT IS ORDERED that respondents Golden Fifty Pharmaceutical Co., Inc., a corporation, and its officers, and Michael Posen, individually and as an officer of said corporation, and its agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of the preparation designated `Golden 50 Tabulets,' or any food, drug, device or cosmetic do forthwith cease and desist from directly or indirectly:

1. Disseminating or causing the dissemination of, by means of the United States mails or by any means in commerce, as `commerce' is defined in the Federal Trade Commission Act, any advertisement which:

(a) Represents directly or by implication that respondents are manufacturers of vitamin and/or mineral preparations or maintain laboratory facilities concerned with the formulation, testing or performance of vitamin and/or mineral preparations.

(b) Represents directly or by implication that any product is offered free or under any other terms when the offer is used as a means of enrolling those who accept the offer in a plan whereby additional supplies of the product are shipped at an additional charge unless all of the conditions of the plan are disclosed clearly and conspicuously and within close proximity to the `free' or other offer.

(c) Represents directly or by implication that an offer is made without `further obligation,' or with `no risk,' or words of similar import denoting on the part of the recipient of such offer when in fact there is an obligation incurred by the recipient.

(d) Represents directly or by implication that an offer is made to only a limited customer group or for only a limited period of time when no such limitations are imposed by respondents.

2. Disseminating, or causing to be disseminated, by any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase of respondents' products in commerce, as `commerce' is defined in the Federal Trade Commission Act, any advertisement which contains any of the representations or misrepresentations prohibited by Paragraph 1 hereof.

Second Amended Complaint, ¶ 7.

The second amended complaint alleges that from October of 1970 to July of 1975 the defendants used several mailing services to disseminate advertisements which violated the cease and desist order. Specifically, Count I charges that the defendants made fourteen mass mailings of advertisements which violated ¶¶ 1(b) and (c); Count II alleges that defendants made an unspecified number of mailings of an advertising leaflet identified as "L-130" in violation of ¶¶ 1(a) and (d); and Count III charges that the defendants mailed an advertisement in violation of ¶ 1(b) to two individuals. By their answer to the second amended complaint, the defendant admitted liability for the conduct charged in Counts I and III of the second amended complaint, but reserved the right to contest the number of violations for which they would be liable and against which the statutory penalties could be assessed. Liability was not admitted for the allegations of Count II. Plaintiff has moved for summary judgment on two issues: defendant's liability for the violations alleged in Count II; and, the proper calculation of the number of violations represented by the charges in Counts I and III. Each issue will be treated in turn.

I. Appropriateness of Summary Judgment on Count II

Determining whether the advertisements violate the cease and desist order is a two-step process. The first step is to construe or interpret the order itself. This inquiry is generally perceived as a question of law for the court. E. g., United States v. J. B. Williams Co., Inc., 498 F.2d 414, 431 (2d Cir. 1974). The next step is to determine whether the challenged advertisements fall within the scope of the order as construed. The cases reveal some disagreement as to whether this is a question of law for the court or a question of fact for the trier of fact. In United States v. Vulcanized Rubber & Plastics Co., 288 F.2d 257, 258 & n. 2 (3d Cir. 1961), the court indicated the question is one of law. The court correctly stated that its role in an action to recover civil penalties, is not to determine whether the challenged practice is deceptive, but merely to consider whether the practice falls within the order's proscription. But drawing this distinction does not answer the question whether the latter analysis involves factual or legal determinations. J. B. Williams, supra, squarely confronted this problem, and found that factual issues are presented. Briefly, the court cited the general rule that the trier of fact decides disputes concerning the meaning and effect of words and acts, particularly if their interpretation depends upon a choice among the reasonable inferences to be drawn from extrinsic evidence. 498 F.2d at 432. Nonetheless, summary judgment is appropriate if the evidence supporting a given interpretation is so clear that a directed verdict would be warranted. Id.; 6 J. Moore, Federal Practice ¶ 56.042 (2d ed. 1976). Lacking pertinent authority from this circuit, we adopt the well-reasoned approach of the Second Circuit.

The meaning of ¶¶ 1(a) and (d) of the cease and desist order is clear. Paragraph 1(a) prohibits defendants from disseminating through the mails any advertisement which directly (i. e., expressly) or by implication represents that they manufacture Golden 50 Tabulets, or maintain laboratory facilities for testing the tabulets' performance. Paragraph 1(d) prohibits defendants from disseminating through the mails any advertisement which represents directly (i. e., expressly) or by implication that an offer of Golden 50 Tabulets is made only to a limited group of customers or for only a limited period of time when no limits are in fact imposed. There is no question that L-130 was disseminated through the mails and so the remaining issue is whether, as plaintiff alleges, L-130 makes or implies these prohibited representations.

L-130 consisted of the following (see Plaintiff's Memorandum, Att. 1, Exh. B):

See Figures 1 and 2 on following pages.

COPYRIGHT MATERIAL OMITTED

As presented to the recipient, the leaflet is folded in thirds. The right hand column of Figure 1, attached, bearing the picture of Johnny Weissmuller, is the front "cover"; the middle column of Figure 1, with the order form, is the back "cover"; the left hand column of Figure 1 is folded inside so that it is the first item seen if the recipient opens the front cover (pursuant to the exhortation "Announcing `Discovery '72' — See Exciting Details").

The material appearing on Figure 2 is printed on the reverse side of all of Figure 1 and is available to the recipient if he or she unfolds the flier.

Plaintiff offers the affidavit of Dr. Ivan L. Preston to support its contention that L-130 violates ¶ 1(a) of the order. See Plaintiff's Memorandum, Att. 1. Dr. Preston's affidavit is a bobtailed version of the results of a consumer reaction opinion poll. After reciting his experiences with such polls, he proceeds to express his opinion as to what the results of a poll of consumers would be were they asked their impressions of L-130. He concludes on the basis of certain of the language of L-130 and the picture of the two men working in a laboratory, that "a large majority of persons . . . would conclude that L-130 . . . represents directly or by implication that Golden Fifty Pharmaceutical Co. Inc., is a manufacturer of vitamin preparations and/or it maintains laboratory facilities concerned with the formulation, testing or performance of vitamin preparations . . . and . . . represents directly or by implication that the offer being made . . . is available for only a limited period of time." Id. at 3-4. Assuming the relevancy of the results of consumer reaction polls in cases such as this in which the issue is not whether defendants' advertising is deceptive (that issue having been previously adjudicated by consent) but whether defendants have violated certain precise provisions of a cease and desist order, Dr. Preston's bobtailed version of the poll most certainly would not be admissible. Thus, he would not be heard to testify on the trial of the case as to the results of a poll which had never been taken. Cf. Zippo Manufacturing Co. v. Rogers Imports, Inc., 216 F.Supp. 670 (S.D.N.Y.1963); Union Carbide Corp. v. Ever-Ready Inc., 531 F.2d 366 (7th Cir. 1976). And he cannot be heard to testify to that effect by way of affidavit on a motion for summary judgment. Rule 56(e), Fed.R.Civ.P. Thus, despite its consumer reaction poll gloss, Dr. Preston's affidavit is nothing more than his...