Weight Watchers Intern., Inc. v. Stouffer Corp.

• Decision Date: 12 October 1990
• Docket Number: No. 88 Civ. 7062 (MBM).,88 Civ. 7062 (MBM).
• Parties: WEIGHT WATCHERS INTERNATIONAL, INC., Plaintiff, v. The STOUFFER CORPORATION, Stouffer Foods Corporation and Nestle Enterprises, Defendants. STOUFFER FOODS CORPORATION, Counterclaim-Plaintiff, v. WEIGHT WATCHERS INTERNATIONAL, INC., H.J. Heinz Company and Foodways National, Inc., Counterclaim-Defendants.
• Court: U.S. District Court — Southern District of New York

744 F. Supp. 1259

WEIGHT WATCHERS INTERNATIONAL, INC., Plaintiff, v. The STOUFFER CORPORATION, Stouffer Foods Corporation and Nestle Enterprises, Defendants.

STOUFFER FOODS CORPORATION, Counterclaim-Plaintiff, v. WEIGHT WATCHERS INTERNATIONAL, INC., H.J. Heinz Company and Foodways National, Inc., Counterclaim-Defendants.

No. 88 Civ. 7062 (MBM).

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

August 30, 1990.

As Amended October 12, 1990.

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William R. Hansen, Bert A. Collison, Ronald J. McGaw, Nims, Howes, Collison & Isner, New York City, Robert J. Hollweg, Weight Watchers Intern., Inc., Jericho, N.Y., for plaintiff/counterclaim-defendants.

Robert V. Vickers, Body Vickers & Daniels, Cleveland, Ohio, Mary Lee Pilla, Nestle Enterprises, Inc., Solon, Ohio, Paul Fields, Ira J. Levy, Darby & Darby, New York City, for defendants/counterclaim-plaintiff.

OPINION AND ORDER

MUKASEY, District Judge.

Whether or not the late Duchess of Windsor was right when she postulated that one can never be too rich or too thin,¹ one certainly can get rich these days by holding out the promise to make others thin. The parties to this action hold out that promise, and clash in pursuit of those riches.

Plaintiff Weight Watchers International, Inc. markets both a diet program and a line of frozen low calorie foods. Plaintiff's diet program, as set forth in greater detail below, employs a system of six food groups (bread, fruit, protein, fat, milk and vegetable) in specified quantities, called exchanges. Defendant Stouffer Foods Corporation manufactures and markets a line of low calorie frozen foods under the name "Lean Cuisine." Beginning in 1987, Stouffer launched an advertising campaign aimed primarily at those who follow the Weight Watchers program. The ads listed what were said to be Weight Watchers exchanges for Stouffer's Lean Cuisine entrees that would enable Weight Watchers adherents to use Lean Cuisine entrees in their Weight Watchers diets. In communications to those who followed its diet program, Weight Watchers disputed the accuracy of the Lean Cuisine ad campaign. This lawsuit followed, with Weight Watchers asserting trademark infringement and both sides leveling charges of deception and unfair trade practices.

Because the Stouffer ads in question were misleading or inaccurate in certain limited respects, they are enjoined for the reasons and to the extent described below, although Stouffer certainly will be able to use the Weight Watchers name in accurate, non-confusing compatibility advertising. The Stouffer claims against Weight Watchers are without substance and are dismissed.

Weight Watchers filed this suit in October, 1988 against The Stouffer Corporation, and later amended the complaint to include as defendants Nestle Enterprises, Inc. and Stouffer Foods Corporation. Plaintiff alleges trademark infringement, false advertising and unfair competition in violation of the Lanham Act, and state law claims of unfair competition, dilution and deceptive trade practices arising out of an advertising campaign for Stouffer Food Corporation's Lean Cuisine line of frozen entrees, including ads in 1987, 1988 and 1989. Plaintiff seeks an injunction prohibiting defendants from using the mark "Weight Watchers" in connection with any diet-related exchange information, or from stating or implying that defendants' products fit into or are interchangeable with plaintiff's diet program or exchanges. Plaintiff seeks the profits defendants earned from the advertising at issue as well as costs of suit.

Defendant Stouffer Foods Corporation filed counterclaims against Weight Watchers, H.J. Heinz Company and Foodways National, Inc., alleging deceptive and unfair trade practices and false advertising in violation of the Lanham Act, as well as state law claims of unfair competition, intentional interference with sale and injurious falsehood. Counterclaim-plaintiff asks for compensatory and punitive damages against counterclaim-defendants, as well as declaratory relief and costs.

From February 26, 1990 to March 7, 1990 the parties tried the case to the court. This opinion contains the findings and conclusions from the evidence at that trial.

I.

A. The Parties

Weight Watchers International is a corporation organized under the laws of Virginia, with its principal place of business in Jericho, New York. (Compl. ¶ 2) Weight Watchers was founded in 1963 by Jean Nidetch, a woman who resolved to lose weight but was unable to do so until she discovered that group support for her weight loss efforts provided the needed catalyst for shedding pounds. She met with a group of overweight friends in her living room in Little Neck, Long Island, and they were so successful at losing weight that soon Nidetch was leading groups in her neighborhood. The groups became a business, and over the next 15 years the business expanded across the globe; by 1978, Weight Watchers had franchises all over the world and 500,000 members per week attending meetings worldwide. (Tr. 31-32)

In 1978, the H.J. Heinz Co. bought Weight Watchers (Tr. 32); four months earlier, Heinz had acquired Foodways National, Inc., a licensee of Weight Watchers which produced frozen foods under the Weight Watchers brand name. (Tr. 56-60) Weight Watchers receives a licensing fee from the sale of Weight Watchers brand frozen food based upon a percentage of sales. (Tr. 97) Foodways is not the only Weight Watchers licensee; other companies—particularly Heinz USA, another subsidiary of H.J. Heinz Co. — produce Weight Watchers brand products such as yogurt, salad dressing, condiments and mixes. (Tr. 104)

Sales of Weight Watchers brand frozen entrees manufactured by Foodways rose from $90 million in fiscal 1982 to over $300 million in fiscal 1989. (PX 66) Also by 1989, sales of the Weight Watchers diet program topped $230 million (Tr. 33), with membership averaging over 600,000 people per week in the United States. (Tr. 33)

Weight Watchers International, H.J. Heinz Co. and Foodways National are all counterclaim-defendants in this case.

Named defendants The Stouffer Corporation (TSC) and Nestle Enterprises, Inc. (NEI) are Ohio corporations with their principal places of business in Solon, Ohio. Defendant and counterclaimant-plaintiff Stouffer Foods Corporation is a Pennsylvania corporation with its principal place of business in Solon, Ohio. TSC owns the registered trademarks "Lean Cuisine" and "Stouffer's." (Tr. 1357)

Stouffer Foods has manufactured and marketed food products since 1946, but it did not introduce the line of frozen entrees at issue here, called Lean Cuisine, until 1981. (PX 66, Tr. 371) By 1982, Lean Cuisine surpassed Weight Watchers frozen entrees in total sales, and by 1983 was selling over twice the volume of the Weight Watchers brand. (PX 66) According to a chart introduced by Weight Watchers, Lean Cuisine's sales started dropping in 1985, and in 1988 were even with Weight Watchers' sales. (PX 66) Since then, Weight Watchers and Stouffer have been competing closely and ferociously for market share.

Defendants assert that this court lacks personal jurisdiction over TSC and NEI. (Answer ¶¶ 53-57) Plaintiff tries to connect NEI with this case on the basis of Nestle Enterprises' ownership of Stouffer and Stouffer Food Corporation, and the alleged involvement of Nestle Chairman James Biggar in approving the Stouffer Foods Corporation advertisement at issue. Because there is no clear legally cognizable evidence that Biggar approved any of the ads at issue, and there is no other evidence of other connections between NEI and this case, plaintiff's claims against Nestle Enterprises are dismissed.

The Stouffer Corporation is more closely tied with Stouffer Foods Corporation, and there is clear evidence that by the middle of 1988, management at TSC knew about Weight Watchers' displeasure with the ads at issue and Weight Watchers' objections to the use of exchange information in these ads, and that they negotiated this dispute with Weight Watchers management. (Tr. 1186) In letters to Weight Watchers' Director of Legal Affairs, TSC's Senior Vice President and General Counsel and Secretary, James Ball, described the history of the Lean Cuisine ad campaign targeted toward Weight Watchers members, discussed exchange information, showed an in-depth knowledge of the ads at issue here, and pointed out Weight Watchers' own shortcomings. (PX 64A, 64B) These letters were written well before the 1989 advertisement was published, and thus indicate that TSC at the very least knew about the advertisements and probably was directly involved in the publishing of such ads. Therefore, The Stouffer Corporation is not dismissed as a defendant in this lawsuit.

B. The Weight Watchers Program

The Weight Watchers weight loss program has four parts: the food plan, the exercise plan, the self-discovery plan and group support. (Tr. 194) The self-discovery plan teaches members to recognize the situations which trigger overeating and to modify their behavior; group support, as the name suggests, provides encouragement from others for each member's weight loss efforts. (PX 85) It is only the food plan, however, that is at issue in this case. Group leaders stress five keys to the food plan: daily totals and weekly limits on what members can eat; exchange lists, which allow members to choose certain amounts of food from each of six food groups; so-called "lifestyle options," which allow members to individualize the program; menu planners; and checklists which members must fill out to keep track of what they eat. (Tr. 197-98) These elements are interrelated and support the basic mandate of limiting food intake.

A food "exchange" is an approximation of the caloric value of foodstuffs in a given portion size. (Tr. 1108) The exchange element of the food plan is designed to ensure that members eat a well-balanced array of foods and consume them in proper amounts....