Wednesday, April 6, 2016

Long legal battle ends with jury victory for Coca-Cola in pomegranate juice dispute

Originally published by » Blog.

A California jury recently ended an eight-year legal battle between POM Wonderful (“POM”) and The Coca-Cola Company (“Coca-Cola”) finding that Coca-Cola’s Pomegranate-Blueberry juice labeling did not mislead customers, even though the juice contained less than 1% Pomegranate and Blueberry juices combined.

Procedural History

We have been following the critical twists and turns of this litigation which began in 2008 and included a trip to the United States Supreme Court. Read the January 28, 2014, July 10, 2014 and October 6, 2014 articles.

In 2008, POM, which markets a line of pomegranate juice beverages, sued Coca-Cola for false advertising under § 43(a) of the Lanham Act as well as California’s Unfair Competition Law (UCL) and its False Adverting Law (FAL). POM’s complaint accused Coca-Cola of deceptively labeling and advertising its “Pomegranate Blueberry Flavored Blend of 5 Juices.” The juice blend, sold under Coca-Cola’s Minute Maid brand, consisted primarily of apple and grape juices – which POM alleged are cheaper and have less nutritional value than pomegranate or blueberry juice – and contained only 0.3% pomegranate and 0.2% blueberry.

Coca-Cola won summary judgment on its preclusion defense, arguing that because FDA food regulations allowed its labeling, POM’s Lanham Act claims based on that labeling represented an irreconcilable conflict between two statutory schemes. In May 2012, the 9th Circuit Court of Appeals affirmed the dismissal. POM Wonderful LLC v. The Coca-Cola Co., 679 F.3d 1170. The Circuit Court declared “that the Lanham Act may not be used as a vehicle to usurp, preempt, or undermine FDA authority.”[1]

Supreme Court reverses in 8-0 opinion

POM successfully petitioned the United States Supreme Court for certiorari, and in a landmark ruling, the Supreme Court reversed.

The central issue before the Supreme Court was whether and how the Food, Drug, and Cosmetics Act (FDCA) and its implementing regulations could be harmonized with the Lanham Act. In an 8-0 opinion, the Supreme Court rejected Coca-Cola’s argument that the FDCA precludes Lanham Act claims due to conflict between the two statutes. Instead, the Court highlighted the two statutes’ “complementary” relationship. Justice Anthony Kennedy, writing for the Court, explained:

Lanham Act suits take[ ] advantage of synergies among multiple methods of regulation. . . . [I]f Lanham Act claims were to be precluded then commercial interests—and indirectly the public at large—could be left with less effective protection in the food and beverage realm than in many other, less regulated industries.

POM Wonderful LLC v. Coca-Cola Co., 134 S.Ct. 2228, 2231-32 (2014).

Jury Trial on Merits

The Supreme Court remanded the case for further proceedings and between March 11 and March 18,[2] the parties tried the merits of POM’s Lanham Act claim.[3] After less than a day of deliberations, a jury of 9 concluded that Coca-Cola did not falsely label and promote its juice – leading to a complete defense victory.

Some commentators have suggested that the jury’s decision vindicates Coca-Cola’s argument that its label had always satisfied FDA regulations and could not be misleading. It is certainly possible that the Jury agreed with Coca-Cola that consumers are more sophisticated than POM was giving them credit for and would understand that the named fruit in a “flavored blend of juices” is just a flavor. However, it is hard to believe Justice Kennedy was alone when he responded to that point during oral argument:

Don’t make me feel bad, because I thought that this was pomegranate juice.

Influence of Unclean Hands Defense

Another explanation for the outcome may be that the jury was unsympathetic to POM because they heard about POM’s own advertising troubles. Throughout the trial, Coca-Cola asserted the affirmative defense of unclean hands, which POM objected to at every turn. See POM’s Motion to Strike Defendant’s Unclean Hands Allegations (Nov. 3, 2009) (Dkt. 103). POM’s Motion for Partial Summary Judgment on Coca-Cola’s Affirmative Defense of Unclean Hands (Dec. 1, 2015) (Dkt. 498), and POM’s Objections to Evidence re: Defendant’s Opposing to Motion for Partial Summary Judgment (Jan. 5, 2016) (Dkt. 521) (Case No. 2:08-cv-06237 (C.D. Cal.)).

Specifically, Coca-Cola argued it should be able to introduce evidence that “POM’s advertisements and promotions tout ‘health claims’ about its pomegranate juice products that are not supported by ‘substantial scientific evidence’” and that its ads also gave “the false impression that its juice products were “fresh squeezed.” See POM’s Motion for Partial Summary Judgment at 14 (Dkt. 498).

In the Ninth Circuit, the unclean hands defense cannot be used “to probe into all the possible types of inequitable conduct ever engaged in by the plaintiff. Plaintiff’s inequitable conduct is the basis for a valid defense only if it relates in some way to the subject matter of litigation.” POM Wonderful LLC v. Welch Foods, Inc., 737 F.Supp.2d 1105, 1109 (C.D. Cal. 2010). Although the parties’ misconduct does not have to be exactly the same, the Court must be able to determine “that [the Plaintiff] dirtied [his hands] in acquiring the right he now asserts, or that the manner of dirtying renders inequitable the assertion of such rights against the defendants.” Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir. 1985).

POM had previously succeeded in barring discussions of its own advertising practices in POM Wonderful v. Welch Foods, Inc..[4] In that earlier case, POM defeated Welch’s motion for summary judgment based on its unclean hands affirmative defense.  While Welch pointed to certain alleged deceptive practices (i.e., omitting water and the term “from concentrate” from the label), the court held these were “premised on a different deception, different factual allegations, and different types of advertisements” than POM’s assertions against Welch (the amount of pomegranate juice in Welch’s product). See id. at 1111.

POM asserted the same argument against Coca-Cola and, citing the Welsh opinion, claimed that “the issue of POM’s health claim advertising does not ‘directly relate’ to the immediate controversy at issue, i.e., whether Coca-Cola deceives consumers into believing its pomegranate blueberry juice primarily contains pomegranate and blueberry juice[.]” See POM’s Motion for Partial Summary Judgment at 2, 11 (Dkt. 498).

Over POM’s repeated objections, U.S. District Judge James Otero ruled that Coca-Cola could present evidence and argument in support of its unclean hands defense. See, e.g. Minute entry denying Motion to Strike Unclean Hand Allegations (Dec. 14, 2009) (Dkt. 143); Minute entry noting submission of the summary judgment briefing, but that the jury trial would move forward (Jan. 19, 2016) (Dkt. 529); Minute entry stating that “Coca-Cola’s unclean hands defense will be tried by an advisory jury” (Mar. 1, 2016) (Dkt. 701); Minute entry providing instructions to the jury that for the unclean hands defense to apply “Coca-Cola must prove by clear-and-convincing evidence that POM engaged in conduct which is sufficiently inequitable that, considering the circumstances, the claim should be barred” (Mar. 11, 2016) (Dkt. 705). No written opinion justifying this decision was produced. See id.

Not surprisingly, POM’s advertising played a central role in both court testimony and closing arguments. Coca-Cola argued that POM lost its right to complain about false advertising because POM purportedly subscribed to the same labeling practices:  Coca-Cola pointed out that there was only .005% passionfruit juice in POM’s “Pomegranate Peach Passion White Tea.”[5] Coca-Cola’s closing arguments also addressed the recent Federal Trade Commission decision which affirmed an administrative judge’s finding that POM had made prior unsubstantiated claims that its juice fought against certain illnesses such as prostate cancer and heart disease (discussed here by our colleague on February 3, 2015).

POM tried to distinguish its own advertising practices from Coca-Cola’s – claiming that unlike the Minute Maid product, pomegranate juice makes up the majority of POM’s juices and did not mislead consumers. Ultimately, the Jury did not have to decide whether POM’s unclean hands barred it from relief. However, the damage to POM’s case caused by evidence on this issue may have already been done.

It not yet clear whether POM intends to appeal the verdict.

[1] The 9th Circuit did vacate the summary judgment to the extent it ruled that POM lacked statutory standing on its UCL and FAL claims and remanded the case on those causes of action.  The district court subsequently granted Coca-Cola summary judgment on the UCL and FAL claims on grounds that they were preempted by the FDCA. POM appealed that ruling as well.

[2] Days earlier, on March 1, 2016, Coca-Cola settled a class action lawsuit brought by consumers claiming the same Minute Maid Pomegranate-Blueberry juice was deceptively labeled.

[3] After winning at the Supreme Court, POM dismissed its appeal of the summary judgment ruling on its UCL and FAL claims.

[4] The Welch dispute concluded with a jury determination that Welch products were deceptively advertised, but that POM failed to prove damages through lost sales.

[5] This POM advertising practice was not asserted at the summary judgment phase, but was asserted for the first time in Coca-Cola’s Proposed Findings of Fact and Conclusions of Law. See Defendant’s Proposed Findings of Fact and Conclusions of Law on POM’s Unclean Hands at 6 (Mar. 8, 2016) (Dkt. 674).

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