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Hansen Beverage Co. v. Vital Pharmaceutical

April 27, 2010

HANSEN BEVERAGE COMPANY, A DELAWARE CORPORATION, PLAINTIFF,
v.
VITAL PHARMACEUTICAL, INC. AKA VPX, A FLORIDA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) DENYING HANSEN'S MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. No. 109); (2) GRANTING IN PART VITAL PHARMACEUTICAL'S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT (Doc. No. 107); and (3) DENIES VITAL PHARMACEUTICAL'S MOTION FOR PARTIAL SUMMARY REGARDING DAMAGES AND OTHER MONETARY RELIEF (Doc. No. 108).

Plaintiff Hansen Beverage Company ("Hansen") moves the Court for partial summary judgment as to Defendant Vital Pharmaceutical, Inc.'s ("VPX") allegedly false advertising claim that its energy shot product provides seven hours of energy. (Doc. No. 109.) VPX moves the Court for summary judgment, or in the alternative, partial summary judgment, as to all of Hansen's claims regarding its energy shot and other energy drinks. (Doc. No. 107.) VPX also moves the Court for partial summary judgment regarding damages and other monetary relief. (Doc. No. 108.)

The parties have filed oppositions and replies as to each motion, in addition to evidentiary objections.

A hearing was held on these motions on April 12, 2010. After considering all the arguments of the parties, for the reasons stated herein, the Court DENIES Hansen's motion for partial summary judgment, GRANTS IN PART VPX's motion for partial summary judgment as to certain advertising claims, and DENIES without prejudice VPX's motion for partial summary judgment regarding damages.

BACKGROUND

Hansen brings this action for false advertising, unfair competition, and trade libel against VPX. VPX and Hansen are competitors in the energy drink and energy shot markets. Hansen produces energy beverages including "Monster" energy drink and Hit Man energy shot. VPX produces an energy shot called Redline Power Rush! 7-Hour Energy Boost ("Power Rush"), and energy drinks including Redline Extreme, Redline Princess, and Redline Ready-to-Drink.

Hansen filed the original Complaint on August 21, 2008, and VPX filed an answer. (Doc. Nos. 1, 24.) On December 30, 2008, the Court denied Hansen's motion for a preliminary injunction enjoining VPX from making claims that its product gives "7 Hours of Pure Energy," "7 Hours of Sustained Energy," and "No Crash." (Doc. No. 33.) The Court found several disputed issues of fact including the definition of "energy," whether Power Rush can provide seven hours of energy, and whether consuming Power Rush results in "no crash."

On April 17, 2009, Hansen filed a First Amended Complaint ("FAC") alleging three causes of action: (1) false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a); (2) false advertising and unfair competition in violation of California Business and Professions Code Sections 17200 and 17500; and (3) trade libel. (Doc. No. 44.)

On March 1, 2010, VPX filed a motion for summary judgment, or in the alternative, partial summary judgment (Doc. No. 107), and a motion for partial judgment regarding damages and other monetary relief (Doc. No. 108). Hansen filed a motion for partial summary judgment, as to VPX's advertising claim that Power Rush provides seven hours of energy. (Doc. No. 109.) Hansen and VPX both filed evidentiary objections and motions to strike affidavits. (Doc. Nos. 115, 116, 120, 121.)

DISCUSSION

I. Legal Standard

Summary judgment is proper where the pleadings and materials demonstrate "there is no genuine issue as to any material fact and . . . the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material issue of fact is a question a trier of fact must answer to determine the rights of the parties under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

The moving party bears "the initial responsibility of informing the district court of the basis for its motion." Celotex, 477 U.S. at 323. To satisfy this burden, the movant must demonstrate that no genuine issue of material fact exists for trial. Id. at 322. Where the moving party does not have the ultimate burden of persuasion at trial, it may carry its initial burden of production in one of two ways: "The moving party may produce evidence negating an essential element of the nonmoving party's case, or, after suitable discovery, the moving party may show that the nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co., v. Fritz Cos., 210 F.3d 1099, 1106 (9th Cir. 2000). To withstand a motion for summary judgment, the non-movant must then show that there are genuine factual issues which can only be resolved by the trier of fact. Reese v. Jefferson Sch. Dist. No. 14J, 208 F.3d 736, 738 (9th Cir. 2000). The nonmoving party may not rely on the pleadings alone, but must present specific facts creating a genuine issue of material fact through affidavits, depositions, or answers to interrogatories. Fed R. Civ. P. 56(e); Celotex, 477 U.S. at 324.

The court must review the record as a whole and draw all reasonable inferences in favor of the nonmoving party. Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1112 (9th Cir. 2003). However, unsupported conjecture or conclusory statements are insufficient to defeat summary judgment. Id.; Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 2008). Moreover, the court is not required "'to scour the record in search of a genuine issue of triable fact,'" Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir.1996) (citations omitted), but rather "may limit its review to the documents submitted for purposes of summary judgment and those parts of the record specifically referenced therein." Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026, 1030 (9th Cir. 2001).

II. Cross-Motions for Summary Judgment

Hansen and VPX filed cross-motions for summary judgment as to VPX's allegedly false claim that Power Rush provides seven hours of energy.*fn1 Because the parties base their falsity analyses on Lanham Act case law, the Court does the same.*fn2

A. False Advertising Under the Lanham Act

There are five elements of a Lanham Act § 43(a) false advertising claim:"(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products."*fn3 Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997).

"To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers." Id. "When evaluating whether an advertising claim is literally false, the claim must always be analyzed in its full context." Id. A false message is conveyed by necessary implication when, "considering the advertisement in its entirety, the audience would recognize the claim as readily as if it had been explicitly stated." Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 587 (3rd Cir. 2002). If literal falsity is proved, the court will presume such literally false statements actually mislead consumers. See U-Haul Int'l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1040-41 (9th Cir. 1986). However, if an advertisement is not literally false, the plaintiff must show that the advertisement has misled, confused, or deceived the consuming public, which is typically tested through the use of consumer surveys.*fn4 Southland Sod Farms,108 F.3d at 1140.

B. Evidentiary Objections and Motions to Strike

The parties have filed numerous evidentiary objections. The evidentiary objections beyond those specifically addressed in this Order do not impact the substantive determination of the merits, and the Court denies those objections as moot.

Hansen objects to the declaration of VPX's expert witness, Dr. Daniel E. Buffington, because he is not qualified as an expert and VPX did not disclose all of the opinions and materials he relies upon in the declaration.

1. Dr. Buffington's Qualifications

Hansen contends that Dr. Buffington lacks the qualifications to render opinions on caffeine and caffeine's effects on the human body. The Court disagrees and finds Dr. Buffington has the requisite knowledge, experience, training, and education to opine as to these matters.*fn5 Among other qualifications, Dr. Buffington has a Doctor of Pharmacy degree, has over 25 years of work experience teaching pharmacological effects of numerous agents, and has been qualified as an expert to testify on the levels and effects of caffeine. (Buffington Decl. ¶ 2; Buffington Dep., at 30-33.) Importantly, Dr. Buffington has also completed a Clinical Pharmacokinetics Residency. (Buffington Decl. ¶ 2.) Pharmacokinetics describes the movement of a drug in the body, and involves, among other things, clearance rate, half-life for elimination, plasma concentration, and metabolism. (Notice of Lodgment in Supp. of Hansen's Mot. for Partial Summ. J., Ex. K, Article K1 ("Magkos").)*fn6

2. Disclosure of Opinions and Materials

Rule 37(c)(1) of the Federal Rules of Civil Procedure imposes a sanction for failure to comply with the disclosure rules: "If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless."*fn7 Fed. R. Civ. P. 37(c)(1). The burden is on the party facing sanctions to prove the failure to disclose was substantially justified or harmless. Yeti By Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1108 (9th Cir. 2001).

Hansen asserts that VPX did not disclose all the articles listed in Dr. Buffington's declaration, either during discovery or in his expert reports, and therefore the information should be excluded pursuant to Rule 37(c)(1). However, because Hansen was aware of this information, the Court finds nondisclosure was harmless. Dr. Buffington found the additional studies after submitting his expert reports, provided them to Hansen at his deposition on February 19, 2010, and was specifically questioned about them at his deposition. (Declaration of Kalina Pagano in Supp. of VPX's Reply ("Pagano Decl."), Ex. C, Dep. of Dr. Buffington ("Buffington Dep.") at 47-48, 53-56; 97-98, 105-120.) In addition, Hansen itself has included these studies as exhibits and discussed them thoroughly in its briefing.

Hansen also contends that Dr. Buffington's declaration contains new opinions regarding Power Rush, including calculations of the amount of caffeine remaining in the bloodstream after seven hours, and comparisons of the amount of caffeine in Power Rush to the amount of caffeine in a cup of coffee. Although Dr. Buffington's declaration contains new illustrations of his previously disclosed theory, it does not contain new opinions. Regardless, the Court finds any nondisclosure harmless because Hansen was aware of VPX's caffeine metabolism theory, and the illustrations relating to coffee do not impact the substantive determination of the merits.

C. VPX's 7-Hour Duration Claim

The Court must first determine what claims VPX makes with regard to Power Rush. It is undisputed that VPX represents that one serving of Power Rush will provide seven hours of energy. The name of the product includes the phrase "7-Hour Energy Boost," and VPX advertises Power Rush as providing "7 Hours of Sustained Energy" and "7 Hours of Pure Energy." (FAC ¶¶ 18, 20, 22.) VPX's website also states that "the intense energy will last beyond your workout to keep you focused and energized throughout your day."*fn8 (FAC ¶ 24.)

Contrary to Hansen's assertion, the Court finds VPX has not implicitly made a claim of comparative superiority over Hansen's products. This claim does not appear on the face of Power Rush's name or advertising, nor is it necessarily implied. In fact, at the time VPX launched Power Rush, Hansen had not yet produced its own Hitman energy shot. (Declaration of John H. Owoc in Supp. of VPX's Mot. for Summ. J. ("Owoc Decl.") ¶¶ 9, 12.)

The Court also finds that VPX does not implicitly represent that its 7-hour duration claim is supported by product testing, which courts in other circuits have referred to as an "establishment claim." The Ninth Circuit has distinguished between advertisements that explicitly or implicitly assert a claim based on product testing, which may be proven false by showing that the tests "'are not sufficiently reliable to permit one to conclude with reasonable certainty that they established' the claim made," and advertisements that make no such assertion, which must be proven false by affirmative evidence. Southland Sod Farms,108 F.3d at 1139. "An advertiser may make [an establishment claim] through the use of specific language, such as 'medically proven,' or through the use of visual representations." Sterling Drug, Inc. v. FTC, 741 F.2d 1146, 1150 (9th Cir. 1984); see also McNeil-P.P.C., Inc. v. Bristol-Myers Squibb Co., 938 F.2d 1544, 1549 (2d Cir.1991) (advertisement which made a product superiority claim but "did not refer to clinical studies" was not an establishment claim); Ciba-Geigy Corp. v. Thompson Medical Co., 672 F. Supp. 679, 686 (S.D.N.Y. 1985) (comparative advertisement using a bar graph was an establishment claim). But see W.L. Gore & Associates, Inc. v. Totes Inc., 788 F. Supp. 800, 809 (D. Del. 1992) (numerical comparison that rainsuits are seven times more breathable than the competitors' gives the impression of independent testing, and was not a claim of general superiority or mere puffing).

Because VPX does not expressly represent that the 7-hour duration claim is based on product testing, or implicitly make that claim through visual representations, Hansen must ...


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