Court Opinion

ID: 1019541
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:37:05.153868+00
Date Added: 2024-06-11T15:12:45.083590
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 05-1621

PHARMANETICS, INCORPORATED,

                                              Plaintiff - Appellant,

           versus

AVENTIS PHARMACEUTICALS, INCORPORATED, a/k/a
Aventis     Pharmaceuticals       Products,
Incorporated,

                                               Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Louise W. Flanagan, Chief
District Judge. (CA-03-817-5)

Argued:   March 15, 2006                      Decided:   May 31, 2006

Before WIDENER and WILLIAMS, Circuit Judges, and William L. OSTEEN,
Senior United States District Judge for the Middle District of
North Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Gregory Neil Stillman, HUNTON & WILLIAMS, Norfolk, Virginia,
for Appellant.    Nancy Karen Deming, TROUTMAN SANDERS, L.L.P.,
Atlanta, Georgia, for Appellee.     ON BRIEF: Robert C. Van Arnam,
HUNTON & WILLIAMS, Raleigh, North Carolina; Gary C. Messplay, HUNTON
& WILLIAMS, Washington, D.C.; Brent L. VanNorman, HUNTON & WILLIAMS,
Norfolk, Virginia, for Appellant.      J. Donald Cowan, Jr., SMITH
MOORE, L.L.P., Greensboro, North Carolina; John J. Dalton, William
N. Withrow, Jr., Mark S. VanderBroek, TROUTMAN SANDERS, L.L.P.,
Atlanta, Georgia, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                                2
PER CURIAM:

     PharmaNetics, Inc. (“Appellant”) brings this appeal challenging

the district court’s rulings in (1) striking its expert testimony

and (2) granting summary judgment on its state law breach-of-

contract and its Lanham Act claims, see 15 U.S.C. § 1051 et seq.,

in Aventis Pharmaceuticals, Inc.’s (“Appellee”) favor.          For the

reasons stated below, this court affirms the district court’s

ruling.

                                 I.

     Appellant is a drug development company that in the late 1990’s

began developing a diagnostic test to quickly monitor the effects

of certain types of anticoagulants (blood thinners).            Doctors

generally use anticoagulants in, among other areas, patients who

have unstable angina, a condition where restricted blood flow to the

heart can cause an increased risk of heart attack.1     Patients with

unstable angina can receive two levels of treatment. A first level,

“medical   management,”   involves    administering   various    drugs,

     1
      A brief description is as follows:
     [A]ngina, whether stable or unstable, is a result of
     coronary artery disease (clogged arteries).        Angina
     becomes unstable when the arteries become so occluded as
     to . . . restrict the blood flow to the heart
     [dangerously], posing a threat of plaque breakage or
     rupture [that] could cause a sudden stoppage of the blood
     flow to the heart.
Leddy v. Mississippi State Med. Ass’n, 7 F. Supp. 2d 819, 821 (S.D.
Miss. 1998).

                                 3
including anticoagulants.           A second level, “invasive management,”

involves instruments that physically remove any blockages. Patients

receive anticoagulants during invasive management to prevent fatal

blood clots (when blood is too thick) or hemorrhaging (when blood

is    too   thin).      Doctors     must   know   the   anticoagulant’s   effect

precisely during invasive management because too much or too little

anticoagulant can lead to death during this drastic procedure.

Diagnostic monitoring tests, which Appellant develops, seek to

accomplish this goal.

       Unstable      angina   may   accompany     other   diseases,   which   can

necessitate changing the monitoring requirements. One such disease

combination is UA/NSTEMI.2          UA/NSTEMI patients can receive medical

management but may later transfer to invasive management, which many

do.   Some cardiologists prefer to monitor coagulation levels during

this entire process, including during medical management.

       Since the 1990’s, Appellee, a pharmaceutical company, has

marketed Lovenox as an anticoagulant that requires no routine

monitoring of blood coagulation, with disclaimers that certain

patients may require monitoring.               Specifically, other warnings on

       2
      UA/NSTEMI means the patient has unstable angina and is at an
increased risk for non-ST-segment elevation myocardial infarction,
a specific type of heart attack. See Braunwald et al., Am. Coll.
of Cardiology & Am. Heart Ass’n, ACC/AHA 2002 Guideline Update for
the Management of Patients with Unstable Angina and Non-ST-Segment
Elevation Myocardial Infarction 4, 73–74 (2002), available at
h t t p : / / w w w . a c c . o r g / c l i n i c a l /
guidelines/unstable/incorporated/UA_incorporated.pdf.

                                           4
the package state anticoagulation monitoring is essential when

doctors administer Lovenox with other drugs or to certain patient

populations.     The FDA, moreover, has approved Lovenox without

monitoring for medical management but not invasive management.       No

quick-acting monitoring test existed for Lovenox initially.

       The inability to monitor Lovenox’s coagulation effects with

sufficient quickness limited its use.     During invasive management,

doctors must know coagulation levels with quickness.       Some doctors,

furthermore, preferred to measure coagulation levels in UA/NSTEMI

patients during all managements, which must occur with similar

quickness.     Thus, Lovenox was unsuitable for not only invasive

treatments but also, in some doctors’ opinions, medical management

of UA/NSTEMI patients.

       In August 2000, the parties entered into an agreement to co-

develop and co-promote Enox, a test that would quickly monitor

Lovenox’s blood-clotting effects and expand Lovenox’s market. After

forming the agreement, Appellee allegedly delayed Enox’s development

by imposing unreasonable obligations and demands besides those in

the agreement, including changing the required range for Enox’s

application.    Appellant claims Appellee imposed these obligations

to avoid its contractual obligations.

       Appellee’s alleged motivation for avoiding these obligations

was that Appellee did not want Enox’s development and promotion to

harm    its   long-standing,   no-monitoring   promotion   for   certain

                                   5
patients.     During the post-contract-formation period, Appellee

continued its long-standing marketing of Lovenox and, allegedly,

even aimed it at invasive-management patients.              The marketing

included advertisements stating Lovenox (1) was therapeutic within

one-half hour and from one dose and (2) required no routine

coagulation monitoring. Appellant claims these advertisements were

false under the Lanham Act since Appellee aimed its no-monitoring-

based advertisements at consumers who, in some cases, required

monitoring.       These advertisements harmed Appellant through lost

sales.

     The parties continued Enox’s development. After Enox’s launch

in January 2003, Appellant claims doctors reported Enox showing

Lovenox overcoagulated some patients and undercoagulated others.

Because Enox showed Lovenox unpredictably coagulated blood and,

thus,    needed   close   monitoring,   Appellee   then   allegedly   began

distancing itself from Enox even more.       Appellee stopped any sales

and support given to Appellant, discarded promotional materials, and

disparaged Enox as useless.      Appellant claims these acts not only

breached the agreement but also caused damages through lost present

and future Enox sales.

     Appellee argues that Appellant lost sales for various reasons

other than its acts, including the medical community’s resistance

to Enox because of its cost and imprecision, Enox’s limited utility,

its lack of clinical-trial support, doctors’ reluctance to change

                                    6
when they were comfortable with using Lovenox without monitoring

even in some UA/NSTEMI patients, low numbers of patients taking

Lovenox     during   invasive      management,    hospitals’    bureaucratic

purchasing processes, and Enox’s general difficulty in use.

     To prove its lost sales damages, Appellant sought to introduce

the testimony of Richard Troxel (“Troxel”).             His testimony was

Appellant’s only evidence of damages.             Prior to formulating his

expert opinion, Troxel met with Appellant to get an overview of this

lawsuit and Appellant’s business.          Appellant gave Troxel a myriad

of requested documents, including both parties’ sales projections

for Enox.      Troxel reviewed the documents and found both sales

projections to be consistent.          Troxel considered Appellee’s five-

year sales projections to be the most important piece of evidence.

Troxel then proceeded to determine values for variables that would

determine lost profits, including (1) estimating the number of Enox

tests needed per patient, based on both parties’ projections, (2)

setting the price per test at $25.00, to which Appellee’s expert

agreed, (3) calculating the per-test profit (subtracting the test’s

manufacturing    costs   and    any   sales   commissions),    (4)    adding   a

residual value to Appellant’s total five-year net income based on

similar industries, and (5) applying two discount rates to determine

what the future earnings are presently worth.           Appellant’s expert

proffered     several    damages      estimates   created     under    various

assumptions.    The district court excluded Troxel’s report because

                                       7
it was (1) too disconnected from this case’s facts and (2) too

speculative.

       The district court ruled Appellant’s damages model to be too

disconnected for various reasons.          For example, the report assumed

that Appellee “[wa]s liable for all of the actions alleged in each

of    [Appellant’s]   claims,   and    .   .   .   [it   assumed]     that   [only

Appellee’s] actions caused” all of Appellant’s losses, “rather than

only those . . . [that] are reasonably inferred from the . . .

record.”    (J.A. at 6737.)      The district court, thus, held that

Appellant   calculated    all   possible       losses    and    indiscriminately

assessed all losses to Appellee.           In examining this evidence as

expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc.,

509 U.S. 579 (1993), the district court held that the evidence

failed to meet Daubert’s standard for “fit.”                    The evidence was

simply not “sufficiently tied to the facts of the case.”                 (J.A. at

6730 (quoting Daubert, 509 U.S. at 591).)

       At the time of the court’s ruling, Appellee was not liable

under all claims, as the report assumed, because the district court

had   granted   partial   summary     judgment.         Also,   the   uncontested

evidence showed that multiple sources caused or would cause lost

sales.     For example, the court noted that doctor resistance to

switch to Enox, low populations of Lovenox patients, Appellee’s

conduct in telling its representatives not to promote Enox, and the

FDA’s limited approval of Enox all caused lost sales.                 A lump sum,

                                       8
indiscriminately attributed to Appellee, was not sufficiently tied

to the facts when the evidence showed various factors caused lost

sales. Implicitly, the jury had no reasonable method to dissect the

report and assess what acts may have caused particular losses.   The

evidence, thus, was too misleading to go before a jury as expert

testimony because “too great an analytical gap [existed] between the

data and the opinion proffered.”     (J.A. at 6731 (quoting General

Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).)

     The district court then explained why Troxel’s report was too

speculative. Citing case law, the district court stated any damages

report must have reasonable certainty.   The court found Enox was a

novel technology and determining future sales was not made on the

basis of established past sales of this or similar technologies.

Furthermore, maximizing Enox’s potential relied on Appellee’s full

cooperation (which the agreement may or may not require), and

Appellant faced reluctant consumers unwilling to switch from their

current tests.   Under these facts, Appellant’s evidence was simply

too speculative to be “expert testimony”—a moniker that could

unfairly persuade a jury that the speculative evidence has much more

certainty and precision than reality showed.

                                 9
                                II.

                                 A.

                                 1.

     Appellant first argues this court should reverse the district

court’s exclusion of Troxel’s report.     Appellant’s reasons are

various, including the argument that an opposing party’s estimates

of lost profits, upon which Troxel relied, are inherently reliable.

Thus, because Troxel relied on Appellee’s lost profits estimates,

the evidence is almost automatically admissible. Appellant contends

the district court also “impermissibly resolved the competing

evidence when it labeled Troxel’s acceptance of [Appellee’s lost

sales] projections as ‘speculative’ and ‘not sufficiently tied to

the facts of the case.’”   (Appellant’s Br. at 55.)

     The district court noted that the report assumed (1) Appellee

was liable on all causes of action and (2) multiple sources caused

damages.   Appellant argues that the report factored these issues

into its calculations, and thus, the district court’s reasoning on

that point was flawed.   According to Appellant, the district court

impermissibly mandated that the evidence must exhaust all possible

causes of lost sales because case law does not require an expert

witness to eliminate all possible causes of injuries.    Appellant

further argues the district court ignored two important Lanham Act

principles:   (1) a wrongdoer should not profit from a Lanham Act

violation and (2) the wrongdoer should bear the uncertain losses of

                                 10
his conduct.   Finally, Appellant contends the district court failed

to conduct the required Daubert analysis. Appellant argues that (1)

the district court had to delineate analysis on four factors for

evaluating expert testimony that Appellant gleaned from case law,

(2) the court evaluated Troxel’s factual assumptions instead of his

methodology, (3) Troxel’s factual assumptions have support in the

record, and (4) case law does not support striking Troxel’s opinion.

                                 2.

     Federal Rule of Evidence 702 provides that

     [i]f   scientific,   technical,  or   other   specialized
     knowledge will assist the trier of fact to understand the
     evidence or to determine a fact in issue, a witness
     qualified as an expert by knowledge, skill, experience,
     training, or education, may testify thereto in the form
     of an opinion or otherwise, if (1) the testimony is based
     upon sufficient facts or data, (2) the testimony is the
     product of reliable principles and methods, and (3) the
     witness has applied the principles and methods reliably
     to the facts of the case.

“Courts of appeals apply an abuse of discretion standard when

reviewing a trial court’s decision to admit or exclude expert

testimony [under Rule 702].”    Cooper v. Smith & Nephew, Inc., 259

F.3d 194, 200 (4th Cir. 2001).        “A district court abuses its

discretion if its conclusion is guided by erroneous legal principles

or rests upon a clearly erroneous factual finding.”

Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999)

(citations omitted).   This court

     is obligated “to consider the full record” as well as the
     reasons assigned by the [district] [c]ourt for its
     judgment, and to reverse the judgment below, if after

                                 11
     such review, the appellate court “has a definite and firm
     conviction that the court below committed a clear error
     of judgment in the conclusion it reached upon a weighing
     of the relevant factors.”

Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 506 (4th Cir. 1977)

(emphasis added) (quoting Finley v. Parvin/Dohrmann Co., 520 F.2d

386, 390 (2d Cir. 1975)).

     Furthermore, “[t]he Supreme Court also has emphasized that ‘the

trial   judge   must   have   considerable      leeway    in   deciding    in    a

particular case how to go about determining whether particular

expert testimony is reliable.’”         Cooper, 259 F.3d at 200 (quoting

Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)).                        No

established procedure exists for Daubert analysis:             “[T]he factors

discussed in Daubert [for analyzing the testimony] were neither

definitive, nor exhaustive. . . . [P]articular factors may or may

not be pertinent in assessing reliability, depending on the nature

of the issue, the expert’s particular expertise, and the subject of

his testimony.”    Id. at 199–200; accord Westberry, 178 F.3d at 261

(“In making its initial determination of whether proffered testimony

is sufficiently reliable, the court has broad latitude to consider

whatever factors bearing on validity that the court finds to be

useful;   the   particular    factors    will    depend    upon   the     unique

circumstances of the expert testimony involved.”).              Finally, even

though Federal Rule of Evidence 702 “liberalize[d] the introduction

of relevant expert evidence,” the district court must balance that

                                    12
freedom with the persuasiveness of potentially misleading expert

evidence.     178 F.3d at 261.

        The district court ruled the expert evidence too misleading,

because it was a lump sum, not sufficiently tied to Appellee’s

possible conduct, and too speculative, because the technology was

novel.     As to the first reason, the district court did not see

divisible units of damages that a jury could reasonably assign to

Appellee’s possible wrongful conduct. Unless Appellant tailored the

evidence to the facts, the district judge would not put the lump sum

before    a   jury     as   expert   evidence.      “[G]iven   the    potential

persuasiveness of expert testimony,” Troxel’s lump sum evidence

“ha[d] a greater potential to mislead than to enlighten.” Id. Even

though part of the district court’s rationale was that Appellee was

not liable under all claims because it had granted partial summary

judgment, a ruling whose substantive merits this court will not

consider, the district court’s rationales need not be applicable in

full.     Cf., e.g., United States v. White, 222 F.3d 363, 372 (7th

Cir. 2000) (affirming a district court’s evidentiary ruling for

different reasons under the Federal Rules of Evidence).                        The

district court’s other rationales are sufficient to exclude the

expert testimony because nothing appears to be clear error, under

these facts, in ruling the lump sum losses to be too misleading when

presented as expert testimony.          Moreover, Appellant shows no clear

error    in   ruling    the   new    technology’s   lost   sales     to   be   too

                                        13
speculative.    Because Appellant does not show “a definite and firm

conviction” of “clear error,” Wilson, 561 F.2d at 506 (quoting

Finley, 520 F.2d at 390), this court will affirm the ruling that

excluded Troxel’s proffered expert testimony.

                                       B.

     Appellant next argues that its Lanham Act claim involving

Appellee’s “therapeutic” claims had a presumption of harm and

damages.    Appellee advertised that Lovenox was therapeutic from one

dose and in one-half hour, meaning Lovenox properly coagulated,

without monitoring, a patient under those conditions.        The district

court found Appellee’s therapeutic claims to be literally false, and

Appellant    further   argues   that    Appellee   intentionally   deceived

consumers with the advertisements.          Appellant argues, under those

two situations, damages are presumed.         The district court rejected

these presumptions because (1) Fourth Circuit precedent questions

whether such presumptions apply, (2) any presumptions of harm exist

only in injunction settings and not in money damages claims, and (3)

the presumptions apply where a competitor’s advertising misleads.

This ruling will be affirmed, but through different analysis without

comment on the district court’s analysis.

     Assuming that a presumed-damages standard would apply to this

Lanham Act claim, damages are presumed only as to causation; the

extent of money damages is a separate matter that must have

                                       14
evidentiary support.   See, e.g., Porous Media Corp. v. Pall Corp.,

110 F.3d 1329, 1336 (8th Cir. 1997) (noting that a Lanham Act

plaintiff, even when presumptions of harm apply, “still b[ears] the

burden of proving an evidentiary basis to justify any monetary

recovery”); PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818

F.2d 266, 271–73 (2d Cir. 1987) (“[T]he quantum of damages, as

distinguished   from   entitlement,   must   be   demonstrated   with

specificity . . . .”).   Thus, a Lanham Act plaintiff may not have

to prove harm through, for example, consumer surveys, but that

plaintiff must still prove the harm’s financial extent.      See 818

F.2d at 273 (“[T]o assist . . . in measuring damages, [a party]

will, of course, be required to provide ‘an evidentiary basis on

which to rest such an award.’” (quoting Vuitton Et Fils, S.A. v.

Crown Handbags, 492 F. Supp. 1071, 1077 (S.D.N.Y. 1979))).

                                 C.

     In affirming the evidentiary ruling and holding that Appellant

must produce evidence of the extent of damages even if a presumption

of harm applies, this court must affirm the grant of summary

judgment on all claims because Appellant has no further evidence of

damages.3   Summary judgment is appropriate where an examination of

     3
      The district court decided summary judgment through these and
additional grounds. The court makes this decision without comment
on the district court’s analysis except to the extent it agrees
with this opinion.

                                 15
the pleadings, affidavits, and other proper discovery materials

before the court demonstrates no genuine issue of material fact

exists, thus entitling the moving party to judgment as a matter of

law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,

322–23 (1986).   The court must view the facts in the light most

favorable to the nonmovant, drawing inferences favorable to that

party if such inferences are reasonable. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 255 (1986).

     For a successful breach-of-contract claim for damages, a party

must generally, among other things, produce evidence of damages.

See, e.g., Restatement (Second) of Contracts § 346(2) (1981).4   For

a Lanham Act claim for money damages, as discussed above, a party

must also generally produce some evidence of damages.   See, e.g.,

Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 286 (4th Cir. 2003).

After excluding Troxel’s report, Appellant has no further evidence

on damages.   Summary judgment, thus, is appropriate because a fact

finder could not award relief without such evidence.

     4
      Though the contract has a choice-of-law clause, the court
finds no conflict in the possibly applicable laws and thus no
reason to decide what substantive law applies in determining this
basic and generally applicable contract principle.

                                  16
                               III.

     For the reasons stated above, the district court’s evidentiary

ruling is affirmed.   With this ruling, Appellant has no further

evidence of damages, and thus, summary judgment on all claims is

                                                         AFFIRMED.

                                17