Court Opinion

ID: 3031048
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:45:19.25191+00
Date Added: 2024-06-11T12:46:36.446376
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              DEC 28 2009

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

POM WONDERFUL LLC,                               No. 08-56375

             Plaintiff - Appellee.               D.C. No. 2:07-cv-002633-CAS

  v.                                             MEMORANDUM *

PURELY JUICE, INC. and PAUL
HACHIGIAN,

              Defendants - Appellants,

                   Appeal from the United States District Court
                       for the Central District of California
                   Christina A. Snyder, District Judge, Presiding

                     Argued and Submitted November 6, 2009
                              Pasadena, California

Before: SCHROEDER and IKUTA, Circuit Judges, and SEDWICK, ** District
Judge.

       POM Wonderful LLC (“POM”) sued for false advertising under § 43(a) of

the Lanham Act and § 17500 of the California Business and Professions Code, and

for unfair competition under § 17200 of the California Code. POM alleged Purely

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable John W. Sedwick, United States District Judge for the
District of Alaska, sitting by designation.
Juice, Inc. and its president, Paul Hachigian, marketed “100%” pomegranate juice

with “no added sugar,” but “knew or should have known” the juice was adulterated

making the representations false. After a bench trial, the district court found

Purely Juice and Hachigian liable and awarded POM damages of $1,192,905,

disgorgement of $305,137 in profits, and attorneys’ fees and costs of $622,755.52.

The parties know the record, so not all facts are set out below.

I. “Intent” is not a required element of a Lanham Act false advertising claim

      It is settled that intent is not an element of a Lanham Act false advertising

claim. See J. Thomas McCarthy, 5 McCarthy on Trademarks and Unfair

Competition § 27:51 (4th ed. 2008) (“McCarthy”). We have made clear by

implication that intent is not an element of such a claim. See William H. Morris

Co. v. Group W., Inc., 66 F.3d 255, 258-59 (9th Cir. 1995). Therefore, the district

court did not err in holding that Purely Juice committed a Lanham Act violation.

II. The district court did not err in finding “knowledge” under § 17500

      The trial court’s fact findings are reviewed for clear error. See Fed. R. Civ.

P. 52(a); Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982). Reversal

requires a “definite and firm conviction that a mistake has been committed.” U.S.

v. United States Gypsum Co., 333 U.S. 364, 395 (1948). Comparing POM’s

proposed fact findings with the district court’s shows the court “uncritically

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accepted findings prepared without judicial guidance.” Anderson v. City of

Bessemer, 470 U.S. 564, 571-73 (1985). Whether “the findings issued by the

District Court represent the judge’s own considered conclusions” is thus in doubt,

and so those findings are reviewed with “particularly close scrutiny.” Id. The trial

court will be affirmed “if the findings are sufficiently comprehensive and pertinent

to the issues to provide a basis for the decision, or if there can be no genuine

dispute about omitted findings.” Vance v. Am. Hawaii Cruises, Inc., 789 F.2d 790,

792 (9th Cir. 1986). “Conclusory and unhelpful findings of fact do not necessarily

require reversal if the record supports the district court’s ultimate conclusion.”

Simeonoff v. Hiner, 249 F.3d 883, 891 (9th Cir. 2001).

      Knowledge is required under § 17500, which makes unlawful a statement

concerning a product for sale made with knowledge of the statement’s falsity. See

Cal. Bus. & Prof. Code § 17500. The duty established by § 17500 “is not satisfied

by blind reliance on representations made by others.” People v. Forest E. Olson,

Inc., 137 Cal. App. 3d 137, 139 (1982). Rather, § 17500 imposes a duty to

investigate and verify facts that would put a reasonable person on notice of

possible misrepresentations. Id. Liability extends to negligent false advertising.

Khan v. Med. Bd. of California, 12 Cal. App. 4th 1834, 1846 (1993).

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      Purely Juice contends the district court erred by finding it had the requisite

knowledge. We disagree. Purely Juice knew a batch of its product was not 100%

pure, without sugar added, from results of the Silliker testing received on February

26, 2007. Further testing revealed that Purely Juice produced additional batches

of product that was not 100% pure even after the February 26 report, and Purely

Juice left that product on the shelves. This shows Purely Juice sold product it

knew, or reasonably should have known, was falsely advertised.

      Despite knowing certain industry brokers had “credibility issues” and there

were “suitability questions” about some concentrate, Purely Juice did little to vet

its broker or suppliers. Purely Juice understood (1) a limited global supply of

pomegranates led some concentrate juice manufacturers to blend pomegranate with

other juices; and (2) difficult harvesting conditions and lack of refrigeration at

processing plants led concentrate manufacturers to add sugar. Nevertheless,

Hachigian testified he selected Perma Pom, Purely Juice’s broker, by simply

“talk[ing] to them and ask[ing] them how long they had been doing pomegranate

juice concentrate and so forth.” The Perma Pom representative testified suppliers

are not subject to any verification process; Perma Pom “take[s] the word of the

supplier” and relies on certificates of quality. That Purely Juice instructed its

broker to immediately switch suppliers does not undermine the district court’s

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conclusion, because Purely Juice’s practice was to blindly rely on the underlying

representations. Forest E. Olson, Inc., 137 Cal. App. 3d at 139.

      The district court did err by concluding (1) Purely Juice was on notice of

adulteration as a result of an internal memorandum, which referenced an article not

admitted in evidence; and (2) Purely Juice was on notice of adulteration based on

general knowledge of foreign and domestic pricing structures from a prior year, but

the error was harmless. The record adequately supports the conclusion that Purely

Juice “knew or should have known” of the falsity of its representations. Simeonoff,
249 F.3d at 891.

III. The district court did not err in finding Hachigian personally liable

      Hachigian is liable under the Lanham Act for “torts which he authorizes or

directs or in which he participates, notwithstanding that he acted as an agent of the

corporation and not on his own behalf.” Coastal Abstract Serv., Inc. v. First Am.

Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (quoting Transgo, Inc. v. Ajac

Transmission Parts Corp., 768 F.2d 1001, 1015 (9th Cir. 1986)). The district court

found that, as president and founder of Purely Juice, Hachigian “authorized and

directed” the acts constituting false advertising under the Lanham Act on the

ground that Hachigian was “directly involved in the manufacturing of Purely

Juice’s ‘100% pomegranate’ product, including the selection of suppliers of the

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pomegranate juice concentrate used in this product.” The record shows Hachigian

knew of the test results from Silliker and Krueger, was personally involved in

making decisions for Purely Juice in response to the results, and had the “final

word” on Purely Juice’s business decisions.

      Hachigian is liable under §§ 17200 and 17500 of the California Business and

Professions Code if he personally caused, or, being in control, at least permitted the

acts constituting false advertising. People v. Toomey, 157 Cal. App. 3d 1, 15

(1984). Hachigian was “in control” of Purely Juice given his position as president

and principal shareholder, his direct involvement in the manufacturing and

marketing process, and his involvement in the selection of concentrate suppliers.

Hachigian is personally liable under § 17200 based on his control. Cortez v.

Purolator Air Filtration Prods. Co., 23 Cal. 4th 163, 181 (2000). To show his

liability under § 17500, it must also be shown that Hachigian “knew or should have

known” of false advertising. Toomey, 157 Cal. App. 3d at 15. Sufficient proof

was given to warrant a finding of knowledge of false advertising by Purely Juice;

Hachigian’s control of Purely Juice supports finding knowledge.

      Hachigian says it is necessary to analyze his liability under the alter ego

doctrine. Personal liability outside the alter ego doctrine exists where the

individual was not simply an officer, but also an affirmative actor. See 4 McCarthy

                                          -6-
§ 25:24. A corporate officer is liable for torts he personally commits, and “cannot

‘hide behind the corporation where he is an actual participant in the tort.’” Coastal

Abstract, 173 F.3d at 734 (quoting Donsco, Inc. v. Casper Corp., 587 F.2d 602,

606 (3d Cir. 1978)).

IV. The district court’s purity standard did not intrude on FDA’s function

      Purely Juice’s contention the district court intruded on FDA’s authority by

using a market definition of purity for the Lanham Act claim lacks merit. POM did

not sue to enforce the FDCA, and the facts show no encroachment on the FDA’s

authority.

V. The district court did not err in calculating damages

      The trial court held Purely Juice products bottled on January 7, February 1,

3, 21, 22, and 24, and April 4, 28, and 30, 2007 contained added sweeteners.

Based on a 120-day shelf life, the court held Purely Juice sold adulterated product

from January 7, until August 30, 2007. Purely Juice argues the district court

extended the period of false advertising by relying on “enjoy by” dates for product

unavailable after March 2007. The shorter period it advocated was based on

Purely Juice’s production cycle, not the time the adulterated product was available

to consumers. Purely Juice offered no evidence to show the product was not

available after March 2007. Its contention that “[t]he latest dates for collection of

                                          -7-
samples for what [POM] alleged was the adulterated product . . . was March 26,

2007” ignores evidence that product with an August 30, 2007 “enjoy by” date, was

publicly available and tested by Krueger in June 2007. The district court did not

clearly err in calculating damages. Lun v. City of Honolulu, 963 F.2d 1167, 1170

(9th Cir. 1992).

VI. Purely Juice failed to brief its argument regarding attorneys’ fees.

      In its statement of issues presented by this appeal, Purely Juice asserts that it

appeals the district court’s award of attorneys’ fees to POM. Because Purely

Juice’s brief contains no argument in support of that claim, it is deemed

abandoned. Kohler v. Inter-Tel Techs., 244 F.3d 1167, 1182 (9th Cir. 2001); see

Fed. R. App. P. 28(a)(9).

      AFFIRMED.

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