Kramer Levin Scores Appellate Victory for Client PBM Products in False Advertising Case

New York, April 20, 2011- Kramer Levin Naftalis & Frankel LLP achieved a significant appellate victory today for its client, PBM Products, Inc., when the United States Court of Appeals for the Fourth Circuit affirmed in all respects a false advertising jury verdict and injunction the firm had previously obtained against Mead Johnson & Company.

In November 2009, a jury in the Eastern District of Virginia found Mead Johnson, one of the world’s largest manufacturers of infant formula, liable for violating the Lanham Act by making false claims that, in substance, asserted falsely that store brand infant formula manufactured by PBM is nutritionally deficient or inferior to Mead Johnson’s Enfamil brand formula. The jury’s award of $13.5 million was the largest jury award in Virginia in 2009 and is one of the largest verdicts ever obtained in a Lanham Act advertising case. In March 2010, the trial judge issued a permanent injunction barring Mead Johnson from making several advertising claims, including that Enfamil is the only infant formula clinically proven to improve brain and eye development. Prior to trial, the district court had dismissed Mead Johnson’s counterclaims, including a claim for defamation, and denied Mead Johnson’s motions to exclude PBM’s consumer survey experts. After the close of Mead Johnson’s case, PBM successfully moved to dismiss Mead Johnson’s $40 million false advertising counterclaim.

In a thorough, 25-page opinion, the Fourth Circuit Court of Appeals rejected each and every ground for appeal asserted by Mead Johnson. The Court concluded that the district court did not abuse its discretion by admitting PBM’s survey evidence and also found that the trial court’s admission of evidence concerning prior litigation between the parties was not error since that evidence was relevant to Mead Johnson’s intent in making misleading advertising claims and was not unfairly prejudicial.

In a sharply worded rebuke of Mead Johnson’s advertising practices, the Court dismissed Mead Johnson’s challenge to the permanent injunction, holding that, “[a]s the litigation history of the parties demonstrates, despite having twice been restrained from disseminating misleading advertising, Mead Johnson continued to do so. PBM cannot fairly compete with Mead Johnson unless and until Mead Johnson stops infecting the marketplace with misleading advertising.” The Court also upheld the scope of the injunction because the district court had tailored its order to reach only specific claims the court found to be false, including that only Enfamil baby formula is clinically proven to improve brain and eye development.

The Court affirmed the trial court’s dismissal of Mead Johnson’s false advertising counterclaim on several grounds, holding that the district court had correctly determined that Mead Johnson’s claims were barred by the statute of limitations or the doctrine of laches, that Mead Johnson’s consumer survey evidence was fatally deficient and that Mead Johnson could not prove PBM’s advertising claims caused any damages. On Mead Johnson’s defamation counterclaim, the appellate court found that a statement in a PBM press release that “Mead Johnson Lies About Baby Formula . . . Again” was not actionable because it was “substantially true.”

The appeal was argued by Kramer Levin’s Harold P. Weinberger, a member of the American College of Trial Lawyers. Mr. Weinberger, Jonathan M. Wagner and Tobias B. Jacoby of Kramer Levin and Robert Redmond of Williams Mullen were on the appellate brief.

Law360, Bloomberg and Virginia Lawyers Weekly reported on the case.