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Fresh Del Monte Produce Inc. v. Del Monte Foods Co.

United States District Court, S.D. New York

March 28, 2013

FRESH DEL MONTE PRODUCE INC., Plaintiff and Counterclaim Defendant,
v.
DEL MONTE FOODS COMPANY, and DEL MONTE CORPORATION, Defendants and Counterclaim Plaintiffs

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[Copyrighted Material Omitted]

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For Fresh Del Monte Produce Inc., Plaintiff: Anthony Joseph Dreyer, LEAD ATTORNEY, Skadden, Arps, Slate, Meagher & Flom LLP(IIA), New York, NY; Kenneth Alan Plevan, LEAD ATTORNEY, Jordan Adam Feirman, Lauren Emily Aguiar, Skadden, Arps, Slate, Meagher & Flom LLP (NYC), New York, NY; Raoul Dion Kennedy, PRO HAC VICE, Skadden Arps Slate Meagher & Flom LLP, Palo Alto, CA.

For Del Monte Foods Company, Del Monte Corporation, Defendants: Bruce P. Keller, Eric Daniel Meyer, LEAD ATTORNEYS, Debevoise & Plimpton, LLP (NYC), New York, NY; Lorin L. Reisner, LEAD ATTORNEY, Securities and Exchange Commission (DC), Washington, DC; Michael J. Beam, LEAD ATTORNEY, Debevoise & Plimpton LLP(919 Third Ave), New York, NY; Arturo J Gonzalez, PRO HAC VICE, Morrison & Foerster LLP, San Francisco, CA; Dennis Patrick Orr, Lashann Moutique DeArcy, Morrison & Foerster LLP (NYC), New York, NY.

For Dongguk University, Intervenor: Robert A. Weiner, LEAD ATTORNEY, McDermott, Will & Emery, LLP (NY), New York, NY.

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OPINION & ORDER

Sidney H. Stein, U.S. District Judge.

Plaintiff Fresh Del Monte Produce, Inc. (" Fresh" ) has moved for a permanent injunction following a jury verdict, largely in its favor, on its breach of contract and Lanham Act claims against defendants Del Monte Corp. (" DMC" ) and Del Monte Foods Co.[1] The jury found that DMC had breached a trademark license agreement with Fresh by selling Del Monte-branded refrigerated fruit products containing five specified types of fruit; the jury also found that DMC had willfully violated the Lanham Act by falsely advertising that most of the accused product lines were fresh when they were actually preserved. Fresh also contends that this is an " exceptional case" within the meaning of the Lanham Act's remedial provision, 15 U.S.C. § 1117(a), and therefore the Court should award it attorneys' fees and prejudgment interest on its Lanham Act claims. Finally, pursuant to New York law, see N.Y. C.P.L.R. § § 5001, 5002, Fresh seeks prejudgment interest on its breach of contract claim.

For the reasons set forth below, the Court finds that the circumstances warrant an injunction, albeit a substantially narrower one than Fresh seeks. Even assuming that Fresh has demonstrated that this is an exceptional case, the Court exercises its discretion to decline to award Fresh attorneys' fees or prejudgment interest on its successful Lanham Act claims. Finally, Fresh is entitled to 9% prejudgment interest on its breach of contract claim up through the date of the verdict, and the Court will instruct the Clerk of Court to add 9% interest from the date of the verdict through the date of the judgment.

I. BACKGROUND

This is the second trial between the two companies entitled to use the Del Monte brand and trademark (together, the " Mark" ). DMC is the successor to the original Del Monte, which in 1989 spun off its fresh fruit division. That division became Fresh, which focuses on selling fresh fruit products, and DMC has since focused on distributing preserved, rather than fresh, produce. In splitting up the business, Del Monte also divided the rights to use the Mark in a license agreement between DMC and Fresh's predecessor (the " License Agreement" ). DMC sold Fresh the rights--often to the exclusion of DMC's own rights--to use the Mark on certain products primarily comprising fresh fruit and vegetables, while DMC largely retained the exclusive right to use the Mark on preserved produce.

Two federal court trials and twenty-four years later, however, the parties still disagree about the meaning of the License Agreement. The first trial, a bench trial before U.S. District Judge Jed S. Rakoff,

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established that DMC had licensed the Mark to Fresh for exclusive use in selling fresh fruit, even if that fresh fruit had been processed in certain ways. See Transcript of Oral Ruling at 15, Del Monte Corp. v. Del Monte Fresh Produce, Inc., No. 98 Civ. 4060 (JSR) (S.D.N.Y. Mar. 18, 1999).

A decade after that bench trial, the parties were once again in court, again disputing the meaning of the License Agreement's terms. Fresh claimed DMC had breached the License Agreement by using the Mark on products for which Fresh held the exclusive rights to do so. Fresh alleged that a refrigerated fruit provision in the License Agreement carved out an exception to the fresh-versus-preserved division of the Mark. That provision specifies that the products covered by Fresh's license include " on an exclusive basis, refrigerated pineapple products (including but not limited to peeled, cored, cut or diced pineapple) and refrigerated Non-Utilized Fruit." (Trial Ex. 1 at 45, Ex. B to Decl. of LaShann M. DeArcy dated May 18, 2012 (" DeArcy Decl." ), Dkt. No. 162.) The Agreement defined Non-Utilized Fruit as " melons, berries, papayas and bananas." ( Id. at 46.) Together, the fruits subject to the refrigerated fruit clause--pineapple and Non-Utilized fruits--are termed the " Five Fruits." Fresh, relying largely on the language of the License Agreement at trial, contended that this refrigerated fruit provision granted it the exclusive right to use the Mark on refrigerated products containing the Five Fruits--even if they are preserved. The jury found that DMC had breached the License Agreement, and awarded damages of $5.95 million on the breach. The parties agree that the jury used a reasonable royalty rate of 1.75% to calculate the damages. ( See Pl.'s Mem. in Supp. of Post-Trial Mot. for Permanent Inj. at 22, Dkt. No. 148; Defs.' Opp. to Pl.'s Post-Trial Mot. for Permanent Inj. at 5, Dkt. No. 167.)[2]

Fresh also alleged that DMC's marketing practices for its Fruit Bowl, Fruit Naturals, Superfruit, SunFresh, and Orchard Select product lines falsely communicated the message that those products contained fresh, rather than preserved, fruit in violation of the Lanham Act. See 15 U.S.C. § 1125(a). Most prominent among DMC's allegedly wrongful marketing practices are labels communicating the false message that refrigeration of the product was required and failing to communicate that the product contains preservatives or is pasteurized, in combination with placing the products next to similar fresh fruit products on refrigerated shelves in the fresh produce section of supermarkets. The jury found that DMC willfully violated the Lanham Act with regard to all but the Orchard Select product line; as to the Orchard Select product line, it found no violation of the Lanham Act by DMC. Although the jury found Fresh had failed to prove any lost sales due to the violations, it awarded Fresh $7.2 million in DMC's profits on the four product lines on which it had found willful Lanham Act violations. Fresh also alleged, and the jury agreed, that DMC's use of a print advertising campaign--the " Fruit Undressed" campaign, which showed fresh fruit in the process of being peeled or cut--had violated the Lanham Act, though Fresh sought no damages on that claim. ( See Verdict Form, Ex. A to DeArcy Decl.)

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II. FRESH IS ENTITLED TO PERMANENT INJUNCTIVE RELIEF

A. The U.S. Supreme Court's Test for Permanent Injunctive Relief Set Forth in the eBay Case Applies to Lanham Act and Trademark License Agreement Disputes.

Section 34 of the Lanham Act specifically authorizes district courts to enter injunctive relief in false advertising cases. 15 U.S.C. § 1116(a). Indeed, " [i]n most cases, after a full trial finding false advertising, a final injunction is appropriate." 5 McCarthy on Trademarks § 27:37 (4th ed. 2012) (" McCarthy" ). Such an injunction is " the usual and standard remedy once trademark infringement has been found." Id. § 30:1. Similarly, courts have recognized that the breach of a trademark license agreement usually requires an injunction to prevent wrongful trademark use--more often by the licensee, but also by the owner-licensor. Compare Gayle Martz, Inc. v. Sherpa Pet Grp., LLC, 651 F.Supp.2d 72, 84 (S.D.N.Y. 2009) (enjoining licensee from infringing trademark by exceeding scope of license), with Shoney's, Inc. v. Schoenbaum, 686 F.Supp. 554, 567-68 (E.D. Va. 1988) (enjoining trademark owner and licensor from breaching licensee's exclusive rights to trademark), aff'd, 894 F.2d 92 (4th Cir. 1990).

Nonetheless, a permanent injunction will only issue if a plaintiff has met the U.S. Supreme Court's four-factor test spelled out in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006), which was a patent dispute:

A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

Id. at 391; accord Salinger v. Colting, 607 F.3d 68, 77 (2d Cir. 2010). Although the U.S. Court of Appeals for the Second Circuit has endorsed slight variations from that test, the panel in Salinger observed that " eBay strongly indicates that the traditional principles of equity [as embodied in the four-factor test] it employed are the presumptive standard for injunctions in any context." Id. at 78. To apply a different test or presumption of entitlement to an injunction would be " a major departure from the long tradition of equity practice [that] should not be lightly implied." eBay, 547 U.S. at 391 (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 320, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982)). As in the patent statute at issue in eBay, section 1116(a)'s grant of authority to issue injunctive relief contains no indication that any other standard should be employed and, to the contrary, expressly incorporates " the principles of equity." 15 U.S.C. § 1116(a); cf. eBay, 547 U.S. at 392 (quoting 35 U.S.C. § 283 (" in accordance with the principles of equity" )). Accordingly, the Court finds that the test articulated in eBay applies here for an injunction against false advertising and breach of the License Agreement.

B. Application

DMC contends that an injunction is not warranted against it largely for two reasons: (1) its voluntary cessation of its violative conduct moots the need for an injunction, and (2) the injury to Fresh is not irreparable and has been more ...


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