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NOT FOR PUBLICATION DEC 28 2009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
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§ 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
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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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