Free Order - District Court of Arizona - Arizona

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

MARLYN NUTRACEUTICALS, INC., an Arizona corporation,

) ) ) Plaintiff, ) ) vs. ) ) WILLIAM WONG, et al., ) ) Defendants. ) ___________________________________)

No. 2:02-cv-1876-HRH

O R D E R Case Status Through a series of case status orders,1 the court has

endeavored to move this case toward a conclusion -- first through a global settlement that failed and then through separate agreements between plaintiff and various of the defendants -- as a result of which the case is now concluded as to defendants Wong2 and Buell.3 The case has also been concluded as to third-party defendant Knobloch.4 claim.5 The case is concluded as to plaintiff's trade secrets

1

Docket Nos. 339 & 341. Docket No. 360. Docket No. 353. Docket No. 331 and 366. Docket No. 280 at 39; Docket No. 282 at 4. - 1 -

2

3

4

5

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 1 of 7

In the court's February 29, 2008, case status order,6 the court set out in very broad terms its concept for a damages retrial as between plaintiff and defendant World Nutrition on plaintiff's Lanham Act / false advertising, unfair competition, and trade libel claims. were The court sought comments from counsel.7 from both plaintiff Marlyn Status reports and

received

Nutraceuticals8

defendant World Nutrition.9

At the same time, plaintiff filed its

renewed motion for interlocutory appeal.10 Concurrent herewith, the court has ruled on plaintiff's renewed motion for interlocutory appeal. That motion has been denied.

It is now time to return to the subject of a retrial of damages issues as between plaintiff and World Nutrition. The

following are the court's reactions to the March comments upon the court's status order. The court had suggested the possibility of a bench trial. That approach is not acceptable to plaintiff, and therefore the retrial will be to a jury. Plaintiff suggests that the retrial jury be instructed that it "must award both compensatory and punitive damages."11 The court

6

Docket No. 341. Id. at 4. Docket No. 349. Docket No. 351. Docket No. 350.

7

8

9

10

Marlyn Nutraceutical's Comments re Case Status at 2, Docket No. 349. - 2 -

11

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 2 of 7

has heretofore indicated12 that it intends using the same damages jury instructions for purposes of the retrial, but that it would consider tweaking those instructions. In the latter regard, it

strikes the court that the retrial jury must be instructed that liability on the part of World Nutrition has been determined on each of plaintiff's Lanham Act / false advertising, unfair

competition, and trade libel claims, and that the jury's job is to determine the amount of damages. However, the court will not

foreclose the possibility of "zero" or nominal ($1.00) compensatory damages. As regards punitive damages, the court considers

liability determined on that issue also; but again, the court will leave the determination of the amount of punitive damages, if any, to the retrial jury. The court will not instruct the jury that it

must employ some specific ratio in determining punitive damages. Going beyond what is discussed by the parties in their responses to the court's case status order, the parties are reminded of the court's rulings with respect to compensatory damages based upon World Nutrition's sales of Vitalzym to

plaintiff's customers.

The issues and state of the evidence on

this damage area is summarized in the court's order of November 14, 2006.13 In that order, the court has discussed disclosure and

damages evidence issues in connection with World Nutrition's motion for a new trial on the trade secrets verdict in favor of plaintiff. That verdict was upheld by the court.
12

As a consequence, plaintiff

Docket No. 341 at 4. Docket No. 280 at 35-38. - 3 -

13

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 3 of 7

will not be in a position for purposes of the retrial to seek a further compensatory damage recovery from World Nutrition based upon sales of Vitalzym to plaintiff's customers. Rather, on the

basis of the available evidence at a second trial, plaintiff will have to show damages from sales of Vitalzym to its own customers as opposed to plaintiff's customers. In this regard, the parties are

reminded that plaintiff has the burden of demonstrating a causal connection between damages sought by plaintiff and the wrongdoing of World Nutrition.14 The parties' responses to the court's case status order discuss various aspects of how evidence would be presented at a retrial. Plaintiff urges that it would be unfairly prejudicial to The court

simply read portions of the record to the new jury.15 views the latter as a legitimate concern.

To the extent possible,

the court believes that live damages testimony should be used with several caveats. First, all of the parties' witnesses must

recognize that they will be subject to cross-examination and possible impeachment to the extent they depart from their prior testimony. Second, however, because plaintiff is entitled to an

instruction that liability has been determined in its favor and against World Nutrition, live testimony as to World Nutrition's wrongful conduct strikes the court as inappropriate. Rather, the

court suggests that the parties consider and propose to the court

Joint Statement of Issues for Trial, Issue No. 23, Docket No. 178.
15

14

Docket No. 349 at 2. - 4 -

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 4 of 7

a fair and reasonably detailed summary of the wrongful conduct in question based upon the testimony taken at the first trial. If the parties are able to agree upon such a statement, the court will employ what the parties propose. Failing in that, the court will

take plaintiff's suggestion and will consider World Nutrition's objections and/or proposals for additions or deletions. Third,

World Nutrition has called to the court's attention the existence of litigation between plaintiff and Mucos Pharma GmbH & Co., which, at the point the court was informed of the litigation, included a preliminary injunction in favor of Mucos enjoining plaintiff from using the Wobenzyme trademark and requiring plaintiff to, among other things, recall all misbranded product. In its presentation

to the court, World Nutrition suggests that plaintiff no longer has the right to sell Wobenzyme; that since 2002, Wobenzyme has not been formulated as was represented on the product label; and that plaintiff's claims of clinical testing of Wobenzyme were false. Based upon what is presently before it, it is the court's view that all of the foregoing is irrelevant to a retrial of damages issues in this case. Damages in this case should be a "snapshot" of

plaintiff's losses attributable to defendant's wrongful conduct up to the point of the first trial of this case. It is the court's

perception that the formulation and/or testing of Wobenzyme is no longer an issue in this case. World Nutrition urges that the retrial should be conducted in two stages: compensatory damages and then punitive damages.

Inasmuch as World Nutrition's liability for both compensatory - 5 -

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 5 of 7

damages and punitive damages on plaintiff's Lanham Act / false advertising, unfair competition, and trade libel claims has been determined, the court is unpersuaded on the basis of what is presently before it that there is any reason to bifurcate damages issues at a retrial. A closing thought for plaintiff's consideration: it is the

court's view that there is only one sensible conclusion to the remaining issues between plaintiff and World Nutrition, and that is the result proposed by the court in its order of November 14, 2006,16 upholding plaintiff's trade secrets verdict and granting World Nutrition a new trial on damages if plaintiff would not accept a remittitur as to both compensatory and punitive damages. Plaintiff's compensatory damages as to defendant World Nutrition should be limited to $6,185.65, and punitive damages to between $6,000.00 and $54,000.00.17 proposing a remittitur.) (The court had suggested $30,000.00 in Witness its renewed motion for an

interlocutory appeal, plaintiff is anxious to obtain appellate review of this case. Based upon the court's order granting World

Nutrition a new trial, plaintiff and World Nutrition are looking at the expense of a retrial, and then probably an appeal as well. is the court's view that plaintiff ought to agree to It the

remittiturs proposed by the court, and that World Nutrition ought to agree to pay the suggested amounts unless plaintiff succeeds on
16

Docket No. 280.

Again, this is in addition to plaintiff's recovery of $25,575.00 in compensatory damages and $51,150.00 in exemplary damages (Docket No. 282) on plaintiff's trade secrets claim. - 6 -

17

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 6 of 7

appeal in obtaining the reversal of the court's order granting World Nutrition a new trial. The court now solicits from plaintiff and World Nutrition the following: (1) proposals for a retrial date, in the first two weeks of November 2008 or commencing February 16, 2009; (2) the parties' comments on the foregoing proposal for the retrial of this case as to damages; and (3) any further suggestions counsel may wish to make regarding a plan for the retrial; or, in the

alternative, (4) The parties' agreement to conclude district court litigation as suggested above.

A report or reports as to the foregoing will please be filed on or before June 26, 2008. DATED at Anchorage, Alaska, this 11th day of June, 2008.

/s/H. Russel Holland United States District Judge

- 7 -

Case 2:02-cv-01876-HRH

Document 377

Filed 06/11/2008

Page 7 of 7