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Bimbo Bakeries USA, Inc. v. Sycamore

United States District Court, D. Utah

March 5, 2019

BIMBO BAKERIES USA, INC., Plaintiff,
v.
LELAND SYCAMORE and UNITED STATES BAKERY, INC., Defendants.

          MEMORANDUM DECISION AND ORDER DENYING IN PART and GRANTING IN PART [555] U.S. BAKERY'S RENEWED MOTION FOR JUDGMENT

          DAVID NUFFER UNITED STATES DISTRICT JUDGE

         Defendant United States Bakery (“U.S. Bakery”) filed a Renewed Motion for Judgment as a Matter of Law (“Renewed Motion for Judgment”).[1] Plaintiff Bimbo Bakeries USA, Inc. (“Bimbo Bakeries”) filed a memorandum in opposition, [2] and U.S. Bakery replied.[3] U.S. Bakery seeks judgment as a matter of law, pursuant to Federal Rule of Civil Procedure 50(b), on Bimbo Bakeries' false advertising and trade secret claims. Alternatively, U.S. Bakery requests that Bimbo Bakeries' damages be remitted on the false advertising claim, or for a new trial pursuant to Rule 59. For the reasons discussed below, the Renewed Motion for Judgment is denied in part and granted in part.

         Contents

         Background ..................................................................................................................................... 2

         Standard of Review ......................................................................................................................... 5

         Discussion ....................................................................................................................................... 7

         Bimbo Bakeries' false advertising claim ............................................................................ 7

         The jury appropriately decided whether the term “local” in U.S. Bakery's tagline is misleading ............................................................................................... 8

         Bimbo Bakeries' expert was properly allowed to establish consumer confusion and materiality .......................................................................................... 11

         Bimbo Bakeries' trade secret claim .................................................................................. 13

         U.S. Bakery failed to establish that Bimbo Bakeries' trade secret is generally known or inconsistent with Bimbo Bakeries' actual practice ................... 13

         U.S. Bakery failed to preserve its other arguments regarding Bimbo Bakeries' trade secret misappropriation claim .......................................................... 14

         Bimbo Bakeries' damages ................................................................................................ 15

         Order….. ....................................................................................................................................... 19

         BACKGROUND

         Bimbo Bakeries sued U.S. Bakery claiming it (1) falsely advertised the origin of some of its bread products by using the word “local” in a company tagline; (2) misappropriated Bimbo Bakeries' trade secret in making and selling its “granny-style” bread; (3) infringed on Bimbo Bakeries' trade dress through its packaging; and (4) caused dilution to Bimbo Bakeries' trade dress.[4] Prior to trial, U.S. Bakery moved for summary judgment on all of Bimbo Bakeries' claims.[5] The motion for summary judgment was denied with respect to the false advertisement and trade secret misappropriation claims.[6] In particular, whether the term “local” is false or misleading was deemed to be an appropriate question for the jury. Further, U.S. Bakery had not shown Bimbo Bakeries' purported trade secret to be generally known.[7] However, Bimbo Bakeries' false advertising damages were limited to Utah and southern Idaho, [8] based upon a prior ruling on expert witnesses.[9]

         U.S. Bakery filed several motions in limine before trial. U.S. Bakery moved for an order declaring that the word “local, ” as a matter of law, is not a factual determination.[10] U.S. Bakery's request was denied, consistent with the court's ruling on summary judgment.[11] U.S. Bakery also moved to exclude evidence related to consumer confusion from U.S. Bakery's use of “local” in its tagline outside of Utah.[12] In support, U.S. Bakery argued that Bimbo Bakeries' expert only surveyed consumers within Utah. The motion was denied, finding that the scope of the consumer survey influences the weight of the evidence rather than its admissibility.[13] With respect to damages, U.S. Bakery sought to exclude any evidence that Bimbo Bakeries was entitled to recover damages for “lost profits”-as opposed to damages based upon unjust enrichment-in connection with its false advertising claim.[14] The motion in limine was denied on the basis that it would be decided at trial whether Bimbo Bakeries' evidence of lost profits for false advertising was sufficient to submit to the jury.[15]

         At trial, Bimbo Bakeries' expert, Glenn Christensen, presented the results of consumer surveys performed regarding U.S. Bakery's tagline to support Bimbo Bakeries' false advertising claim.[16] Bimbo Bakeries also presented expert testimony from Richard Hoffman to calculate damages related to U.S. Bakery's unjust enrichment from its false advertising and trade secret misappropriation.[17] On behalf of U.S. Bakery, expert witness Himanshu Mishra testified to challenge Dr. Christensen's methods and findings, [18] and Gil Miller testified to rebut Mr. Hoffman's methods and calculations.[19]

         At the close of Bimbo Bakeries' case-in chief, U.S. Bakery made an oral motion for judgment as a matter of law regarding the trade secret claim on two grounds: (1) U.S. Bakery does not make its bread the same way that Bimbo Bakeries does; and (2) the trade secret is not protectable because the components are generally known.[20] After the parties rested, U.S. Bakery renewed its oral motion for judgment as a matter law.[21] In addition to the arguments previously made, U.S. Bakery asserted that there was no “chain of confidentiality” between Bimbo Bakeries and U.S. Bakery to support misappropriation of a trade secret[22] and that Mr. Hoffman's calculation of unjust enrichment damages was improper.[23] U.S. Bakery also sought judgment as a matter of law with respect to Bimbo Bakeries' false advertising claim. U.S. Bakery argued that Bimbo Bakeries failed to present evidence of any actual consumer confusion and that Dr. Christensen's testimony should have been excluded.[24] At that time, U.S. Bakery also addressed the geographic scope of the consumer surveys conducted, arguing that Dr. Christensen did not present any data outside of Utah, and, therefore, the jury would be speculating as to how consumers in other states respond to U.S. Bakery's tagline.[25]

         The jury returned a verdict in favor of Bimbo Bakeries on both of its claims.[26] Following post-trial briefing, judgment was entered against U.S. Bakery for $8, 027, 720 in false advertising damages and $1, 578, 942 in trade secret damages (plus exemplary damages in the amount of $789, 471).[27]

         STANDARD OF REVIEW

         Federal Rule of Civil Procedure 50(a) allows a party to move for judgment as a matter of law after another party “has been fully heard on an issue during a trial.”[28] If the motion is not granted, then it may be renewed after the entry of judgment.[29] The renewed motion “may include an alternative or joint request for a new trial under Rule 59.”[30] “In ruling on the renewed motion, the court may: (1) allow judgment on the verdict . . .; (2) order a new trial; or (3) direct the entry of judgment as a matter of law.”[31] Judgment as a matter of law is appropriate when “the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.”[32] The court views the entirety of the record and the evidence in the light most favorable to the nonmoving party.[33]

         Under Rule 59, the court may grant a new trial “after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court.”[34] “A motion for new trial on the grounds that the jury verdict is against the weight of the evidence normally involves a review of the facts presented at trial, and thus involves the discretion of the trial court.”[35] “The inquiry focuses on whether the verdict is clearly, decidedly or overwhelmingly against the weight of the evidence.”[36] When considering a motion for new trial, the court must view all evidence in the light most favorable to the prevailing party.[37] “Where a new trial motion asserts that the jury award is not supported by the evidence, the verdict must stand unless it is clearly, decidedly, or overwhelmingly against the weight of the evidence.”[38]

         Moreover, “the jury's award is inviolate unless . . . it [is] ‘so excessive that it shocks the judicial conscience and raises an irresistible inference that passion, prejudice, corruption, or other improper cause invaded the trial.'”[39] “[T]he amount of damages awarded by a jury can be supported by any competent evidence tending to sustain it.”[40] However, “[i]f a damages award is deemed excessive, but does not taint the finding of liability, a court may order a remittitur.”[41]

         DISCUSSION

         Bimbo Bakeries' false advertising claim

         Bimbo Bakeries claimed that U.S. Bakery's use of “local” in its tagline falsely advertised its bread products by “falsely suggest[ing] to consumers that [U.S. Bakery's] products are made in Utah, ” when in reality “the bakery products that [U.S. Bakery] sells in Utah . . . are shipped from a substantial distance out of state.”[42] “The Lanham Act prohibits the false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin” of a product.[43] To prevail on a false advertising claim, the plaintiff must show:

(1) that [the] defendant made material false or misleading representations of fact in connection with the commercial advertising or promotion of its product; (2) in commerce; (3) that are either likely to cause confusion or mistake as to (a) the origin, association or approval of the product with or by another, or (b) the characteristics of the goods or services; and (4) injure the plaintiff.[44]

         “To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers.”[45]

         U.S. Bakery asserts that Bimbo Bakeries' false advertising claim fails as a matter of law and is unsupported by the evidence, because (1) the word “local” in U.S. Bakery's tagline is not a specific geographic place, and therefore not false or misleading; (2) Bimbo Bakeries' expert testimony was incompetent and cannot support the jury's verdict; and (3) Bimbo Bakeries failed to present evidence that the word “local” was material to a bread purchaser's decision. These arguments were previously asserted by U.S. Bakery in its motions to exclude expert witnesses, motion for summary judgment, motions in limine, and oral motion for judgment as a matter of law. For the same reasons stated in the orders on those motions, U.S. Bakery's request for judgment as a matter of law on Bimbo Bakeries' false advertising claim is denied.

         The jury appropriately decided whether the term “local” in U.S. Bakery's tagline is misleading

         U.S. Bakery argues that Bimbo Bakeries failed to satisfy the first element of its false advertising claim because the use of the term “local” in its tagline was not a false or misleading representation of fact about its bread product. Although it does not carry a set definition, the term “local” is a statement of fact-not a statement of general opinion-which could be found to be misleading as to the nature, characteristics, or qualities of U.S. Bakery's bread.[46] Contrary to U.S. Bakery's assertion, Bimbo Bakeries was not required to prove that U.S. Bakery's advertisement was literally false.[47] Instead, Bimbo Bakeries was allowed to assert an alternative basis for its claim by demonstrating implied falsehood through extrinsic evidence that the use of “local” in U.S. Bakery's tagline tends to mislead or confuse consumers as to where the product is made. At trial, Bimbo Bakeries presented consumer survey data through its expert witness to show that the tagline “local” was misleading and material to purchasers. The jury heard that evidence, as well as the rebuttal testimony of U.S. Bakery's expert, and, as it was entitled to do, decided that U.S. Bakery's use of “local” in its advertising was misleading.

         In support of its Renewed Motion for Judgment, U.S. Bakery cites to Forschner Group, Inc. v. Arrow Trading Co., Inc., [48] a Second Circuit case, to argue that “local” is not a specific geographic location that can be verified objectively as either true or false.[49] That case is not only not binding on this court, but U.S. Bakery's reliance on it is also inapposite. The plaintiff in Forschner Group brought a false advertising claim against the defendant, alleging that defendant's use of the phrase “Swiss Army knife” falsely suggested to consumers that its knives were manufactured in Switzerland.[50] The court determined that the phrase “Swiss Army knife” was not a geographic designation because the phrase could not fairly be read to say “made in Switzerland” so as to be geographically descriptive.[51] However, a term does not need to designate a specific geographic origin to be actionable.

         The court in Forschner Group, applying the analytical framework used to gauge the distinctiveness of trademarks to resolve a question of false designation of geographic origin, [52]distinguished between geographically descriptive terms and geographic terms. “A geographically descriptive term is one that ‘designates geographical location and would tend to be regarded by buyers as descriptive of the geographic location of origin of the goods or services.'”[53] “Under the false advertising provisions of the Lanham Act, a phrase is eligible for protection as a representation of geographic origin only if the phrase is geographically descriptive” and “used in a deceptive manner so as to create a ‘likelihood of confusion' concerning the geographic origin of a product.”[54]

         Here, “local” is a geographically descriptive term, and Bimbo Bakeries presented evidence that U.S. Bakery used the term in a deceptive manner concerning the origin of its bread product-namely, to suggest that its bread products were particularly fresh and of high quality because they were baked within the geographic vicinity of where they were sold.[55] Therefore, the jury's verdict was sufficiently supported by the evidence and not legal error.

         Bimbo Bakeries' expert was properly allowed to establish consumer confusion and materiality

         U.S. Bakery next argues that Bimbo Bakeries failed to provide valid evidence of consumer confusion in order to satisfy the third element of its false advertising claim. A plaintiff “must demonstrate, by extrinsic evidence, that the challenged [advertisements] tend to mislead or confuse consumers.”[56] Such evidence must show that a “statistically significant” No. of people have been misled.[57] “While there is no bright line rule on what constitutes a statistically significant group, courts have held that survey evidence of 15% confusion is sufficient to demonstrate actual confusion.”[58]

         At trial, Bimbo Bakeries' expert, Dr. Christensen, presented the results of consumer surveys performed demonstrating 28% consumer confusion.[59] U.S. Bakery asserts that these surveys were not reliable and that Dr. Christensen was not qualified to testify.[60] U.S. Bakery previously raised this argument in a motion in limine[61] and a motion to exclude the testimony of Dr. Christensen.[62] Both motions were denied, and there is no basis for disturbing those rulings now.[63]

         Dr. Christensen's education, experience, and qualifications qualified him to testify to quantitative surveys. Moreover, the methodology he used did not render his survey results unreliable. “Flaws in methodology typically relate only to the weight of the survey evidence.”[64]Any flaws in Dr. Christensen's methodology were not so substantial as to render the survey's conclusions untrustworthy. As a result, his testimony was properly admitted.

         Having received evidence of consumer confusion, the jury properly determined that U.S. Bakery's use of the term “local” was material to a bread purchaser's decision.[65] A misrepresentation is material if “it would have some effect on consumers' purchasing decisions.”[66] This effect does not have to be a dominant factor so long as it would have some impact on a purchase decision.[67] Further, a plaintiff need only prove a likelihood that a particular misrepresentation would be material to consumer purchase decisions, and need not prove actual influence on consumer decision making.[68] Overall, Bimbo Bakeries put forth sufficient evidence at trial to prove materiality through direct testimony, as well as Dr. Christensen's consumer surveys.[69]

         Bimbo Bakeries' trade secret claim

         Bimbo Bakeries alleged that U.S. Bakery misappropriated Bimbo Bakeries' trade secrets by hiring a competitor's employee, Mr. Faull, and modifying its bread product to more closely resemble Bimbo Bakeries' Trade Secret Process based on confidential methods disclosed by Mr. Faull.[70] To state a claim under Utah's Uniform Trade Secrets Act, a plaintiff must establish (1) the existence of a trade secret; (2) communication of the trade secret to the defendant under an express or implied agreement limiting disclosure of the secret; and (3) the defendant's use of the secret that injured the plaintiff.[71]

         U.S. Bakery asserts that Bimbo Bakeries' trade secret claim fails as a matter of law and is unsupported by the evidence because (1) Bimbo Bakeries' compilation is skill and knowledge of the trade; (2) the compilation does not describe Bimbo Bakeries' actual practice; and (3) U.S. Bakery had the compilation before the time that Bimbo Bakeries asserts that U.S. Bakery stole it.

         U.S. Bakery failed to establish that Bimbo Bakeries' trade secret is generally known or inconsistent with Bimbo Bakeries' actual practice

         Bimbo Bakeries' trade secret is a compilation of specific ingredients and production steps. A trade secret can be a compilation that “derives economic value from not being known or readily ascertainable by others” and “is the subject of reasonable efforts to maintain its secrecy.”[72] A compilation of generally known elements may qualify as a trade secret “if the combination itself is outside the general knowledge and not ascertainable by proper means.”[73] However, a compilation cannot be a trade secret if it is already known to a defendant or to knowledgeable persons in the industry.[74]

         U.S. Bakery argues that Bimbo Bakeries' compilation is generally known and, therefore, unprotected skill and knowledge of the trade.[75] U.S. Bakery previously asserted this argument in its motion for summary judgment, which was denied.[76] None of U.S. Bakery's witnesses, including its baking expert, testified that the use of all four elements of the trade secret to produce a commercial “granny-style” bread was generally known or readily ascertainable to U.S. Bakery.[77] At trial, the jury heard extensive testimony regarding all the elements that merit protection for the compilation trade secret as a whole.[78] Based on the evidence presented at trial, the jury could reasonably find that Bimbo Bakeries had a protectable trade secret and that U.S. Bakery misappropriated that trade secret.

         U.S. Bakery failed to preserve its other arguments regarding Bimbo Bakeries' trade secret misappropriation claim

         U.S. Bakery further asserts that Bimbo Bakeries cannot claim the compilation is a trade secret because (1) the compilation does not reflect Bimbo Bakeries' actual practice: and (2) U.S. Bakery discovered the compilation on its own in June 2013 (five months before Bimbo Bakeries asserts that U.S. Bakery stole it).[79]

         U.S. Bakery forfeited its ability to rely on these theories because it did not pursue these defenses by motion or at trial.[80] As a result, U.S. Bakery is precluded from now pursuing these defenses in a renewed motion for ...


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