Opinion
No. 99 Civ. 9854 (CSH).
August 7, 2001.
MEMORANDUM OPINION ORDER
This case is before the Court on a request by the defendants for a hearing on the merits to consider the plaintiffs motion for attorney's fees and.costs pursuant to 15 U.S.C. § 1117(a) and N.Y. Gen. Bus. Law § 349(h).
Having examined the submissions of the parties on the question of the propriety of attorney's fees, the Court finds that a limited hearing is necessary to resolve material factual disputes between the parties, the resolution of which are necessary conditions to determining the appropriateness of any award for fees.
I. BACKGROUND
The history of . . . this case is detailed in my previous Memorandum Opinion and Order, familiarity with which is assumed. Virgin v. American Longevity, 99 Civ. 9854, 2001 U.S. Dist. Lexis 2046 (S.D.N.Y. February 28, 2001). A brief summary will suffice for purposes of addressing the defendants' request.
Plaintiff Virgin Enterprises Limited ("VEL" or "plaintiff') is a corporation organized under the laws of the United Kingdom. Under its "VIRGIN" trademark, VEL engages in a vast array of business endeavors and is listed as a Fortune 500 corporation with sales revenue in excess of 5 billion pounds. Plaintiff's Second Amended Complaint ("Complaint") at ¶ 8.
Defendant Wellness Lifestyles, Inc., a California corporation existing under the laws of that state, also doing business as American Longevity, was formed in 1996 by the individual defendant Joel Wallach, now the President and CEO of American Longevity (collectively "WLI" or "defendants"). The defendants, through multi-level marketing by individual distributors, sell various cosmetic, dietary, and mineral products.
Plaintiff's Complaint, filed November 17, 2000, alleged that WLI, through its use of the terms "VIRGIN" and "VIRGIN EARTH" on many of its products, was liable to the plaintiff for trademark infringement, pursuant to §§ 32 and 34 of the Trademark Act ("the Act") 15 U.S.C. § 1114, 1116, and 1117; for false description and false advertising under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); for dilution under § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c) and N.Y. Gen. Bus. Law § 360-1; for deceptive acts or practices, including false advertising, in violation of N.Y. Gen. Bus. Law § 349-350; and for unfair competition under Cal. Bus. Prof. Code §§ 17200 et seq. (hereinafter "§ 17200").
After months of discovery, the parties settled the case. The settlement took the form of a final judgment and permanent injunction, entered on March 23, 2001. The judgment was "ENTERED in favor of plaintiff and against defendants" on each of the plaintiff's seven causes of action. Final Judgment and Permanent Injunction Order at 1. The defendants did not admit "that they are liable in this action or that plaintiff has suffered any damage,. . .". Id. The judgment awarded the plaintiff $300,000 in money damages, an amount specified to be exclusive of attorney's fees or costs. Id. at 3.
Soon after judgment was entered in the case, VEL filed a motion for attorney's fees under 15 U.S.C. § 117(a) (providing for attorney's fees in "exceptional cases") and N.Y. Gen. Bus. Law § 349(h) ("the court may award attorneys' fees to a prevailing party"). The Court ordered bifurcation of that motion on April 24, 2001, to consider first WLI's liability vel non for attorney's fees. The Court, having now received complete submissions from the parties on the question of the propriety of attorney's fees, addresses defendants' request for a "hearing on the merits."
Defendants full request is as follows: "If the Court does not find that Plaintiff's motion fails prima facie, Defendants respectfully request a hearing on the merits in accordance with N.Y. State Society of Certified Public Accountants v. Eric Louis Assoc. Inc., 79 F. Supp.2d 331 (S.D.N.Y. 1999). Without knowing what defendants mean by "fails prima facie," the Court does not conclude that plaintiff's motion is without merit on its face. For that reason. the Court must explore the substance of the arguments made by counsel for both parties, as discussed infra. Counsel's citation to Judge Sand's opinion is misleading, as the Judge did not in that case hold the type of hearing defendants' request, but instead decided the matter on written submissions.
VEL apparently does not object to such a hearing, mentioning in passing "[t]he Court can determine these questions [whether to award attorney's fees under federal or New York law] on the existing record or, alternatively, hold further evidentiary hearings." Plaintiff's Memorandum at 3. VEL gives no indication as to its own preference.
II. DISCUSSION
The Second Circuit recently offered guidance on the question of how a district court ought to consider a motion for attorney's fees. InCrescent Publishing Group Inc. v. Playboy Enterprises Inc., 246 F.3d 142 (2d Cir. 2001), the Second Circuit found that the district court abused its discretion by awarding attorney's fees sua sponte without affording the parties an opportunity to present evidence on the propriety and amount, if any, of the fee award. The plaintiff in that case, Crescent Publishing, Inc., sued Playboy Enterprises, Inc. for copyright infringement. Because the plaintiff could not prove copyright ownership, the district court dismissed the claim with prejudice and sua sponte awarded attorney's fees to Playboy. Id. at 145. On appeal Crescent argued, inter alia, that the district court erred in determining that an award of fees was appropriate without permitting Crescent the opportunity to submit evidence in opposition to such award. The Second Circuit agreed, stating:
While not required in every case, an evidentiary hearing, or at the very least an opportunity to submit evidence, is necessary to determine the propriety of a fee award and the amount of such award if it is evident that the material facts necessary for those determinations are genuinely in dispute and cannot be resolved from the record.Id. at 147-48, citing Love v. Deal, 5 F.3d 1406, 1409 (11th Cir. 1993) (holding that district court abused its discretion by not providing an evidentiary hearing, although one was not requested, when there was a dispute of material fact that could not be resolved from the record);Daggett v. Kimmelman 864 F.2d 1122, 1128 (3d Cir. 1989) (hearing required when directly contradictory facts averred); but see Walz v. Town of Smithtown 46 F.3d 162, 170 (2d Cir. 1995) (district court did not exceed its discretion in failing to provide a hearing where "nothing . . . would be developed in such a hearing that would alter the outcome").
In the case at bar, extensive written submissions addressing the propriety of attorney's fees have been filed with the Court. Numerous material disputes are explored in these submissions. The question I must address is whether the record, including these most recent submissions, provides an adequate basis upon which to judge the appropriateness of an award of attorney's fees in favor of VEL. Mindful of the Supreme Court's words of caution that "'[a] request for attorney's fees should not result in a second major litigation'," Buckhannon Board and Care Home, Inc. v. West Virginia Dep't of Health and Human Resources, 121 S.Ct. 1835, 1843 (2001), quoting Hensley v. Eckerhart 461 U.S. 424, 437 (1983), I will not permit the consideration of these submissions to consume an extraordinary amount of the Court's time. Examination of these submissions, however, reveals that a limited hearing on the propriety of attorney's fees is necessary to resolve certain material disputes in the record which cannot adequately be resolved without some testimony and cross-examination. In what follows I describe the limits of these submissions and the discrete issues the hearing must address.
VEL argues that the Court should award it attorney's fees on two bases. First, WLI engaged in a pattern of discovery abuses, recognized by Magistrate Judge Fox when. on two separate occasions, he imposed sanctions against the defendants. Second, the defendants acted with a clear intent to defraud consumers, as evidenced by a series of fraudulent statements made by the defendants in an attempt to sell their products.
A. Abuse of the Discovery Process
VEL first argues that "[i]n one respect, the 'exceptional' character of this case has already been determined by Magistrate Judge Fox," insofar as the Magistrate Judge imposed costs against WLI for its violations of Rule 37(b)(2). Memorandum in Support of Plaintiff's Motion for an Award of Attorney's Fees ("Plaintiff's Memorandum") at 3. VEL characterizes these violations as part of a "'pattern' of discovery misconduct." Id. at 5. WLI refers to them as "moderate" sanctions for "single instances of perceived incomplete discovery response or delayed response." Defendants' Memorandum in Opposition to Plaintiff's Motion for Attorney's Fees ("Defendants' Memorandum") at 20 fn. 15, 20. If necessary, the Court is capable of deciding, based on evidence presently in the record, which characterization of events during discovery is more accurate. Therefore, there is no need for an evidentiary hearing on the question.
B. Bad Faith with an Intent to Defraud
VEL's second argument is more sweeping. VEL contends that WLI acted in bad faith with a specific intent to defraud consumers. Plaintiff's Memorandum at 6. First, VEL alleges that the defendants' products are "(slightly muddy) water purportedly containing "colloidal' minerals."Id. at 7. Second, VEL alleges that because the defendants sell "muddy water," they fraudulently misrepresented the offending products ("literally — water which has seeped through dirt") in an "elaborate 'sales pitch'" through the use of the following seven statements in their advertising and promotional materials. Plaintiff's Memorandum at 7.
I. "US Senate document 264 says there's no longer any nutritional minerals left in our farm and range soils" (Plaintiff's Memorandum, Exhibit 11 at 90, "Live Doctors Do Lie," audiotape by Wallach) (hereinafter sometimes "LDDL").
2. "US Senate document 264 says that . . . as a result the crops, the grains, fruits, vegetables and the nuts that are grown there are minerally deficient, and as a result the animals and people who eat these minerally deficient crops get mineral deficiency diseases, and the only way to prevent and cure them is with mineral supplements" (Plaintiff's Memorandum, Exhibit 11 at 90, "Live Doctors Do Lie," audiotape by Wallach).
3. "The most efficient way to absorb minerals is the colloidal form. Colloidal minerals are 98% absorbable, two and a half more [sic] times more available than chelated minerals and ten times more available than metallic minerals" (Plaintiff's Memorandum, Exhibit 12 at 99-100, "Dead Doctors Don't Lie," audiotape by Wallach) (hereinafter sometimes "DDDL").
4. "They [mountain tribes whose diet supposedly is "rich in colloidal minerals"] have no diabetes, they have no heart disease, no high blood pressure, no arthritis, no osteoporosis, no cancer, no cataracts, no glaucoma, they have no birth defects, they have no jails full of drug addicts, they have no taxes, they have no doctors. Yet they live to be 120 to 140 without disease" (Plaintiff's Memorandum, Exhibit 12 at 102-103, "Dead Doctors Don't Lie," audiotape by Wallach).
5. "Now, the only place you can get these in the United States is from a prehistoric valley in southern Utah" (Plaintiff's Memorandum, Exhibit 12 at 103, "Dead Doctors Don't Lie," audiotape by Wallach). "It's the only one on the market. We have the sole rights to this stuff' (Plaintiff's Memorandum, Exhibit Ii at 119, "Live Doctors Do Lie," audiotape by Wallach).
6. "Everybody else who has a vitamin or mineral or what not just follows the labeling requirements of the FDA. This is the only one that in fact has a federal consent decree to do it, because it passed all their tests, it's the only one that's been put to this level of test, because it works. And people were running around 12, 15 years ago saying "Hey, my arthritis got better, my diabetes got better, my early cataracts went away, and my white hair turned black again. my knee arthritis got better.' And so they thought, oh, they must be putting cortisone, prednisone, antibiotics or drugs in that stuff. And when they examined it for two years it only had 60 colloidal minerals in it" (Plaintiff's Memorandum, Exhibit 12 at 105, "Dead Doctors Don't Lie," audiotape by Wallach).
7. Wallach's claims should be believed, because Wallach "was nominated for the 1991 Nobel Prize in Medicine by the Association of Eclectic Physicians (Chartered 1823)" (Plaintiff's Memorandum, Exhibit 14, Virgin Earth product label).
Plaintiff's Memorandum at 7-9.
WLI responds that its product is not muddy water, and that the statements attributed to Wallach "are true, or are matters of scientific opinion that are well substantiated." Defendants' Memorandum at 10.
Both parties have submitted voluminous papers on behalf of their respective positions concerning WLI's products and marketing materials. In what follows, the Court examines VEL's allegation that WLI's products are principally "bottled shale leachate — literally, water which has seeped through dirt," as well as each of the above statements seriatim.
1. The Quality of Defendants' Products
VEL argues that "the defendants' 'mineral products' consist principally of bottled shale leachate — literally, water which has seeped through dirt — which is said by defendant [Wallach] to contain large quantities of 'colloidal' minerals." Plaintiff's Memorandum at 6-7.
WLI responds that plaintiff's allegation is "unsubstantiated" and "unscientific," and that "in point of fact the product is purified and a rich mineral source in colloidal form, quite unlike common dirt." Defendants' Memorandum at 14.
VEL does not directly substantiate with evidence, expert or otherwise, its claim that WLI's products are, literally and merely "muddy water." Perhaps that is because such a characterization is not cast in scientific jargon, or perhaps it is simply a rhetorical flourish. VEL's experts do, however, criticize the quality of the defendants' products.
Professor Robert Rucker, an expert retained by VEL, contends that based upon his knowledge of the relevant scientific literature and his lab analysis of the defendants' "Virgin Earth Colloidal Minerals" ("VECM") products. "VECM [are] a questionable source of minerals; hardly a value as a supplement." Declaration of Robert Rucker, April 5, 2001, Exhibit I at 9. His analysis of the products also led Rucker to conclude that "[t]he Wallach product is mostly aluminum," recommended by the defendants at a dosage that might be toxic." Id. Exhibit 1 at 7; Exhibit 2 at 1-2.
"The Wallach product is mostly aluminum, e.g. 1578 mg of the 20000 suspended solids and dissolved minerals in VECM, i.e. ~ 7-8% by weight is aluminum. Aluminum is not essential and at high levels is toxic [citing two scientific sources for this claim, neither provided to the Court]. . . . If one consumes VECM as prescribed, it amounts from 200 mg to as much as 450 mg Al per Kg of dry food. . . . Experimental animals show signs of aluminum toxicity at 500 mg/Kg of diet [citing above mentioned sources]. There is a serious issue with a product that is proposed for daily use as a dietary supplement that provides ~ 100-150 mg of aluminum." Rucker Declaration. Exhibit 1 at 7.
The remainder of the Rucker report concerns Wallach's claims about his product's absorption in the body, and is discussed infra.
Professor Dennis Miller, another VEL expert, challenges the absorption claims made by Wallach but does not speak to the general quality of the product in his report, other than to argue that his scientific analysis of WLI's products, specifically with regard to their iron content, convinces him that the products are not absorbable in the manner advertised. Declaration of Dennis Miller, April 5, 2001, at 2; Exhibit I at 6.
Professor John Doxbury, a VEL expert, limits his discussion to the matter of mineral depletion in soil; and Dr. Edward Schneider, a VEL expert, confines his report to the subject of human longevity. Declaration of John Doxbury, April 4, 2001 and Declaration of Edward Schneider, April 3, 2001, respectively.
In sum, VEL has not submitted sufficient evidence, by way of expert analysis, to convince the Court of its claim that the defendant's products are merely "muddy water." But VEL has submitted expert evidence which most assuredly calls into question the quality of the defendants' products.
Defendants, of course, do not accept the plaintiff's disparaging characterization of their products. In arguing that their product is a "purified . . . rich mineral source in colloidal form," the defendants submit the affidavit of George Dust, a chemist for The Rockland Corporation. from which WLI states it purchases its "colloidal mineral product." Defendants' Memorandum at 14. Dust claims that Rockland "mines minerals form [sic] a prehistoric mineral in Emery, Utah. The product mine is Humic Shale . . . not common dirt." Defendants' Memorandum, Exhibit 7, Affidavit of George Dust, April 20, 2001, at 1. Dust describes the process by which the Humic Shale is "transformed into a food grade substance fit for consumption" resulting eventually in a yield of "only water-soluble plant derived minerals," or "(colloidal plant minerals)."Id. at 2. Dust claims that his company's mineral solution is sold not only to WLI but also to Estee Lauder, Vitamin Shoppe and other "national and multinational concerns" none of which have ever voiced concern over its products' safety, nor have any federal or state inspectors ever documented "adverse safety finding[s] form [sic] those inspections." Id. at 2-3. In his statement, Elmer Heinrich, Defendants' Memorandum, Exhibit 20, Declaration of Elmer Heinrich, April 27, 2001 at 1, the Chairman of the Board at the Rockland Corporation, states that during the 1980's an FDA inspector requested a sample of the company's colloidal mineral product to test it for aluminum safety. No problems with the product were discovered. Id.
An affidavit by Steven Govorchin. a chemist at Coors Tek, formerly a division of Coors Brewing Co., "verifies]" that his testing of the Rockland colloidal mineral products contain a "mass of approximately 19,000 mg of mineral solids." Defendants' Memorandum, Exhibit 8, Affidavit of Steve Govorchin, April 20, 2001, at 1. The declaration of Ted Laoudis, CEO of Nutritional Engineering, Inc., states that his company "processes raw colloidal mineral supplies delivered by [defendants] who purchase those minerals from The Rockland Corporation," and has found the "purity and quality" of the materials to meet or exceed all governmental and industry standards. Defendants' Memorandum, Exhibit 9, Declaration of Ted Laoudis, April 19, 2001, at 1.
In addition to the claims made by various management, employees, and corporate clients familiar with the Rockland Corporation. the Report by Professor Gerhard Schrauzer, an expert retained by WLI, states that Schrauzer has visited the Rockland mines personally, and affirms that "[t]he Humic Shale veins mined for extraction are rich in naturally formed water soluble mineral salts." Defendants' Memorandum, Exhibit 5, Report by Gerhard Schrauzer at 3. Having himself "extracted a sample of the humic shale from this location," Schrauzer claims that the presence of "water soluble mineral salts" is in sharp contrast with common dirt.Id. at 3. Further, Schrauzer believes that because Rucker, plaintiff's expert, "does not appear to know the true source or composition of the article he studies, I believe he cannot evaluate the article accurately."Id. at 3. Schrauzer disputes Rucker's claim that the defendants' products may contain toxic levels of certain minerals, including aluminum, and cites authority for the proposition that the content levels of various elements found in WLI's products are well within the range for safe human consumption. Id. 7-10. The secondary sources are cited but not provided to the Court.
Without a laboratory, and in any event without the requisite scientific expertise, the Court is unable, on the basis of these written submissions alone, to judge the quality of the defendants' products. Such a judgment must be made, however, if the Court is to decide whether an award of attorney's fees is appropriate. For that reason, the Court will require the parties to provide testimony at an evidentiary hearing which will inquire into the composition and quality of the defendants' products.
2. The Origin of United States Senate Document 264
Plaintiff challenges WLI's use in its advertising materials, specifically Wallach's audiotapes (e.g. "Live Doctors Do Lie," and "Dead Doctors Don't Lie") and other WLI brochures, of the so-called United States Senate Document #264. The contents of this document, an article published in Cosmopolitan Magazine in June of 1936 under the title "Modern Miracle Men," became part of the Congressional Record of the 74th Congress, in its Second Session, as "Document No. 264." In his confrontationally titled audiotape "Live Doctors Do Lie" ("LDDL"), Wallach refers to this article as follows:
US [sic] Senate document 264 says there's no longer any nutritional minerals left in our farm and range soils, and as a result, the grains, vegetables, fruits and nuts that grow there are minerally deficient. As a result, the animals and people who eat these minerally deficient crops get mineral deficiency disease. And according to the US [sic] Senate document 264, the only way to prevent and cure these diseases is to supplement with minerals. I mean, this is a no-brainer.
Now, the scary thing about US [sic] Senate document 264 is that it was written and published by the US [sic] Senate in 1936. We've known this information for 63 years.
Plaintiff's Memorandum, Exhibit 11 at 90.
During Wallach's deposition. plaintiff's counsel questioned Wallach about his use of this article.
Counsel: — showing you what's been marked as Plaintiff's Exhibit 2, could I direct your attention to the second page of this document. There's a block at the bottom that's headed: The reality. Senate Doc. No. 264.
Wallach: Yes.
Counsel: Do you see that?
Wallach: Yes.
Counsel: Have you ever seen that document No. 264?
Wallach: Yes, I have.
Counsel: Do you have a copy of that Senate Document 264?
Wallach: Not with me
* * * *
Counsel: Does your company have a copy of Senate document No. 264 that's quoted from in this block?
Wallach: I don't know.
Counsel: You don't know. Have you ever seen a copy of Senate document No. 264?
Wallach: Yes, I have.
Counsel: Where did you see it?
Wallach: Where did I see it?
Counsel: Yeah.
Wallach: I saw it in San Diego, California. I saw it in Tulsa, Oklahoma. I saw it in New York, Washington D.C. I've seen it all over the place.
Counsel: And what does it look like?
Wallach: It's an official government pamphlet you can get by writing or calling the U.S. Library of Congress.
Counsel: What makes it official?
Wallach: Because it was written and published by the U.S. Senate, has their seal on it.
Counsel: And what makes you say it was written by the U.S. Senate?
Wallach: Because I believe it says it was.
Counsel: Written by the U.S. Senate?. . .
[Counsel for Wallach incorrectly objects that his client did not say "written"]
* * * *
Counsel: When you said written in that answer —
Wallach: Uh-huh.
Counsel: — Doctor, what did you mean by that?
Wallach: Well, I believe testimony from multiple individuals were [sic] given, and I don't know whether it was a transcript or excerpts or whatever, but this document is a — a testimony of multiple persons.
Counsel: Testimony as in congressional hearing-type testimony.
Wallach: I believe so.
Plaintiff's Memorandum, Exhibit 13 at 75-79.
During further testimony at his deposition, Wallach stated that whoever prepared the defendants' brochure, containing the references to document 264, "apparently" did have an original document 264. Id. at 81.
Defendants attempt to defend against plaintiff's charge that Wallach misrepresented the nature of Senate document 264 by stating that "there is indeed such a document." Defendants' Memorandum at 15. The fact of the matter is that while there is such a document, it was neither written by anyone connected with the United States Senate, nor is it a transcript of testimony before the Senate or any other Congressional body. It is, instead, a reprint from an article in Cosmopolitan Magazine, as the Congressional record itself states on its first page. Plaintiff's Memorandum, Exhibit 16; Defendants' Memorandum, Exhibit 12. It strains credulity to argue, as Wallach does, that he was unaware who authored this article throughout his many years of using it as evidence of the value of his products.
The Court is satisfied that Wallach willfully misrepresented the origin, that is, the authorship and nature of "Senate document 264." That issue need not be further explored in an evidentiary hearing.
3. Senate Document 264 and Mineral Depletion in Soil
Again, Wallach makes the following statement in his DDDL audiotape:
US Senate document 264 says there's no longer any nutritional minerals left in our farm and range soils, and as a result, the grains, vegetables, fruits and nuts that grow there are minerally deficient. As a result, the animals and people who eat these minerally deficient crops get mineral deficiency disease. And according to the US Senate document 264, the only way to prevent and cure these diseases is to supplement with minerals. I mean, this is a no-brainer.
Plaintiff's Memorandum, Exhibit 11 at 90.
Plaintiff's argue that Wallach "intentionally" and "fraudulent[ly]" misstates not only the content of Document 264, but also the truth about the mineral content found in American soil. Plaintiff's Memorandum at 10.
Defendants respond by avoiding altogether the accuracy of Wallach's references to the Cosmopolitan article, stating instead that "[t]he fact that farming and processing practices deplete nutrient stores in soils and the resulting foods is an unremarkable one." Defendants' Memorandum at 15.
The Court has read the entire Cosmopolitan Magazine article, a/k/a Senate Document 264. While plaintiff is correct that the article does not allege that there are no nutritional minerals left in American soil, it does say "foods . . . now being raised on millions of acres of land that no longer contains enough of certain needed minerals, are starving us — no matter how much of them we eat!" Plaintiff's Memorandum, Exhibit 16 at 2. But the article does not suggest that colloidal mineral dietary supplements are a panacea for the depletion of minerals in our soil. Quite to the contrary, the solution suggested in the article is to "rebuild our soils" through "scientific soil feeding" to solve the problem of mineral deficiency. Id. at 5, 3. Nothing is said about mineral supplementation. Taken together with Wallach's statements that the article was written by the United States Senate, it is impossible to avoid the conclusion that Wallach intended his audience to believe that our government was aware, for some 70 years, that our nation's soil, and hence the food harvested from it, lacked the necessary nutritional minerals that only supplements such as those sold by WLI could provide. These circumstances compel the inference, which f4raw, that Wallach intended to mislead the public with respect to these matters.
The Court need not consider, and the parties do not discuss, the reputation of Cosmopolitan Magazine as it existed in 1936. If it bears resemblance to the Cosmopolitan Magazine of today, it could not be said that it is a scientific magazine (unless a compendium of artifices and techniques purportedly enabling women to attract and retain the affections of men may be characterized "scientific"). Because it is Wallach's claims about the origin and contents of the article that are at issue, rather than the wisdom of using a "Cosmo" article as a centerpiece for making scientific claims, I avoid the matter altogether.
Defendants' submission on this subject consists primarily of hundreds of pages taken from various publications referenced in the Blum Fulford Report. Defendants' Memorandum, Exhibit 10. Dr. James Blum, a WLI expert with a doctorate in "Clinical Outcomes Research," has compiled a lengthy report along with Mark Fulford, a self-described "Farm Consultant," intended as evidence in support of defendants' claim that the reality of mineral depletion in soil and foods is well established as "sound science." Defendants' Memorandum at 16. That, however, is not a material dispute. That mineral supplements are of value is not a meaningful question before the Court. What is of importance is Wallach's misrepresentation of a magazine article that was made part of the congressional record, and his exaggerated claim that no nutritional minerals remain in our soil. These statements were made in an effort to sell his products in particular, as mineral supplements, on the ground that those products are essential to good health. This distortion is recognized by the Court.
Defendants also submit 58 pages, many duplicative, from the web site of the United States Department of Agriculture, Agricultural Research Service. Defendants' Memorandum, Exhibit 17. After reading these pages, it is not clear which party benefits more from their content. While the document talks a great deal about the problems associated with soil erosion, it also provides a litany of suggestions on how to improve the already long-standing practices of soil management designed to ensure that needed nutrients are not depleted from our soil or food.
Plaintiff submits the Declaration of John Duxbury, April 4, 2001, to challenge Wallach's statements concerning "the depletion of mineral nutrient content of U.S. soils and the impact of this purported change on the mineral content of crop products." As stated infra, the Court does not wish to go down this path at the hearing. Wallach's claim that no nutritional minerals remain in American soil is an obvious exaggeration of the truth. The extent to which such statements bear on the motion before the Court will be decided by the Court on the record before it.
As the Court will not allow itself to be sidetracked by the general topics of soil management and mineral depletion, those matters will not be discussed at the hearing.
4. Colloidal Minerals and Absorption
In DDDL, Wallach makes the following statement:
The most efficient way to absorb minerals is the colloidal form. Colloidal minerals are 98% absorbable, two and a half more [sic] times more available than chelated minerals and ten times more available than metallic minerals" (Plaintiff's Memorandum, Exhibit 12 at 99-100, "Dead Doctors Don't Lie," audiotape by Wallach).
Plaintiff contends that this statement contains numerous "false and fraudulent" claims. Plaintiff's Memorandum at 10. First, the plaintiff states that a very small percentage of the minerals found in the defendants' products exist in colloidal form, and that those existing as colloids are nonetheless "zero percent absorbable." Id. Plaintiff cites the Schrauzer deposition. Plaintiff's Memorandum, Exhibit 20 at 55, wherein the defense expert agrees that of the 19, 000 milligrams of minerals in a given WLI product, "approximately 2 percent of that quantity is in the form of colloids." Second, VEL contends that even the non-colloidal minerals in WLI's products do not have 98% absorbability. According to Rucker, the shale leachate that defendants' sell is highly acidic, as Schrauzer admits. Rucker Declaration at 2; Plaintiff's Memorandum, Exhibit 20 at 70 (Schrauzer testifies that pH level of product is "around three," which is highly acidic). Upon digestion of the product, "nearly 80% of its mineral content into insoluble — and indigestible and unabsorbable — solid particles." Plaintiff's Memorandum at 10-11. Thirdly, Professor Miller tested the "bioavailability" of iron in the defendants' products and found that it was less "available" for absorption than the iron found in metallic mineral form or in "chelated minerals." Miller Declaration at 2. Miller asserts that "there is little if any evidence published in the peer-reviewed scientific literature that would support Dr. Wallach's claims" about the absorption of colloidal minerals, many of which would be "toxic" to humans if absorbed at the rates Wallach claims his product provides. Rucker concurs with Miller that what Wallach calls "metallic" minerals are absorbable at far greater rates than the 9.8% stated by Wallach. Rucker Declaration at 5-9; Miller Declaration at 2 and Exhibit
1.
WLI argues that the debate over Wallach's use of the "98% absorbable" figure is a result of confusion over the meaning of that phrase as intended by Wallach. Schrauzer states "[w]hen Dr. Wallach claims that his minerals are 98% absorbable, he means that 98% of the minerals ingested reach the stomach in dissolved from [sic], and therefore, by definition, are absorbable." Defendants' Memorandum, Exhibit 5 at 3. Furthermore, Schrauzer argues,
Dr. Rucker confuses 'absorbability' (i.e., the ability of an article to be absorbed) with absorption (the actual uptake of an article into the tissue of the body). A mineral solution can be said to be absorbable up to 98%, even if only a part of the 98% of absorbable solution is in fact absorbed by any single person. The fact is that of the entire mineral solution as much as 98% of it can be absorbed into the body. Absorbability is a prerequisite for absorption but it is not the same thing as absorption.Id. at 4.
Schrauzer also argues that VEL is incorrect in claiming that minerals must remain soluble at the pH levels found in the human "gut" in order to be dissolved. To the contrary, "absorption takes place not only in the gut but also in the duodenum." Defendants' Memorandum, Exhibit 5 at 4. Schrauzer's more complicated explanation of absorption renders VEL's "in-vitro experimentation" hardly relevant to "the actual in-vivo situation." Id. at 5. Schrauzer also denies VEL's argument that the vast majority of the minerals found in WLI's products exist in forms other than colloidal, in part, because the products' instructions recommend combining the product with juice "prior to ingestion" which results in "the formation of more colloidal species. Id. at 6. Lastly, Schrauzer defends Wallach's claim that "his minerals are ten times more available than metallic minerals" and "chelated" minerals. Id. at 6-7. According to his studies, for example, "the bioavailability," a term used interchangeably with absorbability, "of ferrous sulfate," as used in WLI's products, "is in the order of 12-16% that of elemental iron, 0.5-2%." Id. Again, it depends on "how the term," here "metallic," "is defined." Id.
While VEL refers to the defendants' explanation for Wallach's claims as "verbal slight-of-hand," the Court is not so sure. Plaintiff's Reply Memorandum at 7. Because the parties do not adequately present the matter for resolution in their papers, the Court will hear argument on this discrete question of the absorbability of the defendants' products during the general hearing on the products' quality.
5. Human Longevity
Wallach has stated,
"They [mountain tribes whose diet supposedly is "rich in colloidal minerals"] have no diabetes, they have no heart disease, no high blood pressure, no arthritis, no osteoporosis, no cancer, no cataracts, no glaucoma, they have no birth defects, they have no jails full of drug addicts, they have no taxes, they have no doctors. Yet they live to be 120 to 140 without disease" (Plaintiffs Memorandum, Exhibit 12 at 102-103, "Dead Doctors Don't Lie," audiotape by Wallach).
According to VEL, "no such long-lived tribes" exist. Plaintiff's Memorandum at 12. Professor Schneider's declaration states that Wallach's claim about the consumption of colloidal minerals as "'the secret of health and longevity" of various "'cultures'" is "without scientific basis." Declaration of Edward Schneider, at 2-3. According to Schneider, "the longest living woman, Jeanne Calment, died at age 122 on August 4, 1997" and "[n]o one else has documented longevity past age 120." Id. at Exhibit 1. WLI refers to the "people of Vilacabamba and the Hunzukuts in Northern India" as examples of cultures that have achieved "extraordinary health . . . and longevity," but according to Schneider, the reports from decades past about these people's uncommon longevity have "for over 20 years" been viewed as "inaccurate" by the scientific community. Id. Schneider states, with citation to articles not provided to the Court, that the famed discoverer of such alleged longevity has long since repudiated his own findings. Id.
In response to VEL's charges on this point, WLI submits another report by Schrauzer, one of four, dated April 27, 2001, Defendants' Memorandum Exhibit 19, in addition to hundreds of pages of ostensibly scientific essays on longevity. Schrauzer spends much time explaining that Wallach himself qualifies his statements about longevity in his audiotapes, and that Wallach bases his claims on scientific publications, some of which have been provided to the Court. Id. at 4.
VEL disputes altogether Schrauzer's expertise and qualification. as a chemist, to speak to the subject of longevity. As stated in the Court's previous opinion. Virgin v. American Longevity, 99 Civ. 9854, 2001 WL 789299 (S.D.N.Y. July 11, 2001), I accept these submissions as made.
In point of fact, WLI has submitted, without summary or index, documents numbering' many hundreds of pages, including complete texts of books. WLI's apparent purpose is to have the Court comb these pages for some recorded connection between life spans over 120 years of age and the consumption of colloidal minerals. Some articles, including one published in 1973 in National Geographic, provide anecdotal evidence, if no other, that certain individuals have lived to be over 120 years of age. Defendants Memorandum, Exhibit 19 (pages after Schrauzer Report neither numbered nor tabbed). That there is a connection between longevity and physical health, including proper mineral consumption. is obvious and need not be discussed further. But Wallach has not provided evidence to support the statements found in his audiotapes, and affirmed at his deposition. Plaintiff's Memorandum, Exhibit 13 at 131-32, that "the eight long lived cultures known" have reached extraordinary longevity because of a diet "rich in organic colloidal minerals." In the context of selling his products, this statement, along with others mentioned above, exaggerates the benefits of WLI's product line. That much is evident on this record, and the reliability of Wallach's quoted statements on longevity need not be further explored at an evidentiary hearing.
6. Southern Utah Valley and the Consent Decree
In DDDL Wallach makes the following statements,
"Now, the only place you can get these in the United States is from a prehistoric valley in southern Utah" (Plaintiff's Memorandum, Exhibit 12 at 103, "Dead Doctors Don't Lie," audiotape by Wallach). "It's the only one on the market. We have the sole rights to this stuff" (Plaintiff's Memorandum, Exhibit 11 at 119, "Live Doctors Do Lie," audiotape by Wallach).
"Everybody else who has a vitamin or mineral or what not just follows the labeling requirements of the FDA. This is the only one that in fact has a federal consent decree to do it, because it passed all their tests, it's the only one that's been put to this level of test, because it works. And people were running around 12, 15 years ago saying "Hey, my arthritis got better, my diabetes got better, my early cataracts went away, and my white hair turned black again, my knee arthritis got better.' And so they thought, oh, they must be putting cortisone, prednisone, antibiotics or drugs in that stuff. And when they examined it for two years it only had 60 colloidal minerals in it" (Plaintiff's Memorandum, Exhibit 12 at 105, "Dead Doctors Don't Lie," audiotape by Wallach).
According to VEL, the references made in these statements to a federal consent decree "to do" extraction of colloidal minerals from a valley in Southern Utah are "blatantly false and misleading." Plaintiff's Memorandum at 12. VEL does not elaborate upon its objection to WLI's reference to a consent decree, except to provide the Court with a copy, Plaintiff's Memorandum, Exhibit 23, also Defendants' Memorandum, Exhibit 25, and to note that the decree does not "purport to authorize the making of any particular claims by defendants concerning what the accused products 'work' to do." Plaintiff's Reply Memorandum at 9.
Without discussing plaintiff's accusation that Wallach mischaracterizes the above referenced consent decree, WLI provides its account of the "facts and circumstances" surrounding the decree. Defendants' Memorandum at 17. According to the defendants, this "FDA consent order" was created after the Food and Drug Administration investigated the Rockland Corporation's colloidal mineral products for safety. Id. at 17. Finding no safety problem with their products, the FDA entered into "a consent order with Rockland concerning the labeling of the product, not its safety." Id. at 17.
In point of fact, the document discussed by the parties is a Consent Decree of Permanent Injunction. "So Ordered" by the United States District Court for the Northern District of Oklahoma in the case ofUnited States v. Rockland Corporation and Elmer Heinrich, docket number 88-C1666-B. According to that decree, plaintiff, the United States, had filed a complaint on December 30, 1988 seeking an injunction against the Rockland Corporation and certain individuals. On August 23, 1989, the parties consented to the entry of this decree. The decree recognizes that the plaintiff stated a cause of action against the defendants under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et. seq. Far from "having a federal consent decree to do it," this decree restrained and enjoined the defendants in that action, including the Rockland Corporation. whom Wallach refers to as "we" in his audiotapes, from, inter alia, "manufacturing, packing, labeling, or distributing" certain of its products unless given prior approval by the FDA or unless the defendants change the product name and "delete any and all representations that any product subject to this paragraph is safe or effective in the diagnosis, cure, mitigation. treatment, or prevention of disease in man." Plaintiff's Memorandum, Exhibit 23 at 2. The decree goes on to allow inspections by the FDA to ensure compliance, "apart from and in addition to, the authority to make inspections under" 21 U.S.C. § 301 et. seq., to order the reimbursement of costs by the defendants to the FDA, to order destruction of certain products, labels and other literature in the control of the defendants, and to require notification to the FDA by the defendants of any change in "ownership or character of their businesses." Id. at 2-5.
Wallach may refer to the defendants in the Oklahoma litigation as "we" because, as he states, "we have the sole rights to this stuff" ostensibly referring to the product sold by Rockland to WLI.
While I am not familiar with the current state of scientific scholarship on matters such as colloidal minerals, absorption, and human longevity, I am certainly capable of reading and understanding a consent decree of permanent injunction entered by a United States District Court. It is beyond doubt that Wallach completely misrepresents the obvious cause and intention of the decree. It was not entered because WLI's products "passed all [the] tests" of the FDA. The decree was entered to avoid further litigation challenging the defendants alleged violation of federal law, and required the defendants to take numerous corrective actions. Wallach's reference to the decree was obviously intended to create the impression that the decree evidences his product's high quality because "[e]verybody else who has a vitamin or mineral or what not just follows the labeling requirements of the FDA," while his product's supplier "is the only one that in fact has a federal consent decree to do it, because it passed all their tests, it's the only one that's been put to this level of tests, because it works." That is a striking distortion of the consent decree's provenance, purpose, wording, and intended effect.
Because Wallach's misleading use of the document in his promotional materials is patently obvious, the matter need not be further addressed at an evidentiary hearing.
7. 1991 Nobel Prize "Nomination"
WLI states on the labels of various products, and on their website, that Wallach,
"was nominated for the 1991 Nobel Prize in Medicine by the Association of Eclectic Physicians (Chartered 1823)" (Plaintiff's Memorandum, Exhibit 14, Virgin Earth product label; Exhibit 10 at 2, WLI website).
Plaintiff argues that this statement is a misrepresentation; defendants argue that they were unaware that Wallach's nomination was rejected for improper form until this litigation. Plaintiff's Memorandum at 14; Defendants' Memorandum at 17.
The Nobel prize in medicine is awarded annually by the Karolinska Institute of Stockholm, Sweden) Plaintiff's Memorandum, Exhibit 24, Deposition of Hans Lennart Rudolf Wigzell, President Karolinska Institute, at 4-5. According to Wigzell, nominations for the Nobel prize can only be made "by former Nobel Laureates, professors of medical faculties of Nordic countries, and academic institutions which the Nobel assembly deems "competent' to make a nomination and to which an invitation is issued in a particular year." Plaintiff's Memorandum at 13. In his deposition Wigzell stated that Wallach was never considered for the Nobel prize, and that there existed at the Institute no record of any such nomination. Id.
Defendants produced for the plaintiff a letter, dated September 7, 1990, and addressed to the "Nobel Prize Selection Committee," (an entity Wigzell says does not exist) which purports to come from the "Association of Eclectic Physicians," drafted by Daniel Clark, M.D., as President, and William Moore, Esq., as General Counsel. Plaintiff's Memorandum, Exhibit 25. This letter states that the Association of Eclectic Physicians nominates, inter alia, Wallach for the Nobel Prize in Medicine. Id. Defendants claim that they were not aware that this nomination was rejected until the course of this litigation. Defendants' Memorandum at 17.
The Court finds Wallach's assertion of Nobel prize nominee status transparently deceptive. The Court does not take seriously defendants' defense of ignorance in not knowing that there were rules and procedures to follow in nominating someone for this prestigious award. To take them at their word would be to accept that the defendants' believed in good faith that anyone could nominate anyone else as a Nobel prize winner, thereby allowing the "nominee" to consider himself a candidate and identify himself to others as such, no matter how unqualified the nominator, how undeserving the nominee, or how groundless and self-serving the nomination.
These considerations prompted my law clerk and I to discuss whether I should write a letter to the Nobel authorities, nominating my clerk for the Nobel Peace Prize, so that his resume, in addition to a reference to his judicial clerkship, could also state that he was a Nobel Peace Prize nominee. We have decided not to pursue this course.
Other evidence exists which further calls into question the truthfulness of defendants' claim of ignorance. The two "nominators," Clark and Moore, were, respectively, a former doctor who lost his license to practice medicine in 1983, and was later convicted of a third degree felony in 1986 for practicing without said license, and his criminal defense attorney. Plaintiff's Memorandum, Exhibit 26 at 7-8. Even if Wallach believed that certain doctors could nominate other doctors for the prize, one can hardly believe that a letter from Clark and Moore would constitute a nomination for the most renowned honor in the field of medicine. Furthermore, though defendants state that the "Association of Eclectic Physicians" was chartered in 1823, they have provided no evidence of that fact, and quite to the contrary, at his deposition Clark testified that the group was formed in the 1980's. Id. at 15. It is also worth mentioning that the letter addressing the Institute had no return address, and no further evidence concerning the Association was produced in this litigation.
Defendants attempt to minimize this misrepresentation. According to WLI, "[t]he fact of the nomination would lead a consumer to believe Dr. Wallach a scientist of achievement. He is indeed a scientist of achievement . . . (with or without a Nobel nomination)." Defendants' Memorandum at 18. To be "a scientist of achievement" (assuming without deciding that Wallach may accurately be so characterized) is a far cry from being a Nobel prize nominee. The Nobel prize is not the same thing as a People's Choice Award, and it hardly deserves to be degraded in the fashion defendants attempt.
I think it clear that the defendants' references to Wallach as a Nobel Prize nominee in Medicine were intended to mislead the public. This matter need not be further explored at an evidentiary hearing.
* * * *
Given the Court's conclusions on the present record, adverse to defendants, with respect to the accuracy and integrity of a number of assertions or references in defendants' promotional materials, one may ask whether any evidentiary hearing is necessary to adjudicate VEL's claim for attorney's fees. Having posed the question. I answer it in the affirmative.
An evidentiary hearing is necessary to resolve the conflicting opinions of the experts with respect to the contents, quality, substance and efficacy of WLI's products. Those factual issues cannot be decided by a battle of reports and affidavits. The differing views expressed by the experts must be tested by cross-examination. The Court must evaluate the conflicting opinions after seeing and hearing the experts testify.
Such a hearing is necessary because it will deal with core issues. The promotional statements which I have concluded are misleading — "Senate Document 264," human longevity, the consent decree in theRockland Corporation case, and Wallach's portrayal as a Nobel Prize nominee — are simply that: statements intended to promote the sale WLI's products. If WLI's products are excellent products — high in quality and highly beneficial to the health of consumers — then it is arguably easier to excuse promotional excesses as puffing. But if WLI's products were worthless as aids to good health, then these statements arguably take on the more sinister cast of false and misleading advertising. To analogize: somewhat excessive promotional praise of a Rolls Royce may be excused, but the same statements will not pass muster if the car in question cannot run at all.
I put the proposition in the form of these contrasting extremes not because I incline to either view at the present time. My purpose is to explain the need that I perceive for an evidentiary hearing, and the parameters of that hearing.
III. CONCLUSION
An evidentiary hearing consistent with this Opinion will begin on Monday, October 15, 2001 at 10:00 a.m. in Room 17C, 500 Pearl Street. Counsel must be prepared to submit their proof within five trial days. That is the time the Court can set aside for this matter. It should be sufficient.
I do not think it inappropriate to express the view that the parties should explore in mutual good faith the possibility of settling this aspect of the case, as they did the underlying merits. Further litigation will be costly, in respect of both attorney's fees and the fees of expert witnesses. In that regard, the defendants might wish to reflect upon the general rule that a party who prevails upon a contested claim for attorney's fees is entitled to include in that claim attorney's time expended to sustain the claim, in the district court and on appeal.See, e.g., Weyant v. Okst, 198 F.3d 311, 316-17 (2d Cir. 1999) (In 42 U.S.C. § 1983 case, the prevailing plaintiff should be "awarded for time reasonably spent in preparing and defending" an application for attorney's fees, including "a reasonable attorney's fee in connection with this appeal."); Donovan v. CSEA Local Union 1000. American Federation of State. County. and Municipal Employees. AFL-CIO 784 F.2d 98, 106 (2d Cir. 1986X'The fee application is a necessary part of the award of attorney's fees. If the original award is warranted, we think that a reasonable amount should be granted for time spent in applying for the award.") On the other hand, plaintiff might go to considerable additional effort and expense and at the end of the day take nothing on this claim. Accordingly it seems to me that the parties should consider a settlement. If counsel perceive that judicial assistance might be useful in that effort, I would make a reference to a Magistrate Judge, rather than participate in the discussions myself.