Pharmanetics, Inc. v. Aventis Pharmaceuticals, Inc. , 182 F. App'x 267 ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1621
PHARMANETICS, INCORPORATED,
Plaintiff - Appellant,
versus
AVENTIS PHARMACEUTICALS, INCORPORATED, a/k/a
Aventis Pharmaceuticals Products,
Incorporated,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Louise W. Flanagan, Chief
District Judge. (CA-03-817-5)
Argued: March 15, 2006 Decided: May 31, 2006
Before WIDENER and WILLIAMS, Circuit Judges, and William L. OSTEEN,
Senior United States District Judge for the Middle District of
North Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Gregory Neil Stillman, HUNTON & WILLIAMS, Norfolk, Virginia,
for Appellant. Nancy Karen Deming, TROUTMAN SANDERS, L.L.P.,
Atlanta, Georgia, for Appellee. ON BRIEF: Robert C. Van Arnam,
HUNTON & WILLIAMS, Raleigh, North Carolina; Gary C. Messplay, HUNTON
& WILLIAMS, Washington, D.C.; Brent L. VanNorman, HUNTON & WILLIAMS,
Norfolk, Virginia, for Appellant. J. Donald Cowan, Jr., SMITH
MOORE, L.L.P., Greensboro, North Carolina; John J. Dalton, William
N. Withrow, Jr., Mark S. VanderBroek, TROUTMAN SANDERS, L.L.P.,
Atlanta, Georgia, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
2
PER CURIAM:
PharmaNetics, Inc. (“Appellant”) brings this appeal challenging
the district court’s rulings in (1) striking its expert testimony
and (2) granting summary judgment on its state law breach-of-
contract and its Lanham Act claims, see 15 U.S.C. § 1051 et seq.,
in Aventis Pharmaceuticals, Inc.’s (“Appellee”) favor. For the
reasons stated below, this court affirms the district court’s
ruling.
I.
Appellant is a drug development company that in the late 1990’s
began developing a diagnostic test to quickly monitor the effects
of certain types of anticoagulants (blood thinners). Doctors
generally use anticoagulants in, among other areas, patients who
have unstable angina, a condition where restricted blood flow to the
heart can cause an increased risk of heart attack.1 Patients with
unstable angina can receive two levels of treatment. A first level,
“medical management,” involves administering various drugs,
1
A brief description is as follows:
[A]ngina, whether stable or unstable, is a result of
coronary artery disease (clogged arteries). Angina
becomes unstable when the arteries become so occluded as
to . . . restrict the blood flow to the heart
[dangerously], posing a threat of plaque breakage or
rupture [that] could cause a sudden stoppage of the blood
flow to the heart.
Leddy v. Mississippi State Med. Ass’n, 7 F. Supp. 2d 819, 821 (S.D.
Miss. 1998).
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including anticoagulants. A second level, “invasive management,”
involves instruments that physically remove any blockages. Patients
receive anticoagulants during invasive management to prevent fatal
blood clots (when blood is too thick) or hemorrhaging (when blood
is too thin). Doctors must know the anticoagulant’s effect
precisely during invasive management because too much or too little
anticoagulant can lead to death during this drastic procedure.
Diagnostic monitoring tests, which Appellant develops, seek to
accomplish this goal.
Unstable angina may accompany other diseases, which can
necessitate changing the monitoring requirements. One such disease
combination is UA/NSTEMI.2 UA/NSTEMI patients can receive medical
management but may later transfer to invasive management, which many
do. Some cardiologists prefer to monitor coagulation levels during
this entire process, including during medical management.
Since the 1990’s, Appellee, a pharmaceutical company, has
marketed Lovenox as an anticoagulant that requires no routine
monitoring of blood coagulation, with disclaimers that certain
patients may require monitoring. Specifically, other warnings on
2
UA/NSTEMI means the patient has unstable angina and is at an
increased risk for non-ST-segment elevation myocardial infarction,
a specific type of heart attack. See Braunwald et al., Am. Coll.
of Cardiology & Am. Heart Ass’n, ACC/AHA 2002 Guideline Update for
the Management of Patients with Unstable Angina and Non-ST-Segment
Elevation Myocardial Infarction 4, 73–74 (2002), available at
h t t p : / / w w w . a c c . o r g / c l i n i c a l /
guidelines/unstable/incorporated/UA_incorporated.pdf.
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the package state anticoagulation monitoring is essential when
doctors administer Lovenox with other drugs or to certain patient
populations. The FDA, moreover, has approved Lovenox without
monitoring for medical management but not invasive management. No
quick-acting monitoring test existed for Lovenox initially.
The inability to monitor Lovenox’s coagulation effects with
sufficient quickness limited its use. During invasive management,
doctors must know coagulation levels with quickness. Some doctors,
furthermore, preferred to measure coagulation levels in UA/NSTEMI
patients during all managements, which must occur with similar
quickness. Thus, Lovenox was unsuitable for not only invasive
treatments but also, in some doctors’ opinions, medical management
of UA/NSTEMI patients.
In August 2000, the parties entered into an agreement to co-
develop and co-promote Enox, a test that would quickly monitor
Lovenox’s blood-clotting effects and expand Lovenox’s market. After
forming the agreement, Appellee allegedly delayed Enox’s development
by imposing unreasonable obligations and demands besides those in
the agreement, including changing the required range for Enox’s
application. Appellant claims Appellee imposed these obligations
to avoid its contractual obligations.
Appellee’s alleged motivation for avoiding these obligations
was that Appellee did not want Enox’s development and promotion to
harm its long-standing, no-monitoring promotion for certain
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patients. During the post-contract-formation period, Appellee
continued its long-standing marketing of Lovenox and, allegedly,
even aimed it at invasive-management patients. The marketing
included advertisements stating Lovenox (1) was therapeutic within
one-half hour and from one dose and (2) required no routine
coagulation monitoring. Appellant claims these advertisements were
false under the Lanham Act since Appellee aimed its no-monitoring-
based advertisements at consumers who, in some cases, required
monitoring. These advertisements harmed Appellant through lost
sales.
The parties continued Enox’s development. After Enox’s launch
in January 2003, Appellant claims doctors reported Enox showing
Lovenox overcoagulated some patients and undercoagulated others.
Because Enox showed Lovenox unpredictably coagulated blood and,
thus, needed close monitoring, Appellee then allegedly began
distancing itself from Enox even more. Appellee stopped any sales
and support given to Appellant, discarded promotional materials, and
disparaged Enox as useless. Appellant claims these acts not only
breached the agreement but also caused damages through lost present
and future Enox sales.
Appellee argues that Appellant lost sales for various reasons
other than its acts, including the medical community’s resistance
to Enox because of its cost and imprecision, Enox’s limited utility,
its lack of clinical-trial support, doctors’ reluctance to change
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when they were comfortable with using Lovenox without monitoring
even in some UA/NSTEMI patients, low numbers of patients taking
Lovenox during invasive management, hospitals’ bureaucratic
purchasing processes, and Enox’s general difficulty in use.
To prove its lost sales damages, Appellant sought to introduce
the testimony of Richard Troxel (“Troxel”). His testimony was
Appellant’s only evidence of damages. Prior to formulating his
expert opinion, Troxel met with Appellant to get an overview of this
lawsuit and Appellant’s business. Appellant gave Troxel a myriad
of requested documents, including both parties’ sales projections
for Enox. Troxel reviewed the documents and found both sales
projections to be consistent. Troxel considered Appellee’s five-
year sales projections to be the most important piece of evidence.
Troxel then proceeded to determine values for variables that would
determine lost profits, including (1) estimating the number of Enox
tests needed per patient, based on both parties’ projections, (2)
setting the price per test at $25.00, to which Appellee’s expert
agreed, (3) calculating the per-test profit (subtracting the test’s
manufacturing costs and any sales commissions), (4) adding a
residual value to Appellant’s total five-year net income based on
similar industries, and (5) applying two discount rates to determine
what the future earnings are presently worth. Appellant’s expert
proffered several damages estimates created under various
assumptions. The district court excluded Troxel’s report because
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it was (1) too disconnected from this case’s facts and (2) too
speculative.
The district court ruled Appellant’s damages model to be too
disconnected for various reasons. For example, the report assumed
that Appellee “[wa]s liable for all of the actions alleged in each
of [Appellant’s] claims, and . . . [it assumed] that [only
Appellee’s] actions caused” all of Appellant’s losses, “rather than
only those . . . [that] are reasonably inferred from the . . .
record.” (J.A. at 6737.) The district court, thus, held that
Appellant calculated all possible losses and indiscriminately
assessed all losses to Appellee. In examining this evidence as
expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc.,
509 U.S. 579 (1993), the district court held that the evidence
failed to meet Daubert’s standard for “fit.” The evidence was
simply not “sufficiently tied to the facts of the case.” (J.A. at
6730 (quoting Daubert, 509 U.S. at 591).)
At the time of the court’s ruling, Appellee was not liable
under all claims, as the report assumed, because the district court
had granted partial summary judgment. Also, the uncontested
evidence showed that multiple sources caused or would cause lost
sales. For example, the court noted that doctor resistance to
switch to Enox, low populations of Lovenox patients, Appellee’s
conduct in telling its representatives not to promote Enox, and the
FDA’s limited approval of Enox all caused lost sales. A lump sum,
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indiscriminately attributed to Appellee, was not sufficiently tied
to the facts when the evidence showed various factors caused lost
sales. Implicitly, the jury had no reasonable method to dissect the
report and assess what acts may have caused particular losses. The
evidence, thus, was too misleading to go before a jury as expert
testimony because “too great an analytical gap [existed] between the
data and the opinion proffered.” (J.A. at 6731 (quoting General
Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).)
The district court then explained why Troxel’s report was too
speculative. Citing case law, the district court stated any damages
report must have reasonable certainty. The court found Enox was a
novel technology and determining future sales was not made on the
basis of established past sales of this or similar technologies.
Furthermore, maximizing Enox’s potential relied on Appellee’s full
cooperation (which the agreement may or may not require), and
Appellant faced reluctant consumers unwilling to switch from their
current tests. Under these facts, Appellant’s evidence was simply
too speculative to be “expert testimony”—a moniker that could
unfairly persuade a jury that the speculative evidence has much more
certainty and precision than reality showed.
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II.
A.
1.
Appellant first argues this court should reverse the district
court’s exclusion of Troxel’s report. Appellant’s reasons are
various, including the argument that an opposing party’s estimates
of lost profits, upon which Troxel relied, are inherently reliable.
Thus, because Troxel relied on Appellee’s lost profits estimates,
the evidence is almost automatically admissible. Appellant contends
the district court also “impermissibly resolved the competing
evidence when it labeled Troxel’s acceptance of [Appellee’s lost
sales] projections as ‘speculative’ and ‘not sufficiently tied to
the facts of the case.’” (Appellant’s Br. at 55.)
The district court noted that the report assumed (1) Appellee
was liable on all causes of action and (2) multiple sources caused
damages. Appellant argues that the report factored these issues
into its calculations, and thus, the district court’s reasoning on
that point was flawed. According to Appellant, the district court
impermissibly mandated that the evidence must exhaust all possible
causes of lost sales because case law does not require an expert
witness to eliminate all possible causes of injuries. Appellant
further argues the district court ignored two important Lanham Act
principles: (1) a wrongdoer should not profit from a Lanham Act
violation and (2) the wrongdoer should bear the uncertain losses of
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his conduct. Finally, Appellant contends the district court failed
to conduct the required Daubert analysis. Appellant argues that (1)
the district court had to delineate analysis on four factors for
evaluating expert testimony that Appellant gleaned from case law,
(2) the court evaluated Troxel’s factual assumptions instead of his
methodology, (3) Troxel’s factual assumptions have support in the
record, and (4) case law does not support striking Troxel’s opinion.
2.
Federal Rule of Evidence 702 provides that
[i]f scientific, technical, or other specialized
knowledge will assist the trier of fact to understand the
evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience,
training, or education, may testify thereto in the form
of an opinion or otherwise, if (1) the testimony is based
upon sufficient facts or data, (2) the testimony is the
product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably
to the facts of the case.
“Courts of appeals apply an abuse of discretion standard when
reviewing a trial court’s decision to admit or exclude expert
testimony [under Rule 702].” Cooper v. Smith & Nephew, Inc., 259
F.3d 194, 200 (4th Cir. 2001). “A district court abuses its
discretion if its conclusion is guided by erroneous legal principles
or rests upon a clearly erroneous factual finding.”
Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999)
(citations omitted). This court
is obligated “to consider the full record” as well as the
reasons assigned by the [district] [c]ourt for its
judgment, and to reverse the judgment below, if after
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such review, the appellate court “has a definite and firm
conviction that the court below committed a clear error
of judgment in the conclusion it reached upon a weighing
of the relevant factors.”
Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 506 (4th Cir. 1977)
(emphasis added) (quoting Finley v. Parvin/Dohrmann Co., 520 F.2d
386, 390 (2d Cir. 1975)).
Furthermore, “[t]he Supreme Court also has emphasized that ‘the
trial judge must have considerable leeway in deciding in a
particular case how to go about determining whether particular
expert testimony is reliable.’” Cooper, 259 F.3d at 200 (quoting
Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)). No
established procedure exists for Daubert analysis: “[T]he factors
discussed in Daubert [for analyzing the testimony] were neither
definitive, nor exhaustive. . . . [P]articular factors may or may
not be pertinent in assessing reliability, depending on the nature
of the issue, the expert’s particular expertise, and the subject of
his testimony.” Id. at 199–200; accord Westberry, 178 F.3d at 261(“In making its initial determination of whether proffered testimony
is sufficiently reliable, the court has broad latitude to consider
whatever factors bearing on validity that the court finds to be
useful; the particular factors will depend upon the unique
circumstances of the expert testimony involved.”). Finally, even
though Federal Rule of Evidence 702 “liberalize[d] the introduction
of relevant expert evidence,” the district court must balance that
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freedom with the persuasiveness of potentially misleading expert
evidence. 178 F.3d at 261.
The district court ruled the expert evidence too misleading,
because it was a lump sum, not sufficiently tied to Appellee’s
possible conduct, and too speculative, because the technology was
novel. As to the first reason, the district court did not see
divisible units of damages that a jury could reasonably assign to
Appellee’s possible wrongful conduct. Unless Appellant tailored the
evidence to the facts, the district judge would not put the lump sum
before a jury as expert evidence. “[G]iven the potential
persuasiveness of expert testimony,” Troxel’s lump sum evidence
“ha[d] a greater potential to mislead than to enlighten.” Id. Even
though part of the district court’s rationale was that Appellee was
not liable under all claims because it had granted partial summary
judgment, a ruling whose substantive merits this court will not
consider, the district court’s rationales need not be applicable in
full. Cf., e.g., United States v. White, 222 F.3d 363, 372 (7th
Cir. 2000) (affirming a district court’s evidentiary ruling for
different reasons under the Federal Rules of Evidence). The
district court’s other rationales are sufficient to exclude the
expert testimony because nothing appears to be clear error, under
these facts, in ruling the lump sum losses to be too misleading when
presented as expert testimony. Moreover, Appellant shows no clear
error in ruling the new technology’s lost sales to be too
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speculative. Because Appellant does not show “a definite and firm
conviction” of “clear error,” Wilson, 561 F.2d at 506 (quoting
Finley, 520 F.2d at 390), this court will affirm the ruling that
excluded Troxel’s proffered expert testimony.
B.
Appellant next argues that its Lanham Act claim involving
Appellee’s “therapeutic” claims had a presumption of harm and
damages. Appellee advertised that Lovenox was therapeutic from one
dose and in one-half hour, meaning Lovenox properly coagulated,
without monitoring, a patient under those conditions. The district
court found Appellee’s therapeutic claims to be literally false, and
Appellant further argues that Appellee intentionally deceived
consumers with the advertisements. Appellant argues, under those
two situations, damages are presumed. The district court rejected
these presumptions because (1) Fourth Circuit precedent questions
whether such presumptions apply, (2) any presumptions of harm exist
only in injunction settings and not in money damages claims, and (3)
the presumptions apply where a competitor’s advertising misleads.
This ruling will be affirmed, but through different analysis without
comment on the district court’s analysis.
Assuming that a presumed-damages standard would apply to this
Lanham Act claim, damages are presumed only as to causation; the
extent of money damages is a separate matter that must have
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evidentiary support. See, e.g., Porous Media Corp. v. Pall Corp.,
110 F.3d 1329, 1336 (8th Cir. 1997) (noting that a Lanham Act
plaintiff, even when presumptions of harm apply, “still b[ears] the
burden of proving an evidentiary basis to justify any monetary
recovery”); PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818
F.2d 266, 271–73 (2d Cir. 1987) (“[T]he quantum of damages, as
distinguished from entitlement, must be demonstrated with
specificity . . . .”). Thus, a Lanham Act plaintiff may not have
to prove harm through, for example, consumer surveys, but that
plaintiff must still prove the harm’s financial extent. See 818
F.2d at 273 (“[T]o assist . . . in measuring damages, [a party]
will, of course, be required to provide ‘an evidentiary basis on
which to rest such an award.’” (quoting Vuitton Et Fils, S.A. v.
Crown Handbags, 492 F. Supp. 1071, 1077 (S.D.N.Y. 1979))).
C.
In affirming the evidentiary ruling and holding that Appellant
must produce evidence of the extent of damages even if a presumption
of harm applies, this court must affirm the grant of summary
judgment on all claims because Appellant has no further evidence of
damages.3 Summary judgment is appropriate where an examination of
3
The district court decided summary judgment through these and
additional grounds. The court makes this decision without comment
on the district court’s analysis except to the extent it agrees
with this opinion.
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the pleadings, affidavits, and other proper discovery materials
before the court demonstrates no genuine issue of material fact
exists, thus entitling the moving party to judgment as a matter of
law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322–23 (1986). The court must view the facts in the light most
favorable to the nonmovant, drawing inferences favorable to that
party if such inferences are reasonable. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255 (1986).
For a successful breach-of-contract claim for damages, a party
must generally, among other things, produce evidence of damages.
See, e.g., Restatement (Second) of Contracts § 346(2) (1981).4 For
a Lanham Act claim for money damages, as discussed above, a party
must also generally produce some evidence of damages. See, e.g.,
Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 286 (4th Cir. 2003).
After excluding Troxel’s report, Appellant has no further evidence
on damages. Summary judgment, thus, is appropriate because a fact
finder could not award relief without such evidence.
4
Though the contract has a choice-of-law clause, the court
finds no conflict in the possibly applicable laws and thus no
reason to decide what substantive law applies in determining this
basic and generally applicable contract principle.
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III.
For the reasons stated above, the district court’s evidentiary
ruling is affirmed. With this ruling, Appellant has no further
evidence of damages, and thus, summary judgment on all claims is
AFFIRMED.
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