United States District Court, E.D. Pennsylvania
FINDINGS OF FACT AND CONCLUSIONS OF LAW
owners sue in federal court to ensure their trademarks are
not used in deceptive or misleading ways under Congress's
mandates in the Lanham Act. Our citizens properly rely upon
us enforcing the Lanham Act through our judgment orders. We
hold persons in civil contempt upon clear and convincing
evidence of persons violating specific terms of our judgment
orders including skirting our judgment order protecting
cannot find contempt without clear and convincing evidence of
violating our order. Suspecting misconduct, even when fueled
by the alleged wrongdoer's incomplete or ambiguous
explanations, is not enough. And we cannot transform conduct
which may state another claim into civil contempt. Following
briefing, oral argument, and evaluating credibility of
witnesses and the 86 exhibits admitted at our evidentiary
hearing, we cannot find the requisite clear and convincing
evidence Defendants and non-parties violated our July 30,
2015 Consent Judgment enforcing the Plaintiffs rights under
the Lanham Act. The challenged conduct may state a claim
under state law but not for violating the terms of our July
30, 2015 Consent Judgment. We deny Plaintiffs Motion to
enforce or for contempt in the accompanying Order.
Brands, LLC ("Clarion") distributes
over-the-counter dietary products including
"Lipo-Flavonoid Plus" designed to enhance ear
health and functionality. In November 2014, Clarion sued
Llorens Pharmaceutical International Division, Inc. and
Llorens Pharmaceutical Corp. (collectively
"Llorens") alleging they infringed on
Lipo-Flavonoid Plus by distributing and selling
"Lipoflavovit, " as a dietary supplement for ear
health. Clarion sought to permanently enjoin Llorens from,
inter alia, manufacturing, distributing,
advertising, marketing, promoting, or selling its
Lipoflavovit product. Clarion seeks relief under the Lanham
Act; it is not complaining about theft of trade secrets or
and Llorens signed a Settlement Agreement on July 15, 2015
which included agreeing to a Consent Judgment and Permanent
Injunction entered on July 30, 2015 ("Permanent
Injunction"). The Permanent Injunction enjoined Llorens,
Jose Llorens and Thusnelda Ruiz from manufacturing, selling,
distributing, marketing, advertising, or promoting any
dietary supplement designed to enhance inner ear health for a
period of five years.
two years later, Clarion moved for leave to take discovery in
aid of enforcing the Permanent Injunction. After discovery,
Clarion moved to enforce the Permanent Injunction against
Llorens, Mr. Llorens, and non-parties Alternative Pharmacal
Corporation and Jose Hernandez under Federal Rules of Civil
Procedure 70 and 71. Clarion contends Llorens, Mr. Llorens,
Alternative Pharmacal, and Mr. Hernandez violated the
Permanent Injunction in three specific ways: lying about
remaining inventory of bottled and bulk Lipoflavovit product
during the execution of the Permanent Injunction and
receiving payments for at least a portion of the product
after entry of the Permanent Injunction;
"clandestinely" transferring Lipoflavovit inventory
stored in Puerto Rico to Llorens Puerto Rico sales
representatives for later commercial use; and, by selling
"Altiflav" through Alternative Pharmacal.
it has proven at least one of the three acts, Clarion asks we
hold Llorens, Mr. Llorens, Alternative Pharmacal, and Mr.
Hernandez in contempt of the Permanent Injunction and impose
sanctions on them. Clarion cites specific facts to support
its request for civil contempt including backdating of
invoices to show disposition of Lipoflavovit before the date
of the Settlement Agreement; sales of Altiflav by Mr.
Hernandez while employed by Llorens Florida; Lipoflavovit and
Altiflav are the same product; and, Llorens Florida, Llorens
Puerto Rico, Alternative Pharmacal, and Advanced Generic
Corporation, an entity owned by Mr. Hernandez and his wife
Karen Llorens, all operate as one entity or are alter egos of
each other. To further support its requests, Clarion asks we
apply a spoliation inference for the alleged failure of
Llorens, Alternative Pharmacal, and Mr. Hernandez to produce
documents "explaining" the disposition of 5, 190
bottles of Lipoflavovit Clarion contends Defendants sold or
used instead of destroying it.
considering the credibility of testimony and admitted
exhibits, we find Clarion failed to present clear and
convincing evidence of conduct violating the Permanent
Injunction and deny Clarion's Motion in the accompanying
Findings of Fact
Clarion distributes over-the-counter dietary products
including a dietary supplement called
"Lipo-Flavonoid® Plus" designed to enhance ear
health and functionality.
Clarion does not own patent rights or ownership interest in
the chemical formulary for "Lipo-Flavonoid Plus."
Clarion is the assignee of the entire interest and goodwill
in the Lipo-Flavonoid trademark. Clarion alleged its interest
is continuing in the dual packaging and design through Sale
Packaging and Use Packaging. Clarion's Lipo-Flavonoid
product references "Ringing in the Ears?" with a
semi-abstract drawing of a left-facing human ear with
multiple curved line to the right of the ear to mimic sound
waves. The packaging also represented it is
"The only product clinically proven to improve
circulation in the inner ear" . . . under a "Unique
Ear Health Formula."
Clarion swears its Lipo-Flavonoid trademark is "well
recognized by medical professionals, especially ear, nose and
throat ('ENT') specialists and other participants in
the ear health dietary supplement industry, including
manufacturers, distributors and
Relationship among the Defendants and non-parties.
Llorens Pharmaceutical International Division, Inc.
("Llorens Florida") is a Florida corporation with
its principal place of business in Miami,
Llorens Pharmaceutical Corp. ("Llorens Puerto
Rico") has a principal place of business in San Juan,
Llorens is the owner, President, and Chief Executive Officer
of Llorens Florida and Llorens Puerto Rico. Mr. Llorens
testified at our evidentiary hearing. We find his testimony
to be confusing at best but we cannot find he lacks
credibility as to the disposition of Clarion's product in
Thusnelda Ruiz, the wife of Mr. Llorens, is a co-owner of
Llorens Florida and Llorens Puerto Rico.
2017 annual report for Llorens Puerto Rico lists Mr. Llorens
as President and Ms. Ruiz as Vice President.
Annual reports filed for Llorens Florida identifies only Mr.
Llorens and Ms. Ruiz as officers or directors.
Llorens Puerto Rico began selling its
"Lipoflavovit" product, marketed as a dietary
supplement for inner ear health, in 2002 and Llorens Florida
began selling Lipoflavovit in 2013.
Llorens hired Nutri-Force Nutrition to manufacture the
Non-party Jose Hernandez, the son-in-law of Jose Llorens, is
currently the Vice President of Sales and Marketing for
Llorens Florida. Mr. Llorens became the Vice President of
Sales and Vice President of Operations for Llorens Florida in
Llorens Florida's Vice President of Sales, Mr. Hernandez
has authority to enter into sales contracts on its
behalf In 2015, Mr. Hernandez's duties for
Llorens Florida included managing Llorens Florida sales
operations and online sales of Lipoflavovit in the United
States. His responsibility for online sales included
maintaining Llorens Florida's website and developing
relationships between United States
a February 4, 2013 email, Mr. Hernandez asked Nutri-Force
Nutrition if the language "Supports Ear Health"
could be put on the front panel of the Lipoflavovit
Hernandez has no ownership interest in Llorens Florida and
does not participate in board meetings of either Llorens
Following an August - September 2010 Food and Drug
Administration inspection of Llorens Florida, the FDA
characterized Mr. Hernandez as "Director of Sales and
responses to discovery in this matter, Llorens Florida
identified Mr. Hernandez as managing sales
Hernandez is the sole owner, President, Treasurer, Secretary,
and Registered Agent of non-party Alternative Pharmacal Corp.
which maintains its principal place of business at the same
facility as Llorens Florida's principal place of
Hernandez is the President of Advanced Generic Corp. which he
co-owns with his wife, Karen Llorens, the daughter of Jose
Llorens. Advanced Generic is a private label
distributor of generic over-the-counter drugs and dietary
Alternative Pharmacal, among other activities, markets,
sells, and distributes the dietary supplement
Llorens Florida maintains its principal place of business at
a facility located in Miami, Florida (the
"Facility"). Advanced Generic leases warehouse
space from Llorens Florida, and both Advanced Generic and
Alternative Pharmacal use warehouse space and employees of
Llorens Florida at the Facility.
Advanced Generic pays Llorens Florida $1, 000 month in rent
for use of the Facility, despite a lease agreeing to $2, 000
a month in rent.
Neither Alternative Pharmacal nor Advanced Generic share bank
accounts with Mr. Llorens, Llorens Puerto Rico, or Llorens
Llorens has no ownership interest in Alternative Pharmacal or
Clarion sues and resolves the November 2014 infringement
litigation and we enter a July 30, 2015 Consent Judgment and
November 2014, Clarion sued Llorens Florida and Llorens
Puerto Rico alleging trademark infringement under Section 32
of the Lanham Act, 15 U.S.C. §1114; trade dress
infringement under Section 32 of the Lanham Act, 15 U.S.C.
§ 1125(A); false designation of origin and unfair
competition under Section 43(A) of the Lanham Act, 15 U.S.C.
§ 1125(A); and unfair competition under Pennsylvania
law. Clarion later added a claim for false
advertising under Section 43(A) of the Lanham Act, 15 U.S.C.
Clarion alleged the Lipoflavovit product sold by Llorens
infringed on Clarion's Lipo-Flavonoid Plus trademark and
sought to permanently enjoin Llorens from, inter
alia, manufacturing, distributing, advertising,
marketing, promoting, or selling Lipoflavovit "using the
challenged mark or trade dress or any other mark or trade
dress that is confusingly similar to"
Lipo-Flavonoid's mark and trade dress.
Clarion alleged, among other things, the packaging for the
Llorens entities' Lipoflavovit included a
"semi-abstract drawing of a left-facing human ear...
with multiple curved lines to the right of the ear (to mimic
Clarion and the Llorens entities agreed to settle their
dispute, entering into a Settlement Agreement effective July
15, 2015 and filing a joint motion for entry of stipulated
entered the parties' stipulated Consent Judgment and
Permanent Injunction on July 30, 2015.
Paragraph 3 of the Consent Judgment enjoins the Llorens
entities, Jose Llorens, and Thusnelda Ruiz for a five-year
period from "participating, in any manner, by themselves
or in conjunction with any other person or entity, directly
or indirectly, within the United States or elsewhere, in the
manufacture, wholesale, distribution, marketing,
advertisement, or promotion of any dietary supplement product
designed to enhance or marketed as enhancing inner ear
health, or from making any plans to do the
now decide whether the Defendants and non-parties with
familial relationships violated the July 30, 2015 Consent
Llorens' disposition of its Lipoflavovit inventory as of
July 30, 2015.
April 29, 2015, Llorens Florida placed an order with
Nutri-Force Nutrition to manufacture
July 2, 2015, Nutri-Force Nutrition issued Llorens Florida a
sales invoice for 5, 190 bottles and 50, 956 bulk tablets of
July 7, 2015, Mr. Llorens paid the July 2, 2015 Nutri-Force
sales invoice with a check drawn on Llorens Puerto Rico's
some undefined point in July 2015, Mr. Llorens told Mr.
Hernandez of a settlement reached in Clarion's action
against Llorens. Mr. Hernandez testified he knew of the
settlement but did not know the terms of the Permanent
Injunction until after Clarion moved to enforce it against
him and Alternative Pharmacal in 2017.
Llorens told Mr. Hernandez Llorens will no longer sell
Lipoflavovit. Mr. Llorens instructed Mr. Hernandez to
put a notice on Llorens Florida's website announcing
Lipoflavovit would no longer be sold.
the time of Messrs. Llorens's and Hernandez's general
conversation, 5, 190 bottles of Lipoflavovit and 50, 956 bulk
Lipoflavovit tablets were "quarantined, " also
referred to by Mr. Llorens and Mr. Hernandez as
"decommissioned, " in the warehouse of Llorens
Florida at Mr. Llorens's direction.
Hernandez's businesses, Advanced Generic and Alternative
Pharmacal, share warehouse space in Llorens's
Florida's Miami Facility.
Hernandez testified he took the bottled and bulk Lipoflavovit
for re-packaging and re-sale as Altiflav.
July 10, 2015, Mr. Hernandez asked Llorens Florida employee
Jose Perez about the status of the Lipoflavovit in the
Llorens Florida warehouse. Mr. Perez told Mr. Hernandez
Lipoflavovit would be decommissioned or destroyed because
Llorens Florida could no longer sell it.
After learning the Lipoflavovit would be either
decommissioned or destroyed, Mr. Hernandez took possession of
the Lipoflavovit then in the Llorens Florida warehouse on
July 10, 2015 and sent it to Lex Pharmaceutical for
Neither Mr. Hernandez nor Alternative Pharmacal paid Llorens
for the decommissioned Lipoflavovit.
July 13, 2015, Mr. Hernandez sent an email to 21st
Century Labels & Packaging requesting new labels for the
decommissioned Lipoflavovit sent to Lex for repackaging. Mr.
Hernandez originally intended the product to be sold by
Advanced Generic as "Bioflavit."
July 27, 2015, three days before Clarion sought the entry of
a Permanent Injunction, Mr. Hernandez decided to change the
name of the product from "Bioflavit" to
"Altiflav" and change the company marketing the
product from Advanced Generic to Alternative
Sometime in August and September 2015, Lex Pharmaceutical
repackaged the Lipoflavovit into bottles labelled
"Altiflav" for sale by Alternative
Altiflav is a bioflavonoid, a type of fruit extract, with
uses such as circulatory health, vertigo, cardiovascular
activity, and varicose veins. Bioflavonoids may also support
ear health. Both Lipoflavovit and Altiflav contain
Other bioflavonoid products were on the market from July 30,
2015 until Altiflav came onto the market in October
formulation of Lipoflavovit is identical to the formula of
three other products sold by Llorens, including Trombonex and
Actiflovit, marketed by another entity, and Altiflav tablets
are both red in color with no identifying mark.
parties generally agree the chemical formula for these
products regardless of the seller is largely
Hernandez initially intended the Altiflav label to include
"Compare to: Lipoflavovit Tabs."
Hernandez then changed the label to omit "Compare to:
Lipoflavovit Tabs" language and any reference to ear
Nothing in the Altiflav label references ear health. The
Altiflav label does not include a semi-abstract drawing of an
ear of lines mimicking sound waves.
Hernandez ordered 3, 000 additional bottles of Altiflav from
Nutri-Force Nutrition in October 2016 using the identical
formula as in Lipoflavovit. Mr. Hernandez received the 3,
000 bottles in July 2017 but has not sold any pending
resolution of this action.
Llorens's testimony regarding Lipoflavovit inventory at
the time of the Settlement Agreement.
Llorens testified he ordered Lipoflavovit bottles in the
warehouses of Llorens Puerto Rico and Llorens Florida to be
decommissioned or destroyed. The Lipoflavovit inventory was
never decommissioned despite Mr. Llorens's order to do
Although he testified he ordered destruction of warehoused
Lipoflavovit sometime in mid-July 2015, Mr. Llorens also
testified the bottled Lipoflavovit in his warehouses were (a)
given as samples to nine Llorens Puerto Rico sales
representatives; (b) sold in part (1, 050 bottles) to
Drogueria Betances pharmacy in Puerto Rico; and (c) sold the
remaining inventory to other pharmacies in Puerto Rico around
July 15, 2015.
to the Lipoflavovit given to the nine Llorens Puerto Rico
sales representatives, Mr. Llorens initially testified he did
not know how many bottles were given to the sales
representatives, but later in the hearing testified 300
sample packs of four pills to a pack were given to the nine
Llorens sales representatives.
Invoices show Llorens Puerto Rico sales representatives'
receipt of the samples reflecting a quantity of 338
Lipoflavovit "xlOO." Mr. Llorens later testified
the nine Llorens Puerto Rico sales representatives each
received 338 bottles of 100 pills.
documentary evidence shows nine Llorens Puerto Rico sales
representatives each received 338 bottles of Lipoflavovit
containing 100 pills at no charge on July 15, 2015, totaling
3, 042 bottles.
Declarations of eight of the nine Llorens Puerto Rico sales
representatives all swear they received 338 bottles of
Lipoflavovit on July 15, 2015, and did not receive any
Lipoflavovit on or after July 30, 2015.
to the Lipoflavovit product in 5, 190 bottles and 50, 956
bulk tablets from Nutri-Force Nutrition and acquired by Mr.
Hernandez, Mr. Llorens testified the bottled Lipoflavovit
went to Llorens Puerto Rico but the bulk Lipoflavovit
remained in Florida.
Llorens testified the Lipoflavovit acquired by Mr. Hernandez
came in bottles without labels and in bulk and is separate
from the product sent to Puerto Rico to be given to Llorens