The opinion of the court was delivered by: Orlofsky, District Judge.
This case, involving an acrimonious dispute between the
manufacturer of L'eggs® pantyhose and one of its distributors,
has generated numerous motions, four published opinions,*fn1 six
weeks of trial testimony, and now it is almost at an end. This
opinion is, hopefully, dare I say it, my "last L'eggs." The
history of this epic litigation is set forth in great detail in
the four published opinions which have been filed in this case
and will not be repeated here.
At the opening of their case on their Counterclaims, Defendants
and Counterclaim Plaintiffs, Sara Lee Hosiery, Sara Lee Hosiery
International, Sara Lee International, and Sara Lee Corporation
(collectively, "Sara Lee"), the manufacturer of L'eggs pantyhose,
"withdr[e]w the damage claims under the counterclaim[s]," Trial
Tr. at 2522, and elected to seek only injunctive relief.*fn2
See id. at 2522, 2615. Accordingly, Sara Lee's Counterclaim and
Third-Party Complaint (collectively, "Counterclaims") were tried
before the Court, rather than the jury. As a result, I must now
make findings of fact and conclusions of law with respect to Sara
Lee's Counterclaims pursuant to Rule 52(a) of the Federal Rules
of Civil Procedure.*fn3
Additionally, Plaintiff and Counterclaim Defendant, Lithuanian
Commerce Corpation, and Additional Counterclaim Defendants, Algis
Vasys and Laima Zajanckauskiene (collectively, "LCC"), the
exclusive distributor of L'eggs® pantyhose in several Eastern
European countries, moved, during their closing argument on Sara
Lee's Counterclaims, for judgment as a matter of law, see Trial
Tr. at 2653-54, pursuant to Rule 52(c)*fn4 of the Federal Rules
of Civil Procedure.*fn5
This Court asked LCC "to formalize" its motion for judgment as a
matter of law. See Trial Tr. at 2659. As a result, LCC filed
its written motion for judgment as a matter of law on November
20, 1998,*fn6 accompanied by its Proposed Findings of Fact and
Conclusions of Law. Sara Lee filed its Proposed Findings of Fact
and Conclusions of Law on November 20, 1998, and its opposition
to LCC's motion for judgment as a matter of law on December 18,
1998. LCC filed a brief in reply to Sara Lee's opposition on
January 4, 1999.
In its Rule 52(c) motion, LCC asserts, inter alia, that Sara
Lee has failed to meet its burden of proving that: (1) L'eggs®
pantyhose do not have the therapeutic qualities advertised by
LCC; and (2) Sara Lee suffered any injury as a result of the
alleged misrepresentations and false advertising. LCC argues
that, because Sara Lee has failed to meet its burden of proof on
at least two essential elements of all four of its counterclaims,
it cannot recover under any of its four claims.
Based on my findings of fact and conclusions of law, and for
the reasons set forth below, I find that Sara Lee has not
presented any evidence that it suffered any harm whatsoever as a
result of LCC's alleged false advertising and misrepresentations.
I further find that, even if Sara Lee had offered proof of its
alleged injuries, Sara Lee has failed to demonstrate that those
injuries were caused by LCC's alleged misrepresentations.
Finally, I find that Sara Lee has failed to meet its burden of
proof in demonstrating that the alleged misrepresentations made
by LCC in its advertisements were false, misleading, or
disparaging. Thus, Sara Lee has failed to meet its burden of
proof on at least one of the essential elements of each of its
Counterclaims. Accordingly, I will grant LCC's motion for
judgment as a matter of law on Sara Lee's claim under the North
Carolina Unfair Trade Practices Act, and for negligent
misrepresentation and trade libel. In addition, I must dismiss
Sara Lee's claim under § 43(a) of the Lanham Act for lack of
subject matter jurisdiction.
The Parties and Jurisdiction
1. Counterclaim Plaintiff, Sara Lee Corporation, is
incorporated in the state of Maryland and maintains its principal
place of business in Chicago, Illinois. See Joint Final
Pretrial Order ("JFPO"), Stipulated Facts, ¶ 6. Counterclaim
Plaintiff, Sara Lee Hosiery, which manufactures L'eggs®
pantyhose, is a wholly owned subsidiary of Counterclaim
Plaintiff, Sara Lee Corporation. See Trial Tr. at 262-65.
Counterclaim Plaintiff, Sara Lee Hosiery International, located
in Winston-Salem, North Carolina, is a subdivision of
Counterclaim Plaintiff, Sara Lee Hosiery. See JFPO, Stipulated
Facts, ¶¶ 3-4.
2. Counterclaim Defendant, LCC, is incorporated in the state of
New Jersey and maintains its principal place of business at 11
Harwood Lane, Clementon, New Jersey. See id. ¶¶ 1-2. "LCC was
established for the purpose of exporting various consumer goods
and personal care products to Lithuania." Id. ¶ 11.
3. Lithuanian-born,*fn9 Additional Counterclaim Defendant,
Algis Vasys ("Vasys"), is "a resident [and citizen] of New Jersey
who conducts his business from 11 Harwood Lane, Clementon, New
Jersey." See JFPO, Jurisdiction, at 3. Vasys is the sole
shareholder and the President of LCC. Trial Tr. at 1661, 1824;
LCC Exs. 10, 11, 99.
5. This Court has subject matter jurisdiction over Sara Lee's
claim under § 43(a) of the Lanham Act pursuant to
28 U.S.C. § 1331.*fn10
6. This Court has subject matter jurisdiction over Sara Lee's
claim under the North Carolina Unfair Trade Practices Act and for
negligent misrepresentation and trade libel pursuant to
28 U.S.C. § 1332,*fn11 as there is complete diversity of citizenship and
the amount in controversy is in excess of $75,000, exclusive of
interest and costs. Furthermore, this Court has subject matter
jurisdiction over these claims pursuant
28 U.S.C. § 1367(a),*fn12 which permits this Court to exercise supplemental
The Genesis of LCC's Relationship With Sara Lee
7. Some time early in 1993, Vasys traveled to Lithuania and
observed "a country emerging from 50 years of [a] totally
different economic and political system." Trial Tr. at 1583.
Vasys saw this period of transition as an opportunity for
entrepreneurship. See id.
8. "In the spring of 1993," Vasys "hosted a small group of
Lithuanian business people in the" United States, for "a one-week
tour." Id. at 1584. During this tour, Zajanckauskiene and Vasys
met and had the opportunity to "exchange ideas" about starting
"an import business together." Id.; see also id. at 473
(testimony of Zajanckauskiene) (testifying that she discussed
business opportunities with Vasys when she traveled to the United
States in 1993).
9. Within the next few weeks, Vasys "wrote a letter of inquiry
to Sara Lee, stating that [he and Zajanckauskiene] would be
interested in becoming [a] pantyhose, specifically L'eggs or
Hanes, and/or Hanes distributor in Lithuania." Id. at 1585. On
May 19, 1993, Vereen Mizelle ("Mizelle") responded to this letter
on behalf of Sara Lee. See id. Mizelle asked Vasys "nine
questions, inquiring about who [they were] and what [their] plans
might be if [they] in fact were appointed a distributor." Id.;
Sara Lee Ex. 12 (letter from Mizelle to Vasys, dated May 19,
1993, asking nine questions).
10. LCC and Sara Lee then exchanged several letters, discussing
the possibility of LCC selling L'eggs® pantyhose in Eastern
Europe. See, e.g., Sara Lee Exs. 13, 14, 19, 20, 21, 22. This
exchange of correspondence culminated on December 3, 1993, when
"Vasys and  Zajanckauskiene traveled to Sara Lee's offices in
Winston-Salem, North Carolina and met with Sara Lee employees" to
discuss the possibility
of LCC exporting Sara Lee hosiery into Lithuania. JFPO,
Stipulated Facts, ¶ 13; see also Trial Tr. at 480 (testimony of
Zajanckauskiene) (testifying that "on December 3, '93 Mr. Vasys
and I, we went to Winston-Salem to meet with Sara Lee
representative Vereen Mizelle"); LCC Ex. 11 (letter from Vasys to
Mizelle, dated Nov. 1, 1993, confirming "arrangements for a visit
to [Sara Lee's] offices on December 3, 1993"). This meeting
permitted Vasys and Zajanckauskiene to "familiarize themselves
with the product, to familiarize them[selves] with the way [Sara
Lee] did business between [itself] and distributors, to [learn]
about the nature of the product[,] how [Sara Lee] would market[,
and] how [Sara Lee] would spend money with [LCC]." Trial Tr. at
1463 (testimony of Mizelle); see also id. at 480-81 (testimony
of Zajanckauskiene) (same).
11. "Following this meeting, LCC made its initial purchase of
L'eggs® brand pantyhose ordering the styles Sheer Energy®, Sheer
Elengance®, L'eggs Classics®, Active Support®, and Little L'eggs
Tights®." JFPO, Stipulated Facts, ¶ 14; see also Sara Lee Ex.
29 (Invoice No. 931208); LCC Ex. 14 (same). On December 8, 1993,
Sara Lee sent an invoice to LCC for 928 dozen pairs of pantyhose
for the price of $19,951.30, to be sent by truck from North
Carolina to New Jersey. See Sara Lee Ex. 29. Sara Lee also
sent, free of charge, displays, consumer pamphlets, posters, and
swatches. See id.
12. Sara Lee granted LCC the exclusive right to sell L'eggs®
pantyhose in Lithuania, Latvia, Estonia, and the Russian District
of Kaliningrad. See LCC Ex. 110 (letter from Mizelle to Whom It
May Concern, dated Aug. 23, 1995).
13. LCC had already applied to the Lithuanian Government to
obtain a tariff exemption for L'eggs® pantyhose, arguing that
L'eggs® pantyhose with spandex prevent varicose veins and, thus,
are a medical product. See JFPO, Stipulated Facts, ¶ 15. To
this end, LCC submitted various documents, see Sara Lee Ex. 30,
including a "Certificate of Quality," signed by Mizelle, which
asserted that Active Support® pantyhose "stimulate circulation
to prevent swollen, tired, and aching legs." Sara Lee Ex. 51. In
this Certificate, Mizelle also certified that other L'eggs®
brands that contained spandex had qualities similar to Active
Support®. See id. Based on this and other information, the
Lithuanian Government granted the tariff exemption, permitting
LCC to import L'eggs® pantyhose without paying any tariff
charges. See JFPO, Stipulated Facts, ¶ 15. The Latvian
government, after considering similar information, granted the
same tariff exemption. See Sara Lee Ex. 177.
14. Another brand of pantyhose, Sanpellegrino, had also
obtained "the varicose veins exemption" from the Lithuanian
Government, Trial Tr. at 2182 (testimony of Vasys), even though
some of the Sanpellegrino brands had less spandex than some of
the L'eggs® brand pantyhose that had been granted the exemption.
See id. at 2183.
15. After placing its first order for L'eggs® pantyhose in
December of 1993, LCC continued to purchase L'eggs® pantyhose
from Sara Lee and sell them in its territory. See LCC Ex. 117
(summarizing LCC purchases of L'eggs® pantyhose). LCC's sales
grew rapidly. See Trial Tr. at 496 (testimony of
Zajanckauskiene) (testifying that LCC experienced "500 percent
growth" by the end of 1994). As Zajanckauskiene testified:
[E]verybody [was] buying like crazy, all the women
loved it [L'eggs pantyhose]. And the women, once they
buy one time, they would always come back. And since
we advertised a lot, people would be calling us and
asking how come your store doesn't carry that
pantyhose, and the store [managers] then would come
themselves to our store and contact us, saying that
[they would] like to sell [L'eggs pantyhose]. And
that's how the network spread and grew.
Trial Tr. at 496. As a result of this success, LCC abandoned its
attempts to sell any other products and focused its efforts
exclusively on L'eggs® pantyhose. See id. at 1838 (testimony of
16. In addition to purchasing pantyhose from Sara Lee and
importing it into Lithuania, LCC also "engaged in a widespread
advertising campaign consisting of television commercials, radio
advertisements, billboards, in-store posters, coupons and
distributed pamphlets." JFPO, Stipulated Facts, ¶ 16; see also
LCC Ex. 51 (listing advertising expenses). LCC obtained some of
this advertising material from Sara Lee and created some of it
independently. See LCC Ex. 14 (December 8, 1993, invoice
providing advertising material at no cost); Sara Lee Exs. 358-60
(examples of advertising produced by LCC). In addition, Sara Lee
had established "a co-op program," through which Sara Lee would
reimburse its distributors for a portion of their advertising
expenses as an incentive to distributors to promote Sara Lee
products. Trial Tr. at 1516 (testimony of Mizelle); see also
LCC Ex. 19 (letter from Vasys to Mizelle, dated May 9, 1994,
asking for "a refund of approximately $2,000" of "a total of
$7,371,73 [spent by LCC] for advertising L'eggs"); LCC Ex. 49
(letter from Vasys to Mizelle, dated Nov. 23, 1994, noting a
total of $10,631 in advertising expenditures and requesting that
Sara Lee "[p]lease send us the check for your participation in
these advertising expenses"); LCC Ex. 53 (check from Sara Lee to
LCC for $2,800 for "advertising").
17. As part of its advertising, LCC "put [a] special kind of
stickers on the Sara Lee product, on the boxes of pantyhose[,
that] carried [the LCC] logo, . . . address and the phone
number." Trial Tr. at 580 (testimony of Zajanckauskiene). LCC had
these stickers "made . . . in [the] U.S., because in Lithuania
[there is no] access to manufacturing something as good quality
as the stickies made in the U.S." Id.
18. As part of its efforts to promote the L'eggs® brand itself,
LCC advertised that "L'eggs will . . . guard your legs from
fatigue and varicose veins." Sara Lee Ex. 358 (quoting English
translation of Lithuanian television commercial). Similarly, LCC
claimed that L'eggs® pantyhose "speed up blood circulation in
veins in legs, three, five times. . . . This is the prophylactic
measure against superficial vein expansion in legs[,] veins
varicose, swolleness of the legs from the hard working, standing
and sitting position." Id. (English translation of Lithuanian
store poster); see also Sara Lee Exs. 359, 360.
19. Sara Lee's own brochures and advertisements for L'eggs®
pantyhose claimed that Active Support® pantyhose "stimulates
circulation to prevent swollen, tired and achy legs." LCC Ex. 21.
Sara Lee's own advertising also claimed that Sheer Energy®
pantyhose "give the legs an All Day Message®." Id.
20. Three witnesses testified at trial that L'eggs® brand
pantyhose helped to prevent varicose veins. Mizelle, then an
Assistant Marketing Manager for Sara Lee, testified that he
"recommend[ed] L'eggs pantyhose for speeding blood circulation .
. . because in [his] mind [he] associated that with varicose
veins." Trial Tr. at 1419. Similarly, Zajanckauskiene testified
that L'eggs pantyhose "help a lot like a prophylactic means" to
"guard your legs from fatigue and varicose veins." Id. at 1121.
Zajanckauskiene also testified that "Mizelle explained [to Vasys
and Zajanckauskiene] that certain styles of pantyhose[, which]
have spandex in them, . . . [serve as a] prophylactic means of,
to fight varicose vein problems." Id. at 488; see also id. at
600. Lithuanian Dr. Irena Pivoriuniene, who graduated from Vilnus
University Medical School and currently hosts a television talk
show in Lithuania, see id. at 721-22, testified that L'eggs®
pantyhose do not help a woman whose "veins are already expanded
and swollen," but that they can prevent varicose veins "for a
woman who doesn't have" them already. Id. at 757-58.
21. Zajanckauskiene, however, testified that
Mexicanmanufactured L'eggs Regular do not improve circulation or
prevent varicose veins, although LCC advertised that they do.
See id. at 1122-23. Zajanckauskiene testified the
advertisements for Mexican-made L'eggs Regular contained
incorrect information, because "the person who prepared the
advertisement" included his or her own "conclusions," without
approval from LCC. Id.
22. Sara Lee claims that LCC falsely represented that L'eggs®
pantyhose had "certain medical and therapeutic qualities" in its
advertising and in its applications for tariff exemptions. See
JFPO, Sara Lee's Contested Facts Regarding Liability, ¶¶ 63-97,
104. Sara Lee, however, did not present any evidence at trial
which suggests that L'eggs® pantyhose do not assist in the
prevention of varicose veins. Thus, Sara Lee has failed to meet
its burden of proving ...