If a court issues an injunction against you, then you need to take all reasonable steps to ensure compliance with that injunction. Otherwise, you may be at risk of being found in civil contempt.

Indeed, the Fourth Circuit recently upheld a civil contempt order arising from an injunction against false advertising in De Simone v. VSL Pharmaceuticals, Inc., — F.4th –, 2022 WL 2036293, No. 20-1846, No. 20-1869 (4th Cir. Jun. 7, 2022).

Background

Cladio De Simone, an Italian professor and inventor, had licensed an eight-strain probiotic to VSL Pharmaceuticals. Leadiant Biosciences (and later Alfasigma) partnered with VSL to market De Simone's formulation as VSL#3.

De Simone cut ties with VSL in 2015, and later filed suit alleging that Alfasigma and Leadiant violated the Lanham Act by falsely advertising that a new reformulated VSL#3 was clinically equivalent to the prior version, namely, his.

A jury found that Alfasigma and Leadiant were liable for false advertising, and the district court then issued the following injunction prohibiting Alfasigma and Leadiant from:

(1) stating or suggesting in VSL#3 promotional materials directed at or readily accessible to United States consumers that the present version of VSL#3 produced in Italy (“Italian VSL#3”) continues to contain the same formulation found in the versions of VSL#3 produced before January 31, 2016 (“the De Simone Formulation”), including but not limited to making statements that VSL#3 contains the “original proprietary blend” or the “same mix in the same proportions” as earlier version[s] of VSL#3; and (2) citing to or referring to any clinical studies performed on the De Simone Formulation or earlier versions of VSL#3 as relevant or applicable to Italian VSL#3.

Contempt Proceeding

Less than four months after the injunction issued, Alfasigma found itself in civil contempt proceedings because of a prior letter that Alfasigma had sent to healthcare providers (the Healthcare Providers Letter) which could still be found on its web server, and for certain other statements including its social media comments. The Healthcare Providers Letter stated, among other things, that the current Italian-made VSL#3® “is equivalent to the [original] product.”

The Healthcare Providers Letter originally could be found on the Alfasigma website prior to the injunction, and links to the Letter were removed from the website after the injunction was issued. “But Alfasigma didn't remove the Letter itself”; and the Letter could still be accessed by searching “vsl3 litigation” on Google. After being informed of that fact, Alfasigma “then broke the link to the letter” (presumably by removing or renaming the file on its website server).

Citing Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000), the Fourth Circuit noted that a party moving for civil contempt must establish four elements by clear and convincing evidence:

(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge;

(2) that the decree was in the movant's favor;

(3) that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and

(4) that the movant suffered harm as a result.

Once the movant establishes that the alleged contemnor violated the injunction decree, the burden shifts to the alleged contemnor to demonstrate that she made in good faith all reasonable efforts to comply with the decree. United States v. Ali, 874 F.3d 825, 831 (4th Cir. 2017).

Constructive Knowledge

In the civil contempt context, parties have constructive knowledge of their websites. Rainbow Sch., Inc. v. Rainbow Early Educ. Holding LLC, 887 F.3d 610, 618–19 (4th Cir. 2018). The constructive knowledge doctrine charges a party with knowledge that one using reasonable care or diligence should have.

The offending Letter remained on Alfasigma's website server, and Alfasignma was charged with constructive knowledge of that fact.

Substantial Compliance

Substantial compliance is a defense to civil contempt. United States v. Darwin Constr. Co., 873 F.2d 750, 754 (4th Cir. 1989). Substantial compliance requires that “all reasonable steps have been taken to ensure compliance: inadvertent omissions are excused only if such steps were taken.” Id. at 755

Alfasigma argued that this was a “technical violation” and that it had taken reasonable steps to comply with the injunction.

The Fourth Circuit, however, held that “verifying that the Letter wasn't readily accessible via external links is a reasonable step,” which Alfasigma had not done.  Thus, Alfasigma was not in substantial compliance with the injunction, and the civil contempt order against Alfasigma was affirmed.

The Fourth Circuit also affirmed the civil contempt order against Alfasigma based on its social media comments for similar reasons.

Attorneys' Fees Sanction

As for sanctions, lost profits were not awarded because “quantifiable damages” from the violation were not shown. But attorneys' fees for bringing the contempt action were awarded.

The Fourth Circuit upheld the award of attorneys' fees as being compensatory (“reasonable attorney's fees expended in advancing the [contempt m]otion”), and not punitive. See Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) (an award of “attorney's fees incurred because of the misconduct at issue” is compensatory).

The Fourth Circuit also held that willful disobedience was not required in awarding attorneys' fees for violating an injunction. See In re Gen. Motors Corp., 61 F.3d 256, 259 (4th Cir. 1995); see also John Zink Co. v. Zink, 241 F.3d 1256, 1261–62 (10th Cir. 2001).

The attorneys at Thomas P. Howard, LLC litigate cases nationwide including in Colorado.