Haw. Foodservice All. v. Meadow Gold Dairies Haw.

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HAWAII FOODSERVICE ALLIANCE, LLC, A HAWAII LIMITED LIABILITY COMPANY; Plaintiff, v. MEADOW GOLD DAIRIES HAWAII, LLC, A HAWAII LIMITED LIABILITY COMPANY; HOLLANDIA DAIRY, INC., A CALIFORNIA CORPORATION; HERITAGE DISTRIBUTING COMPANY, SAPUTO DAIRY FOODS USA, LLC, A DELAWARE CORPORATION; Defendants.

Civ. No. 21-00460 LEK-WRP

United States District Court, D. Hawaii

January 31, 2024

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

LESLIE E. KOBAYASHI, UNITED STATES DISTRICT JUDGE.

On July 24, 2023, Defendants Meadow Gold Dairies Hawaii, LLC (“MGDH”), Hollandia Diary, Inc. (“Hollandia”), Heritage Distributing Company doing business as Ninth Avenue Foods (“Heritage” or “NAF”), and Saputo Dairy Foods USA, LLC (“Saputo” and collectively “Defendants”) filed a Motion for Summary Judgment (“Motion”). [Dkt. no. 123.] Plaintiff Hawaii Foodservice Alliance, LLC (“Plaintiff”) filed its memorandum in opposition on September 22, 2023, and Defendants filed their reply on September 29, 2023. [Dkt nos. 147, 150.] This Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.1(c) of the Local Rules of Practice for the United States District Court for the District of Hawaii (“Local Rules”). Defendants' Motion is hereby granted in part and denied in part for the reasons set forth below. Summary judgment is granted in part in favor of MGDH and the Motion is denied to the extent that it seeks summary judgment in favor of Hollandia, Heritage, and Saputo.

BACKGROUND

The crux of this case is that Plaintiff alleges MGDH's use of phrasing and imagery suggesting that Meadow Gold brand products are sourced in Hawai'i is misleading and deceptive because Meadow Gold products contain milk and other products, such as whipping cream, imported from the continental United States (“Mainland Milk Products”).

Plaintiff initiated this action on November 24, 2021. See Complaint, filed 11/24/21 (dkt. no. 1).^[1] The operative pleading is Plaintiff's Second Amended Complaint, filed on February 1, 2023. [Dkt. no. 83.] Plaintiff asserts the following claims: false designation of origin and advertising and unfair competition, in violation of the Lanham Act, Tile 15 United States Code Section 1125(a) (“Count I”); an unfair methods of competition claim, in violation of Hawai'i Revised Statutes Chapter 480 (“UMOC” and “Count II”); a false advertising claim pursuant to Hawai'i Revised Statutes Section 708-871 and Section 603-23.5 (“Count III”); and a deceptive trade practices claim, pursuant to Hawai'i Revised Statutes Chapter 481A (“Count IV”).

The parties agree that, “[f]rom at least 1986 to 2020, the Meadow Gold brand operated as a subsidiary of various successive mainland conglomerates,” the most recent of which was Southern Foods, which later became Dean Foods. [Defs.' Separate Concise Statement of Facts, filed 7/24/23 (dkt. no. 124) (“Defs.' CSOF”), at ¶¶ 4-5; Pltf.'s Concise Statement of Facts in Opp. to Defs.' Motion for Summary Judgment as a Matter of Law Filed July 24, 2023, filed 9/22/23 (dkt. no. 148) (“Pltf.'s CSOF”), at ¶¶ 4-5 (admitting Defs.' ¶¶ 4 and 5).] Dean Foods held Meadow Gold Dairies (“MGD”) for approximately twenty years, until its bankruptcy in 2020. [Defs.' CSOF at ¶ 5; Pltf.'s CSOF at ¶ 5.]

Plaintiff “is the largest milk distributor in Hawai'i, with about 65% of the wholesale milk distribution market,” and MGDH has “about 35% of the market.” [Defs.' CSOF at ¶¶ 26-27; Pltf.'s CSOF at ¶¶ 26-27 (admitting Defs.' ¶¶ 26-27 “to the extent ‘the wholesale milk distribution market' is defined as milk product sales to retailers and does not include other sales, such as MGDH's sales to schools”).]

Hollandia, Heritage, and Saputo (collectively “the Dairy Farmers”) supply products to MGDH. [Second Amended Complaint at ¶¶ 7-9; Defs.' Answer to Second Amended Complaint [Dkt. 83], filed 3/1/23 (dkt. no. 88) (“Answer”), at ¶ 5 (admitting those portions of Plaintiff's ¶¶ 7-9).] Specifically, “MGD[H] entered into transactions with Hollandia, Heritage, and Saputo to supply mainland milk.” [Defs.' CSOF at ¶ 33; Pltf.'s CSOF at ¶ 33 (admitting that portion of Defs.' ¶ 33).] MGDH also has agreements “with packaging vendors and advertising firms to supply Hawai'i-themed marketing.” [Defs.' CSOF at ¶ 32; Pltf.'s CSOF at ¶ 32 (admitting that portion of Defs.' ¶ 32).] The packaging and marketing at issue in this case include the use of the terms “Hawaii's Dairy” and “Made with Aloha” and the suggestion of a connection with the “Dairymen's Association,” [Second Amended Complaint at ¶ 1,] and the use of Meadow Gold's mascot “Lani Moo,” [id. at ¶ 28].

I. Defendant's Evidence

In 2020, Bahman Sadeghi (“Sadeghi”), through MGD Acquisition, LLC purchased certain Meadow Gold intellectual property (“IP”), a processing facility in Hilo, and distribution operations on the Island of Maui and the Island of Kaua'i from Dean Foods (“MGDH Acquisition”). Defs.' CSOF, Decl. of Bahman Sadeghi (“Sadeghi Decl.”) at ¶ 3; Further Concise Statement (“Defs.' Reply CSOF”), filed 9/29/23 (dkt. no. 151), Supplemental Declaration of Bahman Sadeghi (“Sadeghi Reply Decl.”) at ¶ 5; see also Sadeghi Decl., Exh. 1 (Intellectual Property Assignment Agreement between Dean Foods Company and MGD Acquisition, LLC, effective 4/30/20). MGD Acquisition, LLC obtained, inter alia, the registered trademarks for “Lani Moo,” “Dairymen's,” and “Hawaii's Dairy.”^[2] [Sadeghi Decl., Exh. 1, Exh. A (Assigned IP).]

Sadeghi was the owner and operator of Island Dairy, a dairy farm on the Island of Hawai'i, from 1986 until he sold the farm in December 2011. During that time, Island Dairy sold milk to Meadow Gold Dairies. [Sadeghi Decl. at ¶ 2.] Based on his experience in the Hawai'i dairy industry, Sadeghi states:

Until the 1980s, Meadow Gold sourced nearly all of its milk from Hawai'i dairy farms. But in the 1980s and 1990s, milk production declined steeply, which led to an increase in mainland imports. Meadow Gold began importing milk in bulk from the mainland in the mid-1990s. Since then, Meadow Gold has sourced the majority of its milk from the mainland. Other distributors rely solely on mainland milk imports. By the 2000s, this was not only common industry knowledge, but was also widely reported to the public. Today, MGD[H] is the only dairy distributor in the islands that has a local source of milk. It is also the only dairy distributor in the islands with an operating milk processing facility.

[Id. at ¶ 5.] Defendants also cite articles and reports that corroborate Sadeghi's statements about the changes in the Hawai'i dairy industry. See Defs.' CSOF, Decl. of Erika L. Amatore (“Amatore Decl.”), Exh. 2 (Clare Gupta, Dairy's Decline and the Politics of “Local” Milk in Hawai'i, FOOD, CULTURE & SOCIETY (Vol. 19, Issue 3, Sept. 2016)) at 497);^[3] Motion, Mem. in Supp. at 4-5 (citing Haw. Dep't Ag. C.N. Lee, Issues Related to Hawai'i's Dairy Industry at 15, available at https://hdoa.hawaii.gov/wp-content/uploads/2013/01/Appendix-B-Dairy.pdf (last visited July 20, 2023); HoNoLuLu MAGAZINE, Milking It, Aug. 5, 2008, available at https://www.honolulumagazine.com/milking-it/ (last visited July 20, 2023)). As to the public's knowledge about the practice of using Mainland Milk Products, Defendants cite: KHoN2, Hawai'i Milk Producers Fight for Survival in Competitive Market, June 30, 2015, available at https://www.khon2.com/news/hawaii-milk-producers-fight-for-survival-incompetitive-market/ (last visited July 20, 2023); HAWAII NEWS NoW, Last Hawaii-Owned Large Dairy May Close, June 30, 2015, available at https://www.hawaiinewsnow.com/story/29448178/last-hawaii-owned-large-dairymay-close/ (last visited July 20, 2023)). [Motion, Mem. in Supp. at 5.]

Sadeghi “purchased Meadow Gold as part of an effort to preserve and restore Hawai'i's dairy farms and dairy industry,” and “[t]he Meadow Gold brand and IP was key to MGD[H]'s local dairy revitalization strategy[.]” [Sadeghi Decl. at ¶¶ 5-6.] Sadeghi relied on the fact that he would be able to continue to follow Dean Foods's practice of using Hawai'i-themed IP, without regard to the issue of whether Meadow Gold brand milk products came from a local source or from the mainland. [Id. at ¶ 7.] Sadeghi has spent over $625,000 to use and expand upon Meadow Gold's Hawai'i-themed marketing, including the “Made with Aloha” tagline. [Id. at ¶ 10.] According to Sadeghi, the Dairy Farmers did not have any role in the determination of the content on Meadow Gold packaging. [Id. at ¶ 11.]

Sadeghi states that, with one exception that is not relevant to the instant case, all of the current Meadow Gold brand products “are essentially identical to the products previously offered by Meadow Gold under Dean Foods.” [Id. at ¶ 8.] It is Defendants' position that the Hawai'i-themed taglines at issue in this case were in use long before MGDH acquired the brand. According to Sadeghi, “Meadow Gold . . . was founded in 1897 as the Oahu Dairymen's Association brand”; Meadow Gold's “beloved mascot, ‘Lani Moo,' . . . was introduced in 1949”; and Meadow Gold has sponsored the American Youth Soccer Association (“AYSO”) in Hawai'i for over fifty years. [Id. at ¶ 6.] Meadow Gold was using the tag-line “Made with Aloha” before Sadeghi purchased the brand, and he states that tagline was used by Dean Foods. Id. at ¶ 10; see also Defs.' CSOF, Decl. of Jerry Linville (“Linville Decl.”) at ¶ 4 (“During the entire time I worked for Meadow Gold under Dean Foods, the brand used the tagline ‘Hawaii's Dairy' in its advertising and marketing materials”).^[4]

Defendants characterize Meadow Gold's marketing of Lani Moo as “aggressive[] and consistent[] since her introduction in 1949.” See Motion, Mem. in Supp. at 6 (citing Amatore Decl. ¶ 2, Ex. 3-12 (...