Kwan v. Sanmedica Int'l

• Citation: 854 F.3d 1088
• Decision Date: 21 April 2017
• Docket Number: No. 15-15496,15-15496
• Parties: Serena KWAN, an individual, On Behalf of Herself and All Others Similarly Situated, Plaintiff–Appellant, v. SANMEDICA INTERNATIONAL, a Utah Limited Liability Company, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

854 F.3d 1088

Serena KWAN, an individual, On Behalf of Herself and All Others Similarly Situated, Plaintiff–Appellant,

v.SANMEDICA INTERNATIONAL, a Utah Limited Liability Company, Defendant–Appellee.

No. 15-15496

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 12, 2017, San Francisco, California

Filed April 21, 2017

Stewart M. Weltman (argued) and Max A. Stein, Boodell & Domanskis LLC, Chicago, Illinois; Elaine Ryan and Patricia N. Syverson, Bonnett Fairbourn Friedman & Balint P.C., Phoenix, Arizona; Manfred Muecke, Bonnett Fairbourn Friedman & Balint P.C., San Diego, California; for Plaintiff–Appellant.

Jason Kerr (argued), Christopher B. Sullivan, Mark J. Williams, and Steven William Garff, Price Parkinson & Kerr PLLC, Salt Lake City, Utah, for Defendant–Appellee.

Before: J. Clifford Wallace and Milan D. Smith, Jr., Circuit Judges, and Ralph R. Erickson,^* District Judge.

OPINION

ERICKSON, District Judge:

Serena Kwan appeals from the district court judgment dismissing her second amended complaint for failing to state a claim upon which relief can be granted.¹ The district court correctly concluded that California law does not provide for a private cause of action to enforce the substantiation requirements of California's unfair competition and consumer protection laws. Further, the district court did not err in concluding that Kwan's second amended complaint failed to allege facts that would support a finding that SanMedica International's claims regarding its product, SeroVital, were actually false. Accordingly, we AFFIRM .

BACKGROUND FACTS AND PROCEDURAL HISTORY

On July 21, 2014, Plaintiff/Appellant, Serena Kwan, an Individual, On Behalf of Herself and All Others Similarly Situated ("Kwan"), filed a class action against Defendants/Appellees, SanMedica International, LLC ("SanMedica"), a Utah Limited Liability Company, and Sierra Research Group, LLC ("Sierra"), a Utah Limited Liability Company, alleging violations of California's Unfair Competition Law ("UCL") and California's Consumers Legal Remedies Act ("CLRA"). Kwan filed a first amended complaint on August 27, 2014. The amended complaint was based on an allegation that the defendants falsely represented that their product, SeroVital, provides a 682% mean increase in Human Growth Hormone ("HGH") levels, that it was clinically tested, and that "peak growth hormone levels" are associated with "youthful skin integrity, lean musculature, elevated energy production, [and] adipose tissue distribution."

On October 7, 2014, Sierra filed a motion under rule 12(b)(2) to dismiss for lack of jurisdiction. On October 16, 2014, Kwan filed a notice of voluntary dismissal of Sierra pursuant to rule 41(a)(1)(A)(I), Fed. R. Civ. P.

The court granted SanMedica's motion to dismiss with leave to amend. The court reasoned that the first amended complaint was based entirely on allegations related to whether SanMedica's claims regarding its product, SeroVital, were properly substantiated. Citing Cal. Bus. & Prof. Code § 17508, the court stated: "Individuals may not bring suit under the UCL or the CLRA alleging only that advertising claims lack substantiation" because that "right is reserved to ‘the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney....’ " The court instructed that if Kwan chose to amend her complaint, "she must allege facts from which the [c]ourt can conclude that Defendant's advertising representations were false." The court continued, "it is not enough for Plaintiff to attack the methodology of Defendant's study; instead, she must allege facts affirmatively disproving Defendant's claims." The court advised:

For example, Plaintiff could allege that one or more of the authorities alluded to actually studied or tested the formula SeroVital contains and found that it does not produce a 682% mean increase in HGH levels, or that Plaintiff herself did not experience such an increase when using the product, or that a study exists somewhere demonstrating that a 682% increase is categorically impossible to achieve in an over-the-counter pill. Of course, Plaintiff should only allege these facts if she can do so in good faith.

Kwan filed a second amended complaint against SanMedica International, LLC, on December 1, 2014. In the second amended complaint, Kwan continues to maintain the two counts. Count one alleges violations of the California Unlawful Business and Practices Act. Count two alleges violations of the California Consumers Legal Remedies Act. Among several paragraphs containing conclusions of law and sweeping arguments, the second amended complaint contains the following material factual allegations:

1) SanMedica manufactures and sells SeroVital, an over-the-counter amino acid supplement represented as an HGH secretagogue, meaning it is supposed to "prompt the body to secrete HGH."

2) SanMedica represents in its marketing campaign and on each label of SeroVital that:

(1) "It is clear that Growth Hormone has been associated with wrinkle reduction, decreased body fat, increased lean muscle mass, stronger bones, improved mood, heightened sex drive, and making users look and feel decades—not years, but DECADES—younger"; (2) "peak growth hormone levels" are "associated with: youthful skin integrity, lean musculature, elevated energy production, [and] adipose tissue distribution"; and (3) that SeroVital is clinically tested to boost human growth hormone ("HGH") by a mean of 682% (hereafter the "682% HGH increase representation").

3) These representations are false.

4) After being exposed to the representation, in May 2014, Kwan purchased one box of SeroVital online from SanMedica.

5) A 120 count bottle of SeroVital sells for approximately $99.00.

6) If she had known the truth about the product, or that it was being sold illegally, Kwan would not have purchased the product.

7) "There is no Credible Scientific Evidence to Support Defendant's 682% HGH Increase Representation, HGH Fountain Of Youth Benefit Representations, And SeroVital Fountain of Youth And Body Composition Representations."

8) The only study identified by Defendant's website is not an example of scientific evidence recognized by experts, was never peer-reviewed, and was never published in a peer-reviewed journal.

9) The study is arguably incredible.

10) SeroVital is a dietary supplement that is sold illegally because SanMedica's marketing claims are not properly substantiated as required by federal and state law regulating the sale of dietary supplements.

11) Kwan and other "Class members have been damaged in their purchases of the Product."

Although the second amended complaint alleges that Kwan purchased SeroVital, it does not allege that she, or any of the purported class members, ever actually used the product.

SanMedica filed a motion to dismiss the second amended complaint under rule 12(b)(6), Fed. R. Civ. P., for failure to state a claim upon which relief can be granted. Because the second amended complaint failed to specifically allege facts to support a finding that SanMedica's claims regarding SeroVital were actually false, the court concluded that Kwan was again merely alleging lack of substantiation. Because Kwan had been provided "the opportunity to amend her complaint, and she has once again failed to allege facts from which the [c]ourt could conclude that Defendant's advertising representations were false," the court dismissed the matter with prejudice. Kwan timely appealed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1291. We review de novo the district court's judgment granting a 12(b)(6) motion for failure to state a claim upon which relief can be granted. Johnson v. Fed. Home Loan Mortg. Corp. , 793 F.3d 1005, 1007 (9th Cir. 2015). This court may affirm the dismissal "based on any ground supported by the record." Johnson v. Riverside Healthcare Sys., LP , 534 F.3d 1116, 1121 (9th Cir. 2008). A dismissal under rule 12(b)(6)"may be based on either a ‘lack of a cognizable legal theory’ or ‘the absence of sufficient facts alleged under a cognizable legal theory.’ " Id . at 1121–22 (quoting Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990) ).

"The task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum." Gee v. Tenneco, Inc. , 615 F.2d 857, 861 (9th Cir. 1980) ; accord U.S. Fidelity and Guaranty Co. v. Lee Investments LLC , 641 F.3d 1126, 1133 (9th Cir. 2011) ("Perhaps a better way of putting it is to say that one of the goals in deciding state law questions is to do no harm to state jurisprudence."). "[F]ederal courts are bound by the pronouncements of the state's highest court on applicable state law." Ticknor v. Choice Hotels, Inc. , 265 F.3d 931, 939 (9th Cir. 2001). Similarly, a federal court is "not free to reject a state judicial rule of law merely because it has not received the sanction of the state's highest court, but it must ascertain from all available data what the state law is and apply it." Estrella v.Brandt , 682 F.2d 814, 817 (9th Cir. 1982). "An intermediate state appellate court decision is a ‘datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.’ " Id. at 817 (quoting West v. A.T.&T. Co. , 311 U.S. 223, 237, 61 S.Ct. 179, 85 L.Ed. 139 (1940) ); see also Lewis v. Tel. Empl. Credit Union , 87 F.3d 1537, 1546 (9th Cir. 1996) (citing In re Kirkland , 915 F.2d 1236, 1239 (9th Cir. 1990) to recognize that "... where there is no convincing evidence that the state supreme court would decide differently, ‘a federal court is obligated to follow the decisions of the state's intermediate appellate courts' ").

DISCUSSION

1. Whether the California law regulating advertising provides a...