Obesity Research Inst., LLC v. Fiber Research Int'l, LLC

• Decision Date: 25 February 2016
• Docket Number: Case No. 15-cv-00595-BAS(MDD)
• Citation: 165 F.Supp.3d 937
• Parties: Obesity Research Institute, LLC, Plaintiff, v. Fiber Research International, LLC, Defendant. And Related Counterclaim
• Court: U.S. District Court — Southern District of California

165 F.Supp.3d 937

Obesity Research Institute, LLC, Plaintiff,

v. Fiber Research International, LLC, Defendant.And Related Counterclaim

Case No. 15-cv-00595-BAS(MDD)

United States District Court, S.D. California.

Signed February 25, 2016

Amanda R. Abeln, Richard P. Sybert, Sean Flaherty, Gordon & Rees LLP, San Diego, CA, Scott J. Ferrell, David W. Reid, James B. Hardin, Richard H. Hikida, Newport Trial Group, Newport Beach, CA, for Plaintiff.

Christopher Sullivan, Jason Kerr, Ronald F. Price, Price Parkinson & Kerr PLLC, Salt Lake City, UT, Jack Fitzgerald, IV, Melanie Rae Persinger, Tran Hai Thi Nguyen, The Law Office of Jack Fitzgerald, PC, Trevor Flynn, San Diego, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF AND COUNTERDEFENDANT OBESITY RESEARCH INSTITUTE'S MOTION TO DISMISS DEFENDANT'S FIRST AMENDED COUNTERCLAIMS

(ECF No. 43)

Hon. Cynthia Bashant, United States District Judge

On March 16, 2015, Obesity Research Institute, LLC (“Obesity Research”) filed a Complaint for Declaratory Judgment against Fiber Research International, LLC (“Fiber Research”) asking the Court to declare that it has no liability under either the Lanham Act, 15 U.S.C. §§ 1125 et seq ., or the Federal Food, Drug, and Cosmetic Act (“FFDCA”), 21 U.S.C. §§ 301 et seq . (ECF No. 1.) On May 28, 2015, Fiber Research filed an Answer, in which it asserts the affirmative defense of unclean hands, and a First Amended Counterclaims. (ECF No. 41 (“FACC”).) The FACC alleges a violation of the Lanham Act (false advertising, unfair competition and false designation in violation of section 1125(a)(1) ), a violation of California's unfair competition law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq., and a violation of California's false advertising law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq . (Id. )

Presently before this Court is a Motion to Dismiss the FACC filed by Obesity Research pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 43.) Obesity Research argues the FACC should be dismissed because: (1) Fiber Research lacks statutory standing to bring the claims; (2) the FACC fails to state a claim for a violation of the Lanham Act and for a violation of the UCL; (3) the FACC fails to allege sufficient particularity under Federal Rule of Civil Procedure 9(b) ; and (4) the allegations in the FACC are barred by laches. Fiber Research opposes. (ECF No. 48.)

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons set forth below, Court GRANTS IN PART and DENIES IN PART Obesity Research's Motion to Dismiss (ECF No. 43).

I. BACKGROUND

As alleged in Fiber Research's FACC, “Glucomannan is a dietary fiber derived from Konjac, a root vegetable.” (FACC at ¶ 24.) Shimizu Chemical Corporation (“Shimizu”) “has developed a proprietary, patented process for extracting and refining Konjac root to produce the highest-quality glucomannan available in the world, called ‘Propol.’ ” (Id. ) “Numerous clinical studies support the efficacy of Propol glucomannan in assisting weight loss.” (Id. )

“In 2006, Obesity Research introduced a weight loss product called Lipozene.” (Id. at ¶ 25.) Although Obesity Research's marketing campaign highlights Propol's strong clinical testing results, “Lipozene contains neither Propol glucomannan, nor any substantially equivalent glucomannan that would justify Obesity Research relying on Propol clinical studies to support its Lipozene weight loss claims.” (Id. at ¶¶ 25, 26.)

Specifically, Fiber Research alleges that Obesity Research repeatedly says Lipozene is “clinically proven,” when, in fact, the clinical studies it relies on are those using Shimizu's Propol. (Id. at ¶¶ 50, 55, 57, 58-61.) Lipozene, to the contrary, “contains poor-quality, cheap ingredients and adulterants that do not have the same functional chemical profile as Propol. Hence, Lipozene does not have the weight loss benefits of Propol as demonstrated by Propol's clinical testing.” (Id. at ¶ 65.) “Instead, there is no reliable clinical data supporting Lipozene's efficacy in...promoting weigh loss.” (Id. at ¶ 66.) Additionally, Fiber Research alleges that Obesity Research falsely represents that at least one of the clinical studies is “sponsored by [Obesity Research]” and that Obesity Research falsely refers to one of the clinical studies of Propol as a “Lipozene Clinical Study,” when in fact Lipozene was not involved in the study at all. (Id. at ¶¶ 70-71.) Finally, Fiber Research claims that Obesity Research falsely represents on its label that there are “[n]o known allergens in this product” when, in fact, there are quantities of sulfites in Lipozene such that an allergen warning is warranted. (Id. at ¶ 67.)

“Pursuant to an exclusive sales contract with Shimizu, Fiber Research markets Propol in the United States.” (Id. at ¶ 28.) Fiber Research is also “the assignee of Shimizu's legal rights of action in the United States for any damages incurred by Shimizu by virtue of any unlawful selling or marketing of products in unfair or unlawful competition with Propol.” (Id. at ¶ 29.) Fiber Research brings this action for injuries both “sustained directly, and as the legal assignee for injuries sustained by Shimizu.” (Id. at ¶ 30.) “Fiber Research has been injured in its efforts to sell Propol as a result of Obesity Research's unfairly passing off its sub-standard, adulterated, unrefined Konjac root product as the same or substantially the same as that studied in clinical trials of Shimizu's Propol glucomannan (even going so far as to call these the ‘Lipozene Clinical Studies.’) Fiber Research is also injured by the loss of good will to Propol caused by Obesity Research's passing off an inferior product as Propol.” (Id. at ¶ 28.)

Fiber Research seeks: (1) a permanent injunction against Obesity Research from falsely advertising, marketing, packaging, labeling, and/or selling Lipozene using any false representations; (2) damages suffered by Fiber Research (directly and as Shimizu's assignee) “as measured by Shimizu's lost sales to Obesity Research and by Obestity [sic] Research's Lipozene profits”; (3) Obesity Research's profits “attributable to its willful false advertising, unfair competition, and deceptive acts or practices”; (4) treble damages under 15 U.S.C. § 1117 ; and (5) attorney's fees and costs. (Id. at ¶ 106.)

II. LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6) ; Navarro v. Block , 250 F.3d 729, 732 (9th Cir.2001). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party.

Cahill v. Liberty Mut. Ins. Co ., 80 F.3d 336, 337–38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ) (internal quotations omitted).

“[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (quoting Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (alteration in original)). A court need not accept “legal conclusions” as true. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Despite the deference the court must pay to the plaintiff's allegations, it is not proper for the court to assume that “the [plaintiff] can prove facts that it has not alleged or that the defendants have violated the...law[ ] in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters , 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).

When a claim is based on fraud or mistake, the circumstances surrounding the fraud or mistake must be alleged with particularity. Fed. R. Civ. P. 9(b). If the allegations fail to satisfy the heightened pleading requirements of Rule 9(b), a district court may dismiss the claim. Vess v. Ciba–Geigy Corp. USA , 317 F.3d 1097, 1107 (9th Cir.2003). To satisfy the particularity requirement of Rule 9(b), “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Vess , 317 F.3d at 1106 (quoting Cooper v. Pickett , 137 F.3d 616, 627 (9th Cir.1997) ). Plaintiffs must plead enough facts to give defendants notice of the time, place, and nature of the alleged fraud, together with the content of any alleged misrepresentation and explain why it is false or misleading. See id. at 1107. The circumstances constituting the alleged fraud must “be specific enough to give defendants notice of the particular misconduct...so that they can defend against the charge and not just deny that they have done anything wrong.” Vess , 317 F.3d at 1106 (quoting Bly–Magee v. California , 236 F.3d 1014, 1019 (9th Cir.2001) (internal quotation marks omitted)); see also In re GlenFed, Inc. Sec. Litig ., 42 F.3d 1541, 1547 (9th Cir.1994), superseded by statute on other grounds as stated in Ronconi v. Larkin , 253 F.3d 423, 429 n. 6 (9th Cir.2001)....