Starr v. VSL Pharm., Inc.

• Citation: 509 F.Supp.3d 417
• Decision Date: 28 December 2020
• Docket Number: Civil Action No. TDC-19-2173
• Parties: David STARR, Sandi Cook, Bernadette Mavrikos, Edward Quiambao, James Tettenhorst, Jeremy Hansen, Krista Karo, Arlene Reed-Cossairt, Peter Stavros, Scott Offutt, Heather Farkas and Stacey Holz, on behalf of themselves and all others similarly situated, Plaintiffs, v. VSL PHARMACEUTICALS, INC., Leadiant Biosciences, Inc., f/k/a Sigma-Tau Pharmaceuticals, Inc., and Alfasigma USA, Inc., Defendants.
• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)

509 F.Supp.3d 417

David STARR, Sandi Cook, Bernadette Mavrikos, Edward Quiambao, James Tettenhorst, Jeremy Hansen, Krista Karo, Arlene Reed-Cossairt, Peter Stavros, Scott Offutt, Heather Farkas and Stacey Holz, on behalf of themselves and all others similarly situated, Plaintiffs,

v.VSL PHARMACEUTICALS, INC., Leadiant Biosciences, Inc., f/k/a Sigma-Tau Pharmaceuticals, Inc., and Alfasigma USA, Inc., Defendants.

Civil Action No. TDC-19-2173

United States District Court, D. Maryland.

Signed December 28, 2020

Edward F. Haber, Pro Hac Vice, Ian J. McLoughlin, Pro Hac Vice, Michelle Blauner, Pro Hac Vice, Patrick J. Vallely, Pro Hac Vice, Shapiro Haber amd Urmy LLP, Boston, MA, Jeffrey Samuel Gavenman, Jeremy W. Schulman, Schulman Bhattacharya, LLC, Bethesda, MD, for Plaintiffs David Starr, Sandi Cook, Bernadette Mavrikos, Edmund Quiambao, James Tettenhorst, Jeremy Hansen, Krista Karo, Arlene Reed-Cossairt.

Michelle Blauner, Pro Hac Vice, Patrick J. Vallely, Pro Hac Vice, Shapiro Haber amd Urmy LLP, Boston, MA, Jeffrey Samuel Gavenman, Schulman Battacharya, LLC, Bethesda, MD, for Plaintiffs Peter Stavros, Stacey Holz, Scott Offutt, Heather Farkas.

Brian Lawrence Schwalb, Calvin R. Nelson, Pro Hac Vice, Venable LLP, Washington, DC, for Defendant VSL Pharmaceuticals, Inc.

Charles S. Fax, Rifkin Weiner Livingston LLC, Bethesda, MD, Liesel Johanna Schopler, Rifkin Weiner Livingston LLC, Annapolis, MD, for Defendant Leadiant Biosciences, Inc.

Annie McGuire, Erinn M. Maguire, Robert Scott Brennen, Miles and Stockbridge PC, Baltimore, MD, Lydia Ferrarese, Pro Hac Vice, Mark A. Weissman, Pro Hac Vice, Herzfeld and Rubin PC, New York, NY, for Defendant Alfasigma USA, Inc.

MEMORANDUM OPINION

THEODORE D. CHUANG, United States District Judge Plaintiffs have filed this class action lawsuit against Defendants VSL Pharmaceuticals, Inc. ("VSL"), Leadiant Biosciences, Inc. ("Leadiant"), and Alfasigma USA, Inc. ("Alfasigma") alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 – 68 (2018) ; breach of express warranty, in violation of the Uniform Commercial Code ("UCC"); unjust enrichment; and violations of various state consumer protection statutes. Defendants have filed a consolidated Motion to Dismiss, seeking dismissal of the entirety of Plaintiffs’ Amended Complaint. Plaintiffs oppose the Motion. Having reviewed the briefs and the submitted materials, the Court finds no hearing necessary. See D. Md. Local R. 105.6. For the reasons set forth below, Defendants’ Motion to Dismiss will be GRANTED IN PART and DENIED IN PART.

BACKGROUND

This case is the latest in a long-running intellectual property dispute between former business partners Claudio De Simone and VSL as to who has rightful ownership of a proprietary probiotic formulation ("the De Simone Formulation") used in a product sold for many years under the name "VSL#3," a trademark owned by VSL. In prior litigation, that issue was put to a jury which, in November 2018, returned a verdict in favor of De Simone and his new business venture, ExeGi Pharma, LLC ("ExeGi"). On June 20, 2019, this Court issued a Permanent Injunction against Leadiant and Alfasigma, the companies that have marketed and distributed VSL#3 on behalf of VSL, enjoining them from (1) stating or suggesting in VSL#3 promotional materials directed at United States consumers that the present version of VSL#3 produced in Italy ("Italian VSL#3" or "the new VSL#3") continues to contain the De Simone Formulation, including by stating that VSL#3 contains the "original proprietary blend" or the "same mix in the same proportions" as the earlier version 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." Prelim. Inj. Order at 2, ECF No. 930, De Simone v. VSL Pharm., Inc. , No. TDC-15-1356 (D. Md. June 20, 2019).

The full history of this dispute is set forth in the multiple opinions issued by this Court in that prior litigation. See De Simone v. VSL Pharm., Inc. , 133 F. Supp. 3d 776 (D. Md. 2015) ; De Simone v. VSL Pharm., Inc. , No. TDC-15-1356, 2016 WL 3466033 (D. Md. June 20, 2016) ; De Simone v. VSL Pharm., Inc. , 352 F. Supp. 3d 471 (D. Md. 2018) ; De Simone v. VSL Pharm., Inc. , 395 F. Supp. 3d 617 (D. Md. 2019) ; and De Simone v. VSL Pharm., Inc. , No. TDC-15-1356, 2019 WL 2569574 (D. Md. June 20, 2019). New facts or revisited facts central to Plaintiffs’ claims, as stated in the Amended Complaint, are set forth below.

Plaintiffs allege that beginning in about 2013, Paulo Cavazza and members and representatives of the Cavazza family in Italy (collectively, "the Cavazza Family"), De Simone's original business partners in bringing the De Simone Formulation to market as VSL#3, began to push for changes to that formulation, specifically the use of cheaper bacterial strains in place of the original strains in order to increase profit margins. In mid-2014, with pressure mounting to market a fraudulent version of VSL#3, De Simone broke from the Cavazza Family, took the De Simone Formulation with him to a new company, ExeGi, and severed the rights of VSL and Leadiant, the company which marketed and distributed VSL#3, to buy or market the De Simone Formulation. At some point in 2016, Defendants ran out of their existing supply of VSL#3 containing the De Simone Formulation and thus began selling the new VSL#3, a probiotic produced in Italy with a different formulation, under the name "VSL#3," while claiming in their packaging materials and marketing activities that it still contained the De Simone Formulation. Plaintiffs allege that Defendants made such claims despite scientific evidence establishing that the new VSL#3 was neither the same, nor as clinically effective, as the De Simone Formulation.

As to packaging, Plaintiffs assert that Defendants improperly continued to use the VSL#3 trademark to identify the new probiotic, even though that mark had become associated with the De Simone Formulation. At some point, however, the packaging was changed to remove labeling information detailing the specific bacterial strains in the probiotic. Plaintiffs assert that this change was made to enable Defendants to avoid making any admission that their formulation was no longer the De Simone Formulation. Yet on the product information sheet inside the package, Defendants continued to state that the new VSL#3 had been the subject of extensive clinical research and cited to clinical studies establishing the efficacy of the De Simone Formulation, not the new formulation.

As to advertising, in May 2016, after Defendants lost access to the De Simone Formulation, Leadiant sent a letter to all health care providers who had previously recommended VSL#3 to their patients stating that production of VSL#3 would be moving to Italy but assuring customers that they would be receiving "the same quality product, containing the same genus and species of bacteria, in the same proportions you have come to expect." Am. Compl. ¶ 79, ECF No. 40. Other Leadiant marketing materials made similar representations. For example, a script to be used in responding to inquiries from health care providers stated that the new VSL#3 remained "the same multi-strain probiotic" as the De Simone Formulation. Id. ¶ 80. A May 24, 2016 Leadiant press release stated that the new VSL#3 was "supported by more than 170 studies" and thus falsely claimed a continuity between the studies, which were conducted on the De Simone Formulation, and the new version of VSL#3. Id. ¶¶ 79-81.

When Alfasigma took over the distribution of VSL#3 from Leadiant in mid-2016, its advertising advanced the same message, including in an August 2016 press release asserting that the new VSL#3 "maintain[ed] the original proprietary mix of eight strains of live bacteria" and was "supported by more than 170 published studies over the past 15 years." Id. ¶ 86. Similar statements appeared on Alfasigma's website. In Facebook postings responding to customer inquiries, Alfasigma stated that the new VSL#3 contained the "same 8 diverse strains and high potency" that had proven effective for the past 15 years. Id. ¶ 92. Such advertising and marketing statements appear to have continued through 2018, when the Alfasigma website contained the statement that VSL#3 had "demonstrated over 15 years of success." Id. ¶ 97.

Between June 2016 and the present, each of the named Plaintiffs routinely purchased the new VSL#3 and assert that, in doing so, they relied on the packaging and marketing materials, which convey the message that the new version of VSL#3 is the same as the version produced with the De Simone Formulation. Many also relied on the recommendation of their doctors. Each Plaintiff thus believed that the new VSL#3 continued to contain the De Simone Formulation.

On July 23, 2019, Plaintiffs filed this class action lawsuit. Defendants filed a Motion to Dismiss, to which the Plaintiffs responded by filing an Amended Complaint. In their Amended Complaint, Plaintiffs assert 19 causes of action, numbered as follows: (1) violations of RICO, 18 U.S.C. §§ 1962(c) - (d) ; (2) breach of express warranty, in violation of the UCC; (3) unjust enrichment; (4) a violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws Ann. ch. 93A § 2 (West 2006) ; (5) a violation of the California Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 – 85 (West 2019) ; (6) a violation of the California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 –09 (West 2017); (7) a violation of the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 –10; (8) a violation of the Texas Deceptive Trade Practices Act, Tex. Bus. & Com. Code Ann. §§ 17.01 – 17.955 (West 2020) ; (9) a violation of the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 –8-226 (West 2012); (10) a violation of the Michigan Consumer Protection Act, Mich. Comp. Laws Ann. §§...