Thermolife Int'l, LLC v. Gaspari Nutrition, Inc.
| Decision Date | 16 December 2011 |
| Docket Number | No. CV 11-01056-PHX-NVW,CV 11-01056-PHX-NVW |
| Parties | ThermoLife International, LLC, Arizona limited liability company, Plaintiff, v. Gaspari Nutrition, Inc., a New Jersey corporation; Richard Gaspari, a New Jersey resident; Daniel Pierce, a New Jersey resident; and Bruce Kneller, a New Jersey resident, Defendants. |
| Court | U.S. District Court — District of Arizona |
Before the Court is Defendants' Motion to Dismiss Pursuant to Fed. R. Civ. P. Rule 9(b) and 12(b)(6) (Doc. 10), Plaintiff's Request for Entry of Default Against Gaspari Nutrition, Inc. On Counts I, II, IV, and V (Doc. 14), and the parties' Joint Memorandum Regarding Discovery Dispute (Doc. 32).
Plaintiff ThermoLife International, LLC ("ThermoLife") and Defendant Gaspari Nutrition, Inc. ("Gaspari") are both suppliers of dietary supplements. Individual Defendants Richard Gaspari, Daniel Pierce, and Bruce Kneller have all been employed by Gaspari. Plaintiff claims that Gaspari falsely and misleadingly marketed and sold products that were not compliant with the federal Dietary Supplement Health and Education Act of 1994 ("DSHEA"). Specifically, Plaintiff claims that Gaspari sold and marketed a product calledNovedex XT as being DSHEA compliant when it was not actually DSHEA compliant. On September 9, 2010, the FDA issued a formal action stating that Novedex XT was not DSHEA compliant because it contained aromatase inhibitors that could cause potential adverse effects in users. On October 7, 2010, Gaspari issued a recall of Novedex XT.
Additionally, Plaintiff claims that Gaspari falsely advertised its Halodrol Liquigels and Halodrol MT products as being DSHEA compliant. On October 6, 2010, the FDA issued a formal enforcement report stating that Gaspari's Halodrol products were not DSHEA compliant and would accordingly be recalled. Plaintiff further claims that Gaspari falsely advertised that its Halodrol products contained 95% 3,4-divanillytetrahydrofuran. However, Plaintiff tested material that was marketed and sold as 95% 3,4-divanillytetrahydrofuran and concluded that the material it had tested was not in fact 95% 3,4-divanillytetrahydrofuran. From this, Plaintiff extrapolates that the commercial production of 95% 3,4-divanillytetrahydrofuran was cost prohibitive, and that Gaspari's Halodrol products could not actually contain 95% 3,4-divanillytetrahydrofuran.
Plaintiff also raises issues related to Gaspari's advertisement of its SuperPump 250 product. Plaintiff claims that Gaspari advertised that the SuperPump 250 contained an ingredient called Turkesterone, although there is not actually any Turkesterone in the SuperPump 250. Alternatively, Plaintiff claims that if there is some amount of Turkesterone in the SuperPump 250, it exists in such trace amounts as to be ineffective; accordingly, Defendant falsely advertised that the SuperPump 250 contained effective levels of Turkesterone. Plaintiff claims that it has been harmed by Gaspari's false and misleading advertisements of all of these products through a direct diversion of ThermoLife's sales and a lessening of the goodwill associated with its products.
Finally, Plaintiff alleges that Gaspari improperly prevented ThermoLife from maintaining exhibiting at the Mr. Olympia bodybuilding competition and trade show, which was held on September 25-26, 2009, by contacting organizers of the Mr. Olympia competition and threatened to pull its advertising if ThermoLife was allowed to exhibit at the event. Plaintiff claims Gaspari's actions caused Plaintiff to lose business opportunities andunrecoupable costs it had expended in anticipation of attending the competition.
ThermoLife's complaint raises five causes of action related to these allegations: (1) False Advertising Under 15 U.S.C. § 1125(a)(1)(B) - Against Gaspari; (2) Common Law Unfair Competition - Against Gaspari; (3) Violation of A.R.S. §§ 13-2301 etseq. - Against Richard Gaspari, Daniel Pierce, and Bruce Kneller; (4) Tortious Interference with Business and Business Expectancy; and (5) Unjust Enrichment.
On a motion to dismiss under Fed. R. Civ. P. 12(b)(6), all allegations of material fact are assumed to be true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Dismissal under Rule 12(b)(6) can be based on "the lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To avoid dismissal, a complaint must contain "only enough facts to state a claim for relief that is plausible on its face." Twombly, 550 U.S. at 570. The principle that a court accepts as true all of the allegations in a complaint does not apply to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 239 S. Ct. 1937, 1951 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949. "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." Id. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. To show that the plaintiff is entitled to relief, the complaint must permit the court to infer more than the mere possibility of misconduct. Id.
Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (internal quotation marks, alteration marks, and citations omitted).
Defendant has moved to dismiss Plaintiff's RICO claim for failing to plead fraud with particularity under Fed. R. Civ. P. 9(b) and for failing to state a plausible claim for relief under Fed. R. Civ. P. 12(b)(6). Defendant also seeks dismissal of Plaintiff's complaint in its entirety for failing to plead fraud with particularity under Fed. R. Civ. P. 9(b), on the theory that because Plaintiff's RICO count and the underlying facts of the complaint sound in fraud, the whole complaint must satisfy the Fed. R. Civ. P. 9(b) pleading standards.
In order to state a claim under Arizona's RICO statute, A.R.S. §§ 13-2301 et seq., Plaintiff must allege Defendants engaged in a "pattern of racketeering activity . . . defined as '[a]t least two acts of racketeering' that are 'related' and 'continuous'[.]"' Lifeflite Med. Air Transport, Inc. V. Native Amer. Air Servs., Inc., 198 Ariz. 149, 151-52, 7 P.3d 158, 160-61 (Ct. App. 2000) (citing H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229,241-42 (1989)); see also A.R.S. § 13-2301(D)(4) (). To establish the necessary continuity element, Plaintiff may allege either open-ended continuity—meaning "past conduct that by its nature projects in the future with a threat of repetition"—or close-ended continuity, meaning "a closed period of repeated conduct." See Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004); A.R.S. § 13-2314.01(T)(3)(iii).
"'Where the predicate racketeering acts of a RICO claim sound in fraud, . . . the pleading of those predicate acts must satisfy the particularity requirement of [Federal Rule of Civil Procedure] 9(b)' . . . which provides that in 'all averments of fraud or mistake, the circumstances constituting the fraud or mistake shall be stated with particularity.'" Laron, Inc. V. Constr. Resource Servs., LLC, 2007 WL 1958732, *5 (citing Wasserman v. Maimonides Med. Ctr., 970 F. Supp. 183, 187 (E.D.N.Y. 1997)). A plaintiff must "state the time, place, and specific content of the false representations as well as the identifies of the parties to the misrepresentation" in order to sufficiently plead fraud with particularity. Odom v. Microsoft Corp., 2007 WL 1297249, at *12 (9th Cir. 2007). Further, where a plaintiff names multiple defendants, it must "identify the role of each defendant in the alleged fraudulent scheme." Swartz, 476 F.3d at 765. "Allegations made on 'information and belief are not sufficient 'unless the complaint sets forth the facts on which the belief is founded.'" Laron, 2007 WL 1958732 at *5 (citing In re Worlds of Wonder Secs. Litigation, 694 F. Supp. 1427, 1432-33 (N.D. Cal. 1988)).
Plaintiff here asserts that the individual Defendants' unlawful predicate acts include "asserting false claims" and conducting "a scheme or artifice to defraud." (Doc. 1 at ¶141 (citing A.R.S. § 13-2301(D)(4)(b)(xv),(xx)). Plaintiff alleges the individual Defendants "knowingly, intentionally, and falsely" made statements that "Gaspari's...
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