Wellnx Life Sciences v. Iovate Health Sciences
| Decision Date | 26 September 2007 |
| Docket Number | No. 06 Civ. 7785(PKC).,06 Civ. 7785(PKC). |
| Parties | WELLNX LIFE SCIENCES INC., f/k/a Nxcare Inc., Plaintiff, v. IOVATE HEALTH SCIENCES RESEARCH INC., Iovate Health Sciences Group Inc., Iovate Health Sciences Inc., Iovate Health Sciences U.S.A. Inc., Canusa Products Inc., Musclemag International Corporation (U.S.A.) Inc., Paul Gardiner, Terrence Begley, Robert Kennedy, John Craig and Vincent Scalisi, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff Wellnx Life Sciences Inc. ("Wellnx") brings this action against several defendants alleging violations of the Lanham Act, conspiracy to violate the Sherman Act, and various tort and statutory claims under New York State law. Wellnx manufactures and sells dietary supplements and is a direct competitor of Iovate Health Sciences Group Inc. and/or its subsidiaries Iovate Health Sciences Research Inc., Iovate Health Sciences Inc., and Iovate Health Sciences U.S.A. Inc. (collectively "Iovate"). Canusa Products Inc. and Musclemag International Corporation (U.S.A.) Inc. (collectively "Canusa") are affiliated corporations that publish bodybuilding periodicals in which dietary supplements are advertised. The individual defendants are agents or employees of the above-named corporate defendants.
This action was commenced on September 28, 2006. Plaintiff filed an amended complaint on November 17, 2006. Defendants have moved to dismiss the Lanham Act and Sherman Act claims — Claims 1 and 2 in the amended complaint — for failure to state a claim. Rule 12(b)(6), Fed. R.Civ.P. Defendants move to dismiss the state claims on the grounds that upon dismissal of the federal claims, the Court should decline to exercise supplemental jurisdiction.
For the reasons stated herein, defendants' motions are granted.
The following facts from the amended complaint are taken as true for the purposes of this motion. See Iqbal v. Hasty, 490 F.3d 143, 147 (2d Cir.2007). All reasonable inferences are drawn in favor of the plaintiff, the non-movant. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007).
Preliminarily, I note that in opposition to the motions to dismiss, plaintiff submitted declarations by fact witnesses with exhibits. These materials are referred to in plaintiff's brief. Defendants seek to have the declarations and exhibits excluded from consideration of the motions. Iovate has submitted a declaration by a fact witness in an effort to show that plaintiffs extrinsic materials relate to a non-party and are irrelevant. Canusa has not submitted declarations by fact witnesses or exhibits, although Canusa does make factual allegations in its brief that go beyond the amended complaint.
"[W]hen matters outside the pleadings are presented in response to a 12(b)(6) motion,' a district court must either `exclude the additional material and decide the motion on the complaint alone' or `convert the motion to one for summary judgment under Fed.R.Civ.P. 56 and afford all parties the opportunity to present supporting material.'" Friedl v. City of N.Y., 210 F.3d 79, 83 (2d Cir.2000) (quoting Fonte v. Bd. of Managers of Cont'l Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988)) (alteration in Friedl). Conversion is not required unless the court's decision is affected by matters outside the pleadings. Amaker v. Weiner, 179 F.3d 48, 51 (2d Cir.1999) (). Thus the court "errs when it considers affidavits and exhibits ..., or relies on factual allegations contained in legal briefs or memoranda ... in ruling on a 12(b) (6) motion to dismiss." Friedl, 210 F.3d at 84-85 (internal citations and quotation marks omitted).
Defendants' Rule 12(b)(6) motions will not be converted into motions for summary judgment. The materials outside the amended complaint — including declarations, exhibits and factual allegations made in the briefs — are excluded from consideration by the Court. The universe of facts for the purposes of this motion is limited to those alleged in the amended complaint and all reasonable inferences to be drawn from those facts.
Plaintiff Wellnx and defendant Iovate manufacture, distribute, market and advertise dietary supplements, including sports nutrition/bodybuilding supplements ("bodybuilding supplements"). (Am, Compl. ¶¶ 18-19.) In the dietary supplement market, Wellnx and Iovate are direct competitors. (Id. ¶ 22.) While there is no indication of how many firms compete in this market, the amended complaint repeatedly states that the dietary supplement industry is "highly competitive." (Id. ¶¶ 21, 34, 107.)
The dietary supplement market is characterized, according to plaintiff, by three distinct submarkets: the markets for (1) bodybuilding supplements, (2) weight loss supplements, and (3) vitamins. (Id. ¶ 20.) The products in each submarket are not reasonably interchangeable with those in the other submarkets, but there is a high cross-elasticity of demand within each submarket. (Id. ¶ 102.) Wellnx and Iovate not only compete generally in the dietary supplement market, but also in the bodybuilding supplement submarket. (Id. ¶ 22.) Bodybuilding supplements are sold to end consumers directly by manufacturers and by retailers. (Id. ¶ 90.) Retailers purchase products from both manufacturers and distributors, the latter of which also purchase inventory from manufacturers. (Id. ¶¶ 54, 90.)
Canusa is a "leading publisher" of bodybuilding publications in the United States. (Id. ¶ 10.) Canusa is alleged to have approximately a 40% share of the consumer market for such publications. (Id. ¶ 124.) Bodybuilding publications in general feature editorial content and advertisements for various products. (Id. ¶ 23.) Canusa directly solicits advertising business from manufacturers and distributors of bodybuilding supplements. (Id. ¶ 38.)
There is considerable demand among bodybuilding supplement manufacturers and distributor for this advertising space. According to plaintiff, advertising in bodybuilding publications is the dominant method by which bodybuilding supplements are marketed to consumers. (Id. ¶ 45.) The amended complaint explains that consumers of bodybuilding supplements represent a niche market and that other advertising methods — such as advertising in general audience publications, on the radio, television or the internet — are not substitutes for or interchangeable with advertising in bodybuilding magazines. (Id. ¶¶ 45, 89. 108.) Consumer demand for bodybuilding supplements is alleged to be "substantially if not wholly generated through print advertisements" in these publications. (Id. ¶ 106.) This creates a specific market for advertising space in bodybuilding publications among manufacturers and distributors of bodybuilding supplements. (Id. ¶¶ 109, 112.)
Plaintiff's claims in this case concern both (1) the bodybuilding supplement submarket and (2) the market for advertising space in bodybuilding publications. The geographic scope of both markets is alleged to be the United States; each state and the District of Columbia is alleged to be a distinct submarket. (Id. ¶ 114-16.)
Wellnx, Iovate and Canusa play different roles in the distribution chains in each market. In the bodybuilding supplement market, Wellnx and Iovate are manufacturers who sell to distributors, retailers and end consumers. Canusa is not in the distribution chain for these products, but consumers of Canusa's bodybuilding publications overlap with consumers of bodybuilding supplements. (Id. ¶ 105.) In the market for advertising space in bodybuilding publications, Wellnx and Iovate, as advertisers of their products, are consumers. Canusa is a seller of advertising space and markets this space directly to advertisers.
The amended complaint alleges that beginning in the year 2000 at the latest, Iovate and Canusa have maintained an exclusive agreement for advertising considerations (the "Agreement"). Under the Agreement, in addition to regular payments by Iovate to Canusa for advertising space, Iovate pays Canusa 10% of Iovate's gross receipts from direct purchases of Iovate products. (Am.Compl. ¶ 31.) Iovate receives:
(a) preferential anti-competitive advertising treatment in Canusa's bodybuilding periodicals; (b) review of competitors' advertisements before such advertisements are published in Canusa periodicals; (c) the right by Iovate to reject its competitors' advertisements or have the opportunity to disparage its competitors' new products or beat them to the market with the same or similarly formulated products; and (d) the right to publish in Canusa periodicals editorial content written by Iovate, but which falsely appeared to be written by the editors of such periodicals.
(Id.) The Agreement's termination provisions require that Iovate pay Canusa $2 million if the Agreement is discontinued. (Id.)
Plaintiff alleges that the existence of the Agreement was intentionally withheld from Iovate's competitors, including plaintiff, when Canusa solicited sales of advertising space in its bodybuilding publications. (Id. ¶ 38-40.) By failing to disclose the Agreement when Canusa presented its advertising rates, publication schedules and specifications for advertisements, Canusa allegedly misled its advertising customers into believing that its advertising space was sold on a "fair and equal basis." (Id. ¶ 41.) Plaintiff also alleges that the Agreement was undisclosed to...
To continue reading
Request your trial
-
Koulkina v. City of New York
...Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007) (emphasis in original); see also Wellnx Life Scis. Inc. v. Iovate Health Scis. Research, Inc., 516 F.Supp.2d 270, 283 (S.D.N.Y.2007); Mazzaro de Abreu v. Bank of Am. Corp., 525 F.Supp.2d 381, 387 n. 10 (S.D.N.Y. 2007). Under both Rule 12(b)......
-
Anthem Sports, LLC v. Under the Weather, LLC
...while not literally false, is nevertheless likely to mislead or confuse customers.’ " Wellnx Life Scis. Inc. v. Iovate Health Scis. Research Inc. , 516 F.Supp.2d 270, 284 (S.D.N.Y. 2007) (quoting Time Warner Cable, Inc. v. DIRECTV, Inc. , 497 F.3d 144, 152–53 (2d Cir. 2007) ). The plaintiff......
-
Tristate Hvac Equip. v. Big Belly Solar Inc.
...WL 2773421, at *3–*5 (E.D.Pa. Sept. 22, 2006). Other courts, however, disagree. See, e.g., Wellnx Life Scis., Inc. v. Iovate Health Scis. Research, Inc., 516 F.Supp.2d 270, 283 n. 2 (S.D.N.Y.2007) (asserting that Rule 8(a), not Rule 9(b), applies to false-advertising claims under the Lanham......
-
Pharmacychecker.Com, LLC v. Nat'l Ass'n of Boards of Pharmacy
...; Capital Imaging Assocs. v. Mohawk Valley Med. Assocs. , 996 F.2d 537, 543 (2d Cir. 1993) ; Wellnx Life Scis. Inc. v. Iovate Health Scis. Research Inc. , 516 F. Supp. 2d 270, 293 (S.D.N.Y. 2007). By contrast, "allegations pleading harm to competition are not required to withstand a motion ......
-
Monopoly Power
...50 and 70 percent market share where an inference of monopoly power would 90. Wellnx Life Scis. v. Iovate Health Scis. Research, 516 F. Supp. 2d 270, 294 (S.D.N.Y. 2007) (citing K.M.B. Warehouse Distribs. v. Walker Mfg., 61 F.3d 123, 129 (2d Cir. 1995)). 91. Broadcom Corp. v. Qualcomm, Inc.......
-
Initial Pleading
...v. Columbia Gas Transmission Corp., 521 F. Supp. 2d 537, 540-41 (S.D. W. Va. 2007); Wellnx Life Scis. v. Iovate Health Scis. Research, 516 F. Supp. 2d 270, 290 -291 (S.D.N.Y. 2007); Temple v. Circuit City Stores, 2007 WL 2790154, at *7 (E.D.N.Y. 2007); Schafer v. State Fa rm Fire & Cas. Co.......
-
Restraints of Trade
...because they are consistent with coincidental parallel conduct. See, e.g. , Wellnx Life Scis., Inc. v. Iovate Health Scis. Research 516 F. Supp 2d 270, 290-91 (S.D.N.Y. 2007) (parallel conduct not deemed “plausible grounds to infer an agreement” where each defendant had a “substantial profi......
-
Table of Cases
...393, 394 Weinberg v. Sprint Corp., 165 F.R.D. 431 (D.N.J. 1996), 424 Wellnx Life Scis., Inc. v. Iovate Health Scis. Research, Inc., 516 F. Supp 2d 270 (S.D.N.Y. 2007), 162 Weyerhaeuser Co. v. Ross Simmons Hardwood Lumber Co., 549 U.S. 312 (2007), 151 In re Wheat Rail Freight Rate Antitrust ......