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In re Hydroxycut Marketing and Sales Practices Litigation

June 1, 2010

IN RE HYDROXYCUT MARKETING AND SALES PRACTICES LITIGATION
(S.D. CAL. NO. 09CV2370)
FLOR E. MENDOZA AND RENE MENDOZA, PLAINTIFF,
v.
IOVATE HEALTH SCIENCES U.S.A., INC., IOVATE HEALTH SCIENCES INTERNATIONAL, INC., IOVATE HEALTH SCIENCES GROUP, INC., IOVATE HEALTH RESEARCH, INC., IOVATE HC 2005 FORMULATIONS, LTD., MUSCLETECH, INC., MUSCLETECH RESEARCH AND DEVELOPMENT, INC., AND WAL-MART STORES, INC., DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' ILLINOIS CONSUMER FRAUD GRANTING LEAVE TO AMEND AS FRAUD CLAIM (COUNT VIII) AND CLAIM (COUNT IX) AND TO ANY CLAIM OF FRAUD BY OMISSION

Pursuant to Federal Rule of Civil Procedure 9(b), defendants Iovate Health Sciences U.S.A., Inc., Iovate Health Sciences International, Inc., Iovate Health Sciences Research, Inc., and HDM Formulations, Ltd. ("Defendants") have filed a motion to dismiss Plaintiffs' fraud claim as pled in Count VIII and Plaintiffs' Illinois Consumer Fraud and the Deceptive Business Practices Act ("Illinois Consumer Fraud Act") claim as pled in Count IX of Plaintiffs' Second Amended Complaint. For the reasons set forth below, Defendants' motion to dismiss ("Motion") is DENIED. The Court denies the Motion on the grounds that the Second Amended Complaint alleges facts sufficient to state a claim for both common law fraud and a violation of the Illinois Consumer Fraud Act against the Defendants. Plaintiffs have pled those facts with the particularity that is required by Federal Rule of Civil Procedure 9(b). Nevertheless, with regard to any claim of fraud by omission, the Court holds Plaintiffs have failed to adequately state the elements the claim. The Court, however, grants Plaintiffs 21 days leave to amend as to any claim of common law fraud by omission.

I. BACKGROUND

On June 5, 2009, Plaintiffs filed a complaint in the District Court for the Northern District of Illinois (N.D. Ill. Case No. 09-CV-3415). On September 29, 2009, Plaintiffs filed a First Amended Complaint. On October 23, 2009, the case was transferred by the Panel on Multidistrict Litigation ("MDL") to the Southern District of California. Upon transfer, the case became part of the pending MDL entitled In re Hydroxycut Marketing and Sales Practices Litigation (09md2087), and was assigned a separate civil case number in the Southern District of California (09cv2370). On December 15, 2009, Plaintiffs filed a Second Amended Complaint ("SAC") in the MDL action in the Southern District of California. On January 22, 2010, Defendants filed a Motion to Dismiss Counts VIII and IX of the SAC pursuant to Federal Rule of Civil Procedure 9(b).

II. STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 9(b) tests the sufficiency of a plaintiff's statement of a claim for fraud. Rule 9(b) requires that a plaintiff state a claim for fraud with particularity as follows:

In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.

Fed. R. Civ. P. 9(b).

A court may dismiss a claim of fraud when its allegations fail to satisfy Rule 9(b) 's heightened pleading requirements. Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1107 (9th Cir.2003).

III. DISCUSSION

Plaintiff, Flor E. Mendoza, alleges that, after ingesting Hydroxycut products manufactured, marketed and sold by defendants, she became lethargic and jaundiced as a result of damage to her liver and ultimately required a liver transplant. SAC ¶¶ 69-70. In the SAC, Plaintiffs bring nine claims against the defendants, including "Count VIII" for "Fraud and Misrepresentation" and "Count IX" for "Illinois Consumer Fraud and Deceptive Business Practices Act." SAC ¶¶ 129-144.

Defendants have moved to dismiss Counts VIII and IX on the ground that Plaintiffs have failed to plead these claims with the particularity that is required by Rule 9(b). Specifically, Defendants contend that Plaintiffs fail to provide sufficient factual details to support either their common law fraud or statutory consumer fraud theories. Upon review of the SAC, the Court holds Plaintiff has alleged her fraud claims with sufficient particularity as follows:

A. Common Law Fraud by Misrepresentation

Under Illinois law, the elements of a cause of action ...


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