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Vasic v. Patenthealth, LLC

United States District Court, S.D. California

May 22, 2014

DRAGAN VASIC, Plaintiff,
v.
PATENTHEALTH, L.L.C., et al., Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS [Doc. No. 41]

CYNTHIA BASHANT, District Judge.

On April 8, 2013, Plaintiff Dragan Vasic commenced this class action arising out of the advertising and sales of a glucosamine-based health supplement. Thereafter, Plaintiff filed a First Amended Complaint against Defendants PatentHEALTH, L.L.C., Arthur Middleton Capital Holdings, Inc. ("Arthur Middleton"), and Walgreen, Co., alleging violations of California's Consumer Legal Remedies Act ("CLRA") and Unfair Competition Law ("UCL"). PatentHEALTH and Arthur Middleton (collectively, "Defendants") now move to dismiss Plaintiff's Second Amended Complaint ("SAC") under Federal Rules of Civil Procedure 9(b), 12(b)(1), and 12(b)(6).

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 following reasons, the Court DENIES Defendants' motion to dismiss.

I. BACKGROUND

Plaintiff alleges in the SAC that he "was exposed to and saw Defendants' representations regarding the joint-health benefits of Trigosamine Max Strength by reading the product label in a Walgreen's store near his home in San Diego, California" in November 2012.[1] (SAC ¶ 13.) According to Plaintiff, "[i]n reliance on the claims listed on the product label... and specifically those claims listed on the front of the product label, that Trigosamine Max Strength would lubricate' joints, relieve' pain, and build' cartilage, [he] purchased the Trigosamine Max Strength product" for approximately $25.00. ( Id. ) At the time, Plaintiff was "experiencing pain and stiffness in his joints following his regular workouts, " and he "purchased the product believing it would provide the advertised joint-health benefits and improve his joint soreness and comfort." ( Id. ) Plaintiff contends that the Trigosamine product did not provide the stated benefits. ( Id. )

Plaintiff also alleges that "Defendants manufacture, distribute, and sell the Trigosamine line of dietary supplements, " which include (1) Trigosamine Max Strength, and (2) Trigosamine Fast-Acting. (SAC ¶ 20.) He adds that since the products' launch, "Defendants have consistently conveyed the message to consumers throughout California that the Trigosamine products will relieve joint pain, lubricate joints, and rebuild joint cartilage." ( Id. ¶ 22.) The basis of this action is Plaintiff's contention that Defendants' advertised claims "are not substantiated by competent, scientific evidence and are factually baseless." ( Id. ) Plaintiff cites numerous studies in his SAC to support his position. ( Id. ¶¶ 28-49.)

Plaintiff additionally alleges in the SAC that there is a unity of interest and ownership between Defendants such that Arthur Middleton is the alter ego of PatentHEALTH. In the SAC, he describes PatentHEALTH as "a limited liability company established under the laws of the state of Ohio, " with its corporate headquarters located at 8000 Freedom Avenue NW, North Canton, Ohio 44720, which "manufactures, distributes, markets, and sells Trigosamine products." (SAC ¶ 14.) Arthur Middleton is similarly described as an Ohio corporation with its corporate headquarters at the same aforementioned address in North Canton, Ohio, which also "manufactures, distributes, markets, and sells the Trigosamine products." ( Id. ¶ 15.) Plaintiff alleges that PatentHEALTH is a wholly owned subsidiary of Arther Middleton, and Arthur Middleton is the sole member of PatentHEALTH. ( Id. ¶¶ 14-15.) He adds that "both Defendants share the same president, treasurer, and incorporator; both Defendants share the same agent for service of process; and both Defendants are represented by the same litigation defense counsel in the present matter." ( Id. ¶ 17.)

Finally, Plaintiff asserts that "Arthur Middleton's involvement in the management and operation of PatentHEALTH extends beyond its investor status" because "PatentHEALTH's stakeholders have not adequately capitalized it to cover prospective liabilities." (SAC ¶ 18.) To support that assertion, Plaintiff alleges that "the Cuyahoga County Common Pleas Court in Ohio appointed a receiver for the business operations and property of PatentHEALTH" and "public records demonstrate that an outstanding loan in the amount of nearly $3.35 million made from PatentHEALTH to Arthur Middleton remained unpaid by Arthur Middleton at the time the court-appointed receiver filed her inventory of PatentHEALTH's property and assets."[2] ( Id. )

On April 8, 2013, Plaintiff commenced this class action. Thereafter, he amended his complaint twice. In his SAC, Plaintiff asserts two claims for: (1) violation of the CLRA, California Civil Code §§ 1750, et seq., and (2) violation of California Business and Professions Code §§ 17200, et seq. Defendants now move to dismiss the SAC under Rules 9(b), 12(b)(1), and 12(b)(6). Plaintiff opposes.

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, 731 (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 Mutual 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 (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 (2009) (citing Twombly, 550 U.S. at 556). "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.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557).

"[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 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in original). A court need not accept "legal conclusions" as true. Iqbal, 556 U.S. at 678. 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 [he or she] has not alleged or that defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Generally, courts may not consider material outside the complaint when ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, documents specifically identified in the complaint whose authenticity is not questioned by parties may also be considered. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superceded by statutes on other grounds). Moreover, the court may consider the full text of those documents, even when the complaint quotes only selected portions. Id. It may also consider material properly subject to judicial notice without converting the motion into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994).

As a general rule, a court freely grants leave to amend a complaint which has been dismissed. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." ...


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