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Moorer v. Stemgenex Medical Group, Inc.

United States District Court, S.D. California

April 6, 2017

SELENA MOORER, individually and on behalf of all others similarly situated, Plaintiffs,
v.
STEMGENEX MEDICAL GROUP, INC., a California Corporation; STEMGENEX, INC., a California Corporation; STEM CELL RESEARCH CENTRE, INC., a California Corporation; ANDRE P. LALLANDE, D.O., an individual; RITA ALEXANDER, an individual; and Does 1-100, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' SECOND AMENDED COMPLAINT

          Hon. Anthony J. Battagalia, United States District Judge

         Presently before the Court is Defendants' Stemgenex Medical Group, Inc., Stemgenex, Inc., Stem Cell Research Centre, Inc., Andre P. Lallande, D.O., and Rita Alexander (collectively, “Defendants”) motion to dismiss Plaintiffs' Selena Moorer, Stephen Ginsberg, and Alexandra Gardner (collectively, “Plaintiffs”) Second Amended Complaint (“SAC”) pursuant to Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6). (Doc. No. 33.) Having reviewed the parties' moving papers and controlling legal authority, the Court finds the motion suitable for determination on the papers without oral argument pursuant to Local Rule 7.1.d.1. Accordingly, the motion hearing presently set for April 13, 2017 is VACATED. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendants' motion.

         Background

         On August 22, 2014, Plaintiffs filed a putative class action complaint against Defendants in the Superior Court of California, County of San Diego, alleging violations of California's Unfair Competition Law, Business and Professions Code section 17200, et seq., (“UCL”), California's False Advertising Law, Business and Professions Code section 17500, et seq., (“FAL”), California's Consumer Legal Remedies Act, California Civil Code section 1770, et seq., (“CLRA”), California's Health and Safety Code section 24170, et seq., (“Human Experimentation”), 18 U.S.C. section 1961, et seq., (“RICO”), Fraud, Negligent Misrepresentation, and Unjust Enrichment. (Doc. No. 1-2.) On September 15, 2016, Plaintiffs filed a First Amended Complaint, (“FAC”), to include a claim for damages under the CLRA. (Doc. No. 1-3.) The FAC contained similar factual allegations, but added Plaintiff Stephen Ginsberg to the action and alleged an additional claim for Financial Elder Abuse. (Id.) On November 16, 2016, Defendants removed the action to this Court pursuant to 28 U.S.C. § 1441(a) and (b). (Doc. No. 1.)

         On November 22, 2016, Defendants moved to dismiss the FAC on nearly identical grounds as their instant motion. (Doc. No. 6.) On December 13, 2016, Plaintiffs filed their SAC, (Doc. No. 24), and the Court denied Defendants' motion to dismiss as moot. (Doc. No. 25.) The SAC added Plaintiff Alexandra Gardner and withdrew the claim for unjust enrichment. (Id.) On December 28, 2016, the Court dismissed the following Defendants from the action pursuant to the parties' stipulation entered on December 27, 2016, (Doc. No. 30): Scott Sessions, M.D., Stem Cells The Human Repair Kit, Stemgenex Biologic Laboratories, LLC, and Stem Genetic. (Doc. No. 32.) On January 16, 2017, Defendants filed the instant motion to dismiss the SAC, (Doc. No. 33), Plaintiffs opposed on February 17, 2017, (Doc. No. 37), and Defendants replied on February 24, 2017, (Doc. No. 38.)

         The operative complaint alleges that Defendants engage in a nationwide scheme to “wrongfully market and sell ‘stem cell treatments'” to consumers who are often “sick or disabled, suffering from incurable diseases and a dearth of hope.” (Doc. No. 24 at 3.) Specifically, Plaintiffs allege that Defendants advertise their “stem cell treatments” to consumers via their website and make misrepresentations that the treatments “effectively treat a multitude of diseases, ” when in actuality, Defendants maintain “no reasonable basis” to make these claims. (Id.) Plaintiffs further allege that Defendants represent to consumers that “100% of its prior consumers are satisfied with its service, ” while omitting material information about its services, including consumer dissatisfaction and complaints regarding the ineffectiveness of the treatments. (Id.) Plaintiffs seek to represent a class of all consumers nationwide who purchased Stem Cell Treatments from StemGenex between December 8, 2013 and present, and a subclass of all members of the nationwide class aged 65 years or older at the time of purchase. (Id. ¶¶ 64-65.)

         Plaintiffs allege that each customer was exposed to Defendants' website, relied on Defendants' “false and misleading marketing” of the Stem Cell Treatments, and have been harmed as a result. (Id.) Specifically, Plaintiff Moorer, suffering from lupus, Plaintiff Ginsberg, an elder over the age of 65 suffering from diabetes, and Plaintiff Gardener, suffering from diabetes, each relied upon the customer satisfaction statistics posted on the StemGenex website in deciding to purchase Defendants' Stem Cell Treatments. (Id. ¶¶ 8-9A.) Plaintiffs allege that each Plaintiff paid a total of $14, 900.00 for the treatment, did not benefit from the treatment, and informed Defendants of their dissatisfaction. (Id. ¶¶ 8-9A, 11.) Further, Plaintiffs allege they would “not have paid for the Stem Cell Treatment had they known that the statistics on the StemGenex website regarding consumer satisfaction were false, and that StemGenex had no reasonable basis for its marketing claim that the Stem Cell Treatments were effective to treat diseases as advertised.” (Id. ¶¶ 10.)

         I. StemGenex, Rita Alexander, and Dr. Andre Lallande

         StemGenex, Inc., has operated in La Jolla, California since 2011. (Id. ¶ 28.) Plaintiffs allege that the other entity Defendants StemGenex Medical Group, Inc. and Stem Cell Research Centre, Inc. operate out of the same facility as StemGenex, Inc. (Id.) Plaintiffs further allege that the named entity Defendants “were the alter ego corporations of individual Defendants Rita Alexander and Dr. Andre Lallande.” (Id. ¶¶ 24-25.) Plaintiffs allege that Defendants Alexander and Lallande own, operate, and/or control the businesses of Stemgenex, Stemgenex Medical Group, Inc., and Stem Cell Research Center, Inc., (collectively referred to as “StemGenex”), including the advertising and/or public relations of StemGenex. (Id. ¶¶ 16-17, 23-24, 26-27.) StemGenex engages in the business of providing Stem Cell Treatments, carried out by Defendant Lallande and other physicians, to consumers “who have illness or medical conditions causing pain and/or disability.” (Id. ¶¶ 26-27.) The treatments involve conducting liposuction of a person's adult fat cells, processing them, and re-injecting them back into the person as stem cells. (Id. ¶ 2.) The total base price of $14, 900.00 for each treatment is the same price charged to each customer. (Id. ¶ 47.) Customers are directed to pay for treatments by making a $2, 500.00 nonrefundable deposit over the phone and then paying the remainder via cashier's check in person at the StemGenex location. (Id. ¶ 127.)

         II. Defendants' Website

         Plaintiffs allege Defendants conduct their false and misleading marketing scheme in part through misrepresentations made on their website, www.stemgenex.com. (Doc. No. 24 ¶ 33.) Specifically, Plaintiffs allege that “[r]epresentations relating to the website are published under the authority, control and/or authorization” of Defendants Alexander and/or Dr. Lallande. (Id. ¶ 28.) Through their website, Defendants communicate to consumers that StemGenex is “a pioneer in research and devoted to effective Stem Cell Treatments.” (Id. ¶ 31.) Defendants “offer[] patients access to cutting edge adipose stem cell therapy for many degenerative diseases” such as Alzheimer's disease, COPD, Parkinson's disease, diabetes, and multiple sclerosis. (Id. at 12-15.) Defendants further represents that the treatment is a “minimally invasive procedure using an individual's own stem cells to treat diseases” and that “the key to the most effective stem cell treatment is through treatment plan customization.” (Id. at 15, 19.) The StemGenex website also suggests stem cell therapy may be repeated and that “[c]urrent studies indicate the strong possibility of a cumulative effect from multiple stem cell therapies.” (Id. ¶ 49.) Plaintiffs allege that up until August 2016, Defendants misrepresented on their website that StemGenex was accredited by the Accreditation Association for Ambulatory Health Care, Inc., (AAAHC), which provides seals of approval for outpatient surgical centers. (Id. ¶¶ 29-30.)

         A. Customer Satisfaction Representations

         Plaintiffs allege that Defendants engaged in a false and misleading marketing scheme regarding the efficacy of the Stem Cell Treatments by manipulating customers' reports of dissatisfaction and misrepresenting satisfaction statistics. (Id. ¶¶ 2, 33, 40A, 49-59.) Specifically, Plaintiffs allege that Defendants Alexander and Lallande “authorized and ratified that statements of dissatisfaction be kept out of the patients' medical files, ” hidden from the public, and “changed the wording of notes to make it appear that the patients were satisfied when they were not.” (Id. ¶ 49.) Plaintiffs allege that when customers haven't received results, StemGenex employees, referred to as “Patient Advocates, ” encourage customers to receive multiple treatments. (Id. ¶¶ 50A-51.)

         As early as December 8, 2013, Defendants began advertising “Patient Ratings” on their website, which steadily represented that StemGenex customers reported 100% positive feedback after receiving Defendants' services. (Id. at 22-26.) Defendants' website displays pie charts showing 100% of customers believe that StemGenex exceeded or at least met their expectations, that StemGenex is a trusted partner in the treatment of their disease, and were “extremely satisfied” with the medical team that performed their Stem Cell Treatment. (Id. at 24-25.) Defendants identify the source of the statistics as “data received from patient exit surveys evaluating patient experience and care, accommodations, staff and facilities.” (Id.) Plaintiffs allege that Defendants know “the 100% satisfaction rate was and is not true and all evidence available to StemGenex proves it was not true at the time the representations were made.” (Id. ¶ 56.) Plaintiffs further allege that Defendants engage in a systematic practice of controlling survey results and misrepresenting consumer ratings to create the false and misleading premise that no customer was “unsatisfied” with the Stem Cell Treatments. (Id. at 26-27.)

         Legal Standards

         A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a). A motion to dismiss pursuant to Rule 12(b)(6) 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). When ruling on a motion to dismiss under Rule 12(b)(6), 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 Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). In doing so however, the court is not bound to accept “legal conclusions” as true. Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009).

         To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, the complaint 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.” Iqbal, 556 U.S. at 678. “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. “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.'” Id. (quoting Twombly, 550 U.S. at 557). As a result, 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 … laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983).

         Complaints alleging fraud must satisfy the heightened pleading requirements of Rule 9(b). Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting that fraud or mistake should be stated with particularity. A pleading is sufficient under Rule 9(b) if it “state[s] the time, place[, ] and specific content of the false representations as well as the identities of the parties to the misrepresentation.” Miscellaneous Serv. Workers, Drivers & Helpers, Teamsters Local No. 427 v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981) (citations omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). Regardless of the title given to a particular claim, allegations grounded in fraud are subject to Rule 9(b)'s pleading requirements. Vess, 317 F.3d at 1103-04; Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). A complaint sounds in fraud where it alleges a “unified course of fraudulent conduct and re[lies] entirely on that course of conduct as the basis of a claim.” In re Daou Sys., Inc., 411 F.3d 1006, 1027 (9th Cir. 2005) (quoting Vess, 317 F.3d at 1103).

         Discussion

         Prior to analyzing the merits of Defendants' motion, the Court must resolve Plaintiffs' request for judicial notice and Defendants' various evidentiary objections to Plaintiffs' request, Exhibit 1 to the SAC, and the declaration of Elizabeth A. Banham (“Banham Declaration”) in support thereof. (Doc. Nos. 37-4, 38-1.)

         I. Plaintiffs' Request for Judicial Notice and Defendants' Evidentiary Objections

         Federal Rule of Evidence 201 allows a court to “take judicial notice of facts that are not subject to reasonable dispute because they are either generally known or can be readily determined by reference to sources whose accuracy cannot reasonably be questioned.” Kanfer v. Pharmacare US, Inc., 142 F.Supp.3d 1091, 1098 (S.D. Cal. 2015). “Under FRE 201(c), the Court must take notice if requested by a party and if supplied with the necessary information.” Shalaby v. Bernzomatic, 281 F.R.D. 565, 570 (S.D. Cal. 2012). “Screen shots of web pages, especially because of the ever-changing content, are not typically the type of document containing facts, the accuracy of which is capable of ready determination.” Evenchik v. Avis Rent A Car Sys., LLC, No. 12-cv-61 BEN (DHB), 2012 WL 4111382, at *1 (S.D. Cal. Sept. 17, 2012). See e.g., In re Easysaver Rewards Litig., 737 F.Supp.2d 1159, 1167-68 (S.D. Cal. 2010) (declining to take judicial notice of changing web screen shots). “As a general rule, the court ‘may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.'” Rich v. Shrader, No. 09-CV-0652-AJB (BGS), 2011 WL 4434852, at *4 (S.D. Cal. Sept. 22, 2011) (quoting Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001), overruled on other grounds). “The court may, however, consider materials that are submitted with and attached to the complaint, as well as unattached evidence on which the complaint ‘necessarily relies' if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the document.” Rich, 2011 WL 4434852, at *4 (citing Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). See e.g., Castagnola v. Hewlett-Packard Co., No. C 11-05772 JSW, 2012 WL 2159385, at *7-10 (N.D. Cal. June 13, 2012) (considering screen shots of defendant's web pages which plaintiff incorporated into his complaint). “Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim.” U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

         In support of their Opposition, Plaintiffs request judicial notice of Defendants' websites, www.stemgenex.com and past iterations of the StemGenex webpage on web archives at https://archive.org/web, and the search term https://stemgenex.com. (Doc. No. 37-4.) The Banham Declaration attests that these website addresses are offered “to show what was posted at various times throughout the Class Period” as relied upon in the SAC and to rebut a claim made in Defendants' motion. (Doc. No. 37-3 ¶ 3.) Banham declares that the archived webpages reveal that the Defendants' “disclaimer tag line about satisfaction data being based on patient exit surveys was not added to the StemGenex web advertising until between November 25, 2015 and May 16, 2016.” (Id. ΒΆ 4.) ...


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