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Moorer v. Stemgenex Medical Group, Inc.

United States District Court, S.D. California

June 24, 2019

Selena Moorer, Plaintiff,
v.
Stemgenex Medical Group, Inc., et al. Defendants.

          ORDER: (1) GRANTING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION (DOC. NO. 95), (2) DENYING DEFENDANTS' MOTIONS TO STRIKE (DOCS. NO. 109, 110)

          HON. ANTHONY J. BATTAGLIA UNITED STATES DISTRICT JUDGE.

         This is a complex and troubling case. The question before the Court today is narrow: whether the case is certifiable. As to that question, the Court finds it is. However, the Court warns of dangers down the road, as stated in the briefing and discussed extensively at the oral argument hearing. Finding the class is narrowly certifiable at this stage, the Court GRANTS Plaintiffs' motion to certify the class. (Doc. No. 95.) The Court DENIES both Defendants' motions to strike the reports of Dr. David Stewart, (Doc. No. 109), and Dr. Michael Kamins and Dr. Eliot Hartstone, (Doc. No. 110), with some caveats.

         I. 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.)

         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.) These statements were based upon “Patient Satisfaction Ratings” or “PSR” collected by defendant. 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, 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.)

         II. MOTIONS TO STRIKE

         Defendants seek to strike two of Plaintiffs' expert reports from Dr. Stewart and Drs. Kamins and Hartstone. (Doc. No. 109, 110.)

         A. LEGAL STANDARDS

         On a motion for class certification, courts apply Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993) to expert testimony. Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011). Expert testimony is admissible if the party offering such evidence shows that the testimony is both reliable and relevant. Fed.R.Evid. 702; Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999); Daubert, 509 U.S. at 590-91. Federal Rule of Evidence 702 permits expert testimony if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.”

         Fed. R. Evid. 702. An expert can be qualified “by knowledge, skill, experience, training, or education. Id.

         At class certification, district courts do not have to conduct a full Daubert analysis. Tait v. BSH Home Appliances Corp., 289 F.R.D. 466, 495 (C.D. Cal. Dec. 20, 2012). Instead, “district courts must conduct an analysis tailored to whether an expert's opinion was sufficiently reliable to admit for the purpose of proving or disproving Rule 23 criteria, such as commonality and predominance.” Id. For this tailored analysis, district courts apply Daubert's relevance and reliability requirements as “useful guideposts but the court[s] retain[ ] discretion in determining how to test reliability as well as which expert's testimony is both relevant and reliable.” Id. (quoting Ellis v. Costco Wholesale Corp., 240 F.R.D. 627, 635 (N.D. Cal. 2007) affirmed on this point by Ellis, 657 F.3d at 982 (holding the district court “correctly applied the evidentiary standard set forth in Daubert”)). But courts still must “resolve any factual disputes necessary to determine” whether the putative class satisfies Rule 23. Id. (quoting Ellis, 657 F.3d at 982).

         B. DR. STEWART'S REPORT

         Defendants seek to strike Dr. Stewart's report, which attempts to analyze what effect the PSR impacted a consumer's decision to purchase the treatment. Essentially, Dr. Stewart's report relates to the proposed class's damages. Defendants argue the report ought to be disqualified because Dr. Stewart is unqualified and touches on efficacy-a charge that has been excluded from Plaintiffs' complaint. The Court finds both Defendants' objections without merit and thus DENIES the motion. (Doc. No. 109.) However, the Court DIRECTS Plaintiffs to change the survey question in accordance with its directions below.

         First, the Court finds Dr. Stewart is qualified. Federal Rule of Civil Procedure 702 provides “[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” Plaintiffs state Dr. Stewart has researched and published extensively regarding market analysis, consumer behavior, branding, marketing communications, research, and management. (Doc. No. 124 at 19.) Plaintiffs assert his publications have “included market effects and the financial dimensions and financial outcomes of marketing.” (Id.) They state “[h]e has examined how consumers and managers search for and use information in decision making, effective communication with consumers, methods for the study of consumers and their behavior, and the effective and efficient design of marketing programs, including marketing research that focuses on pricing strategy.” (Id.) As the Court is allowing Dr. Stewart's survey to discuss damages only and not efficacy of treatment, the Court overrules Defendants' objections.

         The proposed survey to determine damages will ask two initial questions, in sum, (1) how important is the recommendation of previous customers to your decision to pursue a medical procedure, and (2) how important are price differentials in out-of-pocket expenses for a procedure. (Id. at 4.) Respondents to each question can choose between: very important; important; moderately important; slightly important; not at all important; or don't know. (Id. at 5.) Next, the survey will ask the following:

Assume that there was a procedure that could substantially improve [their medical condition]. The procedure costs $14, 900, all of which you would have to pay yourself. Everyone who has had the procedure (100% of all patients receiving the procedure) report satisfaction with the results, that is, all patients reported that the procedure met or exceeded their expectations and were satisfied or extremely satisfied with the outcome. Now assume that you are considering this procedure and learn that not all patients were satisfied. In fact, you learn that only 50% of all patients who obtained the procedure reported any major improvement. Would you still consider this procedure given what you now know about the potential benefit?

(Id.) Respondents can answer with: Yes, I'll try anything that might help; Yes, if I were offered a discount on the price; No; or Don't know. For those who indicated they required a discount, the respondents would then be asked how much of a discount they would want before giving the procedure further consideration, starting with a minimum discount of 5% and up to “more than 65%.” (Id.)

         The Court finds Dr. Stewart's survey question to be a relevant concept with a few changes. The Court directs Dr. Stewart to change the survey to address the actual language Defendants' used on its website and in marketing materials. The Court offers an example:

Assume that there was a procedure that could substantially improve [their medical condition]. The procedure costs $14, 900, all of which you would have to pay yourself. The providers of the procedure report that 100% of it's prior consumers were satisfied with the provider's service. Now assume that you are considering this procedure and learn that the patient's statements of satisfaction were obtained in exit interviews following receiving the procedure. Further you learn that only 50% of all patients who obtained the procedure reported any major improvement following the procedure. Would you still consider this procedure given what you now know about the potential benefit?

         Plaintiffs are free to accept or reject this specific example but must comply with the Court's order to use the actual language used. Thus, the Court DENIES Defendants' motion to strike this report so long as edits are made to the question which follow the Court's guidance stated herein. (Doc. No. 109.)

         C. DRS. KAMINS & HARTSTONE

         Defendants also argue the report proposed by Dr. Kamins and Dr. Hartstone must be stricken. (Doc. No. 110.) This report establishes that the Pie Chart is material and misleading to consumers. (Doc. No. 110 at 4-5.) The proposed survey seeks to establish that the Overall Experience Pie Chart was material to consumers in choosing to consider stem cell treatment. In the survey, respondents were shown non-interactive screenshots of the defendants' web homepage. Respondents, split into two groups, were shown different screenshots from two different dates: March 21, 2015, and May 16, 2016. The March group-“Cell A”-was shown four pie charts regarding satisfaction with overall experience, the medical team, if StemGenex was a trusted partner, and whether patients would recommend StemGenex. The May group-“Cell B”-was shown a screenshot with nine pie charts, however, in this version all pie charts included a disclaimer stating, “patient satisfaction ratings above represent data received from patient exit surveys evaluating patient experience and care, accommodations, staff and facilities.” (Id. at 5.)

         The report then asks respondents to rank various statements which appeared on the screenshots to show which statement “most generated [their] interest in StemGenex stem cell therapy.” (Id.) Defendants note the survey only includes one specific option based from factual information-selected from the overall experience Pie Chart; the others were puffery ...


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