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Peak Health Center v. Dorfman

United States District Court, N.D. California, San Jose Division

November 12, 2019

PEAK HEALTH CENTER, Plaintiff,
v.
BRANDON DORFMAN, Defendant.

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND; DENYING ANTI-SLAPP MOTION TO STRIKE WITHOUT PREJUDICE RE: DKT. NOS. 10, 11

          VIRGINIA K. DEMARCHI UNITED STATES MAGISTRATE JUDGE.

         Plaintiff Peak Health Center (“Peak Health”) filed this action against defendant Brandon Dorfman and Does 1-10[1] on July 18, 2019. Dkt. No. 1. Peak Health subsequently filed an amended complaint as of right on July 30, 2019, asserting the following claims: (1) trade libel; (2) intentional interference with prospective economic advantage; (3) negligent interference with prospective economic advantage; (4) unfair competition under the Lanham Act, 15 U.S.C. § 1125(a); and (5) unfair competition under California Business and Professions Code § 17200 et seq. Dkt. No. 8. This Court has federal question jurisdiction over Peak Health's Lanham Act claim and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367(a). Dkt. No. 8 ¶ 8. The Court also has diversity jurisdiction over this action under 28 U.S.C. § 1332, as Peak Health resides in California, Mr. Dorfman resides in Pennsylvania, and Peak Health asserts an amount in controversy in excess of $75, 000. Id. ¶¶ 1-2, 9.

         Mr. Dorfman now moves to dismiss the amended complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. Dkt. No. 10. He requests that the Court take judicial notice of certain matters in support of that motion. Dkt. No. 12. Mr. Dorfman also specially moves to strike the amended complaint pursuant to California's Anti-Strategic Litigation Against Public Participation (“anti-SLAPP”) statute, California Code of Civil Procedure § 425.16. Dkt. No. 11.

         All named parties have consented to magistrate judge jurisdiction. Dkt. Nos. 5, 9. The Court heard oral argument on Mr. Dorfman's motions on October 22, 2019. Dkt. No. 28. Having considered the parties' briefs and arguments made at the hearing, the Court: (1) grants the motion to dismiss with leave to amend; (2) grants in part and denies in part the request for judicial notice; and (3) denies without prejudice the anti-SLAPP motion to strike.

         I. BACKGROUND

         According to the amended complaint, Peak Health provides plant-based pharmaceuticals and supplements, and it maintains an office in California. Dkt. No. 8 ¶ 1. Peak Health says that one of its principals developed a strain of Humulus yunnanensis, a hops plant, as a source of cannabidiol (“CBD”), a substance typically derived from hemp or cannabis and used to treat various medical conditions. Id. ¶ 13. Because hemp and cannabis are subject to legal restrictions and social stigma, obtaining CBD from another unrestricted source-such as a legal hops plant- is a noteworthy and potentially valuable achievement. See Id. Peak Health purports to be the sole source of CBD derived from Humulus yunnanensis and sells CBD-based products under various trademarks, including “Kriya” and “ImmunAG.” Id.

         At the time of the events described in the amended complaint, Mr. Dorfman was the editor-in-chief and a writer for PotNetwork Holdings, Inc. (“PotNetwork”). Id. ¶ 3. PotNetwork produces and distributes cannabis and hemp products (including CBD products) and also publishes news concerning the cannabis and hemp industries on its website. Id. In early 2019, Mr. Dorfman contacted Peak Health principal Bomi Joseph to ask questions for an article Mr. Dorfman was writing. Id. ¶ 14. Mr. Dorfman questioned Mr. Joseph about his background and the origin and source of the CBD used in Peak Health's products. Id. Peak Health describes Mr. Dorfman's demeanor during the questioning as demonstrating “disdain and animus towards Mr. Joseph.” Id. ¶ 15. After the conversation between Mr. Dorfman and Mr. Joseph, Peak Health says that its public relations agency provided Mr. Dorfman with documents constituting “proof” that Peak Health's CBD originated from Humulus yunnanensis plants grown in India, as well as other documents reflecting laboratory test results supporting Peak Health's claims and Mr. Joseph's patent filings for inventions related to Humulus yunnanensis. Id. ¶¶ 14, 16.

         On February 22, 2019, Mr. Dorfman published an article on the PotNetwork website entitled, “A PotNetwork News investigative report: Bomi Joseph's ‘hops-derived' CBD was a world-changing cannabis alternative fought over by Isodiol and Medical Marijuana, Inc. But he lied about his discovery-and his identity” (“the article”), which is attached as Exhibit A to the amended complaint. Id. ¶ 4. The article asserts that Peak Health and Mr. Joseph's claims about Peak Health's CBD products are inaccurate and fraudulent. Id. ¶ 18; Dkt. No. 12-1, Ex. 1[2] at 3, 7, 11-12. The article also asserts that Peak Health's “Humulus kriya” hops plant does not exist.[3]Dkt. No. 12-1, Ex. 1 at 5. The article also includes statements about Mr. Joseph personally: that his real name is Moses Sunith Prasad Joseph, that his alleged research publications about Humulus kriya and CBD were plagiarized from others' legitimate peer-reviewed publications, that he is a convicted felon who served prison time for defrauding various banks of $20 million in the early 2000s, and that he pled guilty in January 2019 to using a false name on a passport application. Id. at 2-3, 7-8, 10-12.

         Peak Health says that Mr. Dorfman's article is willfully false and libelous. Specifically, Peak Health identifies the following statements in the article as false:

1. “The discovery of cannabidiol from Humulus kriya is a fraudulent one, based on plagiarized research and outright deception.”
2. “Mr. Joseph claimed to have found the world's first alternative source of highly- bioactive CBD through his organization, Peak Health Center in Los Gatos, California, deceit that garnered him favorable press, speaking engagements, and financial gain. In fact, based on his plagiarized research and dubious claims, Mr. Joseph secured himself deals with two publicly-traded companies in the cannabis sector, Isodiol and Medical Marijuana Inc.”
3. “This time around [Mr. Joseph] may very well have stolen from little old ladies, or the sick and injured-from anyone who purchased ImmunAg or Real Scientific Humulus Oil or one of its derivatives in hopes of curing some pain.”

Dkt. No. 8 ¶ 20. Peak Health also says that Mr. Dorfman acted maliciously or with reckless disregard for the truth in quoting Dr. Volker Christoffel, one of the people whose work Mr. Joseph allegedly plagiarized, with respect to the following statements:

4. “‘The whole story with CBD from hop is insane,' Dr. Christoffel told PotNetwork via email. ‘By the phylogenetic relatedness it MIGHT be possible, that some hop varieties may have genes and express i.e., form cannabinoids-the biochemical pathways are not so different and there is a theoretical possibility I would not exclude a priori. BUT these are definitively only traces.'”
5. “Point blank, Dr. Christoffel stated that hops, or Humulus kriya, does not have enough traces of CBD to make it a viable product.”
6. “‘There is nothing, nothing worth,' [Dr. Christoffel] continued. ‘It is just marketing to drive their shares.'”
7. “And as Dr. Christoffel told PotNetwork News via email, the idea of bioactivity sold by Mr. Joseph would seem to be a canard.”

Id. ¶ 21. Peak Health says that Mr. Dorfman's reliance on Dr. Christoffel was reckless because Dr. Christoffel never performed or reviewed any kind of chemical analysis of Peak Health's Humulus yunnanensis-derived CBD. Id. ¶ 22. In fact, Peak Health says, Dr. Christoffel's reference to “Humulus kriya” “is nonsensical, as there is no such product or plant.” Id. Moreover, Peak Health says, the article fails to disclose that Dr. Christoffel is a managing director of yet another cannabis-based pharmaceutical company that competes with Peak Health and is therefore not an independent expert as the article suggests. Id. ¶ 24.

         Peak Health says that the article was intended to harm its commercial interests and that Mr. Dorfman's purpose in publishing it was commercial, not journalistic. Id. ¶ 26. Because of the article, Peak Health says it suffered harm to its reputation and lost business opportunities worth at least $10 million. Id. ¶¶ 25, 31, 37.

         II. LEGAL STANDARD

         A. Rule 12(b)(6)

         “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.'” Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         A court generally may not consider any material beyond the pleadings when ruling on a Rule 12(b)(6) motion. If matters outside the pleadings are considered, “the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). However, documents appended to the complaint, incorporated by reference in the complaint, or which properly are the subject of judicial notice may be considered along with the complaint when deciding a Rule 12(b)(6) motion. Khoja v. Orexigen Therapeutics, 889 F.3d 988, 998 (9th Cir. 2018); see also Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990); MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). A court may take notice of public records, but not of disputed facts stated in public records. Khoja, 899 F.3d at 999 (citing Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001)). In addition, a court may take judicial notice of a fact not subject to reasonable dispute because it either is generally known within the trial court's territorial jurisdiction, or readily can be determined from sources whose accuracy cannot reasonably be questioned. Fed.R.Evid. 201(b).

         B. Rule 9(b)

         Rule 9(b) requires that allegations of fraud be stated with particularity. Specifically, averments of fraud must “be accompanied by ‘the who, what, when, where, and how' of the misconduct charged.” 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)). When an “entire claim within a complaint[] is grounded in fraud and its allegations fail to satisfy the heightened pleading requirements of Rule 9(b), a district court may dismiss the . . . claim.” Id. at 1107. A motion to dismiss a complaint under Rule 9(b) for failure to plead with particularity is “the functional equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state a claim.” Id.

         C. Anti-SLAPP Motion to Strike

         “Anti-SLAPP statutes are designed to allow the early dismissal of meritless lawsuits aimed at chilling expression through costly, time-consuming litigation.” Gardner v. Martino, 563 F.3d 981, 986 (9th Cir. 2009) (quotation marks and citation omitted). California's anti-SLAPP statute provides that “[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” Cal. Civ. Proc. Code § 425.16(b)(1). A defendant in federal court may bring an anti-SLAPP motion with respect to California state law claims asserted under either diversity jurisdiction or supplemental jurisdiction. Jen v. City & Cty. of San Francisco, No. 15-CV-03834-HSG, 2016 WL 3669985, at *11 (N.D. Cal. July 11, 2016). The anti-SLAPP statute does not apply to claims asserted under federal law. Hilton v. Hallmark Cards, 599 F.3d 894, 901 (9th Cir. 2010).

         III. MOTION TO DISMISS

         A. Request for ...


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