United States District Court, S.D. California
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT ECF NO.
Gonzalo P. Curiel United States District Judge
Eashou, Inc. (dba San Diego Cash & Carry), Fountain
Trading Corp., Kachi Enterprises Inc., Main Calif, Inc.,
R&M Palm, Inc., and Zaya Enterprises Inc.
(“Defendants”) - five independent convenience and
liquor stores in the San Diego area as well as one local
wholesaler - move the Court for summary judgment on Plaintiff
Outlaw Laboratory, LP's (“Plaintiff”) claim
of false advertising under the Lanham Act, 15 U.S.C. §
1051 et seq. Plaintiff has alleged that Defendants
are engaged in a scheme to sell sexual enhancement pills,
which contain hidden prescription drugs, and which Defendants
market as “all natural, ” among other false
advertisements. Defendants reject this claim on the reasoning
that the undisputed facts do not show they have contributed
to any false advertising, and thus cannot be held liable for
lawfully re-selling a third party's products.
case thus presents the following question for the Court: can
a local retail or wholesale store that sells another
company's product, without independently advertising that
product, be held liable under Lanham Act for any false
statements on the product's packaging? The Court finds
that it cannot. Consequently, based on the undisputed facts
of this case, the Court finds that no reasonable juror could
find Defendants liable under the Lanham Act and directs
summary judgment as to the Lanham Act claim in DG in
Factual and Procedural Background
is a Texas-based manufacturer of male-enhancement products
called “TriSteel” and “TriSteel 8
hour.” (ECF No. 1, Complaint at ¶
Plaintiff's products are made in the United States,
distributed for sale in all 50 states, and comply with the
Dietary Supplement Health and Education Act. (Id.)
Plaintiff's products are not sold in any retail stores in
California. (ECF No. 90-7, Requests for admission
(“RFA”) Nos. 1- 5). Instead, Plaintiff only sells
its products at www.outlawlaboratory.com. (ECF No. 90-7, RFA
No. 6.) Plaintiff formed in Texas in September
2016, has two employees, and is co-owned by two individuals -
Michael Wear and Shawn Lynch. (ECF No. 133-2, Responses to
Interrogatories (“RTI”) Nos. 1, 3; ECF No. 90-6,
Requests for Production (“RFP”) No. 11; ECF No.
114 at ¶¶ 2, 16, 17, 65.)
Defendants in this case are proprietors of gas stations,
liquor stores, and corner stores. (ECF No. 114 at
¶¶ 26-27.) Defendants sell male-enhancement pills,
i.e. “the Enhancement Products.” (ECF No. 1,
Complaint at ¶ 1; ECF No. 94-7, Decl. of Michael Wear at
¶¶ 2-6; ECF Nos. 94-8 (Kachi Enterprises Inc.),
94-9 (Main Calif, Inc.), 94-10 (R&M Palm, Inc.), 94-11
(Zaya Enterprise, Inc.), 94-12 (Foundation Trading Corp.)).
As of July 2019, Defendants continue to sell Enhancement
Products, (ECF No. 94-1, Decl. of Ruhl at ¶¶ 4-8),
which are displayed on racks “at or near the checkout
counter” without the use of additional, in-store
advertisements. (ECF No. 1, Complaint at ¶ 33; ECF Nos.
94-2 at 3 (Kachi Enterprises Inc.), 94-4 at 3 (R&M Palm,
Inc.), 94-5 at 2 (Zaya Enterprise, Inc.).)
Food and Drug Administration has issued multiple notices
warning that some of the Enhancement Products contain hidden
drugs, including sildenafil (a prescription drug found in
Viagra), desmethyl carbodenafil (an analogue of sildenafil),
dapoxetine (an anti-depressant drug), and tadalafil (a
prescription drug found in Cialis). (ECF No. 90-21 at 13-20,
42-53, 80-87, 110-21, 147-54). Plaintiff has provided
independent testing that shows at least five such products -
Blue Fusion, Premier Zen Platinum 5000, King Kung 8000, Black
Stallion 9000, and Rhino 25 Titanium 8000 - contain the
hidden prescription drugs. (ECF No. 94-13.)
has supplied no evidence to suggest that Defendants had
“any role in formulating the challenged products or had
any role in drafting the language on their packaging.”
(ECF No. 90-6, RFP Nos. 23-77; ECF Nos. 90-20, 90-21.) When
asked for all facts supporting the allegation that Defendants
advertise the Enhancement Products, Plaintiff relied only on
some sales receipts from San Diego Cash & Carry to two
stores not named as defendants - S&N Market and Spotts
Liquor. (ECF No. 1, Complaint at ¶ 33; ECF No. 133-2,
RTI No. 17; ECF No. 90-20, Receipts.)
Plaintiff's Letters to Defendants
December 2017, Plaintiff has mailed demand letters to
proprietors of stores that sell Enhancement Products. (ECF
No. 114 at ¶¶ 26-27.) Outlaw's demand letters
warned recipients that they were “selling illegal
sexual enhancement drugs, ” which “subject your
company to legal action for racketeering . . . under RICO
(Racketeer Influenced Corrupt Organizations) and the Federal
Lanham Act” and obligate the recipients to pay to
Outlaw “profits from the sale of Illicit Products
dating back four years, ” “Attorney's fees,
” “Punitive damages, ” and “Triple
damages.” (ECF No. 90-21 at 3; ECF No. 90-21 at 1-168
(containing letters and attachments sent to five of six
Defendants.)) The letters estimated the recipients'
liabilities at “over $100, 000” but stated that
Outlaw would “settle all claims in exchange for a
one-time settlement agreement of [$9, 765, in the sample
demand letter] and your agreement to stop selling the Illicit
Products.” (Id. at 4).
letters conclude by warning that, “[i]f this matter is
not fully resolved before [a date typically within 30 days],
” a lawsuit will be filed against the recipient.
(Id.) Attached to the letters are typically three
exhibits: (1) “photographs taken at [Defendants'
stores] capturing [the] sale of the Illicit Products, ”
(2) “notices from the Food and Drug Administration
regarding the illegality of the Illicit Products, ” and
(3) a draft complaint with the recipient's name filled in
as defendant. (See, e.g., id. at 2-34).
recipients, like Skyline Market, Inc., acquiesced to the
demand letter and settled with Outlaw. (ECF No. 114 at ¶
35). Others, like NMRM, Inc. and Roma Mikha, Inc., did not
settle but removed the products from their shelves.
(Id. at ¶ 33-34).
Plaintiff Initiated Two Lawsuits, which the Court then
2, 2018, Outlaw filed a complaint in the Southern District of
California against eleven defendants, all of whom had
received a demand letter, and 100 Does. See ECF No.
1 at ¶¶ 2, 15-26, Outlaw Laboratory, LP v. DG
in PB, LLC et al (hereinafter, the “DG in
PB” action), Case No. 18-CV-0840-GPC (S.D. Cal.
2018). Plaintiff alleges that the defendants sold the
Enhancement Products and that the packaging contained false
advertisements, including that the products are “all
natural, ” contain “no harmful synthetic
chemicals, ” “no prescription necessary, ”
and have limited side effects. (Id. at ¶¶
3, 32-33). In this action, Plaintiff has pled one claim for
false advertising in violation of § 43(a)(1)(B) of the
Lanham Act. (Id. at ¶¶ 49-55).
24, 2018, Outlaw filed a second complaint in San Diego
Superior Court against fifty-one defendants, all of whom had
received a demand letter, and 100 Does. See ECF No.
1-2 at 13, Outlet Laboratory, LP v. San Diego Outlet,
Inc. (hereinafter, the “San Diego
Outlet” action), Case No. 18-CV-1882-GPC (S.D.
Cal. 2018). Like the DG in PB Complaint, the San
Diego Outlet complaint alleges that the defendants
engaged in a scheme to sell unlawful “Rhino products,
” which contain hidden prescription drugs.
(Id. at ¶¶ 1-3). As with the Enhancement
Products, Outlaw claims that, by selling the Rhino products
at their stores, the defendants disseminate false statements
including that the products are “all natural, ”
contain “no harmful synthetic chemicals, ”
“no prescription necessary, ” and have limited
side effects. (Id. at ¶ 57.) In the San
Diego Outlet complaint, Plaintiff pleads three causes of
action: (1) a violation of California Business and Profession
Code § 17200 (prohibiting unlawful, unfair, or
fraudulent business acts); (2) a violation of the California