Ariix, LLC v. Nutrisearch Corporation

District Court, S.D. California·Decided April 13, 2023·No. 3:17-cv-00320·Unknown

Opinion

ARIIX, LLC, Case No.: 17CV320-LAB (DDL)

Plaintiff, ORDER RE: REMAND v. et al., Defendant.

Plaintiff Ariix, LLC (“Ariix”), a nutritional supplement company, brings this suit under the Lanham Act based on a theory of false advertising. Ariix alleges that Defendants NutriSearch Corporation (“NutriSearch”), the publisher of the NutriSearch Comparative Guide to Nutritional Supplements (“Guide”), and Lyle MacWilliam, the Guide’s author (together with NutriSearch, “Defendants”), were directly funded by Ariix’s competitor, USANA Health Sciences, Inc. (“Usana”), so that Usana could achieve the Guide’s number-one rating for nutritional supplements. This Court originally dismissed Ariix’s false advertising claim, but in a two-one decision, the Ninth Circuit reversed, finding that Ariix had “plausibly alleged that the defendant’s publication was commercial speech, was sufficiently disseminated, and contained actionable statements of fact.” (Dkt. 41 at 2). The appellate panel remanded the case to this Court to decide the third element of a Lanham Act claim—whether the defendant’s publication was for the purpose of influencing consumers to buy the defendant’s goods or services. Having considered the parties’ briefings on this issue, the Court finds as follows. On February 16, 2017, Ariix commenced this suit against Defendants,1 bringing a false advertising or promotion claim under the Lanham Act, 15 U.S.C. § 1125(g). (Dkt. 1). Following its initial dismissal of Ariix’s original Complaint, the Court again dismissed Ariix’s First Amended Complaint (“FAC”), finding that Ariix failed to plead facts showing that a consumer review publication like the Guide meets the definition of “commercial advertising or promotion” under the Lanham Act. (Dkt. 27). Specifically, the Court held that consumer product reviews fall outside the scope of § 1125(a)(1)(B) because they are not commercial speech and instead are statements of opinion. The Court also found that Ariix had failed to plausibly allege that Defendants had made false statements about Usana’s or Ariix’s products. On Ariix’s appeal, the Ninth Circuit narrowly considered whether Ariix had plausibly alleged that NutriSearch had engaged in “commercial speech” in its publication of the Guide. (Dkt. 41); Ariix, LLC v. NutriSearch Corp., 985 F.3d 1107, 1115 (9th Cir. 2021). In distinguishing commercial and non-commercial speech, the Ninth Circuit looked to the three Bolger factors: whether (1) “the speech is an advertisement,” (2) it “refers to a particular product,” and (3) “the speaker has economic motivation.” Id. at 1115–16 (quoting Hunt v. City of Los Angeles, 638 F.3d 703, 715 (9th Cir. 2011)); see also Bolger v. Youngs Drug Prods. Corp., 463 1 Ariix initially filed this suit against NutriSearch, MacWilliam, and Usana, but on March 21, 2022, the Court dismissed Usana from this action for lack of personal jurisdiction. (Dkt. 67). On April 1, 2022, Ariix notified the Court of its intent not to U.S. 60, 66–67 (1983). The court’s analysis turned primarily on the third factor, which “asks whether the speaker acted primarily out of economic motivation, not simply whether the speaker had any economic motivation.” Id. at 1116 (emphasis in original). The panel majority found that the Guide “is more like a sophisticated marketing sham rather than a product review guide,” thereby rendering it “paid promotion” free from the protections enjoyed under the First Amendment. Id. at 1118–19 (“Simply put, paid promotion is commercial speech.”). The panel majority concluded that where, as here, it’s alleged that a publisher claiming to offer independent product reviews has secretly rigged the ratings to favor one company over another in exchange for financial compensation, such speech can be considered commercial. The majority also ruled that Defendants were not shielded by the First Amendment and that Ariix had “plausibly alleged that the defendant’s publication was commercial speech, was sufficiently disseminated, and contained actionable statements of fact.” (Id. at 2). The panel majority left it to this Court to decide, on remand, whether Defendants’ publication was made “for the purpose of influencing consumers to buy defendant’s goods or services.” Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 735 (9th Cir. 1999). The Court now looks to Ariix’s Second Amended Complaint (“SAC”) and considers this issue in the first instance.2 2 Ariix filed a Notice of Supplemental Authority of a related case filed by Ariix against Usana in the District of Utah for allegations mirroring those in the present case. (See Dkt. 72); Ariix LLC v. Usana Health Scis., Inc., No. 2:22-cv-00313-JNP- DAO (D. Utah). Specifically, Ariix brings to the Court’s attention that court’s Decision and Order Denying Defendant’s Motion to Dismiss, including Judge Jill Parrish’s interpretation of the Ninth Circuit’s Mandate regarding whether Ariix had plausibly alleged the existence of an agency relationship between Usana, NutriSearch, and MacWilliam. Although the Court is not bound by the Utah court’s reasoning, pursuant to Federal Rule of Evidence 201, the Court nevertheless takes judicial notice on its own of the Utah court’s decision. United States ex rel. To establish a false advertising claim under the Lanham Act, a plaintiff must allege “a false or misleading representation of fact in commercial advertising or promotion that misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” Prager Univ. v. Google LLC, 951 F.3d 991, 999 (9th Cir. 2020) (internal citations and quotation marks omitted). The Ninth Circuit defines “commercial advertising or promotion” as “(1) commercial speech, (2) by a defendant who is in commercial competition with plaintiff, (3) for the purpose of influencing consumers to buy defendant’s goods or services, and (4) that is sufficiently disseminated to the relevant purchasing public.” Ariix, 985 F.3d at 1115; see also Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1054 (9th Cir. 2008). This Court must decide whether there is evidence to support a plausible claim as to the third element of a false advertising claim—that is, whether Ariix has plausibly alleged that publication of the Guide was intended to influence consumers to buy NutriSearch’s product. While the Ninth Circuit didn’t decide this issue on appeal, the panel majority did note that the allegations in the complaint suggest that the advertising was “intended to help Usana’s goods, not NutriSearch’s product,” Ariix, 985 F.3d at 1120, and that in analyzing this element, it may be helpful for this Court “to determine whether the defendants and Usana had an agency relationship; for example, it might be the case that the defendants were acting as agents of Usana and therefore had a vested interest in the goods that Usana sold, which might be enough to satisfy this element,” id. at 1120 n.10. Judge Collins likewise noted in his dissent that the third element may be satisfied

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