Catilina Nominees Proprietary Ltd. v. Stericycle, Inc.

CourtDistrict Court, N.D. Illinois
DecidedMarch 26, 2021
Docket1:15-cv-10734
StatusUnknown

This text of Catilina Nominees Proprietary Ltd. v. Stericycle, Inc. (Catilina Nominees Proprietary Ltd. v. Stericycle, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Catilina Nominees Proprietary Ltd. v. Stericycle, Inc., (N.D. Ill. 2021).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

CATILINA NOMINEES PROPRIETARY ) LTD., et al., ) ) Plaintiffs, ) ) No. 15-cv-10734 v. ) ) Judge Andrea R. Wood STERICYCLE, INC., ) ) Defendant. )

MEMORANDUM OPINION AND ORDER Plaintiffs Catilina Nominees Proprietary Ltd. and Daniels Sharpsmart, Inc. (“Sharpsmart”) sued Defendant Stericycle, Inc. (“Stericycle”) alleging infringement of U.S. Patent No. 6,250,465 (“’465 Patent”), titled “Sharps Container.” After the parties were well into fact discovery, the Court granted Plaintiffs’ motion for leave to file an amended complaint to assert a new claim for false advertising under the Lanham Act, 15 U.S.C. § 1125(a). Now before the Court is Stericycle’s motion to dismiss the newly added claim pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (Dkt. No. 140.) For the reasons stated below, Stericycle’s motion is granted and Plaintiffs’ false advertising claim is dismissed without prejudice. BACKGROUND Because Stericycle has moved to dismiss the false advertising claim under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in the amended complaint as to that claim and draw all reasonable inferences from those facts in Plaintiffs’ favor. Bell v. City of Country Club Hills, 841 F.3d 713, 716 (7th Cir. 2016). In their amended complaint, Plaintiffs describe themselves as “innovators in the market for reusable containment solutions for collection of regulated medical waste.” (Am. Compl. ¶ 11, Dkt. No. 139.) Plaintiffs allege that they developed their patented reusable sharps container, known as the “Sharpsmart Container,” to allow for the disposal of medical syringes while preventing individuals from reaching into the device to retrieve used needles. (Id. ¶ 12.) Along with the container itself, Plaintiffs offer a service that includes the delivery of clean containers as well as the pickup and sterilization of used full containers. (Id. ¶ 13.)

Stericycle is Plaintiffs’ competitor in the medical waste market. (Id. ¶ 15.) In 2011, Stericycle entered into discussions with Plaintiffs concerning a potential business transaction. (Id. ¶ 16.) As part of those discussions, Plaintiffs gave Stericycle a confidential memorandum with details about the Sharpsmart Container. (Id. ¶ 17.) On December 27, 2013, Stericycle received Section 510(k) approval from the U.S. Food and Drug Administration (“FDA”) for the “Stericycle Sharps Management Service Reusable Sharps Container.” (Id. ¶ 18.) Stericycle’s Section 510(k) submission described the device as a substitute for the Sharpsmart Container. (Id. ¶¶ 19, 21.)1 Specifically, in the product description for its Section 510(k) submission, Stericycle described its container as having “a counterbalanced lid design that acts as a protective barrier to keep sharps

objects within the container from coming back up through the lid and anyone from reaching into the container to retrieve sharps waste.” (Id. ¶ 20 (quotation marks omitted).) Plaintiffs’ original complaint in this case, filed on November 30, 2015, asserted one count against Stericycle for alleged infringement of the ‘465 patent for the Sharpsmart Container. The amended complaint now also alleges that Stericycle’s Section 510(k) submission and promotional materials for its own product are false and misleading in violation of the Lanham Act. According to Plaintiffs, Stericycle made the following false and misleading statements:

1 The purpose of a Section 510(k) submission is to show that a new device does not need preapproval from the FDA to be marketed as safe and effective because it is “substantially equivalent” to another legally marketed device. See Riegel v. Medtronic, Inc., 552 U.S. 312, 317 (2008); 21 U.S.C. §§ 360c(f)(1)(A)(ii), (i)(1)(A), 360e(b)(1).  Stericycle’s container is “ideal for patient rooms and treatment areas where security and convenience are critical” and its “design utilizes safety/engineering controls that prevents access to the contents of the container.” (Id. ¶ 35 (alterations and quotation marks omitted).)

 “IF NEEDLESTICKS ARE A PROBLEM, WE HAVE THE SOLUTION.” (Id. ¶ 36. (quotation marks omitted).)

 Stericycle’s containers “have marketing clearance from the FDA.” (Id. (quotation marks omitted).)

 One of the container’s benefits is a “100% sustained reduction in needlesticks,” with an asterisk that notes that fact is “[b]ased on an independent national study.” (Id. ¶ 37 (quotation marks omitted).)

 The container’s lid option “incorporates safety/engineering controls that include limited access to the contents of the container.” (Id. ¶ 38 (quotation marks omitted).)

With its present motion, Stericycle asks the Court to dismiss Plaintiffs’ false advertising claim for two reasons: first, Stericycle argues that the newly added claim is barred by the applicable statute of limitations; and second, it claims that the amended complaint does not contain sufficient factual matter to state a claim and, in particular, to allege fraud with particularity. DISCUSSION Under Rule 12(b)(6), a complaint must contain sufficient factual allegations 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 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.” Id. This plausibility standard demands “more than a sheer possibility that a defendant has acted unlawfully.” Id. A formulaic recitation of the elements is not enough to survive dismissal. Id.; Twombly, 550 U.S. at 555. Furthermore, the Court is “not obliged to accept as true legal conclusions or unsupported conclusions of fact.” Hickey v. O’Bannon, 287 F.3d 656, 658 (7th Cir. 2002). Rule 9(b) additionally requires a party alleging fraud to “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). This means that the plaintiff must plead “the who, what, when, where, and how” of the alleged fraud. AnchorBank, FSB v. Hofer, 649 F.3d

610, 615 (7th Cir. 2011) (internal quotation marks omitted). As Plaintiffs point out, whether a Lanham Act false advertising claim “must be pled in accordance with Rule 9(b) is not settled within the Seventh Circuit.” Towada Audio Co., Ltd. v. Aiwa Corp., No. 18-cv-4397, 2019 WL 1200748, at *8 (N.D. Ill. Mar. 14, 2019). However, the Seventh Circuit has suggested in dicta that Rule 9(b) does apply to such claims. See Gensler v. Strabala, 764 F.3d 735, 737 (7th Cir. 2014) (remarking that the plaintiff’s Lanham Act claim “charges [the defendant] with a form of fraud, so we would expect [the] complaint to allege with particularity the nature of the grievance” (citing Fed. R. Civ. P. 9(b))). This Court readily concludes that the heightened pleading requirements of Rule 9(b) apply to Plaintiffs’ false advertising claim.

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Catilina Nominees Proprietary Ltd. v. Stericycle, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/catilina-nominees-proprietary-ltd-v-stericycle-inc-ilnd-2021.