Nutrition Distribution LLC v. Custom Nutraceuticals LLC

194 F. Supp. 3d 952, 2016 U.S. Dist. LEXIS 88677, 2016 WL 3654277
CourtDistrict Court, D. Arizona
DecidedJuly 8, 2016
DocketNo. CV-16-00173-PHX-DGC
StatusPublished
Cited by10 cases

This text of 194 F. Supp. 3d 952 (Nutrition Distribution LLC v. Custom Nutraceuticals LLC) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nutrition Distribution LLC v. Custom Nutraceuticals LLC, 194 F. Supp. 3d 952, 2016 U.S. Dist. LEXIS 88677, 2016 WL 3654277 (D. Ariz. 2016).

Opinion

ORDER

David G. Campbell, United States District Judge

Defendants are nutritional supplement companies that manufacture and market Ostarine, a selective androgen receptor modulator (“SARM”) with effects similar to those of anabolic steroids. Doc. 20, ¶¶ 1, 19. Plaintiff, a competing nutritional supplement company, asserts that Defendants have violated the Lanham Act by engaging in false advertising of Ostarine. ¶¶ 25-36. Plaintiff also asserts that Defendants have violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by engaging in a pattern of criminal activity in connection with their sale of Ostarine and similar products. ¶¶ 37-41. Defendants move to dismiss these claims, or in the alternative, to stay the action pending the Ninth Circuit’s resolution of a related case. Doc. 21. The motion has been fully briefed (Does. 25, 26), and the Court concludes that oral argument will not aid in its decision.1 For the reasons that follow, the Court will dismiss the RICO claim with leave to amend, and otherwise deny the motion.

I. Lanham Act.

“The Lanham Act creates a cause of action for unfair competition through misleading advertising or labeling.” POM Wonderful LLC v. Coca-Cola Co., — U.S. [955]*955—, 134 S.Ct. 2228, 2234, 189 L.Ed.2d 141 (2014); see 15 U.S.C. § 1125(a)(1)(B) (“Any person who ... uses in commerce ... any ... false or misleading description of fact, or false or misleading representation of fact, which ... misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods ... shall be liable in a civil action”). This cause of action may be invoked by competitors — those entities that stand to suffer ‘“an injury to a commercial interest in sales or business reputation’ ” as a proximate result,of the defendant’s misrepresentations. Id. (quoting Lexmark Int'l Inc. v. Static Control Components, Inc., — U.S. —, 134 S.Ct. 1377, 1395, 188 L.Ed.2d 392 (2014)).

Plaintiff alleges that Defendants have made false and misleading representations about Ostarine. First, Plaintiff alleges that Defendants have labeled their Ostarine products as “not for human consumption,” while simultaneously representing that Os-tarine is a body-building drug and an “[e]asy to dose oral SARM.” Doc. 20 ¶¶ 1, 26. - Second, Plaintiff alleges that Defendants have failed to disclose that the World Anti-Doping Agency and the U.S. Anti-Doping Agency have banned the use of SARMs — information that may be material to the competitive athletes targeted by Defendants’ marketing. ¶ 31. Third, Plaintiff alleges that Defendants have represented that Ostarine has few side effects, when medical evidence suggests that it has potentially serious side effects., ¶¶ 27-30. Plaintiff alleges that Defendants’ statements have caused it a loss of good will and a diversion of business from its own products. ¶¶ 18, 24, 35.

Defendants do not dispute that Plaintiff has adequately pleaded the elements of a Lanham Act claim. Instead, they argue that the Court should abstain from deciding this claim because it raises issues that should be answered in the first instance by the Food and Drug Administration (“FDA”).

In general, “[a] federal court’s obligation to hear and decide cases within its jurisdiction is virtually unflagging.” Lexmark, 134 S.Ct. at 1386. The primary jurisdiction doctrine constitutes a limited exception to this principle. This doctrine allows a federal court to abstain from deciding a case within its subject matter jurisdiction if it determines that the “initial decisionmaking responsibility should be performed by the relevant agency rather than the courts.” Syntek Semiconductor Co. v. Microchip Tech. Inc., 307 F.3d 775, 780 (9th Cir.2002). Such abstention may be appropriate where a claim “implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the regulatory industry.” Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 760 (9th Cir.2015) (citation omitted). Courts should consider “(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.” Id.

The Court concludes that it should not dismiss this case under the primary jurisdiction doctrine. The Court need not consult- the FDA to determine whether it is false and misleading to label a product as “not for human consumption” while touting the benefits of such consumption. This question is not one “that “requires resolution of an issue of first impression, or of a particularly complicated issue that Congress has committed to a regulatory agency.” Id. at 760 (quotation marks and citations omitted); cf. United States v. Storage Spaces Designated Nos. 8 & 19 Located at 277 E. Douglas, Visalia, Cal., 777 F.2d [956]*9561363, 1367 (9th Cir.1985) (“Because the products are labeled as ‘incense,’ when it appears that they are, in fact, intended for drug use, there is a reasonable basis for believing that the labeling is false and misleading.”).

Nor does the Court require the FDA’s expertise to determine whether it is false and misleading to market a product to competitive athletes while neglecting to mention that it has been banned by the World Anti-Doping Agency and the U.S. Anti-Doping Agency. It is not clear that this question even implicates the FDA’s regulatory scheme; the Food, Drug, and Cosmetic Act (“FDCA”) ‘“is not focused on the truth or falsity of advertising claims,’ but is instead directed to protecting’” public safety. Mut. Pharm. Co. v. Ivax Pharm., Inc., 459 F.Supp.2d 925, 933 (C.D.Cal.2006) (quoting Sandoz Pharm. Corp. v. Richardsorn-Vicks, Inc., 902 F.2d 222, 230 (3d Cir.1990)). Thus, the FDCA does not prohibit all omissions that might be material to a consumer, but only those that are material “with respect to consequences which may result from the use of the article.” 21 U.S.C. § 321(n). Even assuming the FDA could require Defendants to disclose that their product has been banned by major sports agencies, the issue is not one that implicates the agency’s technical and policy expertise. Indeed, Plaintiff may have a superior understanding of how consumers of body building products would react to this information. Cf. POM Wonderful, 134 S.Ct. at 2238 (competitor’s “awareness of unfair competition practices may be far more immediate and accurate than that of’ the FDA).

Finally, the Court will not abstain from deciding Plaintiffs claim that Defendants made false and misleading statements about Ostarine’s side effects. The FDA certainly has primary jurisdiction to regulate statements about the side effects of drugs. See, e.g., 21 U.S.C. § 352

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Bluebook (online)
194 F. Supp. 3d 952, 2016 U.S. Dist. LEXIS 88677, 2016 WL 3654277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nutrition-distribution-llc-v-custom-nutraceuticals-llc-azd-2016.