United States District Court, D. Arizona
ORDER
Honorable Susan M. Brnovich United States District Judge
Pending
before the Court is Defendant Sparta Nutrition LLC's
Motion to Dismiss under Federal Rules of Civil Procedure
(“Rules”) 12(b)(1) and 12(b)(6) and the primary
jurisdiction doctrine. (Doc. 16, “Mot.” or
“Motion”.) Plaintiff ThermoLife International LLC
responded and Defendant replied. (Doc. 19,
“Resp.”; Doc. 20, “Repl.”) The Court
heard oral argument on January 10, 2020. (Doc. 31.) Having
considered the pleadings, oral argument, and relevant law,
the Court grants Defendant's Motion to Dismiss with leave
to amend as explained below.[1]
I.REQUEST
FOR JUDICIAL NOTICE
Defendant
requests judicial notice under Federal Rule of Evidence 201
of current labels and website advertising printouts for two
of its products (see Docs. 17, 17-1), and the former
labels for those products (see Docs. 21, 21-1).
Plaintiff objects to the Court taking judicial notice of the
current labels and website advertising because they are
disputed and “not public records or other record of
undisputed accuracy.” (Resp. at 6.) Plaintiff does not
object to the Court judicially noticing the former labels.
Courts
may “consider certain materials-documents attached to
the complaint, documents incorporated by reference
in the complaint, or matters of judicial notice-
without converting the motion to dismiss into a motion for
summary judgment.” United States v. Ritchie,
342 F.3d 903, 908 (9th Cir. 2003) (emphasis added); see
Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998
(9th Cir. 2018) (explaining Rule 201 and
incorporation-by-reference doctrine). Rule 201 permits courts
to judicially notice a fact “not subject to reasonable
dispute because it (1) is generally known within the trial
court's territorial jurisdiction; or (2) can be
accurately and readily determined from sources whose accuracy
cannot reasonably be questioned.” Fed. R. Ev. 201(b).
The
Court agrees with Plaintiff that judicial notice of the
current labels and website advertising is premature at this
stage. However, the Court will judicially notice the former
labels because Plaintiff does not object to Defendant's
request. (See Docs. 21, 21-1.)
II.
BACKGROUND[2]
Plaintiff,
a self-proclaimed “world leader in the use and
development of nitrate technology in dietary supplements,
[3]” is an Arizona LLC founded in 1998
with “at least 16 patents with more than 450 claims
related [to] amino acid nitrate compounds, compositions, and
their uses in dietary supplements and food products.”
(Doc. 1, “Compl.” ¶¶ 1, 11, 19.)
“With few exceptions, anytime an amino acid is combined
with nitrate(s) and sold and marketed to consumers in a
dietary supplement, that product relies on [Plaintiff's]
patented technology.” (Id. ¶ 23.) More
specifically, “[Plaintiff] licenses and sells its
patented creatine nitrate for use in dietary supplement
products.” (Id. ¶ 26.) Because of
“the popularity of [Plaintiff's] nitrates in the
dietary supplement market, [its] business is tied to the
performance of products that rely on [its] patented
ingredients and technologies.” (Id. ¶
30.)
Defendant
is a Florida LLC founded in 2016 that advertises and sells
dietary supplements to consumers and wholesalers through its
website. (Id. ¶¶ 12, 33.) Although
Plaintiff “licenses and sells its patented creatine
nitrate for use in dietary supplement products, ”
(id. ¶ 26), and Defendant sells actual dietary
supplements, (id. ¶¶ 12, 33), the
Complaint alleges that “[Defendant] competes directly
with [Plaintiff] and the licensees of [its] patented
ingredients and technology in the dietary supplement
market.” (Id. ¶ 33.)
In
claiming “an identifiable economic interest in the
dietary supplement market, ” (id. ¶ 32),
Plaintiff brings three claims against Defendant based on the
“intentional false advertising” or false marking
of products on its website, (id. ¶ 38). The
three claims are: (1) false advertising under the Lanham Act;
(2) common law unfair competition for false advertising; and
(3) false patent marking under 35 U.S.C. § 292.
(Id. ¶¶ 111-134.) The Complaint alleges
Plaintiff is “harmed when consumers are misled into
purchasing any falsely advertised product that competes with
any product that contains ingredients that are sourced from
[it] and/or technology that is licensed from [it].”
(Id. ¶ 31.)
III.
LEGAL STANDARDS
Under
Federal Rule of Civil Procedure 12(b)(1), a party may move to
dismiss for lack of subject-matter jurisdiction. See
Carijano v. Occidental Petroleum Corp., 643 F.3d 1216,
1227 (9th Cir. 2011) (“Article III standing is a
species of subject matter jurisdiction.” Id.).
“Federal courts are courts of limited
jurisdiction” and may only hear cases as authorized by
the Constitution or Congress. Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377 (1994). Because our
jurisdiction is limited, a cause of action presumably lies
outside of it, and the burden of establishing jurisdiction is
on the party asserting it. Id. “A motion to
dismiss for lack of subject matter jurisdiction under Rule
12(b)(1) may attack either the allegations of the complaint
as insufficient to confer upon the court subject matter
jurisdiction, or the existence of subject matter jurisdiction
in fact.” Renteria v. United States, 452
F.Supp.2d 910, 919 (D. Ariz. 2006) (citation omitted).
“With a 12(b)(1) motion, a court may weigh the evidence
to determine whether it has jurisdiction.” Autery
v. United States, 424 F.3d 944, 956 (9th Cir.
2005).
A party
may also move to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6). When evaluating a
complaint under Rule 12(b)(6), well-pled factual allegations
are presumed true and construed in the light most favorable
to the nonmoving party. Cousins v. Lockyer, 568 F.3d
1063, 1067 (9th Cir. 2009). To survive a Rule 12(b)(6) motion
to dismiss for failure to state a claim, a complaint must
meet Rule 8(a)(2)'s minimum requirements. Rule 8(a)(2)
requires a “short and plain statement of the claim
showing that the pleader is entitled to relief, ” so
that the defendant has “fair notice of what the . . .
claim is and the grounds upon which it rests.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). A
complaint setting forth a cognizable legal theory survives a
motion to dismiss if it contains sufficient factual matter
stating a claim to relief that is “plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570). Facial
plausibility only exists if the pleader sets forth
“factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Id. “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. Plausibility does not equal “probability,
” but requires “more than a sheer possibility
that a defendant has acted unlawfully.” Id.
“Where a complaint pleads facts that are ‘merely
consistent' with a defendant's liability, it
‘stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Twombly, 550 U.S. at 557).
IV.
DISCUSSION
Defendant
moves to dismiss under Rule 12(b)(1) for lack of subject
matter jurisdiction and Rule 12(b)(6) for failure to state a
claim. (Mot. at 2.) Defendant also moves to dismiss, or in
the alternative to stay this proceeding, under the primary
jurisdiction doctrine. (Id.) “Because the
issue of standing presents a ‘threshold question of
justiciability,' the Court will address the parties'
Rule 12(b)(1) standing arguments first.” ThermoLife
Int'l LLC v. Am. Fitness Wholesalers LLC, No.
CV-18-04189-PHX-JAT, 2019 WL 3840988, at *1 (D. Ariz. Aug.
15, 2019) (citing United States ex rel. Kelly v.
Boeing Co., 9 F.3d 743, 747 (9th Cir. 1993));
see Traffic School.com, Inc. v. Edriver Inc., 653
F.3d 820, 825 (2011) (“[T]he district court should have
undertaken an independent analysis of Article III standing
before determining standing under the Lanham Act.”).
Only if injury in fact is alleged will the Court address the
other arguments. See DaimlerChrysler Corp. v. Cuno,
547 U.S. 332, 341 (2006) (“If a dispute is not a proper
case or controversy, the courts have no business deciding it,
or expounding the law in the course of doing so.”).
A.
Article III Standing
“We
have ‘an obligation to assure ourselves' of
litigants' standing under Article III.”
Id. at 340 (citing Friends of Earth, Inc. v.
Laidlaw Environmental Services (TOC), Inc., 528 U.S.
167, 180 (2000)). Article III “endows the federal
courts with the ‘judicial Power of the United
States.'” Spokeo, Inc. v. Robins, 136
S.Ct. 1540, 1547 (2016) (quoting Art. III, § 1).
“The judicial Power of the United States” only
extends to “Cases” and
“Controversies.” Art. III, §§ 1-2.
Undoubtedly, “[n]o principal is more fundamental to the
judiciary's proper role in our system of government than
the constitutional limitation of federal-court jurisdiction
to actual cases or controversies.” Raines v.
Byrd, 521 U.S. 811 (1997) (quotations and citation
omitted).
“One
element of the case-or-controversy requirement . . . is that
plaintiffs must establish that they have standing to
sue.” Clapper v. Amnesty Int'l USA, 568
U.S. 398, 408 (2013) (quotations omitted) (citing
Raines, 521 U.S. at 818); DaimlerChrysler,
547 U.S. at 342 (2006); Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992). Article III standing
exists to “prevent the judicial process from being used
to usurp the powers of the political branches.”
Clapper, 568 U.S. at 408 (citation omitted); see
Spokeo, 136 S.Ct. at 1547 (“Standing to sue is a
doctrine rooted in the traditional understanding of a case or
controversy . . . [that] developed in our case law to ensure
that federal courts do not exceed their authority as it has
been traditionally understood.”).
Plaintiff
bears the responsibility of establishing standing,
Lujan, 504 U.S. at 560-61, and must do so for each
claim brought as well as the type of relief sought.
Summers v. Earth Island Inst., 555 U.S. 488, 493
(2009); see DaimlerChrysler, 547 U.S. at 352. To
establish standing, “[P]laintiff must have (1) suffered
an injury in fact, (2) that is fairly traceable to the
challenged conduct of the defendant, and (3) that is likely
to be redressed by a favorable judicial decision.
Spokeo, 136 S.Ct. at 1547; see Lujan, 504
U.S. at 560 (“[T]he irreducible constitutional minimum
of standing contains [these] three elements.”).
“[A]t the pleading stage, the plaintiff must
‘clearly . . . allege facts demonstrating' each
element [of standing].” Spokeo, 136 S.Ct. at
1547. Here, both parties' primarily dispute whether the
Complaint alleges injury in fact.
1.
Injury in Fact
A
plaintiff does not “automatically satisf[y] the
injury-in-fact requirement whenever a statute grants a person
a statutory right and purports to authorize that person to
sue to vindicate that right.” Id. at 1549;
see Id. at 1543 (“Article III standing
requires a concrete injury even in the context of a statutory
violation.”). Rather, a “plaintiff must have
suffered . . . an invasion of a legally protected interest
which is (a) concrete and particularized and (b)
‘actual or imminent, not ‘conjectural' or
‘hypothetical.'” Lujan, 504 U.S. at
560. “At the pleading stage, general factual
allegations of injury resulting from the defendant's
conduct may suffice, for on a motion to dismiss we
‘presum[e] that general allegations embrace those
specific facts that are necessary to support the
claim.” Id. at 561 (quotations and citation
omitted).
Defendant
argues the Complaint fails to identify an “actual
injury to ThermoLife, such as lost sales, lost ability to
license its technology, or damage its reputation.”
(Repl. at 6; see Mot. at 10 (“ThermoLife has
not alleged any concrete injury, competitive or otherwise,
proximately caused by the alleged false marking or
advertising.”).) Defendant further argues
Plaintiff's “generalized interest in the dietary
supplement industry as a whole . . . has not adequately
alleged an economic or reputational injury flowing directly
from [Defendant's] alleged conduct.” (Repl. at 6.)
Although
Plaintiff omits any targeted discussion of Article III
standing in its brief, [4] (see Resp. at 1-3), it claims
the Complaint alleges a “competitive injury”
because Defendant's false advertising and marking
misleads customers into purchasing its products instead of
ones containing ingredients sourced from Plaintiff,
(id. at 2). This allegedly “causes ThermoLife
to lose licensing fees and sales” from Defendant's
competitors. (Id. at 2.) Plaintiff further claims it
does not need to allege “specific lost sales or deals,
” (id. at 10), or “that customers were
misled, ” (id. at 11).
The
Court agrees with Plaintiff that the Complaint adequately
alleges Article III injury in fact at this stage.
Spokeo, 136 S.Ct. at 1547. Aside from conclusory
allegations that Plaintiff suffered “competitive”
or “commercial” injuries by Defendant's
conduct, [5] it also alleges Plaintiff is “harmed
when consumers are misled into purchasing falsely advertised
product that competes with any product that contains
ingredients sourced from [it] and/or technology that is
licensed from [it].” (Compl. ¶ 31.) Because of
Defendant's false advertising and marking, the Complaint
alleges “ThermoLife has suffered, and will continue to
suffer damage to its business, reputation and good will and
has lost sales and profits that ThermoLife would otherwise
have made, ” (id. ¶ 118), and that
“[e]ach false marking by [Defendant] . . . is likely to
discourage or deter persons and companies from
commercializing competing products or pursuing research and
development of competing products and or related products,
which injures ThermoLife and the public by stifling
competition and increasing the costs of goods, ”
(id. ¶ 133). At the motion to dismiss stage,
these allegations sufficiently allege injury in fact. See
Lujan, 504 U.S. at 561.
Accordingly,
the Complaint adequately alleges Plaintiff suffered an injury
in fact caused by Defendant's false advertising and
marking of the products sold on its website. Neither party
argues whether Plaintiff lacks standing under the causation
and redressability prongs, and the Court is satisfied that
they do. See Lexmark, 572 U.S. at 125
(“Lexmark does not deny that Static Control's
allegations of lost sales and damage to its business
reputation give it standing under Article III to press its
false advertising ...