Opinion
3:23-cv-01990-BEN-JLB
08-01-2024
HANEY, INC., an Idaho corporation, doing business under the assumed name UTEST, Plaintiff, v. AXIUM BIORESEARCH, a California corporation, doing business as Drug Exam; and SERGIUS ALBERT SALVATORE, an individual, Defendants.
ORDER GRANTING MOTION TO DISMISS [ECF NO. 8]
HON. ROGER T. BENITEZ UNITED STATES DISTRICT JUDGE
Plaintiff Haney, Inc. (“Plaintiff”) brings its complaint for false advertising and unfair business practices against Defendants Axium BioResearch (“Axium”) and Serguis Salvatore (“Salvatore”) (collectively, “Defendants”). ECF No. 1 (“Compl.”). Before the Court is Defendants' motion to dismiss. ECF No. 8. Plaintiff opposed the motion. ECF No. 11 (“Oppo.”). Defendants submitted a reply. ECF No. 12 (“Reply”). The motion was submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil Procedure. ECF No. 13.
For the reasons set forth below, the Court GRANTS Defendants motion to dismiss.
For purposes of these motions, the Court assumes the facts pled in the complaint as true. Mazarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).
Advin Biotech, Inc (“Advin”), who is not a party to this action, develops and manufactures multi-level strip drug testing kits for at-home use. Compl. ¶ 30. Advin kits are FDA approved and include a “package insert” describing testing and preliminary analytical findings regarding the efficacy of the kits. Id. Advin then distributes its drug testing kits to resellers and distributors; resellers repackage Advin kits under their own private labels for resale. Id. ¶ 32. There are certain requirements resellers must meet to use Advin's FDA accreditation. Id. ¶¶ 33-34.
Defendant Salvatore previously worked for Advin. Id. ¶ 30. In 2016, Salvatore incorporated his own business, Axium Bioresearch, with the goal of manufacturing drug test kits using similar component parts as Advin. Id. ¶ 36. The complaint alleges Salvatore began “selling Advin Biotech knockoffs [sic] drug test kits, using Defendant Axium as a front.” Id. The exact timing is unclear but is alleged to have occurred sometime between 2016 and 2018. The complaint alleges Defendants made two false statements when marketing their test kits: (1) that their test kits were FDA approved; and (2) that the test kits were “made in the USA.” Id. ¶ 39.
Compare Compl. ¶ 36 (June 2016 incorporation of Axium and allegation that it sold knockoffs) with ¶ 37 (June 2018, Defendants purchased “knockoff component parts”) and ¶ 38 (Defendants “subsequently used [knockoff components] to manufacture their own private label drug test kits”) (emphasis added).
In September 2020, Salvatore left his employment with Advin. Id. ¶ 41. The complaint alleges at this point Axium “transitioned to becoming a distributor-reseller of Advin [] drug test kits[.]” Id. Advin requested and received the relevant certifications for Axium to become a reseller of its product and use its FDA accreditation. Id. ¶¶ 4243. Although it is again unclear, the complaint appears to allege Defendants continued to sell their own drug test kits but pass them off as Advin kits in order to falsely maintain they were FDA approved and manufactured domestically. Id. ¶¶ 44-48.
“This new business arrangement provided Defendants with a convenient facade, portraying itself as a distributor-reseller of Advin Biotech's ostensibly U.S. FDA approved and domestically manufactured drug kits, with a bonafide written ‘Package Insert.' However, this was nothing more than a fraudulent ruse, as Defendants clandestinely procured similar component parts...” Id. ¶ 47.
Noted above, Advin is not a party to this lawsuit. Plaintiff identifies itself as Haney, Inc., an Idaho corporation doing business as “Utest.” Id. ¶ 22. Plaintiff does not directly describe the nature of its business or the products it sells. The most direct allegation in the complaint states Plaintiff is “a fellow business competitor who also sells similar drug test kits online via Amazon.com and Walmart.com[.]” Id. ¶ 105. However, it is unclear whether there exists some similarity between Plaintiff's and Defendants' products, and the exact nature of Plaintiff's business. While Plaintiff makes assertions on this point in its opposition brief (discussed below), these details are absent from the complaint.
II. LEGAL STANDARD & DISCUSSION
Under Federal Rule of Civil Procedure (“Rule”) 12(b)(1), a district court must dismiss an action if the court lacks jurisdiction over the subject matter of the suit. Fed.R.Civ.P. 12(b)(1). The party seeking to invoke federal jurisdiction bears the burden of establishing that jurisdiction exists. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986). A complaint may be dismissed under Rule 12(b)(1) if “there is no case or controversy”- i.e., the plaintiff lacks Article III standing. Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011) (citation omitted).
To satisfy Article III's standing requirement, a plaintiff must demonstrate three elements: (1) it has suffered an injury in fact; (2) the injury is fairly traceable to the challenged action of defendant (“traceability”); and (3) it is likely that the injury will be redressed by a favorable decision (“redressability”). Maya, 658 F.3d at 1067 (citation omitted). A jurisdictional challenge under Rule 12(b)(1) may be made either on the face of the pleadings or based on extrinsic evidence. Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003).
Defendants make three general attacks on the complaint: (1) Plaintiff lacks Article III standing because the complaint does not adequately allege an injury in fact; (2) Plaintiff is not the real party in interest connected with the complaint's allegations; and (3) Plaintiff does not adequately allege any of its claims. Because Plaintiff lacks Article III standing, the motion is granted.
Defendants argue Plaintiff has not adequately alleged an injury in fact sufficient to confer subject matter jurisdiction to this Court. Mot. at 14-15. While Defendants' brief includes a short discussion regarding the difference between a facial and factual attack on standing. Id. at 13. Defendants appear to do both when they argue: “Plaintiff has no factual basis to assert that either Defendant has somehow harmed it. It has made no factual allegations that these Defendants ‘harmed him in a legally cognizable way.'” Mot. at 15.
In Maya, the Ninth Circuit stressed that the Iqbal-Twombly standard deals with a “fundamentally different issue[,]” and should not be applied to challenges under 12(b)(1). 658 F.3d at 1068. However, “[t]his is not to say that a plaintiff may rely on a bare legal conclusion to assert injury-in-fact, or engage in an ‘ingenious academic exercise in the conceivable' to explain how defendants' actions caused his injury.” Id. (footnotes and citation omitted).
Here, the Complaint simply states that Defendants' conduct has caused Plaintiff “to lose money and property[,]” and “competitive and commercial injury[.]” Compl. ¶¶ 75-76, 86-87. Perhaps the most concise statement of how Defendants' conduct relates to Plaintiff's injury is that Defendants were conferred “an unfair competitive advantage over law-abiding drug testing kit company's [sic] like Plaintiff[.]” Id. ¶ 14. However, this still falls shy of actually describing the nature of the harm Plaintiff is claiming and how it relates to Defendant. Plaintiff argues that it adequately pled an injury-in-fact because: (1) Plaintiff “lost sales” as a result of Defendants' practices; and (2) Plaintiff is a competitor who also sells drug test kits “that are in fact FDA approved and made in the United States[.]” Oppo. at 9-11. Unfortunately, neither of these basic facts are actually alleged in the complaint.
In Chapman v. Pier 1 Imports (U.S.) Inc., the Ninth Circuit dismissed a plaintiff's ADA claim on appeal for lack of standing. 631 F.3d 939, 954 (9th Cir. 2011). The Court noted even under the liberal standard applied to civil rights plaintiffs, “a liberal interpretation of uncivil rights complaint may not supply essential elements of the claim that were not initially pled.” Chapman, 631 F.3d at 954 (quoting Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992)). The Court went on to conclude the complaint's allegations were insufficient to confer standing:
“Chapman's complaint fails to sufficiently allege the essential elements of Article III standing. Although Chapman alleges that he is physically disabled, and he visited the Store and encountered architectural barriers that denied him full and equal access, he never alleges what those barriers were and how his disability was affected by them so as to deny him the full and equal access that would satisfy the injury-in-fact requirement (i.e., that he personally suffered discrimination under the ADA on account of his disability.)”Id. at 954. The complaint in this case suffers from similar deficiencies. Although Plaintiff need not detail “how much money the defendant received from its false advertising or the full scope of its damages[,]” this does not mean that Plaintiff may simply assert it was a competitor selling a “similar” product and therefore nebulous “competitive harm” can be imputed to Plaintiff. This is especially true given the complete lack of detail regarding Plaintiff's business and products, detail which Plaintiff partially includes in its opposition but fails to include in its complaint. See, e.g., Oppo. at 8. Given this information is readily available and apparently known to Plaintiff, the Court concludes the complaint may be cured of this deficiency. Accordingly, leave to amend will be granted under Federal Rule 15(a)(2).
IV. CONCLUSION
For the reasons set forth above, the Court GRANTS Defendants' motion to dismiss without prejudice. Plaintiff shall have twenty-one (21) days from the date of this order to file an amended complaint curing the deficiencies noted herein.
IT IS SO ORDERED.