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dismissing an unfair competition claim for failure to satisfy Rule 9(b)
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Civ. No. 00CV1839-B (CGA)
March 8, 2001
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS PURSUANT TO FED. R. CIV. P. 9(b) AND/OR 12(b)(6) AND DEFERRING RULING MOTION TO STRIKE PURSUANT TO CAL. CODE CIV. P. § 425.16
[Docket Nos. 83-88, 89-91, 92-94, 95-97, 98-100, 101-102]
Defendants' Motions to Dismiss pursuant to FED. R. CIV. p. 9(b) and/or 12(b)(6) and Defendants' Motions to Strike pursuant to CAL. CODE CIV. P. § 425.16 came on for hearing on March 5, 2001. Richard Scruggs, Esq., Peggy Reali, Esq., and Sidney Backstrom, Esq. appeared on behalf of Plaintiff Todd D. Vess. David J. Noonan, Esq. and Luther Ziegler, Esq. appeared on behalf of Defendant American Psychiatric Association ("APA"). Edward D. Chapin, Esq. and Gerald Zingone, Esq. appeared on behalf of Defendant Children and Adults with Attention Deficit/Hyperactivity Disorder ("CHADD"). Bruce Jones, Esq., James A. O'Neal, Esq., and Roxanne Wilson, Esq. appeared on behalf of Defendants Ciba-Geigy Corp. USA ("Ciba-Geigy") and Novartis Pharmaceuticals Corp. ("Novartis"). Having reviewed the matter and heard oral presentations, the Court hereby enters the following Order.
I. POSTURE OF THE CASE
Plaintiff filed his original complaint on September 13, 2000. Plaintiff moved for leave to file his First Amended Complaint on January 17, 2001 and the Court granted that Motion on January 26, 2001. By the time Plaintiff moved for leave to file his First Amended Complaint, all of the Defendants had moved to dismiss Plaintiff's original complaint pursuant to FED. R CIV. P.9(b) and/or 12(b)(6) and filed Special Motions to Strike Claims pursuant to CAL. CODE CIV. P. § 425.16. The Court's Order granting leave to amend invited the parties to submit revised briefing on their motions to specifically address the First Amended Complaint.
The APA filed a revised Special Motion to Sirike Claims pursuant to CAL. CODE CIV. P. § 425.16 on February 2, 2001. Defendants Ciba-Geigy and Novartis filed their revised Motion to Dismiss Pursuant to FED. R. CIV. P. 9(b) and their revised Special Motion to Strike Claims pursuant to CAL. CODE CIV. P. § 425.16 on February 5, 2001. CHADD also moved on February 5, 2001 to dismiss the First Amended Complaint pursuant to FED. R CIV. P.9(b) and 12(b)(6) and to strike claims pursuant to CAL. CODE CIV. P. § 425.16. Finally, on the same day, the APA filed its Motion to Dismiss First Amended Complaint pursuant to FED. R. CIV. P. 12(b)(6) and joined in the Rule 9(b) motions of its codefendants.
The Defendants set their motions for the same hearing date. The Court's analysis of the motions leads the Court to consider first Defendants' Motions to Strike pursuant to CAL. CODE CIV. P. § 425.16. That analysis involves the consideration of two issues: (1) Defendants' burden to demonstrate prima facie that the speech at issue is protected speech relating to a public issue and, (2) Plaintiff's burden to demonstrate a probability of prevailing on his claims.
II. STATEMENT OF FACTS
Plaintiff Todd D. Vess is a minor suing through his Guardian ad Litem, Deborah Vess, on behalf of himself, those similarly situated, and the general public of the state of California. Vess is a San Diego resident whose citizenship is diverse from all of the defendants. Am. Compl. §§ 4, 7-10. Plaintiff alleges that he was prescribed Ritalin in June 1994 when he was nine years old and that he purchased and ingested the drug for a non-specified period of time. Am. Compl. § 6.
The defendants are two non-profit groups and a manufacturer of Ritalin. Defendant American Psychiatric Association is a nonprofit organization dedicated to the "advancement of knowledge, education and research in the field of psychiatry as well as to improvement of the diagnosis and treatment of the mentally ill." APA's Mem. to Strike at 4. The APA publishes the Diagnostic and Statistic Manual of Mental Disorders ("DSM"). Plaintiff claims that the DSM contains false and misleading information about Attention Deficit Disorder (ADD), Attention Deficit Hyperactivity Disorder (ADHD), and Ritalin.
Defendant CHADD is a nonprofit group that provides support to parents and individuals who have children or have personally been diagnosed as having Attention Deficit/Hyperactivity Disorder. CHADD Mem. to Strike at p. 4. CHADD describes itself as a "support and advocacy organization with over 200 local chapters and 20,000 members." Id.
Defendant Novartis Pharmaceuticals Corp. is a Ritalin manufacturer. Novartis' predecessor, Ciba-Geigy Corp., began manufacturing methylphenidate under the brand name Ritalin in 1955. Novartis Mem. to Strike at 2. Ciba-Geigy's patent on Ritalin expired in the 1970s and there have been generic forms of the drug since. Plaintiff is suing both Novartis and Ciba-Geigy. Plaintiff alleges that Ciba/Novartis has been the primary or exclusive manufacturer of Ritalin since 1955. Am. Compl. § 13.
Plaintiff alleges Ciba/Novartis has engaged in a variety of misconduct regarding Ritalin. Ciba/Novartis allegedly fails to warn Ritalin users that the full range of side effects has not yet been adequately studied. Am. Compl. § 33. Ciba/Novartis allegedly failed to disclose the limited effectiveness of its product and misled clinicians and the public to believe Ritalin had positive benefits, despite the fact that the drug may not cause any benefits at all. Am. Compl. § 34.
Plaintiff alleges that Ciba/Novartis conspired with the APA to "develop, promote, broaden[,] and confirm the diagnoses of Attention Deficit Disorder (ADD) and Attention Deficit Hyperactivity Disorder (ADHD)." Am. Compl. § 15. Plaintiff claims that Ciba/Novartis and the APA have a financial relationship. Am. Compl. § 16. According to Plaintiff, the APA included ADD in the 1980 DSM, even though ADD did not meet the APA's own criteria for inclusion. Am. Compl. § 19. Plaintiff complains that the current DSM contains further misrepresentations and omits dissenting opinions. Am. Compl. §§ 23, 26. In addition, Plaintiff claims that the APA has fraudulently failed to disclose Novartis' role in the creation, promulgation, and revision of the DSM or the financial relationship between the APA and Ciba/Novartis. Am. Compl. § 27.
Plaintiff claims that CHADD deliberately attempted to increase the sales of Ritalin, to increase the available supply, and to reduce or eliminate laws and restrictions on the use of Ritalin because of Ciba/Novartis' significant contributions to CHADD. Am. Compl. § 37. Plaintiff complains that CHADD does not reveal on its website that it receives significant contributions from Ciba/Novartis. Am. Compl. § 37.
The Defendants are sued as coconspirators. Am. Compl. § 41. Plaintiff alleges violations of the Consumer Legal Remedies Act ("CLRA"), CAL. CODE § 1770 for allegedly unlawful competition, and unfair and deceptive acts. Plaintiff sues under CAL. BUS. PROF. § 17200 for unfair competition. And Plaintiff sues under CAL. BUS. PROF. § 17500 for false and misleading statements. Plaintiff seeks injunctive relief, disgorgement of revenues and profits, restitution, and punitive damages.
II. SUMMARY OF FINDINGS
A. Motions to Strike Pursuant to CAL. CODE CIV. P. § 425.16
The Court finds that the Motions to Strike pursuant to CAL. CODE CIV. P. § 425.16 cannot be fully decided at this time. Defendants have met their burden of showing that the anti-SLAPP statute applies because the speech at issue is clearly speech protected under the United States and California Constitutions in connection with a public issue. CAL. CODE CIV. P. § 425.16(b)(1). Plaintiff; however, has not in the Court's view commenced to show that he has a possibility of prevailing on his claims because the Court finds the First Amended Complaint is defective under both FED. R. CIV. P. 9(b) and 12(b)(6).
B. Motions to Dismiss Pursuant to FED. R. CIV. P.9(b) and 12(b)(6)
The Court grants Defendants' FED. R. CIV. P.9(b) motions. The First Amended Complaint attempts to allege a conspiracy to defraud. Plaintiff's allegations fail to show misrepresentations of any material facts, by whom any misrepresentations were made, when any misrepresentations were made, and where any misrepresentations were made as required by the Federal Rules of Civil Procedure.
The Court grants Defendants FED. R. CIV. P.12(b)(6) motions. The First Amended Complaint fails to state a cause of action because of a number of defects, including the absence of any allegations of causation, actionable conduct, or damage.
Plaintiff is given leave to amend his complaint. At such time as a cause of action is stated by Plaintifi the Court will be in a position to evaluate whether Plaintiff has shown a probability of prevailing on his claims. If Plaintiff's complaint survives Rule 9(b) and Rule 12(b)(6) challenges, the Court will consider Defendants' Motions to Strike. If Plaintiff can show a probability of prevailing under an amended complaint, the Motions to Strike will be denied. If Plaintiff's final attempt at amending his complaint does not survive Rule 9(b) and/or Rule 12(b)(6) challenges, the Motions to Strike pursuant to CAL. CODE CIV. P. § 425.16 will be granted, with prejudice, with costs and reasonable attorneys' fees to the Defendants incurred prosecuting the Motions to Strike.
IV. DISCUSSION DEFENDANTS' MOTIONS TO STRIKE PURSUANT TO CAL. CODE CIV. P. § 425.16
A. Standand of Law
CAL. CODE CIV. P. § 425.16 is California's anti-Strategic Lawsuits Against Public Participation, or "SLAPP" statute. It is intended to deter lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. CAL. CODE CIV. P. § 425.16(a). A SLAPP motion may be brought to strike a lawsuit based on a defendant's exercise of free speech. If a defendant prevails on a SLAPP motion, he is entitled to reasonable attorney's fees and costs. CAL. CIV. CODE § 425.16(c). If a plaintiff prevails and the court finds the special motion to strike is frivolous or solely intended to cause delay, the court shall award costs and reasonable attorney's fees to plaintiff. Id.
The anti-SLAPP statute, although state law, Is substantive law that supports a motion to dismiss in diversity actions. United States v. Lockheed Missiles Space Co., Inc., 190 F.3d 963, 972-73 (9th Cir. 1999).
The anti-SLAPP statute establishes a procedure for early dismissal of meritless lawsuits against public speech. Metabolife Int'l Inc. v. Wornick, 72 F. Supp.2d 1160, 1165 (S.D.CAl. 1999). "Once the defendant establishes prima facie that the statute applies, the plaintiff must show a "reasonable probability' of prevailing on its claim." Id. (citingWilcox v. Superior Court, 27 Cal.App.4th 809, 824-25 (1994)). To establish defendant's prima facie case, it must show that the lawsuit arises from any act "in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." CAL. CODE CIV. P. § 425.16(b)(1).
If the defendant makes the prima facie showing, the plaintiff must demonstrate that "'the complaint is legally sufficient and supported by a prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited."' Id. (quoting Wilcox, 27 Cal.App.4th at 823). "This burden is 'much like that used to determine a motion for nonsuit or directed verdict,' which mandates dismissal when "no reasonable jury' could find for plaintiff" Id. (quoting Wilcox, 27 Cal.App.4th at 824).
Plaintiff must meet its burden of proving prima facie falsity of statements with admissible evidence. Id. at 1165, 1167. In a case where discovery has not yet begun, as in this case, the plaintiff must produce its own evidence, admissible under Fed.R.Evid. 702, that the statements complained of are false. Id. at 1167.
B. The APA's SLAPP Motion
According to the APA, Plaintiff is asking this Court to hold a nonprofit educational and scientific association liable in damages for developing and publishing a book about unquestionably important public health issues. APA Mem. to Strike at 1. The DSM is a "classification and glossary of mental disorders used to provide a common language for clinicians and research investigators to communicate regarding the disorders for which they have professional responsibility." Id. at 4.
As a threshold matter, the APA explains that the anti-SLAPP statute applies to corporations as well as individuals, and has been applied to two of the causes of actions involved in this case, the Consumer Legal Remedies Act and the California Unfair Practices Act. DuPont Merck Pharm. Co. v. Superior Court, 78 Cal.App.4th 562 (2000).
Next, the APA argues that publication of the DSM is core First Amendment speech in connection with a public issue, as is the scientific debate surrounding its publication. Publication of the DSM falls within the anti-SLAPP's definition of speech. CAL. CODE CIV. P. § 425.16(e)(3) defines speech as "any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest." Section 425.16(e)(4) provides an alternative definition of speech that includes petitioning activities. The DSM is a writing made in a public forum. And even Plaintiff admits that the DSM is a matter of public interest. Am. Compl. at § 17 (the DSM generates "great public attention").
In support, the APA cites Metabolife, 72 F. Supp.2d 1160. In that case, the court granted defendants' anti-SLAPP motion and dismissed the case with prejudice. The speech at issue was statements made on a television show that Metabolife was not safe. The Court found these statements protected. "Because the safety of Metabolife 356 remains an open question of substantial public importance, contributions to the debate are protected by the First Amendment." Id. at 1172. The APA also cites a string of cases recognizing generally that scientific expression and debate are protected by the First Amendment.
In addition, the APA argues that its efforts to educate state, national, and international governmental bodies about diagnostic categories and criteria is protected petitioning activity. The APA lists as examples its collaborative activities with the World Health Organization and other federal agencies. The APA has offered its views on ADD and ADHD before Congressional Committees and has worked with WHO to establish uniform standards and guidelines. The APA argues that Plaintiffs Amended Complaint implicates the integrity of the APA's dialogue with the government.
After arguing its prima facie case, the APA turns to Plaintiff's probability of success. The APA argues that Plaintiff's Amended Complaint fails to allege any specific facts to support its charges and maintain its claims. Furthermore, the APA claims that the declarations supplied by Plaintiff do not meet the threshold for admissibility prescribed by Fed.R.Evid. 702 and Daubert because none of the declarants is a psychiatrist or medical doctor, was involved in the development of the criteria for ADD and ADHD, identify specific false or misleading statements, or provide evidence of improper financial relationships.
C. CHADD'S SLAPP Motion
CHADD's recent mission statement provides:
"CHADD works to improve the lives of people affected by AD/HD through:
Collaborative Leadership Advocacy Research Education and Support
CHADD CARES!"
(Cohen Decl. § 4). To carry out these goals, CHADD publishes magazines and other printed materials, holds an annual conference, and conducts outreach efforts to governmental agencies and legislative bodies. (Cohen Decl. § 9)
CHADD argues that Plaintiff is attacking its right to petition the government "to reduce and eliminate laws and restrictions concerning the use of Ritalin" (Am. Compl. § 37) and restrain its communications with its members and the public about AD/HD and its effective treatment (Am. Compl. §§ 36-37, 39, 40). CHADD argues that the anti-SLAPP statute protects these activities.
D. Novartia' SLAPP Motion
Novartis' argues that Plaintiff's claims arise out of Novartis' participation in the public discussion and development of diagnostic criteria for the serious medical conditions of ADD and ADHD. FDA approval continues for the use of Ritalin in treating ADD/ADHD. Novartis does not diagnose ADD/ADHD or prescribe Ritalin to any patients. Thus, according to Novartis, Plaintiff is only attacking Novartis' speech in connection with Ritalin.
Novartis claims that all of Plaintiff's allegations against Novartis involve speech. The claims include Novartis' alleged promotion, support, facilitation, failure to provide information, and misrepresentations in connection with Ritalin. Am. Compl. §§ 15, 31, 33, 34, 38, 42, 43, 48, 57. Novartis argues that the speech relates to a public issue and a matter of public interest, as evidenced by Plaintiff's own lawsuit.
Novartis cites DuPont-Merck in support of its argument. In that case, a pharmaceutical company was sued under CAL. CODE § 1750 and CAL. BUS. PROF. § 17500 (the same statutes at issue here) based on the company's lobbying, advertising, marketing, and public relations activity concerning competing versions of a drug. The Court of Appeal found that the company's speech was protected under the anti-SLAPP statute and remanded the case to the trial court to determine whether plaintiffs could show a probability of success on the merits. DuPont-Merck, 78 Cal.App.4th at 564.
Novartis argues that Plaintiff's claims are exactly the type the anti-SLAPP statute was designed to prevent. Plaintiff is attempting to impose his view on the way doctors practice medicine in California, rather than debating the current DSM standards and FTC approval in the available public fora. Novartis cites authority that this Court may look at the litigation history in evaluating its anti-SLAPP motion and points out that the same plaintiff's attorneys have begun multiple class actions in multiple states with classes that overlap. Furthermore, some of the attorneys here sued in the late 1980s and early 1990s making some of the same fraud and conspiracy allegations present here. One of the Plaintiff's lawyers here is quoted as saying "We're going to make it very, very costly for any company to make a profit off of this. It's going to be very, very expensive to prescribe Ritalin from now on." (Drury Decl. Ex. C).
Church of Scientology of Cal. v. Wollersheim, 42 Cal.App.4th 628, 649 (1996).
Finally, Novartis argues that Plaintiff cannot establish a probability that he can prevail on his claims. Novartis makes the following arguments:
Plaintiff failed to plead fraud with the particularity required by FED. R. CIV. P.9(b). Novartis Mem. to Strike at 13.
The allegations that Novartis contributed money and information to the APA allege nothing illegal. Id. at 13-14.
Plaintiff has not stated a cause of action under the UN Convention because the treaty at issue does not give rise to a private right of action. Id. at 14.
The statute of limitations bars Plaintiff's claims. The CLRA has a three year statute of limitations and the Unfair Competition Law has a four year statute of limitations. The last revision of the DSM occured 1994, the same year that Plaintiff alleges he was prescribed Ritalin. Id. at 15-16.
Plaintiff cannot maintain a consumer rights action for allegedly being inadequately informed of risks where the he never experienced any related damage. Id. at 16.
Plaintiff cannot prove that ADD does not exist or that Ritalin is not an effective treatment. Id. at 18.E. Plaintiff's Omnibus Opposition 1. Plaintiff argues that California's anti-SLAPP law is inapplicable.
Plaintiff contends that Defendants failed to prove that his lawsuit is the type of action the California legislature intended the anti-SLAPP statute to encompass. First, Plaintiff argues that his lawsuit is not generally the type the anti-SLAPP statute was designed to deter. Plaintiff points out that the anti-SLAPP statute was intended to deter lawsuits brought primarily to chill the exercise of protected speech. The hallmark of a SLAPP suit is that it lacks merit and is brought to obtain an advantage over another party by imposing litigation costs. Plaintiff contends that the parties are not the usual parties in an anti-SLAPP action, the lawsuit does not seek to weaken Defendants' litigation position or deter future litigation, and California's Legal Remedies and Unfair Practices Acts are not among the favored causes of actions in SLAPPS.
In a lengthy footnote, Plaintiff argues that Defendants' activities do not fall within the realm of protected petitioning because the Constitutional language on petitioning applies to people or groups who feel "aggrieved." Plaintiff argues that petitioning activity involves seeking redress from the government for grievances. Plaintiff cites one case including language that the right of petition "is essential to protect the ability of those who perceive themselves to be aggrieved by the activities of governmental authorities to seek redress through all the channels of government." City of Long Beach v. Bozek, 31 Cal.3d 527, 535 (1982).
Second, Plaintiff argues that his experts' testimony establishes that his case is not a strategic lawsuit against public participation, but is instead a lawsuit based on serious and substantial scientific problems. Plaintiff's expert Dr. Kirk reaches the conclusion that "39% of children who do not suffer from ADD/ADHD are diagnosed as having this mental disorder." Dr. Kirk goes on to attack the DSM as unscientific and reliable. In addition, Plaintiff's expert Dr. Caplan concludes that the APA's process in revising the DSM is unscientific. Moreover, Dr. Kirk claims that his research uncovered a financial connection between Ciba-Geigy and the APA.
Finally, Plaintiff argues that DuPont-Merck, 78 Cal.App.4th 462, andMetabolife, 72 F. Supp.2d 1160, are distinguishable. Plaintiff states that the activities at issue in DuPont-Merck were "(1) lobbying and other activities seeking to influence the decisions of regulatory and legislative bodies and (2) advertising, marketing, and public relations activities directed at the medical profession and the general public." Pl. Omnibus Opp. at 13 (citing DuPont-Merck, 78 Cal.App.4th at 555-56.) Plaintiff then claims that the activities at issue here are different because they "involve the facilitation of and inappropriate broadening of the diagnostic criteria for ADD/ADHD . . . nor does the complaint attempt to harm the ability of the defendants to freely speak of the drug Ritalin." Id.
Plaintiff argues that Metabolife is distinguishable based on the "identity of the parties who claim to have been victimized by the SLAPP lawsuit." Id. at 14. According to Plaintiff in this case a large pharmaceutical company and two national organizations claim to be the victims of an attack on their free speech and petition rights by a mere teenager. In contrast, Metabolife involved a television broadcast. According to plaintiff, the "anti-SLAPP was not meant to assist these powerful entities in their attempts to prevent an individual from raising claims about a product in the United States Judicial System." Id.
2. Plaintiff argues that he has a reasonable probability of success.
First, Plaintiff quotes the elements of California Legal Remedies Act § 1770 under which he is suing:
(a). The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful:
(2) Misrepresenting the source, sponsorship, approval or certification of goods or services;
(3) Misrepresenting the affiliation, connection or association with, or certification by another;
(5) Representing that goods or services have sponsors hip, approval, characteristics, ingredients, uses, benefits or quantities which they do not have . . .;
(7) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
CAL. CODE § 1770(a)(2), (3), (5), (7).
Next, Plaintiff makes the following points in support of his argument against the APA:
The process by which the DSM is constructed is scientifically flawed and not based upon empirical evidence. Pls. Omnibus Opp. at 19.
The APA has engaged in a pattern and practice of misrepresenting to the public that the DSM is grounded in empirical evidence since 1980. Id. at 20.
Ritalin use is much higher in the United States than in European countries and the DSM can account for this difference. Id. at 21.
Plaintiff is a victim of the ever-broadening ADD/ADHD diagnoses. Id. at 23.
The APA misrepresents its affiliation, connection, or association with another by failing to disclose its dependancy on pharmaceutical companies for contributions. Id. at 24.
Finally, Plaintiff makes the following points in support of his argument against Ciba/Novartis:
Ciba/Novartis acted in concert with the APA in improperly broadening the criteria for ADD/ADHD. Id.
Ciba/Novartis engaged in improper funding of the APA. Id. at 25.
Plaintiff does not make any additional arguments against CHADD.
3. Plaintiff asks the Court to grant discovery if it finds Defendants' SLAPP motions meritorious.
Plaintiff argues that this Court should find Section 425.16 inconsistent with the federal policy of granting discovery before ruling on summary judgment.
F. CAL. CODE CIV P. § 425.16 Applies to All of the Speech at Issue 1. Defendants have carried their prima fade burden.
According to the First Amended Complaint, the APA's speech at issue is publication of the DSM. First Am. Compl. §§ 15-23, 25-27, 35. CHADD's speech at issue is government lobbying regarding the laws on Ritalin and general dissemination of allegedly false information through undisclosed fora. First Am. Compl. §§ 37, 40. Novartis' speech at issue is speech promoting Ritalin to the APA and to the public. First Am. Compl. §§ 38. Plaintiff concedes that the issue is one of public importance.
CAL. CODE CIV. P. § 425.16(e)(3) specifically provides that speech protected by the anti-SLAPP statute includes, "any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest." Defendants have prima facie shown that the speech at issue is protected.
Plaintiff's arguments to the contrary are unpersuasive. The anti-SLAPP law does not specify that it only applies to certain types of parties or specific causes of action. In fact, it specifically provides that "this section shall be construed broadly." CAL. CODE CIV. P. § 425.16(a). Furthermore, Plaintiff's declarations do not provide any support for Plaintifi's argument that this lawsuit does not fall within the anti-SLAPP provisions.
2 The Court cannot make a finding as to Plaintiff's probability of prevailing on the claim because Plaintiff has not yet stated a claim.
As described in detail herein in connection with the Defendants' motions to dismiss, Plaintiff has not alleged any causal connection to these Defendants. He has not alleged that he, his parents, or his physician relied on the DSM in misdiagnosing him with ADD; he has not alleged that he, his parents, or his physician have ever seen any CHADD literature; he has not alleged that Novartis misdiagnosed him or that he even suffered any damages as the result of taking Ritalin. Because Plaintiff has not yet stated a claim, the Court cannot yet rule whether there is a probability that Plaintiff will eventually prevail on any claims.
3. Discovery is not appropriate.
An express purpose of the anti-SLAPP statute is to avoid imposing litigation costs, including discovery, on Defendants protected by the statute. CAL. CODE CIV. P. § 425.16(g) specifically stays discovery. The Court may order specified discovery, notwithstanding 425.16(g), only upon noticed motion and for good cause shown. Id. The Court finds that Plaintiff has not shown good cause for lifting the stay and granting discovery. Plaintiff's lawsuit is based on alleged misrepresentations by the Defendants. Plaintiff should be able to specifically allege the content, source, and date of those misrepresentations and provide its own competent evidence why it believes the representations were false. Plaintiff does not need discovery from Defendants to allege its claims in accordance with the Federal Rules of Civil Procedure.
DEFENDANTS' MOTIONS TO DISMISS PURSUANT TO FED R. CIV. P.9(b)
A. Standard of Law
FED. R CIV. P.9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting the fraud or mistake shall be stated with particularity." As the Ninth Circuit explained in Bly-Magee v. California, 236 F.3d 1014 (9th cir. 2001):
Rule 9(b) serves not only to give notice to defendants of the specific fraudulent conduct against which they must defend but also "to deter the filing of complaints as a pretext for the discovery of unknown wrongs, to protect [Defendants] from the harm that comes from being subject to fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society the enormous social and economic costs absent some factual basis.'Id. at 1018 (quoting In re Stac Elec. Sec. Litig., 89 F.3d 1399, 1405 (9th Cir. 1996)).
Rule 9(b) imposes a burden beyond FED. R CIV. P.8(a)'s pleading requirement that the plaintiff need only give the defendant fair notice of its claim. Rule 9(b) requires particularized allegations of the circumstances constituting fraud. Plaintiff must set forth an explanation as to why the statement or omission complained of was false or misleading. In re Glenfed, Inc. Secur. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). Plaintiff must include statements regarding the time, place, and nature of the alleged fraudulent activities. Id.
B. Defendants' Rule 9(b) Arguments
1. The Defendants argue that Rule 9(b) applies to the causes of action alleged by Plaintiff.
CHADD and Novartis specifically moved to dismiss pursuant to FED. R. CIV. P.9(b). The APA joined in both motions.
FED. R. CIV. P.9(b) requires that in "all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Defendants provide binding authority that Plaintiff's causes of action must be pled with particularity. See Haskell v. Time, Inc., 857 F. Supp. 1392, 1398 n. 9 (E.D.Cal. 1994) (Sections 17200 and 17500 unfair business practices and false advertising must be pled in accordance with FED. R. CIV. P.9(b)); Khoury v. Maly's of Cal., Inc., 14 Cal.App.4th 612, 619 (1993) (dismissing a complaint that failed to describe the manner in which customers were misled, explaining that a plaintiff suing under Section 17200 "must state with reasonable particularity the facts supporting the statutory elements of the violation"); Outboard Marine Corp. v. Superior Court, 52 Cal.App.3d 30, 37 (1975) (Consumer Legal Remedies Act Section 1770 is a fraud cause of action).
Moreover, Ciba/Novartis argue that FED. R. CIV. P.9(b)'s pleading requirement applies because Plaintiff's allegations sound in fraud, such as misrepresentation, deception, and inducement.
2. Defendants argue that the First Amended Complaint does not meet the pleading requirements provided by Rule 9(b) .
Defendants complain that Plaintiff's allegations fail to explain the time, place, and nature of the alleged fraud beyond broad generalizations. CHADD argues that Plaintiff's Amended Complaint does not identify even one false, misleading, or deceptive statement made by CHADD. CHADD also points out that Plaintiff has not identified any advertisements.
Ciba/Novartis argue that they are not on notice of their apparent misrepresentations and that Plaintiff's allegations are insufficient to justify discovery. Ciba/Novartis argue that if Plaintiff is in a position under Rule 11 to allege that he has been deceived by passages of the DSM, misrepresentations, or advertising, he should be in a position to state what passages, facts, or advertisements misled him.
Ciba/Novartis brought to the Court's attention that the Southern District of Texas found that FED. R. CIV. P.9(b)'s pleading requirement applies to a complaint brought by the same plaintiffs' attorneys alleging facts virtually identical to the instant Amended Complaint when it dismissed plaintiffs complaint with leave to amend.
C. Plaintiff Contends That He Is Not Required to Comply with FED. R. CIV. P. 9(b), but Has Done So, in Any Event .
Plaintiff claims that FED. R. CIV. P.9(b) does not apply to his consumer rights based causes of action. Plaintiff says that Rule 9(b) only applies to common law fraud and mistake. Plaintiff objects that the Defendants' authority only discussed the application of Rule 9(b) in dicta.
In any event, Plaintiff argues that he has met Rule 9(b)'s mandates. Plaintiff says he has pled the best he can without the benefit of discovery and that this Court should be hesitant to dismiss the Amended Complaint before discovery. Plaintiff claims that the following allegations sufficiently plead fraud:
a. CHADD received contributions from Ciba/Novartis without disclosing the contributions,
b. CHADD has attempted to increase the supply of Ritalin,
c. CHADD's activities have led to a substantial increase in the amount of Ritalin taken by school children,
d. CHADD has distributed misinformation.
In specific response to Ciba/Novartis' Motion, Plaintiff argues that the following allegations plead fraud with particularity:
a. Novartis maintained financial relationships with CHADD and the APA,
b. Novartis failed to disclose the financial relationships,
c. Novartis took steps to increase the use of Ritalin,
d. Novartis failed to warn consumers that inadequate studies have been performed on side effects,
e. Novartis has misled the public about the limited effectiveness of Ritalin.
D. Discussion
Plaintiff failed to plead fraud with the particularity required by FED. R. CIV. P.9(b). Plaintiff does not persuasively distinguish the binding authority that FED. R. CIV. P.9(b) applies to his claims and is incorrect that Rule 9(b) only applies to common law causes of action.
In addition, allegations of a financial relationship between Novartis, CHADD, and the APA do not state an actionable claim. Plaintiff failed to plead any allegations of specific representations that were false, when the representations were made, where the representations were made, and by whom. Finally, Plaintiff has not alleged any causal connection to the Defendants or any damages. Plaintiff should be able to point out some specific misrepresentations to support Plaintiff's claims, but failed to do so. The Court hereby grants Defendants' Rule 9(b) motions.
DEFENDANTS' MOTIONS TO DISMISS PURSUANT TO FED.R. CIV. P.12(b)(6)
A. Standard of Law
A motion to dismiss for failure to state a claim pursuant to FED. R. CIV. P.12(b)(6) tests the legal sufficiency of the claims in the complaint. A claim can only be dismissed with prejudice if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). This court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them, and must construe the complaint in the light most favorable to plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The court need not, however, accept every allegation in the complaint as true; rather, the court "will examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff" Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted).
"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990) (citingFort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir. 1984)). "However, material which is properly submitted as part of the complaint may be considered." Hal Roach Studios, 896 F.2d at 1555 n. 19 (citing Amfac Mtg Corp. v. Arizona Mall of Tempe, 583 F.2d 426 (9th Cir. 1978)). In addition, a court may, on a motion to dismiss, take judicial notice of facts outside the pleadings as allowed pursuant to Federal Rule of Evidence 201. Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986) (abrogated on other grounds by Astoria Federal Savings and Loan Ass'n v. Solimino, 501 U.S. 104 (1991)). Therefore, "on a motion to dismiss a court may properly look beyond the complaint to matters of public record and doing so does not convert a Rule 12(b)(6) motion to one for summary judgment." Mack, 798 F.2d at 1282.
B. Defendants' Arguments in Support of their Rule 12(b)(6) Motions to Dismiss
Novartis did not move to dismiss under FED. R. CIV. P.12(b)(6).
The APA and CHADD argue that their activities are not the sort of "unlawful" or "unfair" consumer or business activity covered by the California consumer protection statutes under which Plaintiff sues. The DSM states that it is not intended for consumers, but is instead to be applied by professional psychiatrists, physicians, and psychologists. Moreover, neither the APA nor CHADD actually markets or sells Ritalin. Nowhere does the Amended Complaint allege a transaction between the APA and Plaintiff, CHADD and Plaintiff; that Plaintiff purchased or read the DSM, that Plaintiff ever read any CHADD literature, or that Plaintiff saw or relied on any APA or CHADD advertisements.
1. The APA contends that it is protected by a California safe harbor doctrine because California laws Incorporate the DSM.
The APA's primary contention is that the DSM is protected under a California law "safe harbor" because the State of California has adopted the DSM language verbatim as part of several statutes, therefore the DSM language may not be considered unlawful. For example, to obtain MediCal coverage for a mental disorder, the disorder must be diagnosed in accordance with the DSM. The MediCal regulations specifically include the DSM definition for ADD.
The APA cites Cal-Tech Comm., Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163 (1999) in support of its safe harbor argument. In that case, cellular phone manufacturers sued L.A. Cellular for selling phones below cost In relevant part; Plaintiffs alleged that L.A. Cellular violated the CAL. BUS. PROF. § 17200's proscription on unfair competition, which is defined as "any unlawful, unfair or fraudulent business act or practice."
The Cal-Tech court explained that 17200 is "sweeping," but not unlimited.Id. at 182. "When specific legislation provides a 'safe harbor,' plaintiffs may not use the general unfair competition law to assault that harbor." Id. "To forestall an action under the unfair competition law, another provision must actually "bar' the action or clearly permit the conduct." Id. at 183.
The court recognized a safe harbor where another statute provided that "providers of cellular services shall be permitted to sell cellular telephones below cost" under defined circumstances Id. The court remanded the case to determine whether those defined circumstances were present.
2. The APA and CHADD argue that the scope of the relevant statutes does not encompass the their not-for-profit activities.
The APA also cities Schnall v. The Hertz Corp., 78 Cal.App.4th 1144 (2000). In that case, a statute provided that "a rental company may charge for an item or service provided" if certain conditions were met. The court upheld dismissal of Plaintiff's 17200 unfair business practice claim based on a rental agreement that met the statute's requisite conditions, finding the agreement was protected by the statute's safe harbor.
The CLRA forbids certain unfair and deceptive practices that are "undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services any consumer." CAL. CIV. CODE § 1770. Transaction is defined as "an agreement between a consumer and any other person." Id. § 1761(e). Likewise, Section 17200 covers "business act[s] or practice[s]" designed to deceive consumers or competitors. CAL. Bus. PROF. § 17200. "[T]he statute only applies to activities that can properly be called a business practice." Isuzu Motors Ltd. v. Consumers Union. Inc., 12 F. Supp.2d 1035, 1048 (C.D.Cal. 1998). The APA and CHADD argue that these provisions are limited to transactions between a buyer and seller in the sale of consumer goods.
In support, the APA cites Boyd v. Keyboard Network Magazine, 2000 WL 274204 (N.D. Cal. March 1, 2000). In that case, the plaintiff attempted to hold a magazine liable for a good purchased through an advertisement in the magazine. Plaintiff sued under two of the statutes at issue here, CAL. BUS. PROF. § 17500 and CAL. CIV. CODE § 1770. The court found that a publisher has no duty to investigate or otherwise warn readers of a potentially misleading advertisement.
The court explained that Section 17500 was inapplicable because that section only applies to two classes of defendants: "those who harbor the 'intent directly or indirectly to dispose of real or personal property or to perform services . . . or to induce the public to enter into any obligations relating thereto . . ."; and those who "make or disseminate or cause to be so disseminated [untrue or misleading statements] as part of a plan or scheme with the intent not to sell that personal property or those services . . ."' Id. at *3 The court found neither category applied because a third party defrauded plaintiff and plaintiff did not allege that the magazine attempted to induce plaintiff to purchase or contract for goods or services.
The court found Section 1770 similarly inapplicable because the defendants' actions were not intended to result in the sale or lease of consumer goods or services. Nor did they occur in the context of a transaction in which consumer goods or services were leased or sold. The APA argues that the CLRA has even less applicability here, where the DSM is intended to guide physicians in diagnosis, not in the use of any specific treatment program or purchase or sale of any product Plaintiff nowhere contends that CHADD engages in any transactions, business activities, or advertising of Ritalin that bring it within the scope of these statutes.
The APA also argues that the legislative history makes clear that the CLRA only provides a remedy for consumers who have been deceived by unethical merchants in sales transactions, which is not at issue here.
3. The APA argues that the alleged affirmative misrepresentations are not actionable.
The CLRA makes illegal: "misrepresenting the source, sponsorship, approval, or certification of goods or services" and "misrepresenting the affiliation, connection, or association with, or certification by, another." CAL. CIV. CODE § 1770(a)(2) (3). The APA contends that Plaintiff's allegation that the APA failed to disclose Novartis' contributions does not fall under either category. The APA provides legislative history that the former category forbids industries from labeling their products as being at the top of a grading standard when no grading standard actually exists. The latter category forbids the labeling of a product as approved by a celebrity, when the celebrity does not in fact endorse the product.
4. The APA argues there is not the requisite causal link.
The CLRA applies to damages "as a result of the" unlawful practice. CAL. CIV. CODE § 1780. The APA argues that Plaintiff cannot maintain his claim unless he can link the APA's alleged activity with a specific injury, such as the misdiagnosis or wrong prescription of the named plaintiff caused by the DSM. The Amended Complaint does not contain any allegations of whether or how the DSM played a role in Plaintiff's diagnosis.
5. The APA and CHADD argue that they cannot be held liable for false advertising because they do not advertise Ritalin.
Neither the APA nor CHADD markets or sells pharmaceutical products and the Amended Complaint does not allege that the APA or CHADD sold Ritalin. Plaintiff's cause of action is based on the allegation that "untrue and misleading advertising" presents "a continuing threat to members of the general public of California" because the "prescription and use of the drug methylphenidates presents the serious threat of health consequences." Am. Compl. § 65. The APA and CHADD contend that this claim cannot be maintained against them.
C. Plaintiff's Opposition to the 12(b)(6) Motions
1. Plaintiff argues that there is no safe harbor protecting the DSM because California's adoption of DSM language in other statutes is irrelevant.
Plaintiff argues that the California legislature did not specifically consider or decide whether the APA could be sued for publication of the DSM.
2. Plaintiff argues the consumer protection statutes encompass the APA's and CHADD's activities.
In response to the APA's argument, Plaintiff argues that the DSM is widely published and available and there is no language prohibiting consumers from using it, so it falls within the consumer protection statutes. Second, Plaintiff argues that the sale of the DSM is the consumer transaction at issue, not the sale of Ritalin, so it is irrelevant that the APA does not sell Ritalin. Finally, Plaintiff claims that the misrepresentation at issue is the DSM's misrepresentation that its diagnostic criteria for ADD is scientifically reliable. Plaintiff argues that this misrepresentation is proscribed under Section 1770(a)(5) (the DSM claims to have qualities which it does not actually have) and Section 1770(a)(7) (the DSM is of a particular quality).
Plaintiff argues that CHADD's activities fall within the consumer protection statutes. First, Plaintiff argues that CHADD failed to rebut his allegations that CHADD has not fully disclosed the source of its financial contributions. Second, Plaintiff responds that the CLRA should be liberally construed to promote its purpose of protecting consumers against unfair and deceptive business practices. Plaintiff alleges that CHADD sells its magazines and other printed materials. Plaintiff cites a 1954 case to argue that a business practice is anything done habitually that becomes a custom in arguing that both the APA and CHADD engage in business practices.
Finally, Plaintiff argues that virtually any representation made in any manner in connection with the sale of goods, services, or credit is advertising. Plaintiff argues that his allegations that CHADD and the APA made misrepresentations are sufficient to maintain his cause of action for false advertising.
3. Plaintiff argues there is a causal connection.
Plaintiff claims that the misrepresentations at issue against the APA are:
a. Misrepresentation as to the source and sponsorship of the DSM;
b. Misrepresentation of the APA's affiliation, connection, or association with others including Novartis and CHADD;
c. Misrepresenting that the DSM has sponsorship, approval, and characteristics that it does not,
d. Misrepresenting that the DSM is of a particular standard when it is not.
After asserting these grounds, Plaintiff asserts, "[t]hus, the causal link between Plaintiff and the APA's misrepresentations has been adequately alleged."
4. Plaintiff claims that the false advertising at issue is the advertising of the DSM and CHADD's alleged misstatements.
Plaintiff claims that this count against the APA applies to the DSM because the DSM misleads the public into believing it is based on valid science, when in fact it is not. And Plaintiff argues that this Count against CHADD is based on CHADD's public misrepresentations.
D. Discussion of the APA's and CHADD's 12(b)(6) Motions
There is no causal connection between the APA and this Plaintiff, nor between CHADD and this Plaintiff Plaintiff does not allege that he, his doctor, or his parents ever read the DSM or any CHADD literature. Nor does he allege that he suffered damages that directly resulted from any alleged misstatements in the DSM or in CHADD literature. Plaintiff's late contention that the sale at issue in his claims against the APA is the sale of the DSM is disingenuous and found nowhere in the Amended Complaint in any event, Plaintiff alleges no misrepresentations in connection with the sale of the DSM or CHADD literature. If the issue is the APA's and CHADD's acceptance of donations, Plaintiff has cited no APA or CHADD statement that it does not accept Novartis' contributions, or even any statement listing some donors, while omitting Novartis. Finally, Plaintiff has not identified any advertisements. The Court hereby grants the APA's and CHADD's 12(b)(6) Motions to Dismiss.
V. CONCLUSION
The Court hereby GRANTS Defendant American Psychiatric Association's Motion to Dismiss Plaintiff's First Amended Complaint Pursuant to FED. R. CIV. P.12(b)(6). The Court hereby GRANTS Defendant CHADD Inc.'s Motion to Dismiss the Complaint Pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. The Court hereby GRANTS Defendants Novartis and Ciba-Geigy's Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 9(b). Plaintiff is granted leave to amend. if he elects to do so, he must file his Second Amended Complaint on or before April 16, 2001, if no amended complaint is filed by April 16, 2001, the Court will dismiss Plaintiff's First Amended Complaint with prejudice and grant each Defendant's Motion to Strike pursuant to CAL. CODE CIV. P. § 425.16 with reasonable attorney's fees and costs.
If the Plaintiff elects to amend his complaint, the Defendants shall appear as they deem appropriate within twenty days of service, if the Court finds that the Second Amended Complaint states a claim, the Court will then complete its consideration of Defendant's Motions to Strike under CAL. CODE CIV. P. § 425.16. Defendants may supplement or replace their Motions to Strike the First Amended Complaint with briefing that specifically addresses the Second Amended Complaint and Plaintiff may respond accordingly. The Defendants have already met their prima facie burden of showing that their speech is protected. Thus, the only issue before the Court, once a claim is stated, will be whether Plaintiff has shown a probability of prevailing on his claims.
If IS SO ORDERED.