Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01056/USCOURTS-azd-2_11-cv-01056-0/pdf.json

Nature of Suit Code: 450
Nature of Suit: Interstate Commerce
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

ThermoLife International, LLC, an

Arizona limited liability company, 

Plaintiff, 

vs.

Gaspari Nutrition, Inc., a New Jersey

corporation; Richard Gaspari, a New

Jersey resident; Daniel Pierce, a New

Jersey resident; and Bruce Kneller, a New

Jersey resident, 

Defendants. 

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No. CV 11-01056-PHX-NVW

ORDER

Before the Court is Defendants’ Motion to Dismiss Pursuant to Fed. R. Civ. P. Rule

9(b) and 12(b)(6) (Doc. 10), Plaintiff’s Request for Entry of Default Against Gaspari

Nutrition, Inc. On Counts I, II, IV, and V (Doc. 14), and the parties’ Joint Memorandum

Regarding Discovery Dispute (Doc. 32).

I. Background

Plaintiff ThermoLife International, LLC (“ThermoLife”) and Defendant Gaspari

Nutrition, Inc. (“Gaspari”) are both suppliers of dietary supplements. Individual Defendants

Richard Gaspari, Daniel Pierce, and Bruce Kneller have all been employed by Gaspari.

Plaintiff claims that Gaspari falsely and misleadingly marketed and sold products that were

not compliant with the federal Dietary Supplement Health and Education Act of 1994

(“DSHEA”). Specifically, Plaintiff claims that Gaspari sold and marketed a product called

Case 2:11-cv-01056-NVW Document 34 Filed 12/16/11 Page 1 of 10
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Novedex XT as being DSHEA compliant when it was not actually DSHEA compliant. On

September 9, 2010, the FDA issued a formal action stating that Novedex XT was not

DSHEA compliant because it contained aromatase inhibitors that could cause potential

adverse effects in users. On October 7, 2010, Gaspari issued a recall of Novedex XT.

Additionally, Plaintiff claims that Gaspari falsely advertised its Halodrol Liquigels

and Halodrol MT products as being DSHEA compliant. On October 6, 2010, the FDA issued

a formal enforcement report stating that Gaspari’s Halodrol products were not DSHEA

compliant and would accordingly be recalled. Plaintiff further claims that Gaspari falsely

advertised that its Halodrol products contained 95% 3,4-divanillytetrahydrofuran. However,

Plaintiff tested material that was marketed and sold as 95% 3,4-divanillytetrahydrofuran and

concluded that the material it had tested was not in fact 95% 3,4-divanillytetrahydrofuran.

From this, Plaintiff extrapolates that the commercial production of 95% 3,4-

divanillytetrahydrofuran was cost prohibitive, and that Gaspari’s Halodrol products could not

actually contain 95% 3,4-divanillytetrahydrofuran.

Plaintiff also raises issues related to Gaspari’s advertisement of its SuperPump 250

product. Plaintiff claims that Gaspari advertised that the SuperPump 250 contained an

ingredient called Turkesterone, although there is not actually any Turkesterone in the

SuperPump 250. Alternatively, Plaintiff claims that if there is some amount of Turkesterone

in the SuperPump 250, it exists in such trace amounts as to be ineffective; accordingly,

Defendant falsely advertised that the SuperPump 250 contained effective levels of

Turkesterone. Plaintiff claims that it has been harmed by Gaspari’s false and misleading

advertisements of all of these products through a direct diversion of ThermoLife’s sales and

a lessening of the goodwill associated with its products.

Finally, Plaintiff alleges that Gaspari improperly prevented ThermoLife from

maintaining exhibiting at the Mr. Olympia bodybuilding competition and trade show, which

was held on September 25-26, 2009, by contacting organizers of the Mr. Olympia

competition and threatened to pull its advertising if ThermoLife was allowed to exhibit at the

event. Plaintiff claims Gaspari’s actions caused Plaintiff to lose business opportunities and

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unrecoupable costs it had expended in anticipation of attending the competition.

ThermoLife’s complaint raises five causes of action related to these allegations: (1)

False Advertising Under 15 U.S.C. § 1125(a)(1)(B) - Against Gaspari; (2) Common Law

Unfair Competition - Against Gaspari; (3) Violation of A.R.S. §§ 13-2301 et seq. – Against

Richard Gaspari, Daniel Pierce, and Bruce Kneller; (4) Tortious Interference with Business

and Business Expectancy; and (5) Unjust Enrichment.

II. Legal Standard

A. Rule 12(b)(6), Federal Rules of Civil Procedure

On a motion to dismiss under Fed. R. Civ. P. 12(b)(6), all allegations of material fact

are assumed to be true and construed in the light most favorable to the nonmoving party.

Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Dismissal under Rule 12(b)(6) can

be based on “the lack of a cognizable legal theory” or “the absence of sufficient facts alleged

under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th

Cir. 1990). To avoid dismissal, a complaint must contain “only enough facts to state a claim

for relief that is plausible on its face.” Twombly, 550 U.S. at 570. The principle that a court

accepts as true all of the allegations in a complaint does not apply to legal conclusions or

conclusory factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 239 S. Ct. 1937, 1951

(2009). “Threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements, do not suffice.” Id. at 1949. “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. “The plausibility standard is not akin

to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant

has acted unlawfully.” Id. To show that the plaintiff is entitled to relief, the complaint must

permit the court to infer more than the mere possibility of misconduct. Id.

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B. Rule 9(b), Federal Rules of Civil Procedure

“In alleging fraud or mistake, a party must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Rule 9(b) requires allegations of fraud

to be “specific enough to give defendants notice of the particular misconduct which is alleged

to constitute the fraud charged so that they can defend against the charge and not just deny

that they have done anything wrong.” Bly-Magee v. California, 236 F.3d 1014, 1019 (9th

Cir. 2001). “While statements of the time, place and nature of the alleged fraudulent

activities are sufficient, mere conclusory allegations of fraud are insufficient.” Moore v.

Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). Further, 

Rule 9(b) does not allow a complaint to merely lump multiple defendants

together but requires plaintiffs to differentiate their allegations when suing

more than one defendant and inform each defendant separately of the

allegations surrounding his alleged participation in the fraud. In the context

of a fraud suit involving multiple defendants, a plaintiff must, at a minimum,

identify the role of each defendant in the alleged fraudulent scheme.

Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (internal quotation marks,

alteration marks, and citations omitted).

III. Motion to Dismiss

Defendant has moved to dismiss Plaintiff’s RICO claim for failing to plead fraud with

particularity under Fed. R. Civ. P. 9(b) and for failing to state a plausible claim for relief

under Fed. R. Civ. P. 12(b)(6). Defendant also seeks dismissal of Plaintiff’s complaint in its

entirety for failing to plead fraud with particularity under Fed. R. Civ. P. 9(b), on the theory

that because Plaintiff’s RICO count and the underlying facts of the complaint sound in fraud,

the whole complaint must satisfy the Fed. R. Civ. P. 9(b) pleading standards.

A. RICO Count

In order to state a claim under Arizona’s RICO statute, A.R.S. §§ 13-2301 et seq.,

Plaintiff must allege Defendants engaged in a “pattern of racketeering activity . . . defined

as ‘[a]t least two acts of racketeering’ that are ‘related’ and ‘continuous’[.]”’ Lifeflite Med.

Air Transport, Inc. V. Native Amer. Air Servs., Inc., 198 Ariz. 149, 151-52, 7 P.3d 158, 160-

61 (Ct. App. 2000) (citing H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229,

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241-42 (1989)); see also A.R.S. § 13-2301(D)(4) (defining unlawful activities that constitute

“racketeering acts” when committed for financial gain). To establish the necessary

continuity element, Plaintiff may allege either open-ended continuity—meaning “past

conduct that by its nature projects in the future with a threat of repetition”—or close-ended

continuity, meaning “a closed period of repeated conduct.” See Turner v. Cook, 362 F.3d

1219, 1229 (9th Cir. 2004); A.R.S. § 13-2314.01(T)(3)(iii).

“‘Where the predicate racketeering acts of a RICO claim sound in fraud, . . . the

pleading of those predicate acts must satisfy the particularity requirement of [Federal Rule

of Civil Procedure] 9(b)’ . . . which provides that in ‘all averments of fraud or mistake, the

circumstances constituting the fraud or mistake shall be stated with particularity.’” Laron,

Inc. V. Constr. Resource Servs., LLC, 2007 WL 1958732, *5 (citing Wasserman v.

Maimonides Med. Ctr., 970 F. Supp. 183, 187 (E.D.N.Y. 1997)). A plaintiff must “state the

time, place, and specific content of the false representations as well as the identifies of the

parties to the misrepresentation” in order to sufficiently plead fraud with particularity. Odom

v. Microsoft Corp., 2007 WL 1297249, at *12 (9th Cir. 2007). Further, where a plaintiff

names multiple defendants, it must “identify the role of each defendant in the alleged

fraudulent scheme.” Swartz, 476 F.3d at 765. “Allegations made on ‘information and belief’

are not sufficient ‘unless the complaint sets forth the facts on which the belief is founded.’”

Laron, 2007 WL 1958732 at *5 (citing In re Worlds of Wonder Secs. Litigation, 694 F. Supp.

1427, 1432-33 (N.D. Cal. 1988)).

Plaintiff here asserts that the individual Defendants’ unlawful predicate acts include

“asserting false claims” and conducting “a scheme or artifice to defraud.” (Doc. 1 at ¶141

(citing A.R.S. § 13-2301(D)(4)(b)(xv),(xx)). Plaintiff alleges the individual Defendants 

“knowingly, intentionally, and falsely” made statements that “Gaspari’s products are DSHEA

complaint . . . contain raw materials . . . that are not found in Gaspari’s products... and that

anyone who alleges otherwise is not truthful.” (Id. at ¶ 143.) Although these claims clearly

sound in fraud, Plaintiff’s RICO count does not contain specific enough allegations to make

out a claim under RICO with the particularity required by Rule 9(b). While there are

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allegations related to specific allegedly false statements scattered throughout the complaint,

Plaintiff has not sufficiently linked those allegations specifically to the RICO count in order

to make clear which statements support Plaintiff’s RICO claim and which statements support

Plaintiff’s other state law and Lanham Act claims. Further, Plaintiff has not sufficiently

alleged when and in what forum these alleged false statements were made.

 Plaintiff has also failed to state a plausible claim for relief under Arizona’s RICO

statute. While the complaint alleges facts that plausibly support Plaintiff’s claims for alleged

state law and Lanham Act violations, it does not allege facts which comfortably fit within the

parameters of a RICO claim. For example, Plaintiff’s complaint has not identified when the

alleged predicate activities occurred, beyond stating that at least two of the false statements

were made within the last five years (Doc. 1 at ¶ 142), making it difficult to ascertain whether

Defendants’ allegedly unlawful conduct was sufficiently continuous. See, e.g., Lifelite, 161,

152 (citing H.J. Inc., 492 U.S. at 242) (noting “[p]redicate acts extending over a few weeks

or months and threatening no future criminal conduct do not satisfy’” the continuing activity

requirement). Nor has Plaintiff alleged how Defendants’ “predicate misconduct . . . by its

nature projects into the future with a threat of repetition,” Turner, 362 F.3d at 1229,

especially considering Plaintiff concedes that Defendants’ non-DSHEA compliant products

were recalled upon notification by the FDA of their non-compliance and no allegations were

made that Defendants continued to advertise their products as being DSHEA-compliant after

the FDA determined the products were non-compliant. Conclusory allegations that

Defendants’ “false statements are continuous, ongoing and pose a threat of continued

unlawful activity” (Doc. 1 at ¶ 147) are insufficient to state a claim for relief.

For these reasons, Defendant’s motion to dismiss Plaintiff’s RICO count (Doc. 10)

will be granted. Plaintiff will be permitted leave to amend by January 13, 2012.

B. Application of Fed. R. Civ. P. 9(b) to Non-RICO Counts

Defendants also claim that Plaintiff’s complaint should be dismissed in its entirety

because the underlying factual allegations supporting the complaint sound in fraud. Plaintiff

argues that only its RICO requires a showing of fraud and, accordingly, only the RICO count

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must be pled with particularity. Plaintiff further asserts that, to the extent its state law claims

and claim for false advertising under the Lanham Act must be pled to the Rule 9(b) standard,

the complaint is sufficient under Rule 9(b).

While Plaintiff’s state law and Lanham Act claims do not require proof of fraud to

state a claim for relief, such claims may nonetheless be subject to the heightened pleading

standard under Rule 9(b) if the complaint as a whole “sounds in fraud.” See Vess v.

Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (9th Cir. 2003) (“[T]he plaintiff may allege

a unified course of fraudulent conduct and rely entirely on that course of conduct as the basis

of a claim. In that event, the claim is said to be ‘grounded in fraud’ or to ‘sound in fraud,’ and

the pleading of that claim as a whole must satisfy the particularity requirement of 9(b).”).

Further, Ninth Circuit case law also suggests that “misrepresentation claims are a species of

fraud, which must meet Rule 9(b)’s particularity requirement.” Meridian Project Sys., Inc.

v. Hardin Constr. Co., LLC, 404 F. Supp. 2d 1214, 1219 (E.D. Cal. 2005); see also Neilson

v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003) (same). Indeed,

many courts have applied Rule 9(b)’s heightened pleading standard to claims for false

advertising brought under the Lanham Act. See e.g., Collegenet, Inc. v. XAP Corp., 2004

WL 2303506, *4 (D. Or. Oct 12, 2004) (applying Rule 9(b) to a Lanham Act claim where

plaintiff alleged “knowing” and “intentional conduct”); Max Daet-wyler Corp. v. Input

Graphics, Inc., 608 F.Supp. 1549, 1556 (E.D.Pa.1985) (although Lanham Act claims are not

categorically subject to the heightened pleading requirements of 9(b), “the policies which

underlie Rule 9(b)'s requirement that the nature of an alleged misrepresentation be pleaded

with specificity are equally applicable to the type of misrepresentation claims presented in

plaintiff's Lanham Act claim.”); Pestube Systems, Inc. v. HomeTeam Pest Def., LLC, 2006

WL 1441014 (D. Ariz. May 24, 2006) (applying Rule 9(b) to Lanham Act claim where claim

was “grounded” or “sounding” in fraud because of allegations of knowing

misrepresentations.)

Here, Plaintiff’s complaint details numerous allegations against Defendants, some of

which allege fraud and others of which do not. Compare (Doc. 1 at ¶ 6 (alleging Gaspari

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“falsely advertis[ed] its products . . . Gaspari kn[ew] or should have known [were] not

DSHEA complaint”)) with (Id. at ¶ 143 (alleging that individual Defendants “knowingly

[and] intentionally” made false statements about Gaspari’s products)). However, the false

statements that make out Plaintiff’s state law and Lanham Act claims also appear to be the

basis for Plaintiff’s RICO claim, wherein Plaintiff alleges the false statements were made

knowingly, intentionally, and fraudulently. It is a fair conclusion, as Plaintiff’s claims are

currently pled, that Plaintiff alleges Defendants acted in unified conduct of fraud, making the

complaint as a whole sound in fraud. Thus, Plaintiff “must state the time, place and specific

content of the false representations as well as the identities of the parties to the

misrepresentation” for all of its claims. See Schreiber, 806 at 1401. Plaintiff will be given

leave to amend its complaint to either allege all counts with the particularity required by Rule

9(b), or more clearly delineate their claims to make clear which counts relate to and rely upon

Defendants’ allegedly fraudulent activity and which do not, if a unified conduct of fraud is

not, in fact, the basis for Plaintiff’s allegations.

IV. Plaintiff’s Motion for Default

In its response to Defendants’ motion to dismiss, Plaintiff also requests entry of

default against Defendant Gaspari Nutrition, Inc. on Counts I, II, IV, and V (Doc. 14).

Plaintiff claims that “[a]lthough Defendants’ Motion to Dismiss purports to be filed on behalf

of all Defendants, the Motion to Dismiss does not argue that any claim against Gaspari

should be dismissed.” (Id. at 7.) Plaintiff further contends that to the extent Gaspari had

responded to some of the claims in the complaint, default would still be appropriate for the

claims to which Gaspari had not responded (Id. at 7, n.3).

Contrary to Plaintiff’s assertion, Defendants’ motion to dismiss was filed on behalf

of all Defendants and represents the response of all Defendants (Doc. 10). Further,

Defendants have effectively responded to all of Plaintiff’s claims in their motion, which

seeks dismissal of Plaintiff’s entire complaint on the basis that the complaint sounds in fraud

and Plaintiff has failed to plead fraud with the particularity required by Fed. R. Civ. P. 9(b).

(Id. at 2, n.3.) (“As the gravamen of Plaintiffs’ [sic] Complaint is a unified course of

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fraudulent conduct, Plaintiff’s entire Complaint—not just the Little RICO claim—is subject

to dismissal.”). 

Even if Defendants had failed to responded to one or more claims listed in Plaintiff’s

complaint, such failure would not be sufficient cause for entry of default as requested.

Plaintiff cites Gerlach v. Michigan Bell Telephone Co., 448 F.Supp. 1168, 1174 (E.D.1978)

for the proposition that because each claim in a complaint constitutes an independent basis

for the suit, a motion to dismiss certain claims should not toll the time to respond to the other

allegedly unchallenged claims. However, the holding in Gerlach “is clearly the minority

position and the recent authority is clearly opposed to any such holding.” Pestube Systems,

Inc. V. HomeTeam Pest Defense, LLC, No. CV05-2832-PHX-MHM, 2006 WL 1441014, at

*7 (D. Ariz. May 24, 2006). Rather, the majority of courts have expressly held that even

though a pending motion to dismiss may only address some of the claims alleged, the motion

to dismiss tolls the time to respond to all claims. See id. (collecting cases). The majority rule

recognizes that requiring a defendant to answer some claims raised in the complaint

concurrently with a pending motion to dismiss creates the potential for duplicative

proceedings if the motion to dismiss were denied, and is therefore more persuasive than the

Gerlach rule. Id. For these reasons, Plaintiff’s motion for entry of default (Doc. 14) will be

denied.

V. Discovery Dispute

The parties have also filed a joint memorandum regarding a discovery dispute related

to Defendant’s Response and Objections to Plaintiff’s First Set of Requests for Production

of Documents (Doc. 32). Because the Court will dismiss Plaintiff’s complaint with leave to

amendment, a ruling on the scope of discovery at this stage is premature. The parties may

renew their relevant objections if they arise later in this litigation.

IT IS THEREFORE ORDERED that Plaintiff’s Request for Entry of Default Against

Gaspari Nutrition, Inc. On Counts I, II, IV, and V (Doc. 14) is denied.

IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss Pursuant to Fed.

R. Civ. P. Rule 9(b) and 12(b)(6) (Doc. 10) is granted.

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IT IS FURTHER ORDERED that Plaintiff may file an amended complaint by January

13, 2012. The Clerk is directed to terminate this case without further order if Plaintiff does

not file an amended complaint by January 13, 2012.

DATED this 16th day of December, 2011.

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