Thursday, November 30, 2017
Court of Appeal:
UCL/False Advertising Suit Impermissibly Sought Damages
By a MetNews Staff Writer
A company that makes and sells nutritional supplements for bodybuilders has no cause of action under the Unfair Competition Law or the False Advertising Act against a competitor that allegedly sapped profits from it by marketing a misrepresented and potentially dangerous product with effects akin to outlawed steroids, the Court of Appeal for this district has held.
The unpublished opinion by Presiding Justice Dennis Perluss of Div. Seven was filed Tuesday. It affirms a judgment of dismissal following Los Angeles Superior Court Judge Michael L. Stern’s sustaining of a demurrer, without leave to amend, to the first amended complaint of Nutrition Distribution, LLC, which does business as Athletic Xtreme.
Defendant Southern SARMs, Inc. marketed a product it called “MK-2866,” containing Ostarine, which affects the production of the male hormone, androgen. Southern SARMS represented to the public that it is safe; Nutrition Distribution alleges that its side effects include liver damage and a boosted risk of heart disease.
Disgorgement of Profits
The plaintiff averred that its own safe and natural concoction, “Advanced PCT,” was bypassed by many consumers in favor of its rival’s product by virtue of what it asserted to be the defendant’s false claims of safeness. It sought, pursuant to the Unfair Competition Law (“UCL”) a disgorgement of its profits.
It also alleged that Southern SARMs’s false advertising caused economic and reputational harm to it, resulting in monetary loss.
Perluss pointed out that both the UCL, Business & Professions Code §17200 et seq., and the False Advertising Act, Business & Professions Code §17500 et seq., provide for restitutionary and injunctive relief, not damages. He wrote:
“Nutrition Distribution’s first amended complaint sought recovery of Southern SARMs’s profits from the sale of Ostarine through false and misleading advertising and ‘restitution of all Defendant’s ill-gotten gains.’ Nutrition Distribution is not entitled to either remedy for violations of the UCL or false advertising law under the facts alleged in its pleading.”
Rejecting the contention that the plaintiff was seeking restitution, not damages, Perluss said:
“Although Nutrition Distribution asserts it has a vested interest in any profits and business Southern SARMs wrongfully diverted from it, its characterization of its requested remedy as restitution does not make it so. To the contrary, compensation for lost business opportunities is a traditional measure of tort damages, not restitution….”
He added that the UCL authorizes only “restitutionary disgorgement”—restoring a plaintiff to property previously possessed—not disgorgement based on unjust enrichment.
With respect to the plaintiff’s effort to gain injunctive relief, Perluss said the complaint sought a total ban on any manufacturing, marketing or sales by the defendant not only of a product containing Ostarine but also any similar substance. This was overly broad, he said, noting that “[n]either in the trial court nor on appeal” did Nutrition Distribution seek “leave to amend to narrow the scope of the injunction sought to parallel the statutory violations it has alleged.”
“Indeed, any such effort might well be futile. Although not properly considered in ruling on Southern SARMs’s demurrer, in connection with its opposition to the motion for preliminary injunction, Southern SARMs introduced evidence, uncontradicted by Nutrition Distribution, it had stopped all marketing and sales of Ostarine (and had never manufactured it) and had no intention of resuming marketing or sales of the product.”
The opinion declares the appeal from Stern’s denial of a preliminary injunction to be moot.
The case is Nutrition Distribution v. Southern SARMs, B278132.
Robert Tauler and Lisa Zepeda of Tauler Smith represented National Distribution and Arezoo Jamshidi, Daniel C. DeCarlo and Josephine Brosas of Lewis Brisbois Bisgaard & Smith acted for Southern SARMs, Inc.
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