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David Delre, On Behalf of Himself and All Others Similarly Situated v. Wayne Perry

December 17, 2012

DAVID DELRE, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
WAYNE PERRY, DYNOVA LABORATORIES, INC., SICAP INDUSTRIES, LLC, AND HI-TECH PHARMACAL, INC., DEFENDANTS.
MATTHEW HARRISON, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF, -AGAINST- WAYNE PERRY, DYNOVA LABORATORIES, INC., SICAP INDUSTRIES, LLC, AND HI-TECH PHARMACAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge:

MEMORANDUM OF DECISION AND ORDER -

The Plaintiffs David Delre ("Delre") and Matthew Harrison ("Harrison," and collectively "the Plaintiffs"), individually and on behalf of all others similarly situated, have each brought separate actions against the Defendants Wayne Perry ("Perry"), Dynova Laboratories, Inc. ("Dynova"), SiCap Industries, LLC ("SiCap"), and Hi-Tech Pharmacal, Inc. ("Hi-Tech," and collectively "the Defendants"), seeking to recover damages for the Defendants' alleged violations of various consumer protection and warranty laws in connection with their marketing and sale of a group of over-the-counter drugs. The Plaintiffs now jointly move pursuant to Federal Rules of Civil Procedure ("Fed. R. Civ. P.") 42(a)(2) and 23(g) to consolidate their actions and appoint their respective counsel, Faruqi & Faruqi, LLP ("Faruqi & Faruqi"), and Bursor & Fisher, P.A. ("Bursor & Fisher"), as co-lead interim class counsel. For the reasons set forth below, the Court grants the Plaintiffs' motions.

I. BACKGROUND

A. The Plaintiff Delre's Complaint

On May 15, 2012, the Plaintiff Delre commenced a class action lawsuit against the Defendants by filing a Complaint in the United States District Court for the Eastern District of New York (Case No. 12-CV-2429). The case was originally assigned to United States District Court Judge Brian M. Cogan in the Brooklyn Courthouse, but was thereafter reassigned to this Court by Chief Judge Carol Bagley Amon.

According to Delre's Complaint, the Defendants sold a range of "Sinus Buster/Buster Brands products," which included Sinus Buster, Sinus Buster Mild, Cold Buster f/k/a Sinus Buster Anti-Cold Formula ("Cold Buster"), Allergy Buster f/k/a Sinus Buster Allergy Formula, and Headache Buster f/k/a Sinus Buster Headache Formula (collectively "the Sinus Buster Products"). The Sinus Buster Products sell across the country for $10.00 to $15.00 per bottle. Apparently, the Sinus Buster Products contain capsaicin-an ingredient used in hot cayenne peppers to make them hot-which the Defendants claim can treat sinus congestion and related cold, allergy and headache symptoms. While the Defendants sell the Sinus Buster Products as over-the-counter homeopathic drugs, Delre asserts that the Sinus Buster Products are in fact "illegal [] non-homeopathic drugs" and that the Defendants "have misled consumers into believing that the Sinus Products are [] approved" by the U.S. Food and Drug Administration ("FDA") when they are not (Delre Compl., ¶¶ 7, 8.)

Further, Delre's Complaint questions the efficacy of homeopathic medicines and remedies in general and describes homeopathy as a "200-year old pseudoscience." (Delre Compl., ¶ 5.) The FDA defines homeopathy as "the practice of treating the syndromes and conditions which constitute disease with remedies that have produced similar syndromes and conditions in healthy subjects." (Delre Compl., ¶ 5.) In a somewhat confusing statement in the Complaint, it is stated that "[u]nder homeopathic theory, the more an ingredient is diluted in a solution, the more potent it purportedly becomes at treating the symptom for which it is known to cause." (Delre Compl., ¶ 5.) The Merriam-Webster Dictionary definition of "homeopathy" is "a system of medical practice that treats a disease especially by the administration of minute doses of a remedy that would in healthy persons produce symptoms similar to those of the disease." Medical Definition of Homeopathy, Merriam-Webster.com, http://www.merriam-webster.com/dictionary/homeopathy (last visited Dec. 17, 2012).

The Sinus Buster Products were created and developed by the Defendant Perry, a resident of New York. Perry also founded the Defendant SiCap in 2003. SiCap, a limited liability company with its principal headquarters in New York, engaged in the design and marketing of purportedly homeopathic herbal based nutritional products. Allegedly, Perry developed the original line of Sinus Buster Products as dietary supplements, rather than homeopathic drugs, and did not list homeopathic dilutions of their ingredients. However, Delre asserts that the Sinus Buster Products were never dietary supplements, but were unapproved illegal drugs, as Perry and SiCap claimed the products could treat, cure or prevent sinus, cold, headache and allergy symptoms.

In his autobiography Working Class Entrepreneur, Perry admits that "early operations with respect to the Sinus Buster Products 'weren't completely legal in the eyes of the government'" and that "even though SiCap initially sold the Sinus Buster Products as dietary supplements, . . . he learned that the FDA considered those products to be [] drugs." (Delre Compl., ¶ 91.) Thus, SiCap and Perry, finding "'many gray areas in the FDA rules,'" began marketing and selling Sinus Buster Products as homeopathic remedies in 2006. (Delre Compl., ¶ 95.) In this regard, in 2006, SiCap and Perry released a new line of homeopathic Sinus Buster Products, which corresponded with the previous line of Sinus Buster Products that were dietary supplements. The new line of Sinus Buster Products included the same ingredients as the old line. However, each of the Sinus Buster Products in the new line listed a homeopathic concentration of capsaicin as an active ingredient.

In 2008, the Defendant Dynova, a privately held Delaware corporation with its corporate headquarters in New Jersey, acquired SiCap and the Sinus Buster Products, and SiCap became a wholly owned subsidiary of Dynova. Following the acquisition, Perry remained the CEO of SiCap until 2010 and continued to serve as a spokesperson for the Sinus Buster Products. Dynova rebranded the Sinus Buster Products and reformulated Cold Buster for oral administration. Capsaicin became an inactive ingredient in the reformulated Cold Buster, while the homeopathic concentration of Pelagronium sidoides 1X was listed as its only active ingredient. No other Sinus Buster Products were reformulated. Dynova marketed the Sinus Buster Products as "fast, effective and safe." (Delre Compl., ¶ 114.)

In 2012, the Defendant Hi-Tech, a Delaware corporation with its principal place of business in New York, acquired the Sinus Buster Products. High-Tech continues to market and sell the Sinus Buster Products through its Health Care Products division. Perry retains a financial interest in the continued sales of the Sinus Buster Products.

Delre is a citizen of New Jersey who purchased one of the Sinus Buster Products, Cold Buster, for his personal use from a CVS retail pharmacy located in New Jersey. He claims he paid about $11.00 and read, believed and relied on the representations on the product's label.

While Delre does not specifically state what prompted him to take Cold Buster, the Court presumes Delre took Cold Buster to treat cold symptoms, since he used Cold Buster "as directed." (Delre Compl., ¶ 185.)

According to Delre, Cold Buster did not give him the relief promised on the product's label or in the Defendants' advertisements. Instead, according to Delre, Cold Buster was "useless" to him and his family and provided them no relief. (Delre Compl., ¶ 185.) Delre contends that he would not have purchased any Sinus Buster Products if he was aware of the fact that Sinus Buster Products (1) were not proven effective for their intended use; (2) were not effective for their intended use; (3) were not lawful for sale in the United States; (4) were not FDA approved; and (5) were sold as homeopathic products in order to circumvent FDA regulations and oversight, including its requirement that the Defendants prove the efficacy of those products.

According to Delre's Complaint, the Defendants have made the following false and misleading claims in connection to the marketing and selling of the Sinus Buster Products: (1) that the Sinus Buster Products are homeopathic; (2) that the Sinus Buster Products are effective or clinically proven to be effective for their intended use; and (3) that the Sinus Buster Products are FDA approved. Delre asserts that these misrepresentations by the Defendants are material and important to a consumer's purchasing decision, since they concern the effectiveness of the Sinus Buster Products, the qualities of those products and the reason for which they are sold. As such, Delre, on behalf of himself and the members of a class defined as all persons, who within the relevant statute of limitations period, purchased Sinus Buster Products in the United States, brings seven class action claims against the Defendants for (1) violation of Magnuson-Moss Warranty Act, 115 U.S.C. ยง 2301, et seq.; (2) unjust enrichment; ...


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