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Weisblum v. Prophase Labs, Inc.

United States District Court, S.D. New York

February 20, 2015

ELI WEISBLUM et al., Plaintiffs,
v.
PROPHASE LABS, INC. et al., Defendants

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[Copyrighted Material Omitted]

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For Eli Weisblum, individually and on behalf of all others similarly situated, Plaintiff: Joseph Ignatius Marchese, Neal Jamison Deckant, Scott A. Bursor, Yitzchak Kopel, LEAD ATTORNEYS, Frederick John Klorczyk, Bursor & Fisher, P.A., New York, NY.

For James Loren Gibbs, Plaintiff: Joseph Ignatius Marchese, Bursor & Fisher, P.A., New York, NY.

For Prophase Labs, Inc., Theodore W. Karkus, Defendants: Eric F. Gladbach, PRO HAC VICE, Jessica Kristen Shook, Reed Smith LLP (NYC), New York, NY; Robert D. Phillips, Jr., Reed Smith, LLP (Los Angeles), Los Angeles, CA; Thomas A. Evans, Reed Smith LLP, San Francisco, CA.

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OPINION AND ORDER

JESSE M. FURMAN, United States District Judge.

Plaintiffs Eli Weisblum and James Loren Gibbs bring this putative consumer class action against Prophase Labs, Inc. (" Prophase" ) and its Chief Executive Officer, Theodore W. Karkus (together with Prophase, " Defendants" ), alleging various federal and state claims arising out of their marketing and sale of Cold-EEZE cold remedy products (" Cold-EEZE" ). At bottom, Plaintiffs allege that Defendants made false representations in marketing Cold-EEZE as effective in reducing the duration and severity of the common cold. Defendants move to dismiss the Amended Complaint (the " Complaint" ) for lack of personal jurisdiction, lack of standing, and failure to state a claim upon which relief may be granted. (Docket No. 34). For the reasons explained below, Defendants'

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motion is GRANTED in part and DENIED in part.

BACKGROUND

The following facts, taken from the Complaint, are assumed to be true for the purposes of this motion. See, e.g., Kalnit v. Eichler, 264 F.3d 131, 135 (2d Cir. 2001). Cold-EEZE are homeopathic, over-the-counter cold remedy products that are manufactured and distributed by Prophase. (Am. Compl. (Docket No. 17) ¶ ¶ 1, 11). Although Cold-EEZE are sold in various forms (including lozenges, oral sprays, and " Quick-Melts" ), they are all " essentially the same product." ( Id. ¶ ¶ 1, 14). Defendants market Cold-EEZE as alleviating cold symptoms. Each product's label, for example, states that Cold-EEZE " reduce the duration of the common cold" and " reduce the severity of cold symptoms." ( Id. ¶ 16). Similarly, the packaging of Cold-EEZE Lozenges states that they are " [c]linically proven to reduce the duration of the common cold." ( Id. ¶ 17). In addition, Karkus -- Prophase's CEO -- made personal guarantees of the efficacy of Cold-EEZE in treating cold symptoms. Several of the Cold-EEZE products contained an insert from Karkus promising that " Cold-EEZE is the right remedy to shorten your cold" ( id. ¶ ¶ 21-22), and packages of Cold-EEZE Lozenges contained an insert from Karkus stating that they are " clinically proven to shorten your cold by almost half." ( Id. ¶ 20). Karkus also made similar claims in national television advertisements for Cold-EEZE. ( Id. ¶ 25).

Plaintiffs Weisblum and Gibbs both purchased Cold-EEZE. Weisblum purchased Cold-EEZE Lozenges in New York in January 2014 after he " heard Defendants' media advertisements and reviewed the product's packaging and labeling." ( Id. ¶ 9). Specifically, he read on the package that Cold-EEZE are " clinically proven" to reduce the severity and duration of the common cold and that they would reduce the severity of his cold symptoms. ( Id.). He would not have purchased Cold-EEZE in the absence of such representations. ( Id.). Gibbs purchased Cold-EEZE Lozenges in California in January 2013. ( Id. ¶ 10). He too reviewed the lozenges' packaging before deciding to purchase them, and relied on the claims that Cold-EEZE would shorten and reduce the severity of his cold. ( Id. ¶ 10). Like Weisblum, Gibbs would not have purchased Cold-EEZE absent these representations. ( Id.).

Weisblum filed this lawsuit on behalf of himself and others similarly situated on May 19, 2014, and Gibbs was added as a named plaintiff in the Amended Complaint on August 4, 2014. (Docket Nos. 1, 17). Put simply, Plaintiffs allege that Defendants' representations about the effectiveness of Cold-EEZE are false. According to the Complaint, clinical studies have found that Cold-EEZE are ineffective in treating cold symptoms, and studies that have found otherwise are biased and " fundamentally flawed." (Am. Compl. ¶ ¶ 26-28, 30-36). The Complaint alleges violations of New York and California consumer protection laws ( id. ¶ ¶ 49-67, 92-137), violations of the Magnuson-Moss Warranty Act, 15 U.S.C. § § 2301, et. seq ( id. ¶ ¶ 68-78), breach of express and implied warranties ( id. ¶ ¶ 79-91), unjust enrichment ( id. ¶ ¶ 138-43), and fraud ( id. ¶ ¶ 144-57). Defendants move to dismiss the Complaint in its entirety.

DISCUSSION

As noted, Defendants move to dismiss on several grounds. First, they move, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss all of Gibbs's claims against Prophase (but not

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Karkus) for lack of personal jurisdiction. (Defs.' Mem. Law Supp. Mot. To Dismiss Pls.' First Am. Class Action Compl. (Docket No. 35) (" Defs.' Mem." ) 3-7). Second, they move, presumably pursuant to Rule 12(b)(1), to dismiss claims as to Cold-EEZE products other than lozenges on the ground that Plaintiffs lack standing to bring those claims. ( Id. at 8-10). Finally, they move, pursuant to Rule 12(b)(6), to dismiss all counts for failure to state a claim. ( Id. at 10-19). The Court will address each argument in turn.

A. Personal Jurisdiction With Respect to Gibbs's Claims Against Prophase

Defendants argue first that the Court lacks personal jurisdiction with respect to Gibbs's claims (the " California claims" ) against Prophase. As the Second Circuit recently explained, there are " two categories of personal jurisdiction: general and specific personal jurisdiction. General, all-purpose jurisdiction permits a court to hear any and all claims against an entity. Specific jurisdiction, on the other hand, permits adjudicatory authority only over issues that arise out of or relate to the entity's contacts with the forum." Gucci America, Inc. v. Weixing Li, 768 F.3d 122, 134 (2d Cir. 2014) (internal quotation marks, citations and footnote omitted). The plaintiff bears the burden of establishing personal jurisdiction. See Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir. 2010). " [T]he showing a plaintiff must make to defeat a defendant's claim that the court lacks personal jurisdiction over it 'varies depending on the procedural posture of the litigation.'" Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013) (per curiam) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)). " 'Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith, legally sufficient allegations of jurisdiction. At that preliminary stage, the plaintiff's prima facie showing may be established solely by allegations.'" Id. (quoting Ball, 902 F.2d at 197).

In this case, Plaintiffs do not (and could not) argue that there is specific personal jurisdiction over the California claims against Prophase. ( See, e.g., Pls.' Opp'n Defs. Mot. To Dismiss (Docket No. 39) (" Pls.' Mem." ) 3-7). Instead, they argue in the first instance that Defendants forfeited any objection to the Court's exercise of general personal jurisdiction with regard to the California claims by answering Plaintiffs' original Complaint without raising a personal jurisdiction defense and by " substantially participating in this action." ( Id. 3-4). Those arguments are without merit. Because the original Complaint asserted claims only on behalf of New York plaintiffs (Class Action Compl. (" Original Compl." ) (Docket No. 2) ¶ 9), Prophase had no reason to object to the Court's exercise of personal jurisdiction. And, in any event, Prophase did object: In its answer to the original Complaint, Prophase admitted that its products were sold in New York, but it " denie[d]" the remaining jurisdictional allegations. (Answer (Docket No. 10) ¶ 7). As for Prophase's participation in the litigation to date, forfeiture is appropriate " only if the party waited years before moving or engaged in substantial pre-trial activity." Infinity Consulting Grp., LLC v. Am. Cybersystems, Inc., No. 09-CV-1744 (JS) (WDW), 2010 WL 2267470, at *2 (E.D.N.Y. May 30, 2010). Here, as Prophase points out in its reply memorandum of law, Prophase took at least some actions pursuant to the Federal Rules of Civil Procedure and orders of the Court. (Defs.' Reply Mem. Law Further Supp. Mot. To Dismiss Pls.' First Am. Class Action Compl. (" Defs.' Reply" ) (Docket No. 40) 2 (citing Fed.R.Civ.P. 26(f)(1)

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and Docket No. 28)). Thus, it " would be highly inequitable to conclude that [Prophase] waived its personal jurisdiction claim" on that basis. M& D Inf. Sys., Inc., v. Tower Grp., Inc., No. 05-CV-552 (PCD), ...


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