FILED
NOT FOR PUBLICATION
APR 14 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
THERMOLIFE INTERNATIONAL, LLC, No. 14-15180
Plaintiff-counter-defendant - D.C. No. 2:11-cv-01056-NVW
Appellant,
v. MEMORANDUM*
GASPARI NUTRITION INC.,
Defendant-counter-claimant -
Appellee.
Appeal from the United States District Court
for the District of Arizona
Neil V. Wake, District Judge, Presiding
Argued and Submitted February 10, 2016
San Francisco, California
Before: SILVERMAN, FISHER and TALLMAN, Circuit Judges.
ThermoLife International, LLC (ThermoLife) appeals from an adverse
judgment in its suit against Gaspari Nutrition Inc. (GNI), a competitor in the
dietary supplement market. As relevant here, ThermoLife sued GNI for six counts
of false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and unfair
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
competition under Arizona common law. ThermoLife alleges that from 2005 to
2010 GNI falsely advertised its testosterone boosters as “safe,” “natural,” “legal”
and compliant with the Food, Drug & Cosmetic Act, (FDCA), as amended by the
Dietary Supplement Health Education Act (DSHEA). The district court excluded
four of ThermoLife’s experts as unreliable; granted summary judgment because the
FDCA precluded or preempted all but one of ThermoLife’s claims and ThermoLife
could not establish the elements of falsity, materiality and injury; and denied
ThermoLife’s requests for discovery sanctions and Rule 59(e) relief.
We have jurisdiction under 28 U.S.C. § 1291, and we vacate the judgment
and remand for further proceedings on all six of the Lanham Act claims and the
unfair competition claim.
I. FDCA preclusion and preemption
We review de novo the district court’s grant of summary judgment based on
its interpretation of the FDCA, see PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 923
(9th Cir. 2010), and hold the FDCA neither precludes ThermoLife’s Lanham Act
claims nor preempts its unfair competition claim.
A. In deciding whether the FDCA precludes ThermoLife’s claims, the
district court did not have the benefit of Pom Wonderful LLC v. Coca-Cola Co.,
134 S. Ct. 2228 (2014), which squarely controls the issue. Pom Wonderful
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established that the FDCA generally does not preclude Lanham Act claims for
false labeling of food. Id. at 2241. Both of the Court’s rationales applies to
ThermoLife’s claims: neither the FDCA nor the Lanham Act expressly bars
ThermoLife’s claims, id. at 2237; and whereas the FDCA protects public health by
relying on the FDA’s expertise, Lanham Act claims like ThermoLife’s protect
commercial interests by relying on the market expertise of competitors, id. at 2238-
39. Indeed, Pom Wonderful expressly rejected most of GNI’s arguments on
preclusion.1
GNI contends Pom Wonderful is distinguishable because ThermoLife’s
claims “require litigation of the alleged underlying FDCA violation . . . where the
FDA has not itself concluded that there was such a violation.” PhotoMedex, 601
F.3d at 924. But ThermoLife’s claims that GNI falsely advertised its products as
“safe” and “natural” require no interpretation of the FDCA; and, as we explain
below, ThermoLife need not demonstrate a FDCA violation to prevail on its claims
that GNI falsely advertised its products as “legal” or “DSHEA-compliant.”
Whatever the precedential value of the PhotoMedex rule after Pom Wonderful – an
1
See Pom Wonderful, 134 S. Ct. at 2239 (explaining that a Lanham Act
plaintiff seeks to enforce unfair competition rules, not the FDCA); id. (explaining
that the FDCA’s exclusive federal enforcement authority “does not indicate that
Congress intended to foreclose private enforcement of other federal statutes”).
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issue we do not decide – that rule would not bar ThermoLife’s claims.
Accordingly, the FDCA does not preclude ThermoLife’s Lanham Act claims.
B. The unfair competition claim also is not preempted. Although the FDCA
expressly preempts state-law requirements that conflict with certain FDCA
provisions, see 21 U.S.C. § 343-1, those provisions do not include § 343(a), which
governs the misbranding of food through false or misleading labeling. Nor does
the FDCA’s bar against private enforcement impliedly preempt the unfair
competition claim. There is a general “presumption against pre-emption,” Wyeth v.
Levine, 555 U.S. 555, 565 n.3 (2009), and the FDCA does not impliedly preempt
claims where, as here, “the state-law duty ‘parallels’ the federal-law duty,” Stengel
v. Medtronic Inc., 704 F.3d 1224, 1231 (9th Cir. 2013) (en banc).
The district court’s ruling that ThermoLife abandoned its unfair competition
claim was clearly erroneous. At summary judgment, ThermoLife responded to
each of GNI’s arguments by contending the unfair competition claim was not
preempted, the elements of that claim (and the false advertising claims) were
established and the claim was timely.
II. Exclusion of Expert Opinion Evidence
Reviewing for an abuse of discretion, see Lust ex rel. Lust v. Merrell Dow
Pharm., Inc., 89 F.3d 594, 596-97 (9th Cir. 1996), we hold the district court
4
improperly excluded Dr. Sox’s and Berger’s opinion evidence but properly
excluded Hornbuckle’s and Epperson’s opinion evidence.
A. The district court erred in excluding Dr. Sox’s opinion on the safety of
GNI’s products. Each of the district court’s rationales essentially faulted Dr. Sox
for not opining on whether GNI’s products were, in fact, safe. But that reasoning
“applied too high a relevancy bar.” Messick v. Novartis Pharm. Corp., 747 F.3d
1193, 1197 (9th Cir. 2014). Dr. Sox’s opinion needed only to “logically
advance[]” the issue, id. at 1196 (quoting Daubert v. Merrell Dow Pharm., Inc., 43
F.3d 1311, 1315 (9th Cir. 1995)), which it did by opining the dietary supplement
industry would not have deemed GNI’s products “safe.” Contrary to the district
court’s conclusions, moreover, Dr. Sox did provide a standard for determining
what is “safe” – i.e., the industry standard – and his presumption that GNI’s
ingredients were not safe was sufficiently valid in light of the industry’s strict
reliance on establishing safety through certain procedures GNI had not used.
B. The district court also erred in excluding Berger’s survey evidence on
materiality. “[S]urvey evidence should be admitted ‘as long as [it is] conducted
according to accepted principles and [is] relevant.” Fortune Dynamic, Inc. v.
Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1037 (9th Cir. 2010)
(second and third alterations in original) (quoting Wendt v. Host Int’l, Inc., 125
5
F.3d 806, 814 (9th Cir. 1997)). By asking consumers of testosterone boosters
whether they would have continued using GNI’s products (or switched to another
testosterone booster) after learning GNI’s advertisements were false, Berger’s
survey was “probative on whether the advertisements influenced consumers’
purchasing decisions.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134,
1143 (9th Cir. 1997). Although the district court faulted the survey’s biased
questions and unrepresentative sample, neither defect was so serious as to preclude
the survey’s admissibility. See Fortune Dynamic, 618 F.3d at 1037-38 (holding
that a survey with “highly suggestive” questions was admissible); Southland Sod
Farms, 108 F.3d at 1143 (holding that objections as to “leading questions” and an
unrepresentative sample “go only to the weight, and not the admissibility, of the
survey”).
Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477 (5th Cir. 2004), is
distinguishable. Berger’s survey sample did not “severely limit[] the probative
value of the survey’s results” by omitting a “large proportion” of the class of
potential consumers, but included both consumers of GNI’s products and
consumers of other testosterone boosters. Id. at 487-88. Nor was the survey
unreliable simply because it was not validated. Berger reasonably explained why
the survey could not be validated and concluded it was nevertheless a “good
6
survey” based on respondents’ “consistent, across-the-board answers.” GNI also
asserts Berger’s conclusions were not based on sufficient facts or data, but none of
his conclusions involved “too great an analytical gap between the data and the
opinion proffered.” Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997). We
therefore conclude the district court improperly excluded Berger’s opinion and
survey evidence.
C. The district court did not abuse its discretion in excluding Hornbuckle’s
opinion on injury as too subjective to be reliable. A trial court has broad discretion
to decide “how to determine reliability.” Kumho Tire Co. v. Carmichael, 526 U.S.
137, 152 (1999). Although the reliability of a non-expert opinion can “depend[]
heavily on the knowledge and experience of the expert,” United States v. Hankey,
203 F.3d 1160, 1169 (9th Cir. 2000), the district court was not required to base
Hornbuckle’s reliability on his knowledge and experience. Because Hornbuckle
used a novel and wholly subjective methodology, the district court could exercise
its discretion to exclude his opinion evidence.
D. The district court did not err in excluding Epperson’s opinion on
damages. Epperson’s model for calculating actual damages relied on Hornbuckle’s
report to establish the market share ThermoLife could have captured absent GNI’s
allegedly false advertising. Given the exclusion of that report, Epperson’s model
7
required a substitute estimate of ThermoLife’s market share. Yet ThermoLife
points to no evidence in the record from which a reasonable jury could conclude a
specific percentage of customers would have purchased ThermoLife’s testosterone
boosters. Because a jury would be unable to supply this essential input,
Epperson’s model of actual damages was not “based on sufficient facts or data”
and would not have been helpful to the jury. Fed. R. Evid. 702.
Epperson’s disgorgement calculations likewise were unreliable because they
included sales revenue for five years before the first allegedly false statement.
Although Epperson could assume the issue of causation, his assumption still had to
be “based on sufficient facts or data,” id., and there is no evidence that GNI
profited from 2000 to 2004 from false advertising that commenced in 2005.
Epperson’s assumption, which was never explained, relied on “simply too great an
analytical gap between the data and the opinion proffered” for the disgorgement
calculations to be reliable. Joiner, 522 U.S. at 146.
III. Falsity, materiality and injury elements of the Lanham Act claims
We review de novo the district court’s grant of summary judgment on the
Lanham Act claims – including the determination that ThermoLife failed to
establish injury, see Southland Sod Farms, 108 F.3d at 1145-46 – and ask whether
the evidence, when viewed in the light most favorable to ThermoLife, establishes a
8
triable issue of material fact. See id. at 1138. We hold there is a triable issue of
falsity, materiality and injury on all six Lanham Act claims.
A. The district court erroneously concluded there is no triable issue of
falsity for each type of GNI’s advertisements.
1. Counts 1, 2 and 5 involve advertisements that GNI’s products were
“legal” or “DSHEA-compliant.” The district court was correct that such
statements are generally inactionable opinion because they “purport to interpret the
meaning of a statute or regulation.” Coastal Abstract Serv., Inc. v. First Am. Title
Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999). But there is a “well-established
exception” that an opinion “by a speaker who lacks a good faith belief in the truth
of the statement” is actionable. PhotoMedex, 601 F.3d at 931. Because every
opinion “explicitly affirms . . . that the speaker actually holds the stated belief,” a
CEO’s statement about legal compliance “would falsely describe her own state of
mind if she thought her company was breaking the law.” Omnicare, Inc. v.
Laborers Dist. Council Const. Indus., 135 S. Ct. 1318, 1326 (2015). Here,
ThermoLife points to numerous emails indicating GNI was aware its products were
not DSHEA-compliant. Therefore there is a triable issue of falsity on Counts 1, 2
and 5.
9
2. There is also a triable issue of falsity on Counts 4 and 6, concerning
GNI’s statements that its products were “safe.” Because those statements do not
“purport to interpret the meaning of a statute or regulation,” they are statements of
fact, not opinion. Coastal Abstract Serv., 173 F.3d at 731. GNI asserts its
products were presumed safe until the FDA proved otherwise. But the statutory
provision on which GNI relies, 21 U.S.C. § 342(f), neither mentions a presumption
of safety nor establishes whether a dietary supplement is safe, but defines when a
supplement is safe enough that it is not an “adulterated food.” On the merits, a
reasonable jury could find GNI’s products were not safe based on the recall
evidence and Dr. Sox’s report.2
3. Finally, there is a triable issue of falsity on Count 3, concerning GNI’s
statements that Novedex is “natural” and its ingredients are “naturally occurring
and are found in natural foodstuffs.” These statements were not inactionable
opinion. Because the statements were “capable of . . . being reasonably interpreted
as a statement of objective fact” – namely, that the ingredients were taken from or
2
We reject GNI’s contention that the recall evidence is inadmissible.
Unlike in Toole v. McClintock, 999 F.2d 1430, 1434-35 (11th Cir. 1993), the
FDA’s finding on the safety of aromatase inhibitors was neither “proposed” nor
based on outside research. And unlike in Werner v. Upjohn Co., 628 F.2d 848, 853
(4th Cir. 1980), ThermoLife seeks to introduce the recall evidence to prove the
falsity of GNI’s statements, not GNI’s negligence.
10
could be found in nature – they were statements of fact, not opinion. Coastal
Abstract Serv., 173 F.3d at 731. Based on Dr. Sox’s opinion evidence, a
reasonable jury could conclude that the dietary ingredients in GNI’s products were
not natural or naturally occurring and hence GNI’s statements in Count 3 were
false.
B. The district court erred with respect to materiality, as well. A statement
is material if it is “likely to influence the purchasing decision.” Cook, Perkiss &
Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 244 (9th Cir. 1990).
ThermoLife pointed to GNI’s survey results, Berger’s survey results and Internet
message board posts, all of which indicated that the safety, legality and natural
ingredients of GNI’s products were – to varying degrees – important factors in
consumer purchasing decisions. This evidence establishes a triable issue of
materiality.3
C. There is a triable issue on injury. “We have generally presumed
commercial injury when defendant and plaintiff are direct competitors and
defendant’s misrepresentation has a tendency to mislead consumers.”
TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 826 (9th Cir. 2011). This
3
Because we conclude there is a triable issue on materiality, we do not reach
ThermoLife’s argument that GNI’s statements were material as a matter of law.
11
presumption is warranted even in false advertising cases because, when
competitors vie for the same customers, “a misleading ad can upset their relative
competitive positions” and thereby cause injury. Id. at 827.
GNI contends this presumption is inconsistent with our observation that
“actual evidence of some injury resulting from the deception is an essential
element of the plaintiff’s case.” Harper House Inc. v. Thomas Nelson, Inc., 889
F.2d 197, 210 (9th Cir. 1989). But Harper House held only that a court cannot
assume injury without any evidence of causality and consumer deception. See id.
at 209-10. Consistent with that observation, TrafficSchool.com permits a jury to
infer injury based on evidence of direct competition (which provides a causal link)
and a likelihood of consumer deception. See 653 F.3d at 826.
GNI argues the presumption applies only in the context of standing, but the
two standards – which are derived from the same statutory language – are one and
the same. See id. (“The Lanham Act permits ‘any person’ to sue if he ‘believes
that he . . . is likely to be damaged.’” (alterations in original) (quoting 15 U.S.C.
§ 1125(a))); Southland Sod Farms, 108 F.3d at 1139 (“The elements of a Lanham
Act § 43(a) false advertising claim are: . . . the plaintiff has been or is likely to be
injured as a result of the false statement. . . .” (footnote omitted)).
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A reasonable jury could infer ThermoLife has established a presumption of
commercial injury. GNI does not dispute it directly competed with ThermoLife in
the market for testosterone booster products; and GNI’s literally false statements
necessarily misled consumers. Because GNI has not attempted to rebut the
presumption, ThermoLife has established a triable issue on injury. See
TrafficSchool.com, 653 F.3d at 827.
D. The district court decided only the issue of injury (“actual harm”), but
not damages (“amount of harm”). Thus we decline to decide whether ThermoLife
has presented sufficient evidence to establish entitlement to damages.
IV. Discovery sanctions and Rule 59(e) relief
We review for an abuse of discretion the district court’s denial of discovery
sanctions, refusal to reopen discovery and denial of Rule 59(e) relief based on
newly discovered evidence. See Panatronic USA v. AT&T Corp., 287 F.3d 840,
846 (9th Cir. 2002) (request to reopen discovery); Dixon v. Wallowa County, 336
F.3d 1013, 1022 (9th Cir. 2003) (Rule 59(e) relief); Fjelstad v. Am. Honda Motor
Co., 762 F.2d 1334, 1337 (9th Cir. 1985) (discovery sanctions). We hold that the
district court properly exercised its discretion on each ruling.
A. Case-dispositive sanctions for spoliation were not proper because the
evidence was too speculative to make the requisite finding of willfulness, fault, or
13
bad faith. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). Even
ThermoLife’s expert concluded intentional deletion was merely the “typical
explanation” – but not the only explanation – for the number of deleted files found
on the CEO’s hard drive. The district court’s finding of lack of willfulness was a
“permissible view[] of the evidence.” Anderson v. City of Bessemer City, N.C.,
470 U.S. 564, 574 (1985).
B. ThermoLife failed to “show how allowing additional discovery would
have precluded summary judgment.” Panatronic USA, 287 F.3d at 846 (quoting
Chance v. Pac-Tel Teletrac Inc., 242 F.3d 1151, 1161 n.6 (9th Cir. 2001)). The
district court considered all of the evidence ThermoLife now points to – and in any
case no additional discovery was needed to preclude summary judgment because
ThermoLife raised a triable issue on each element of its claims.
C. ThermoLife was not entitled to Rule 59(e) relief based on newly
discovered evidence. ThermoLife has not shown how “the outcome would likely
have been different” had GNI disclosed the evidence sooner, Dixon, 336 F.3d at
1022, and the evidence was not “newly discovered” because it was “available
before disposition of the motion for summary judgment,” Frederick S. Wyle Prof’l
Corp. v. Texaco, Inc., 764 F.2d 604, 609 (9th Cir. 1985).
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V. Costs
Because we vacate the district court’s grant of summary judgment to GNI,
we also vacate the award of costs to GNI.
VI. Conclusion
In sum, the district court properly excluded the opinions of Hornbuckle and
Epperson and properly denied discovery sanctions and Rule 59(e) relief. But the
district court improperly excluded Dr. Sox’s and Berger’s opinion and erred in
granting summary judgment on ThermoLife’s six Lanham Act claims and unfair
competition claim. Because the FDCA neither precludes nor preempts those
claims and factual issues preclude summary judgment, we vacate the judgment and
remand for further proceedings. Each party shall bear its own costs on appeal.
AFFIRMED in part; VACATED and REMANDED in part.
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