PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS
8:14-CV-00420 DOC (JPRx)
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STEVE W. BERMAN (pro hac vice)
steve@hbsslaw.com
HAGENS BERMAN SOBOL SHAPIRO LLP
1918 Eighth Avenue, Suite 3300
Seattle, WA 98101
Telephone: (206) 623-7292
Facsimile: (206) 623-0594
-and-
LEE M. GORDON (SBN 174168)
lee@hbsslaw.com
HAGENS BERMAN SOBOL SHAPIRO LLP
301 North Lake Avenue, Suite 203
Pasadena, CA 91101
Telephone: (213) 330-7150
Facsimile: (213) 330-7152
Counsel for Plaintiff
and the Proposed Class
UNITED STATES DISTRICT COURT
CENTAL DISTRICT OF CALIFORNIA
SOUTHERN DIVISION
JOSETTE RUHNKE, an individual, et
al.; on behalf of herself and all others
similarly situated,
Plaintiff,
vs.
SKINMEDICA, INC., a Delaware
Corporation, and ALLERGAN, INC., a
Delaware Corporation,
Defendants.
Case No. 8:14-cv-00420 DOC (JPRx)
CLASS ACTION
PLAINTIFF’S OPPOSITION TO
DEFENDANTS’ MOTION TO
DISMISS FIRST AMENDED
CLASS ACTION COMPLAINT
UNDER FEDERAL RULE OF
CIVIL PROCEDURE 12(B)(6)
Date: August 4, 2014
Time: 8:30 a.m.
Ctrm: 9D
Judge: Hon. David O. Carter
Case 8:14-cv-00420-DOC-RNB Document 23 Filed 07/08/14 Page 1 of 34 Page ID #:208
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TABLE OF CONTENTS
Page
I. INTRODUCTION ............................................................................................... 1
II. FACTUAL BACKGROUND ............................................................................. 3
A. The Parties ................................................................................................. 3
B. TNS® Products and the Growth Factor Mix Contained
Therein ...................................................................................................... 4
C. Defendants’ Marketing and Sale of TNS® Products ................................ 5
D. Drug and Cosmetic Regulatory Requirements ......................................... 6
E. Safety Concerns Associated with the TNS® Growth Factor
Mix ............................................................................................................ 7
F. Defendants’ Failure to Disclose the True Regulatory and
Safety Status of TNS® Products .............................................................. 9
G. Plaintiff’s Claims in This Action .............................................................. 9
III. LEGAL STANDARDS ....................................................................................... 9
A. Motion to Dismiss Standards under Rules 8(a), 9(b), and
12(b)(6) ..................................................................................................... 9
B. General Standards for the UCL, CLRA, FAL, and Civil
Deceit ...................................................................................................... 10
IV. ARGUMENT .................................................................................................... 12
A. Plaintiff Adequately Alleges that TNS® Products Qualify as
“Drug” Products. ..................................................................................... 12
B. Plaintiff Sufficiently Alleges that the Omitted Facts about
the Regulatory Status and Safety Status of TNS® Products
Are True. ................................................................................................. 16
1. TNS® Products are unapproved drugs being sold to
consumers illegally. ...................................................................... 16
2. Defendants failed to adequately determine that TNS®
Products are safe, which Defendants were required to
do before marketing and selling such products to
consumers. .................................................................................... 16
3. The TNS® growth factor mix raises genuine safety
conerns. ......................................................................................... 19
C. Plaintiff Adequately Alleges a Duty to Disclose and
Scienter. ................................................................................................... 21
Case 8:14-cv-00420-DOC-RNB Document 23 Filed 07/08/14 Page 2 of 34 Page ID #:209
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D. Plaintiff Adequately Alleges Her Claims Against Defendant
Allergan as a Parent Company that Cross-Promotes the
TNS® Products. ...................................................................................... 21
1. The FAC sufficiently differentiates between
SkinMedica and Allergan. ............................................................ 21
2. The FAC sufficiently alleges that Allergan holds out
TNS® Products to be Allergan products. ..................................... 22
E. Plaintiff Sufficiently Pleads a Claim for Punitive Damages. ................. 22
F. Plaintiff Has Standing to Seek Injunctive Relief. ................................... 23
V. CONCLUSION ................................................................................................. 25
Case 8:14-cv-00420-DOC-RNB Document 23 Filed 07/08/14 Page 3 of 34 Page ID #:210
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TABLE OF AUTHORITIES
Page(s)
CASES
Ashcroft v. Iqbal,
556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) .................................. 9, 10
Bates v. United Parcel Serv., Inc.,
511 F.3d 974 (9th Cir. 2007) ................................................................................... 23
Bell Atl. Corp. v. Twombly,
550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) ...................................... 10
Brazil v. Dole Food Co.,
935 F. Supp. 2d 947 (N.D. Cal. 2013) ..................................................................... 14
Cel–Tech Cmmc’ns, Inc. v. Los Angeles Cellular Tel. Co.,
20 Cal. 4th 163, 973 P.2d 527 (1999)...................................................................... 11
Colgan v. Leatherman Tool Grp., Inc.,
135 Cal. App. 4th 663, 38 Cal. Rptr. 3d 36 (2006) ................................................. 11
Corral v. Carter’s Inc.,
No. 1:13-CV-0262 AWI SKO, 2014 WL 197782 (E.D. Cal. Jan. 16,
2014) ........................................................................................................................ 20
Eckler v. Wal-Mart Stores, Inc.,
No. 12-CV-727-LAB-MDD, 2012 WL 5382218 (S.D. Cal. Nov. 1,
2012) ........................................................................................................................ 20
Estée Lauder, Inc. v. FDA,
727 F. Supp. 1 (D.D.C. 1989) .................................................................................. 12
Falk v. General Motors Corp.,
496 F. Supp. 2d 1088 (N.D. Cal. 2007) ................................................................... 10
Fortyune v. American Multi–Cinema, Inc.,
No. CV 10–5551, 2002 WL 32985838 (C.D. Cal. Oct. 22, 2002) .......................... 25
FTC. v. Pantron I Corp.,
33 F.3d 1088 (9th Cir. 1994) ............................................................................. 14, 15
Case 8:14-cv-00420-DOC-RNB Document 23 Filed 07/08/14 Page 4 of 34 Page ID #:211
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Henderson v. Gruma Corp.,
No. CV 10-04173 AHM .................................................................................... 24, 25
Koehler v. Litehouse, Inc.,
No. CV 12-04055 SI, 2012 WL 6217635 (N.D. Cal. Dec. 13, 2012) ..................... 24
Lujan v. Defenders of Wildlife,
504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed. 2d 351 (1992) ........................................ 23
Manzarek v. St. Paul Fire & Marine Ins. Co.,
519 F.3d 1025 (9th Cir. 2008) ................................................................................. 10
National Council Against Health Fraud v. King Bio Pharm., Inc.,
107 Cal. App. 4th 1336 (2003) .......................................................................... 17, 18
O'Shea v. Littleton,
414 U.S. 488, 94 S.Ct. 669, 38 L.Ed. 2d 674 (1974) .............................................. 24
Otto v. Abbott Labs., Inc..,
No. CV 12-1411-SVW (DTB), 2013 U.S. Dist. Lexis 53287 (C.D.
Cal. Mar. 15, 2013) .................................................................................................. 20
Park v. Welch Foods, Inc.,
No. 5:12-CV-06449-PSG, 2013 WL 5405318 (N.D. Cal. Sept. 26,
2013) ........................................................................................................................ 14
Pedinol Pharmacal, Inc. v. Rising Pharm., Inc.,
512 F. Supp. 2d 137 (E.D.N.Y. 2007) ..................................................................... 15
Peel v. BrooksAmerica Mortg. Corp.,
788 F. Supp. 2d 1149 (C.D. Cal. 2011) ................................................................... 10
Swartz v. KPMG LLP,
476 F.3d 756 (9th Cir. 2007) ............................................................................. 10, 21
United States v. An Article… "Line Away, Temp. Wrinkle Smoother,
Coty",
284 F. Supp. 107 (D. Del. 1968) aff’d, 415 F.2d 369 (3d Cir. 1969) ..................... 15
United States v. An Article ... “Line Away” ...,
415 F.2d 369 (3d Cir. 1969) .................................................................................... 13
United States v. An Article ... “Sudden Change”,
409 F.2d 734 (2d Cir. 1969) .................................................................................... 13
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United States v. Hohensee,
243 F.2d 367 (3rd Cir.1957) (cert. denied, 353 U.S. 976, 77 S.Ct.
1058, 1 L.Ed. 2d 1136 (1957)) ................................................................................ 12
United States v. Kasz Enters.,
855 F. Supp. 534, amended, 862 F. Supp. 717 (D.R.I. 1994) ........................... 14, 15
United States v. Livdahl,
459 F. Supp. 2d 1255 (S.D. Fla. 2005) .................................................................... 12
United States v. Storage Spaces Designated Nos. “8” & “49”,
777 F.2d 1363 (9th Cir. 1985) ................................................................................. 12
Vess v. Ciba-Geigy Corp. USA,
317 F.3d 1097 (9th Cir. 2003) ................................................................................. 10
White v. Ultramar, Inc.,
21 Cal. 4th 563 (1999) ............................................................................................. 23
Williams v. Wells Fargo Bank N.A.,
No. 11-21233-CIV, 2011 WL 4901346 (S.D. Fla. Oct. 14, 2011) ......................... 21
STATUTES
21 C.F.R. § 314 ......................................................................................................... 6, 16
21 C.F.R. §§ 740.10 .................................................................................................. 7, 17
21 U.S.C. § 321 ..................................................................................................... 1, 6, 12
21 U.S.C. § 331 ............................................................................................................... 6
21 U.S.C. § 352 ............................................................................................................... 7
21 U.S.C. § 355 ................................................................................................... 6, 16, 17
21 U.S.C. § 362 ............................................................................................................... 7
Cal. Bus. & Prof. Code §§ 17200, et seq. ........................................................... 9, 10, 11
Cal. Bus. & Prof. Code § 17201 ................................................................................... 10
Cal. Bus. & Prof. Code § 17203 ................................................................................... 10
Cal. Bus. & Prof. Code §§ 17500, et seq. ................................................................. 9, 11
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Cal. Bus. & Prof. Code § 17508 ................................................................................... 17
Cal. Civ. Code § 1709 ......................................................................................... 9, 12, 23
Cal. Civ. Code § 1710 ......................................................................................... 9, 12, 23
Cal. Civil Code §§ 1750, et seq. ............................................................................... 9, 11
Cal. Civ. Code § 1770 ................................................................................................... 11
Cal. Civ. Code § 1780 ................................................................................................... 22
Cal. Civ. Code § 3294 ....................................................................................... 2, 3, 4, 23
Cal. Health & Safety Code § 109875. ............................................................................ 9
Cal. Health & Safety Code § 109925 ............................................................................. 7
Cal. Health & Safety Code § 110290 ........................................................................... 17
Cal. Health & Safety Code § 111330 ............................................................................. 7
Cal. Health & Safety Code § 111335 ............................................................................. 7
Cal. Health & Safety Code § 111550 ....................................................................... 7, 16
Cal. Health & Safety Code § 111560 ....................................................................... 7, 16
Cal. Health & Safety Code § 111730 ........................................................................... 17
Consumers Legal Remedies Act ..................................................................................... 9
FDCA ..................................................................................................................... passim
Sherman FD&C ..................................................................................................... passim
OTHER AUTHORITIES
FDA Cosmetic Labeling Manual, 1991 WL 11250880 (FDA Oct. 1,
1991) ........................................................................................................................ 17
U.S. Food and Drug Administration, FDA 101: BIOLOGICAL PRODUCTS
(2008) ............................................................................................................... 4, 7, 13
Fed. R. Civ. P. 8 .......................................................................................................... 1, 9
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Fed. R. Civ. P. 9 .................................................................................................. 1, 10, 21
Fed. R. Civ. P. 12 ............................................................................................................ 9
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010428.11 701810 V1
I. INTRODUCTION
Defendants SkinMedica, Inc. and Allergan, Inc. market and sell a misbranded
line of skin care “cosmeceuticals” called “TNS®” (short for “Tissue Nutrient
Solutions”). TNS® products (“TNS® Products”) contain a mix of human growth
factors and other biological components that have been bioengineered from human
foreskin tissue. By design, TNS® Products induce cell growth and stimulate other
physiological effects on the skin. Not surprisingly, these products qualify as “drug”
products under federal and state laws alike.
In her First Amended Class Action Complaint (“FAC”), Plaintiff Josette
Ruhnke alleges that Defendants market and sell misbranded TNS® Products without
FDA-approval, without conducting well-controlled safety studies (as required by law),
and despite genuine safety concerns. The challenged conduct violates the federal
Food, Drug, & Cosmetics Act (“FDCA”) as well as the parallel provisions of
California’s Sherman Food, Drug, and Cosmetics Law (“Sherman FD&C”). It also
constitutes unlawful, unfair, and deceptive conduct in violation of California’s
consumer protection statutes.
Defendants now move to dismiss the FAC on grounds that Plaintiff does not
plead her claims sufficiently and plausibly under Rules 8(a) and 9(b). Defendants are
incorrect. The FAC comports with applicable pleading standards and provides clear
notice of the alleged misconduct. In particular, Defendants’ arguments fail for the
following reasons.
Plaintiff adequately alleges that TNS® Products qualify as “drug” products.
Skin creams often qualify as cosmetics and drug products, and TNS® Products
certainly fit the bill. A “drug” includes any article “intended to affect the structure or
any function of the body of man.” 21 U.S.C. § 321(g)(1)(C). Based on Defendants’
promotional materials and other relevant sources, the FAC amasses substantial support
for the claim that TNS® – a proprietary growth factor mix – is intended to affect the
structure or function of the skin. Indeed, the whole idea of using TNS® growth
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factors in topical skin creams is to promote skin cell growth, slow the skin’s aging
process, increase the skin’s thickness and elasticity, and otherwise affect the skin’s
structure or function. Therefore, Plaintiff sufficiently alleges that TNS® Products are
drug products.
Plaintiff sufficiently alleges that the omitted facts about the regulatory and
safety status of TNS® Products are true. According to the FAC: (i) TNS® Products
are unapproved and misbranded drugs being marketed and sold illegally to consumers
in the United States; (ii) Defendants have failed to adequately determine that TNS®
Products are safe (as required by law); and (iii) TNS® Products pose genuine safety
concerns. These allegations are supported, among other things, by Defendants
mistaken view that TNS® Products are strictly cosmetics, Defendants’ lack of any
new drug application for TNS® Products, and public reports confirming that safety
studies for such products are lacking. The FAC also pleads ample facts about the
safety concerns posed by growth factors contained in TNS® (including cancer risks).
Plaintiff adequately alleges Defendants’ duty to disclose and scienter. The
FAC alleges that Defendants had a duty to disclose the true regulatory/safety status of
TNS® Products. This duty arises from the FDCA and Sherman FD&C, Defendants’
superior and exclusive knowledge of the true facts, and Defendants’ concealment of
such facts.
Plaintiff adequately alleges claims against Defendant Allergan for cross-
promoting TNS® Products. In December 2012, Allergan acquired SkinMedica.
TNS® Products are now cross-promoted both as SkinMedica and Allergan products.
Given this, the FAC adequately alleges that Allergan is liable for the same unlawful
sales as SkinMedica (from and after the date of acquisition).
Plaintiff adequately pleads her claim for punitive damages. Contrary to
Defendants’ Motion, Civil Code Section 3294(b) does not apply here because this is
not an action by an employee against an employer. Thus, there is no need for Plaintiff
to make allegations about Defendants’ “officers, directors, or managing agents,” and
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Plaintiff otherwise alleges willful misbranding and concealment of the sort that readily
supports punitive damages.
Plaintiff has standing to seek injunctive relief. Plaintiff purchased a misbranded
TNS® Product. As set forth in the FAC, Defendants continue to market and sell
misbranded TNS® Products. Injunctive relief is warranted in cases of this sort.
II. FACTUAL BACKGROUND
A. The Parties
Defendant SkinMedica, Inc. (“SkinMedica”) is a pharmaceutical company
headquartered in Carlsbad, California. (FAC ¶ 11.) Defendant Allergan, Inc.
(“Allergan”) is a health care company headquartered in Irvine, California. (FAC
¶ 12.) SkinMedica markets and sells TNS® Products. (FAC ¶ 2.) In or about
December 2012, Allergan acquired SkinMedica along with the rights and
responsibilities associated with the TNS® Product line. (FAC ¶ 12.) At present,
TNS® Products are also promoted as Allergan products. (Id.)
Plaintiff Josette Ruhnke purchased one of the TNS® Products – TNS Essential
Serum – through her doctor’s office in California during the putative class period, for
personal use. (FAC ¶ 9.) If she had known that TNS® Products are being sold
illegally without prior regulatory approvals, or that safety for these products had not
been adequately determined, or about the potential health risks associated with TNS®,
then she would not have purchased a TNS® Product (or would have paid less for it).
(FAC ¶¶ 7, 10.) As a result, she overpaid for TNS® Products and suffered economic
damage just as thousands of other consumers did. (FAC ¶¶ 7, 10, 70, 73-77, 85.)
This is not a personal injury case and Plaintiff need not prove that TNS®
causes cancer or other adverse reactions. This is a putative class action that seeks:
(i) to address the economic injuries suffered by thousands of consumers who
purchased expensive and misbranded TNS® Products, and (ii) to prevent future
injuries from the ongoing marketing of misbranded drug products to consumers.
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010428.11 701810 V1
B. TNS® Products and the Growth Factor Mix Contained Therein
TNS® Products contain a proprietary mix of “human growth factors” and other
biological ingredients under the TNS® brand name and the “NouriCel-MD®”
trademark. (FAC ¶¶ 2-3.) This TNS growth factor mix was derived from human
foreskin tissue. (FAC ¶ 3.) Growth factors are proteins intended to mobilize,
stimulate, decrease or otherwise alter the production of cells in the body. (FAC ¶ 4.)
For example, growth factors can promote cell division. (Id.) In regulating biological
products, the FDA’s center for Drug Evaluation and Research describes “growth
factors” as “proteins that affect the growth of a cell.”1
In 2007, SkinMedica’s research leader for TNS®, RE Fitzpatrick, published an
article (the “Fitzpatrick article”) entitled “Endogenous Growth Factors in
Cosmeceuticals.” (Defs. Req. for Judicial Notice, June 3, 2014, ECF No. 21 (“RJN”),
Ex. 2.) 2 According to SkinMedica’s research leader: “Topical application of human
growth factors in multiple clinical studies has been shown to reduce the signs and
symptoms of skin aging, including [statistically] significant reduction in fine lines and
wrinkles and increase in dermal collagen synthesis.” (Id. at 350.) The SkinMedica
research proclaims that the flagship TNS Recovery Complex reduces fine lines,
wrinkles, and sun damage around the eyes, and increases collagen and epidermal
thickness. (Id. at 353-54.) Moreover, according to the Fitzpatrick article, topical
application of growth factors and cytokines affects the dermal matrix. (Id. at 356.)3
Plaintiff alleges that SkinMedica markets several TNS® Products, all of which
contain substantially the same proprietary mix of growth factors and other proteins—
1 U.S. Food and Drug Administration, FDA 101: BIOLOGICAL PRODUCTS, at 2 (2008),
available at: http://www.fda.gov/forconsumers/ consumerupdates/ucm048341.htm.
2 The parties agree that the Court may take judicial notice of the articles attached to
Defendants’ RJN (i.e., Exs. 1 and 2).
3 For instance, the author explains how topical application of growth factors can
penetrate hair follicles, sweat glands, or compromised skin, and interact with cells in
the epidermis (such as keratinocytes) to produce signaling cytokines that affect cells
deeper in the dermis. (Id.) It can stimulate keratinocyte growth, which can amplify
the original growth factor effects, produce other growth factors, and regenerate and
remodel the dermal extracellular matrix. (Id.)
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i.e., each TNS® Product contains the same growth factor mix in one concentration or
another. (FAC ¶¶ 19-22.) Each TNS® Product is a topical skin care product that is
developed, marketed, and sold by SkinMedica. (Id.) The labeling and packaging of
each product omits the same material facts and Plaintiff alleges the same misbranding
under the same laws for the same reasons with respect to each product. (FAC ¶ 22.)
C. Defendants’ Marketing and Sale of TNS® Products
Defendants intend for their TNS® Products to have a physiological effect on the
skin, i.e., Defendants promote the ability of these products to stimulate skin cell
growth, slow the skin’s aging process, reduce sun damage, increase collagen
production, increase the skin’s thickness, and regenerate and remodel the skin’s
structure. (See, e.g., RJN, Ex. 2; FAC ¶¶ 40, 46.) As set forth in the FAC, the
following additional facts show that Defendants intend for TNS® to affect the
structure and/or function of the skin:
SkinMedica’s 2004 IPO states: “We are a specialty pharmaceutical
company focused on developing, acquiring and commercializing
products that treat dermatologic conditions and diseases and improve
the appearance of skin” (¶23) (emphasis added);
Defendants market TNS® Products as physician-dispensed
“cosmeceuticals”, and sell these products primarily through
dermatologist offices (¶¶ 20, 23);
Defendants promote TNS® growth factors as key ingredients in the
TNS Product line (¶23);
SkinMedica’s Product Guide describes the TNS® line as vital to the
anti-aging process and working with the skin’s “natural cellular
restructuring process” to “reduce the appearance of fine lines and
wrinkles, diminish age spots, and improve skin texture and elasticity”
(¶ 25, Fig. 1, ¶ 40; see also RJN, Ex. 2);
In its Product Guide, SkinMedica advertises its growth factors as
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proteins that “regulate cellular growth and the activity of skin cells”
(¶ 25);
In its Product Guide, SkinMedica advertises how a “physiologically
balanced” mix of growth factors is needed in the skin “to maintain a
healthy skin structure” (¶ 25, Fig. 1);
In the Product Guide, SkinMedica also advertises that growth factors
are proteins that “regulate cellular growth and the activity of skin
cells” (Id.);
The Product Guide further describes TNS®, a “Tissue Nutrient
Solution,” as “a combination of growth factors and other naturally
occurring elements that are crucial to the regeneration of healthy skin”
(Id.);
The Product Guide also describes its flagship TNS® Product as the
first and only “patented anti-aging treatment” using a combination of
“growth factors clinically proven to improve” skin tone, texture,
elasticity, etc. (¶ 26); and
TNS® Products are designed to affect the skin’s structure and function
by inducing skin cell division and growth, and stimulating the
formation of collagen and elastic fibres in the skin. (¶ 40.)
D. Drug and Cosmetic Regulatory Requirements
Under the FDCA, a “drug” includes “articles (other than food) intended to affect
the structure or any function of the body of man.” 21 U.S.C. § 321(g)(1)(C). The
FDCA generally prohibits delivery of a new drug in interstate commerce absent an
approved new drug application. See 21 U.S.C. § 355.4 A new drug application must
include adequate tests showing the drug product to be safe. See 21 U.S.C. § 355 (b),
(d); see also 21 C.F.R. § 314. In addition, the FDCA prohibits delivery of
“misbranded” drug products in interstate commerce. See 21 U.S.C. § 331. A drug
4 In some cases, drug manufacturers may need to file and seek approval of a Biologics
License Application or conform to OTC “monograph” requirements. (FAC ¶¶ 29-31.)
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product will be deemed “misbranded” for a variety of reasons, including if it fails to
disclose any material fact about the drug to consumers, if the labeling omits the
established name or quantity of any active ingredient, or if it fails to warn about unsafe
uses (among other things). See 21 U.S.C. § 352.5
The FDA explicitly states that its Center for Drug Evaluation and Research
regulates certain “categories of biological products mostly produced by biotechnology
methods, including: … growth factors …” (emphasis added).6 According to the FAC,
there is no approved drug application for TNS® Products, and these growth factor
products are misbranded under the FDCA and Sherman FD&C. (FAC ¶¶ 6, 42-44,
85.) Neither the FDA nor the California Department of Public Health (“DPH”) has
determined TNS® Products (or the growth factors therein) to be safe; neither has
approved TNS® Products for marketing or sale. (Id.) Instead, the sale of TNS®
Products is prohibited by law. (Id.)
Furthermore, under the FDCA and Sherman FD&C, a “cosmetic” product will
be deemed “misbranded” if the labeling is false or misleading in any particular. See
21 U.S.C. § 362; see also Cal. Health & Safety Code at §111730. Notably, any
cosmetic product whose safety has not been adequately substantiated prior to
marketing with safety tests covering each ingredient shall be deemed misbranded
under the FDCA unless it conspicuously warns consumers that the product’s safety
has not been adequately determined. See 21 CFR §§ 740.1, 740.10. The TNS®
Product labeling contains no such warning.
E. Safety Concerns Associated with the TNS® Growth Factor Mix
As a threshold matter, Defendants were required by law and public policy to
conduct adequate safety tests of TNS® Products and each ingredient therein, or warn
consumers that the safety of TNS® Products had not been determined. The FAC
alleges that Defendants have not conducted controlled safety studies in accordance
5 See parallel provisions of California’s Sherman FD&C, i.e., Cal. Health & Safety
Code §§ 109925(c), 111330, 111335, 111550, 111560. (FAC ¶¶ 32-34, 37.)
6 See FDA 101: BIOLOGICAL PRODUCTS, at 2.
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with federal and state regulations. (FAC ¶¶ 7, 60, 62-64, 69, 85.)7 In assessing the
safety of growth factors in skin creams, the DermNet New Zealand Trust explains:
“Much remains unknown at this time, especially in terms of long-term risk or stability,
when growth factors are used in cosmetics and applied to skin. Well-controlled
clinical studies are lacking.” (FAC ¶ 52.)8
In addition, the FAC pleads that TNS® Products (or the growth factors therein)
pose genuine safety concerns including increased cancer risks. (FAC ¶ 5.) Growth
factors have known carcinogenic potential because they literally cause cells to grow,
and every growth factor has certain tumor types that secrete the specific growth factor.
(FAC ¶ 50.) According to the FAC, substantial research addresses the links between
growth factors – including those contained in TNS® – and cancer. (FAC ¶ 51.) An
example is referenced in the FAC, namely, the “Finch article”. The article discusses
the facts that KGF may contribute to tumor growth in specific situations, it may cause
tumors to metastasize, it may protect malignant cells, and/or it may foster secondary
malignancies. (RJN, Ex. 1 at 812, 819.)
Plaintiff amply alleges that TNS® Products (or the growth factors therein) pose
health risks. The FAC looks at two approved growth factor products (Regranex® and
Kepivance®), the labeling of which provide prominent safety warnings about
increased cancer risks. (FAC ¶¶ 55-58.) Regranex® contains a platelet-derived
growth factor (“PDGF”) found in studies to increase the risks of cancer. PDGF is
associated with TNS®, either as a direct ingredient or because TNS® can induce the
body to produce it. (See RJN, Ex. 2 at 356.) Kepivance®, a form of the “KGF-1”
growth factor, was found to increase the growth of tumor cells. Admittedly, TNS®
Products contain KGF-1. (FAC ¶ 51.)
7 Defendants do not even disclose the name and quantity of each active ingredient in
TNS®; the product labels merely refer to a “Human Fibroblast Conditioned Media”.
(FAC ¶ 24.)
8 SkinMedica’s own research in 2007 acknowledged that more controls on product
quality and stability were needed and the effects of growth factors in conjunction with
other procedures or products should be evaluated further. (RJN, Ex. 2 at 357.)
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F. Defendants’ Failure to Disclose the True Regulatory and Safety
Status of TNS® Products
Plaintiff alleges that, in marketing and selling these expensive cosmeceuticals to
consumers, Defendants fail to disclose the true regulatory and safety status of TNS®
Products. Namely, Defendants omit the facts that: (i) TNS® Products are misbranded
drug products being sold illegally without prior regulatory approval; (ii) safety for
TNS® Products has not been adequately determined; and (iii) the TNS® growth factor
mix poses genuine safety concerns. (FAC ¶ 7.) Defendants had a duty to disclose
these facts based on the governing drug and cosmetic regulations and in light of
Defendants’ superior knowledge and concealment of the true facts. (FAC ¶¶ 59-66.)
G. Plaintiff’s Claims in This Action
Plaintiff alleges that Defendants’ conduct violates the Sherman FD&C
(California’s Health & Safety Code §§ 109875 et seq.) and the following consumer
protection statutes: (i) California’s Business & Professions Code §§ 17200, et seq. (the
Unfair Competition Laws or “UCL”); (ii) California Civil Code §§ 1750, et seq. (the
Consumers Legal Remedies Act or “CLRA”); (iii) California’s Business &
Professions Code §§ 17500, et seq. (the False Advertising Laws or “FAL”); and
(iv) California Civil Code §§ 1709-1710 (Deceit). (FAC ¶¶ 8, 91-131.)
III. LEGAL STANDARDS
A. Motion to Dismiss Standards under Rules 8(a), 9(b), and 12(b)(6)
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the
legal sufficiency of the claims asserted in the complaint. See Ashcroft v. Iqbal, 556
U.S. 662, 678-79, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).9 Rule 12(b)(6) is read in
conjunction with Federal Rule of Civil Procedure Rule 8(a), which requires a short
and plain statement of the claim showing that the pleader is entitled to relief. While
the Rule 8 pleading standard does not require detailed factual allegations, it does
9 Internal citations and quotations omitted and emphasis in original unless otherwise
indicated.
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require more than mere legal conclusions. Iqbal, 556 U.S. at 678.
On a motion to dismiss, the district court accepts as true a plaintiff’s well-pled
factual allegations and construes all factual inferences in the light most favorable to
the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th
Cir. 2008). Dismissal of a complaint for failure to state a claim is not proper where a
plaintiff has alleged “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d
929 (2007). “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.” Iqbal, 556 U.S. at 678.
To the extent applicable, Federal Rule of Civil Procedure 9(b) requires that
allegations of fraud be “state[d] with particularity.” However, “omissions” need not
be pled with the same degree of specificity. See Falk v. General Motors Corp., 496 F.
Supp. 2d 1088, 1098-99 (N.D. Cal. 2007) (time, place, and content of omissions need
not be pled with same specificity as affirmative misrepresentations); see also Peel v.
BrooksAmerica Mortg. Corp., 788 F. Supp. 2d 1149, 1159-60 (C.D. Cal. 2011). The
purpose of Rule 9(b) is to require a plaintiff 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.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007).10
B. General Standards for the UCL, CLRA, FAL, and Civil Deceit
Under California Business & Professions Code §§ 17200, et. seq. (the Unfair
Competition Law or “UCL”), any person or entity that has engaged, is engaging, or
threatens to engage “in unfair competition may be enjoined in any court of competent
jurisdiction.” Cal. Bus. & Prof. Code §§ 17201, 17203. “Unfair competition” includes
10 “[I]f particular averments of fraud are insufficiently pled under Rule 9(b), a district
court should ‘disregard’ those averments, or ‘strip’ them from the claim. The court
should then examine the allegations that remain to determine whether they state a
claim.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003).
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“any unlawful, unfair or fraudulent business act or practice and unfair, deceptive,
untrue or misleading advertising.” Id. at § 17200. The California Supreme Court
construes “unfair competition” broadly. See Cel–Tech Cmmc’ns, Inc. v. Los Angeles
Cellular Tel. Co., 20 Cal. 4th 163, 180, 973 P.2d 527 (1999) (“Because Business and
Professions Code section 17200 is written in the disjunctive, it establishes three
varieties of unfair competition—acts or practices which are unlawful, or unfair, or
fraudulent”). Here, Plaintiff alleges that the prohibited marketing and sale of
misbranded TNS® Products was unlawful. Additionally or alternatively, the
challenged acts and omissions were unfair and/or deceptive to a reasonable consumer.
The Consumers Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq. (the
“CLRA”) makes illegal any “unfair methods of competition and unfair or deceptive
acts or practices undertaken by any person in a transaction intended to result or which
results in the sale or lease of goods or services to any consumer.” Cal. Civ. Code
§ 1770(a). In particular, Section 1770(a)(2) prohibits “[m]isrepresenting the source,
sponsorship, approval, or certification of goods or services;” Section 1770(a)(5)
prohibits “[r]epresenting that goods or services have . . . characteristics, . . . uses,
benefits, or quantities which they do not have . . .;” Section 1770(a)(7) prohibits
“[r]epresenting that goods . . . are of a particular standard, quality, or grade . . . if they
are of another.” The CLRA is to be “liberally construed and applied to promote its
underlying purposes, which are to protect consumers against unfair and deceptive
business practices and to provide efficient and economical procedures to secure such
protection.” Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th 663, 680, 38
Cal. Rptr. 3d 36, 46 (2006). Plaintiff alleges that the challenged misbranding and
omissions violate Section 1770(a), subparts (2), (5), and (7).
The False Advertising Law, California Business & Professions Code §§ 17500,
et. seq. (the “FAL”) broadly proscribes deceptive advertising in California.
Section 17500 generally prohibits a company from making any untrue or misleading
statement in advertising products, which reasonably should be known to be untrue or
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misleading, or not to sell those products as advertised. The challenged misbranding
and omissions constitute false advertising under the FAL.
Plaintiff also alleges that the challenged misbranding and omissions of material
fact constitute Deceit under California Civil Code §§ 1709-1710. Section 1709
provides: “One who willfully deceives another with intent to induce him to alter his
position to his injury or risk, is liable for any damage which he thereby suffers.”
Under Section 1710, Deceit includes: “[i] The suggestion, as a fact, of that which is
not true, by one who does not believe it to be true; or [ii] the suppression of a fact, by
one who is bound to disclose it, or who gives information of other facts which are
likely to mislead for want of communication of that fact.”
IV. ARGUMENT
A. Plaintiff Adequately Alleges that TNS® Products Qualify as “Drug”
Products.
A “drug” includes any article “intended to affect the structure or any function of
the body of man.” 21 U.S.C. § 321(g)(1)[C] (emphasis added). The vendor’s “intent
may be derived or inferred from labeling, promotional material, or any other relevant
source.” United States v. Storage Spaces Designated Nos. “8” & “49”, 777 F.2d
1363, 1366 (9th Cir. 1985). The FDCA is “given a liberal interpretation to effectuate
its high purpose of protecting unwary consumers in vital matters of health.” United
States v. Hohensee, 243 F.2d 367, 370 (3rd Cir.1957) (cert. denied, 353 U.S. 976, 77
S.Ct. 1058, 1 L.Ed. 2d 1136 (1957)); see also United States v. Livdahl, 459 F. Supp.
2d 1255, 1260 (S.D. Fla. 2005) (finding allegations sufficiently alleged “that one of
the ‘intended uses’ of [defendant’s] product was the treatment of facial wrinkles, and
that this intended use brings the product within the definitions of a ‘drug’ set forth in
21 U.S.C. § 321(g)(1)(C)”).
“Some products, such as a skin cream, can be both a cosmetic and a drug under
the FDCA. If a product is both, it must comply with the stricter requirements
applicable to drugs.” Estée Lauder, Inc. v. FDA, 727 F. Supp. 1, 2 (D.D.C. 1989); see
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also United States v. An Article ... “Sudden Change”, 409 F.2d 734, 739 (2d Cir.
1969) (skin cream qualified as drug product); United States v. An Article ... “Line
Away” ..., 415 F.2d 369, 371-372 (3d Cir. 1969) (same).
As set forth in the FAC, Defendants intend for TNS® Products to have a
physiological effect on the body, and in particular, to affect the structure or function of
the skin. Through press releases, research publications, product guides, and labeling,
Defendants promote the ability of these products to stimulate skin cell growth, slow
the skin’s aging process, reduce sun damage, increase collagen production, increase
the skin’s thickness, and regenerate and remodel the skin’s structure. (FAC ¶¶ 40, 46;
see also RJN, Ex. 2.) From the outset, SkinMedica has presented itself as a
pharmaceutical company that markets physician-dispensed cosmeceuticals, including
“Tissue Nutrient Solutions” products. (FAC ¶¶ 20, 23.)
Defendants promote “growth factors” as the key ingredients in TNS® Products
(FAC ¶ 23), since growth factors stimulate cell growth – indeed the only reason to
advertise the use of growth factors is to highlight their physiological effects.
Importantly, the FDA publicizes: “The Center for Drug Evaluation and Research
(CDER) within FDA regulates other categories of biological products mostly
produced by biotechnology methods, including: . . . growth factors (proteins that
affect the growth of a cell).”11
Equally important, SkinMedica’s Product Guide advertises how: (i) growth
factors work as proteins that “regulate cellular growth and the activity of skin cells;”
(ii) a “physiologically balanced” mix of growth factors is needed in the skin “to
maintain a healthy skin structure;” (iii) TNS® is “a combination of growth factors and
other naturally occurring elements that are crucial to the regeneration of healthy skin;”
(iv) TNS® is vital to the anti-aging process and works with the skin’s “natural cellular
restructuring process” to “reduce the appearance of fine lines and wrinkles, diminish
age spots, and improve skin texture and elasticity;” and (v) SkinMedica further
11 See FDA 101: BIOLOGICAL PRODUCTS, at 2 (emphasis added).
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describes its flagship TNS® Product as the first and only “patented anti-aging
treatment” using a combination of “growth factors clinically proven to improve” skin
tone, texture, and elasticity. (FAC ¶ 25, Fig. 1, ¶ 40; see also RJN, Ex. 2.)
The marketing, product labeling and advertising for TNS® Products, and the
supporting publications discussed above, objectively convey how Defendants intend
for TNS® to have a physiological effect on the structure and/or function of the skin.
The corresponding allegations in the FAC are not conclusory. To the contrary, the
FAC puts Defendants on notice of how and why TNS® Products qualify as drug
products.
Defendants repeatedly rely on United States v. Kasz Enters., 855 F. Supp. 534,
amended, 862 F. Supp. 717 (D.R.I. 1994), with regard to assessing a vendor’s
objective intent about its products. (Mem. of P. & A. in Supp. of Defs’ Mot. to
Dismis, June 23, 2014, ECF No. 20-1 (“MTD”) at 7, 17.) Kasz helps to show how
TNS® Products qualify as drugs. In Kasz, the court found that certain hair loss
products (“Solutions 109”) qualify as drug products “because they are represented to
have a physiological effect on the body of man, namely, to cause hair growth and to
prevent hair loss.” 855 F. Supp. at 540. The Ninth Circuit reached a similar
conclusion in FTC. v. Pantron I Corp., 33 F.3d 1088, 1104 (9th Cir. 1994) (“We see
no error in the district court’s conclusion that the Helsinki Formula is intended to
affect the bodily function of hair growth”).12 Similarly, TNS® Products qualify as
drug products because Defendants represent their products to have a physiological
effect on the human body by promoting skin cell growth, reducing wrinkles, sun
damage and the effects of aging, promoting collagen production, increasing the skin’s
thickness and elasticity, and otherwise regenerating or remodeling the skin’s structure.
Next, Defendants rely on Dole Food Co.13 and Welch Foods, Inc.14 to suggest
12 Moreover, in Pantron I Corp., the Ninth Circuit had no trouble distinguishing a case
in which a vendor advertises “only that [a lotion] would cause a temporary, superficial
change in the user’s appearance” for a matter of hours. Id. (emphasis added).
13 Brazil v. Dole Food Co., 935 F. Supp. 2d 947, 964 (N.D. Cal. 2013).
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that the FAC fails to specify how TNS® Products qualify as drugs. (MTD at 18.)
These cases, however, are inapposite. They concern food labeling claims, and articles
of “food” are expressly excluded from the definition of “drugs”). The cases have no
bearing on whether the FAC adequately alleges that TNS® Products qualify as drug
products (which, plainly, they do).
Defendants also contend that there are other skin care products on the market
containing human growth factors, which are not addressed in the FAC. (MTD at 19.)
No doubt, other companies could be selling unapproved skin creams that qualify as
drug products. This in no way undercuts the fact that TNS® Products are drug
products. Defendants further contend that the FDA has not specifically announced
that TNS® Products are “drugs” or that they are unlawfully sold. (Id.) In truth: “The
fact is that many drugs are in widespread use without FDA approval as ‘new drugs.’
The FDA is well aware of the marketing of unapproved drugs. . . . The FDA cannot,
as a practical matter, use its enforcement powers to remove all unapproved drugs from
the market place at once.” Pedinol Pharmacal, Inc. v. Rising Pharm., Inc., 512 F.
Supp. 2d 137, 140 (E.D.N.Y. 2007) (finding no question that skin cream for dry skin,
containing lactic acid as an active ingredient, qualified as a drug product).
Finally, Defendants argue that TNS® Products are “not intended to be drug
products.” Defendants misconstrue the relevant “intent” under the FDCA and
Sherman FD&C. What matters in this context are the “intended uses or effects of the
product”, i.e., whether the products are intended to affect the structure or any function
of the body. See Kasz, 855 F. Supp. at 539 (emphasis added); see also United States v.
An Article… "Line Away, Temp. Wrinkle Smoother, Coty", 284 F. Supp. 107, 111 (D.
Del. 1968) aff’d, 415 F.2d 369 (3d Cir. 1969) (“Nor is it of significance that Line
Away is described as a cosmetic on some of the labels, selling literature or
advertisements. The essential question is whether the product falls within the
14 Park v. Welch Foods, Inc., No. 5:12-CV-06449-PSG, 2013 WL 5405318 (N.D. Cal.
Sept. 26, 2013).
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definition of a drug in the Act”). Therefore, it does not help Defendants to disclaim
that its products are intended “to be drug products” given that – in light of the intended
uses and effects on the skin – TNS® Products fall well within the statutory definition
of a drug.
B. Plaintiff Sufficiently Alleges that the Omitted Facts about the
Regulatory Status and Safety Status of TNS® Products Are True.
1. TNS® Products are unapproved drugs being sold to consumers
illegally.
As set forth in Section IV(A) above, the FAC pleads considerable facts showing
that TNS® Products qualify as drug products. There is no dispute, however, that
Defendants market and sell TNS® Products without FDA approval and without
complying with the regulatory scheme for drug products. Simply put, then, the FAC
sufficiently alleges that TNS® Products are unapproved and misbranded drugs being
sold to consumers illegally.
2. Defendants failed to adequately determine that TNS® Products are
safe, which Defendants were required to do before marketing and
selling such products to consumers.
Through the FDA approval process, a vendor must affirmatively show that a
drug product is safe. See, e.g., 21 U.S.C. § 355 (b), (d) (applicant’s investigation must
include adequate safety tests showing that the drug product is safe).15 Without
pursuing and securing a new drug application (FAC ¶ 43), Defendants bypassed the
federal and state drug safety review entirely. Defendants do not even disclose the
name and quantity of each active ingredient in TNS®. This failure alone constitutes
misbranding. (FAC ¶ 24.) In any event, Defendants offer no studies to substantiate
the safety of their so-called “Human Fibroblast Conditioned Media” – either as a
whole or with respect to the many biological ingredients contained therein.
Accordingly, the FAC sufficiently alleges that Defendants failed to conduct adequate
15 See also 21 C.F.R. § 314 (providing for a thorough review of drugs (i) to facilitate
approval of drugs shown to be safe and (ii) to ensure the disapproval of drugs not
shown to be safe); Cal. Health & Safety Code §§ 111550, 111560 (requiring new drug
applications to be supported by adequate safety tests).
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safety studies for TNS® Products as required by law. (FAC ¶¶ 7, 52, 54, 62.)16
In their Motion, Defendants claim that SkinMedica has “safely” sold these
products to thousands of consumers across the country for over a decade. (MTD at 1,
15.) In truth, the safety of TNS® Products cannot be substantiated based merely on
Defendants’ purported history of sales without major incident reports. Adequate
safety testing is mandatory. See 21 U.S.C. § 355 (d) (drug safety tests required); see
also FDA Cosmetic Labeling Manual, 1991 WL 11250880, at *17 (FDA Oct. 1, 1991)
(In order for safety of a cosmetic to be adequately substantiated, qualified scientific
experts must determine safety from toxicological and other test data). Defendants do
not show that, in fact, they performed adequate safety tests. They do not show that
TNS® Product consumers were evaluated for malignancies or increased health risks
over the past decade. At most, Defendants suggest that consumers chose not to
spontaneously report major incidents to Defendants, which establishes little if
anything. Without TNS® Product warnings on the label, consumers who did
experience health problems would have little reason to report them to Defendants
(except perhaps for immediate skin reactions).
Defendants argue that advertising claims based on “lack of substantiation” are
not cognizable under the California consumer protection laws. (MTD at 15.) The
argument is misplaced. The “lack of substantiation” cases – which spring from
National Council Against Health Fraud v. King Bio Pharm., Inc., 107 Cal. App. 4th
1336, 1344-45 (2003) – deal with a different situation than the one presented here.
In King Bio, the California Court of Appeal considered a claim that a
homeopathic remedy was not shown to be effective as advertised. The court
addressed the fact that Business & Professions Code Section 17508 permits the
16 TNS® Products are cosmetics and drugs for the reasons discussed above.
Furthermore, a cosmetics vendor must warn consumers that “safety for [the] product
has not been determined” unless each ingredient has been substantiated for safety with
adequate test data. See 21 CFR §§ 740.1, 740.10; see also Cal. Health & Safety Code
§§ 110290, 111730. Safety for TNS® Products (and each ingredient) has never been
determined with adequate tests. Yet, Defendants do not warn consumers of this.
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Attorney General (but not private persons) to require an advertiser to substantiate an
advertising claim. See King Bio, at 1343. The court held that private plaintiffs have
the burden of producing evidence that an advertising claim is false or misleading. In
the process, the court distinguished claims based on regulatory violations like the ones
raised here. The court in King Bio observed that:
The FDA permits homeopathic remedies included in the
Homeopathic Pharmacopoeia to be marketed. King Bio’s
products are included in the Homeopathic Pharmacopoeia
and otherwise comply with FDA regulations. Thus, prior to
the marketing of a product by King Bio, the general efficacy
and safety of the remedy has been substantiated to the extent
required by federal law. Public policy would not be
furthered under these circumstances by requiring King Bio
to substantiate its advertising claims as to general efficacy
every time a private plaintiff brings a false advertising
action. Id. at 1348.
The case at hand is quite different. Here, by contrast: (i) the FDA does not
permit new drugs to be marketed without prior submission of adequate safety tests;
(ii) TNS® Products do not comply with the FDA regulations and parallel state law
provisions for drugs and cosmetics; (iii) prior to marketing, Defendants did not
conduct adequate safety tests of TNS® Products to the extent required by state and
federal law, and of course (iv) Defendants did not secure regulatory approvals. In
light of the foregoing, Plaintiff can and does sufficiently allege that Defendants failed
to adequately determine the safety of TNS® Products as required by law.17
Stated another way, Defendants were required by law to show that TNS®
17 Significantly, not one of Defendants’ “lack of substantiation” cases deals with the
laws requiring vendors to show that their drug products are safe (or in the case of
cosmetics, to warn consumers whenever the safety of the products has not been
determined through an examination of adequate test data).
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Products were safe before marketing and selling those products to consumers – their
failure to do so is both demonstrable and actionable here.
3. The TNS® growth factor mix raises genuine safety conerns.
The FAC sufficiently alleges additional facts showing that TNS® raises genuine
safety concerns (including potential cancer risks).
First, at the most basic level, the FAC alleges that TNS can cause adverse
reactions. According to the FAC, Defendants have ignored consumer reports of
adverse reactions relating to TNS® Products. (FAC ¶ 63.)18 In addition, the scientific
literature has observed adverse reactions (such as allergies, eye issues, and rashes) to
growth factors associated with TNS®. (FAC ¶ 50.) The TNS Product labeling,
however, does not warn of any adverse reactions. (FAC ¶ 54.) In short, the FAC
adequately alleges facts showing that TNS® Products may cause adverse reactions,
which are known to Defendants but not disclosed to consumers.
Second, the FAC alleges facts showing that TNS® has carcinogenic potential
because it can cause cells to grow, and every growth factor has certain tumor types
that secrete the specific growth factor. (FAC ¶ 50.) Indeed, Defendants do not dispute
that TNS® stimulates cell growth. (See, e.g., RJN, Ex. 2.) Common sense leads one
to ask: “What stops TNS® from stimulating cancer cells?”
Third, the Regranex® and Kepivance® studies illustrate cancer-related risks
associated with one or more of the ingredients in TNS®. (FAC ¶¶ 55-58.) Defendants
argue that Regranex® and Kepivance® are drugs that differ from TNS® Products, for
example, because they are not applied topically to intact skin and do not have a
balanced mix of 110 growth factors. (MTD at 9.) Drug and cosmetic vendors,
however, must substantiate that each ingredient is safe (not just the product as a
whole). The growth factors associated with Regranex® and Kepivance® (KGF-1,
PDGF) have been shown to pose cancer-related risks. The same growth factors are
18 Defendants assert that Plaintiff fails to point to a specific incident of an adverse
reaction. (MTD at 12.) But, this is a tongue-in-cheek observation. Defendants do not
(and cannot) say that they are unaware of adverse reaction reports.
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contained in TNS® and could stimulate such growth factors in the body. Defendants
offer no evidence showing that these risks dissipate once the growth factors are
incorporated into TNS® and applied topically to the skin.
Defendants emphasize that TNS® Products contain a physiologically-balanced
mix of 110 growth factors and other types of proteins, rather than just 1 or 2 growth
factors. Yet, this only invites more serious health concerns. Exactly which other
ingredients are found in TNS®, in what quantities, and how can Defendants say those
ingredients are safe without controlled safety testing of each ingredient and the TNS®
Products as a whole?19
Fourth, the scientific literature also reflects that growth factors (including those
associated with TNS®) can pose cancer-related risks. (FAC ¶ 51.) The Finch article
referenced in the FAC is but one example. Defendants note a few observations from
the 2006 Finch article addressing a lack of evidence that KGF generally promotes the
growth of tumors,20 and how KGF may have beneficial health effects. (MTD at 4.)
Defendants simply disregard the potential cancer risks actually discussed in the article,
including the facts that KGF may contribute to tumor growth in specific situations, it
may cause metastasis, and it may foster malignancies. (RJN, Ex. 1 at 812, 819.)
Defendants cite to Corral as an example of safety-related allegations that were
found to be deficient,21 but the allegations in Corral dealt with crib bumpers, not drugs
or cosmetics. There is no regulatory framework requiring vendors to substantiate that
a crib bumper is safe. Furthermore, the plaintiff in Corral did not allege a factual link
between the defendant’s crib bumper and any risk of harm. Here, by contrast, there is
19 Neither Otto v. Abbott Labs., Inc.., No. CV 12-1411-SVW (DTB), 2013 U.S. Dist.
Lexis 53287 (C.D. Cal. Mar. 15, 2013) nor Eckler v. Wal-Mart Stores, Inc., No. 12-
CV-727-LAB-MDD, 2012 WL 5382218 (S.D. Cal. Nov. 1, 2012) deals with drugs or
cosmetics, and neither case intimates that only a combination of ingredients could
pose safety concerns, as Defendants wrongly suggest.
20 The more recent Regranex® study, however, now provides such evidence.
21 Corral v. Carter’s Inc., No. 1:13-CV-0262 AWI SKO, 2014 WL 197782 (E.D. Cal.
Jan. 16, 2014).
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a regulatory framework that requires vendors of drugs and cosmetics to substantiate
the safety of their products through adequate testing or warn consumers that safety of
the products has not been determined. Plaintiff also alleges a factual link between one
or more of the ingredients found in Defendants’ TNS® mix and increased cancer risks.
For the foregoing reasons, TNS® raises genuine safety concerns.
C. Plaintiff Adequately Alleges a Duty to Disclose and Scienter.
Defendants maintain that there is no duty to disclose the alleged facts about the
regulatory and safety status of TNS® Products. This is because, in Defendants’ view,
no regulatory or safety issues exist in the first place. For reasons discussed in Sections
IV(A) and (B) above, Plaintiff adequately alleges that TNS® Products are unapproved
and misbranded drugs, Defendants have not shown TNS® to be safe as required by
law, and TNS® otherwise poses genuine safety concerns. Consequently, Defendants
had a duty to disclose these facts consistent with the FDCA, Sherman FD&C, and
California’s consumer protection laws. Moreover, the FAC sufficiently alleges a duty
to disclose and scienter arising from Defendants’ superior knowledge and concealment
of such facts. (FAC ¶¶ 59-66.)22
D. Plaintiff Adequately Alleges Her Claims Against Defendant Allergan
as a Parent Company that Cross-Promotes the TNS® Products.
1. The FAC sufficiently differentiates between SkinMedica and Allergan.
Under Rule 9(b), a plaintiff must identify the role of each defendant in the
alleged misconduct. See Swartz, 476 F.3d at 765. On the other hand, a plaintiff need
not break out and repeat all allegations separately for each defendant. See Swartz, 476
F.3d at 765; see also Williams v. Wells Fargo Bank N.A., No. 11-21233-CIV, 2011
WL 4901346, at *12 (S.D. Fla. Oct. 14, 2011) (“[W]hen multiple defendants are
named in a complaint, the allegations can and usually are to be read in such a way that
each defendant is having the allegation made about him individually”). In this case,
22 Under Rule 9(b), knowledge and intent may be alleged generally. See Fed. R. Civ.
P. Rule 9(b).
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the FAC contains extensive allegations as to the marketing and sale of misbranded
TNS® Products, and the corresponding failure to disclose material facts about the
regulatory/safety status of TNS® Products. All such allegations directly and
unambiguously apply to Defendant SkinMedica, Inc. in the first instance.
Beyond this, the FAC also alleges that Defendant Allergan, Inc. acquired
SkinMedica on or about December 19, 2012. (FAC ¶ 12.) SkinMedica is now “an
Allergan Company”. (FAC ¶ 2.) Since the acquisition, Allergan has held out the
SkinMedica TNS® Products to be “Allergan products” too, and Allergan has
represented to consumers that all safety concerns associated with these products are
described on package inserts that accompany its products. (FAC ¶¶ 12, 49.) In sum,
the FAC adequately identifies the role of each Defendant in the alleged misconduct.
2. The FAC sufficiently alleges that Allergan holds out TNS® Products to
be Allergan products.
According to Defendants, TNS® Products are not Allergan products. (MTD at
21.) The FAC adequately alleges otherwise. Namely, while SkinMedica certainly
markets and sells TNS® Products, the same products are cross-promoted as Allergan
products. (FAC ¶¶ 12, 49.) In this regard, Allergan publishes “a list of Allergan
products” for which it claims that “all safety concerns regarding our products are
described on the package inserts that accompany them.”23 TNS® Products are
included on the Allergan product list. Based upon the cross-promotion of TNS®
Products by SkinMedica and Allergan, Plaintiff adequately alleges claims against both
Defendants in this action.
E. Plaintiff Sufficiently Pleads a Claim for Punitive Damages.
A consumer who suffers damage as a result of the use of a practice proscribed
under the CLRA may recover punitive damages. Cal. Civ. Code § 1780(a)(4). In
addition, anyone who willfully deceives another person may be liable for punitive
23 Letter from Sulaiman Hamidi, Allergan Manager of Health & Safety, to Allergan
Customers, May 2014 (emphasis added), available on Allergan, Inc.’s website at:
http://www.allergan.com/assets/pdf/msds/ehs-material_safety_data_sheet_letter.pdf.
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damages. Cal. Civ. Code §§ 1709, 1710, 3294(a). In this case, Plaintiff adequately
pleads that she suffered damages as a result of Defendants’ CLRA violations and
willful deceit. (FAC ¶¶ 101-112, 123-131). Furthermore, Plaintiff alleges that
Defendants suppressed material facts with the intent to deprive consumers of money.
(FAC ¶ 129.) These allegations adequately support a prayer for punitive damages.
Defendants argue that the FAC fails to plead how “officers, directors, or
managing agents” for Defendants consciously disregarded, authorized, or ratified the
alleged fraud. They mistakenly rely on pleading rules in Cal. Civ. Code § 3294(b),
which explicitly and exclusively apply to claims by employees against employers.24
Predictably, Defendants sole authority – White v. Ultramar, Inc., 21 Cal. 4th 563
(1999) – is a wrongful termination case. Here, Plaintiff does not bring an action
against her employer, and thus, Civil Code § 3294(b) is inapposite. In other words,
Plaintiff need not plead that an “officer, director, or managing agent” for each
Defendant consciously disregarded, authorized, or ratified the challenged practices.
F. Plaintiff Has Standing to Seek Injunctive Relief.
To demonstrate Article III standing, a plaintiff must establish that: (1) they have
suffered an “injury in fact,” (2) there is a “causal connection between the injury and
the conduct complained of,” and (3) it is “likely, as opposed to merely speculative,
that the injury will be redressed by a favorable decision.” Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed. 2d 351 (1992). For
injunctive relief, a plaintiff must show a threat of repeated injury. See Bates v. United
Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007).
Defendants do not dispute that Plaintiff alleges a concrete injury-in-fact caused
by the challenged conduct. Instead, Defendants contend that there is no threat of
repeated injury now that Plaintiff is aware of the true facts about TNS® Products.
(MTD at 23-24.) While past wrongs standing alone do not show a threat of future
24 “An employer shall not be liable for damages pursuant to subdivision (a), based
upon acts of an employee of the employer. . . .” Id. (emphasis added); see also White
v. Ultramar, Inc., 21 Cal. 4th 563, 566-67 (1999).
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injury, “past wrongs are evidence bearing on whether there is a real and immediate
threat of repeated injury[.]” O'Shea v. Littleton, 414 U.S. 488, 496, 94 S.Ct. 669, 38
L.Ed. 2d 674 (1974). To be sure, past sales combined with ongoing marketing of
misbranded products should suffice to show a threat of repeated injury for purposes of
Article III standing:
If the Court were to construe Article III standing for FAL
and UCL claims as narrowly as the Defendant advocates,
federal courts would be precluded from enjoining false
advertising under California consumer protection laws
because a plaintiff who had been injured would always be
deemed to avoid the cause of the injury thereafter (“once
bitten, twice shy”) and would never have Article III
standing. While Plaintiffs may not purchase the same []
products as they purchased during the class period, because
they are now aware of the true content of the products, to
prevent them from bringing suit on behalf of a class in
federal court would surely thwart the objective of
California’s consumer protection laws. . . . Defendant has
not presented evidence or even alleged that it has removed
its allegedly misleading advertising from its products. With
such advertising remaining on supermarket shelves,
Plaintiffs, as representatives of a class, should be entitled to
pursue injunctive relief on behalf of all consumers in order
to protect consumers from Defendant’s alleged false
advertising.
Henderson v. Gruma Corp., No. CV 10-04173 AHM AJWX, 2011 WL
1362188, at *7-8 (C.D. Cal. Apr. 11, 2011); see also Koehler v. Litehouse, Inc., No.
CV 12-04055 SI, 2012 WL 6217635, at *6 (N.D. Cal. Dec. 13, 2012) (“The Court
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agrees with Henderson. To do otherwise would eviscerate the intent of the California
legislature in creating consumer protection statutes because it would effectively bar
any consumer who avoids the offending product from seeking injunctive relief”);
Fortyune v. American Multi–Cinema, Inc., No. CV 10–5551, 2002 WL 32985838, at
*7 (C.D. Cal. Oct. 22, 2002).
In this case, Plaintiff alleges that she purchased an unapproved and misbranded
drug product that was manufactured and unlawfully marketed by Defendants. Since
the challenged conduct is ongoing, Defendants can continue to subject Plaintiff and
the putative class to similarly unlawful, unfair, and deceptive marketing in the future.
At the motion to dismiss stage, Plaintiff’s prior purchase combined with Defendants’
ongoing marketing sufficiently shows a threat of repeated injury.
V. CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss the First Amended
Class Action Complaint should be denied in its entirety.
DATED: July 8, 2014 Respectfully submitted,
HAGENS BERMAN SOBOL SHAPIRO LLP
By: /s/ Lee M. Gordon
Lee M. Gordon
lee@hbsslaw.com
301 North Lake Avenue, Suite 203
Pasadena, CA 91101
Telephone: (213) 330-7150
Email: lee@hbsslaw.com
Steve W. Berman (admitted pro hac vice)
steve@hbsslaw.com
HAGENS BERMAN SOBOL SHAPIRO LLP
1918 8th Avenue, Suite 3300
Seattle, WA 98101
Telephone: (206) 623-7292
Email: steve@hbsslaw.com
Attorneys for Plaintiff Josette Ruhnke and the
Proposed Class
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CERTIFICATE OF SERVICE
I hereby certify that on July 8, 2014, I electronically filed the foregoing
document using the CM/ECF system which will send notification of such filing to the
e-mail addresses registered in the CM/ECF system, as denoted on the Electronic Mail
Notice List, and I hereby certify that I have caused to be mailed a paper copy of the
foregoing document via the United States Postal Service to the non-CM/ECF
participants indicated on the Manual Notice List generated by the CM/ECF system.
/s/ Andy Katz
ANDY KATZ
Case 8:14-cv-00420-DOC-RNB Document 23 Filed 07/08/14 Page 34 of 34 Page ID #:241
