Karathanos v. Quincy Bioscience Holding Company, Inc. et al

Motion to Dismiss for Failure to State a Claim and for Lack of Jurisdiction

E.D.N.Y.June 29, 2017

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK JOHN KARATHANOS, on behalf of himself and all others similarly situated, Plaintiff, vs. QUINCY BIOSCIENCE HOLDING COMPANY, INC., a corporation; QUINCY BIOSCIENCE, LLC, a limited liability company; PREVAGEN, INC., a corporation d/b/a SUGAR RIVER SUPPLEMENTS; QUINCY BIOSCIENCE MANUFACTURING, LLC, a limited liability company; MARK UNDERWOOD, individually and as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC.; and MICHAEL BEAMAN, individually as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC. Defendants. : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :: Case No. 2:17-cv-01091 ADS AYS DEFENDANTS’ NOTICE OF MOTION TO DISMISS PLAINTIFF’S COMPLAINT Hon. Arthur D. Spatt Case 2:17-cv-01091-ADS-AYS Document 24 Filed 06/29/17 Page 1 of 4 PageID #: 216 1 TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE that Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman hereby move before the Honorable Arthur D. Spatt, United States District Judge for the Eastern District of New York, for an order dismissing Plaintiff James Vanderwerff’s Complaint and each claim stated therein. This motion is made pursuant to Rules 8, 9(b), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure, on the grounds that: (a) Plaintiff fails to plausibly allege any valid claim under New York General Business Law §§ 349 and 350 against any defendant; (b) Plaintiff fails to plausibly allege any valid claim against defendants Underwood and Beaman under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, and the claim also fails to meet Rule 9(b)’s heightened pleading standard; (c) Plaintiff lacks standing to pursue any claim for injunctive relief; and (d) there is no sufficient basis to exercise personal jurisdiction over defendants Underwood and Beaman. PLEASE TAKE FURTHER NOTICE that this motion is made in accordance with the Court’s Order, dated April 29, 2017 (Dkt. No. 14); Case 2:17-cv-01091-ADS-AYS Document 24 Filed 06/29/17 Page 2 of 4 PageID #: 217 2 PLEASE TAKE FURTHER NOTICE that this motion relies upon the accompanying memorandum of points and authorities and the declarations of William P. Cole, Mark Underwood and Michael Beaman, submitted and filed herewith, and upon the pleadings and papers filed in this action. Dated: June 29, 2017 Jeffrey S. Jacobson Kelley Drye & Warren LLP 101 Park Avenue New York, NY 10178 Tel: (212) 808-5145 Fax: (212) 808-7897 jjacobson@kelleydrye.com By: /s/ William P. Cole Matthew R. Orr (admitted pro hac vice) William P. Cole (admitted pro hac vice) CALL & JENSEN, APC 610 Newport Center Drive, Suite 700 Newport Beach, CA 92660 Tel: (949) 717-3000 Fax: (949) 717-3100 morr@calljensen.com wcole@calljensen.com Attorneys for Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., dba Sugar River Supplements, Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman Case 2:17-cv-01091-ADS-AYS Document 24 Filed 06/29/17 Page 3 of 4 PageID #: 218 3 CERTIFICATION OF FILING AND SERVICE I hereby certify that on the 29th day of June 2017, a copy of the foregoing DEFENDANTS’ NOTICE OF MOTION TO STAY PROCEEDING was filed via Electronic Case Filing. Notice of this filing will be sent to all parties via the Court’s Electronic Case Filing System. By: /s/ William P. Cole Matthew R. Orr (admitted pro hac vice) William P. Cole (admitted pro hac vice) CALL & JENSEN, APC 610 Newport Center Drive, Suite 700 Newport Beach, CA 92660 Tel: (949) 717-3000 Fax: (949) 717-3100 morr@calljensen.com wcole@calljensen.com Attorneys for Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., dba Sugar River Supplements, Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman Case 2:17-cv-01091-ADS-AYS Document 24 Filed 06/29/17 Page 4 of 4 PageID #: 219 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK JOHN KARATHANOS, on behalf of himself and all others similarly situated, Plaintiff, vs. QUINCY BIOSCIENCE HOLDING COMPANY, INC., a corporation; QUINCY BIOSCIENCE, LLC, a limited liability company; PREVAGEN, INC., a corporation d/b/a SUGAR RIVER SUPPLEMENTS; QUINCY BIOSCIENCE MANUFACTURING, LLC, a limited liability company; MARK UNDERWOOD, individually and as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC.; and MICHAEL BEAMAN, individually as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC. Defendants. : : : : : : : : : : : : : : : : : : : : : : : : : Case No. 2:17-cv-01091 ADS AYS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT Hon. Arthur D. Spatt Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 1 of 28 PageID #: 220 i TABLE OF CONTENTS I. STATEMENT OF FACTS .............................................................................................. 1 II. INTRODUCTION ........................................................................................................... 5 III. LEGAL STANDARDS ................................................................................................... 6 A. Rule 8: The Twombly/Iqbal Standard ................................................................................6 B. Heightened Standard Under Fed. R. Civ. P. 9(b) ..............................................................7 C. Personal Jurisdiction: Federal Rule of Civil Procedure 12(b)(2) ......................................8 IV. ARGUMENT ................................................................................................................... 9 A. Karathanos Fails to Plausibly Allege a Claim Under New York General Business Law §§ 349 and 350 Because it is Based on An Invalid Lack of Substantiation Theory .......................................................................................................9 B. The Court Should Dismiss the RICO Claims..................................................................10 1. Karathanos Fails to Allege Predicate Acts with Particularity, as Required by Rule 9(b) ......................................................................................................................12 2. Karathanos Fails to Plead the RICO Element of Proximate Causation with Particularity, as Required by Rule 9(b)........................................................................13 3. The Complaint does not Contain Adequate Factual Allegations to Plausibly Infer that Defendants Specifically Intended to Defraud ..............................................14 C. Karathanos Lacks Standing to Pursue any Claim for Injunctive Relief ..........................16 D. The Court Lacks Personal Jurisdiction over Underwood and Beaman ...........................18 V. CONCLUSION .............................................................................................................. 21 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 2 of 28 PageID #: 221 ii TABLE OF AUTHORITIES Federal Cases Arma v. Buyseasons, Inc., 591 F. Supp. 2d 637 (S.D.N.Y. 2008) ....................................................................................... 19 Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987) .................................................................................................................. 20 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................... 6, 7, 15, 16 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .................................................................................................................... 6 Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997)........................................................................................................ 18 Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) ............................................................................................................ 20, 21 Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181 (2d Cir. 2005)...................................................................................................... 16 City of Los Angeles v. Lyons, 461 U.S. 95 (1983) .................................................................................................................... 16 Crude Oil Commodity Litigation, 2007 WL 1946553 (S.D.N.Y. Jun. 28, 2007) ............................................................................. 8 Destfino v. Reiswig, 630 F.3d 952 (9th Cir. 2015) ...................................................................................................... 7 Devon Drive Lionville LP v. Parke Bancorp Inc., 2016 WL 7475816 (E.D. Pa. Dec. 29, 2016) ...................................................................... 11, 13 Dolan v. PHL Variable Ins. Co., 2016 WL 6879622 (M.D. Pa. Nov. 22, 2016) ............................................................................ 8 Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990 (9th Cir. 2014) .................................................................................. 11, 14, 15, 16 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 3 of 28 PageID #: 222 iii First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763 (2d Cir. 1994)............................................................................................ 10, 11, 13 Gallagher v. Chipotle Mexican Grill, Inc., 2016 WL 454083 (N.D. Cal. 2016) .......................................................................................... 17 Hoffman v. Natural Factors Nutritional Products Inc., 2014 WL 2916452 (D.N.J. June 26, 2014) ........................................................................... 9, 10 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ............................................................................................................ 11, 13 In re Integrated Resources Real Estate Ltd. Partnerships Securities Litigation, 850 F. Supp. 1105 (S.D.N.Y. 1993) .......................................................................................... 11 In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204 (2d Cir. 2003)........................................................................................................ 8 Karabu Corp. v. Gitner, 16 F. Supp. 2d 319 (S.D.N.Y. 1998) ......................................................................................... 19 Katzman v. Victoria’s Secret Catalogue, 167 F.R.D. 649 (S.D.N.Y. 1996) .............................................................................................. 11 Levine v. First American Title Ins. Co., 682 F. Supp. 2d 442 (E.D. Pa. 2010) ........................................................................................ 14 Lum v. Bank of America, 361 F.3d 217 (3d Cir. 2004)................................................................................................ 11, 12 McNair v. Synapse Group, Inc., 672 F.3d 213 (3d Cir. 2012).......................................................................................... 16, 17, 18 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Young, 1994 WL 88129 (S.D.N.Y. Mar. 15, 1994) ................................................................................ 8 Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993)........................................................................................................ 7 Moore v. PaineWebber, Inc., 189 F.3d 165 (2d Cir. 1999)............................................................................................... passim Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016)...................................................................................................... 16 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 4 of 28 PageID #: 223 iv Ontel Prods., Inc. v. Project Strategies Corp., 899 F. Supp. 1144 (S.D.N.Y. 1995) .......................................................................................... 20 O’Shea v. Littleton, 414 U.S. 488 (1974) .................................................................................................................. 17 Parness v. Christie, 2015 WL 4997430 (D.N.J. Aug. 19, 2015) .............................................................................. 11 Penguin Grp. (USA), Inc. v. Am. Buddha, 609 F.3d 30 (2d Cir. 2010).......................................................................................................... 8 Pilates, Inc. v. Current Concepts Kenneth Endelman, 1996 WL 599654 (S.D.N.Y. Oct. 18, 1996) ............................................................................. 19 Quinn v. Walgreen Co., 958 F. Supp. 2d 533 (2013) ........................................................................................................ 9 Robinson v. Hornell Brewing Co., 2012 WL 1232188 (D.N.J. Apr. 11, 2012) ............................................................................... 17 Sathianathan v. Smith Barney, Inc., 2006 WL 538152 (S.D.N.Y. 2006) ........................................................................................... 14 Sears v. Likens, 912 F.2d 889 (7th Cir. 1990) ...................................................................................................... 8 Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) ...................................................................................................... 8 Thomas v. Ashcroft, 470 F.3d 491 (2d Cir. 2006)........................................................................................................ 8 Tomasino v. Estee Lauder Companies Inc., 44 F. Supp. 3d 251 (E.D.N.Y. 2014) ........................................................................ 9, 16, 17, 18 State Cases Kreutter v. McFadden Oil Corp., 522 N.E.2d 40 (N.Y. 1988) ....................................................................................................... 19 Federal Statutes 18 U.S.C. § 1341 ........................................................................................................................... 12 18 U.S.C. § 1962 ........................................................................................................................... 10 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 5 of 28 PageID #: 224 v State Statutes New York General Business Law §§ 349 and 350 ............................................................ i, 5, 9, 10 Federal Rules Fed. R. Civ. P. 8 ........................................................................................................................... 12 Fed. R. Civ. P. 8(a)(2) ..................................................................................................................... 6 Fed. R. Civ. P. 9(b) ................................................................................................................ passim Fed. R. Civ. P. 12(b)(2)................................................................................................................ i, 8 State Rules N.Y. C.P.L.R. § 302 ...................................................................................................................... 18 N.Y. C.P.L.R. § 302(a)(1) ............................................................................................................. 18 N.Y. C.P.L.R. § 302(a)(2) ............................................................................................................. 18 N.Y. C.P.L.R. § 302(a)(3) ............................................................................................................. 19 N.Y. C.P.L.R. § 302(a)(4) ............................................................................................................. 19 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 6 of 28 PageID #: 225 1 MEMORANDUM OF POINTS AND AUTHORITIES I. STATEMENT OF FACTS This case arises from Plaintiff John Karathanos’s alleged purchase of Prevagen®, a dietary supplement marketed for supporting memory and other cognitive benefits. Karathanos claims Prevagen® does not work, but his Complaint does not describe any scientific study so concluding. Instead, he simply alleges that Defendants “do not have studies” substantiating Prevagen®’s efficacy. Compl. (Doc. 1), ¶ 34. He further alleges that even though a randomized, double-blind, placebo-controlled study resulted in positive findings for Prevagen®’s efficacy, those findings do not, in his opinion, “provide reliable evidence” of a treatment effect. Id. ¶ 28. Based on these allegations, on February 27, 2017, Karathanos filed the Complaint against six defendants: Quincy Bioscience Holding Company, Inc.; Quincy Bioscience, LLC; Prevagen, Inc.; Quincy Bioscience Manufacturing, LLC; Mark Underwood; and Michael Beaman. Complaint (Doc. 1). The Complaint challenges the marketing of Prevagen® Regular Strength, Prevagen® Extra Strength, Prevagen® Chewables, and Prevagen® Professional. Id. ¶ 18. The active ingredient in the Prevagen® at issue is aqoaequorin, a calcium-binding protein originally discovered in aequoria victoria jellyfish. Id. Prevagen®’s advertising and labeling state that Prevagen® “improves memory”; supports “healthy brain function,” including a “sharper mind” and “clearer thinking”; and is “clinically tested” and “clinically shown to help with mild memory problems associated with aging.” Id. ¶ 1, 26. Karathanos alleges that Defendants “do not have studies showing that orally-administered apoaequorin can cross the human blood brain barrier and, therefore, they do not have evidence that apoaequorin enters the human brain.” Id. ¶ 34. (Notably, however, he does not allege that the only way a substance can affect human brain function is by crossing the human blood-brain Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 7 of 28 PageID #: 226 2 barrier, nor does he allege that the Prevagen® label says anything about crossing the human blood-brain barrier.) Karathanos further alleges that Defendants base the representations about Prevagen®’s benefits “primarily” on the results of a scientific study known as the “Madison Memory Study,” but he claims that the Madison Memory Study does not substantiate the representations. Compl. (Doc.1), ¶¶ 27-28. When presented with a motion to dismiss pursuant to Rule 12(b)(6), “the Court may consider documents that are referenced in the complaint,” as well as “documents that the plaintiff relied on in bringing suit and that are either in the plaintiff’s possession or that the plaintiff knew of when bringing suit[.]” Millennium Health, LLC v. EmblemHealth,Inc., --- F. Supp. 3d ---, No. 16-CV-748 (JGK), 2017 WL 979048, at *1 (S.D.N.Y Mar. 9, 2017). Karathanos extensively references, and relies upon, the Madison Memory Study in his Complaint. The Madison Memory Study was a 90-day randomized, double-blind, placebo-controlled study designed “to determine whether Prevagen with apoaequorin (10 mg) improves quantitative measures of cognitive function in community dwelling, older adults.” Declaration of William P. Cole, Exh. 1 (Kenneth C. Lerner, Madison Memory Study: A Randomized, Double-Blinded, Placebo- Controlled Trial of Apoaequorin in Community-Dwelling, Older Adults, at 1 (Aug. 1, 2016))(“Memory Study”); see also Compl. ¶ 27. For the Memory Study, 218 adults aged 40 to 91, each with self-reported memory difficulties, were randomly assigned to receive either apoaequorin capsules or placebos, and were instructed to take one capsule per day. Memory Study at 2, 4. Examiners obtained a baseline cognitive score for each participant using an eight- question screening tool called AD8, used to differentiate between adults facing normal cognitive aging and those with early signs of dementia. Id. at 2. In the study, AD8 scores of 0 to 2 are Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 8 of 28 PageID #: 227 3 considered reflective of normal aging or “very mild[]” cognitive impairment-i.e, healthy, older adults. Id. On days zero, eight, 30, 60, and 90, participants completed nine quantitative computerized tests designed to measure several areas of cognitive function. Id. at 2-3. The tests were selected from the Cogstate Research Battery. Id. at 2. These tests are favored for their “brief, repeatable” tasks on which performance cannot be meaningfully impacted by “practice.” Id. at 2. They included: International Shopping List (ISL) and International Shopping List - Delayed Recall (ISRL), which measured verbal learning and memory, respectively; Groton Maze Learning (GML) and Groton Maze Learning - Delayed Recall (GMP), which measured executive function and memory, respectively; Detection (DET), which measured psychomotor function; Identification (IDN), which measured visual learning; and One Back (ONB) and Two Back (TWOB), which measured working memory. Id. at 2. At the end of 90 days, test results were analyzed to, among other things, “assess whether sample selection bias occurred” and “prevent[] . . . false positive associations . . . and loss minimization of data.” Id. at 4. If a test result is statistically significant, the result is likely attributable to the specific factor tested-here, orally-administered apoaequorin. To calculate the level of statistical significance, researchers use a test statistic known as the “p-value.” The lower the p-value, the less likely the test results are due to chance alone. In the Madison Memory Study, researchers used a p-value of .05. Memory Study at 4. In other words, results with a value of p ≤0.05 were considered reliable evidence that participants’ improvements in the performance of the Cogstate Research Battery tests were attributable to apoaequorin. The Memory Study showed “statistically significant results in the AD8 0-1 and AD8 0-2 subgroups,” which “contain individuals with either minimal or no cognitive impairment, and are Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 9 of 28 PageID #: 228 4 the appropriate population for a dietary supplement intended to support people with mild memory loss associated with aging.” Id. at 5. Specifically, results showed that participants in the treatment group with AD8 scores of 0-2-in other words, otherwise healthy adults with mild but not severe memory impairment-showed statistically significant improvements as compared to placebo recipients on the GML (p=0.04), OCL (p=0.02), and IDN (p=0.037) tests, and showed trends toward statistical significance on the GMR test (p=0.107). Id. at 9. Participants in the treatment group with AD8 scores of 0-1 also experienced statistically significant improvements as compared to placebo recipients on the GMR (p=0.011), DET (p=0.015), and OCL (p=0.01) tests, and showed trends toward statistical significance on the GML (p=0.10) and ISL (p=0.13) tests. Id. Because Prevagen® is “intended for healthy, non-demented individuals,” results from the AD8 0-1 and AD8 0-2 subgroups were considered “the most relevant to the efficacy of the product.” Memory Study at 2. Accordingly, the study concluded that “Prevagen demonstrated the ability to improve aspects of cognitive function in older participants with either normal cognitive aging or very mild impairment, as determined by AD8 screening.” Id. at 9. Karathanos himself acknowledges that the Memory Study produced statistically-significant results. See Compl. (Doc.1) ¶ 28 (acknowledging a “few positive findings”). While not disputing the existence of those results, the validity of the tests, or the qualifications of the scientists who performed them, Karathanos nevertheless alleges that the Madison Memory Study did not “provide reliable evidence of a treatment effect” because, he contends, “researchers conducted more than 30 post hoc analyses . . . , looking at data broken down by several variations of smaller subgroups.” Id. Karathanos does not explain what is meant by “30 post hoc analyses,” and the Madison Memory Study itself provides no support for Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 10 of 28 PageID #: 229 5 the allegation. He then claims that the act of focusing on a subgroup rather than the entire study population “greatly increases the probability that some statistically significant changes would occur by chance alone.” Id. What Karathanos characterizes as “the few positive findings on isolated tasks for small subgroups of the study population” did not, in his opinion, “provide reliable evidence of a treatment effect.” Id. No support is provided for that conclusory statement. Finally, although the Complaint contains virtually no allegations distinguishing between, or identifying, the roles or alleged actions of the various defendants, it attempts to allege, against all Defendants, a consumer fraud claim under New York General Business Law §§ 349 and 350 (hereafter, “the § 349 claim”). In a senseless overreach, Karathanos also attempts to allege a federal Racketeer Influenced and Corrupt Organization (“RICO”) claim against Mark Underwood and Michael Beaman. Id. ¶ 48. II. INTRODUCTION For several reasons, the Court should dismiss each of Karathanos’s claims. First, the § 349 claim is based on an invalid lack of substantiation theory. Second, Karathanos’s overreaching RICO claim does not meet Rule 9(b)’s heightened pleadings standard. In fact, although Karathanos claims mail fraud and wire fraud as the predicate acts, he does not allege with particularity even a single mailing or wire transmission, and he fails to adequately plead proximate causation. Even more fundamentally, the Complaint does not contain adequate factual allegations to plausibly infer that defendants Underwood and Beaman specifically intended to defraud, and therefore does not show a plausible entitlement to relief under RICO. Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 11 of 28 PageID #: 230 6 Third, Karathanos lacks Article III standing to pursue any claim for injunctive relief. Having alleged that Prevagen is a single-purpose product that does not work, and that had he known the “truth” about Prevagen®, he would not have purchased it, Karathanos is not at any risk of being harmed by Defendants’ alleged misrepresentations again, and has no standing to seek injunctive relief. Fourth, the Court should dismiss this case against the two individual defendants because it lacks personal jurisdiction over them. There is no allegation either individual defendant is a resident of New York. Nor does the Complaint allege facts sufficient to establish that New York’s long-arm statute supports jurisdiction over either individual defendant. As such, Karathanos has not sustained his initial burden of establishing personal jurisdiction over the individual defendants. Moreover, based upon the facts set forth in the individual defendants’ declarations, no facts could exist that would support the exercise of personal jurisdiction over them. Based on those facts, even if New York’s long-arm statute did support jurisdiction, which it does not, the exercise of personal jurisdiction over the individual defendants would violate due process. III. LEGAL STANDARDS A. Rule 8: The Twombly/Iqbal Standard Federal Rule of Civil Procedure 8(a)(2) requires a complaint to set forth “a short and plain statement of the claim showing that a pleader is entitled to relief.” This rule demands “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(internal citation omitted). The complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Iqbal, 556 U.S. at 678. A claim has facial Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 12 of 28 PageID #: 231 7 plausibility only if 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. “Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. (internal quotation and citation omitted). When considering plausibility, courts must also consider an “obvious alternative explanation” for the defendant’s behavior. Id. at 682. While a court should construe the factual allegations in the light most favorable to the plaintiff, the court does not accept as true “legal conclusions,” “labels and conclusions” or a “formulaic recitation of the elements of a cause of action[.]” Iqbal, 556 U.S. at 678. A complaint does not suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id. (citation omitted). B. Heightened Standard Under Fed. R. Civ. P. 9(b) Rule 9(b) imposes a heightened pleading requirement concerning allegations of fraud, including RICO claims predicated on mail fraud or wire fraud. Moore v. PaineWebber, Inc., 189 F.3d 165, 173 (2d Cir. 1999). Rule 9(b) requires that the circumstances constituting the fraud must be stated with particularity. Fed. R. Civ. P. 9(b). To satisfy this standard, the plaintiff must “specify the statements its claims were false or misleading, give particulars as to respect in which plaintiffs contend the statements were fraudulent, state when and where the statements were made, and identify those responsible for the statements.” Moore, 189 F.3d at 173. Furthermore, “Rule 9(b) is not satisfied where the complaint vaguely attributes the alleged fraudulent statements to ‘defendants’.” Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993); accord Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2015)(Rule 9(b) does not allow a complaint “to lump multiple defendants together” but instead requires that Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 13 of 28 PageID #: 232 8 plaintiffs “differentiate their allegations when suing more than one defendant”)(quotation and citation omitted); Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990)(complaint failed to satisfy Rule 9(b) where it “lumps all the defendants together and does not specify who was involved in what activity”). Thus, the plaintiff must plead with particularity facts identifying the role of each defendant in the fraudulent scheme. Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007); Dolan v. PHL Variable Ins. Co., No. 15-cv-01987, 2016 WL 6879622, at *6 (M.D. Pa. Nov. 22, 2016)(collecting cases); In re Crude Oil Commodity Litigation, No. 06-cv-6677 (NRB), 2007 WL 1946553, at *6 (S.D.N.Y. Jun. 28, 2007)(“In situations where multiple defendants are alleged to have committed fraud, the complaint must specifically allege the fraud perpetrated by each defendant, and ‘lumping’ all defendants together fails to satisfy the particularity requirement.”); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Young, No. 91 Civ. 2923 (CSH), 1994 WL 88129, at *7 (S.D.N.Y. Mar. 15, 1994)(“Sweeping references to the collective fraudulent actions of multiple defendants will not satisfy the particularity requirements of Rule 9(b)”). C. Personal Jurisdiction: Federal Rule of Civil Procedure 12(b)(2) Plaintiff has the burden of demonstrating personal jurisdiction over each Defendant. E.g., Penguin Grp. (USA), Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir. 2010). “In order to survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that jurisdiction exists.” Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006). Such a showing entails making “legally sufficient allegations of jurisdiction,” including “an averment of facts that, if credited[,] would suffice to establish jurisdiction over the defendant.” In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 14 of 28 PageID #: 233 9 IV. ARGUMENT A. Karathanos Fails to Plausibly Allege a Claim Under New York General Business Law §§ 349 and 350 Because it is Based on An Invalid Lack of Substantiation Theory To state a claim under New York General Business Law §§ 349 and 350, a plaintiff must plausibly allege: (1) the defendant’s deceptive acts were directed at consumers; (2) the acts are misleading in a material way, and (3) the plaintiff has been injured as a result. Quinn v. Walgreen Co., 958 F. Supp. 2d 533, 543 (2013). Prior substantiation claims-that is, claims in which a plaintiff alleges that a defendant cannot substantiate the advertising claims it made about a product-are not cognizable. Id. at 544 (a “lack of substantiation” theory is “nonactionable”); Tomasino v. Estee Lauder Companies Inc., 44 F. Supp. 3d 251, 258 n.4 (E.D.N.Y. 2014). The Court should dismiss the § 349 claim because “the gravamen” of Karathanos’s claim is that Defendants “failed to substantiate” claims of Prevagen®’s efficacy “with reliable medical studies, clinical data or scientific research.” Hoffman v. Natural Factors Nutritional Products Inc., No. 12-7244 (ES)(MAH), 2014 WL 2916452, at *4 (D.N.J. June 26, 2014). Hoffman is on point. In that case, the plaintiff attempted to allege a claim under the New Jersey Consumer Fraud Act (“NJCFA”) against the maker of Pharma GABA, a dietary supplement that contained Gamma Aminobutyric Acid and that was marketed as promoting “mental focus” and providing relief for anxiety. Although the plaintiff alleged that these efficacy claims were false, the Court found that “the crux of Plaintiff’s asserted NJCFA claims are based on a lack of substantiation theory, which are not viable under the NJCFA.” Id. at *4. In so holding, the court noted the complaint’s allegations that there were “no reliable medical studies validating Defendant’s claim of product efficacy” and that the efficacy claims were “without valid medical/clinical support.” Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 15 of 28 PageID #: 234 10 Id. The court observed that the plaintiff’s reliance on an invalid substantiation theory was further confirmed by the plaintiff’s allegation that the defendant’s product could deliver no mental-focus benefit “because it has been demonstrated in a study published in European Journal of Clinical Nutrition that GABA supplements cannot cross the blood brain barrier.” Id. Because the gravamen of the NJCFA claim was that the defendant could not substantiate its efficacy claims with medical studies or scientific research, the Court dismissed the NJCFA claim with prejudice. Id. at *4, 7. The same applies here. Karathanos alleges that the “few positive findings” in the Madison Memory Study do not substantiate Prevagen’s efficacy claims. Compl. (Doc. 1), ¶ 28. As in Hoffman, he alleges that Defendants “do not have studies” showing that orally- administered apoaequorin can cross the human “blood brain barrier” and “do not have evidence” that it enters the human brain. Id. ¶ 34. He does not cite any study affirmatively disproving apoaequorin’s efficacy. Because the crux of Karathanos’s § 349 claim is an invalid lack of substantiation theory, the Court should dismiss the claim with prejudice. B. The Court Should Dismiss the RICO Claims Karathanos purports to bring a federal RICO claim against the individual defendants, Underwood and Beaman. Under RICO, it is “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c). The elements of a federal RICO claim are (1) a violation of section 1962, (2) injury to business or property, and (3) causation of the injury by the violation. First Nationwide Bank v. Gelt Funding Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 16 of 28 PageID #: 235 11 Corp., 27 F.3d 763, 767 (2d Cir. 1994). The plaintiff is required to show that a RICO predicate offense was the proximate cause of his injury. Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992); First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 769 (2d Cir. 1994)(“RICO provides a civil remedy only to those persons injured ‘by reason of’ the defendant’s predicate acts.”); Parness v. Christie, No. 15-3505 (JLL), 2015 WL 4997430, at *7 (D.N.J. Aug. 19, 2015). Karathanos’s RICO claim is supposedly based on predicate acts of mail fraud and wire fraud. Compl. (Doc. 1), ¶ 53. Accordingly, his RICO claim is subject to Rule 9(b)’s heightened pleading standards. Moore v. PaineWeber, Inc., 189 F.3d 165, 172 (2d Cir. 1999); Lum v. Bank of America, 361 F.3d 217, 223 (3d Cir. 2004); Devon Drive Lionville LP v. Parke Bancorp Inc., No. 15-cv-3435, 2016 WL 7475816, at *5, 12 (E.D. Pa. Dec. 29, 2016). Furthermore, “[t]he mail fraud and wire fraud statutes are identical except for the particular method used to disseminate the fraud, and contain three elements: (A) the formation of a scheme to defraud, (B) the use of the mails or wires in furtherance of that scheme, and (C) the specific intent to defraud.” Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014). “Because the ‘mere assertion of a RICO claim . . . has an almost inevitable stigmatizing effect on those named as defendants, . . . courts should strive to flush out frivolous RICO allegations at an early stage of the litigation.’” Katzman v. Victoria’s Secret Catalogue, 167 F.R.D. 649, 655 (S.D.N.Y. 1996)(citation omitted). Thus, courts should discern, and weed out, the putative RICO case that is really “nothing more than an ordinary fraud case clothed in the Emperor’s trendy garb.” In re Integrated Resources Real Estate Ltd. Partnerships Securities Litigation, 850 F. Supp. 1105, 1148 (S.D.N.Y. 1993). Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 17 of 28 PageID #: 236 12 As explained below, under both Rule 8 and Rule 9(b), Karathanos fails to state a valid RICO claim. 1. Karathanos Fails to Allege Predicate Acts with Particularity, as Required by Rule 9(b) Karathanos fails to allege the predicate acts of either mail fraud or wire fraud with particularity. He does not identify any specific mailing or use of the wire, but instead alleges generally that Underwood and Beaman “distributed the false and misleading statements” via “the U.S. mails and interstate wire facilities.” Compl. (Doc. 1), ¶ 58. Under established law, this is insufficient. In Lum, for example, the plaintiffs also relied on mail and wire fraud as a basis for a RICO claim. 361 F.3d at 223. But rather than actually identifying any specific mailing, the plaintiffs made the following general allegations: (a) During the Class Period, Defendants used the U.S. mails and/or interstate wire facilities in connection with accomplishing the fraudulent scheme described in this Complaint. Each such use of the U.S. mails or interstate wire facilities was for the purpose of executing and furthering the fraudulent scheme or conspiracy described in this Complaint. Each month during the Class Period, Defendants mailed thousands of bank statements, advertisements for credit cards, contracts and promotional materials containing the fraudulent stated and artificially inflated interest rates to Plaintiffs and the Class in furtherance of their fraudulent scheme. Each such act constituted a violation of 18 U.S.C. § 1341. Lum, 361 F.3d at 224. The plaintiffs made similar, general allegations about the defendants’ purported use of the wires, but the complaint did not identify any specific wire transmission. Id. The court held that “these conclusory allegations do not satisfy Rule 9(b).” Id. The plaintiffs’ general allegations also failed to identify which defendant made the misrepresentations to the plaintiffs. Id. Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 18 of 28 PageID #: 237 13 Similarly, in Devon, the plaintiffs attempted to predicate RICO claims on allegations of mail fraud, but failed to identify any specific mailings. 2016 WL 7475816, at *12. The defendants contended that the plaintiffs failed to meet Rule 9(b)’s requirements, because they failed to allege any “specifics like dates, sender, recipient and content” or offer an explanation as to how any particular mailing contributed to the alleged fraudulent scheme. Id. The court agreed. Id. In contrast, the court found that the wire fraud predicate was adequately pleaded, only because the complaint alleged the particulars of two specific wire transfers. Id. at *13. Compare Moore, 189 F.3d at 173 (finding predicate acts of mail fraud were adequately pled under Rule 9(b) where the complaint contained: “[A] chart listing twelve different mailings said to contain fraudulent representations, along with the dates of these mailings and cross-references to the paragraphs of the complaint in which the mailings are further discussed. The persons responsible for the allegedly fraudulent statements are identified, and the chart lists dates and specific documents.”). Karathanos does not identify any specific mailing or any specific wire transmission. He does not allege the date, place, and content of any actual mailing or interstate wire transmission, and he does not make particularized allegations as to how a specific mailing or wire transmission contributed to the alleged fraudulent scheme. Accordingly, the Court should dismiss the RICO claim. 2. Karathanos Fails to Plead the RICO Element of Proximate Causation with Particularity, as Required by Rule 9(b) Having failed to adequately plead any predicate acts, Karathanos also fails to plead facts establishing, with particularity, that a predicate act proximately caused his alleged injury. See Holmes, 503 U.S. at 268; First Nationwide Bank, 27 F.3d at 769. Instead, he alleges only the Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 19 of 28 PageID #: 238 14 legal conclusion that “[b]ut for the predicate acts described above - namely, Defendant Underwood’s and Defendant Beaman’s numerous false and misleading statements and marketing and advertising containing omissions sent via interstate wire facilities - Plaintiff and the New Jersey Class members would not have paid as high a price for Prevagen as they did, or would not have purchased Prevagen at all.” Compl. (Doc. 1), ¶ 61. But because the Complaint does not adequately identify any specific wire transmission, and because Karathanos never alleges that he actually relied on any such specific wire transmission (or, for that matter, any mailing) actually containing a representation made by defendant Underwood or defendant Beaman, he fails to state any claim. In fact, with no references to date, content or actual speaker, Karathanos merely alleges that he was “exposed” to “television advertisements.” Compl. (Doc. 1), ¶ 8. He alleges no such “exposure” to any particular mailing. See Sathianathan v. Smith Barney, Inc., No. 04 Civ. 7122(DAB)(FM), 2006 WL 538152, at *23 (S.D.N.Y. 2006)(“Sathianathan makes conclusory allegations that the mails were used in furtherance of this scheme, but has not cited any specific mailings which might constitute predicate racketeering acts.”). For all the reasons previously stated, these vague allegations fail to meet Rule 9(b)’s heightened pleading standards. 3. The Complaint does not Contain Adequate Factual Allegations to Plausibly Infer that Defendants Specifically Intended to Defraud As noted, because Karathanos claims predicate acts of mail fraud and wire fraud, he must plead facts plausibly establishing that defendants Underwood and Beaman specifically intended to defraud. Moore, 189 F.3d at 173 (“the plaintiff must ‘allege facts that give rise to a strong inference of fraudulent intent’”)(citation omitted); Eclectic Properties, 751 F.3d at 997; Levine v. First American Title Ins. Co., 682 F. Supp. 2d 442, 462 (E.D. Pa. 2010). “The level of factual Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 20 of 28 PageID #: 239 15 specificity needed to satisfy this pleading requirement will vary depending on the context.” Eclectic Properties, 751 F.3d at 997. But when companies engage in transactions that are facially legitimate and otherwise act as routine participants in American commerce, “a significant level of factual specificity is required to allow a court to infer reasonably that such conduct is plausibly part of a fraudulent scheme.” Id. Here, Karathanos alleges only the legal conclusions that Underwood and Beaman “undertook a fraudulent scheme” and “engaged” in acts of mail fraud and wire fraud. Compl. (Doc. 1), ¶¶ 53, 57. Trimmed of these “threadbare recitals” and legal conclusions, Iqbal, 556 U.S. at 678, the Complaint contains no factual allegations plausibly establishing a specific intent to defraud on the part of Underwood or Beaman. In fact, the Complaint does not allege any facts from which the Court could plausibly conclude that, prior to making any allegedly false representations, Underwood or Beaman believed that Prevagen “does not and cannot” work. Compl. (Doc. 1), ¶ 2. The Complaint certainly alleges no facts giving rise to a “strong inference” of fraudulent intent. Moore, 189 F.3d at 173. To the contrary, the Complaint alleges merely that Underwood and Beaman relied “primarily” on the Madison Memory Study to substantiate the claims concerning Prevagen. Compl. (Doc. 1), ¶ 27. The Complaint does not describe what else Underwood and Beaman replied upon, much less make any effort to discredit it or explain how Underwood or Beaman knew it was false. Next, despite conceding that the Memory Study resulted in some statistically- significant “positive findings,” Karathanos simply claims the Memory Study does not “provide reliable evidence of a treatment effect.” Id. These conclusory assertions-which are not stated in the Memory Study itself-do not plausibly establish that Underwood or Beaman did not believe in the Memory Study or actually thought Prevagen did not work, much less that they Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 21 of 28 PageID #: 240 16 intended to defraud anyone. The Complaint contains no allegations sufficient to discount the “obvious alternative explanation” for Underwood and Beaman’s behavior-namely, that they acted with belief in Prevagen’s efficacy. Iqbal, 556 U.S. at 682. Taken as a whole, Karathanos’s allegations are insufficient to allow the Court to “infer reasonably” that the conduct at issue-the marketing and sale of dietary supplements by a business acting as a routine participant in American commerce-“is plausibly part of a fraudulent scheme” carried out by a racketeering organization. Eclectic Properties, 751 F.3d at 998. Accordingly, the Court should dismiss the RICO claims. C. Karathanos Lacks Standing to Pursue any Claim for Injunctive Relief The Court should dismiss Karathanos’s claim for injunctive relief because he does not have Article III standing to pursue it. To seek prospective relief, the plaintiff must show that he is “likely to suffer future injury” from the defendant’s conduct.” City of Los Angeles v. Lyons, 461 U.S. 95, 105 (1983). In the class action context, that requirement must be satisfied by the named plaintiff. Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181, 199 (2d Cir. 2005); McNair v. Synapse Group, Inc., 672 F.3d 213, 223 (3d Cir. 2012). “Although past injuries may provide a basis for standing to seek money damages, they do not confer standing to seek injunctive relief unless the plaintiff can demonstrate that she is likely to be harmed again in the future in a similar way.” Nicosia v. Amazon.com, Inc., 834 F.3d 220, 239 (2d Cir. 2016); accord Tomasino v. Estee Lauder Companies Inc., 44 F. Supp. 3d 251, 256 (E.D.N.Y. 2014)(“While the plaintiff alleges that she purchased ANR products as the result of the defendants’ allegedly false or misleading advertising, ‘[p]ast exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief . . . if Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 22 of 28 PageID #: 241 17 unaccompanied by any continuing, present adverse effects.’” (quoting O’Shea v. Littleton, 414 U.S. 488, 495-96 (1974))). Tomasino is on point. In that case, the plaintiff alleged that she purchased two cosmetic products from the defendant in reliance on the defendant’s allegedly false representations that the products could “repair DNA” and repair past signs of aging. 44 F. Supp. 3d at 254-55. The court dismissed the plaintiff’s claim for injunctive relief, finding that she had no standing to pursue any injunctive relief. Id. at 256. The court held the plaintiff “has not alleged a sufficient future injury to establish standing to assert her claims for injunctive relief because she has demonstrated that she is, in fact, unlikely to purchase ANR products again.” Id. The court observed that the plaintiff’s complaint “has made clear that she does not believe the ANR products have the effects advertised by Estee Lauder, and that she would not have purchased them in the first place absent the allegedly misleading advertisements.” Id. Thus, the plaintiff had no standing to seek injunctive relief. Id.; accord McNair, 672 F.3d at 223 (holding the plaintiffs had no standing to pursue injunctive relief where they were no longer defendant’s customers and did not allege that they intended to become its customers again, and observing that “the law accords people the dignity of assuming that they act rationally, in light of the information they possess”); Gallagher v. Chipotle Mexican Grill, Inc., No. 15-cv-03952-HSG, 2016 WL 454083, at *3 (N.D. Cal. 2016)(granting motion to dismiss all claims for injunctive relief, observing that because the plaintiff alleged that she would not have purchased the product at all had she known the defendant’s representations were false, “[i]t is entirely implausible that Plaintiff risks being harmed by Defendant’s alleged misrepresentations again”); Robinson v. Hornell Brewing Co., No. 11-2183, 2012 WL 1232188, at *5-6 (D.N.J. Apr. 11, 2012)(plaintiff lacked standing to Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 23 of 28 PageID #: 242 18 pursue injunctive relief on behalf of any class because he was not at risk of purchasing the product again). Here, Karathanos alleges that Prevagen® is a “singular purpose product: its only purported benefit is to enhance brain function and memory - which it does not and cannot do.” Compl. (Doc. 1), ¶ 2. He also alleges that, had he “known the truth about Defendants’ false representations, he would not have purchased Prevagen.” Id. ¶ 8. In light of these allegations, he is not at any risk of purchasing Prevagen® again and does not face any threat of future injury. McNair, 672 F.3d at 225; Tomasino, 44 F. Supp. 3d at 256. Accordingly, Karathanos lacks standing to pursue any claim for injunctive relief. D. The Court Lacks Personal Jurisdiction over Underwood and Beaman To determine whether personal jurisdiction exists over Underwood and Beaman, the Court must look to the long-arm statute of the forum state. See, e.g., Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). If the exercise of jurisdiction is appropriate under New York’s long-arm statute (N.Y. C.P.L.R. § 302), the Court must then decide whether such exercise comports with due process. See id. In this case, jurisdiction over Underwood and Beaman is lacking under the plain language of New York’s long-arm statute, but also because the requisites of due process have not been met. New York’s long-arm statute does not support jurisdiction over Underwood and Beaman. The Complaint fails to allege, and indeed the facts of this case demonstrate that Karathanos cannot prove, that either Beaman or Underwood “transacts any business within the state or contracts anywhere to supply goods or services in the state” (C.P.L.R. § 302(a)(1)); that either individual committed “a tortious act within the state” (C.P.L.R. § 302(a)(2)); that either individual “regularly does or solicits business, or engages in any other persistent course of Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 24 of 28 PageID #: 243 19 conduct, or derives substantial revenue from goods used or consumed or services rendered, in” New York or that either “expects or should reasonably expect the act to have consequences” in New York (C.P.L.R. § 302(a)(3)); or that either individual “own[], use[] or possess[] any real property” in New York (C.P.L.R. § 302(a)(4)). See Compl. ¶¶ 13-17; Underwood Decl. at ¶¶ 3- 17; Beaman Decl. at ¶¶ 3-17. In fact, Karathanos does not contend that Underwood or Beaman personally engaged in any business in New York sufficient to confer jurisdiction over them in their individual capacities. At best, all the allegations against Underwood and Beaman are for vicarious or contributory liability arising from allegedly wrongful conduct. See, Compl. ¶¶ 13- 16. Therefore, to establish personal jurisdiction over Underwood and Beaman, Karathanos would have to demonstrate that the corporate defendants transacted business in New York as Underwood’s and Beaman’s agents. See Karabu Corp. v. Gitner, 16 F. Supp. 2d 319, 323 (S.D.N.Y. 1998) (citing Kreutter v. McFadden Oil Corp., 522 N.E.2d 40, 44 (N.Y. 1988)). To impute jurisdiction to Underwood and Beaman, Karathanos would have to allege specific facts showing that the corporate defendants engaged in purposeful activities in or directed at New York for the benefit of and with the knowledge and consent of Underwood and Beaman, and specific facts showing that Underwood and Beaman exercised control over the corporate defendants in the matter. See id. (citations and quotes omitted). This Karathanos cannot do. The mere assertion that an individual is an owner or officer of a company cannot serve as a basis for jurisdiction over the individual; rather, specific allegations that the individual personally engaged in the offending conduct are required. See, e.g., Arma v. Buyseasons, Inc., 591 F. Supp. 2d 637, 647-48 (S.D.N.Y. 2008) (“Plaintiffs cannot base jurisdiction on ‘conclusory allegations that the defendant controls the corporation.’”) (quoting Karabu, 16 F. Supp. 2d at 323); Pilates, Inc. v. Current Concepts Kenneth Endelman, No. 96 Civ. 0043 (MGC), 1996 WL 599654, at *3 Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 25 of 28 PageID #: 244 20 (S.D.N.Y. Oct. 18, 1996) (“[A] general allegation that an officer controls a corporation is not sufficient to establish personal jurisdiction. Plaintiff must allege personal conduct by the officer related to the transaction or tort which is the basis for the claim.”); Ontel Prods., Inc. v. Project Strategies Corp., 899 F. Supp. 1144, 1148 (S.D.N.Y. 1995) (“[Plaintiff] cannot obtain personal jurisdiction over [defendant] based solely on his position as President of P.S.C.; instead, [plaintiff] must show that [defendant] personally took part in the activities giving rise to the action at issue.”). Here, Karathanos makes no allegation about Underwood’s or Beaman’s personal contacts with the State of New York. Even if Karathanos had alleged that the corporate defendants engaged in purposeful activities in or directed at New York relating to this litigation (that is far from clear), Karathanos has not alleged that such activities were for Underwood’s or Beaman’s benefit and has not alleged sufficient facts showing that either individual exercised control over any such allegedly tortious action. Even if New York’s long-arm statute supported jurisdiction over Underwood and Beaman (it does not), the exercise of personal jurisdiction over Underwood and Beaman would violate due process. “The constitutional touchstone of the determination whether an exercise of personal jurisdiction comports with due process remains whether the defendant purposefully established minimum contacts in the forum State.” Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 108-109 (1987) (internal quotation marks and citations omitted). Minimum contacts must come about by an action of the defendant purposefully directed toward the forum state. See id. at 112. The Due Process Clause protects a person’s interest in not being subject to binding judgments imposed by foreign sovereigns. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471- 72 (1985). The heart of this protection is fair warning-the Due Process Clause requires “that Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 26 of 28 PageID #: 245 21 the defendant’s conduct and connection with the forum State [be] such that he should reasonably anticipate being haled into court there.” Id. at 474 (citation omitted). Here, putting aside for a moment Karathanos’s inability to attribute any corporate defendant’s alleged conduct to Underwood or Beaman, Karathanos makes no allegation that either Underwood or Beaman took any action purposefully directed at New York such that they would reasonably anticipate being haled into court in New York. It would violate due process to require Underwood or Beaman to appear in New York simply because they are owners of a company that places products into the stream of commerce. This is true even if Underwood and Beaman knew that the stream of commerce might inevitably sweep Quincy’s products into New York. For all of the foregoing reasons, the Court lacks personal jurisdiction over Underwood and Beaman and the claims against them must be dismissed. V. CONCLUSION For the foregoing reasons, Defendants respectfully request that the Court grant their motion to dismiss. Dated: June 29, 2017 Jeffrey S. Jacobson Kelley Drye & Warren LLP 101 Park Avenue New York, NY 10178 Tel: (212) 808-5145 Fax: (212) 808-7897 jjacobson@kelleydrye.com By: /s/ William P. Cole Matthew R. Orr (admitted pro hac vice) William P. Cole (admitted pro hac vice) CALL & JENSEN, APC 610 Newport Center Drive, Suite 700 Newport Beach, CA 92660 Tel: (949) 717-3000 Fax: (949) 717-3100 morr@calljensen.com wcole@calljensen.com Attorneys for Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., dba Sugar River Supplements, Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 27 of 28 PageID #: 246 22 CERTIFICATION OF FILING AND SERVICE I hereby certify that on the 29th day of June 2017, a copy of the foregoing MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT was filed via Electronic Case Filing. Notice of this filing will be sent to all parties via the Court’s Electronic Case Filing System. By: /s/ William P. Cole Matthew R. Orr (admitted pro hac vice) William P. Cole (admitted pro hac vice) CALL & JENSEN, APC 610 Newport Center Drive, Suite 700 Newport Beach, CA 92660 Tel: (949) 717-3000 Fax: (949) 717-3100 morr@calljensen.com wcole@calljensen.com Attorneys for Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., dba Sugar River Supplements, Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman Case 2:17-cv-01091-ADS-AYS Document 24-1 Filed 06/29/17 Page 28 of 28 PageID #: 247 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK JOHN KARATHANOS, on behalf of himself and all others similarly situated, Plaintiff, vs. QUINCY BIOSCIENCE HOLDING COMPANY, INC., a corporation; QUINCY BIOSCIENCE, LLC, a limited liability company; PREVAGEN, INC., a corporation d/b/a SUGAR RIVER SUPPLEMENTS; QUINCY BIOSCIENCE MANUFACTURING, LLC, a limited liability company; MARK UNDERWOOD, individually and as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC.; and MICHAEL BEAMAN, individually as an officer of QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, and PREVAGEN, INC. Defendants. : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :: Case No. 2:17-cv-01091 ADS AYS DECLARATION OF WILLIAM P. COLE IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT Hon. Arthur D. Spatt Case 2:17-cv-01091-ADS-AYS Document 24-2 Filed 06/29/17 Page 1 of 14 PageID #: 248 2 William P. Cole, of full age, hereby declares as follows: 1. I am an attorney admitted pro hac vice in this matter, and an attorney in the firm of Call & Jensen, APC, counsel for Defendants Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, Prevagen, Inc., Quincy Bioscience Manufacturing, LLC, Mark Underwood, and Michael Beaman. 2. Attached hereto as Exhibit 1 is a true and correct copy of Kenneth C. Lerner, Madison Memory Study: A Randomized, Double-Blinded, Placebo-Controlled Trial of Apoaequorin in Community-Dwelling, Older Adults (Aug. 1, 2016). I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. This declaration was executed on June 28, 2017, at Newport Beach, California. ______________________________ William P. Cole Case 2:17-cv-01091-ADS-AYS Document 24-2 Filed 06/29/17 Page 2 of 14 PageID #: 249 EXHIBIT 1 Case 2:17-cv-01091-ADS-AYS Document 24-2 Filed 06/29/17 Page 3 of 14 PageID #: 250 SWKPE[ DKQUEKGPEG VKVNGPH 5DTG Ngctpkpi!)QEN*-!Qpg!Dcem!)QPD*-!cpf!Vyq!Dcem! )VYQD*!)Vcdng!2*/ 3 Vcdng!2!Eqipkvkxg!Ogcuwtgogpv!Vguvu! Vcum! 9PVHTPDVLQPDN AKQRRLPJ ;LUV "9A;# 9PVHTPDVLQPDN AKQRRLPJ ;LUV % 6HND[HG @HFDNN "9A@;#! 8TQVQP /1112+ 1/176 1/257 1/;8; 1/441 1/124+ 1/115+ Ykvjkp!r xcnwg 1/484 1/141+ 1/114+ 1/3;7 1/116+ 1/;76 1/947 1/126+ 1/132 Ykvjkp!r xcnwg 1/113+ 1/1;2 >1/1112+ 1/111+ 1/672 1/965 1/168 1/325 1/12;+ 8TQWR Z BLOH 1/38; 1/9;8 1/5;2 1/189 1/132+ 1/571 1/2;4 1/499 1/585 Dcug >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ 4HVYHHP 8TQWR ? XDNWHCrqcgswqtkpRncegdq Vcdng!4!cpf!5!nkuv!vjg!ogcp!xcnwgu!cpf!UF!qh!qwveqogu!qp!Fc{!1!cpf!Fc{!;1!hqt!vjg!CF9!1.2!CF9!1.3!! uwditqwru-!tgurgevkxgn{/!Ykvjkp!itqwr!r!xcnwgu!cpf!r!xcnwgu!htqo!vjg!okzgf!oqfgn!cpcn{uku!ctg!cnuq!! tgrqtvgf/!! Pqvgu!qp!Vcdng!4 2!Vkog!ku!vjg!pwodgt!qh!xkukvu!ukpeg!vjg!kpkvkcn!Dcugnkpg!xkukv!cpf!ycu!eqfgf!cu!c!ecvgiqtkecn!xctkcdng/ Case 2:17-cv-01091-ADS-AYS Document 24-2 Filed 06/29/17 Page 8 of 14 PageID #: 255 7 Vcdng!5!BKH AFQTH 6LIIHTHPFHU LP VKH BYQ 8TQWRU 4HIQTH DPG 3IVHT BTHDVOHPV "36/ '%)#! Vcumu 9A; 9A@; 8<; 8<@ FGV 96= QEN QPD VYQD Pqvgu!qp!Vcdng!5 2!Vkog!ku!vjg!pwodgt!qh!xkukvu!ukpeg!vjg!kpkvkcn!Dcugnkpg!xkukv!cpf!ycu!eqfgf!cu!c!ecvgiqtkecn!xctkcdng/ 4HVYHHP 8TQWR ? XDNWHCrqcgswqtkpRncegdq Fc{!1 35/56!³!5/186 9/386!³!3/496 71/48!³!32/19 ;/511!³!6/535 3/611!³!1/192 3/837!³!1/179 2/116!³!1/224 2/3;9!³!1/296 2/334!³!1/275 Fc{!1 36/12!³!6/545 9/873!³!3/447 69/6;!³!34/56 9/9;9!³!5/581 3/645!³!1/215 3/83;!³!1/183 2/124!³!1/218 2/467!³!1/274 2/362!³!1/225 8TQWR 1/435 1/576 1/151+ 1/218 1/361 1/148+ 1/131+ 1/;55 1/;45 Fc{!;1 36/61!³!6/585 ;/111!³!3/;19! 61/13!³!33/54 9/972!³!6/;49 3/648!³!1/1;; 3/843!³!1/175 2/129!³!1/232 2/532!³!1/267 2/428!³!1/287 Fc{!;1 38/79!³!5/745 ;/593!³!3/511 57/57!³!29/89 8/128!³!5/833 3/644!³!1/211 3/836!³!1/172 2/152!³!1/211 2/4;8!³!1/251 2/413!³!1/238 Vkog 1/111+ 1/126+ >/1112+ 1/1;3 1/276 1/891 1/548 1/111+ 1/111+ Ykvjkp!r xcnwg 1/1;1 1/123+ 1/111+ 1/33; 1/156+ 1/378 1/3;3 >/1112+ 1/113+ Ykvjkp!r xcnwg >1/1112+ 1/113+ >1/1112+ 1/112+ 1/786 1/926 1/157+ 1/192 1/139+ 8TQWR Z BLOH 1/14;+ 1/814 1/574 1/478 1/476 1/219 1/468 1/334 1/3;1 Dcug >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ >/1112+ Kpvgtpcvkqpcn!Ujqrrkpi!Nkuv!cpf!Kpvgtpcvkqpcn!! Ujqrrkpi!Nkuv.Fgnc{gf!Tgecnn! Hkiwtg!2!ujqyu!vjg!cxgtcig!rgtegpvcig!ejcpig! LP 9A; UFQTHU ITQO 4DUHNLPH VQ HDFK XLULV LP RDTVLFLRDPVU ! ykvj!CF9!ueqtgu!qh!1.2/!Vjg!Gzrgtkogpvcn!itqwr! fgoqpuvtcvgf!cp!22/3;&!kpetgcug!kp!vjg!pwodgt! qh!eqttgev!tgurqpugu-!yjkng!vjg!Eqpvtqn!itqwr! ! gzjkdkvgf!c!3/41&!kortqxgogpv/!Cu!eqorctgf!vq! 4DUHNLPH$ D UVDVLUVLFDNN[ ULJPL_FDPV GLIIHTHPFH YDU qdugtxgf!kp!vjg!Gzrgtkogpvcn!itqwr!)r?1/113*-!! dwv!pqv!vjg!Eqpvtqn!itqwr!)r?1/484*/!C!vtgpf! ! vqyctfu!ukipkhkecpeg!ycu!ujqyp!kp!eqorctkpi! vjg!Gzrgtkogpvcn!itqwr”u!tguwnvu!vq!vjg!Eqpvtqn! itqwr”u!tguwnvu!)r?1/236*/ Hkiwtg!3!ujqyu!vjg!cxgtcig!rgtegpvcig!ejcpig! LP 9A; UFQTHU ITQO 4DUHNLPH VQ HDFK XLULV LP RDTVLFLRDPVU ! ykvj!CF9!ueqtgu!qh!1.3/!Vjg!Gzrgtkogpvcn!itqwr! ujqygf!c!21/79&!kpetgcug!kp!vjg!pwodgt!qh!! eqttgev!tgurqpugu-!yjkng!vjg!Eqpvtqn!itqwr! ujqygf!c!5/3;&!kpetgcug/!Eqorctgf!vq!Dcugnkpg-! VKH PWOEHT QI FQTTHFV THURQPUHU YDU ULJPL_FDPVN[ kpetgcugf!kp!vjg!Gzrgtkogpvcn!itqwr!)r>1/1112*-! dwv!pqv!kp!vjg!Eqpvtqn!itqwr!)r?1/1;1*/!Vjg!vyq! itqwru!vgpfgf!vq!ujqy!c!itqwr!fkhhgtgpeg!qh! itgcvgt!ocipkvwfg/!Pqpgvjgnguu-!c!ukipkhkecpv!! fkhhgtgpeg!dgvyggp!vjg!Gzrgtkogpvcn!cpf!Eqpvtqn! itqwru!ycu!pqv!qdugtxgf!)r?1/435*/!Vjku!oc{!dg! vjg!tguwnv!qh!c!ueqtg!tgfwevkqp!vjcv!qeewttgf!cv!! xkukv!3!kp!vjg!Gzrgtkogpvcn!itqwr/! Cu!eqorctgf!vq!Dcugnkpg-!dqvj!itqwru!ujqygf!c! UVDVLUVLFDNN[ ULJPL_FDPV QT PHDTN[ ULJPL_FDPV LPFTHDUH LP 9A@; UFQTHU LP RDTVLFLRDPVU YLVK 36/ UFQTHU QI '%) ! DPG RDTVLFLRDPVU YLVK 36/ UFQTHU QI '%(& ALJPL_FDPV fkhhgtgpegu!dgvyggp!vjg!Gzrgtkogpvcn!cpf!! Eqpvtqn!itqwru!ygtg!pqv!qdugtxgf/ Fc{ 91 41 71 ;1 Eqpvtqn R g te g p vc i g !E j c p i g Itqwr Vtgcv 1 3 5 7 9 21 1/3; 2/7; 4/93 3/41 1/55 8/11 8/95 22/3; 91 41 4/87 .1/84 7/49 7/97 21/79 6/43 7/13 5/3; 71 ;1 R g te g p vc i g !E j c p i g 1/1 3/6 6/1 8/6 21/1 Hkiwtg!31/1112-!Eqpvtqn!r?1/114*/!Vjgtg!ycu!c!vtgpf!! VQYDTGU ULJPL_FDPFH LP FQORDTLPJ VKH THUWNVU ! htqo!vjg!Gzrgtkogpvcn!itqwr!vq!vjg!Eqpvtqn!! itqwr!)r?1/214*/!! ! Hkiwtg!5!ujqyu!vjg!cxgtcig!rgtegpvcig!ejcpig! LP 8<; UFQTHU ITQO 4DUHNLPH VQ HDFK XLULV LP RDT. vkekrcpvu!ykvj!CF9!ueqtgu!qh!1.3/!Vjg!Gzrgtkogpvcn! itqwr!fgoqpuvtcvgf!c!31/81&!tgfwevkqp!kp!vjg!! pwodgt!qh!oqxgu!tgswktgf!vq!vtcxgtug!c!21z21! oc|g-!yjkng!vjg!Eqpvtqn!itqwr!gzjkdkvgf!c!28/25&!! tgfwevkqp/!Cu!eqorctgf!vq!Dcugnkpg-!dqvj!itqwru! HZRHTLHPFHG D UVDVLUVLFDNN[ ULJPL_FDPV THGWFVLQP kp!vjg!pwodgt!qh!oqxgu!tgswktgf!)Gzrgtkogpvcn! r>1/1112-!Eqpvtqn!r?1/1113*/!Vjg!Gzrgtkogpvcn! itqwr”u!tguwnvu!ygtg!uvcvkuvkecnn{!ukipkhkecpv!cu!! eqorctgf!vq!vjg!Eqpvtqn!itqwr!)r?1/1511*/! ! Itqvqp!Oc|g!Tgecnn! Hkiwtg!6!ujqyu!vjg!cxgtcig!rgtegpvcig!ejcpig! LP 8<@ UFQTHU ITQO 4DUHNLPH VQ HDFK XLULV LP RDT. vkekrcpvu!ykvj!CF9!ueqtgu!qh!1.2/!Vjg!Gzrgtkogpvcn! itqwr!tgswktgf!41/9;&!hgygt!oqxgu!vq!eqorngvg! vjg!oc|g!dgvyggp!Fc{u!1!cpf!;1/!Vjg!Eqpvtqn! itqwr!gzrgtkgpegf!c!5/44&!tgfwevkqp/!Eqorctgf! VQ 4DUHNLPH$ D UVDVLUVLFDNN[ ULJPL_FDPV FKDPJH YDU qdugtxgf!kp!vjg!Gzrgtkogpvcn!itqwr!)r?1/111*-!dwv! pqv!vjg!Eqpvtqn!itqwr!)r?1/3;7*/!Vjg!Gzrgtkogpvcn! JTQWR^U THUWNVU YHTH UVDVLUVLFDNN[ ULJPL_FDPV ! eqorctgf!vq!vjg!Eqpvtqn!itqwr!)r?1/122*/! 91 41 .4/15 .22/55 .27/99 .26/41 .33/77 .8/25 .28/63 .28/6; 71 ;1 R g te g p vc i g !E j c p i g .31 .26 .21 .6 1 Fc{ EqpvtqnItqwr Vtgcv 91 41 .7/79 .23/59 .29/13.29/22 .31/81 .8/;6 .28/25 .;/35 71 ;1 R g te g p vc i g !E j c p i g .31 .26 .21 .6 1 Fc{ EqpvtqnItqwr Vtgcv 91 41 6/87 .29/66 .24/6; .41/9; 9/25 .5/44 .26/;7 71 ;1 R g te g p vc i g !E j c p i g .41 .31 .21 21 1 Fc{ EqpvtqnItqwr Vtgcv .27/63 Hkiwtg!4XHTHZRTHUULQP DPG RWTL_FDVLQP QI VKH THFQOELPDPV Ec3,.dkpfkpi!rtqvgkp-!crqcgswqtkp/!Kpqw{g-!U/!gv!cn/! 4-!2;9;-!L!Dkqejgo-!Xqn/!216-!rr/!584.8/! 3/!Uchgv{!cuuguuogpv!qh!Crqcgswqtkp-!c!rtqvgkp! rtgrctcvkqp