Friday, November 22, 2013

Retailer's California claims against supplier proceed

TRC & Associates v. NuScience Corp., 2013 WL 6073004, No. 2:13–cv–6903 (C.D. Cal. Nov. 18, 2013)

TRC, a supplement retailer, sued NuScience and Lumina based on their sales to TRC of a dietary supplement, Cellfood.  TRC alleged that defendants misrepresented Cellfood’s ingredients, safety, and efficacy. Defendants allegedly actively concealed a key ingredient that poses a “severe health hazard” and misrepresented compliance with federal regulations.

The court found that TRC had Article III standing.  It allegedly bought more than $700,000 of Cellfood from Lumina (the distributor; NuScience is the manufacturer) in reliance on misrepresentations from both, leaving it with unsold product and potential liability for product already sold.  It also alleged damage to its reputation. 

The court declined to hold TRC’s claims barred by the FDCA at this point, despite Pom Wonderful and even though allegations in the complaint referred to defendants’ violations of the FDCA and an FDA warning letter to Lumina.  Most of the cases barring enforcement of the FDCA under another cause of action are Lanham Act cases, not common-law fraud cases like this one; the complaint here was based on alleged affirmative misrepresentations—the alleged fraudulent conduct was not the violation of the FDCA but what defendants allegedly told or failed to tell TRC.  But the court expressed willingness to revisit the issue later.

Also, TRC’s UCL and FAL claims didn’t attempt to apply California law extraterritorially.  TRC is a Nevada corporation with a principal place of business in Ohio; Lumina is incorporated and headquartered in Florida.  But NuScience is a California corporation with its principal place of business in California.   State remedies can be invoked by out of state parties who are harmed by wrongful conduct occurring in California.  Here, the allegedly fraudulent conduct occurred in California—the material misrepresentations originated with NuScience in California, traveled through Florida, and ended up in Ohio.  Cellfood is made in California.  The ingredients of Cellfood and the representations about it were at issue in the case.  Given the complaint’s allegations, the relationship between the defendants allowed a reasonable inference that Lumina had some role in the alleged California misconduct.

1 comment:

  1. Anonymous8:50 PM

    Thank you for reporting on this story. Please investigate and report the rest of the story of this racketeering organization.