Tuesday, April 11, 2017

lack of substantiation isn't actionable, but claims of 100% satisfaction are

Moorer v. Stemgenex Medical Group, Inc., 2017 WL 1281882, No. 16-cv-02816 (S.D. Cal. Apr. 6, 2017)

Plaintiffs brought the usual California claims (plus RICO and California’s Health and Safety Code section 24170, et seq., (Human Experimentation) (!), and Financial Elder Abuse), based on allegedly false advertising of “stem cell treatments” to consumers who are often “sick or disabled, suffering from incurable diseases and a dearth of hope.” Defendants allegedly falsely represented to consumers that “100% of its prior consumers are satisfied with its service.”

The court first found that claims based on lack of substantiation weren’t sustainable.  Plaintiffs undamentally alleged omission of the material information that no data or reasonable basis supported the efficacy of the stem cell treatments. “False-advertising claims based on a lack of substantiation, rather than provable falsehood, are not cognizable under the California consumer-protection laws.”  The closest the plaintiffs got to alleging falsity was “the generally accepted scientific consensus is that there is no treatment for degenerative diseases, or any disease, with a person’s own adult adipose stem cells, that has been proven ‘effective’ at any level.” But is that true because the treatment has been “tested and disproven, or rather, is it because no study regarding its efficacy has been conducted yet, and thus, scientific literature is devoid of a conclusion?”  Plaintiffs didn’t plead the existence of any scientific study that purported to prove that the stem cell procedure didn’t work.

However, claims about misrepresentation of patient satisfaction ratings survived. Defendants represented that their patient satisfaction ratings were monitored and updated on a monthly basis, but plaintiffs alleged that the publicized ratings remained at 100% even after complaints from customers.

However, the claim for financial elder abuse failed to satisfy Rule 9(b).  Also, “an elder prospective customer viewing the website on his or her own volition is not enough to constitute ‘undue influence,’” one of the elements.  Plaintiffs also argued that defendants engaged in human experimentation without informed consent because defendants referred to their treatments as “studies” and claimed to be a “pioneer in research.” To qualify as a “medical experiment,” the use of a device must be “in the practice or research of medicine in a manner not reasonably related to maintaining or improving the health of the subject or otherwise directly benefiting the subject.” Thus, the stem cell treatments fell outside the ambit of “pure research.”  The innovative nature of the treatment didn’t rise to the level of requiring informed consent.  [This seems like a pretty big loophole.  What about malpractice?]

The RICO claim failed because it was a RICO claim, but with leave to amend. 

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