Kwan v. SanMedica International
2017 U.S. App. LEXIS 6995
| 9th Cir. | 2017Background
- Plaintiff Serena Kwan filed a class action under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) alleging SanMedica’s supplement SeroVital was falsely marketed (including a claim of a 682% mean increase in HGH) and that those claims lacked credible scientific substantiation.
- Kwan purchased one box of SeroVital but did not allege she or class members actually used the product; she alleged economic injury from the purchase.
- The district court dismissed Kwan’s first amended complaint for alleging only lack of substantiation (a remedy the court said is reserved to public prosecuting authorities) and gave leave to amend to plead actual falsity.
- Kwan’s second amended complaint repeated substantiation-focused allegations and conclusory assertions that the claims were false; it did not allege specific facts establishing the advertised claims were actually false.
- The district court dismissed the second amended complaint with prejudice for failure to state a claim; Kwan appealed and the Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether California law allows private suits to enforce advertising substantiation rules | Kwan argued her complaint alleged false and misleading claims (e.g., “clinically tested,” 682% HGH increase) and thus private enforcement was permissible | SanMedica argued substantiation enforcement is reserved to prosecuting authorities and private plaintiffs must plead actual falsity and reliance | Held: Private plaintiffs may not bring claims that merely allege lack of substantiation; King Bio controls and private suits must plead actual falsity and injury in fact |
| Whether the second amended complaint pleaded actual falsity sufficient to survive 12(b)(6) | Kwan contended the allegations implied falsity (e.g., “clinically tested” implied credible clinical proof) | SanMedica argued allegations were conclusory and merely asserted lack of substantiation, not falsity | Held: Complaint failed plausibly to allege the advertising was actually false; dismissal affirmed |
| Whether Lanham Act concepts (establishment vs non-establishment claims) should apply to shift burden | Kwan urged adopting Lanham Act distinctions to require defendant to justify claims | SanMedica and precedent argued California law places burden on plaintiff and does not import Lanham Act shifting | Held: Court declined to import Lanham Act burden-shifting; doing so would conflict with California statutory scheme |
| Whether dismissal should be with prejudice after leave to amend | Kwan argued prior opportunity justified another chance | SanMedica argued prior amendment opportunity and continued failure to plead falsity warranted final dismissal | Held: Dismissal with prejudice was appropriate because plaintiff had ample opportunity and could not cure the pleading defect |
Key Cases Cited
- National Council Against Health Fraud v. King Bio Pharm., 107 Cal.App.4th 1336 (Cal. Ct. App.) (private plaintiffs cannot bring mere lack-of-substantiation claims; burden to prove falsity rests with plaintiff)
- In re Tobacco II Cases, 207 P.3d 20 (Cal. 2009) (Proposition 64 imposed limits on private UCL enforcement and requires reliance for fraud-based UCL claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standards require factual allegations supporting plausible claims)
- Johnson v. Fed. Home Loan Mortg. Corp., 793 F.3d 1005 (9th Cir.) (de novo review of 12(b)(6) dismissals)
- Gee v. Tenneco, Inc., 615 F.2d 857 (9th Cir. 1980) (federal courts in diversity must follow state law pronouncements)
- In re King Bio relied-upon precedent illustrating burden allocation and limits on private substantiation suits: Lewis v. Tel. Empl. Credit Union, 87 F.3d 1537 (9th Cir.) (federal courts follow state intermediate appellate rulings absent convincing evidence otherwise)