Nutrition Distribution LLC v. PEP Research, LLC et al
ORDER granting in part and denying in part Dkt # 11 Motion to Dismiss. Signed by Judge William Q. Hayes on 9/7/2016. (mdc)
SEP 0 7 2017
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
NUTRITION DISTRIBUTION LLC,
an Arizona Limited Liability
PEP RESEARCH, LLC, a Texas
Limited Liability ComJ?~l!Y dba
International Peptide; BRIAN
REYNDERS, an individual; FRED
REYNDERS, an individual;
INCORPORA TED, a Delaware
Corporation; AUTHORIZE.NET, a
Utah Co~oration; AMAZON
PAYMENTS, a Washington
CoQJoration; and DOES 1 through 10,
CASE NO. 16cv2328-WQH-BLM
HA YES, Judge:
The matter before the Court is the motion to dismiss filed by Defendants PEP
Research LLC, Brian Reynders, and Fred Reynders. (ECF No. 11 ).
On December 30, 2016, Plaintiff Nutrition Distribution LLC filed a first
amended complaint. (ECF No. 11 ). The amended complaint alleges a cause of action
for false advertising in violation of§ 42(a)(l )(B) of the Lanham Act against Defendant
PEP Research LLC dba International Peptide ("PEP") and a cause of action for a
1 violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18
2 U.S.C. § 1962, against Defendants PEP, Brian Reynders, Fred Reynders, Mastercard
3 International Incorporated, Authorize.net, Amazon Payments, and Does 1through10. 1
On January 13, 2017, PEP, Brian Reynders, and Fred Reynders ("Defendants")
6 filed a motion to dismiss for failure to state a claim. (ECF No. 11 ). On February 20,
7 2017,Plaintifffiledaresponseinopposition. (ECFNo.13). OnFebruary27,2017,
8 Defendants filed a reply. (ECF No. 14).
9 II. ALLEGATIONS OF THE COMPLAINT
Plaintiff is a "cutting edge sports supplement manufacturer and marketer" and
11 "leader in the nutritional supplement market, specifically for bodybuilding." (ECF No.
12 9 at if 24). "Plaintiff has several categories of bodybuilding products, including pre13 workouts, muscle-gainers, fat burners, and male performance enhancement." Id. if 25.
14 "Plaintiff has introduced numerous natural supplements that directly compete with
15 Defendant's 'Research Chemicals,' including but not limited so, 'Advanced PCT,'
16 "UltraReps,' 'StackedBCAA,' 'SuperSize,' 'GymJuice,' and 'GermanCreatine."' Id.
Defendant PEP is a competing supplement company. Id.
if 29. Defendant PEP
19 is engaged in "false and misleading advertising and statements in connection with its
20 various purported 'research peptides and chemicals,' including but not limited to,
21 numerous well-known prescription only drugs, Selective Androgen Receptor
22 Modulators ('SARMS') and synthetic peptides (collectively, the 'Research
23 Chemicals')." Id.
1. Defendant PEP offers "prescription-only drugs" such as
24 Sildenafil Citrate and Talafadil for sale on its website. Id.
if 2. "Like the other
25 products advertised and available for sale on its website, Defendant [PEP] has
The docket reflects that no proof of service has been filed for Defendants
27 Mastercard International Incorporated, Authorize.net, and Amazon Payments. Further1
Plaintiff mentions Visa and Ainerican Express in the portion of the complaint relatea
28 to the RICO cause of action but the complaint does not otherwise name Visa and
American Express as defendants.
1 mislabeled these products as 'not for human consumption' and intended for laboratory
2 research only."' Id.
"Defendant [PEP] markets and sells various SARMs, which are synthetic drugs
4 with similar effects to illegal anabolic steroids ... [and] may pose significant health
5 and safety risks to consumers." Id.
ii 4. Defendant PEP "fails to disclose that SARMs
6 are specifically prohibited for use in sporting events by the World Anti-Doping Agency
7 and the U.S. Anti-Doping Agency, despite the fact that Defendant markets its products
8 to bodybuilders, competitive athletes, and other consumers seeking to improve their
9 physical performance and physiques." Id.
"Furthermore, Defendant [PEP] advertises and offers for sale various synthetic
peptides, which cannot be dispensed for human use without a prescription from a
licensed medical practitioner due to their toxicity and potentially harmful effects." Id.
ii 6. "Defendant [PEP] mislabels these products as 'not for human consumption' and
'intended for laboratory research only,' but clearly markets its 'research chemicals' to
15 consumers for personal use." Id.
Defendant represents to consumer that its so-called "research chemical"
Sermorelin is commonly used as a "doping substance in S]Jorts," and
assures consumers of the product's safety for personal use, "Sermorelin
alone or combined with GHRP-2 and GHRP-6 1s a harmless and efficient
way to stimulate and enhance your body's growth hormone production."
fT]he product description for Defendant's "research chemical"
Clenbuterol acknowledges human consumption, despite its purported
"disclaimers" - "Clenbuterol has been popularized in the public mind
recently by media potrayals of off-label use for fat loss, as well as some
professional athlefe doping scandals involving the drug." [Defendant
PEP] then proceeded to post advertisements on its Facebook account
containing a free product give away contest for Clenbuterol~ and to award
a personal fitness trainer as the contest recipient of a rree bottle of
ii 8. "Defendant's use of falsely marketed substances has the tendency to deceive
26 a substantial segment of the public and consumers ... into believing that they are
27 purchasing a product with different characteristics." Id.
ii 50. "The deception is
28 material because it is likely to influence a consumer's purchasing decision, especially
1 if the consumer is unaware of the serious risks of using these purported 'Research
2 Chemicals,' and/or steroids or illegal substances." Id. ~ 51. "[Defendant PEP's]
3 'Research Products' directly compete with Plaintiffs products ...." Id. ~ 53.
4 "Defendant's false and misleading advertising is harmful to the marketplace for dietary
5 and natural nutritional supplements, including Plaintiffs products, and potentially to
6 individual consumers." Id.~ 39. "[U]sers of[DefendantPEP's] 'Research Chemicals'
7 have little incentive to use Plaintiffs natural nutritional supplements until they are hurt
8 or the 'Research Chemicals' are taken off the market." Id. "Plaintiff has suffered both
9 an ascertainable economic loss of money and reputational injury by the diversion of
10 business from Plaintiff to [Defendant PEP] and the loss of goodwill in Plaintiffs
11 products." Id. ~ 54.
12 III. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state
14 a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal Rule of
15 Civil Procedure 8(a) provides that "[a] pleading that states a claim for relief must
16 contain ... a short and plain statement of the claim showing that the pleader is entitled
17 to relief." Fed. R. Civ. P. 8(a)(2). Dismissal under Rule 12(b)(6) is appropriate where
18 the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable
l9 legal theory. SeeBalistreriv. PacificaPoliceDep 't, 901F.2d696, 699 (9th Cir. 1990).
"[A] plaintiffs obligation to provide the 'grounds' ofhis 'entitle[ment] to relief
21 requires more than labels and conclusions, and a formulaic recitation of the elements
22 of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
23 (quoting Fed. R. Civ. P. 8(a)). When considering a motion to dismiss, a court must
24 accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, 556 U.S. 662,
25 679 (2009). However, a court is not "required to accept as true allegations that are
26 merely conclusory, unwarranted deductions of fact, or unreasonable inferences."
27 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). "In sum, for a
28 complaint to survive a motion to dismiss, the non-conclusory factual content, and
1 reasonable inferences from that content, must be plausibly suggestive of a claim
2 entitling the plaintiff to relief." Moss v. US. Secret Service, 572 F.3d 962, 969 (9th
3 Cir. 2009) (internal quotation marks omitted).
4 IV. DISCUSSION
A. Lanham Act
Defendant PEP contends that the false advertising claim under the Lanham Act
7 must be dismissed because Plaintiff fails to plead a false or misleading statement,
8 deception, or materiality of the alleged deception. (ECF No. 11-1 at 5-7). Defendant
9 PEP contends that Plaintiff fails to allege a false advertising injury and that PEP's
1o alleged statements are "inapposite to the type of statements that generally give rise to
false advertising injury." Id. at 6, 7-8.
Plaintiff contends that the amended complaint sufficiently alleges false and
13 misleading statements, deception, and materiality. (ECF No. 13 at 3-5). Plaintiff
14 contends that it has standing to bring a Lanham Act claim because Plaintiff adequately
15 alleges "a commercial injury based on a misrepresentation that harms its ability to
16 compete." Id. at 6.
The Lanham Act provides,
Any person who, on or in connection with any goods or services, or any
container for goods uses in commerce any word, term, name, symbol, or
device, or any combination thereof, or any false designation of origin,
false or misleading description of fact, or false or misleading
representation of fact, which ... in commercial advertising or promotion,
misrepresents the nature, characteristics, qualities, or geographic origin
of his or her or another erson' s goods, services, or commercia1 activities,
shall be liable in a civi action by any person who believes that he or she
is or is likely to be damaged by sucli act.
23 15 U.S.C. § 1125 (a)(l); see also Lexmark Intern., Inc. v. Static Control Components,
24 Inc., 134 S. Ct. 1377, 1384 (2014).
The elements of a Lanham Act § 43( a) false advertising claim are: ( 1) a
false statement of fact b~ the defendant in a commercial advertisement
about its own or another s product; (2) the statement actually deceived or
has the tendency to deceive a substantial segment of its audience; (3) the
deception is material, in that it is likely to influence the purchasing
decision; (4) the defendant caused its false statement to enter interstate
commerce; and ( 5) the plaintiff has been or is likely to be injured as a
result of the false statement, either by direct diversion of sales from itself
to defendant or by a lessening of the goodwill associated with its
Southland Sod Farms v. Stover Seed Co., 108F.3d1134, 1139 (9th Cir. 1997) (citation
omitted); Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1110 (9th Cir. 2012).
"[A] false advertising cause of action under the Act is not limited to literal falsehoods;
it extends to false representations made by implication or innuendo." Cook, Perkiss
& Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 245 (9th Cir. 1990).
However, the alleged false statement must "contain the kind of detailed or specific
factual assertions that are necessary to state a false advertising cause of action under
the Act." Id. at 246.
Plaintiff alleges that Defendant PEP markets and advertises various "research
chemicals" for personal use and consumption despite the fact that the products are
unsafe for these purposes. Specifically, Plaintiff alleges that Defendant PEP
represents to consumers that its so-called "research chemical" Sermorelin
is commonly used as a "do_ping substance in sp,orts," and assures
consumers of the pr_ociuct' s safoty lor personal use, ' Sermorelin alone or
combined with GHRP-2 and GHRP-6 is a harmless and efficient way to
stimulate and enhance your body's growth hormone production." ...
Similarly, the product description for Defendant's "research chemical"
Clenbuterol aCknowledges human consumption, despite its p].lfported
"disclaimers" - "Clenbuterol has been popularized in the public mind
recently by media portrayals of off-label use for fat loss, as well as some
professional athlete dopmg scandals involving the drug." International
Peptide then_proceeded to post advertisements on its Facebook account
containing a free product give away contest for Clenbuterol~ and to award
a personal fitness trainer as the contest recipes of a rree bottle of
21 (ECF No. 9 at iii! 7-8). Plaintiff alleges that the "use of falsely marketed substances has
22 the tendency to deceive a substantial segment of the public and consumers ... into
23 believing they are purchasing a product with different characteristics." Id. iJ 50.
24 Finally, Plaintiff alleges that the "deception is material because it is likely to influence
25 a consumer's purchasing decision, especially ifthe consumer is unaware of the serious
26 risks of using these purported 'Research Chemicals,' and/or steroids or illegal
27 substances." Id.
The Court concludes that these factual allegations are sufficient
28 to support a reasonable inference that Defendant PEP made "a false statement of fact
1 ... in a commercial advertisement about its own ... product." See Southland Sod
2 Farms, 108 F.3d at 1139. Further, the Court concludes that Plaintiff alleges facts
3 sufficient to support a reasonable inference that the statements "actually deceived or
4 ha[ ve] the tendency to deceive a substantial segment of its audience" and that
5 "deception is material, in that it is likely to influence the purchasing decision." Id.
Additionally, Defendant PEP contends that the Lanham Act cause of action must
7 be dismissed for failure to adequately plead a false advertising injury. (ECF No. 11-1
8 at 7-8). To bring a false advertising suit under§ 43(a) of the Lanham Act, a "plaintiff
9 must show: ( 1) a commercial injury that is based on misrepresentation about a product;
10 and (2) that the injury is 'competitive,' or harmful to the plaintiffs ability to compete
11 with the defendant." Jack Russell Terrier Networkv. Am. Kennel Club, Inc., 407 F.3d
12 1027, 1037 (9th Cir. 2005) (quoting Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir.
13 1995)). Where a plaintiff directly competes with a defendant and the defendant's
14 misrepresentation has a tendency to mislead consumers, a "misrepresentation will give
15 rise to a presumed commercial injury that is sufficient to establish standing."
16 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 826-27 (9th Cir. 9011).
Plaintiffhas alleged that it "introduced numerous natural nutritional supplements
18 that directly compete with Defendant's 'Research Chemicals."' (ECF No. 9 'If 28).
19 Further, Plaintiff alleges, "Defendant's false and misleading advertising is harmful to
20 the marketplace for dietary and natural nutritional supplements, including Plaintiffs
21 products .... Indeed, users of [PEP' s] 'Research Chemicals' have little incentive to use
22 Plaintiffs natural nutritional supplements until they are hurt or the 'Research
23 Chemicals' are taken off the market." Id. 'If 39. Plaintiff alleges that it has suffered
24 "economic loss of money and reputational injury by the diversion of business from
25 Plaintiff to [PEP]." Id. 'If 54. The Court concludes that Plaintiff has alleged sufficient
26 facts to plead a false advertising injury under the Lanham Act.
B. Primary Jurisdiction Doctrine
Defendants contend that dismissal 1s warranted pursuant to the primary
1 jurisdiction doctrine because "[t]his case involved technical and unsettled questions
2 about the propriety of the chemicals and peptides which would be more adequately
3 addressed after the FDA or the appellate court provides guidance." (ECF No. 11-1 at
4 9). Plaintiff contends that the primary jurisdiction doctrine is inapplicable to this
5 matter. (ECF No. 13 at 7-8).
"Primary jurisdiction is a prudential doctrine that permits courts to determine
7 'that an otherwise cognizable claim implicates technical and policy questions that
8 should be addressed in the first instance by the agency with regulatory authority over
9 the relevant industry rather than by the judicial branch."' Astiana v. Hain Celestial
10 Grp., Inc., 783 F.3d 753, 760 (9th Cir. 2015) (quoting Clark v. Time Warner Cable,
11 523 F.3d 1110, 1114 (9th Cir. 2008)). The doctrine allows a federal court to abstain
12 from deciding a case within its subject matter jurisdiction if it determines that the
13 "initial decisionmaking responsibility should be performed by the relevant agency
14 rather than the courts." Syntek Semiconductor Co., Ltd., v. Microchip Tech. Inc., 307
15 F.3d 775, 780 (9th Cir. 2002). The application of the doctrine of primary jurisdiction
16 is "committed to the sound discretion of the court." Id. at 781 (citing United States v.
17 General Dynamics Corp., 828 F.2d 1356, 1362 (9th Cir. 1987)). "[C]ourts in
18 considering the issue have traditionally employed such factors as (1) the need to
19 resolve an issue that (2) has been placed by Congress within the jurisdiction of an
20 administrative body having regulatory authority (3) pursuant to a statute that subjects
21 an industry or activity to a comprehensive regulatory authority that (4) requires
22 expertise or uniformity in administration." Id.
In this case, Defendants seek dismissal of the case pursuant to the primary
24 jurisdiction doctrine because the amended complaint is "replete with disingenuous
25 allegations about health concerns" and "squarely falls within the purview of the [Food
26 and Drug Administrations's] authority." (ECF No. 11-1 at 9).
27 require the Court to determine whether PEP's advertisements are false and misleading
28 because they market "research chemicals" for personal use and consumption despite
1 also labeling the products as "not for human consumption." (ECF No. 9). The
2 technical and policy expertise of the Food and Drug Administration is not necessary
3 to determine whether the advertisements are misleading. See Nutrition Distribution,
4 LLCv.NewHealth Ventures,LLC,No. l6-CV-02338-BTM-MDD,20l 7WL2547307,
5 at *3 (S.D. Cal. June 13, 2017). The Court concludes that this matter does not warrant
6 dismissal under the primary jurisdiction doctrine. See, e.g., Nutrition Distribution LLC
7 v. Custom Nutraceuticals LLC, 194 F. Supp. 3d 952, 955 (D. Ariz. 2016).
C. RICO, 18 U.S.C. § 1962
Defendants contend that Plaintiff fails to state a RICO claim because the
1o amended complaint fails to sufficiently allege RICO conduct, the existence of an
enterprise entity distinct from its alleged members, and a requisite predicate act. (ECF
12 No. 11-1 at 10-11 ). Defendants contend that Plaintiff also fails to plead a RICO claim
13 based on conspiracy. Id. at 11. Defendants contend that Plaintiff"cannot use RICO
14 as a means to circumvent the FDCA' s express prohibition against private enforcement."
15 Id. Defendants contend that Plaintiff lacks standing to bring the RICO claim because
16 it fails to adequately allege injury and causation. Id. at 12.
Plaintiff contends that it adequately alleges racketeering activity. (ECF No. 13 ).
18 Plaintiff contends that the amended complaint alleges the predicate act of "the
19 introduction or delivery for introduction into interstate commerce of a misbranded drug
20 ... as well as misbranding" and wire fraud "by including defendants' payment
21 processors." Id. at 9. Plaintiff contends that it may bring a RICO claim "based on
22 allegations of mail or wire fraud (in the form of deceptive advertising)." Id. at 9.
23 Plaintiff contends that the amended complaint adequately pleads a quantifiable injury
24 through allegations that Defendants' racketeering activities have diverted sales to
25 Defendants' website, which is in direct competition with Plaintiff. Id. at 10.
The Racketeer Influenced and Corrupt Organizations ("RICO") Act provides for
27 civil and criminal liability. Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007)
28 (citing Pub. L. No. 91-452, § 901, 84 Stat. 922 (1970) (codified at 18 U.S.C. §
1 1964(c)). "Under RICO's civil enforcement mechanism, 'any person injured in his
2 business or property by reason of a violation of [18 U.S.C. § 1962] may sue therefor
3 in any appropriate United States district court and shall recover threefold the damages
4 he sustains and the cost of the suit, including a reasonable attorney's fee ...."
5 Canyon Ctyv. Sygenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008) (citing 18 U.S.C.
6 § 1964(c)). "To have standing under§ 1964(c), a civil RICO plaintiff must show: (1)
7 that his alleged harm qualifies as injury to his business or property; and (2) that his
8 harm was 'by reason of the RICO violation, which requires the plaintiff to establish
9 proximate causation." Id. (citing Holmes v. Sec. Investor Prat. Corp., 503 U.S. 258,
10 268 (1992)).
"Subsections 1962(a) through (c) prohibit certain 'pattem[s] of racketeering
12 activity' in relation to an 'enterprise."' United Bhd. ofCarpenters & Joiners ofAm. v.
13 Bldg. & Const. Trades Dep't, AFL-CIO, 770 F.3d 834, 837 (9th Cir. 2014).
Pursuant tol8 U.S.C. § 1962(c),
It shall be unlawful for any person employed by or associated with any
enterprise engages in, or the activities of wliich affect, interstate or foreign
commerce, to conduct or participate, directly or indirectly, in the conduct
of such entel])rise's affairs through a pattern of racketeering activity or
collection of unlawful debts.
18 18 U.S.C. § 1962(c). "The elements of a civil RICO claim [under§ 1962(c)] are as
19 follows: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering
20 activity (known as 'predicate acts') (5) causing injury to plaintiffs business or
21 property." United Bhd. of Carpenters, 770 F.3d at 837 (citing Living Designs, Inc. v.
22 E.I. Dupont de Nemours & Co., 431F.3d353,361 (9th Cir. 2005));seealso Odom, 486
23 F.3d at 547; Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). "A 'pattern of
24 racketeering activity' requires at least two predicate acts of racketeering activity, as
25 defined in 18 U.S.C. § 1961(1) within a period often years." Canyon Cty, 519 F.3d at
26 972. Pursuant to 18 U.S.C. § 1962(d), it is "unlawful for any person to conspire to
27 violate any of the provisions of subsection (a), (b ), or (c) of this section." 18 U.S.C.
28 § 1962(d).
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Plaintiff alleges that Defendants Fred Reynders and Brian Reynders "formed
2 [PEP] to sell illegal peptides through www.internationalpeptide.com ... which is
3 engaged in a comprehensive scheme to obtain money and property by means of false
4 and fraudulent pretenses, representations and promises, including the illicit sale of
5 peptides and other pharmaceuticals." (ECF No. 9 at
if 61). Plaintiff alleges, "Co-
6 conspirators Mastercard, Visa, American Express, Authorize.net, and Amazon
7 Payments handle merchant processing for [PEP] and benefit from [PEP's] sale of
8 misbranded drugs." Id.
Only certain violations of federal law, listed in 18 U.S.C. § 1961(1), constitute
10 a RICO predicate act. See Sanfordv. MemberWorks, Inc., 625 F.3d 550, 557 (9th Cir.
2010) ('"Racketeering activity' is any act indictable under several provisions of Title
12 18 of the United States Code ... "). Plaintiff fails to allege sufficient facts to identify
13 two or more instances in which Defendants violated a statute listed in § 1961(1).
14 Accordingly, Plaintiff fails to allege sufficient facts to adequately allege a pattern of
15 racketeering activity. Plaintiff fails to state a RICO cause of action pursuant to §
16 1962(c) or a cause of action pursuant to § 1962(d) for a conspiracy to violate RICO
17 United Bhd. of Carpenters, 770 F.3d at 837 (holding that to state a claim under §
18 1962(c) a complaint must allege a pattern of racketeering activity); Howard v. Am.
19 Online Inc., 208 F.3d 741, 751 (9th Cir. 2000) ("Plaintiffs cannot claim that a
20 conspiracy to violate RICO existed if they do not adequately plead a substantive
21 violation of RICO.").
22 V. ATTORNEYS' FEES
Plaintiff requests that the Court award attorneys' fees in the amount of$4,550
24 pursuant to 28 U.S.C. § 1927 and the Court's inherent powers. Plaintiff contends that
25 attorneys' fees are warranted because Defendants failed to provide "direct controlling
26 authority" to the Court and pursued frivolous arguments. (ECF No. 13 at 10-11).
27 Defendants contend that the motion to dismiss was not made in bad faith and that
28 Defendants' counsel had a good faith argument why the non-binding authority should
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1 not apply to this case. (ECF No. 14 at 9-10).
Pursuant to 28 U.S.C § 1927, "[a]ny attorney ... who so multiplies the
3 proceedings in any case unreasonably and vexatiously may be required by the court to
4 satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred
5 because of such conduct." 28 U.S.C. § 1927. Section 1927 sanctions must be
6 supported by a finding of bad faith or recklessness. Lahiri v. Universal Music & Video
7 Distrib. Corp., 606 F.3d 1216, 1219 (9th Cir. 2010); In re Keegan Mgmt. Co., Sec.
8 Litig., 78 F.3d 431, 436 (9th Cir. 1996). "Bad faith is present when an attorney
9 knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for
10 the purpose of harassing an opponent." In re Keegan, 78 F.3d at 436 (citing Estate of
11 Blas v. Winkler, 792 F.2d 858, 860 (9th Cir. 1989)). The bad faith requirement sets a
12 high threshold. Primus Auto. Fin. Servs. v. Batarse, 115 F.3d 644, 649 (9th Cir. 1997).
13 Sanctions pursuant to § 1927 are also available for "recklessness when combined with
14 an additional factor such as frivolousness, harassment, or an improper purpose." Fink
15 v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001).
Federal courts also have inherent power to impose sanctions against attorneys
17 and parties for bad faith conduct in litigation. See Chambers v. NASCO, Inc., 501 U.S.
18 32, 43-47 (1991). "Before awarding sanctions under its inherent powers ... the court
19 must make an explicit finding that counsel's conduct constituted or was tantamount to
20 bad faith." Mendez v. Cty of San Bernardino, 540 F.3d 1109, 1131 (9th Cir. 2008)
(quoting Primus, 115 F.3d at 648) (internal quotation marks omitted), overruled on
22 other grounds by Arizona v. ASARCO LLC, 773 F.3d 1050 (9th Cir. 2014). "Because
inherent powers are shielded from direct democratic controls, they must be exercised
24 with restraint and discretion." Roadway Express, Inc. v. Piper, 447 U.S. 752, 764
The Court does not find that Defendants' motion to dismiss was frivolous; nor
27 does the Court find that Defendants' counsel litigated this motion recklessly or in bad
28 faith. The Court declines to exercise its discretion to award attorneys' fees as a
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1 sanction under either § 1927 or its inherent power.
2 VI. CONCLUSION
IT IS HEREBY ORDERED that the motion to dismiss filed by Defendants PEP
4 Research LLC, Brian Reynders, and Fred Reynders (ECF No. 11) is DENIED as to the
5 Lanham Act cause of action against Defendant PEP Research LLC and GRANTED as
6 to the RlCO cause of action against Defendants PEP Research LLC, Brian Reynders,
7 and Fred Reynders.
WILLIAM O. HAYES
United Statesl)istrict Judge
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