Nutrition Distribution LLC v. PEP Research, LLC et al

Filing 85

ORDER Denying 78 the Defendants' Motion for Attorney Fees. Signed by Judge William Q. Hayes on 5/8/2019. (tcf)(jrd)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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NUTRITION DISTRIBUTION
LLC, an Arizona Limited
Liability Company,

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v.
PEP RESEARCH, LLC, a Texas
Limited Liability Company doing
business as International Peptide;
BRIAN REYNDERS, an
individual; FRED REYNDERS, an
individual; DOES 1 through 10,
inclusive,
Defendants.
HAYES, Judge:
The matter before the Court is the motion for attorney fees and related expenses filed

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ORDER
Plaintiff,

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Case No.: 16cv2328-WQH-BLM

by Defendants. (ECF No. 78).
I.

PROCEDURAL BACKGROUND
On September 15, 2016, Plaintiff initiated this action by filing a complaint, alleging

violation of § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), against
Defendants PEP Research LLC (PEP), Brian Reynders, and Fred Reynders. (ECF No. 1).
On December 30, 2016, Plaintiff filed an amended complaint, the operative Complaint in
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this action, alleging the same claim.1 Plaintiff alleged that Defendants’ supplement

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company, a competitor of Plaintiff, engaged in false and misleading advertising of certain

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prescription-only drugs and synthetic peptides (the Products).

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Complaint stated that Defendants falsely represent the Products as “research peptides and

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chemicals” that are “not for human consumption” and “intended for laboratory research

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only” (the Representations). Id. ¶ 1. Plaintiff alleged the Representations are misleading

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because Defendants market and advertise the Products for personal use and consumption.

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Id. Plaintiff alleged the Representations are misleading because Defendants do not inform

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consumers that the Products are banned from sporting events and pose health and safety

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(ECF No. 9).

The

risks. Id.

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On September 7, 2017, the Court denied Defendants’ motion to dismiss with respect

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to Plaintiff’s Lanham Act claim and granted the motion to dismiss as to Plaintiff’s

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Racketeer Influenced and Corrupt Organizations Act claim. (ECF No. 15).

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On February 15, 2019, the Court granted summary judgment in favor of Defendants.
(ECF No. 75).

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On March 4, 2019, Defendants filed a motion for attorney fees and related expenses.
(ECF No. 78).

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On March 25, 2019, Plaintiff filed a response in opposition to the motion for attorney
fees. (ECF No. 81).

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On April 1, 2019, Defendants filed a reply in support of the motion for attorney fees.
(ECF No. 83).

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II.

CONTENTIONS

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Defendants contend that they are entitled to attorney fees pursuant to the Lanham

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Act and Fed. R. Civ. P. 54(d)(2) because this case is exceptional within the meaning of the

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Plaintiff’s claims against Defendants Mastercard International Incorporated, Authorize.net, and Amazon
Payments were dismissed for failure to serve. (ECF No. 21).
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attorney fee statutory provision. Defendants assert that the Court informed Plaintiff of the

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evidence necessary to avoid summary judgment in the September 7, 2017 order denying

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Defendants’ motion to dismiss and that Plaintiff had no evidence supporting the Lanham

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Act claim two years later at summary judgment. Defendants contend that it was frivolous

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and unreasonable for Plaintiff to approach summary judgment without any evidence in

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support of the Lanham Act claim. Defendants assert that Plaintiff knew no false advertising

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had occurred or caused harm, and that Plaintiff pursued the litigation to drive up litigation

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costs and obtain discovery sanctions or a settlement. Defendants contend that an award of

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attorney fees would properly compensate Defendants and Defendants’ counsel and deter

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Plaintiff and Plaintiff’s counsel from pursuing similar actions.

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Plaintiff contends that Defendants have not met the burden to show this case is

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exceptional based on the fact that Defendants prevailed on summary judgment. Plaintiff

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contends that the claims in this case were not frivolous or unreasonable because the Court

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denied Defendants’ motion to dismiss.

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demonstrated an improper motive by referencing Plaintiff’s other cases because Plaintiff

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has prevailed in prior similar suits. Plaintiff contends that the Court should consider

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Defendants’ efforts to thwart discovery and corresponding discovery sanctions in this case.

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Plaintiff asserts that Plaintiff is not engaged in a scheme warranting deterrence; rather,

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“retailers like Defendants are criminally convicted for their intentional schemes to defraud

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and mislead.” (ECF No. 81 at 7).

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III.

Plaintiff contends that Defendants have not

DISCUSSION

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The Lanham Act permits an award of reasonable attorneys’ fees to a prevailing party

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in “exceptional cases.” 15 U.S.C. § 1117(a). The “exceptional” determination is within

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the discretion of the trial court. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S.

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559, 564 (2014). “[D]istrict courts analyzing a request for fees under the Lanham Act

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should examine the ‘totality of the circumstances’ to determine if the case was exceptional,

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exercising equitable discretion in light of the nonexclusive factors identified in Octane

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Fitness and Fogerty, and using a preponderance of the evidence standard.” SunEarth, Inc.
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16cv2328-WQH-BLM

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v. Sun Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (first quoting and citing

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Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014), then citing

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Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)) (internal citation omitted). “[A]n

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‘exceptional’ case is simply one that stands out from others with respect to the substantive

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strength of a party’s litigating position (considering both the governing law and the facts

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of the case) or the unreasonable manner in which the case was litigated.” Id. at 1180

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(quoting Octane Fitness, 572 U.S. at 554). Courts determining if a case is “exceptional”

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consider

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unreasonableness (both in the factual and legal components of the case) and the need in

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particular circumstances to advance considerations of compensation and deterrence.” Id.

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at 1181 (quoting Octane Fitness, 572 U.S. at 554 n.6). “[A] case presenting either

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subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from

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mine-run cases to warrant a fee award.” Octane Fitness, 572 U.S. at 555.

nonexclusive

factors

including:

“frivolousness,

motivation,

objective

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In this case, Plaintiff alleged that Defendants violated the Lanham Act by advertising

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and selling products labeled “not for human consumption” when those products were

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intended for human consumption.

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demonstrating a lack of evidence to support the Lanham Act claim, which shifted the

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burden to Plaintiff to set forth evidence demonstrating a genuine issue of material fact—a

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burden Plaintiff failed to carry. Defendants have not shown by a preponderance of the

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evidence that this case “case present[s] either subjective bad faith or exceptionally

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meritless claims,” based on Plaintiff’s failure to set forth the evidence needed to maintain

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the Lanham Act claim. See Octane Fitness, 572 U.S. at 555. Defendants have not shown

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by a preponderance that Plaintiff’s claims were frivolous or improperly motivated or

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objectively unreasonable based on the facts and law of this case. Defendants have not

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shown by a preponderance that compensation and deterrence considerations require an

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award of fees in this case.

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Nutraceutical, LLC, No. 316CV02810BENBGS, 2018 WL 5840042, at *3 (S.D. Cal. Nov.

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7, 2018) (awarding fees based on clear and convincing evidence of “wrongfulness,

Defendants prevailed on summary judgment by

Compare Certified Nutraceuticals, Inc. v. Avicenna

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willfulness, and bad faith in engaging in inequitable conduct,” misleading representations

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to the court, and a litigation history of disregarding court orders), with Sophia & Chloe,

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Inc. v. Brighton Collectibles, Inc., No. 12-CV-2472-AJB-KSC, 2019 WL 1429588, at *9

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(S.D. Cal. Mar. 29, 2019) (determining that the plaintiff’s failure to provide evidence to

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survive summary judgment did not render the case exceptional). The Court declines to

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exercise its discretion to find this case “exceptional” within the meaning of 15 U.S.C. §

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1117(a).

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IV.

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CONCLUSION

IT IS HEREBY ORDERED that Defendants’ motion for attorney fees (ECF No. 78)
is DENIED.
Dated: May 8, 2019

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