Ameritox, LTD. v. Millennium Laboratories, Inc.

Filing 132

ORDER granting in part and denying in part 101 Motion to dismiss; denying as moot 120 Motion to modify; denying as moot 123 Motion to Seal Document ; denying 131 Motion for leave to file. See order for details. Signed by Judge Susan C Bucklew on 8/23/2012. (JMM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
AMERITOX, LTD.,
Plaintiff,
v.

Case No.: 8:11-cv-775-T-24-TBM

MILLENNIUM LABORATORIES, INC.,
Defendant.
__________________________________________/

ORDER
This matter comes before the Court on Defendant Millennium Laboratories, Inc.’s
(“Millennium”) Motion to Dismiss Counts I, VI, and VII of Plaintiff Ameritox, Ltd.’s
(“Ameritox”) Third Amended Complaint. (Doc. No. 101). Ameritox filed a Response in
Opposition (Doc. No. 118) to Millennium’s motion.
On August 9, 2012, the Court directed Ameritox to file a supplemental brief that
addressed, with citations to authority: “(1) whether a Lanham Act claim based on advertisements
implicitly representing that the practices being promoted are legal, when in actuality they are
not, is permissible; and (2) whether a court or agency of competent jurisdiction has clearly and
unambiguously ruled that the specific billing practices that Millennium has promoted are illegal
and that such law existed at the time that Millennium made the representations.” (Doc. No. 129
at 4–5). Ameritox filed its supplemental brief on August 20, 2012. (Doc. No. 130).
Upon review, and for the following reasons, Millennium’s motion to dismiss is
GRANTED in part and DENIED in part.
I.

Background
A.

Facts

Ameritox is a clinical laboratory that engages in screening urine specimens for the
presence of drugs. (Doc. No. 92 ¶8). Millennium is one of Ameritox’s competitors in the
industry. (Doc. No. 101 at 4). Healthcare providers contract with companies like Ameritox and
Millennium to determine whether patients are abusing their prescriptions. (Doc. No. 92 ¶8).
Both companies compete for a share of the market in Arizona, Florida, California, New
Hampshire, Tennessee, and Texas. (Id. at ¶9). Ameritox alleges that Millennium distributed a
series of false and misleading advertisements to healthcare providers and their patients in an
attempt to enter an already crowded market. (Id. at 4–5, 9). These representations are described
in detail below. Ameritox also asserts that Millennium engaged in a host of unfair business
practices, including providing illegal inducements to garner business, performing medically
unnecessary confirmatory testing, assisting healthcare providers in acquiring an improper
ownership interest in purportedly independent businesses, and not collecting legally required copayments and deductibles. (Id. at ¶200–07).
Ameritox filed suit on April 8, 2011 and submitted an Amended Complaint on June 14,
2011. (Doc. No. 1; Doc. No. 15). This Court dismissed the federal law claims of the Amended
Complaint on January 6, 2012 without prejudice, and Ameritox filed its Second Amended
Complaint on January 23, 2012. (Doc. No. 62; Doc. No. 66). On March 28, 2012, this Court
granted Ameritox’s motion to consolidate the initial litigation with a related case transferred to
this Court from the Southern District of California. This Court ordered Ameritox to file “one
final amended complaint, which includes all counts and allegations it intends to raise in this
matter.” (Doc. No. 89 at 4). The Court specifically cautioned Ameritox, “The Court will not
permit further amendments without good cause.” (Id.) (emphasis original). Ameritox
submitted the current Third Amended Complaint on April 9, 2012. (Doc. No. 92).
In Count I, Ameritox asserts a claim of false advertising, accusing Millennium of
2

wrongfully claiming that the products and services it promoted were legal and proper for
healthcare providers and their patients to use. Count VI raises a claim of tortious interference,
alleging that Millennium targeted Ameritox’s existing customers with these false
representations. Count VII is a claim for unfair competition that contends that Millennium
engaged in the actions set forth in its false representations and that these actions were improper.
Millennium has not moved for dismissal of Counts II–V, all of which are related state law
claims.
B.

Millennium’s Alleged Representations

The Court notes that Ameritox’s Third Amended Complaint does not explicitly delineate
the different advertisements it alleges are false. However, in its Motion to Dismiss, Millennium
has identified eight distinct representations, and it challenges each.
1.

Representation 1 – Billing Letter

Ameritox alleges that Millennium made a number of false or misleading claims related to
its billing scheme in the form of printed advertisements, which Ameritox labels as “billing
letters.” (Id. at ¶¶68–70). Millennium allegedly provided the billing letters to healthcare
providers for distribution to their patients. (Id. at ¶68, Ex. F and Ex. G). Ameritox alleges that
Millennium informed potential customers that its corporate policy was to not collect from
patients the difference between the amount Millennium billed for its services and the amount the
patients’ insurance companies agreed to pay. (Id. at ¶67, Ex. E). Relatedly, Ameritox states that
Millennium advertised that it would not require patients to pay deductibles or co-pays. (Id. at
¶67, Ex. E).
Ameritox alleges that these advertisements were false, deceptive, and misleading to three
classes of patients: those enrolled in Medicare who are not required to pay any co-pay or
deductible; those enrolled in Florida Medicaid who are required to pay only a $1 co-payment;
3

and those enrolled in private insurance programs that include the services that Millennium
provides within a patient’s annual deductible. (Id. at ¶¶74–76). Therefore, Ameritox alleges that
Millennium advertised an illusory benefit. (Id. at ¶74–76). Furthermore, because waiving these
payments is apparently illegal, Ameritox also alleges that Millennium garnered business by
falsely representing to potential customers that these actions were proper. (Id. at ¶¶77–78).
Ameritox asserts that it was harmed by healthcare providers selecting Millennium over Ameritox
based upon the illegal financial benefit to patients Millennium advertised. (Id. at ¶¶71–72).
2.

Representation 2 – Press Release

Ameritox alleges that Millennium distributed a misleading press release to thousands of
healthcare providers across the nation. (Id. at ¶98). Ameritox claims that in this press release,
Millennium’s CEO advocates for Medicare to reimburse healthcare providers at a higher rate for
drug screening and that he also represents Millennium has no vested interest in advocating for
this change. (Id. at ¶98). Ameritox asserts that presenting the press release from a purportedly
neutral standpoint is misleading, because Millennium’s business model depends upon generating
as much revenue as possible for healthcare providers, so long as they agree to contract with
Millennium. (Id. at ¶98). Thus, Ameritox alleges that Millennium is falsely representing its
motive as altruistic and that such a misrepresentation would induce healthcare providers to
choose Millennium as their laboratory. (Id. at ¶99).
3.

Representation 3 – Billing Manual

Ameritox alleges that Millennium distributed a billing manual to a substantial number of
healthcare providers using its services. (Id. at ¶ 93–95). The manual allegedly described
Millennium’s “unnecessary, duplicative, and improperly coded billing methods.” (Id. at ¶95).
Ameritox alleges the billing manual deceptively represented that Millenenium’s billing scheme
was proper. Consequently, Ameritox contends, healthcare providers selected Millennium as
4

their testing laboratory, which caused Ameritox to lose potential or existing business. (Id. at
¶95).
4.

Representation 4 – Gross Revenue Chart

Ameritox alleges that Millennium provided a substantial number of healthcare providers
with a chart entitled “Gross Revenue by Insurance Category for Multi-Clin 11 Panel Test Kit,”
which Ameritox asserts promotes an improper billing practice. (Id. at ¶¶35–37, Ex. A).
Specifically, Ameritox alleges that, under Millennium’s billing and coding method, doctors
could bill Medicare multiple times for screening a single urine sample for multiple classes of
drugs. Ameritox claims this constitutes false advertising because the chart deceptively implied
that Millennium’s billing and coding method was proper and could be instituted in good faith.
(Id. at ¶38). Ameritox claims it was harmed by healthcare providers choosing Millennium based
on this allegedly false advertising. (Id. at ¶38).
5.

Representation 5 – Fractional Ownership

Ameritox alleges that Millennium misled prospective and existing customers regarding
the propriety of a fractional ownership relationship. (Id. at ¶61–62). Millennium allegedly
encouraged healthcare providers to purchase an ownership share in third-party laboratories that
purportedly were independent of Millennium, but in fact are related to Millennium. The
healthcare providers would then receive a portion of the third-party laboratories’ billings as a
return on their investments. (Id. at ¶60). The third-party laboratories would forward the urine
samples to Millennium for additional, duplicative testing. Millennium allegedly promoted this
illegal scheme through oral representations, in-person visits, emails, and the distribution of the
paperwork necessary to establish a fractional ownership. (Id. at ¶61, Ex. D). Ameritox contends
that healthcare providers were enticed to choose Millennium as their laboratory by this financial
opportunity. (Id. at ¶62).
5

6.

Representation 6 – Communications Encouraging Health Care
Providers to Utilize Billing Modifiers

Ameritox alleges that, “through e-mail and other media,” Millennium “encouraged
Health Care Providers to un-bundle global fees for urine drug screen testing by utilizing billing
modifiers.” (Id. at ¶34). Ameritox contends that these representations deceived healthcare
providers into believing that Millennium’s revenue-generating schemes were proper, and that the
healthcare providers were materially influenced to choose Millennium for laboratory services in
order to take advantage of that promised revenue increase. (Id. at ¶38).
7.

Representation 7 – Communications Encouraging Health Care
Providers to Reduce Individual Component POCT Tests and Instead
to Send Samples to Millennium for Comprehensive Testing

Similarly, Ameritox alleges that, “through e-mail and other media,” Millennium
“encouraged Health Care Providers to reduce the number of individual component POCT tests
performed in the office, but to send the sample to Millennium for more expensive comprehensive
testing that would be billed to third party payors.” (Id. at ¶34). Ameritox contends that, enticed
by the potential for increased revenue, healthcare providers were materially influenced to choose
Millennium for laboratory services over Ameritox. (Id. at ¶38).
8.

Representation 8 – Communications Regarding the Provision of
Products and Services

Ameritox alleges that Millennium, “via email and other media, as well as through oral
representations made during phone calls and visits,” misleadingly represented to healthcare
providers that the provision of products and services to those providers at below-market value
rates complied with federal and state law. (Id. at ¶63). Millennium allegedly provided
healthcare providers with supplies necessary for onsite drug screening, compensated consultants
that assisted healthcare providers in ascertaining required waivers, and provided chemical
analyzers to healthcare providers at nominal rates. (Id.) Ameritox contends that healthcare
6

providers consequently chose Millennium with the mistaken belief that enjoying these benefits
complied with applicable law. (Id. at ¶64).
C.

Motion to Dismiss

Millennium moves to dismiss Count I for failure to state a claim, asserting that Ameritox
failed to allege sufficiently that Millennium’s representations: (1) constitute commercial
advertisement governed by the Lanham Act; (2) were false or misleading; (3) deceived or were
likely to deceive consumers; or (4) had a material effect on consumers’ purchasing decisions.
Additionally, Millennium contends that its representations are non-actionable statements of
opinion. Millennium also moves the Court to dismiss Counts VI and VII for failure to state a
claim.
II.

Standard of Review
In deciding a motion to dismiss, the district court is required to view the complaint in the

light most favorable to the plaintiff. See Murphy v. Fed. Deposit Ins. Corp., 208 F.3d 959, 962
(11th Cir. 2000) (citing Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir. 1999)). The Federal
Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he
bases his claim. Instead, Rule 8(a)(2) requires a short and plain statement of the claim showing
that the pleader is entitled to relief in order to give the defendant fair notice of what the claim is
and the grounds upon which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(citation omitted). As such, a plaintiff is required to allege “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do.” Id. at 554.
While the Court must assume that all of the allegations in the complaint are true,
dismissal is appropriate if the allegations do not “raise [the plaintiff’s] right to relief above the
speculative level.” Id. The standard on a 12(b)(6) motion is not whether the plaintiff will
ultimately prevail in his or her theories, but whether the allegations are sufficient to allow the
7

plaintiff to conduct discovery in an attempt to prove the allegations. See Jackam v. Hospital
Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986).
III.

Discussion
A.

Count I — Lanham Act

Millennium argues the Court should dismiss Ameritox’s claims against it for false
advertising under the Lanham Act, 15 U.S.C. § 1125(a). The Lanham Act was enacted to
“protect persons engaged in . . . commerce against unfair competition.” Id. at § 1127. Section
43(a) of the Lanham Act provides in relevant part that:
Any person who . . . in commercial advertising or promotion,
misrepresents the nature, characteristics, qualities, or geographic
origin of his or her or another person’s goods, services, or
commercial activities, shall be liable in a civil action by any person
who believes that he or she is or is likely to be damaged by such act.
15 U.S.C.A. § 1125(a)(1)(B). Section 43(a) protects against a number of deceptive commercial
practices, including false advertising or promotion. Seven-Up Co. v. Coca-Cola Co., 86 F.3d
1379, 1383 (5th Cir. 1996). “To be actionable under the Lanham Act, the speech at issue must
be commercial in nature. Commercial speech encompasses not merely direct invitations to trade,
but also communications designed to advance business interests.” VG Innovations, Inc. v.
Minsurg Corp., No. 8:10-cv-1726-T-33MAP, 2011 WL 1466181, at *5 (M.D. Fla. Apr. 18,
2011) (citations, internal quotation marks, and alterations omitted).
The Court must consider each representation individually, as opposed to grouping them
as an overall advertising campaign. While a court should consider the context of a
representation, “it may not assume context.” Johnson & Johnson Vision Care, Inc. v. 1-800
Contacts, Inc., 299 F.3d 1242, 1248 (11th Cir. 2002) (emphasis original). This is because such
an assumption would presume “that consumers will be exposed to every advertisement in a
8

campaign.” Id. While Ameritox does allege that Millennium engaged in a “nationwide,
centrally-coordinated” advertising campaign, Ameritox provides no information of how the
different alleged false advertisements relate to one another. (Doc. No 92 ¶14). Therefore, this
Court cannot presume that consumers received or interpreted every representation in concert.
1.

Whether Millennium’s Representations Qualify as Commercial
Activity

The Lanham Act regulates actions that constitute “commercial advertising or promotion.”
Therefore, before the Court determines whether Millennium’s conduct violates the Lanham Act,
it must first decide whether Millennium’s representations were commercial in nature. 15
U.S.C.A. § 1125(a)(1); VG Innovations, Inc., 2011 WL 1466181, at *5. For representations to
constitute “commercial advertising or promotion,” they must be:
(1) commercial speech; (2) by a defendant who is in commercial
competition with plaintiff; (3) for the purpose of influencing
consumers to buy defendant’s goods or services. While the
representations need not be made in a “classical advertising
campaign,” but may consist instead of more informal types of
“promotion,” the representations (4) must be disseminated
sufficiently to the relevant purchasing public to constitute
“advertising” or “promotion” within that industry.
VG Innovations, Inc., 2011 WL 1466181, at *5 (citing Gordon & Breach Sci. Publishers, S.A. v.
Am. Inst. of Physics, 859 F. Supp. 1521, 1535–36 (S.D.N.Y. 1994)). Of the four elements that
comprise this inquiry, Millennium contends only that Ameritox fails to allege the dissemination
prong sufficiently for each representation at issue. It argues Ameritox has failed to identify the
breadth of the dissemination and to whom such dissemination was made. (Doc. No. 101 at 8–9).
“The requisite level of circulation and the relevant purchasing public will vary according to the
industry.” VG Innovations, Inc., 2011 WL 1466181, at *6.
Representation 1 consists of billing letters addressed to patients. Millennium asserts that
9

Ameritox improperly alleges that the purchasing public to which the billing letters were
disseminated is composed of healthcare providers and their patients. (Doc. No. 101 at 9). In its
previous order granting partial dismissal, the Court noted that it was not clear whether Ameritox
was alleging that healthcare providers, patients, or both groups constituted the relevant
purchasing public. In its Third Amended Complaint, Ameritox has clarified its assertion that
Millennium targeted both groups, alleging that Millennium first gave the billing letters to
healthcare providers who, in turn, provided them to patients. (Doc. No. 92 ¶69). The Court
concludes that with this clarification, Ameritox has sufficiently defined the purchasing public
with respect to Representation 1.
Millennium also states that if the relevant purchasing public is so defined, then Ameritox
fails to allege sufficient dissemination. Specifically, Millennium claims that if the purchasing
public includes all patients who use healthcare, then the group consists of millions of members.
(Doc. No. 101 at 10). However, the relevant purchasing public would not include all healthcare
providers and all patients, but only doctors and patients who provide and seek urine drug testing.
Ameritox alleges that the billing letter was disseminated to thousands of healthcare providers
and, in turn, to thousands of their patients. (Doc. No. 92 ¶106). The Court concludes that this is
sufficient to survive a motion to dismiss.
For Representations 2–8, Ameritox alleges dissemination to thousands of healthcare
providers in the relevant states. (Doc. No. 92 ¶¶111–21). There is no ambiguity here as to the
definition of the purchasing public; therefore, the Court must consider whether “thousands of
healthcare providers” sufficiently alleges the requisite dissemination. Assuming Ameritox’s
factual allegations are true, as the Court must at this stage of the proceedings, the Court
concludes that Ameritox has met its burden, especially considering the numerical and geographic
10

breadth of healthcare providers that Millennium allegedly targeted.
2.

Lanham Act

A successful false advertising claim under the Lanham Act must establish:
(1) the advertisements of the opposing party were false or misleading;
(2) the advertisements deceived, or had the capacity to deceive,
consumers; (3) the deception had a material effect on purchasing
decisions; (4) the misrepresented product or service affects interstate
commerce; and (5) the movant has been-or is likely to be-injured as
a result of the false advertising.
Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004). For
Representation 1 (Billing Letter), Millennium argues that Ameritox has failed to satisfy the
second and third prong of the Lanham Act test — that the representations were deceptive or that
they had a material effect on consumers’ purchasing decisions. For all other representations,
Millennium contends Ameritox fails to establish any of the first three prongs of the Lanham Act
test — false or misleading, deceptive, and material.
a.

False or Misleading Advertising

This first prong — whether the challenged representations were false or misleading —
may be satisfied by demonstrating that the contents of the representations are literally false or are
misleading. Intertape Polymer Corp. v. Inspired Techs., Inc., 725 F. Supp. 2d 1319, 1333 (M.D.
Fla. 2010). A misleading advertisement “may literally be true (or is ambiguous) but implicitly
conveys a false impression, is misleading in context, or is likely to deceive consumers.” Id.
i.

Literal Falsity

Ameritox alleges that Millennium directly communicated a literal falsity to consumers
via Representation 2 (Press Release). Ameritox asserts that Millennium’s statement in its press
release that “Millennium as a corporation has no financial stake in this argument” is wholly

11

untrue. (Doc. No. 92 ¶98). If Millennium’s press release advocated for an increase in Medicare
reimbursements, and if Millennium’s business model is premised on generating increased
revenue for healthcare providers partly through Medicare reimbursements (both factual
allegations the Court must accept as true at this time), then Ameritox makes an acceptable
showing that the press release was literally false.
Similarly, with respect to Representations 3 (Billing Manual), 5 (Fractional Ownership),
and 8 (Communications Regarding the Provision of Products and Services), Ameritox alleges
that Millennium represented that the conduct advocated “was in compliance with federal and
state laws” and was otherwise proper. (See Doc. No. 92 at ¶¶ 62, 111, 112, 113, 114 and 116).
Ameritox alleges, however, that the conduct these representations advocated was illegal. The
Court concludes that these allegations are sufficient to survive Millennium’s motion to dismiss.
ii.

False by Necessary Implication

For the remaining Representations, Ameritox asserts that the messages Millennium
purportedly conveyed are literally false by implication. Ameritox claims that Representations 4
(Gross Revenue Chart), 6 (Communications Encouraging Health Care Providers to Utilize
Billing Modifiers), and 7 (Communications Encouraging Health Care Providers to Reduce
Individual Component POCT Tests and Instead to Send Samples to Millennium for
Comprehensive Testing) are false advertising, because they falsely suggest that the practices
they promote are legal and proper. In other words, Ameritox’s claims are premised on the belief
that Millennium’s representations concomitantly promote a practice and convey the message that
such practice is legal for the targeted audience to use or implement. Because Ameritox has not
alleged that these representations explicitly address legality, Ameritox must allege that these
representations are false by implication.
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The “false by necessary implication” doctrine has not been expressly recognized by the
Eleventh Circuit, but it has been recognized by other circuit courts,1 and the concept has been
applied by district courts within this circuit.2 As the Third Circuit explains, “A ‘literally false’
message may be . . . conveyed by necessary implication when, considering the advertisement in
its entirety, the audience would recognize the claim as readily as if it had been explicitly stated.”
Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d
578, 586–87 (3d Cir. 2002) (internal quotation marks omitted). Ameritox alleges that
Millennium’s representations necessarily convey the message, “You can legally undertake this
action.” That message is not directly set forth by a representation; therefore, the Court will
construe Ameritox’s argument thusly: Millennium’s representations contain a literal falsity by
necessary implication.
First, the Court will consider the audience for which Millennium’s representations were
intended. The relevant question is whether the targeted audience believed Millennium’s
representations conveyed the message that the actions the representations promoted were legal
and proper. For example, did healthcare providers believe that the gross revenue chart both
advertised Millennium’s billing scheme and expressed that the billing scheme was legal?
Ameritox alleges, yes, consumers chose Millennium with the mistaken belief that its
representations promoted legal conduct. Furthermore, Ameritox makes that factual allegation

1

The Court is aware of adoption of this doctrine by five circuits. See Time Warner Cable, Inc. v.
DIRECTV, Inc., 497 F.3d 144, 148, 158 (2d Cir. 2007); Scotts Co. v. United Indus. Corp., 315 F.3d 264,
274–75 (4th Cir. 2002); Clorox Co. Puerto Rico v. Proctor & Gamble Commercial Co., 228 F.3d 24,
34–35 (1st Cir. 2000); Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997);
Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 946–47 (3d Cir. 1993).
2
See, e.g., Precision IBC, Inc. v. PCM Capital, LLC, No. 10-682-CG-B, 2011 WL 5444114, at *11–12
(S.D. Ala. Oct. 17, 2011); Green Bullion Fin. Servs., LLC v. Money4Gold Holdings, Inc., 639 F. Supp.
2d 1356, 1366 (S.D. Fla. 2009).

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explicitly and repeatedly.3
Assuming that healthcare providers believed the representations implicitly conveyed
legality, Millennium asserts that Ameritox must demonstrate that the actions proposed by
Millennium’s representations are, in fact, illegal. (Doc. No. 101 at 15). Millennium relies on the
logic that the statement, “These actions are legal,” cannot be false if the actions are actually
legal. Consequently, the argument goes, if the underlying actions are not illegal or otherwise
improper, then Millennium’s representations are not false advertising but legitimate promotion.
Ameritox alleges that the testing and billing practices these Representations 4, 6 and 7 promote
are illegal or improper. (Doc. No. 92 ¶¶61–64, ¶¶77–78). The Court concludes that these
allegations are sufficient to survive a motion to dismiss.
iii.

Misleading

Finally, Ameritox contends that Representation 1 (Billing Letter) is misleading, because
it promotes an illusory benefit. Representation 1 states that Millennium will not require patients
to make co-payments or pay deductibles. Ameritox asserts that this is deceptive, because some
patients were not required to make any payment for Millennium’s services, despite Millennium’s
representations. (Doc. No. 92 ¶74–76). If Millennium did not charge patients co-payments or
deductibles, then a representation that it will not seek payment from patients cannot be literally
false. However, Ameritox’s assertion is that Representation 1 “implicitly convey[ed] a false
impression” by having consumers believe that they would enjoy some benefit under
Millennium’s billing scheme. Intertape Polymer Corp., 725 F. Supp. 2d at 1333. These
statements sufficiently allege that Representation 1 is misleading; therefore, if Millennium had
3

For example, see Doc. No. 92 ¶64 (“Health Care Providers, believing that they could legally take
advantage of these unlawful inducements, chose Millennium’s laboratory services over Ameritox’s in
order to receive these inducements.”).

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challenged Representation 1 concerning the first prong of the Lanham Act test, the Court would
conclude that Ameritox’s allegations are sufficient to survive a motion to dismiss.
b.

Deception or Tendency to Deceive

The deception prong may be satisfied if the representations either “actually deceived . . .
or had the tendency to deceive” the relevant purchasing public. See Third Party Verification,
Inc. v. Signaturelink, Inc., 492 F. Supp. 2d 1314, 1324 (M.D. Fla. 2007). Millennium argues that
Ameritox merely parrots the language of the Lanham Act test. (Doc. No. 101 at 16). Ameritox
alleges that Millennium’s representations deceived or were likely to deceive consumers by
misrepresenting the legality and propriety of Millennium’s billing scheme, Millennium’s
provision of benefits to healthcare providers, and the proposed fractional ownership relationship.
(Doc. No. 92 ¶¶38, 62, 64, 71–72, 95). These factual allegations do more than merely
regurgitate the language of the deception element by specifying how consumers actually were or
were likely to be deceived.
Millennium also contends that Ameritox does not properly demonstrate consumer
deception. (Doc. No. 101 at 16). Here, labeling representations as either “false” or “misleading”
carries consequences. Allegations of literally false representations do not require supporting
evidence of consumer deception, but allegations of misleading advertisements do. Johnson &
Johnson Vision Care, 299 F.3d at 1247. However, although a party must support allegations of
misleading advertisements with evidence of consumer deception at later stages of litigation, that
burden does not exist at the pleading stage. See Alphamed Pharmaceuticals Corp. v. Arriva
Pharmaceuticals, Inc., 391 F. Supp. 2d 1148, 1165 (S.D. Fla. 2005) (“At the pleading stage,
[plaintiff] is not required to submit [evidence of consumer deception]. It is sufficient for
[plaintiff] to allege that the statements are deceptive.”). Because Ameritox is not required to
15

present evidence of consumer deception to combat a motion to dismiss, Millennium’s argument
fails at this time.
c.

Materiality

In addition to establishing that Millennium’s representations were misleading and
deceptive, Ameritox must demonstrate that these representations were “likely to influence the
purchasing decision.” Johnson & Johnson, 299 F.3d at 1250. This requirement may be satisfied
by showing “the defendants misrepresented an inherent quality or characteristic of the product”
and “is based on the premise that not all deceptions affect consumer decisions.” Id. Millennium
alleges that Ameritox merely parrots the language of the materiality element. (Doc. No. 101 at
17).
Ameritox alleges that Representations 1, 3, 4, 6, and 7 were materially misleading in
misrepresenting to healthcare providers and patients that the testing and billing methods they
described were legal and proper. Ameritox asserts that Representations 5 and 8 were similarly
material to the purchasing decision of healthcare providers by misrepresenting the legality of the
proposed fractional ownership relationship and the provision of allegedly illegal benefits,
respectively. Ameritox alleges that healthcare providers chose to contract with Millennium as
their drug testing laboratory because of these misrepresentations. (Doc. No. 92 ¶¶38, 62, 64,
71–72, 95). These factual allegations are sufficient to survive a motion to dismiss.
Representation 2 is somewhat different in that it alleged that healthcare providers were
materially influenced to contract with Millennium by a press release that deceptively implied
that Millennium’s advocacy to change Medicare’s reimbursement policy was unrelated to its
financial interests. (Doc. No. 92 ¶¶98–99). However, here too, Ameritox sufficiently pleads the
materiality element in alleging that healthcare providers were at least in part persuaded to choose
16

or retain Millennium based on a deceptive implication that Millennium acted magnanimously.
Accepting these factual allegations as true, Representation 2 also meets the pleading requirement
for materiality.
3.

Non-Actionable Statements of Opinion

Millennium claims that even if Representations 1 and 3–8 conveyed false or misleading
information, those representations were non-actionable statements of opinion. The Lanham Act
regulates only representations of fact — statements that are “capable of being proven false.”
Gen. Cigar Holdings, Inc. v. Altadis, S.A., 205 F. Supp. 2d 1335, 1357 (S.D. Fla. 2002) (citation
omitted). Millennium contends that any statement it may have made regarding the legality or
propriety of the actions and services described in its representations were statements of opinion.
Statements by laypersons that purport to interpret the meaning of a statute or regulation
are opinion statements, and not statements of fact, unless “a court or agency of competent
jurisdiction” has clearly and unambiguously ruled on the matter. Id. (citing Coastal Abstract
Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999)). Additionally, “the
proper inquiry is whether the law was unambiguous at the time [the] alleged misstatements were
made.” Dial A Car, Inc. v. Transp., Inc., 82 F.3d 484, 489 (D.C. Cir. 1996).
In response to Millennium’s argument that its representations were unactionable
statements of opinion, Ameritox explained in its response to Millennium’s motion to dismiss
why the practices in Representations 1 (Billing Letter) and 8 (Communications Regarding the
Provision of Products and Services) are illegal. Specifically, Ameritox provided support for its
arguments that the waiver of co-payments and deductibles, and the provision of inducements to
healthcare providers at below-market value in exchange for referrals, violate established law and
that those practices were held to be unlawful before Millennium disseminated its challenged
17

representations. (Doc. No. 118 at 12–16).
However, Ameritox did not assert — either in its complaint or in its response to
Millennium’s motion to dismiss — that the conduct promoted in Representations 3–7 was
unambiguously illegal at the time the representations were disseminated.4 Consequently, for
Representations 3–7, the Court directed Ameritox to file a supplemental brief that addressed
“whether a court or agency of competent jurisdiction has clearly and unambiguously ruled that
the specific billing practices that Millennium has promoted are illegal and that such law existed
at the time that Millennium made the representations.” (Doc. No. 129).
Ameritox has complied with that directive, citing a combination of agency reports,
statutes, regulations, and case law indicating that the conduct Millennium allegedly promoted in
Representations 3–7 (unbundling, unnecessary and duplicative testing, and fractional ownership)
had been clearly and unambiguously ruled illegal by a court or agency of competent jurisdiction
at the time that Millennium made the representations. The Court concludes that this is sufficient
to state a Lanham Act claim and survive Millennium’s motion to dismiss.
B.

Count VI – Common Law Unfair Competition – Tortious Interference

Millennium moves the Court to dismiss Ameritox’s tortious interference claims raised in
Count VI for failure to identify a tort, impermissible shotgun pleading, and failure to state a
claim.
4

The representations in (3) through (7) are: (3) in a billing manual, Millennium described
unnecessary, duplicative, and improperly coded billing methods; (4) in a gross revenue chart,
Millennium suggested that healthcare providers bill multiple times for screening a single urine
sample for multiple classes of drugs; (5) Millennium advocated for fractional ownership of thirdparty laboratories; (6) Millennium encouraged healthcare providers to un-bundle global fees for
urine drug screen testing by utilizing billing modifiers; and (7) Millennium encouraged health
care providers to reduce the number of individual component POCT tests performed in the
provider’s office and to instead send their samples to Millennium for more expensive
comprehensive testing.
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1.

Failure to Identify a Tort

Millennium contends that it cannot determine which tort Ameritox alleges in Count VI.
(Doc. No. 101 at 21). Although Ameritox’s labeling of Count VI as “Common Law Unfair
Competition-Tortious Interference” lacks clarity, the Court is unpersuaded by Millennium’s
contention that it cannot determine whether Ameritox seeks relief under the tort of unfair
competition or tortious interference.
First, Ameritox’s allegation of suffering harm “as a result of Millennium’s intentional
and unjustified interference” would apprise a reasonable reader that Count VI advances a claim
of tortious interference. Second, Ameritox’s factual allegations that Millennium was aware of
Ameritox’s existing business relationships with healthcare providers would be a curious and
unnecessary addition to a claim of unfair competition. Furthermore, although Millennium
contends that it was unable to determine the tort asserted by Count VI, it did in fact argue that
Count VI does not properly state a claim of tortious interference.5 While the Third Amended
Complaint is not a model of clarity, it was at least clear enough to allow Millennium to deduce
that it faces a claim of tortious interference.
2.

Shotgun Pleading

The Court also rejects Millennium’s shotgun-pleading argument. Millennium contends
that dismissal is appropriate because it is unclear under which states’ laws Ameritox advances
claims of tortious interference. (Doc. No 101 at 22). Ameritox has alleged (1) that it enjoyed
advantageous business relationships with health care providers in Arizona, Florida, California,

5

The Court recognizes that a defendant confronted with an unclear pleading may face a Catch-22: the
defendant may either contend that the pleading is so unclear as to render it indiscernible or respond to the
claim it believes the plaintiff makes. However, in this instance, Millennium could readily infer from
Ameritox’s pleading which claims were being raised.

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New Hampshire, Tennessee, and Texas; (2) that Millennium knew of those ongoing business
relationships; (3) that Millennium intentionally and unjustifiably interfered with those
relationships; and (4) that as a result of Millennium’s interference, Ameritox has suffered
injuries to its relationships in Arizona, Florida, California, New Hampshire, Tennessee, and
Texas. (Doc. No. 92 at 44–46). The Court agrees with Millennium that Ameritox’s pleading
lacks clarity. However, with these factual allegations, it can be inferred that Ameritox has
advanced claims for tortious interference under the state laws of Arizona, Florida, California,
New Hampshire, Tennessee, and Texas.
3.

Failure to State a Claim

Next, the Court turns to Millennium’s assertion that Ameritox failed to state a claim for
tortious interference. In Florida, the elements of tortious interference are:
(1) the existence of a business relationship, not necessarily evidenced
by an enforceable contract; (2) knowledge of the relationship on the
part of the defendant; (3) an intentional and unjustified interference
with the relationship by the defendant; and (4) damage to the plaintiff
as a result of the breach of the relationship.
Tamiami Trail Tours, Inc. v. Cotton, 463 So. 2d 1126, 1127 (Fla. 1985) (per curiam). The
elements of tortious interference under the laws of Arizona, California, New Hampshire,
Tennessee, and Texas are substantially similar to those in Florida.6, 7
Millennium contends that Ameritox failed properly to allege disruption to its existing
6

Millennium cites California’s elements, which parse the third prong of Floridia’s elements into
intentional acts by the defendant and actual disruption with the relationship. See Sybersound Records,
Inc. v. UAV Corp., 517 F.3d 1137, 1151 (9th Cir. 2008) (citation omitted); (Doc. No. 101 at 24–25).
However, Millennium does not demonstrate that any substantive difference exists between these
standards.
7
See Antwerp Diamond Exch. of Am., Inc. v. Better Business Bureau, 637 P.2d 733, 739–40 (Ariz.
1981); Sybersound Records, 517 F.3d at 1151 ; Wilcox Indus. Corp. v. Hansen, __ F. Supp. 2d __, No.
11-cv-551-PB, 2012 WL 1600293, at *6 (D.N.H. May 7, 2012); Trau-Med of Am., Inc. v. Allstate Ins.
Co., 71 S.W.3d 691, 701 (Tenn. 2002); ThermoTek, Inc. v. WMI Enters., LLC, No. 3:10-cv-2618-D,
2011 WL 1485421, at *8 (N.D. Tex. 2011).

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relationships and damage it suffered as a result. (Doc. No. 101 at 25). Ameritox alleges that its
relationships with healthcare providers would have continued had the healthcare providers not
been induced by Millennium’s tortious interference to switch drug-testing laboratories. (Doc.
No. 92 ¶187). The alleged tortious interference includes false and misleading advertisements,
improper kickbacks, the illegal provision of below market-value supplies, the illegal billing
scheme, and illegal fractional ownership relationships proposed by Millennium, all of which
have been thoroughly described above. (Doc. No. 92 ¶¶188–94). These allegations are
sufficient for purposes of a motion to dismiss to substantiate disruption to Ameritox’s existing
relationships with healthcare providers and the damage it suffered by losing clients.
Consequently, Millennium’s motion must be denied as to Count VI.
C.

Count VII – Common Law Unfair Competition

In Count VII, Ameritox asserts an unfair competition claim under common law.
Millennium moves the Court to dismiss Count VII for failure to identify a legally cognizable
claim. Specifically, Millennium points out that federal common law has not existed in seventyfive years. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) (“There is no federal . . .
common law.”).
In Count VII, Ameritox clearly intended to advance claims for unfair competition under
the state laws of Arizona, Florida, California, New Hampshire, Tennessee, and Texas. In
Arizona, Florida, New Hampshire, and Texas, “unfair competition” is an umbrella term for
causes of action arising out of conduct that is contrary to honest practice in industrial and
commercial matters and/or conduct which is likely to confuse or deceive the public. See Third
Party Verification, 492 F. Supp. at 1324–25 (citation omitted); see also Doe v. Arizona Hosp. &
Healthcare Ass’n, CV07–1292–PHX–SRB, 2009 WL 1423378, at *11 (D.Ariz. Mar.19, 2009);
21

Optical Alignment Sys. and Inspection Servs., Inc. v. Alignment Servs. of N. Am., Inc., 909 F.
Supp. 58, 61 (D.N.H. 1995); Vendever LLC v. Intermatic Mfg. LTD, No. 3:11-cv-201-B, 2011
WL 4346324, at *6 (N.D. Tex. Sept. 16, 2011).
Under the common law of California and Tennessee, however, the tort of unfair
competition is limited to those instances in which a party passes off its goods or services as those
of another. See Groupion, LLC v. Groupon, Inc., __ F. Supp. 2d __, No. C 11-870 JSW, 2012
WL 1655728, at *12 (N.D. Cal. May 8, 2012); Brainard v. Vassar, 561 F. Supp. 2d 922, 937
(M.D. Tenn. 2008) (quoting Sovereign Order of Saint John of Jerusalem, Inc. v. Grady, 119 F.3d
1236, 1243 (6th Cir. 1997)).
The factual allegations in the Third Amended Complaint are sufficient to state a plausible
claim that Millennium’s conduct was contrary to honest practice in industrial and commercial
matters and that its conduct was likely to confuse or deceive the public. Therefore, Ameritox has
stated a plausible claim for unfair competition under the common law of Florida, Arizona, New
Hampshire, and Texas. However, because Ameritox has not alleged that Millennium has
engaged in any conduct that could be characterized as “passing off,” Ameritox’s claims for
common law unfair competition under the common law of California and Tennessee fail.
Accordingly, Millennium’s motion is granted with respect to Count VII as it relates to claims
under California and Tennessee law. Otherwise, Millennium’s motion is denied as to Count VII.
IV.

Conclusion
Accordingly, it is ORDERED AND ADJUDGED that Millennium’s Motion to Dismiss

(Doc. No. 101) is GRANTED in part and DENIED in part. The motion is:
(1)

GRANTED with respect to Count VII as it relates to claims for common law
unfair competition under California and Tennessee law;
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(2)

Otherwise, DENIED.

Furthermore:
(3)

Millennium’s Motion for Leave to File a Reply (Doc. No. 131) is DENIED.

(4)

The discovery stay is hereby lifted.

(5)

Ameritox’s Motion to Modify or Lift the Stay (Doc. No. 120) is DENIED as
moot.

(6)

The Clerk is directed to remove Exhibits A and B to Ameritox’s Motion to
Modify or Lift the Stay (Doc. No. 120) from the docket sheet and file those
exhibits under seal.

(7)

Millennium’s Motion to File Under Seal (Doc. No. 123) is DENIED as moot.

DONE AND ORDERED this 23rd day of August, 2012.

Copies to:
Counsel of Record

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