Alfasigma USA, Inc. v. EBM Medical, LLC et al

Filing 48

ORDER AND REASONS: IT IS ORDERED that Corporate Defendants' 30 Motion for Leave to File Reply is GRANTED; IT IS FURTHER ORDERED that Corporate Defendants' 22 Motion to Dismiss is DENIED as to Counts I, II, IV, V, and VI, and GRANTED as to Count VIII. Signed by Judge Ivan L.R. Lemelle on 4/2/2018. (mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ALFASIGMA USA, INC.

CIVIL ACTION

VERSUS

NO. 17-7753

EBM MEDICAL, LLC, ET. AL.

SECTION “B”(4)

ORDER AND REASONS
Before the Court is Defendants EBM Medical, LLC (“Defendant
EBM”) and Food For Health International, LLC’s (“Defendant FFH”)
(collectively, the “Corporate Defendants”), “Motion to Dismiss”
(Rec. Doc. 22), Plaintiff Alfasigma USA’s Response in Opposition
(Rec. Doc. 29), and the Corporate Defendants’ “Motion for Leave to
File Reply in Excess of page Limitation” (Rec. Doc. 30). For the
reasons discussed below,
IT IS ORDERED that Corporate Defendants’ Motion for Leave
to File Reply (Rec. Doc. 30) is GRANTED;
IT IS FURTHER ORDERED that Corporate Defendants’ Motion to
Dismiss (Rec. Doc. 22) is DENIED as to Counts I, II, IV, V, and
VI, and GRANTED as to Count VIII.

FACTS AND PROCEDURAL HISTORY
Plaintiff
pharmaceutical

Alfasigma
company

that

USA,

LLC

manufactures

(“Alfasigma”)
and

sells

is

a

physician-

prescribed medical foods. Rec. Doc. 1. Relevant here are three of
Alfasigma’s medical foods: CerefolinNAC, Deplin, and Metnax (the
“Alfasigma Products”). Id. at 2.

Alfasigma markets the Alfasigma
1

Products directly to physicians who then prescribe the Alfasigma
Products to their patients. Rec. Doc. 1 at 9.
Made defendants in this case are two corporations, EBM Medical
and

Food

For

individuals 1.

Health
Rec.

(the

Docs.

“Corporate
1

and

Defendants”),

22.

Defendant

and

EBM

seven

Medical

(“Defendant EBM”) is a Missouri based start-up, founded in 2016.
Rec. Doc. 22-1 at 2. Defendant EBM markets, promotes, and sells
medical

products

to

health

care

providers,

including

medical

foods: EB-C3, EB-P1, EB-N3 and EB-N5 (the “Defendant Products”).
Rec. Docs. 1 and 22-1. In particular, the Complaint alleges that
Defendant Heard co-founded EBM Medical shortly after leaving his
position as Director of Marketing for Alfasigma in April 2016.
Rec. Doc. 1 at 10.
Essentially, Corporate Defendant EBM pays Corporate Defendant
FFH to manufacture and distribute the Defendant Products to various
healthcare providers. Rec. Doc. 22-1 at 2.
Alfasigma alleges that Defendant Products are “knock-off”
versions of Alfasigma’s Products using Alfasigma’s proprietary and
confidential

information.

Rec.

Doc.

1

at

2.

Specifically,

Alfasigma alleges that Defendant Product EB-C3 is a “purported

1

The individual defendants: Zachary Heard, Jason Tomlinson,
Richard Wickline, Jeffrey Romano, Stephen Smith, Brendan Costello,
and Russell Edwards all worked for Alfasigma prior to the filing
of this lawsuit, and are currently employed by Corporate Defendant
EBM. Rec. Docs. 1 and 21.
2

equivalent” of Alfasigma Product CerefolinNAC, EB-P1 is an alleged
equivalent of Deplin, and that EB-N3 and EB-N5 are purported
equivalents of Metnax. Rec. Doc. 1 at 3. Alfasigma further alleges
that

the

customer

Corporate
lists

in

Defendants
order

to

used

market

Alfasigma’s

the

Defendant

confidential
Products

to

Alfasigma’s physician customers. See generally, Rec. Doc. 1.
On August 11, 2017, Alfasigma filed an eight-count Complaint
(Rec. Doc. 1) against Defendants, alleging the following: Count I)
misappropriation of trade secrets in violation of the 18 U.S.C. §
1836

(the

Defend

Trade

Secrets

Act

or

“DTSA”);

Count

II)

misappropriation of trade secrets in violation of LS § 51:1431
(the Louisiana Uniform Trade Secrets Act or “LUTSA”); Count III)
breach of contract; Count IV) false advertising in violation of
the Lanham Act; Count V) unfair competition in violation of the
Lanham Act; Count VI) violation of the Louisiana Unfair Trade
Practices Act; Count VII) Louisiana Civil Code, Article 2315; and
Count VIII) tortious interference. The instant motion to dismiss
was filed by the Corporate Defendants and seeks to dismiss Counts
I, II, IV, V, VI, and VIII. Rec. Doc. 22.

LAW AND ANALYSIS
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted. Such a motion is rarely
3

granted because it is viewed with disfavor. See Lowrey v. Tex. A
& M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997).
When reviewing a motion to dismiss, courts must accept all
well-pleaded

facts

as

true

and

view

them

in

the

light

most

favorable to the non-moving party. Baker v. Putnal, 75 F.3d 190,
196 (5th Cir. 1996). However, “[f]actual allegations must be enough
to raise a right to relief above the speculative level.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). “To survive a motion
to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on
its

face.”

2009)(quoting

Gonzales

v.

Ashcroft

Kay,
v.

577
Iqbal,

F.3d
129

600,

603

S.Ct.

(5th
1937,

Cir.
1949

(2009))(internal quotation marks omitted). The Supreme Court in
Iqbal explained that Twombly promulgated a “two-pronged approach”
to determine whether a complaint states a plausible claim for
relief. Iqbal, 129 S.Ct. at 1950. First, courts must identify those
pleadings that, “because they are no more than conclusions, are
not entitled to the assumption of truth.” Id. Legal conclusions
“must

be

supported

by

factual

allegations.”

Id.

“Threadbare

recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. at 1949.
Upon identifying the well-pleaded factual allegations, courts
“assume their veracity and then determine whether they plausibly
give rise to an entitlement of relief.” Id. at 1950. A claim has
4

facial plausibility when the plaintiff pleads factual content that
allows

the

court

to

draw

the

reasonable

inference

that

the

defendant is liable for the misconduct alleged.” Id. at 1949. This
is a “context-specific task that requires the reviewing court to
draw

on

its

plaintiffs

judicial

must

experience

“nudge

their

and

common

claims

sense.”

across

the

Id.

line

The
from

conceivable to plausible.” Twombly, 550 U.S. at 570.
Counts I & II: Misappropriation of Trade Secrets under DTSA
and LUTSA
Counts I and II of the Complaint allege that in violation of
the

DTSA

and

maliciously
related

to

LUTSA

the

misappropriated
the

Alfasigma

Corporate

Defendants

Plaintiff’s
Products’

various

willfully
trade

formulation,

and

secrets

marketing,

pricing, and customers; including Alfasigma’s customer lists. Rec.
Doc. 1 at 20-22.
The

DTSA

allows

for

a

private

right

of

action

for

misappropriation of a trade secret where a plaintiff sufficiently
alleges: 1) the existence of a trade secret; 2) misappropriation
of that trade secret by another; and 3) the trade secret’s relation
to a good or service used or intended for use in interstate or
foreign commerce. 18 U.S.C. § 1836(b)(1); Source Prod. & Equip.
Co. v. Schehr, No. CV 16-17528, 2017 WL 3721543, at *2 (E.D. La.
Aug. 29, 2017).

5

Louisiana is one of many states that has adopted the Uniform
Trade Secrets Acts. La. Stat. Ann. § 51:1439 (“LUTSA”). It is wellaccepted that the DTSA is in general comport with state trade
secret law. Compare 18 U.S.C. §§ 1836, 1839, with Uniform Trade
Secrets Act § 1 (amended 1985); see also, Source Prod., No. CV 1617528, 2017 WL 3721543, at *2. Under LUTSA, “misappropriation” is
defined as:
(a) acquisition of a trade secret of another by a person
who knows or has reason to know that the trade secret
was acquired by improper means; or
(b) disclosure or use of a trade secret of another
without express or implied consent by a person who:
(i) used improper means to acquire knowledge of the
trade secret; or
(ii) at the time of disclosure or use, knew or had
reason to know that his knowledge of the trade secret
was:
(aa) derived from or through a person who had utilized
improper means to acquire it;
(bb) acquired under circumstances giving rise to a
duty to maintain its secrecy or limit its use; or
(cc) derived from or through a person who owed a duty
to the person seeking relief to maintain its secrecy
or limit its use; or
(iii) before a material change of his position, knew or
had reason to know that it was a trade secret and that
knowledge of it had been acquired by accident or
mistake.
La. Stat. Ann. § 51:1431 (Emphasis added).

6

Additionally, both DTSA and LUTSA similarly define “trade
secret” as information 2 that derives independent economic value
from

not

being

generally

known

to

or

ascertainable

by

other

persons, that is the subject of reasonable efforts to maintain the
information’s secrecy. La. Stat. Ann. § 51:1431; 18 U.S.C. § 1839
(2016).
As a threshold matter Plaintiff must allege the existence of
a trade secret. 18 U.S.C. § 1839 (2016). Corporate Defendants’
motion

does

not

contest

the

existence

of

Plaintiff’s

trade

secret(s). Rec. Doc. 22-1 at 19. This Court also finds that
Plaintiff has sufficiently alleged the existence of a trade secret.
Plaintiff’s

Complaint

sets

forth

allegations

regarding

the

formulation of its Alfasigma Products, as well as customer lists
and other information used to market Alfasigma Products. Rec. Doc.
1 at 8. Alfasigma’s complaint further alleges that this information
is

considered

“highly

proprietary”

and

that

Alfasigma

uses

reasonable methods to keep this information secret; including the
execution of confidentiality agreements. Id. at 10. Alfasigma’s
complaint goes further to allege that each of the seven individual

2

Information
includes:
financial,
business,
scientific,
technical, economic, or engineering information including a
formula, pattern, compilation, program, device, method, technique,
or process. See La. Stat. Ann. § 51:1431; 18 U.S.C. § 1839 (2016).

7

defendants were required to sign such confidentiality agreements
upon hire. Id.
In support of their motion to dismiss as to Counts I and II,
the

Corporate

Defendants

contend

that

Alfasigma’s

complaint

concedes that the overall composition of the Alfasigma Products
are distinct from the Defendants Products. Rec. Doc. 22-1 at 19.
The Corporate Defendants also maintain that Alfasigma fails to
allege in specificity actions taken by the Defendants that amount
to misappropriation. Id. at 20. However, these arguments are
misguided. The portion of Alfasigma’s complaint that discusses the
notion that the compositions of the Alfasigma Products and the
Defendant Products are distinct deals with Alfasigma’s allegations
regarding

false

advertising,

not

misappropriation

of

trade

secrets. Id. at 19; See La. Code Civ. Proc. Ann. art. 892 (Article
892 allows a plaintiff to plead more than one alternative cause of
action, even if the legal or factual bases for those causes of
action

are

complaint

inconsistent
contains

misappropriation

and

or

mutually

sufficient
disclosure

exclusive.).

Plaintiff’s

allegations
of

trade

secrets

regarding
by

the

defendants, especially Corporate Defendants’ use of Alfasigma’s
“trade secret list of physicians” to market and sell Defendant
Products to physicians on Alfasigma’s customer lists. Rec. Doc. 1
at 12-13.

8

Counts IV, V, and VI: False Advertising and Unfair Competition
Counts IV and V of the complaint present accusations of 1)
false advertising and 2) unfair competition by the Corporate
Defendants, in violation of 15 U.S.C. § 1125(a), the “Lanham Act.”
Specifically,
promotional

Plaintiff

claims

claims

about

that

their

the

Corporate

products

are

Defendants’

literally

and/or

impliedly false and misleading. Rec. Doc. 1 at 24. Plaintiff also
claims

that

Defendant

Corporate

Products

Defendants’

“have

the

same

representation
formulation,

that

the

quality

and

ingredients as the Alfasigma Products” is misleading and unfair
competition. Id. at 26. Finally, similar to Count IV, Count VI
alleges Corporate Defendants violated Louisiana Statute 51:411
(the “Louisiana Unfair Trade Practices and Consumer Protection
Law” or “LUTPA”) by making representations about their products
that are untrue, deceptive and misleading. Id. at 28.
The Corporate Defendants argue that even if Alfasigma’s
allegations are accepted as true Alfasigma failed to properly
allege reasonable consumer reliance on any misleading statement or
fact.

Rec.

Doc.

22-1

at

11.

Defendants

further

argue

that

Alfasigma’s allegations of false and misleading statements fail to
meet the standards set forth in Twombly. 3

3

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
9

Section 43(a) of the Lanham Act requires a plaintiff to
establish: 1) a false or misleading statement of fact about a
product; 2) such statement either deceived, or had the capacity to
deceive a substantial segment of potential consumers; 3) the
deception is material, in that it is likely to influence the
consumer's purchasing decision; 4) the product is in interstate
commerce; and 5) The plaintiff has been or is likely to be injured
as a result of the statement at issue. Pizza Hut, Inc. v. Papa
John's Int'l, Inc., 227 F.3d 489, 495 (5th Cir. 2000); Taquino v.
Teledyne Monarch Rubber, 893 F.2d 1488, 1500 (5th Cir.1990).
In order to obtain monetary damages or equitable relief in
the form of an injunction, “a plaintiff must demonstrate that the
commercial advertisement or promotion is either literally false,
or that . . . it is likely to mislead and confuse consumers.” Pizza
Hut, 227 F.3d at 495 (emphasis added). Additionally, “puffery” is
non-actionable. 4 Finally, “with respect to materiality, when the
statements of fact at issue are shown to be literally false, the
plaintiff need not introduce evidence on the issue of the impact
the statements had on consumers.” Pizza Hut, 227 F.3d at 497; Am.

4

The Fifth Circuit defines “puffery” as: (1) an exaggerated,
blustering, and boasting statement upon which no reasonable buyer
would be justified in relying; or (2) a general claim of
superiority over comparable products that is so vague that it can
be understood as nothing more than a mere expression of opinion.
Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 497 (5th
Cir. 2000).

10

Council of Certified Podiatric Physicians & Surgeons v. Am. Bd. of
Podiatric Surgery, Inc., 185 F.3d 606, 614 (6th Cir. 1999) (“Where
statements are literally false, a violation may be established
without evidence that the statements actually misled consumers.”).
Here, Alfasigma’s complaint sets forth a prima facie case for
false

advertising

under

the

Lanham

Act

and

LUPTA.

Corporate

Defendants are incorrect in their contention that Plaintiff’s
complaint is insufficient for failure to allege specific consumer
reliance on any alleged misleading statements. Not only does
Alfasigma sufficiently plead a prima facie case stating reliance
(Rec. Doc. 1 at 25), Alfasigma further includes communications
between Corporate Defendants and prior Alfasigma customers, where
Corporate Defendants expressly and literally represent to the
physicians that Defendant Products are “the same formulation such
as Deplin with pharmaceutical grade quality ingredients at about
1/2 the price.” Rec. Doc. 1 at 12. Plaintiff also includes a second
correspondence between Defendants and another physician and the
Corporate Defendants represent that they have a “Deplin brand
equivalent that ships directly to the patient for $37 per month.”
Id. at 13.
As the requirements of the LUTPA “mirror those of the Lanham
Act,” and because Alfasigma has sufficiently pled pursuant to the
Lanham, its state law claims of unfair trade practices withstand
dismissal at this stage as well. Louisiana World Exposition, Inc.
11

v. Logue, 746 F.2d 1033 (5th Cir. 1984); Advantage Media Grp. v.
Smart Discipline, LLC, No. CV 09-320-A-M2, 2010 WL 11538262, at
*14 (M.D. La. Jan. 12, 2010).
Count VIII: Tortious Interference with Business Relations.
Plaintiff’s
interference

with

complaint
business

makes

allegations

relations

against

of

tortious

the

Corporate

Defendants, in violation of Louisiana Civil Code Article 2315(A).
Rec. Doc. 1 at 29; La. Civ. Code Ann. art. 2315 (“Every act whatever
of man that causes damage to another obliges him by whose fault it
happened to repair it.”).
Louisiana

law

protects

a

businessman

from

malicious

and

wanton interference. McCoin v. McGehee, 498 So. 2d 272, 274 (La.
Ct. App. 1986). Accordingly, in a claim for tortious interference
with business the plaintiff must show by a preponderance of the
evidence that the defendant improperly influenced others not to
deal with the plaintiff. Junior Money Bags, Ltd. v. Segal, 970
F.2d 1, 10 (5th Cir. 1992).
Here, Corporate Defendants assert that Count VIII should be
dismissed for the plaintiff’s failure to allege that the Corporate
Defendants “actually prevented any identifiable third party from
conduction business with Plaintiff.” Rec. Doc. 22-1 at 7. We agree.
While Alfasigma provides support for the alleged malicious conduct
by Corporate Defendants, Plaintiff’s Complaint fails to point to
any third party that Corporate Defendants actually prevented from
12

conducting business with Alfasigma. We conclude that Alfasigma’s
complaint does not support a claim for tortious interference with
business relations.

New Orleans, Louisiana, this 2nd day of April, 2018.

___________________________________
SENIOR UNITED STATES DISTRICT JUDGE

13