Asociacion de Laboratorios Clinicos v. Medical Card Systems, Inc. et al

Filing 100

OPINION AND ORDER: Granting 44 Motion to Dismiss for Failure to State a Claim; Granting 59 Motion to Dismiss; Adopting 90 Report and Recommendation; Denying 91 Motion to Set Aside. Signed by Judge Gustavo A. Gelpi on 3/2/2016. (MET)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

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ASOCIACION DE
CLINICOS, et al.,

LABORATORIOS

Plaintiffs,
v.
CASE NO. 15-1099 (GAG)
MEDICAL CARD SYSTEM INC., MCS
ADVANTAGE INC., et al.,
Defendants.

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OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION
Plaintiffs filed suit against MCS and MCS Advantage (“Defendants”) alleging false
commercial advertisement in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)
et seq., breach of contract, tortious interference and requesting specific performance of contracts,
invoking the Court’s supplemental jurisdiction, as per 28 U.S.C. § 1367. (Docket No. 52.)
Defendants move to dismiss under FED. R. CIV. P. 12(b)(6), arguing Plaintiffs fail to state
a plausible claim of false commercial advertising under Section 43(a) of the Lanham Act.
(Docket No. 44.) Defendants further request the Court to dismiss Plaintiffs’ state law claims
brought under the Court’s supplemental jurisdiction. Id.
Magistrate Judge Bruce McGiverin issued an elaborately-reasoned Report and
Recommendation finding that Defendants’ motion to dismiss should be granted, recommending
dismissal with prejudice of Plaintiffs’ Lanham Act claims and dismissal without prejudice of
Plaintiffs’ state law claims. (Docket No. 90.) Judge McGiverin reasoned that Plaintiffs failed to
allege that Defendants made false or misleading representations intended to influence potential
customers to purchase Defendants’ goods or services. Therefore, Plaintiffs do not satisfy the

Civil No. 15-1099 (GAG)
four elements of a false advertisement claim. Specifically, the Magistrate Judge articulated that
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“the letters were sent only to patients that were already enrolled in an advantage plan” and
because these were existing customers, “even drawing all inferences in Plaintiffs’ favor, it is not
plausible that defendants intended to gain new customers for their own goods and services,” as
provided by the four-part test first pronounced in Gordon & Breach Science Publishers v.
Americans Institute of Physics, 859 F.Supp 1521 (S.D.N.Y. 1994), and adopted by the First
Circuit in Podiatrist Ass’n, Inc. v. La Cruz Azul De Puerto Rico, Inc., 332 F.3d 6, 19 (1st Cir.
2003). (Docket No. 90 at 20.)

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Pursuant to Local Rule 72(a), Plaintiffs timely objected the R&R and request it should by
vacated. (Docket No. 91). Their main argument is that the Court applied an erroneous standard
for false advertising claims under the Lanham Act. Id. In the alternative, if the Court agrees
with Judge McGiverin’s reasoning, Plaintiffs request a third opportunity to amend their
complaint. Id. Defendants responded to Plaintiffs’ objections. (Docket No. 92.) Per leave of
Court, Plaintiffs replied. (Docket No. 93.)

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After careful review, the Court hereby ADOPTS Magistrate Judge McGiverin’s R&R at
Docket No. 90 and GRANTS Defendants’ motion to dismiss at Docket No. 44. The Court’s
reasoning follows.
I.

Standard of Review
The District Court may refer dispositive motions to a United States Magistrate Judge for

a report and recommendation. 28 U.S.C. § 636(b)(1)(B).

Parties may file objections to a

Magistrate Judge’s R&R. Rule 59(b) of the Federal Rules of Civil Procedure states that“[w]ithin
14 days after being served with a copy of the recommended disposition, or at some other time the
court sets, a party may serve and file specific written objections to the proposed findings and
recommendations.” Upon a party’s objection, the Court shall make a de novo review. “The

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Civil No. 15-1099 (GAG)
district judge must consider de novo any objection to the magistrate judge's recommendation.
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The district judge may accept, reject, or modify the recommendation, receive further evidence, or
resubmit the matter to the magistrate judge with instructions.” FED. R. CIV. P. 59(b)(3).
II.

Discussion
In Plaintiffs’ objection to the R&R they argue the Magistrate Judge applied an erroneous

standard for false advertising claims under the Lanham Act. Specifically, that the standard
applied in the R&R mistakenly added an additional element to their false advertisement claim.
(Docket No. 91 at 11.)
The Magistrate Judge noted that to adequately state a claim of false advertising under 15
U.S.C. § 1125 (a)(1)(B), a representation must: “(a) constitute commercial speech (b) [be] made
with the intent of influencing potential customers to purchase the speaker’s goods or services (c)
by a speaker who is a competitor of the plaintiff in some line of trade or commerce and (d) [be]
disseminated to the consuming public in such a way as to constitute ‘advertising’ or ‘promotion.’
Podiatrist Ass’n., 332 F.3d at 19.
According to Plaintiffs, the Supreme Court in Lexmark Int’l, Inc. v. Static Control
Components, Inc., 134 S. Ct. 1377, 1395 (2014) set a new standard for false advertising claims
under the Lanham Act that eliminated the second prong of the above-cited test, requiring the
representation be made with the intent of influencing potential customers to purchase the
speaker's goods or services.
Plaintiffs’ argument fails. The Lexmark holding discussed, and was limited to, a party’s
standing to sue under Section 43(a) of the Lanham Act, not the elements of a false advertising
claim under said statute. As Defendants correctly state in their response, the Lexmark case did
not modify, much less create a new test for false advertising claim under the Lanham Act.

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Civil No. 15-1099 (GAG)
Gordon and Podiatrist remain good law. Accordingly, Plaintiffs’ request for the Court to vacate
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the Magistrate Judge’s R&R is DENIED.
III.

Conclusion
After careful review, the Court hereby ADOPTS the R&R at Docket No. 90 in its

entirety and GRANTS Defendants’ motion to dismiss at Docket No. 44. Plaintiffs’ Lanham Act
claims are DISMISSED with prejudice.

Plaintiffs’ supplemental state-law claims are

DISMISSED without prejudice.
SO ORDERED.
In San Juan, Puerto Rico this 2nd day of March, 2016.

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s/ Gustavo A. Gelpí
GUSTAVO A. GELPI
United States District Judge

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