I Love Omni LLC et al v Omnitrition International Inc

Filing 40

Memorandum Opinion and Order Granting 29 MOTION to Dismiss First Amended Complaint filed by Omnitrition International Inc. As a result of this ruling, only the plaintiffs claims for breach of contract remain pending. (Ordered by Senior Judge A. Joe Fish on 7/20/2017) (svc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

I LOVE OMNI, LLC, ET AL.,
Plaintiffs,
VS.
OMNITRITION INTERNATIONAL,
INC.,
Defendant.

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CIVIL ACTION NO.
3:16-CV-2410-G

MEMORANDUM OPINION AND ORDER

Before the court is the motion of the defendant, Omnitrition International,
Inc. (“Omnitrition”), to dismiss the claims of the plaintiffs, I Love Omni, LLC
(“ILO”) and Heidi Whitehair (“Whitehair”), pursuant to FED R. CIV. P. 12(b)(6)
(docket entry 29). For the reasons stated below, the defendant’s motion is granted.
I. BACKGROUND
The court provided a detailed factual background of this case in its
memorandum opinion and order dated March 17, 2017 (“Order”) (docket entry 26).
The plaintiffs filed their original complaint on August 18, 2016. Original
Complaint (“Complaint”) (docket entry 1). Whitehair sued Omnitrition for breach

of contract, violation of the Texas Theft Liability Act (“TTLA”), business
disparagement, tortious interference with business relationships, and violation of the
Lanham Act. Id. at 8-12. ILO sued Omnitrition for breach of contract, violation of
the TTLA, tortious interference with business relationships, and violating the
Lanham Act. Id. The plaintiffs also sought a declaratory judgment concerning five
provisions of the contract. Id. at 7-8.
Omnitrition filed a motion to dismiss the plaintiffs’ claims on October 28,
2016. See Defendant’s Motion to Dismiss (docket entry 9). The court dismissed the
plaintiffs’ claims for declaratory judgment, TTLA violations, business disparagement,
tortious interference with business relationships, and Lanham Act violations. See
Order at 10-17. The court denied the defendant’s motion to dismiss the breach of
contract claim. Id. at 11-12. The court gave the plaintiffs leave to amend their
complaint to cure their pleading defects. Id. at 18.
The plaintiffs timely filed an amended complaint on March 31, 2017. See
Plaintiffs’ First Amended Complaint (“Amended Complaint”) (docket entry 27). In
the amended complaint, the plaintiffs assert claims against Omnitrition for breach of
contract, business disparagement, tortious interference with business relationships,
and Lanham Act violations. See id. The plaintiffs dropped their declaratory
judgment and TTLA claims. See id.

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In response, Omnitrition filed the instant motion pursuant to Federal Rule of
Civil Procedure 12(b)(6) to dismiss the business disparagement, tortious interference,
and Lanham Act claims. See Defendant’s Motion to Dismiss First Amended
Complaint (“Motion”) (docket entry 29). The plaintiffs then filed a timely response,
which was followed by Omnitrition’s timely reply. See Plaintiffs’ Response to
Defendant’s Motion to Dismiss First Amended Complaint (“Plaintiffs’ Response”)
(docket entry 33); Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion
to Dismiss First Amended Complaint (“Reply”) (docket entry 39). The motion is
now ripe for decision.
II. ANALYSIS
A. Rule 12(b)(6) Motion to Dismiss
“To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead
‘enough facts to state a claim to relief that is plausible on its face.’” In re Katrina
Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atlantic
Corporation v. Twombly, 550 U.S. 544, 570 (2007)), cert. denied, 552 U.S. 1182
(2008). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formalistic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555
(internal quotation marks, brackets, and citations omitted). “Factual allegations

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must be enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful in
fact).” In re Katrina Canal, 495 F.3d at 205 (quoting Twombly, 550 U.S. at 555)
(internal quotation marks omitted). “The court accepts all well-pleaded facts as true,
viewing them in the light most favorable to the plaintiff.” Id. (quoting Martin K. Eby
Construction Company, Inc. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.
2004)) (internal quotation marks omitted).
The Supreme Court has prescribed a “two-pronged approach” to determine
whether a complaint fails to state a claim under Rule 12(b)(6). See Ashcroft v. Iqbal,
556 U.S. 662, 678-79 (2009). The court must “begin by identifying the pleadings
that, because they are no more than conclusions, are not entitled to the assumption
of truth.” Id. at 679. The court should then assume the veracity of any well-pleaded
allegations and “determine whether they plausibly give rise to an entitlement of
relief.” Id. The plausibility principle does not convert the Rule 8(a)(2) notice
pleading standard to a “probability requirement,” but “a sheer possibility that a
defendant has acted unlawfully” will not defeat a motion to dismiss. Id. at 678. The
plaintiff must “plead[] factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. “[W]here the
well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged -- but it has not ‘show[n]’ -- ‘that the pleader

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is entitled to relief.’” Id. at 679 (alteration in original) (quoting FED. R. CIV. P.
8(a)(2)). The court, drawing on its judicial experience and common sense, must
undertake the “context-specific task” of determining whether the plaintiffs’
allegations “nudge” their claims against Omnitrition “across the line from conceivable
to plausible.” See id. at 679, 683.
1. Whitehair’s Business Disparagement Claim
The general elements of a claim for business disparagement are:
(1) publication by the defendant of the disparaging words; (2) falsity; (3) malice;
(4) lack of privilege; and (5) special damages. Forbes Inc. v. Granada Biosciences, Inc.,
124 S.W.3d 167, 170 (Tex. 2003); 67 TEX. JUR. 3D SLANDER OF TITLE § 4 (2015).
“The tort is part of the body of law concerned with the subject of interference with
commercial or economic relations.” Hurlbut v. Gulf Atlantic Life Insurance Company,
749 S.W.2d 762, 766 (Tex. 1987). The Restatement identifies the tort by the name
“injurious falsehood” and notes its application “in cases of the disparagement of
property in land, chattels, or intangible things or of their quality.” Id. (citing
RESTATEMENT (SECOND) OF TORTS § 623A, comment a (1977)).
While Whitehair identifies particular statements Omnitrition made, and to
whom they were made, she still fails to state a claim for business disparagement. As
Omnitrition asserts, Whitehair did not plead that any of Omnitrition’s statements
were false. Reply ¶¶ 5-6; Forbes Inc., 124 S.W.3d at 170; see Barrash v. American

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Association of Neurological Surgeons, Inc., No. 4:13-CV-1054, 2013 WL 4401429, at *4
(S.D. Tex. Aug. 13, 2013) (concluding that the plaintiff failed to adequately plead
falsity because the plaintiff “has not demonstrated or even pled that the statements .
. . are false.”). Nor has she pled any facts that would allow the court to reasonably
infer that the statements were false.
Moreover, the plaintiffs’ special damages assertion still lacks sufficient factual
support. The Fifth Circuit has mandated that plaintiffs allege a “direct, pecuniary
loss” attributable to a defendant’s false communications to succeed on a business
disparagement claim. Johnson v. Hospital Corporation of America, 95 F.3d 383, 391 (5th
Cir. 1996). Such pecuniary loss must be “realized or liquidated, such as specific lost
sales, loss of trade, or loss of other dealings.” Encompass Office Solutions, Inc. v. Ingenix,
Inc., 775 F. Supp. 2d 938, 959 (E.D. Tex. 2011) (citing Astoria Industries of Iowa, Inc.
v. SNF, Inc., 223 S.W.3d 616, 628 (Tex. App.--Fort Worth 2007, pet. denied))
(emphasis added). Finally, lost profits are special damages and must be specifically
pleaded. Naegeli Transportation v. Gulf Electroquip, Inc., 853 S.W.2d 737, 739 (Tex.
App.--Houston [14th Dist.] 1993, writ denied). Whitehair asserts that she has
“suffered special damages, including, lost income, associated with lost business
relationships and lost sales from individuals who heard and relied on Defendant’s
disparaging statements.” Amended Complaint ¶ 39. This conclusory assertion fails
to allege the damages that Whitehair suffered with any specific factual support. See

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Nationwide Bi-Weekly Administration, Inc. v. Belo Corporation, 512 F.3d 137, 147 (5th
Cir. 2007) (affirming the dismissal of a business disparagement claim because the
plaintiff “failed to allege any specific economic loss”); Encompass, 775 F. Supp. 2d at
959 (dismissing a business disparagement claim when “the only allegation . . .
relating to special damages” was that the plaintiff suffered “lost profits and lost
goodwill/business reputation”); Teel v. Deloitte & Touche LLP, No. 3:15-CV-2593-G,
2015 WL 9478187, at *6 (N.D. Tex. Dec. 29, 2015) (Fish, J.) (concluding that the
assertion that the plaintiff was “unable to find employment” and “suffered economic
loss” was conclusory, and had no factual support). Therefore, because Whitehair has
failed to sufficiently plead the falsity and special damages elements, her business
disparagement claim is dismissed.
2. The Plaintiffs’ Claim for Tortious Interference
with Business Relationships
In the amended complaint, the plaintiffs clarify that they intended “tortious
interference with business relationships” to “extend beyond existing contracts (to
include prospective relationships).” Amended Complaint at 11, n.21. In the
March 17 Order, the court dismissed the plaintiffs’ claim for tortious interference
with existing contracts because they “did not explicitly plead the existence of a
contract subject to interference between ILO, or Whitehair, and the down-line.”
Order at 15. The plaintiffs did not address this pleading defect in their amended

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complaint. Thus, to the extent that the plaintiffs intended to reassert a claim for
tortious interference with existing contracts, it is dismissed.
Texas law protects prospective as well as existing contracts from third party
interference. Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 712-13 (Tex. 2001).
Tortious interference with business or prospective contractual relations concerns
“business relations that have not yet been reduced to a contract or to a continuing
business relationship not amounting to a formal contract.” Heil-Quaker Corporation v.
Mischer Corporation, 863 S.W.2d 210, 214 (Tex. App.--Houston [14th Dist.] 1993,
pet. granted, judgm’t vacated w.r.m.). To prevail on a tortious interference with
prospective business relationships claim, the plaintiff must establish that: (1) there
was a reasonable probability that the plaintiff would have entered a business
relationship with a third party; (2) the defendant either acted with a conscious desire
to prevent the relationship from occurring or knew the interference was certain or
substantially certain to occur as a result of the conduct; (3) the defendant’s conduct
was independently tortious or unlawful; (4) the interference proximately caused the
plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.
Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013).
Though it is not necessary to prove that the contract would have certainly been made
but for the interference, “that result must have been reasonably probable, considering
all of the facts and circumstances attendant to the transaction.” Cantu v. Guerra &

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Moore, Ltd., LLP., 328 S.W.3d 1, 7 (Tex. App.--San Antonio 2009, no pet. h.)
(quoting Richardson-Eagle, Inc. v. William M. Mercer, Inc., 213 S.W.3d 469, 475-76
(Tex. App.--Houston [1st Dist.] 2006, pet. denied)). As to the “independently
tortious” requirement, the plaintiff must prove the defendant’s conduct “would be
actionable under a recognized tort.” Wal-Mart, 52 S.W.3d at 726.
The plaintiffs contend that Omnitrition tortiously interfered with prospective
business relationships when Roger Daley, Omnitrition’s founder, held a conference
call with Independent Marketing Associates on August 12, 2016. Amended
Complaint ¶¶ 32, 41. The plaintiffs allege that Daley disparaged Whitehair on this
call, and that “given Plaintiffs close relationship with individuals on the call, . . . there
was a high probability that Whitehair would have entered into a business
relationship with same.” Id. ¶ 41. The defendant asserts that the claim should be
dismissed because the plaintiffs have only pleaded that “given their close relationship
with unspecified individuals,” there was a “high probability” that “some unspecified
business relationship” would have been entered into. Motion ¶ 20. The court agrees.
See M-I LLC v. Stelly, 733 F. Supp. 2d 759, 776 (S.D. Tex. 2010). In M-I, the Court
dismissed M-I’s tortious interference with prospective business relationships claim for
failure to sufficiently plead the reasonable probability element. See id. The court
concluded that M-I’s “averment that it ‘has provided [w]ellbore cleanout tools and
services to BP for other [projects], and expected to provide the same for [another

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project],’ . . . does not plead a reasonable probability that M-I and BP would have
entered into a contractual relationship for the [other] project.” Id. Similarly, the
closest Whitehair comes to pleading reasonable probability is that “given Plaintiffs
close relationship with individuals on the call,” there was a high probability that
“Whitehair would have entered into a business relationship with same.” Amended
Complaint ¶ 41. In fact, M-I actually pled more than Whitehair, and its claim was
still dismissed. M-I LLC, 733 F. Supp. 2d at 776. M-I pled a specific party with
which it intended to enter into a business relationship, and pled the project that they
wished the relationship to center around. Id. On the other hand, as Omnitrition
points out, Whitehair merely points to “unspecified individuals” and “some
unspecified business relationship.” Motion ¶ 20. Accordingly, Whitehair fails to
sufficiently plead that there was a reasonable probability that she would have entered
into a business relationship with a third party.
Omnitrition further contends that the plaintiffs failed to adequately allege that
they suffered any actual harm related to any tortious interference with business
relationships. Motion ¶ 23. Omnitrition argues that the plaintiffs’ assertion that
they “have suffered damages in their ability to develop and maintain business
relationships based on the above tortious conduct” is a “formulaic recitation of the
elements.” Id. Courts within this district have held that the actual loss suffered in a
tortious interference with prospective business relationships claim must be

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“ascertainable at the time of the litigation.” Santander Consumer USA, Inc. v. Zeigler
Chrysler Dodge Jeep-Downers Grove, LLC, No. 3:16-CV-3310-B, 2017 WL 2729998, at
*11 (N.D. Tex. June 26, 2017) (Boyle, J.). In Santander, the plaintiff alleged that the
defendant’s statements “caused customer confusion and uncertainty,” “interfered
with [the plaintiff’s] ability to successfully maintain ongoing and financially
beneficial relationships,” and “caused reputational harm to [the plaintiff].” Id. The
court concluded that the plaintiff “failed to allege any actual damages ascertainable at
the time of the litigation with regard to prospective contractual relations,” because
the plaintiff did “not allege lost business or profits.” Id. Furthermore, “speculation
[was] required to conclude that . . . [defendant’s] interference caused damages.” Id.
As a result, the claim was dismissed for failure to sufficiently plead the proximate
cause and damages elements. Id. Here, the only damages the plaintiffs assert
regarding the tortious interference claim is “their ability to develop and maintain
business relationships.” Motion ¶ 23. Thus, “speculation is required” to conclude
that Omnitrition’s alleged interference caused damages. Moreover, the plaintiffs do
not allege lost business or profits regarding this claim. Therefore, as in Santander, the
plaintiffs have “failed to allege any actual damages ascertainable at the time of the
litigation with regard to prospective contractual relations.” See Santander Consumer
USA, Inc., 2017 WL 2729998, at *11.

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Finally, the plaintiffs do not sufficiently plead that Omnitrition’s conduct was
independently tortious. Aside from the conclusory statement that the “conduct by
Omnitrition . . . [is] independently tortious and [was] purposefully designed to
interfere with any ability of Plaintiff to create successful business in any other
business endeavor,” there is no mention of any independent tort that Omnitrition
could be liable for. Amended Complaint ¶ 41. As stated above, the amended
complaint’s business disparagement claim is insufficient; no other independent tort is
mentioned in the pleading. Thus, the plaintiffs have failed to sufficiently plead that
Omnitrition’s conduct was independently tortious. See Santander Consumer USA, Inc.,
2017 WL 2729998, at *10 (asserting that although the plaintiff alleged that
“contacting customers to tell them that fraud had occurred in connection with [the
plaintiff’s] business constitutes an independently tortious and/or wrongful act,” “[the
plaintiff], however, neither references a specific tort nor lists any elements of a
relevant tort.”). For these reasons, the plaintiffs have failed to sufficiently plead the
reasonable probability, proximate cause, damages, and independently tortious
conduct elements. Therefore, the plaintiffs’ tortious interference with prospective
business relationships claim is dismissed.
3. The Plaintiffs’ Claims for Lanham Act Violations
The plaintiffs contend that Omnitrition made the following false and
misleading commercial statements, and that these statements injured the plaintiffs:

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a.
Omnitrition has alleged on its website and promoted
to have 5.2 million distributors in 24 countries around the
world.
b.
Omnitrition asserts that its Omni Drops claim on its
Supplement Fact label to contain HCG in an amount of
3x6x12x30x60x and in other promotional literature
Omnitrition represents that its Omni Drops are
“formulated with HCG” and that the Drops contain HCG
as an “ingredient.”
c.
Omnitrition represented to distributors and
customers nationwide that their Omni Drops plan would
safely allow then to shed unwanted weight.
Amended Complaint ¶ 42.
Regarding the first statement, the plaintiffs aver that “Omnitrition has
nowhere near that number of distributors and is based almost exclusively in the
United States.” Id. The plaintiffs contend that the second statement violates the
Lanham Act because “due to laboratory testing it is believed that Omni Drops fail to
contain a detectable level of HCG.” Id. Finally, the plaintiffs assert that the third
statement violates the Lanham Act because “the Federal Drug Administration has
advised consumers to steer clear of over the counter weight-loss products that contain
HCG,” and the FDA has said that “HCG products marketed as weight loss aids are
unproven and illegal,” and “it’s the decrease in calories that accounts for any weight
loss.” Id. Omnitrition, on the other hand, contends that the plaintiffs lack standing
to bring their Lanham Act claim. Motion ¶ 25.

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To establish standing under 15 U.S.C. § 1125(a), “a plaintiff must plead (and
ultimately prove) an injury to a commercial interest in sales or business reputation
proximately caused by the defendant’s misrepresentations.” Lexmark International, Inc.
v. Static Control Components, Inc.,

U.S.

, 134 S. Ct. 1377, 1395 (2014). Further,

a plaintiff “ordinarily must show economic or reputational injury flowing directly
from the deception wrought by the defendant’s advertising; and that that occurs
when deception of consumers causes them to withhold trade from the plaintiff.” Id.
at 1391. “Only plaintiffs who have suffered an injury that negatively impacts their
ability to compete in the marketplace have standing to sue” under the Lanham Act.
Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 797 (5th Cir. 2011).
In its March 17 Order, the court concluded that the plaintiffs had not shown
they had standing to sue under the Lanham Act. Order at 16-17. The court
concluded that “the plaintiffs do not provide any facts regarding their alleged injuries,
or that Omnitrition’s conduct deceived consumers.” Id. at 16. In the amended
complaint, the plaintiffs allege that Omnitrition’s misrepresentations caused them
“damage in confusion to customers and prospective customers of Plaintiff Whitehair
and lost sales, which damage was proximately caused by defendant’s
misrepresentations.” Amended Complaint ¶ 44. These allegations constitute a mere
“formulaic recitation of the elements” that the Supreme Court cautioned against in
Twombly. See Twombly, 550 U.S. at 555.

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Furthermore, the court’s March 17 Order concluded that the plaintiffs “failed
to allege that Omnitrition’s conduct ‘caused [consumers] to withhold trade from the
plaintiff.’” Order at 17; Lexmark International, Inc., 134 S. Ct. at 1391. Moreover, the
plaintiffs did not make “any factual allegations that Omnitrition’s statements caused
customers to switch from purchasing the plaintiffs’ products to purchasing
Omnitrition’s products or that consumers do not distinguish the plaintiffs’ products
from Omnitrition’s products.” Order at 16. In the amended complaint, the plaintiffs
allege that “Omnitrition’s statements regarding its Omni Drops are
misrepresentations about the quality of the Omni Drops” and that the “Drops are
competitive with diet-related products Plaintiff Whitehair promotes through her
company Innov8tive Nutrition.” Amended Complaint ¶ 44. The plaintiffs have still
not alleged that any consumers have switched from purchasing their product to
purchasing Omnitrition’s. In fact, the plaintiffs do not identify which of their
products competes with Omni Drops. Therefore, the plaintiffs have not adequately
pleaded an “injury to a commercial interest in sales or business reputation
proximately caused by the defendant’s misrepresentation.” Lexmark International, Inc.,
134 S. Ct. at 1395. Nor have they shown that they have “suffered an injury that
negatively impacts their ability to compete in the marketplace.” Harold H Huggins
Realty, 634 F.3d at 797. Thus, the plaintiffs have failed to show that they have

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standing to sue under the Lanham Act. Accordingly, the plaintiffs’ Lanham Act
claims are dismissed.
III. CONCLUSION
For the above stated reasons, the defendant’s Rule 12(b)(6) motion to dismiss
is GRANTED. As a result of this ruling, only the plaintiffs’ claims for breach of
contract remain pending.
SO ORDERED.

July 20, 2017.

___________________________________
A. JOE FISH
Senior United States District Judge

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