Date: 09-07-2015

Case Style: Vincent v. Utah Plastic Surgery Society

Case Number: 13-4146

Judge: Carolyn B. McHugh

Court: UNITED STATES COURT OF APPEALS TENTH CIRCUIT

Plaintiff's Attorney: Sonny J. Olsen

Defendant's Attorney: Barton H. Kunz, II, Dale J Lambert, David M. Bennion, Cory D. Sinclair, Robert S. Gurney, Dale J Lambert

Description: The facts alleged by Plaintiffs are fully set out in the district court’s order.
Relevant to this appeal, Plaintiffs allege the individual Defendants are all
members of the Utah Plastic Surgery Society (the “Society”) and certified as
plastic surgeons by The American Board of Plastic Surgery (the “Board”). The
Society is alleged to be an unincorporated entity headquartered in Utah. The
Board is a nonprofit Illinois corporation headquartered in Philadelphia. Plaintiffs
are Utah-licensed physicians who perform cosmetic surgery in the state of Utah.
Plaintiffs are not certified as plastic surgeons by the Board.
Plaintiffs assert Defendants have conspired to prevent them from competing
in the cosmetic surgery market. Their appellate arguments center on billboard
advertisements Defendants placed along Interstate-15 in Utah that were
denominated as “Public Safety Announcements.” According to Plaintiffs, these
billboards conveyed a contrived and deceptive notion that cosmetic surgery is
safer when performed by plastic surgeons rather than cosmetic surgeons.
Plaintiffs assert this message is also conveyed on a website referenced on the
-3
billboards. Both the billboards and the website contain the insignias of the Board
and the Society.
Plaintiffs asserted claims arising under the Sherman Act, the Lanham Act,
and Utah state law. Defendants moved to dismiss the complaint for failure to
state a claim, arguing Plaintiffs failed to adequately plead the Sherman and
Lanham Act claims. The district court granted the motion, dismissing all federal
and state claims.1
III. Discussion
A. Standard of Review
Because Plaintiffs’ federal claims were dismissed pursuant to Rule
12(b)(6), our review is de novo. Cohen v. Longshore, 621 F.3d 1311, 1315 (10th
Cir. 2010). A complaint is subject to dismissal under Rule 12(b)(6) if it contains
only a “formulaic recitation of the elements of a cause of action.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). To survive dismissal, “a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation
omitted). “A claim has 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.
1The district court declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice.
-4
B. Sherman Act
Plaintiffs’ Sherman Act claims arise under both 15 U.S.C. § 1 and § 2.
“[T]he Sherman Act is not concerned with overly aggressive business practices,
or even conduct that is otherwise illegal, so as long as it does not unfairly harm
competition.” JetAway Aviation, LLC v. Bd. of Cnty. Comm’rs, 754 F.3d 824, 835
(10th Cir. 2014). Thus, Plaintiffs’ Sherman Act claims were properly dismissed
if their complaint fails to sufficiently allege that Defendants’ conduct had an
anticompetitive effect in the relevant market.2 See Lenox MacLaren Surgical
Corp. v. Medtronic, Inc., 762 F.3d 1114, 1119 (10th Cir. 2014) (holding a
plaintiff cannot prove a § 2 monopolization claim without showing “harm to
competition”); Elliott Indus. Ltd. P’ship v. BP Am. Prod. Co., 407 F.3d 1091,
1124-25 (10th Cir. 2005) (affirming the dismissal of § 1 claim because plaintiff
failed to sufficiently allege defendant’s conduct harmed competition).
Although Plaintiffs’ appellate brief contains nary a reference to their
complaint, this court has reviewed the document in its entirety. The complaint
contains a bald, unsupported assertion that Defendants’ conduct has restrained
“competition in the cosmetic surgery market.” This vague and conclusory
allegation does not sufficiently allege anticompetitive effect. Our independent
review of the complaint has uncovered no factual allegations that “raise a right to
2Based on Plaintiffs’ appellate argument, we will assume for purposes of this appeal that the relevant market is the Wasatch Front.
-5
relief above the speculative level.” Twombly, 550 U.S. at 555. Accordingly, we
affirm the dismissal of Plaintiffs’ Sherman Act claims.3
C. Lanham Act
Plaintiffs also raise false advertising claims under the Lanham Act, alleging
the billboards and website maintained by Defendants mislead the public into
mistakenly believing cosmetic procedures performed by cosmetic surgeons are
risky and inherently dangerous.4 15 U.S.C. § 1125 (prohibiting certain unfair
business practices). To prevail on a false advertising claim, a plaintiff must
show,
(1) that defendant made material false or misleading representations of fact in connection with the commercial advertising or promotion of its product; (2) in commerce; (3) that are either likely to cause confusion or mistake as to (a) the origin, association or approval of the product with or by another, or (b) the characteristics of the goods or services; and (4) injure the plaintiff.
Cottrell, Ltd. v. Biotrol Int’l, Inc., 191 F.3d 1248, 1252 (10th Cir. 1999) (citations
omitted). The district court concluded Plaintiffs failed to set out a plausible claim
3Plaintiffs § 2 claim is inadequately briefed and, ordinarily, we would treat it as waived. Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836, 840-41 (10th Cir. 2005). Because our conclusion that Plaintiffs’ complaint fails to sufficiently allege an anticompetitive effect resolves both of Plaintiffs’ Sherman Act claims, we affirm the dismissal of the § 2 claim on that basis.
4In their complaint, Plaintiffs also asserted one of the defendants violated the Lanham Act by making false and misleading representations of fact during a television interview. The district court concluded this claim failed because the statements were not commercial speech for purposes of the Lanham Act. Although Plaintiffs briefly mention these comments in their opening brief, they have not appealed the district court’s ruling on this issue.
-6
that Defendants made false statements or misrepresentations of fact and, thus,
failed to sufficiently allege the element of falsity. According to Plaintiffs, the
district court erroneously imposed a heightened standard, requiring them to prove
their allegations rather than plausibly plead them. Plaintiffs argue they
sufficiently alleged that statements made on Defendants’ billboards and website
are either literally or impliedly false under the correct pleading standard.
Plaintiffs assert the applicable test for whether a statement is literally false
can be found in a twenty-year-old case from a federal district court in
Pennsylvania. See Johnson & Johnson-Merck Consumer Pharm. Co. v. Rhone
Poulenc Rorer Pharm. Co., 1993 WL 21239 (E.D. Pa. 1993). It is unnecessary to
address Plaintiffs’ argument because, without regard to whether the district court
properly analyzed the issue of literal falsity, Plaintiffs’ complaint does not allege
Defendants’ statements are literally false, either on their face or by necessary
implication.5 See Zoller Labs, LLC v. NBTY, Inc., 111 F. App’x 978, 982 (10th
Cir. 2004) (setting out, in an unpublished nonprecedential disposition, two ways
to prove literal falsity). But see Eastman Chem. Co. v. Plastipure, Inc., 775 F.3d
230, 240 (5th Cir. 2014) (noting only the First, Second, Third, Fourth, Ninth, and
5Plaintiffs’ make a brief, unsupported allegation that Defendants’ statements are literally false because the Board denies that it permitted Defendants to use its seal in their advertisements. The unresolved question of whether the Board gave permission is not material because Plaintiffs’ complaint does not allege that the use of the Board’s seal is a literal falsity and they have never filed a proper motion to amend. See infra § III D.
-7
Federal Circuits have adopted the “false by necessary implication” doctrine).
Plaintiffs, themselves, acknowledged during oral argument that they are
advancing an implied falsity claim.6
As to whether they sufficiently pleaded implied falsity, Plaintiffs direct this
court to eleven paragraphs in their complaint which they assert “contain the very
‘amorphous, misleading statements’ as contemplated by the Lanham Act.” These
referenced paragraphs identify the challenged statements made by Defendants and
describe Plaintiffs’ characterization of those statements. To prevail on their
implied falsity claims, however, Plaintiffs must show “actual consumer
deception.” Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 14 (7th Cir. 1992);
see also Scotts Co., v. United Indus. Corp., 315 F.3d 264, 273 (4th Cir. 2002)
(“[I]f a plaintiff’s theory of recovery is premised upon a claim of implied
falsehood, a plaintiff must demonstrate, by extrinsic evidence, that the challenged
[advertisements] tend to mislead or confuse consumers.” (quotation omitted)).
Plaintiffs can make this showing by presenting extrinsic evidence that
demonstrates “a statistically significant part of the commercial audience holds the
false belief allegedly communicated by the challenged advertisement.” Johnson
& Johnson * Merck Consumer Pharm. Co., v. Smithkline Beecham Corp., 960
6Plaintiffs’ concession is relevant because a plaintiff proceeding under an implied falsity theory “must also introduce evidence of the statement’s impact on consumers.” Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 495 (5th Cir. 2000).
-8
F.2d 294, 297-98, 298 (2d Cir. 1992). Plaintiffs’ complaint contains no such
factual allegation or any other specific factual allegation on the issue of actual
consumer deception. Any assertions in their complaint on public confusion are
mere speculation. For example, Plaintiffs’ complaint alleges that “Defendants’
false and misleading statements have created confusion among Plaintiffs’ clients,
potential clients, and will continue to do so if permitted to continue.” This
allegation is wholly unsupported by even a single relevant fact.7 The Supreme
Court has clearly stated that “a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at
555 (quotations and alteration omitted). Under this controlling standard,
Plaintiffs’ complaint inadequately pleads actual consumer deception.
Not only have Plaintiffs failed to adequately plead implied falsity, they
have also failed to adequately plead damages. Plaintiffs argue their complaint
adequately alleges that they lost sales and potential customers because of
7Plaintiffs argue they should be permitted to produce customer reaction surveys if this court concludes they are necessary. This argument is easily rejected. Plaintiffs have not indicated that they possess any such surveys. Further, Plaintiffs are required at the pleading stage to allege enough facts “to raise a reasonable expectation that discovery will reveal evidence” to support their claim. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). While Plaintiffs’ complaint need not contain sufficient evidence to prove their claim, they cannot file an inadequate complaint and then use the discovery process to develop a factual basis for their claims in the first instance. Id.
-9
Defendants’ statements. They assert the district court erred because it determined
their complaint must contain sufficient facts to prove their entitlement to
damages. Plaintiffs not only mischaracterize the district court’s ruling but they
also overstate the allegations in their complaint.
Plaintiffs argue they have pleaded damages with particularity “by setting
forth they have lost goodwill, . . . they have lost current customers, current
customers have lost faith in them resulting in lost revenue, they have lost sales,
their affiliate relationships have been damaged, and they have lost opportunities
at surgical centers that have been misinformed.” But Plaintiffs’ appellate brief
does not direct this court to the paragraphs in the complaint in which these
allegations appear. Our review of the complaint reveals the following allegation
on the issue of Lanham Act damages: “Plaintiffs have been and will continue to
be damaged as a result of Defendants’ false statements by the resultant market
confusion, by disruption of Plaintiffs’ relationships with its customers, loss of
potential customers, by diversion of Plaintiffs’ customers to Defendants, and by
damage to Plaintiffs’ goodwill and reputations as competent and reliable cosmetic
surgeons.” This allegation, like the allegations related to implied falsity, is
wholly conclusory. Plaintiffs’ complaint does not contain a single factual
allegation supporting their “labels and conclusions.” Id. at 555. For example, the
complaint does not indicate how much Plaintiffs’ profits have decreased since
Defendants began their advertising campaign; it does not quantify or estimate the
-10
decrease in goodwill; it does not quantify the number of potential customers who
allegedly have been lost because of Defendants’ statements or how that number
would be measured. Plaintiffs’ assertion of damages is merely a “formulaic
recitation” of the damages element of their Lanham Act claim and their bald
allegations are insufficient to “raise the right to relief above the speculative
level.” Id.
D. Amendment
In their memorandum opposing Defendants’ motion to dismiss, Plaintiffs
included the following request: “[I]n the event the Court finds Plaintiffs have not
met their burden with respect to satisfying the Court in pleading an adequate
amount of facts with the prescribed amount of particularity, Plaintiffs request the
Court allow an amendment to the complaint.” The district court declined to
recognize Plaintiffs’ statement as a proper motion to amend. Plaintiffs challenge
the district court’s ruling, arguing the court abused its discretion by refusing to
permit them to amend their complaint. See TV Commc’ns Network, Inc. v. Turner
Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir. 1992) (setting out an
abuse-of-discretion standard of review). There was no abuse of discretion.
This court addressed a nearly identical situation in Glenn v. First National
Bank in Grand Junction, 868 F.2d 368 (10th Cir. 1989). There, we declined to
construe a one-sentence request, made in response to a motion to dismiss, as a
motion for leave to amend because it failed to state the grounds for the request
-11
and did not “rise to the status of a motion.” Id. at 370. The request Plaintiffs
made to the district court likewise gives no grounds for the requested amendment.
It does not specify how Plaintiffs would amend their complaint to provide
necessary, but omitted, factual background. As we stated in Glenn, it was nothing
more than a “premature request for leave to amend” that was a “mere ‘shot in the
dark.’” Id. Accordingly, the district court did not abuse its discretion in failing
to recognize Plaintiffs’ request as a motion to amend the complaint.
E. Motion to Dismiss
After Plaintiffs filed their opening appellate brief, the Board moved to
dismiss the appeal against it, arguing Plaintiffs now concede the Board did not
authorize the use of its symbol or mark on the advertisements at issue. According
to the Board, this concession renders the appeal against the Board frivolous
because use of the Board’s mark is the sole basis for Plaintiffs’ claims against the
Board. Having read Plaintiffs’ brief in its entirety, we do not think it can
reasonably be interpreted to contain the concession alleged by the Board. On
appeal, plaintiffs argue Defendants’ use of the Board’s mark without its
permission supports their argument that Defendants’ statements are literally false.
They do not, however, specifically concede the mark was used without
permission. They merely use the Board’s factual assertion to support their
-12
argument.8 Accordingly, the Board’s motion is denied as is their request for
damages.

Outcome: Plaintiffs have failed to plead either a Sherman Act or Lanham Act claim
that has facial plausibility. The judgment of the district court is affirmed.

ENTERED FOR THE COURT

Plaintiff's Experts:

Defendant's Experts:

Comments: Plaintiffs-appellants are cosmetic surgeons who brought an action against Defendants in Utah federal court, asserting false advertising claims under the Lanham Act and monopolization claims under the Sherman Act. Defendants moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The district court granted Defendants’ motion. As to the Sherman Act claims arising under 15 U.S.C. § 1, the district court concluded Plaintiffs failed to adequately allege either a per se violation or that Defendants’ concerted action had an anticompetitive effect on the market. The Sherman Act claims arising under 15 U.S.C. § 2 were dismissed because Plaintiffs failed to adequately allege Defendants possessed monopoly power in the relevant market. Plaintiffs’ Lanham Act claims were dismissed because Plaintiffs failed to *This order and judgment is not binding precedent except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. -2 adequately allege the challenged advertisements were either literally or impliedly false, and failed to adequately plead damages. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the dismissal of Plaintiffs’ complaint.