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USANA Health Scis., Inc. v. Minkow

United States District Court for the District of Utah, Central Division

March 3, 2008, Decided; March 4, 2008, Filed

Case No. 2:07-cv-159 TC

Opinion

ORDER AND MEMORANDUM DECISION

Plaintiff USANA Health Sciences, Inc., ("USANA") filed this action against Defendants Barry Minkow and Fraud Discovery Institute, Inc., (collectively, "Defendants") alleging that Defendants engaged in a scheme of illegal market manipulation. USANA asserts four causes of action under California state law and one claim under federal securities law.

In response, Defendants moved to strike all state law causes of action under California's anti-SLAPP (strategic  [*2] lawsuit against public participation) statute, and moved to dismiss the amended complaint for failure to state a claim upon which relief can be granted.

For the reasons stated more fully below, the court strikes the four state law causes of action. Because USANA has standing to seek an injunction under federal securities law, the court does not dismiss the claim under Rule 10(b)(5) of the 1934 Securities Exchange Act. 15 U.S.C. § 78j; 17 C.F.R. § 240.10b-5.

Additionally, USANA has objected to an order by Magistrate Judge Alba granting expansive expedited discovery to Defendants. Through this order and memorandum decision, the court has shifted the focus of the litigation, and accordingly, vacates Judge Alba's expedited discovery order.

BACKGROUND 1

Defendant Fraud Discovery Institute, ("FDI") co-founded by Mr. Minkow, authored a lengthy and uncomplimentary report about USANA's products and business practices ("the report"). On February 20, 2007, FDI sent the report to the Securities and Exchange Commission, the Federal Bureau of Investigation, and the Internal Revenue Service.  [*3] On February 21, 2007, Mr. Minkow wrote a letter to those agencies explaining that he had short sold some shares in USANA. (See Letter from B. Minkow (Feb. 21, 2007), Original Compl. Ex. 2 at 2.)

FDI subsequently published the report on its website and issued a press release on March 15, 2007, highlighting several key findings from the report. Since that time, Defendants have apparently continued to make statements about USANA, through "follow-up reports" (Am. Compl. P 37), banner advertisements on the internet, and YouTube videos. 2

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2008 U.S. Dist. LEXIS 16613 *; 2008 WL 619287

USANA HEALTH SCIENCES, INC., a Utah corporation, Plaintiff, vs. BARRY MINKOW, a citizen of California; FRAUD DISCOVERY INSTITUTE, INC., a California corporation; JOHN DOES 1-100, Defendants.

CORE TERMS

anti-SLAPP, Defendants', discovery, amended complaint, stock, claim for relief, alleges, cause of action, manipulation, motion to strike, no evidence, probability, unfair competition, misleading, prevailing, motion to dismiss, deceptive, parties, seller, injunctive relief, misstatements, collision, expedited, products, tortious, strikes, argues, shares

Civil Procedure, Defenses, Demurrers & Objections, Motions to Strike, General Overview, Judicial Officers, Judges, Discretionary Powers, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Summary Judgment, Opposing Materials, Motions for Additional Discovery, Constitutional Law, Fundamental Freedoms, Freedom of Speech, Evidence, Burdens of Proof, Allocation, Burden Shifting, Testimony, Credibility of Witnesses, Antitrust & Trade Law, Consumer Protection, False Advertising, State Regulation, Deceptive & Unfair Trade Practices, Securities Law, Securities Exchange Act of 1934 Actions, Express Liabilities, Price Manipulation, Torts, Business Relationships, Intentional Interference, Elements, Prospective Advantage, Implied Private Rights of Action, Deceptive & Manipulative Devices, Standing