Temming v. Summus Holdings, LLC

Background

Steve Temming leased a medical laser at a veterinary trade show in San Francisco. He alleged that the laser was branded in a way that suggested it was manufactured by Eltech K-Laser, an Italian company. He also alleged that Scott Allen, an employee of Summus Medical Laser, said that Eltech manufactured the laser and that Summus was an authorized distributor. Temming later determined that the laser was not made by Eltech and sued Summus Medical Laser, Summus Holdings, LLC, and Richard Albright.

The amended complaint asserted a federal racketeering claim under 18 U.S.C. § 1962(c), based on alleged counterfeit-goods trafficking, mail fraud, wire fraud, and unlawful sale of a counterfeit good. It also asserted a California False Advertising Law claim and a common-law fraud claim. The lease with Beneficial Equipment Finance Corporation contained Pennsylvania choice-of-law and venue provisions and required Temming to accept personal jurisdiction in Pennsylvania courts.

Personal Jurisdiction

The court had previously held that it had personal jurisdiction—the legal power to exercise authority over a defendant—only over Summus Medical Laser, not over Summus Holdings or Richard Albright. The amended complaint added no facts that changed that conclusion. Temming asked to depose Albright to test facts in Albright’s declaration, but the court found no colorable basis for jurisdictional discovery and denied that request.

Racketeering Claim

The court dismissed the racketeering claim with prejudice. It held that Temming still had not plausibly alleged investment injury, which the parties agreed was required, or adequately alleged the predicate acts supporting the claim. The court noted that Temming had already been given an opportunity to correct the earlier complaint’s deficiencies.

Common-Law Fraud Claim

Temming did not oppose dismissal of the common-law fraud claim. He said he believed opposition was unnecessary because the court had previously allowed the claim to remain. The court explained that an amended complaint replaces the earlier complaint and that defendants may challenge claims in the amended complaint, including on grounds previously rejected.

The court did not immediately dismiss the fraud claim. Instead, it allowed Temming fourteen days from filing of the order to submit a response of up to five pages. The defendants could file an optional reply of up to two pages within seven days after that response.

False Advertising Claim

The court held that Temming plausibly stated a claim under California’s False Advertising Law. It rejected the argument that the statute provides no private right of action. Applying the reasonable-consumer test, the court concluded that the allegedly similar branding and the alleged statement that Eltech manufactured the laser could plausibly mislead consumers. Whether the conduct was actually deceptive was a factual question not suitable for resolution on a motion to dismiss.

Choice of Law and Transfer

The defendants argued that they could rely on the Pennsylvania provisions in Temming’s lease because they were intended third-party beneficiaries—people or entities the contracting parties meant to benefit. The court disagreed. Reading the lease as a whole, it found no clear intent to benefit the supplier. The lease’s provisions concerning the lessor’s lack of warranties, Temming’s selection of the equipment, the supplier’s lack of agency, and waivers and indemnity instead reflected a standard lease-financing arrangement.

Because the defendants did not establish that they were intended third-party beneficiaries, the court held that they could not use the lease’s Pennsylvania choice-of-law or forum-selection provisions. The court denied the motion to apply Pennsylvania law and denied the motion to transfer the case to Pennsylvania.

Disposition

The court granted the motion to dismiss in part. It found no personal jurisdiction over Summus Holdings and Richard Albright, denied jurisdictional discovery, dismissed the racketeering claim with prejudice, held that the false-advertising claim survived, and ordered supplemental briefing on the common-law fraud claim. It denied the motion to transfer.