SmileDirectClub, LLC v. Jacqueline I. Fulop, D.M.D., P.C.

Background

SmileDirectClub, LLC sells clear aligners through SmileShop stores and impression kits. The company alleged that Jacqueline I. Fulop, D.M.D., P.C. and Jacqueline I. Fulop-Goodling, who offer Invisalign treatment, used SmileDirectClub’s marks on their website and made false or misleading statements about SmileDirectClub’s services. The alleged statements compared SmileDirectClub with Invisalign, warned about possible pain or danger from SmileDirectClub’s services, and encouraged consumers to schedule appointments with Fulop-Goodling.

SmileDirectClub’s amended complaint asserted federal and common-law trademark and unfair-competition claims, along with claims under New York General Business Law §§ 349 and 350. Sections 349 and 350 prohibit deceptive business practices and false advertising. The defendants moved to dismiss only the claims under §§ 349 and 350.

Legal Standard

To state a claim under either statute, a plaintiff must allege that the defendant’s deceptive acts were directed at consumers, materially misleading, and caused injury. Although the statutes primarily protect consumers, a business competitor may sue if the alleged conduct causes harm to the public at large. The complaint must allege conduct with significant public consequences; ordinary competitor disputes focused on lost sales, reputation, goodwill, or consumer confusion generally do not satisfy that requirement.

Court’s Analysis

The court determined that the central injury alleged in the amended complaint was harm to SmileDirectClub’s business. SmileDirectClub alleged that the defendants used its marks and criticized its services to divert potential customers and sales, interfere with customer relationships, and damage its reputation and goodwill.

The court concluded that SmileDirectClub’s additional allegations of public harm did not change the nature of the claims. Assertions that the defendants’ statements would harm the public interest or public health were described as unsupported conclusions. The allegation that consumers might forgo dental treatment because of the statements was speculative. The court also reasoned that the statements encouraged consumers to obtain clear-aligner treatment from the defendants rather than discouraging dental treatment altogether.

The court rejected the argument that consumers who could not afford other teeth-straightening procedures would be harmed by being steered away from SmileDirectClub. The complaint did not allege that those consumers lacked similarly priced alternatives or that the alternatives were unsafe or caused injuries. The court also distinguished cases involving threats to public safety, misleading health-benefit claims contradicted by clinical trials, or misrepresentations designed to defraud Medicare recipients.

Disposition

The court held that the amended complaint did not allege conduct with significant ramifications for the public at large. Because the gravamen of the complaint was injury to SmileDirectClub’s business, the court found that SmileDirectClub lacked standing as a competitor under New York General Business Law §§ 349 and 350.

The court granted the defendants’ motion to dismiss and dismissed SmileDirectClub’s claims under §§ 349 and 350 with prejudice. It directed the parties to submit a proposed discovery schedule within 14 days of docketing the memorandum and order and directed the clerk to terminate the motion at docket entry 17.