On Monday, Judge Troy Nunley of the Eastern District of California denied a preliminary injunction to the plaintiffs in a fraud case against OsteoStrong Franchising LLC and two company executives.
OsteoStrong is a seller of franchises for bone density improvement centers, which use equipment purported to increase bone density and prevent osteoporosis and other medical conditions, such as diabetes, according to the defendants. The plaintiffs, John P. Baird, Bret Kurihara, OS New Mexico LLC, BNS RD LLC, Sean Simpson, Charla Simpson, Mary Jo McHenry, and K&L Wellness LLC, all are small business owners and franchisees of OsteoStrong centers across the nation.
The court recounted the plaintiffs’ allegations, including that OsteoStrong misrepresented and omitted information about the company “in an effort to induce potential franchisees into signing” franchise agreements. For example, the alleged misrepresentations and omissions related to the company’s intellectual property rights and history of bankruptcies and lawsuits, according to the court. The plaintiffs also claimed that their franchise agreements have exposed them to criminal and civil liability and that the company does not comply with federal medical device standards in the marketing of its equipment as viable to “diagnose, treat, or cure” medical conditions.
The plaintiffs moved for a preliminary injunction after the court denied them a temporary restraining order on Nov. 5, 2020; in this operative order denying the injunction, the court largely echoes its reasoning behind denying the restraining order, noting that a preliminary injunction is germane in extraordinary circumstances where the need for relief is urgent.
“Here, the Court need not address all of the parties’ arguments on imminent, irreparable injury because it finds Defendants’ argument regarding Plaintiffs’ failure to demonstrate actual harm persuasive,” the court said. “Despite the Court explicitly noting in its November 5, 2020 Order that Plaintiffs have not pleaded in their Complaint or demonstrated any specific dates or times to signify that relief is urgently needed, … Plaintiffs surprisingly once again fail to convince the Court that any concrete harm is forthcoming in their reply.”
The court cited OsteoStrong’s argument that it “has never received a complaint from the FDA” in its “entire existence” as compelling evidence of a lack of injury, noting that the plaintiffs did not provide any proof of civil or criminal complaints against them by clients or employees.
“Based on the foregoing, Plaintiffs’ contention is that irreparable harm is possible, not likely, which is insufficient for injunctive relief,” the court concluded.
Power Law P.C. represents the plaintiffs. Gordon Rees Scully Mansukhani LLP represents the defendants.
