ZO Skin Health Wins Important Court Victory

On July 26, a Los Angeles County Superior Court Judge issued a written opinion rejecting Obagi Medical Products Inc.’s (OMP) motion to dismiss claims by ZO Skin Health, Inc. that OMP engaged in anti-competitive practices. ZO, a company formed to give consumers access to world-renowned dermatologist Dr. Zein Obagi’s retail skin care products, filed a lawsuit in January challenging OMP’s anti-competitive practices. The lawsuit presents evidence that OMP, one of the world’s top producers of physician-dispensed, medical skin care products, has engaged in a wide range of unlawful activities to prevent ZO from providing consumers with access to the newest anti-aging skin care products developed by Dr. Obagi.

OMP unsuccessfully asked the Court to dismiss ZO’s claims that: (1) OMP improperly relies on an illegal non-compete clause in a contract to interfere with ZO’s distributor relationships; (2) OMP illegally interfered with ZO’s agreement to sell its business; and (3) OMP wrongfully failed to honor its promise to help arrange a beneficial deal between ZO and a major Japanese pharmaceutical company. The Court rejected all of OMP’s arguments and allowed all of ZO’s claims to stand.

In its ruling, and based on the facts alleged, the Court allowed ZO to proceed toward trial on its claims that OMP’s “threats against Plaintiff’s [ZO’s] potential customers [were] intended to deter business” and that ZO “sufficiently alleged enforceable agreements” with a major Japanese pharmaceutical company that ZO claims that OMP interfered with. In denying OMP’s motion to dismiss ZO’s claims, the Court concluded that, “the moral blame attached to the defendant’s conduct sufficiently relates to violating laws of free competition” and “the closeness of the connection between the defendant’s conduct and the injury suffered is clear….”

“We are pleased with the Court’s ruling today,” said attorney Matthew W. Close of O’Melveny & Myers LLP, the law firm that represents ZO. “ZO’s lawsuit presents clear evidence that OMP improperly attempted to prevent ZO from marketing and selling its line of products to consumers. The Court’s ruling is clear and thanks to today’s ruling ZO is in a position to reveal all the facts in court.”

At the time ZO filed its lawsuit, the company outlined its goals for the litigation: (1) to halt OMP’s illegal campaign against ZO; (2) to permit ZO’s new products to be widely distributed without threats and wrongful interference; and (3) to secure just compensation for the damage that OMP’s improper campaign has already caused.

The case, ZO Skin Health, Inc. vs. OMP, Inc. is scheduled to go to trial February 23, 2011.