IN THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA Civil

IN THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA

Civil Division

DISTRICT OF COLUMBIA

a municipal corporation

400 6

Street, N.W., 10

Floor

Washington, D.C. 20001,

PLAINTIFF,

SMILEDIRECTCLUB, INC.

414 Union Street

Nashville, TN 37219

DEFENDANT.

Case No.:

Judge:

JURY TRIAL DEMANDED

COMPLAINT FOR VIOLATIONS OF THE

CONSUMER PROTECTION PROCEDURES ACT

Plaintiff District of Columbia (the “District”), through the Office of Attorney General,

brings this consumer protection enforcement action pursuant to the District of Columbia

Consumer Protection Procedures Act (“CPPA”), D.C. Code §§ 28-3901, et seq. against

Defendant SMILEDIRECTCLUB, INC. (“SDC”), which is an oral care company that offers

dental aligners through online kits that it markets as a less expensive alternative to braces, often

targeting lower-income consumers.

SDC prominently advertises: “More than 1.5 million smiles made – and counting.” But

not all of SDC’s customers have been happy with their results. Consumers seeking a refund from

SDC because they were dissatisfied or even harmed by SDC’s products, have faced SDC’s

Faustian bargain, with the company requiring those consumers to sign onerous non-disclosure

agreements (“NDAs”) in exchange for refunds. These NDAs prohibited consumers from sharing

information about the harms caused by SDC’s products, under threat of lawsuits and fines. This

stifling of complaints prevented other District consumers from having complete, accurate

information about SDC’s products when making purchase decisions.

SDC offers a “Lifetime Smile Guarantee” under which it makes an unqualified “promise”

to provide a full refund within the first 30 days of use of its aligners and a prorated refund after

that time to any customer who is dissatisfied with its products. However, SDC consumers who

seek a refund after 30 days are required to sign an oppressive NDA, under which they must

refrain from making any negative statements about SDC or else face severe consequences,

including a $10,000 per violation penalty. The NDA also requires consumers to withdraw any

complaints that they have filed against SDC and to take down any negative social media posts

about the company or its products. SDC requires this NDA regardless of the reason for the

refund—even where the consumer reports that SDC’s products caused significant injuries

requiring medical attention. As a result, some of the most negative reviews of SDC’s products—

containing the most critical information that District consumers would want to consider when

deciding whether to purchase SDC’s products—are concealed from public view.

In this time where consumers depend on unbiased, publicly shared information to make

their purchasing decisions, and the marketplace relies on a free flow of information to function

equitably, these unfair and deceptive tactics negatively impact not only District consumers who

have been coerced into signing SDC’s NDAs, but all District consumers who are attempting to

learn about SDC before a potential purchase and can only see a biased and deceptively curated

sample of other consumers’ experiences.

SDC’s deceptive and unfair conduct violates the CPPA. The District brings this case to:

void these harmful NDAs that SDC has unlawfully procured; permanently enjoin SDC from

engaging in activities that violate the CPPA; obtain restitution for District consumers and civil

penalties as permitted by statute; and recover the District’s fees and costs. In support of its

claims, the District states as follows:

JURISDICTION AND PARTIES

1. This Court has jurisdiction over the subject matter of this case pursuant to D.C.

Code §§ 11-921 and 28-3909.

2. This Court has personal jurisdiction over Defendant SDC pursuant to D.C. Code §

13-423(a). SDC has offered, advertised, and provided dental products to thousands of District

residents since at least 2015.

3. Plaintiff District of Columbia, a municipal corporation empowered to sue and be

sued, is the local government for the territory constituting the permanent seat of the government

of the United States. The District is represented by and through its chief legal officer, the

Attorney General for the District of Columbia. The Attorney General has general charge and

conduct of all legal business of the District and all suits initiated by and against the District and

is responsible for upholding the public interest. D.C. Code § 1-301.81(a)(1). The Attorney

General is specifically authorized to enforce the District’s consumer protection laws, including

the CPPA, pursuant to D.C. Code § 28-3909.

4. SDC is a Delaware limited liability company with principal offices in Nashville,

Tennessee.

5. SDC was founded in 2014 and became a publicly traded company in 2019.

FACTUAL ALLEGATIONS

SDC’s Products and Services.

6. SDC offers clear aligners as an alternative to traditional orthodontics.

7. Consumers who wish to purchase SDC’s aligners can either order an impression

kit online or visit one of SDC’s brick-and-mortar locations or pop-up shops.

8. SDC markets its aligners as less expensive and faster than traditional

orthodonture. It is also less expensive than other clear aligner competitors.

9. In its 10-K filed with the Securities and Exchange Commission for the fiscal year

ending in December 2021, (“10-K”), SDC attributes its growth largely to the use of its products

by lower-income consumers.

10. Its aligners cost around $1950, which SDC states in its 10-K is up to 60% less

than traditional, in-person orthodontal care.

11. SDC claims in its 10-K to be able to provide these cost savings by “removing the

overhead cost of multiple in-person doctor visits” and monitoring a consumer’s progress through

its tele-dentistry platform, SmileCheck. In other words, although SDC asserts that dentists

oversee the consumer’s care, this work is generally done remotely.

12. Consumers pay for SDC’s services either upfront, or through SDC’s financing

program via a monthly payment plan.

13. In its Initial Public Offering filed with the SEC in 2019, SDC claimed that its

aligners produced results in less than half of the time of traditional braces (5-10 months,

compared to 12-24 months for orthodontist visits).

14. In addition to aligners, SDC offers other dental products such as whitening kits,

water flossers, and other ancillary oral care items.

SDC’s Refund-Backed ‘Lifetime Smile Guarantee.’

15. In the consumer review section of its website, SDC advertises that it has a five-

star rating (the highest rating) from 65,318 reviews with a nominal number of lower star reviews.

https://smiledirectclub.com/results/ downloaded 11/9/22.

16. That same webpage links to pages of positive reviews from consumers, with

statements such as “Comfortable,” “Great service,” and “Very Easy. The impression kit didn’t

take long at all and loved how simple it was.”

17. The website further claims, “More than 1.5 million smiles made – and counting”

and states that SDC can help with dental problems such as crowding, spacing, underbite,

overbite, and crossbite.

18. SDC advertises these positive reviews along with a guarantee that “Your new

smile is guaranteed for life.”

19. SDC has even trademarked the phrase “Lifetime Smile Guarantee.”

20. In conjunction with this “guarantee,” SDC promises that, “[i]f you decide

SmileDirectClub aligners aren’t for you within the first 30 days of use, we’ll refund your cost

100%. Even after the first 30 days, you can return your unused aligners for a prorated refund.

That’s our promise to you.”

21. Nowhere in the Guarantee, or anywhere else on its website, does SDC disclose

that a general requirement for consumers to obtain a refund after the first 30 days is that they

must also sign an onerous NDA that suppresses negative views.

22. Rather, as detailed below, SDC endeavors to hide even the existence of these

NDAs.

23. Nowhere in the Guarantee, or anywhere else on its website, does SDC disclose to

consumers that the reviews on its website and elsewhere have been filtered, so that some of the

most damning reviews have been removed from public view through SDC’s use of NDAs.

SDC’s Oppressive NDA.

24. If a consumer requests a refund more than 30 days after purchasing the product,

SDC generally requires the consumer to sign a “General Release” (NDA) to receive a refund.

These NDAs are generally form contracts with identical terms. The NDAs are a prerequisite to

the receipt of refunds, even if the reason for the refund (such as injuries caused by SDC’s

products) did not become apparent until after the 30 days. Accordingly, in order to qualify under

SDC’s guarantee and obtain the return of even part of the thousands of dollars they paid for

products that may be defective, harmful, or otherwise unsatisfactory, consumers have no choice

but to “agree” to these NDAs. And through these NDAs, SDC goes to great lengths to suppress

negative information about the company.

25. First, the NDA includes a gag clause that requires that the consumer not even

disclose the existence of the NDA.

Releasor covenants and agrees that he/she shall keep strictly confidential and shall

not make public, disseminate, release or otherwise reference, allude to, suggest to

any person, agency or other entity, including but not limited to media or press, in

any manner whatsoever, the terms or existence of this General release or the

facts underlying the Transaction.

(emphasis added).

26. Second, the NDA requires that the consumer affirmatively remove any negative

reviews the consumer already posted, and agree not make or communicate any negative

comments about SDC or its products in the future:

. . . Releaser further covenants and agrees that he/she will not make, publish, or

communicate any statements or opinions that would disparage, create a negative

impression of, or in any way be harmful to the business or business reputation of SDC

or its affiliates or their respective employees, officers, directors, products, or services.

(emphasis added).

27. Third, several provisions of the NDA require consumers to release all claims that

they may have against SDC—including claims relating to injuries caused by the products, and

even claims that they do not yet know about—and agree not to sue SDC in the future.

28. In addition to not suing, the NDA prohibits consumers from notifying government

agencies or regulators about their problems with the product and to withdraw any filed

complaints.

Releaser covenants and agrees that he/she has not filed any complaint with any

local, state or federal agency or regulator (each, a “Complaint” and collectively,

the “Complaints”), or, in the event that Releaser has filed any Complaint(s) prior

to executing this Release, Releaser hereby agrees to withdraw any and all

outstanding Complaints upon receipt of the Payment. Releaser further agrees that

he/she will not file any future Complaints.

29. In fact, in the course of the investigation leading up to the filing of this lawsuit,

SDC would not even waive enforcement of this provision to enable the D.C. Office of the

Attorney General to speak to District consumers who had signed an NDA to gather pertinent

information, claiming that such conversations would harm SDC’s reputation.

30. Even if the consumer receives a subpoena or court order to provide testimony, the

NDA requires the consumer to notify SDC so that the company may take “whatever legal action

[SDC] deems appropriate, including, but not limited to seeking a protective order.”

31. Consumers are subject to damages for any breach of the NDA, including but not

limited to $10,000 per violation.

Violation of this General Release by Releaser, including by a violation of the

confidentiality or covenant not to sue provisions, or the filing of a complaint or

grievance shall be deemed to be a material breach and shall give SDC a right to

seek remedies, including actual damages and/or injunctive relief as may be

appropriate and provided by law and/or equity. SDC shall have the right to seek

actual damages or to declare the forfeiture of the Payment by Releaser and

require its repayment, at SDC’s sole election. If Releaser violates this General

Release, SDC shall be entitled, as liquidated damages and not as a penalty, of

Ten Thousand Dollars ($10,000.00) per violation. . . . In addition, Releaser

shall pay to SDC any amounts which Releaser receives in exchange for any

activity hereunder which results in a violation of this General Release and that

such amounts shall be considered additional liquidated damages hereunder.

(emphases added).

32. This provision is no empty threat, as SDC has sued a consumer for breach of an

NDA at least once in the past. See, e.g., SmileDirectClub v. Minor, No. 3:18-cv-00320 (M.D.

Tenn.). The company often uses litigation as a tool to limit information about its products. For

example, SDC sued media outlets that reported negative information about the company. See

SmileDirect Club v. Gizmodo Media Group, LLC (Chancery Court, Davidson County, TN). And

when state dental boards in California, Georgia, and Alabama established new rules or

interpreted existing rules in a manner that restricted how SDC could do business, it sued them as

well.

33. In a ‘belts and suspenders’ approach, SDC also quashes public accountability

through its use of arbitration clauses. During the registration process on SDC’s website,

consumers must agree to arbitrate their disputes with SDC. This ‘agreement’ comes in the form

of a clickwrap check box through which consumers agree to terms that they need not have

viewed or read. SDC managed to have a class-action filed against it dismissed by obtaining an

order compelling the consumer to arbitrate. The consumer in that class-action, Sollinger v.

SmileDirectClub, LLC, 19-cv-5977 (S.D. N.Y.), had alleged that SDC’s aligners led to tooth pain

and sensitivity. According to the complaint, the consumer’s dentist advised him that his cracked

teeth were caused by SDC’s aligners.

34. In the District of Columbia, numerous consumers have signed SDC’s NDAs. In

return for signing the NDAs, these District consumers often received only a partial refund or

sometimes just a waiver of the balance due.

35. Consumers across the country who have used SDC’s products have signed SDC’s

NDA, thus depriving District consumers of valuable information about SDC’s products.

SDC’s Aligners Have Caused Consumer Injury.

36. Absent SDC’s deceptive and unfair practice of requiring onerous NDAs, District

consumers would have additional information about the significant harms that can be caused by

SDC’s products.

37. Some dentists have reported their patients’ problems with SDC’s aligners to the

Food and Drug Administration through adverse event reports.

38. Some of these FDA reports indicate permanent injury or the risk of permanent

injury. For instance:

• PATIENT TREATMENT FROM SMILE DIRECT CLUB WITHOUT SUPERVISION

OF A DENTAL PROFESSIONAL. MOVEMENT OF TOOTH #9 WAS DONE TOO

QUICKLY AND RESULTED IN KILLING THE TOOTH. THIS WOULD NOT HAVE

HAPPENED IF THE TREATMENT USE OF A CLASS II MEDICAL DEVICE WAS

OVERSEEN BY A DENTAL PROFESSIONAL. THE ISSUE WITH SMILE DIRECT

CLUB IS EVIDENT FROM THIS CASE AND MANY OTHERS. FDA SAFETY

REPORT ID # (B)(4).

• PT HAD CONTRACTED WITH SMILE DIRECT CLUB FOR DO-IT YOURSELF

ORTHODONTICS. SHE PRESENTED TO ME WITH FRONT TEETH THAT WERE

SO SORE SHE COULD NOT TOUCH THEM NOR HAVE HOT OR COLD FOOD.

AN X-RAY DISCLOSED THICKENED LIGAMENTS AROUND FRONT TOOTH

WHICH INDICATES VERY HIGH TORQUING FORCES TO TEETH. THE

ALIGNERS WERE MADE OUT OF A MATERIAL THAT WAS WAY TOO STIFF,

AND WAY TOO LONG. EXCESSIVE FORCE WAS BUILT INTO THE ALIGNER

SHE SHOWED ME, MAKING HER TEETH LOOSE AND SENSITIVE. PT HAD

PROCEEDED WITH THIS MAIL-ORDER TREATMENT WITH NO CLEARANCE

FROM ME, AND HER WISDOM TEETH NOT BEING REMOVED AS

RECOMMENDED. FDA SAFETY REPORT ID# (B)(4).

• IRREVERSIBLE PULPITIS

AFTER SMILE DIRECT CLUB USAGE. FDA SAFETY

REPORT ID# (B)(4).

39. A limited number of consumers who have rejected SDC’s NDAs have

complained to law enforcement or the Better Business Bureau.

40. Some of these reports indicate that the consumer suffered pain, damage, and

considerable costs in remedying problems caused by SDC’s aligners. For instance:

• One consumer reported that her teeth ended up being worse after using SDC

aligners and she ended up needing dental work that cost $18,000 after spending

$2,000 on SDC aligners.

• Another consumer reported that he only had minor cosmetic issues before using

SDC aligners but ended up with an irregular and painful bite and other dental

problems after using the product.

• A third consumer reported that the aligners caused pericoronitis when his teeth

shifted, requiring painful surgery and teeth extraction.

41. In sum, SDC’s aligners have caused both physical and financial injuries to some

consumers.

Inside the innermost part of each tooth is an area called the pulp. The pulp contains the blood

supply and nerves for the tooth. Pulpitis is a condition that causes painful inflammation of the

pulp. It can occur in one or more teeth, and is caused by bacteria that invade the tooth’s pulp,

causing it to swell. https://www.healthline.com/health/pulpitis (downloaded 11/7/22)

42. However, consumer awareness of these types of issues has been suppressed

through SDC’s unfair and deceptive use of NDAs.

COUNT ONE

(Deception and Material Omissions in Violation of the

Consumer Protection Procedures Act)

43. The District re-alleges and incorporates by reference paragraphs 1 through 42.

The CPPA is a remedial statute that should be broadly construed. It establishes a right to truthful

information from merchants about consumer goods and services that are or would be purchased,

leased, or received in the District of Columbia.

44. Consumers obtain dental aligners and other oral hygiene products from Defendant

for personal, household, or family purposes and, therefore, these services are consumer goods

and services.

45. Defendant, in the ordinary course of business, offers to sell or supply consumer

goods and services and is therefore a merchant.

46. Merchants who violate the CPPA may be subject to restitution, damages, civil

penalties, temporary or permanent injunctions, the costs of the action, and reasonable attorneys’

fees. D.C. Code § 28-3909.

47. The CPPA prohibits any person from engaging in unfair and deceptive trade

practices, including by,

a. “misrepresent[ing] as to a material fact which has a tendency to mislead,” D.C.

Code §28-3904(e);

b. “fail[ing] to state a material fact if such failure tends to mislead,” D.C. Code § 28-

3904(f); and

c. 3904(f-1) “[u]sing innuendo or ambiguity as to a material fact, which has a

tendency to mislead” D.C. Code § 28-3904(f-1).

48. Defendant’s representations, including its statement that “[e]ven after the first 30

days, [consumers] can return your unused aligners for a prorated refund,” as well as its

statements that it has a five-star rating from its customers, and very few negative reviews, are

misrepresentations of material facts that have the tendency to mislead consumers in violation of

D.C. Code § 28-3904(e), or alternatively, constitute ambiguities as to a material fact in violation

of D.C. Code § 28-3904(f-1).

49. Defendant’s omissions, including its failure to disclose that consumers who seek a

refund after 30 days must sign an NDA, as well as its failure to disclose that the overwhelmingly

positive reviews on its website and elsewhere are distorted in part due to its NDAs which

suppress negative reviews, are omissions of material facts that have the tendency to mislead

consumers and are unlawful trade practices in violation of D.C. Code § 28-3904(f).

COUNT TWO

(Unfair Practices in Violation of the Consumer Protection Procedures Act)

50. The District re-alleges and incorporates by reference paragraphs 1 through 42.

51. The CPPA prohibits any person from engaging in unfair trade practices.

52. SDC’s actions, in requiring dissatisfied consumers to refrain from making

negative comments about SDC and to delete posted negative comments have caused or are likely

to cause substantial injury to consumers who seek unbiased reviews of SDC’s products when

making potential purchasing decisions, including the expenditure of thousands of dollars for

SDC’s products, but are instead provided with SDC’s distorted version of user’s experiences.

53. SDC’s practice of selling aligners that have produced significant pain and injury

to some consumers, while requiring negative reviews to be hidden through NDAs, caused or is

likely to cause substantial injury to consumers who were unable to make fully informed choices

about their purchase decision and suffered pain and injury from their use of SDC’s aligners or

other dental products.

54. SDC’s imposition of these NDAs, and its related aggressive litigation tactics to

enforce those NDAs, has also caused substantial harm to the public by limiting consumers’

ability to share pertinent information with government regulators and law enforcement officials,

thus hampering those entities’ ability to monitor SDC’s compliance with the law, protect the

public, and remedy SDC’s harmful conduct.

55. Additionally, SDC’s threats to sue, litigation against consumers who had signed

NDAs, and suppression of litigation filed by harmed consumers, caused or were likely to cause

substantial injury to consumers as such actions caused many consumers to withdraw their

negative reviews. Additionally, Defendant’s actions reinforced the threats in the NDAs and

further resulted in the elimination of negative information about SDC from the marketplace.

56. These substantial harms were not reasonably avoidable by consumers seeking a

refund after 30 days, and for whom a refund was essential, as those consumers were given no

choice but to sign the NDAs, and consumers seeking information about SDC’s products were

unlikely to know that NDAs were causing negative reviews to disappear from social media,

government investigations, SDC’s website, and other public sources of information.

57. Defendant’s practices are not outweighed by countervailing benefits to consumers

or to competition and thus constitute unfair practices in violation of D.C. Code 28-3904.

PRAYER FOR RELIEF

WHEREFORE, the District of Columbia respectfully requests this Court enter a

judgment in its favor and grant relief against Defendants as follows:

a) Issue injunctive and/or declaratory relief voiding contracts entered into by

Defendant that violate the District of Columbia Consumer Protection Procedures Act, D.C. Code

§ 28–3901, et seq.;

b) Permanently enjoin Defendant’s violations of the District of Columbia Consumer

Protection Procedures Act, D.C. Code § 28–3901, et seq.;

c) Order Defendant to pay restitution and damages pursuant to D.C. Code §§ 28–

3909(a) and (b);

d) Order the payment of civil penalties as permitted by statute pursuant to D.C. Code

§ 28–3909(b);

e) Award the District the costs of this action and reasonable attorney’s fees pursuant

to § 28–3909(b); and

f) Grant such further relief as the Court deems just and proper.

Jury Demand

The District of Columbia demands a trial by jury by the maximum number of jurors

permitted by law.

Dated: December 5, 2022

Respectfully submitted,

KARL A. RACINE

Attorney General for the District of Columbia

JENNIFER JONES

Deputy Attorney General

Public Advocacy Division

ARGATONIA WEATHERINGTON

Assistant Deputy Attorney General

________s/_______________________

ADAM TEITELBAUM (#1015715)

Director, Office of Consumer Protection

__________s/___________________

WENDY J. WEINBERG (# 445460)

Senior Assistant Attorney General

Office of Consumer Protection

GRIFFIN SIMPSON

Assistant Attorney General (#1753943)

Office of the Attorney General

400 Sixth Street, N.W., 10

Floor

Washington, D.C. 20001

(202) 724-1342

[email protected]

Dated: December 5, 2022