Sensible Foods, LLC v. World Gourmet, Inc. et al

Filing 43

Order by Hon. Samuel Conti granting in part and denying in part 30 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 2/21/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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SENSIBLE FOODS, LLC,

)
)
Plaintiff,
)
)
v.
)
)
WORLD GOURMET, INC.; HAIN GOURMET, )
INC.; HAIN CELESTIAL GROUP, INC.; )
WORLD GOURMET MARKETING, LLC; AND )
SENSIBLE SNACKS, INC.,
)
)
Defendants.
)
)
I.

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Case No. 11-2819 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS'
MOTION TO DISMISS
PLAINTIFF'S FIRST AMENDED
COMPLAINT

INTRODUCTION
Plaintiff Sensible Foods, LLC ("Plaintiff") brings this action

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against Defendants World Gourmet, Inc. ("World Gourmet"), Hain

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Gourmet, Inc. ("Hain Gourmet"), Hain Celestial Group, Inc., ("Hain

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Celestial"), World Gourmet Marketing, LLC ("WGM"), and Sensible

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Snacks, Inc. ("Sensible Snacks") (collectively, "Defendants").

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No. 28 ("FAC").

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Dismiss Plaintiff's First Amended Complaint pursuant to Rule

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12(b)(6) of the Federal Rules of Civil Procedure.

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("Mot.").

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claims.

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37 ("Reply").

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PART and DENIES IN PART Defendants' Motion.

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///

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///

ECF

Now before the Court is Defendants' Motion to

ECF No. 30

Defendants seeks to dismiss five of the FAC's twelve

Id.

The Motion is fully briefed.

ECF Nos. 36 ("Opp'n"),

For the reasons set forth below, the Court GRANTS IN

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II.

BACKGROUND
As always when considering a Rule 12(b)(6) motion, the Court

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takes all the well-pleaded facts of the operative complaint as

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true.

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previous Order partially granting Defendants' motion to dismiss

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Plaintiff's original complaint.

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brief, this case is about a trademark dispute between competitors

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in the healthy snack food business.

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use or have sought to use trademarks that prominently feature the

The Court has already summarized this case's history in a

See ECF No. 26 ("Order").

In

Plaintiff and Defendants both

United States District Court

For the Northern District of California

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word "sensible."

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parties' ongoing trademark dispute, Defendant Hain Celestial

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contemplated buying Plaintiff, but the sale never materialized.

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the course of sale negotiations, the parties signed a

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Confidentiality Agreement.

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proceedings before the Trademark Trial and Appeal Board ("TTAB"),

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Defendants improperly disclosed certain confidential information in

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violation of the Agreement.

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misuse of trade names and marks similar to Plaintiff's.

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The procedural history of this case is as follows.

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initially brought suit before this Court on sixteen claims.

ECF

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No. 1 ("Compl.").

ECF

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No. 14.

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Court dismissed with prejudice.1

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Plaintiff's claims without prejudice.2

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1

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27
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Some time ago, in apparent response to the

In

Plaintiff now alleges that during

Plaintiff also alleges continuing

Plaintiff

Defendants moved to dismiss all sixteen.

Plaintiff voluntarily withdrew four claims, which the
The Court also dismissed six of
Finally, the Court left six

The Court dismissed with prejudice claims for: trademark
infringement under California law; cyberpiracy under both the
federal Lanham Act and California law; and unjust enrichment.
Order at 6.
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The Court dismissed without prejudice claims for: breach of
contract; breach of implied contract; breach of implied covenant of

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of Plaintiff's claims undisturbed.3
Plaintiff timely filed a First Amended Complaint.4

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Plaintiff

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now asserts claims for: (1) breach of implied contract, against

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Hain Celestial; (2) breach of contract -- specifically, the

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Confidentiality Agreement -- against Hain Celestial; (3) breach of

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implied covenant of good faith and fair dealing, against Hain

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Celestial; (4) contributory infringement; (5) unfair competition

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under California Business and Professions Code section 17200 et

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seq.; (6) deceptive trade practices under California Business and

United States District Court

For the Northern District of California

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Professions Code section 17500 et seq.; (7) false advertising under

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California Business and Professions Code section 17500 et seq.; (8)

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trademark infringement under the federal Lanham Act, 15 U.S.C. §

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1051 et seq.5; (9) reverse confusion under the Lanham Act, § 1114

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et seq.; (10) cancellation of federal trademark registration under

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the Lanham Act, §§ 1064 and 1119; (11) false advertising,

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misrepresentation, and unfair competition under the Lanham Act, §

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1125(a) et seq.; and (12) common law trademark infringement.

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///

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good faith and fair dealing; contributory trademark infringement;
and false advertising under both California law and the federal
Lanham Act. Order at 19-20.
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26
27
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The Court left undisturbed claims for: unfair competition and
deceptive trade practices under California law; trademark
infringement, reverse confusion, and cancellation of trademark
registration under the Lanham Act; and common law trademark
infringement. Order at 20.
4

Plaintiff attached the Confidentiality Agreement to the First
Amended Complaint. ECF No. 28 Ex. CA ("CA"). The Court therefore
may properly consider the contents of the Confidentiality Agreement
while deciding this motion. Hal Roach Studios, Inc. v. Richard
Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990).
5

Further references to the Lanham Act are to section numbers
within Title 15 of the United States Code.

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1

Of these twelve claims, Defendants challenge five: claim 1

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(breach of implied contract by Hain Celestial); claim 2 (breach of

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the Confidentiality Agreement by Hain Celestial); claim 3 (breach

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of implied covenant of good faith and fair dealing by Hain

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Celestial); claim 7 (false advertising under California law); and

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claim 11 (false advertising, misrepresentation, and unfair

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competition under the Lanham Act).

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United States District Court

For the Northern District of California

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 129 S. Ct. 1937, 1950 (2009).

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court must accept as true all of the allegations contained in a

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complaint is inapplicable to legal conclusions.

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recitals of the elements of a cause of action, supported by mere

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conclusory statements, do not suffice."

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Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

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in a complaint must be both "sufficiently detailed to give fair

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notice to the opposing party of the nature of the claim so that the

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party may effectively defend against it" and "sufficiently

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plausible" such that "it is not unfair to require the opposing

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

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Ashcroft v.

However, "the tenet that a

Threadbare

Id. (citing Bell Atl.
The allegations made

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party to be subjected to the expense of discovery."

Starr v. Baca,

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633 F.3d 1191, 1204 (9th Cir. 2011).

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plead sufficient facts, leave to amend should be given freely, but

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"a district court may dismiss without leave where a plaintiff's

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proposed amendments would fail to cure the pleading deficiencies

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and amendment would be futile."

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Loans, Inc., 656 F.3d 1034, 1041 (9th Cir. 2011).

When a complaint fails to

Cervantes v. Countrywide Home

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IV.

DISCUSSION

United States District Court

For the Northern District of California

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A.

Breach of Implied Contract by Hain Celestial (Claim 1)

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To state a claim for breach of contract, a plaintiff must

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allege (1) that a contract existed between plaintiff and defendant,

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(2) that plaintiff has substantially performed or been excused from

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performance, (3) that defendant breached, and (4) that plaintiff

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suffered resultant damages.

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Appel, 74 Cal. App. 4th 299, 307 (Cal. Ct. App. 1999) (citing

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Otworth v. S. Pac. Transp. Co., 166 Cal. App. 3d 452, 459 (Cal. Ct.

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App. 1985)).

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the same elements as does a cause of action for breach of contract,

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except that the promise is not expressed in words but is implied

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from the promisor's conduct."

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Inc., 161 Cal. App. 4th 172, 182 (Cal. Ct. App. 2008).

See, e.g., Harris v. Rudin, Richman &

"A cause of action for breach of implied contract has

Yari v. Producers Guild of Am.,

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The Court previously dismissed Plaintiff's breach of implied

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contract claim because Plaintiff failed to allege which defendant

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was a party to the implied contract, what the terms of the contract

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were, or how it had been breached.

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has substantially revised this claim.

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the other party to the implied contract was Hain Celestial.

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See Order at 13-14.

Plaintiff

Plaintiff now alleges that
FAC ¶

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191.

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obligations on Hain Celestial: first, to stop using the marks

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"sensible snack" and "sensible snacks" (together, "the Sensible

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Snack(s) mark"), and, second, to "enter purchase discussions for

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the Plaintiff . . . ."

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Celestial continued to use the Sensible Snack(s) mark,

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notwithstanding the implied contract.

Id.

Plaintiff further alleges that Hain

Id. ¶ 195.

Defendants move to dismiss on three grounds.

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Plaintiff alleges that the implied contract imposed two

First, they

claim that the Confidentiality Agreement precludes Plaintiff from

United States District Court

For the Northern District of California

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asserting a claim for breach of implied contract because it

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contained a merger clause that "expressly superseded all prior

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agreements 'with respect to the subject matter thereof.'"

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6 (quoting FAC Ex. 1 ("CA") at 3).

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First Amended Complaint to admit that Hain Celestial entered into

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the allegedly promised purchase discussions, and therefore to

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negate Plaintiff's claim for breach of a promise to do so.

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7.

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inadequately alleges the existence of consideration to support Hain

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Celestial's purported promise to stop using the Sensible Snack(s)

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mark.

Mot. at

Second, Defendants read the

Id. at

Third, they contend that the First Amended Complaint

See id. at 7-10.
Plaintiff responds that Hain Celestial's alleged promise to

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discontinue use of the Sensible Snack(s) mark lies outside the

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scope of the Confidentiality Agreement's merger clause.

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8.

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clause against Hain Celestial because, according to Plaintiff's

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brief, Hain Celestial's attorney drafted the Confidentiality

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Agreement.

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stay the TTAB proceedings, alleged in the First Amended Complaint

Opp'n at

It urges the Court to interpret any ambiguity in the merger

Id. at 9.

Lastly, Plaintiff argues that its promise to

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at paragraph 191, served as consideration for Hain Celestial's

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promises.

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Id. at 10-12.

The Court declines to dismiss this claim.

Taking the

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allegations of the First Amended Complaint as true, Plaintiff has

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alleged that it exchanged an agreement to stay the TTAB proceedings

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for two promises from Hain Celestial: a promise to discontinue use

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of the Sensible Snack(s) mark and a promise to discuss purchasing

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Plaintiff.

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effectively admits that Hain Celestial held the allegedly promised

As Defendants note, the First Amended Complaint

United States District Court

For the Northern District of California

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purchase discussions with Plaintiff.

But holding the purchase

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discussions would not, by itself, give Plaintiff the benefit of its

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alleged bargain.

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of Hain Celestial's alleged promise to stop using the Sensible

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Snack(s) mark.

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the Court must take this allegation as true.

Plaintiff would also have to receive the benefit

Plaintiff alleges that it did not, FAC ¶ 195, and

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Defendants' argument that the Confidentiality Agreement's

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merger clause precludes Plaintiff's breach of implied contract

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claim is unavailing.

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Confidentiality Agreement specify what "subject matter," or

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matters, the parties had in mind when they wrote the phrase "with

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respect to the subject matter thereof" in the Confidentiality

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Agreement's merger clause.

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the Court to make factual findings based on evidence extrinsic to

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the Confidentiality Agreement as well as to the pleadings.

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Court may not go so far in the context of a Rule 12(b)(6) motion.

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Neither the First Amended Complaint nor the

Answering that question would require

The

Defendants contend that the First Amended Complaint

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contradicts Plaintiff's argument that the Confidentiality Agreement

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related to a different "subject matter" than the alleged implied

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1

contract.

Reply at 3.

The Court sees no such contradiction.

The

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pleading describes with reasonable clarity a straightforward

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exchange of promises: Plaintiff's promise to stay the TTAB

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proceedings for Hain Celestial's promises to discuss purchasing

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Plaintiff and to stop using the Sensible Snack(s) mark.

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Confidentiality Agreement simply does not address Hain Celestial's

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second alleged promise.

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argument that the Confidentiality Agreement and the alleged implied

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contract concern two different subject matters.

The

That is not inconsistent with Plaintiff's

Hain Celestial

United States District Court

For the Northern District of California

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allegedly made two promises, but it does not necessarily follow

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that both promises must have been part of the subject matter of the

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Confidentiality Agreement:

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pertain to both promises while the Confidentiality Agreement

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pertained to only one.

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the express terms of the Confidentiality Agreement and the

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pleadings.

The Court cannot determine otherwise from

Accordingly, the Court DENIES Defendants' motion to dismiss

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The alleged implied contract could

claim 1.6
B.

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Breach of Confidentiality Agreement by Hain Celestial
(Claim 2)

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Plaintiff intends to assert this claim against Hain Celestial

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for violation of the Confidentiality Agreement.

FAC ¶¶ 200-21.

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its briefing, however, Plaintiff admits that the First Amended

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In

Complaint contains an "inadvertent drafting mistake" and seeks

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Because the Court has not relied on the rule of construction
construing ambiguous documents against their drafters, see Opp'n at
9, the Court does not reach Defendant's argument that application
of the rule here would be improper, Reply at 4.

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leave to amend.

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this claim is whether to dismiss it with prejudice.

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Opp'n at 13-14.

Therefore, the only question for

The Court rules that dismissal with prejudice is warranted

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because the amendments proposed by Plaintiff would be futile.

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Cervantes, 656 F.3d at 1041.

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brief to indicate what it intended to write in the First Amended

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Complaint.

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alleges that Hain Celestial revealed Plaintiff's confidential

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information -- which Plaintiff identifies as its "profitability" --

Id. at 13.

See

Plaintiff has used its Opposition

The First Amended Complaint currently

United States District Court

For the Northern District of California

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in a document filed as part of the TTAB proceedings, the TTAB

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Answer.

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a different document filed in that same proceeding, the TTAB

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Response.

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and the Court takes judicial notice of them for the purpose of

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determining whether the proposed amendment would be futile.

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ECF Nos. 32 Ex. 1 ("TTAB Answer"), 39 Ex. 1 ("TTAB Response").

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Defendants point out, neither document says anything about

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Plaintiff's profitability.

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does not adequately plead a breach, and neither would Plaintiff's

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proposed amendment.

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its claim in the Opposition brief amounted to Plaintiff's third

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bite at the apple, that the Court's previous Order already gave

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Plaintiff guidance concerning this claim, and that the Court has

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already put Plaintiff on warning that failure to attend to

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important details would not be tolerated, see Order at 1 n.1, the

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Court sees no reason to give Plaintiff a fourth bite.

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Id. at 13.

Plaintiff would amend the pleading to indicate

Id. at 13.

Both documents are part of the public record

See
As

Therefore, Plaintiff's current pleading

Considering that Plaintiff's restatement of

The Court GRANTS Defendants' motion to dismiss claim 2 and
DISMISSES that claim WITH PREJUDICE.

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C.

1

Breach of Implied Covenant of Good Faith and Fair Dealing
by Hain Celestial (Claim 3)

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The implied covenant of good faith and fair dealing is

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"implied by law in every contract."

Guz, 24 Cal. 4th at 350.

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Court previously dismissed Plaintiff's implied covenant claim

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because Plaintiff failed to identify on which contract it based the

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claim.

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existence of three contracts with Hain Celestial.

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Plaintiff identifies these as: (1) "an implied agreement that [Hain

The

Plaintiff has amended this claim and now alleges the
FAC § 225.

United States District Court

For the Northern District of California

10

Celestial] would discontinue the use of the phrase, 'sensible

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snack(s),' to eliminate the resulting public confusion and

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Plaintiff would agree to stay the TTAB Proceedings;" (2) the

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written Confidentiality Agreement; and (3) "an oral agreement to

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facilitate the purchase of Plaintiff by [Hain Celestial] . . . ."

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Id.

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implied covenants arising from these promises by allegedly

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continuing to use the Sensible Snack(s) mark, revealing Plaintiff's

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confidential information, and refusing to buy Plaintiff.

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Plaintiff claims, in essence, that Hain Celestial breached the

None of these provide a proper basis for a breach of implied

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covenant claim.

To the extent that Plaintiff bases this claim on

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violations of the implied covenant arising from the first and

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second agreements, it must fail because these allegations merely

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reallege contractual breaches as breaches of the implied covenant.

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Such claims are superfluous and properly dismissed.

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4th at 352-53.

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Hain Celestial's alleged refusal to buy Plaintiff, the claim must

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fail for two reasons.

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substantive duties or limits on the contracting parties beyond

Guz, 24 Cal.

To the extent that Plaintiff bases this claim on

First, the implied covenant cannot "impose

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1

those incorporated in the specific terms of their agreement."

Id.

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at 349-50.

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enter into purchase discussions, not an agreement to buy Plaintiff.

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And, as discussed in Section IV.A supra, the First Amended

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Complaint indicates that Hain Celestial did in fact enter into the

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contemplated purchase discussion.

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for breach of the implied covenant on allegations that Plaintiff

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actually received the benefit of its bargain.

Plaintiff alleges the existence of an agreement to

Plaintiff cannot base a claim

The only way this agreement could support a breach of implied

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United States District Court

For the Northern District of California

10

covenant claim is if it was an agreement for Hain Celestial to

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later agree to buy Plaintiff -- that is, an "agreement to agree,"

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as distinct from an agreement to negotiate.

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Robbins U.S.A., 96 Cal. App. 4th 1251, 1257-58 n.10 (Cal. Ct. App.

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2002) (explaining distinction).

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existence of an agreement to negotiate, an agreement which, taking

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the allegations of the First Amended Complaint as true, Hain

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Celestial substantially performed.

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that its agreement with Hain Celestial amounted to an agreement to

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later agree to purchase Plaintiff.

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alia, that Hain Celestial "reneged on its promise to pay a fair

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price").

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invalid as a matter of law.

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n.10.

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discussions, Plaintiff received the benefit of that bargain.

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Either way, the implied covenant claim fails as a matter of law.

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Accordingly, the Court GRANTS Defendants' motion to dismiss

See Copeland v. Baskin

Plaintiff essentially alleges the

Plaintiff also, however, hints

See FAC ¶ 236 (alleging, inter

To the extent that this is an agreement to agree, it is
Copeland, 96 Cal. App. 4th at 1257-58

To the extent it is merely an agreement to enter purchase

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claim 3 and DISMISSES that claim WITH PREJUDICE.

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///

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D.

1

False Advertising Under California Law (Claim 7) and

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False Advertising, Misrepresentation, and Unfair

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Competition under the Lanham Act (Claim 11)
As in its previous Order, the Court addresses Plaintiff's

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5

state and federal false advertising claims together.

Previously,

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the Court dismissed Plaintiff's false advertising claims because

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they identified no false statements of fact.

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Plaintiff has extensively revised these claims.

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(state law claim), ¶¶ 328-37 (Lanham Act claim, incorporating

Order at 15-16.
FAC ¶¶ 267-301

United States District Court

For the Northern District of California

10

allegations in state law claim).

Plaintiff now alleges that

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Defendants have made false statements by: (1) using the word

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"veggie" in the name of its Veggie Straws, Veggie Chips, and Veggie

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Crisps products when in fact those products are "primarily potato

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product[s]," see id. ¶¶ 268, 282; (2) using the word "apple" in the

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name of its Apple Straws product when in fact that product is a

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"primarily potato product," see id. ¶¶ 268, 283; (3) making various

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health-related claims -- for example, that Defendants' products are

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"the next generation in unique and better-for-you snacks" -- that

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mislead the public into thinking Defendants' products are healthy,

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see id. ¶¶ 278, 291;

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trademark "Sensible Portions" partially in front of a heart-shaped

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design, in a manner that misleads the public into thinking

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Defendants' products are healthy, see Opp'n at 17 (citing FAC ¶

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101).

and (4) on Defendants' logo, positioning the

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While a court deciding a Rule 12(b)(6) motion must take a

26

complaint's well-pleaded factual allegations as true, it also must

27

determine, relying on its "judicial experience and common sense,"

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whether those allegations amount to a "plausible" claim.

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Iqbal,

1

129 S. Ct. at 1950.

2

plausibility requirement.

3

strains the boundaries of the English language -- to say that

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products made primarily from potatoes are not made of "veggies."

5

Similarly, Plaintiff complains of the word "apple" in the name of

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the Apple Straws product, all the while alleging that the product

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contains pureed apples.

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cannot credibly claim that the words "veggie" and "apple," when

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used to describe products containing veggies and apples, are

United States District Court

For the Northern District of California

10

Here, Plaintiff has not met Iqbal's

"literal falsit[ies]."

It is simply implausible -- indeed, it

FAC ¶ 271.

In both cases, Plaintiff

Id. ¶¶ 282, 283.

Plaintiff's claim that Defendants have made actionably false

11
12

health claims fares no better.

A district court may determine as a

13

matter of law whether an advertising statement is mere puffery or a

14

factual, and hence actionable, statement.

15

Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir.

16

1999).

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of being reasonably interpreted as a statement of objective fact."7

18

Id.

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Opp'n at 14-15 (collecting statements).

20

examples, the statement that Defendants' products contain the

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"right" ingredients, FAC § 277, is not capable of being proved

22

false.

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claim that its products are "guilt free," id. ¶ 278, as a statement

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of objective fact.

Coastal Abstract Serv.,

Actionable statements are "capable of being proved false or

Here, each statement identified by Plaintiff is puffery.

See

To take two representative

Likewise, no consumer could reasonably take Defendants'

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27
28

7

A corollary of this rule is that Plaintiff's statements on these
points -- for example, its statement that "[t]he relevant
purchasing public thinks that [Defendants'] Products are healthy,"
FAC ¶ 291 -- are not factual allegations but rather conclusions of
law which are not entitled to the presumption of truth. Cf. Iqbal,
129 S. Ct. at 1950.

13

Plaintiff's last argument, that the Sensible Portions logo

1
2

itself forms the basis of a false advertising claim because it

3

includes a heart symbol, lacks merit.

4

statement "capable of being proved false or of being reasonably

5

interpreted as a statement of objective fact."

6

Serv., 173 F.3d at 731.

7

discussion of various parts of Food and Drug Administration

8

regulations promulgated in Title 21 of the Code of Federal

9

Regulations.

A heart symbol is not a

Coastal Abstract

Plaintiff devotes considerable time to a

Opp'n at 14-18.

This discussion is marginally

United States District Court

For the Northern District of California

10

relevant at best because Defendants do not rely on the FDA

11

regulations and Plaintiff has not brought a claim under them.

12

Plaintiff has adequately pled facts that allow the Court to

13

ascertain the viability of Plaintiff's false advertising claims,

14

and these claims fail as a matter of law.

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GRANTS Defendants' motion to dismiss claims 7 and 11 and DISMISSES

16

those claims WITH PREJUDICE.

Accordingly, the Court

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V.

CONCLUSION

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For the foregoing reasons, the Court GRANTS IN PART AND DENIES

20

IN PART the motion by Defendants World Gourmet, Inc., Hain Gourmet,

21

Inc., Hain Celestial Group, Inc., World Gourmet Marketing, LLC, and

22

Sensible Snacks, Inc. to dismiss Plaintiff Sensible Foods, LLC's

23

First Amended Complaint, and rules as follows:

24

•

Plaintiff's second claim (breach of contract), third claim

25

(breach of implied covenant of good faith and fair dealing),

26

seventh claim (false advertising under California Business and

27

Professions Code section 17500), and eleventh claim (false

28

advertising, misrepresentation, and unfair competition under

14

1

the Lanham Act, 15 U.S.C. § 1125(a) et seq.) are DISMISSED

2

WITH PREJUDICE.

3

•

Plaintiff's first claim (breach of implied contract) remains

4

undisturbed, as do the other claims asserted in Plaintiff's

5

First Amended Complaint.

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7

The parties are hereby ordered to appear before this Court for

8

a case management conference on Friday, March 16, 2012, at 10:00

9

a.m. in Courtroom One, United States Courthouse, 450 Golden Gate

United States District Court

For the Northern District of California

10

Avenue, San Francisco, California.

The parties are to file one

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Joint Case Management Conference Statement seven days prior to the

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conference.

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IT IS SO ORDERED.

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Dated: February 21, 2012
UNITED STATES DISTRICT JUDGE

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