Transfresh Corporation v. Ganzerla & Associates, Inc. et al

Filing 21

ORDER by Judge Joseph C. Spero granting in part and denying in part 10 Motion to Dismiss (jcslc1, COURT STAFF) (Filed on 3/23/2012)

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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TRANSFRESH CORP.,

No. C-11-06348 JCS

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Plaintiff,
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v.
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GANZERLA & ASSOC., INC., ET AL.,
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For the Northern District of California

United States District Court

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ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS COMPLAINT PURSUANT TO
FEDERAL RULE OF CIVIL
PROCEDURE 12(b)(6) [Docket No. 10]

Defendants.
___________________________________/

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I.

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INTRODUCTION
Plaintiff TransFresh Corp. (“TransFresh”) brings this action for injunctive relief and other

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remedies under the Lanham Act, 15 U.S.C. §§ 1051 et. seq., and under California state law based on

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alleged false advertising and unfair competition on the part of Defendant PeakFresh USA

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(“PeakFresh”) in connection with statements and a video posted on PeakFresh’s website. According

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to TransFresh, the video purports to compare PeakFresh’s system for packaging fresh produce to

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maintain freshness during transport with that of TransFresh and misleadingly depicts PeakFresh’s as

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being more environmentally friendly than TransFresh’s. TransFresh further seeks a declaratory

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judgment, pursuant to 28 U.S.C. § 2201, that it has not made false and misleading statements to the

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public or its customers about PeakFresh’s products and services. Defendants have filed a Motion to

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Dismiss Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(6) (“the Motion”). The

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parties have consented to the jurisdiction of a United States magistrate judge pursuant to 28 U.S.C. §

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636(c).

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The Court finds that the Motion is suitable for determination without oral argument,

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pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing set for March 30, 2012 is vacated.

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The Case Management Conference scheduled for March 30, 2012 at 9:30 a.m. is moved to 1:30

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p.m. on the same day. For the reasons stated below, the Motion is GRANTED in part and

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DENIED in part.

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II.

BACKGROUND
The Complaint1

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A.

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Plaintiff TransFresh is a Delaware corporation whose principal place of business is Salinas,

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California. Complaint, ¶ 7. Plaintiff markets products and services to maintain the freshness of

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produce during transport using its proprietary technology, under the trademark TECTROL. Id., ¶ 8.

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According to TransFresh, it is the industry leader and has provided goods and services in the field

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for over four decades. Id., ¶8
Part of Plaintiff’s technology uses “a relatively small amount of CO2 in connection with food

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For the Northern District of California

United States District Court

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products” to preserve the freshness of the produce that is being transported. Id., ¶ 9. “Plaintiff

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recovers CO2 from processes where it would otherwise be released into the atmosphere.” Id. CO2 as

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a food additive is on the FDA’s Generally Recognized as Safe list. Id., ¶ 10.

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Defendant Greg Ganzerla is an individual and is alleged to be the principal of Defendant

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Ganzerla & Associates, Inc., also doing business as PeakFresh. Id., ¶ 12. PeakFresh also markets

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products and services to enhance the freshness of produce and as such, is a direct competitor of

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TransFresh. Id., ¶ 13.

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Defendants operate a website located at www.PeakFreshusa.com (the “Website”) on which

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they have posted a video (the “Video”) that “purports to discuss preserving the environment and to

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explore ‘one promising example’ of working in greater harmony with the environment,” namely,

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Defendants’ PeakFresh system. Id., ¶¶ 14, 16. TransFresh alleges, on information and belief, that

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Defendants solicited production of the Video, and/or had substantial input of information to the

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Video, and/or had substantial control over the information to be included in the Video, and/or

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assisted in the filming of the Video.” Id., ¶ 15. TransFresh alleges that the Video “features [its]

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The Court assumes the allegations in the complaint to be true for the purposes of this motion.
See Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996)(on motion to dismiss under Rule
12(b)(6) of the Federal Rules of Civil Procedure, the court assumes the facts alleged in the complaint
are true).

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equipment, [which is] readily recognizable by consumers of each party’s goods and services, to

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illustrate what the Video claims are harmful practices in Plaintiff’s use of CO2 in its fresh produce

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pallet covers.” Id., ¶ 16. TransFresh further alleges that the Video compares the CO2 released from

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Plaintiff’s process to car exhaust, even though car exhaust contains far more CO2, as well as

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damaging components absent in Plaintiff’s process, including ozone, nitrogen oxide, hydrocarbons,

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carbon monoxide, and particulates. Id., ¶ 18.

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According to TransFresh, the Video “omits to state that a significant amount of the CO2

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released has been produced by the berries themselves [and] [t]he net amount of CO2 released when

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opening Plaintiff’s produce pallet is only marginally greater than that created by produce using the
PeakFresh method.” Id., ¶ 19. Further, TransFresh alleges, the Video and the Website use the

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For the Northern District of California

United States District Court

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perjorative term “gassing” when referring to Plaintiff’s TECTROL process. Id., ¶ 20. Plaintiff

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alleges that the Video’s claims that Plaintiff’s products and services introduce an unhealthy amount

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of CO2 into the atmosphere are unsubstantiated and false on their face. Id., ¶ 29. Conversely,

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TransFresh alleges that Defendants’ claims that their method is “green” and more environmentally

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responsible than alternative methods are unsubstantiated and untrue. Id., ¶¶ 31-34.

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TransFresh alleges that the intended goal of the Video is to denigrate Plaintiff and its goods

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and services and to destroy its reputation among actual and prospective customers as well as the

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general public. Id., ¶ 20. TransFresh also alleges that the Video makes many statements that are

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“false on their face, misleading, and/or fail to disclose information needed to prevent the statements

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from being misleading.” Id., ¶ 21. For example, TransFresh alleges that Defendants falsely claim in

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the Video, as well as on its Website, that PeakFresh uses modified atmosphere packaging (“MAP”);

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according to TransFresh, the Video shows pallets of produce, but PeakFresh’s pallet cover system is

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not, in fact, a MAP system. Id., ¶ 22-23. “MAP packaging is a food-packaging method in which the

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proportions of carbon dioxide, nitrogen, and oxygen in a sealed container are different from those in

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the normal (ambient) air to enhance the food’s shelf life.” Id., ¶ 23. However, PeakFresh’s bag is

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open at the bottom and does not “significantly modify the ambient air.” Id.

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TransFresh also alleges that PeakFresh has sent prospective strawberry shipper customers a

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sample of a PeakFresh consumer bag, which is sealable, and told them that they can test its pallet

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cover system by putting some strawberries inside the sealable bag and putting it in the customer’s

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home refrigerator. Id. ¶ 24. “PeakFresh then states or implies that the PeakFresh unsealed pallet

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cover system will work as well as the sealed bag on strawberries, a statement which has no

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foundation.” Id. According to Plaintiff, Defendants have also falsely claimed that strawberries

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shipped in a PeakFresh pallet bag have a shelf life of at least 20 days but has provided no

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substantiation for this claim. Id., ¶ 44. In addition, TransFresh alleges that Defendants have falsely

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claimed that Plaintiff’s goods and services are not certified as organic. Id., ¶ 45.
TransFresh also alleges that Defendants make misleading and false references to a 1999 UC

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For the Northern District of California

United States District Court

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Davis study that they claim “validated that PeakFresh works just as effectively as the older gassing

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methods” when in fact, the study was inconclusive. Id., ¶ 43. According to TransFresh, Defendants

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have “also cited to a 2009 study that was inconclusive (without stating that it was inconclusive) and

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have not referred to more recent studies conducted by UC Davis in 2009 and 2010.” Id.

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TransFresh alleges that it has requested information from Defendants, including by letter

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dated February 16, 2011, supporting the claim that the PeakFresh process is more beneficial to the

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environment than competing solutions, but PeakFresh has not provided any supporting information.

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Id., ¶ 48. TransFresh has also complained to Defendants that their statements and the Video violate

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federal and state law, but Defendants have refused to remove them from the PeakFresh website. Id.,

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¶ 51.

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TransFresh alleges, “[o]n information and belief, [that] Defendants’ acts described herein are

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intended to convey a false or misleading message” and that “Defendants’ actions have been

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committed willfully, maliciously and intentionally.” Complaint, ¶¶ 49, 57.

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TransFresh alleges that it has suffered injury in the form of loss of reputation and business as
a result of Defendants’ conduct.
Based on these allegations, TransFresh asserts the following claims against Defendants: 1)

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false advertising, false designation and description and unfair competition under the Lanham Act, 15

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U.S.C. § 1125(a); 2) unfair competition and false advertising under California Business and

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Professions Code, Sections 17200, 17500 & 17508; 3) declaratory judgment under 28 U.S.C. §

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2201; 4) “greenwashing” in violation of California Business and Professions Code Sections 17580 &

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17580.5; 5) unfair competition under California common law; 6) trade libel under California Civil

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Code Sections 45, 45a & 46; and 7) intentional interference with prospective economic advantage.

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In support of Plaintiff’s claim for declaratory relief (Claim Two), Plaintiff alleges that

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Defendants sent Plaintiff a “cease-and-desist” letter dated November 30, 2011 (“the Cease-and-

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Desist Letter”) complaining that Plaintiff’s website and sales representatives had “intentionally

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posted and communicated false advertisements to the general public or customers, that Plaintiff
made false disparaging remarks regarding Defendants’ products to clients, retailers or growers, that

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For the Northern District of California

United States District Court

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Plaintiff made false and misleading statements to the public, and that the facts in Plaintiffs’

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communications are not substantiated.” Id., ¶ 76. Plaintiff further alleges that the letter threatened

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litigation, stating as follows:

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Unless this matter is immediately resolved to our client’s satisfaction, we intend to hold
TransFresh responsible and liable for its unlawful and tortious conduct. We demand that
TransFresh respond to this letter by no later than December 9, 2011. If you fail or refuse to
comply with each of the demands listed above within the period specified, we will take all
necessary steps to enforce and protect PeakFresh’s rights and remedies. If this matter should
proceed to litigation, please note that TransFresh will be required to compensate our client
for any and all damages incurred and will be required to disgorge any and all revenues
arising from its unlawful conduct. Govern yourself accordingly.

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Id., ¶ 77.

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B.

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In the Motion, Defendants assert that all of TransFresh’s claims sound in fraud and therefore,

The Motion to Dismiss

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that the heightened pleading requirement of Rule 9(b) of the Federal Rules of Civil Procedure

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applies. Motion at 5 (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (9th Cir. 2003)).

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Defendants further contend that Plaintiff has not pleaded sufficient facts in support of its claims to

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meet this standard. Id. at 6-12. Defendants also argue that all of Plaintiff’s claims against Gregory

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Ganzerla as an individual fail because Plaintiff has not alleged specific facts relating to any alleged

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wrongful conduct but instead has only alleged that Ganzerla is the principal of PeakFresh. Finally,

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Defendants contend that Plaintiff’s claim for declaratory relief (Claim Three) is not ripe because the

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Cease-and-Desist Letter was merely an “attempt to reach an informal resolution of the issues

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contained therein,” the alleged controversy is “hypothetical,” and withholding review will not result

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in any “direct or immediate hardship” to Plaintiff.

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In its Opposition, Plaintiff argues that Rule 9(b) does not apply to any of its claims and that

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even if it does, Plaintiff’s factual allegations are sufficient to meet that standard. Plaintiff rejects

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Defendants’ argument that its claims against Ganzerla as an individual fail on the basis that no

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misconduct by Ganzerla is alleged. Plaintiff points to its extensive factual allegations against

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“Defendants,” expressly defined in the Complaint as including PeakFresh and Ganzerla. See
Complaint, ¶ 12. With respect to its claim for declaratory relief, Plaintiff asserts that Defendants’

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For the Northern District of California

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Cease-and-Desist Letter is not an informal attempt to resolve a dispute but rather, a direct and urgent

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threat of litigation that gives rise to an actual controversy.

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III.

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ANALYSIS
A.

Legal Standard
1.

Rule 12(b)(6)

A complaint may be dismissed for failure to state a claim for which relief can be granted

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under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 12(b)(6). “The purpose

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of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star

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Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). In ruling on a motion to dismiss

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under Rule 12, the court analyzes the complaint and takes “all allegations of material fact as true and

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construe(s) them in the lights most favorable to the non-moving party.” Parks Sch. of Bus. v.

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Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal may be based on a lack of a cognizable

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legal theory or on the absence of facts that would support a valid theory. Balistreri v. Pacifica

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Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint must “contain either direct or

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inferential allegations respecting all the material elements necessary to sustain recovery under some

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viable legal theory.” Bell Atl. Corp. v. Twombley, 550 U.S. 544, 562 (2007) (citing Car Carriers,

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Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)). The factual allegations must be

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definite enough to “raise a right to relief above the speculative level.” Id. at 555. However, a

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complaint does not need detailed factual allegations to survive dismissal. Id. Rather, a complaint

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need only include enough facts to state a claim that is “plausible on its face.” Id. at 570. That is, the

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pleadings must contain factual allegations “plausibly suggesting (not merely consistent with)” a

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right to relief. Id. at 1557 (noting that this requirement is consistent with Fed. R. Civ. P. 8(a)(2),

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which requires that a pleading which sets forth a claim for relief shall contain “a short and plain

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statement of the claim showing that the pleader is entitled to relief”).

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2.

Rule 9(b) of the Federal Rules of Civil Procedure provides as follows:

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Fraud or Mistake; Conditions of Mind. In alleging fraud or mistake, a party must state
with particularity the circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person's mind may be alleged generally.

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For the Northern District of California

United States District Court

Rule 9(b)

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Fed. R. Civ. P. 9(b). Where fraud is alleged, the pleading requirements of Rule 9(b) apply whether

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the claim is based on federal or state law. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (9th

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Cir. 2003).

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“Rule 9(b) applies when (1) a complaint specifically alleges fraud as an essential element of

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a claim, (2) when the claim ‘sounds in fraud’ by alleging that the defendant engaged in fraudulent

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conduct, but the claim itself does not contain fraud as an essential element, and (3) to any allegations

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of fraudulent conduct, even when none of the claims in the complaint ‘sound in fraud.’” Davis v.

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Chase Bank U.S.A., N.A., 650 F. Supp.2d 1073, 1089-1090 (C.D. Cal. 2009) (citing Vess v.

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Ciba-Geigy Corp. USA, 317 F.3d at 1102-06). In Vess, the Ninth Circuit offered guidance as to the

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applicability of Rule 9(b) to claims in which fraud is not an essential element of the claim where the

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complaint includes allegations of both fraudulent and non-fraudulent conduct. 317 F.3d 1097, 1104-

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1105 (9th Cir. 2003). The court adopted the following rule:

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in a case where fraud is not an essential element of a claim, only allegations (“averments”) of
fraudulent conduct must satisfy the heightened pleading requirements of Rule 9(b).
Allegations of non-fraudulent conduct need satisfy only the ordinary notice pleading
standards of Rule 8(a).

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Id. at 1104. The court explained that “[i]n some cases, the plaintiff may allege a unified course of

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fraudulent conduct and rely entirely on that course of conduct as the basis of a claim,” in which case,

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“the claim is said to be ‘grounded in fraud’ or to ‘sound in fraud,’ and the pleading of that claim as a

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whole must satisfy the particularity requirement of Rule 9(b),” even though fraud is not a required

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element of the claim. Id. at 1103. On the other hand, “a plaintiff may choose not to allege a unified

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course of fraudulent conduct in support of a claim, but rather to allege some fraudulent and some

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non-fraudulent conduct,” in which case “only the allegations of fraud are subject to Rule 9(b)’s

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heightened pleading requirements.” Id.

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Thus, on a motion to dismiss, “if particular averments of fraud are insufficiently pled under
Rule 9(b), a district court should ‘disregard’ those averments, or ‘strip’ them from the claim . . .[and]

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For the Northern District of California

United States District Court

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then examine the allegations that remain to determine whether they state a claim.” Id. (quoting Lone

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Star Ladies Inv. Club v. Schlotzsky's Inc., 238 F.3d 363, 368 (5th Cir.2001) (“Where averments of

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fraud are made in a claim in which fraud is not an element, an inadequate averment of fraud does not

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mean that no claim has been stated. The proper route is to disregard averments of fraud not meeting

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Rule 9(b)’s standard and then ask whether a claim has been stated”); Carlon v. Thaman (In re

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NationsMart Corp. Sec. Litig.), 130 F.3d 309, 315 (8th Cir.1997)(“The only consequence of a

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holding that Rule 9(b) is violated with respect to a § 11 claim would be that any allegations of fraud

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would be stripped from the claim. The allegations of innocent or negligent misrepresentation, which

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are at the heart of a § 11 claim, would survive”).

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To satisfy Rule 9(b), the plaintiff must include “the who, what, when, where, and how” of the

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fraud. Vess, 317 F.3d at 1106 (citations omitted). “The plaintiff must set forth what is false or

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misleading about a statement, and why it is false.” Decker v. Glenfed, Inc., 42 F.3d 1541, 1548 (9th

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Cir. 1994). A claim for fraud must be “specific enough to give defendants notice of the particular

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misconduct which is alleged to constitute the fraud charged so that they can defend against the

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charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727,

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731 (9th Cir. 1985). The heightened pleading requirements of Rule 9(b) are intended to protect

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defendants from harm to their reputation and are based on the recognition that “[f]raud allegations

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may damage a defendant’s reputation regardless of the cause of action in which they appear.” Vess,

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317 F.3d at 1104.

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While the Federal Rules of Civil Procedure do not explicitly provide that a complaint or

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claim can be dismissed for failure to satisfy the requirements of Rule 9(b) where that rule is

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applicable, it is well established that such dismissal is appropriate. Vess, 317 F.3d at 1107. As the

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court in Vess explained, “[a] motion to dismiss a complaint or claim ‘grounded in fraud’ under Rule

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9(b) for failure to plead with particularity is the functional equivalent of a motion to dismiss under

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Rule 12(b)(6) for failure to state a claim. Id.

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Sufficiency of Allegations
1.

Whether Rule 9(b) Applies to Plaintiff’s Claims

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For the Northern District of California

United States District Court

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B.

The same factual allegations support all of Plaintiff’s claims except the declaratory relief

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claim. The crux of TransFresh’s claims are that PeakFresh has made numerous misleading and

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false representations regarding its own processes and those of TransFresh and that PeakFresh’s

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conduct was (and continues to be) knowing and intentional. There is no suggestion that any of the

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statements or omissions alleged in the complaint are the result of mistake. To the contrary, the

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Complaint alleges generally that Defendants’ conduct was “committed willfully, maliciously and

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intentionally.” Complaint, ¶ 57. Therefore, the Court finds that Plaintiff’s claims (except its

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declaratory relief claim) sound in fraud and must meet the heightened pleading requirements of Rule

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9(b). See Pestube Systems, Inc. v. HomeTeam Pest Def., LLC, 2006 U.S. Dist LEXIS 34337 at *14-

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15 (D. Ariz. May 24, 2006) (applying Rule 9(b) to Lanham Act claim where court found that claim

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was “analogous to a claim of fraud” because “the crux of [the p]laintiff’s Lanham Act violation

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claim is based upon unidentified alleged false or misleading material descriptions of facts knowingly

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misrepresenting the nature, characteristics, or qualities of Defendant’s products”); Sensible Foods,

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LLC v. World Gourmet, Inc., 2011 WL 5244716, at *7 (N.D.Cal. November 3, 2011)(applying Rule

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9(b) to false advertising claim under Cal. Bus. & Prof. Code Section 17500 on basis that claim

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sounded in fraud); Planet Coffee Roasters, Inc. v. Dam, 2009 WL 2486457, at * 4 (C.D.Cal., August

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12, 2009) (applying Rule 9(b) to common law unfair competition claim on basis that claim sounded

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in fraud); People for the Ethical Treatment of Animals, Inc. v. California Milk Producers Advisory

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Board,125 Cal.App.4th 871, 902 (2005) (noting that Cal. Bus. & Prof. Code Section 17580 prohibits

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a specific form of false advertisements, “those associated with ‘environmental misrepresentations’”);

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Huntair, Inc. v. Gladstone, 774 F.Supp.2d 1035, 1044 (N.D.Cal., 2011) (applying Rule 9(b) to claim

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for intentional interference with prospective economic relations).2

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2.

Whether Plaintiff has Alleged Sufficient Facts as to PeakFresh

As discussed above, to satisfy Rule 9(b), the plaintiff must include “the who, what, when,

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where, and how” of the fraud. Vess, 317 F.3d at 1106. The Court addresses each of these

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requirements as to the misrepresentations alleged in the complaint.

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For the Northern District of California

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a.

Statements Made in The Video

Plaintiff identifies a number of representations contained in the Video that it contends are

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false and misleading. See Complaint, ¶¶ 18 (use of CO2 in TransFresh’s process is significant and

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harmful to environment, comparable to car exhaust), 22 (PeakFresh uses a “unique version of

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modified atmosphere packaging”), 29 (TransFresh’s process releases unhealthy amounts of CO2 into

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environment while PeakFresh’s process is a healthy or “green” alternative), 31 (PeakFresh’s method

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is more environmentally responsible and safer for employees than alternative methods). As to these

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The Court notes that some courts have held generally that Rule 9(b) does not apply to claims
for libel and slander. See, e.g., Kennedy Funding, Inc. v. Chapman, 2010 WL 4509805, at *5 (N.D.Cal.,
November 3, 2010) (holding that defamation, which encompasses both libel and slander, is not subject
to heightened pleading requirement of Rule 9(b)); N'Genuity Enterprises Co. v. Pierre Foods, Inc.,
2009 WL 2905722, at * 14 (D.Ariz., Sept. 9, 2009) (“The Federal Rules of Civil Procedure do not
include [defamation, libel and slander] among the list of allegations that must be pled with particularity,
and “[a] requirement of greater specificity for [pleading] particular claims is a result that must be
obtained by the process of amending the Federal Rules, and not by judicial interpretation”); U.S. ex rel.
Putnam v. Eastern Idaho Regional Medical Center, 2008 WL 4498812, at *1 (D.Idaho, October 3, 2008)
(“[w]hile the Federal Rules of Civil Procedure require more specific pleading in certain cases,
defamation cases are not among them”). In this line of cases, Vess is not addressed at all; rather, the
holdings in these cases appear to derive from the Supreme Court’s rejection of heightened pleading
standards in the context of employment discrimination claims in Swierkiewicz v. Sorema N.A., 534 U.S.
506, 515 (2002) and Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507
U.S. 163, 168 (1993). Those case, however, acknowledge that averments of fraud are subject to Rule
9(b). See Leatherman, 507 U.S. at 168; Swierkiewicz, 534 U.S. at 513. Thus, they leave open the
possibility that a claim such as libel may be subject to Rule 9(b) where, as here, the alleged conduct
upon which it is based is fraudulent.
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statements, Plaintiff has identified specific statements, the source of those statements (a video

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allegedly made with PeakFresh’s participation), when they were made (ongoing), where they can be

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found (the PeakFresh website) and why they are misleading (because TransFresh’s process is not

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harmful to the environment, PeakFresh’s process is not more environmentally friendly than

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TransFresh’s and PeakFresh does not use MAP packaging). The Court finds that these allegations

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are sufficient to meet the pleading requirements of Rule 9(b) as to PeakFresh.

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b.

Statements Made on the Website

Complaint, ¶¶ 31 (claims that Defendants’ method is a “green” method and safer for employees and

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the environment than alternative methods). Plaintiff identifies specific statements, the source of the

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For the Northern District of California

Plaintiff alleges that a number of statements on the PeakFresh website are false. See

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United States District Court

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statements (PeakFresh), and where they can be found (the Website), as well as including allegations

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explaining why the statements are false and misleading. Although the statements are described in a

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somewhat cursory fashion, the Court concludes that the allegations are sufficient to meet the

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pleading requirements of Rule 9(b) as to PeakFresh.

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c.

Statements Made in Connection With PeakFresh’s Sealable Bags

Plaintiff alleges PeakFresh has sent potential customers sealable bags and instructed them to

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test them in their home refrigerator and then states or implies that its open pallet covers work as well

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as the sealed bags, “a statement which has no foundation.” Complaint, ¶ 24. This allegation does

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not meet the requirements of Rule 9(b). Although the “what” and “why” are alleged, TransFresh

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does not include allegations identifying who specifically made these statements, when the statements

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were made, or to whom they were made. Accordingly, to the extent Plaintiff’s claims are based on

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these alleged misrepresentations, the claims are not sufficiently alleged.

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d.

Statements Made in Connection with UC Davis Study

Plaintiff alleges that PeakFresh has made statements that misrepresent the findings of a 1999

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UC Davis study, circulated an altered version of the UC Davis study, and failed to refer to more

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recent UC Davis studies in 2009 and 2010. Complaint, ¶ 43. These allegations fail under Rule 9(b)

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on several grounds. First, TransFresh fails to allege when and where the statements about the 1999

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UC Davis study were made. Second, TransFresh does not explain why PeakFresh’s failure to refer

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to the 2009 and 2010 studies is misleading. Third, Plaintiff does not include allegations identifying

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how the version of the study circulated by PeakFresh was altered or why the altered version is

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misleading. Accordingly, to the extent Plaintiff’s claims are based on these alleged
misrepresentations, the claims are not sufficiently alleged.

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For the Northern District of California

United States District Court

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e.

Other Statements

Plaintiff alleges that Defendants have falsely claimed that strawberries shipped in a

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PeakFresh pallet bag have a shelf life of 20 days, and that Defendants have falsely claimed that

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Plaintiff’s goods and services are not certified as organic. Complaint, ¶¶ 44, 45. Plaintiff does not,

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however, allege specific facts as to when or where these statements were made, who made the

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statements, or why they are misleading. Accordingly, to the extent Plaintiff’s claims are based on

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these alleged misrepresentations, the claims are not sufficiently alleged.

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3.

Whether Plaintiff has Alleged Sufficient Facts as to Gregory Ganzerla

Under California law, principals do not incur personal liability for the torts of the corporation

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merely by virtue of their corporate position. United States Liability Ins. Co. v. Haidinger-Hayes,

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Inc., 1 Cal. 3d 586, 595 (1970). However, they may be liable if they “participate in the wrong or

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authorize or direct that it be done.” Id. Where there are multiple defendants who are alleged to

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have engaged in fraudulent conduct, “a plaintiff must, at a minimum, ‘identif[y] the role of [each]

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defendant[ ] in the alleged fraudulent scheme.’” Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.

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2007) (quoting Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir.1989)).

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Here, it is unclear from Plaintiff’s allegations the basis for imposing individual liability on Gregory

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Ganzerla as to the specific statements discussed above. Therefore, the Court finds that Plaintiff has

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not satisfied the requirements of Rule 9(b) as to Gregory Ganzerla.

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The Court rejects TransFresh’s argument that its claims are adequately pleaded as to Gregory

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Ganzerla because Ganzerla may be PeakFresh’s alter-ego, which is a factual question. While an

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individual who is found to be an alter-ego of a corporation may be held liable for the statements of

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the corporation, Misik v. D'Arco, 197 Cal.App.4th 1065,1071-1072 (2011), Plaintiff has not alleged

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alter-ego liability or any facts that would support such a theory in its complaint. See Wady v.

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Provident Life and Accident Ins. Co. of America, 216 F.Supp.2d 1060, 1067 (C.D.Cal., 2002) (listing
cases holding that alter ego liability was waived because it was not alleged in complaint).

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For the Northern District of California

United States District Court

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C.

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The Declaratory Judgment Act (“the Act”) provides that “[i]n a case of actual controversy

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within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal

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relations of any interested party seeking such declaration, whether or not further relief is or could be

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sought.” 28 U.S.C. § 2201(a). The Supreme Court has held that the phrase “case of actual

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controversy” in the Act refers to the type of “Cases” and “Controversies” that are justiciable under

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Article III. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Aetna Life Ins.

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Co. v. Haworth, 300 U.S. 227, 240 (1937)). That standard, in turn, requires that the dispute before

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the court must be “‘definite and concrete, touching the legal relations of parties having adverse legal

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interests’; and that it be ‘real and substantial’ and ‘admi[t] of specific relief through a decree of a

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conclusive character, as distinguished from an opinion advising what the law would be upon a

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hypothetical state of facts.’” Id. (quoting Aetna, 300 U.S. at 240-41). The Court summarized the

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standard for determining whether a cases or controversy exists as follows: “Basically, the question

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in each case is whether the facts alleged, under all the circumstances, show that there is a substantial

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controversy, between parties having adverse legal interests, of sufficient immediacy and reality to

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warrant the issuance of a declaratory judgment.” Id. (quoting Maryland Casualty Co. v. Pacific Coal

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& Oil Co., 312 U.S. 270, 273 (1941)). The MedImmune Court expressly rejected the Federal

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Whether Declaratory Relief Claim is Ripe

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Circuit’s “reasonable apprehension of suit” test, which required that a party seeking declaratory

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relief establish that there is an “imminent threat of suit.” Id. at 132 n. 11.

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In this case, the standard articulated in MedImmune is met. The Cease-and-Desist Letter,

statements and addressed in detail why these statements were false and misleading. See Declaration

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of E. Lynn Perry in Support of Plaintiff Transfresh Corporation’s Response to Defendants’ Motion

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to Dismiss Complaint Pursuant to FRCP Rule 12(b)(6) (“Perry Decl.”), Ex. 1 (Cease-and-Desist

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Letter). Notably, the statements at issue are, essentially, mirror images of the statements about

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which TransFresh complains. In particular, PeakFresh complained in the Cease-and-Desist Letter

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that the following statements on the TransFresh website are false and unsubstantiated: 1) “Tectrol

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For the Northern District of California

which was referenced in the Complaint, accused TransFresh of false advertising, listed specific

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United States District Court

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has repeatedly demonstrated increased revenue potential of 2-10% over standard refrigeration and

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open bags;” and 2) Tectrol treated strawberries averaged 11% less decay than open bags after

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simulated transit and distribution.” Id. PeakFresh also threatened to “hold TransFresh responsible

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and liable for its unlawful and tortious conduct” if TransFresh did not comply PeakFresh’s demands

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by December 9, 2011. Id. Based on the issues raised in the Cease-and-Desist Letter, the Court finds

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that there is a substantial controversy between the parties, that they have adverse interests, and that

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the controversy is real and immediate. Therefore, the Court rejects PeakFresh’s assertion that this

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claim is not ripe for adjudication.

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IV.

CONCLUSION

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For the reasons stated above, the Motion is Granted in part and Denied in part. In particular,

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Plaintiff’s claims are dismissed to the extent that: 1) they are alleged against Gregory Ganzerla; and

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2) they are based on statements the Court has found do not meet the pleading requirements of Rule

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9(b), discussed above. The Court Denies the Motion in all other respects. Plaintiff shall be

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permitted to file an amended complaint addressing the deficiencies identified in this Order no later

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than thirty (30) days from the date of this Order.

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IT IS SO ORDERED.

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Dated: March 23, 2012

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JOSEPH C. SPERO
United States Magistrate Judge

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For the Northern District of California

United States District Court

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