Wilson v. Frito-Lay North America, Inc. et al

Filing 73

Order by Hon. Samuel Conti granting in part and denying in part 59 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 10/24/2013)

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1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 United States District Court For the Northern District of California 9 MARKUS WILSON and DOUG CAMPEN, individually and on behalf of all others similarly situated, 10 Plaintiffs, 11 v. 12 FRITO-LAY NORTH AMERICA, INC., 13 Defendant. 14 15 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 12-1586 SC ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS PLAINTIFFS' SECOND AMENDED COMPLAINT 16 17 18 I. INTRODUCTION 19 Now before the Court is Defendant Frito-Lay North America, 20 Inc.'s ("Defendant") motion to dismiss Plaintiffs Markus Wilson and 21 Doug Campen's ("Plaintiffs") second amended complaint. 22 ("SAC"), 59 ("MTD"). 23 ("Opp'n"), 68 ("Reply"), and suitable for decision without oral 24 argument, Civ. L.R. 7-1(b). 25 Court GRANTS in part and DENIES in part Defendant's motion. 26 /// 27 /// 28 /// ECF Nos. 47 The motion is fully briefed, ECF Nos. 64 For the reasons explained below, the 1 II. BACKGROUND 2 A. 3 The parties are familiar with this case's basic facts, as Factual Background 4 summarized below. Defendant makes snack food products, including 5 "Lay's Classic Potato Chips," "Lay's Classic Potato Chips," "Lay's 6 Honey Barbeque Potato Chips," "Lay's Kettle Cooked Mesquite BBQ 7 Potato Chips," "Cheetos Puffs," and "Fritos Original Corn Chips" 8 (collectively the "Purchased Products"). 9 Purchased Products, and claim to have been misled by their labels, Plaintiffs bought the United States District Court For the Northern District of California 10 between March 29, 2008 and March 29, 2012 (the "Class Period"). In 11 their SAC, they also bring claims on behalf of a putative class of 12 people in California and elsewhere who bought a variety of 13 Defendant's other Products that the named Plaintiffs did not buy. 1 Plaintiffs allege that Defendant's marketing of the Products 14 15 is misleading because: (1) some Products are labeled "All Natural" 16 despite containing artificial or unnatural ingredients, flavoring, 17 coloring, or preservatives; (2) some Products are labeled as 18 containing "0 Grams Trans Fat" despite having total fat levels that 19 render such a claim misleading; (3) some Products contain MSG but 20 are labeled as having "No MSG"; and (4) Defendant's website, whose 21 address appears on some Products' labels, is a "label" subject to 22 FDA regulations, and it makes claims about the Products that are 23 misleading and unlawful. Plaintiffs claim that they care about buying healthy foods, 24 25 e.g., foods with artificial ingredients or high levels of fat, and 26 27 28 1 When the Court discusses these non-purchased products alongside the Purchased Products, the Court refers to them collectively as the "Products." Separately, they are the "Non-Purchased Products". 2 1 that they would not have bought any of the Products if they knew 2 that Defendant's claims about such ingredients were not true. 3 e.g., SAC ¶¶ 46-47, 60, 64-65, 80, 82, 86-87, 104, 128, 141, 154. See, 4 B. Procedural Background 5 In their FAC, Plaintiffs asserted nine causes of action 6 against Defendant: (1-3) violations of the "unlawful," "unfair," 7 and "fraudulent" prongs of California's Unfair Competition Law's 8 ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq.; (4-5) violations 9 of the "misleading and deceptive" and "untrue" prongs of United States District Court For the Northern District of California 10 California's False Advertising Law ("FAL"), Cal. Bus. & Prof. Code 11 § 17500, et seq.; (6) violations of California's Consumers Legal 12 Remedies Act ("CLRA"), Cal. Civ. Code § 1750, et seq.; (7) 13 restitution based on unjust enrichment or quasi-contract; (8) 14 breach of warranty under California's Song-Beverly Act, Cal. Civ. 15 Code § 1790, et seq.; and (9) breach of warranty under the federal 16 Magnuson-Moss Act, 15 U.S.C. § 2301, et seq. 17 Defendant moved to dismiss the FAC. The Court granted 18 Defendant's motion in part and denied it in part, dismissing 19 Plaintiffs' breach of warranty claim with prejudice but granting 20 Plaintiffs leave to amend their other claims. 21 Order") at 31-32. 22 plead more specific facts about the Non-Purchased Products and 23 about how Defendant's website could constitute "labeling" such that 24 claims asserted on it could predicate Plaintiffs' various causes of 25 action. 26 ECF No. 46 ("Apr. 1 Specifically, the Court allowed Plaintiffs to In their SAC, Plaintiffs include more facts about the Non- 27 Purchased Products and Defendant's website. 28 warranty claim having been dismissed with prejudice, and with 3 With their breach of 1 Plaintiffs having chosen not to re-plead their restitution claim, 2 the only causes of action remaining in the case are Plaintiffs' 3 UCL, FAL, and CLRA claims. 4 theories for their UCL, FAL, and CLRA claims, and also alleges new 5 violations based on the Non-Purchased Products. 6 moves to dismiss the SAC. The SAC elaborates on Plaintiffs' Defendant now 7 8 III. LEGAL STANDARD 9 A. A motion to dismiss under Federal Rule of Civil Procedure United States District Court 10 For the Northern District of California Motions to Dismiss 11 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. 12 Block, 250 F.3d 729, 732 (9th Cir. 2001). 13 on the lack of a cognizable legal theory or the absence of 14 sufficient facts alleged under a cognizable legal theory." 15 Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 16 1988). 17 should assume their veracity and then determine whether they 18 plausibly give rise to an entitlement to relief." 19 Iqbal, 556 U.S. 662, 679 (2009). 20 must accept as true all of the allegations contained in a complaint 21 is inapplicable to legal conclusions. 22 elements of a cause of action, supported by mere conclusory 23 statements, do not suffice." 24 Twombly, 550 U.S. 544, 555 (2007)). 25 generally "limited to the complaint, materials incorporated into 26 the complaint by reference, and matters of which the court may take 27 judicial notice." 28 540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor "Dismissal can be based "When there are well-pleaded factual allegations, a court Ashcroft v. However, "the tenet that a court Threadbare recitals of the Id. (citing Bell Atl. Corp. v. The court's review is Metzler Inv. GMBH v. Corinthian Colls., Inc., 4 1 Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). 2 B. Rule 9(b) 3 Claims sounding in fraud are subject to the heightened 4 pleading requirements of Federal Rule of Civil Procedure 9(b), 5 which requires that a plaintiff alleging fraud "must state with 6 particularity the circumstances constituting fraud." See Kearns v. 7 Ford Motor Co., 567 F. 3d 1120, 1124 (9th Cir. 2009). "To satisfy 8 Rule 9(b), a pleading must identify the who, what, when, where, and 9 how of the misconduct charged, as well as what is false or United States District Court For the Northern District of California 10 misleading about [the purportedly fraudulent] statement, and why it 11 is false." 12 Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks 13 and citations omitted). United States ex rel Cafasso v. Gen. Dynamics C4 Sys., 14 C. Leave to Amend 15 Under Federal Rule of Civil Procedure 15(a), leave to amend 16 "should be freely granted when justice so requires," bearing in 17 mind that "the underlying purpose of Rule 15 . . . [is] to 18 facilitate decision[s] on the merits, rather than on the pleadings 19 or technicalities." 20 2000) (en banc) (internal citations, quotation marks, and 21 alterations omitted). 22 discretion to deny leave to amend due to 'undue delay, bad faith or 23 dilatory motive on [the] part of the movant, repeated failure to 24 cure deficiencies by amendments previously allowed, undue prejudice 25 to the opposing party . . . , [and] futility of amendment.'" 26 Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th 27 Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)) 28 (alterations in original). Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. However, a court "may exercise its 5 "[W]here the plaintiff has previously been granted leave to 1 2 amend and has subsequently failed to add the requisite 3 particularity to its claims, the district court's discretion to 4 deny leave to amend is particularly broad." 5 Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009) (internal 6 quotations, citations, and alterations omitted). 7 failure to cure a complaint's deficiencies by previous amendment is 8 reason enough to deny leave to amend. 9 Corp., 545 F.3d 733, 742 (9th Cir. 2008) (citing Foman, 371 U.S. at Zucco Partners, LLC v. Indeed, repeated Abagninin v. AMVAC Chem. United States District Court For the Northern District of California 10 182); Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 11 1990)). 12 13 IV. DISCUSSION 14 A. 15 The Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 301 et The Statutory Framework 16 seq., as amended by the Nutrition Labeling and Education Act of 17 1990 ("NLEA"), 21 U.S.C. § 343(r), et seq., is the operative 18 statute in this matter. 19 The many subsections of 21 U.S.C. § 343 establish the 20 conditions under which food is considered "misbranded." Generally, 21 food is misbranded under 21 U.S.C. § 343(a)(1) if "its labeling is 22 false or misleading in any particular." 23 regulate the information that must be included in all packed 24 products' "nutrition box," as well as all other nutrient content 25 claims that appear elsewhere on the label. Sections 343(q) and (r) 26 Section 343(q) governs information that must be disclosed 27 about certain nutrients in food products -- principally in the 28 nutrition box area. Section 343(r) discusses "nutrition levels and 6 1 health-related claims" about food products made anywhere on their 2 labels. 3 content or health information that a manufacturer includes on the 4 food label or packaging. 5 has classified these nutrient claims as "express" (e.g., "100 6 calories"), "implied" (e.g., "high in oat bran"), and "health 7 claims," which "characteriz[e] the relationship of any substance to 8 a disease or health-related condition." 9 101.14; see also Chacanaca v. Quaker Oats Co., 752 F. Supp. 2d It governs all voluntary statements about nutrition The Food and Drug Administration ("FDA") 21 C.F.R. §§ 101.13, United States District Court For the Northern District of California 10 1111, 1116-17 (N.D. Cal. 2010) (describing the statutory scheme). 11 Section 343(r) clarifies that it does not govern nutrition content 12 claims made under Section 343(q) (i.e., inside the nutrition box), 13 though an accompanying regulation, 21 C.F.R. § 101.13, clarifies 14 that "[i]f such information is declared elsewhere on the label or 15 in labeling, it is a nutrition content claim and is subject to the 16 requirements for nutrient content claims [under Section 343(r)]." 17 See Chacanaca, 752 F. Supp. 2d at 1117. 18 Plaintiffs' state law claims are based on California's Sherman 19 Food, Drug, and Cosmetic Act ("Sherman Act"), Cal. Health & Safety 20 Code § 109875 et seq., which adopts and incorporates the FDCA. 21 Sherman Act § 110100 ("All food labeling regulations and any 22 amendments to those regulations adopted pursuant to the federal 23 acts in effect on January 1, 1993, or adopted on or after that date 24 shall be the food regulations of this state."). 25 includes provisions of the FDCA and NLEA that set forth food 26 labeling and packing requirements. See This specifically 27 B. Standing as to the Non-Purchased Products 28 To satisfy Article III standing, plaintiffs must allege: (1) a 7 1 concrete, particularized, actual or imminent injury-in-fact; (2) 2 that the injury is traceable to the defendant's action; and (3) 3 that a favorable ruling could redress the injury. 4 the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 5 180-81 (2000). 6 III standing by alleging that they purchased a product they 7 otherwise would not have purchased, or that they spent too much on 8 such a product, in reliance on a defendant's representations in ads 9 or on labels. See Friends of Plaintiffs in a case like this one can show Article See, e.g., Brazil v. Dole Food Co., Inc., -- F. United States District Court For the Northern District of California 10 Supp. 2d --, 2013 WL 1209955, at *11-13 (N.D. Cal. Mar. 25, 2013). 11 It is Plaintiffs' burden to show standing. 12 Wildlife, 504 U.S. 555, 561 (1992). 13 Lujan v. Defenders of The parties do not dispute whether Plaintiffs have pled 14 standing as to the Purchased Products. 15 they have standing as to the Non-Purchased Products. 16 The question is whether In putative class actions like this one, this Court has often 17 held that plaintiffs can demonstrate standing at the pleading stage 18 if they plead sufficiently detailed facts that the non-purchased 19 products are "substantially similar" to the purchased products for 20 which they have standing. 21 Cream, Inc., No. C 11-2910 EMC, 2012 WL 2990766, at *11 (N.D. Cal. 22 July 20, 2012). 23 whether the challenged products are of the same kind, whether they 24 are comprised of largely the same ingredients, and whether each of 25 the challenged products bears the same alleged mislabeling. 26 id. at *13. 27 28 See, e.g., Astiana v. Dreyer's Grand Ice Factors that other courts have considered include See Defendant argues that Plaintiffs fail to establish standing or state a claim for the Non-Purchased Products. 8 MTD at 5-6. First, 1 Defendant notes that Plaintiffs added eighty-five new products -- 2 the Non-Purchased Products -- to their SAC. 3 plead to have bought these products. 4 long lists of products that they flatly state contain unlawful or 5 misleading statements. 6 ("All Natural" and "No MSG" labeling), 84 ("0 Grams Trans Fat" 7 labeling). 8 Defendant argues that because Plaintiffs allege no facts stating 9 that the Non-Purchased Products are "the same or similar" to the Plaintiffs do not Instead they simply provide SAC ¶¶ 44 ("All Natural" labeling), 62 The SAC provides no other detail about these products. United States District Court For the Northern District of California 10 Purchased Products with respect to Plaintiffs' claims, Plaintiffs 11 cannot -- even in a putative class action -- assert causes of 12 action as to products that are not in fact substantially similar to 13 the products they actually bought. 14 notes that while Plaintiffs include purported images of the Non- 15 Purchased Products' labels in their SAC, see SAC Ex. 8 (product 16 labels), the SAC does not state that any Plaintiff actually saw 17 these labels. See MTD at 6-9. Defendant also MTD at 9-10. 18 Plaintiffs oppose these arguments, contending that the eighty- 19 five Non-Purchased Products are "substantially similar" to the five 20 Purchased Products. 21 are "potato chips, corn chips, and puffed corn products," all of 22 which they allege to be unlawfully or misleadingly labeled. 23 Opp'n at 3-4. 24 by the same manufacturer and, with the exception of flavors, 25 contain the same ingredients and implicate the same concerns. 26 at 4. 27 28 According to Plaintiffs, all of the Products See Plaintiffs claim that all of the Products are made Defendant is right. Id. Plaintiffs have failed to allege substantial similarity among the Purchased Products and the Non- 9 1 Purchased Products. Plaintiffs have taken lists of snack foods, 2 appended them to paragraphs of their SAC, and asserted in their 3 briefs -- not in their pleadings -- that they are all basically the 4 same. 5 provide do not help. 6 of the eighty-five new Products are actionably mislabeled, and the 7 Court is not inclined to pore over each ingredient list and guess. 8 The Court instructed Plaintiffs to be clear about why any Non- 9 Purchased Products were similar enough to the Purchased Products The Court is not convinced, and the exhibits Plaintiffs Plaintiffs take no time to explain how each United States District Court For the Northern District of California 10 for standing purposes. Order at 12 (setting forth clear guidelines 11 for amendment on this point). Plaintiffs fail to do so. 12 In their SAC, Plaintiffs simply provide a list of Non- 13 Purchased Products, attach barely-legible labels (purportedly as 14 they appeared during the Class Period), and assert that these 15 labels are unlawful or misleading. 16 not enough -- the Court cannot just assume that every one of the 17 Non-Purchased Products' labels is actionable in the same way as the 18 more fully described Purchased Products' labels are. 19 the label on the purportedly actionable "Lay's Balsamic Sweet 20 Onion" package, SAC Ex. 8 at 25, has a stamp that, unlike any other 21 product, reads "Made With All Natural Potatoes and Seasonings," 22 which is not the same as the labels discussed in the Court's Order 23 on the FAC, which state "Made With All Natural Ingredients." 24 Similarly, the "Miss Vickie's Sea Salt & Vinegar" package, SAC Ex. 25 8 at 35, has a stamped ribbon that reads only "All Natural." 26 See SAC ¶¶ 42, 62, 84. This is For example, The Court will not assume that each of these subtly different 27 Products is like all the others. To meet the plausibility standard 28 of Rule 8, Plaintiffs have to say more, especially when they are 10 1 asserting standing as to Products they did not purchase -- 2 otherwise their pleadings amount to unacceptably bare legal 3 conclusions. 4 Plaintiffs' SAC's allegations about the Non-Purchased Products are 5 not detailed or plausible enough to survive a motion to dismiss. 6 Plaintiffs' boilerplate claims as to the Non-Purchased Iqbal, 556 U.S. at 663; Twombly 550 U.S. at 370. 7 Products are therefore DISMISSED. 8 prejudice, since the Court has already given Plaintiffs leave to 9 amend on this point, as well as clear instructions on how to do so United States District Court For the Northern District of California 10 successfully. 11 C. This dismissal is with Whether Websites Mentioned on Product Labels Constitute Labeling 12 In their FAC, Plaintiffs contended that Defendant's website 13 14 constitutes "labeling" of the Products under the FDCA. The Court 15 dismissed Plaintiffs' claims that were based on the website, 16 because the Court did not find that Plaintiffs had sufficiently 17 alleged that any of Plaintiffs' cited website language was drawn 18 closely enough to any Product to merit the website's constituting 19 "labeling" under the FDCA. Now Plaintiffs cite extensive language from the website and 20 21 claim that it explains and supplements Defendant's other statements 22 about the Products, such that the Court should find that the 23 website language constitutes labeling. 24 SAC ¶¶ 105-54). 25 about other companies' websites, which they say deserve deference. 26 Id. at 10-12. 2 27 2 28 See Opp'n at 9-10 (citing Plaintiffs also cite several FDA warning letters Plaintiffs also cite a third-party website's language about MSG and food labeling. Opp'n at 22 n.11. The Court declines to take judicial notice of this website, since it has not been referenced 11 1 Section 321(m) defines "labeling" as "all labels and other 2 written, printed, or graphic matter (1) upon any article or any of 3 its containers or wrappers, or (2) accompanying such article." 4 issue here is whether statements made on the www.fritolay.com 5 website "accompany" the Named Products such that they can be 6 classified as "labeling" under the FDCA. 7 The It is true that statements not actually printed on a label 8 itself can constitute "labeling" for FDCA purposes. What matters 9 is whether the separate material serves the purpose of labeling, United States District Court For the Northern District of California 10 which is to supplement or explain the product. 11 States, 335 U.S. 345, 349-350 (1950) ("One article or thing is 12 accompanied by another when it supplements or explains it . . . No 13 physical attachment one to the other is necessary. 14 textual relationship that is significant."); Alberty Food Prods. 15 Co. v. United States, 185 F.2d 321, 324-25 (9th Cir. 1950) (citing 16 Kordel for this proposition); see also United States v. Harkonen, 17 No. C 08-0164 MHP, 2009 WL 1578712, at *9 (N.D. Cal. June 4, 2009) 18 (stating that Kordel " remains the leading Supreme Court authority 19 on the scope of the labeling provision."). 20 Plaintiffs base their claims on the fact that some of the Named 21 Products include phrases like "Visit our website @ fritolay.com" in 22 tiny print at the bottom of their back labels. 23 Plaintiffs claim that Defendant's marketing language on the 24 www.fritolay.com or www.lays.com websites constitutes mislabeling 25 under the FDCA. 26 Kordel v. United It is the In this matter, From this The Court is not persuaded by Plaintiffs' argument that the 27 28 in any pleading and Plaintiffs do not explain why it should be incorporated now. 12 1 Court owes deference to two warning letters that the FDA sent to 2 two other companies. 3 interpretation of its own ambiguous regulation is controlling 4 unless "plainly erroneous or inconsistent with the regulation." 5 Bassiri v. Xerox Corp., 463 F.3d 927, 930 (9th Cir. 2006) (quoting 6 Auer v. Robbins, 519 U.S. 452, 461 (1997)). 7 this case has contended that the FDA's regulations on labeling are 8 ambiguous, and the Court does not find that they are. 9 FDA's regulation is very clear on this point, and when the FDA has It is true that an agency's informal However, no party in Indeed, the United States District Court For the Northern District of California 10 directly referenced it, the agency's instruction mirrors the 11 Supreme Court precedent discussed above: 12 13 14 15 16 [I]f the label for a product contained a statement that referred the consumer to a specific website for additional information about a claim for the product, the website is likely to be 'labeling.' The websites, in these cases, are considered written, printed, or graphic matter that supplements or explains the product and is designed for use in the distribution and sale of the product. 17 18 SAC Ex. 20 (FDA Letter, "Guidance for Industry and FDA: Dear 19 Manufacturer Letter Regarding Food Labeling") at 3. 20 On this point, the Court declines to analogize to the 21 situations the FDA considers in its warning letters. 22 do not address how the FDA regulations on labeling are to apply. 23 Instead they discuss specific websites that the FDA had 24 independently concluded constituted labeling. 25 such specific conclusions about Defendant's Products in this case, 26 and the Court does not find that labels' references to Defendant's 27 website constitute "labeling" for FDA regulatory purposes. 28 website address appears below Defendant's physical address, not 13 Those letters The FDA has made no The 1 near the ingredients list or any nutritional facts. 2 Product's packaging does Defendant direct consumers to its website 3 for more facts about the labeled Product. 4 not find that Defendant's website constitutes "labeling" under the 5 FDCA. 6 Nowhere on any The Court therefore does "Labeling" as a regulatory matter aside, Plaintiffs also fail 7 to plead that they ever saw, read, or were even aware of any 8 website before this suit. 9 irrelevant because, according to them, there is no requirement that Plaintiffs admit this but claim it is United States District Court For the Northern District of California 10 a purchaser rely on a particular statement in order to bring a UCL 11 unlawfulness claim based on that statement. 12 According to Plaintiffs, misbranded food products are unlawful by 13 nature and therefore actionable. 14 Holding for them on this point would be an affront to state and 15 federal standing rules. 16 California law requires UCL plaintiffs to plead injury and reliance 17 -- a legislative decision based specifically on curtailing lawsuits 18 by plaintiffs who have had no contact with advertising, for 19 example. 20 2011) (affirming that UCL and FAL claims must be pled with injury 21 and reliance). 22 lawsuits by all manner of plaintiffs who could simply troll grocery 23 stores and the Internet looking for any food product that might 24 form the basis of a class-action lawsuit. 25 point of these consumer protection laws. 26 Id. Opp'n at 13. Plaintiffs are wrong. Federal standing requires an injury, and Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310, 326 (Cal. Ignoring these basic legal rules would invite Surely that is not the Since Plaintiffs have twice failed to indicate how Defendant's 27 website could form the basis of a good-faith UCL, FAL, or CLRA 28 cause of action, Plaintiffs' claims based on Defendant's website 14 1 are DISMISSED WITH PREJUDICE. 2 D. Plaintiffs' Remaining Claims 3 The CLRA, FAL, and UCL, which are the basis of Plaintiffs' 4 first through sixth causes of action, are California consumer 5 protection statutes. The UCL makes actionable any "unlawful, unfair 6 or fraudulent business act or practice." 7 17200. 8 statement concerning property or services that is "untrue or 9 misleading." Cal. Bus. & Prof. Code § The FAL makes it unlawful to make or disseminate any Id. § 17500. The CLRA also prohibits "unfair methods United States District Court For the Northern District of California 10 of competition and unfair or deceptive acts or practices." 11 Civ. Code § 1770. 12 Cal. Plaintiffs' case, broadly, has two parts: (1) the UCL 13 unlawfulness claims based on Plaintiffs' contention that 14 Defendant's products are misbranded as a matter of law and 15 therefore are predicates for a UCL unlawfulness violation, and (2) 16 the rest of Plaintiffs' tort claims, which are premised on 17 Plaintiffs' allegations that Defendant's labels are misleading, 18 unfair, and fraudulent. 19 20 i. See SAC ¶¶ 4, 8. Plaintiffs' Misbranding Theory Plaintiffs' UCL "misbranding theory" -- as distinct from the 21 portion of their UCL claim based on Plaintiffs allegedly having 22 been misled or deceived by Defendant's labels -- is that 23 Defendant's labels are unlawfully misbranded under the FDCA and the 24 Sherman Law, and are therefore actionable under the UCL's 25 unlawfulness prong even absent allegations of reliance. 26 at 13-14. 27 facet of their UCL claim is that Defendant's mere alleged violation 28 of the underlying regulations, without more, is enough to state a See Opp'n In other words, Plaintiffs' theory of liability for this 15 1 2 claim for a UCL unlawfulness prong violation. As a threshold issue, the parties dispute whether Rule 9(b)'s 3 particularity requirements govern Plaintiffs' UCL unlawfulness 4 claims. 5 UCL unlawfulness claims based on the CLRA and FAL, because all of 6 those theories rely on allegations of a unified course of 7 fraudulent conduct -- i.e., the mislabeled Products. 8 Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003); Kearns v. 9 Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (holding that, The Court finds that it does at least as to Plaintiffs' Ness v. Ciba– United States District Court For the Northern District of California 10 where "TAC allege[d] a unified fraudulent course of conduct," 11 claims were "grounded in fraud" and the "entire complaint" had to 12 be pled "with particularity"). 13 misbranding theory is not grounded in misrepresentation or 14 deception, but the Court finds otherwise. 15 Plaintiffs' SAC that the behavior that Plaintiffs allege violated 16 FDA regulations and the Sherman Law is misrepresentation or 17 deception, because Plaintiffs are asserting that Defendant used 18 deceptive labeling practices to hide the truth of the Products' 19 ingredients. 20 Plaintiffs are subject to Rule 9(b) pleading standards for their 21 unlawfulness claim, but they met it. 22 they must also plead reliance for an unlawfulness claim, as they 23 must for UCL unfairness and fraud claims. 24 Plaintiffs contend that their It is clear from However, the Court finds that this dispute is a wash: The only question is whether According to Plaintiffs, unlawful conduct is the only 25 necessary element for UCL unlawfulness liability, unlike the 26 fraudulent or unfairness prongs which require particularity as to 27 reliance and injury. 28 "misbranding theory" is not divorced from its other UCL theories: See id. This is incorrect. 16 Plaintiffs' 1 they are all connected, since, as noted above, Plaintiffs' 2 misbranding theory is essentially of a piece with their other 3 theories. 4 The California Supreme Court has interpreted the UCL as 5 requiring plaintiffs to have suffered economic injury "as a result 6 of" the unfair competition they allege. 7 326. 8 unlawful activity would have standing to sue. 9 Court noted above and as the California Supreme Court stated in Kwikset, 51 Cal. 4th at Otherwise plaintiffs who had no contact with the allegedly This would, as the United States District Court For the Northern District of California 10 Kwikset, be an invitation to shakedown suits. 11 4th at 335 n.21 (stating that this rule exists to curb "shakedown 12 suits by parties who had never engaged in any transactions with 13 would-be defendants"). 14 interpretation, finding that in accordance with California law, 15 plaintiffs must show that they lost money or property because of 16 reliance on an allegedly unlawful practice, in order to establish 17 standing for UCL unlawfulness claims. 18 Application Litig., 844 F. Supp. 2d 1040, 1071 (N.D. Cal. 2012); In 19 re Actimmune Mktg. Litig., No. C 08-02376 MHP, 2010 WL 3463491, at 20 *8 (N.D. Cal. Sept. 1, 2010), aff'd, 464 F. App'x 651 (9th Cir. 21 2011) (alleging unlawfulness alone, without reliance, "only 22 accomplishes half of [the plaintiff's] burden in a UCL unlawful 23 prong action," since "as a result of" in the statutory language 24 places a burden of reliance on the plaintiff); Durell v. Sharp 25 Healthcare, 183 Cal. App. 4th 1350, 1363 (Cal. Ct. App. 2010). 26 See Kwikset, 51 Cal. Other courts agree with this See, e.g., In re iPhone "Reliance is proved by showing that the defendant's 27 misrepresentation or nondisclosure was 'an immediate cause' of the 28 plaintiff's injury-producing conduct." 17 In re Tobacco II Cases, 46 1 Cal. 4th 298, 326 (Cal. 2009) (citation and alteration omitted). 2 "A plaintiff may establish that the defendant's misrepresentation 3 is an immediate cause of the plaintiff's conduct by showing that in 4 its absence[,] the plaintiff in all reasonable probability would 5 not have engaged in the injury-producing conduct." 6 and quotation marks omitted). Id. (citation The issue at this point is therefore whether Plaintiffs 7 8 establish, at the pleading stage, that Defendant's alleged 9 violation of labeling laws alone -- separate from any alleged fraud United States District Court For the Northern District of California 10 or deception connected with Plaintiffs' reliance or injury -- 11 supports a UCL unlawfulness claim. 12 for Defendant. 13 action for UCL unlawfulness relies solely on Defendant's alleged 14 violation of the Sherman Law or FDA regulations, that claim is 15 DISMISSED WITH PREJUDICE because Plaintiffs fail to allege reliance 16 under this theory. 17 because the allegedly misbranded products were "legally worthless 18 and had no economic value," see Opp'n at 13, is insufficient to 19 save this claim. 20 having been harmed by being deceived into buying Products whose 21 ingredients they specifically wanted to avoid, not that they were 22 harmed in some non-specific way by purchasing Products that they 23 later learned were "legally worthless." On this point, the Court finds To the extent that Plaintiffs' first cause of Plaintiffs' argument that they were harmed Plaintiffs' SAC supports their allegations of Plaintiffs do, however, plausibly allege violations of the FAL 24 25 and CLRA, as the Court found in its April 1 Order. 26 Plaintiffs' UCL unlawfulness claim survives to the extent that it 27 is predicated on violations of those laws. 28 /// 18 Accordingly, ii. 1 2 "All Natural" and "0 Grams Trans Fat" Claims Defendant argues that Plaintiffs' claims based on Defendant's 3 "All Natural" and "0 Grams Trans Fat" statements should be 4 dismissed, because Plaintiffs have failed to allege injury, 5 deception, or reliance under Twombly and Rule 9(b). 6 Plaintiffs assert that this is an attempt to reargue the motion to 7 dismiss that the Court denied, see Opp'n at 15, 19, but Defendant 8 insists that it is raising new arguments as to the sufficiency of 9 Plaintiffs' pleadings, Reply at 10. United States District Court For the Northern District of California 10 The Court agrees with Plaintiffs. Reply at 10. The Court has already found 11 Plaintiffs' pleadings on these points sufficient to survive a 12 motion to dismiss. 13 under Twombly and Rule 9(b) in its first Order. 14 to reconsider the matter. 15 DENIED. 16 deceived by these claims to survive a motion to dismiss. 17 If it had not, it would have dismissed them The Court declines Defendant's motion on this point is Plaintiffs plead enough about having been misled or iii. "No MSG" Claims 18 In the April 1 Order, the Court found that Plaintiffs' claims 19 based on Defendant's "No MSG" labels were not preempted by federal 20 regulations. 21 was actually the FDA's interpretation of its own rules about MSG, 22 made in a November 2012 announcement that the Court found warranted 23 deference. 24 November 2012 regulatory statement was a binding interpretation of 25 the FDA's own rules, the parties had not explained how (if at all) 26 that interpretation could apply retroactively to Defendant's labels 27 as they appeared during the Class Period, prior to the November 28 2012 statement. Apr. 1 Order at 19-20. Id. The regulation in question However, the Court noted that while the FDA's Id. at 21 n.4. Now the parties dispute whether 19 1 the FDA's binding interpretation applies retroactively, thereby 2 making Defendant's pre-November 2012 "No MSG" labels actionable. 3 Defendant contends that Plaintiffs' claims are preempted because 4 they would impose restrictions that did not exist before November 5 2012. Plaintiffs claim that the November 2012 statement was just an 6 7 affirmation of an FDA policy that had been in place for decades: in 8 short, any ingredient that is a source of MSG as opposed to being 9 MSG itself (like torula yeast) will bar a food product from being United States District Court For the Northern District of California 10 labeled "No MSG," even though that ingredient itself must be 11 labeled by its common name in the product's ingredient box. 12 Opp'n at 21-24. 13 "No MSG" prior to November 2012 would still be actionably 14 mislabeled if it contained an ingredient that was a source of MSG. 15 Id. 16 1990 and 1996, which all inform companies that their food products 17 were mislabeled because the products contained ingredients that 18 were sources of MSG. 19 Plaintiffs also cite an August 31, 1995 FDA Backgrounder that 20 states "the FDA considers foods whose labels say 'No MSG' or 'No 21 Added MSG' to be misleading if the food contains ingredients that 22 are sources of free glutamates, such as hydrolyzed protein." 23 Ex. 15 ("1995 Backgrounder"). 3 See So according to Plaintiffs, any Product labeled Plaintiffs point to several FDA warning letters, sent between See Opp'n at 22-23 (citing Opp'n Exs. 4-5). Opp'n Defendant first argues that the Court had ruled that 24 25 Plaintiffs' claims could proceed as to claims based on purchases 26 made after November 19, 2012. Reply at 13. That is a misreading 27 28 3 The Court takes judicial notice of these documents under Federal Rule of Evidence 201. 20 1 of the April 1 Order: the Court expressly made no finding as to 2 retroactivity there. 3 important parts of Defendant's argument concern the significance of 4 the FDA's 1995 Backgrounder and the mid-1990s warning letters. 5 First, Defendant argues that the 1995 Backgrounder was only 6 evidence of an abandoned rule, not of FDA Policy. 7 Second, Defendant argues that the warning letters Plaintiffs cite 8 were sent during 1990 and 1996, when the FDA was considering the 9 rule -- discussed in the 1995 Backgrounder -- that it later The more Reply at 13. United States District Court For the Northern District of California 10 abandoned. 11 policy until November 19, 2012 only required ingredients containing 12 MSG to be labeled separately from MSG, and nothing more. 13 Defendant's arguments are underpinned by the Court's conclusion 14 that the FDA's November 2012 statement clarified an ambiguous 15 regulation, and by the Ninth Circuit's holding that retroactive 16 application of such a regulatory clarification contravenes due 17 process. 18 Cir. 2008). 19 Id. See Apr. 1 Order at 19-21. Finally, Defendant claims that in any event, FDA Id. United States v. AMC Entm't, Inc., 549 F.3d 760, 770 (9th Defendant is correct. Plaintiffs cite the 1996 proposed 20 rulemaking and several pre-1996 warning letters, but as the Court 21 stated in its April 1 Order, the FDA's regulations between then and 22 November 19, 2012 were ambiguous. 23 resolved that ambiguity. 24 complying with a regulation that was not explicitly clarified until 25 November 19, 2012 would buck due process and Ninth Circuit 26 precedent. The November 2012 statement To insist that Defendant should have been The Court declines to do either. 27 Before the FDA's November 2012 clarification, the only 28 information about the FDA's MSG regulations that would have been 21 1 available to Defendant were warning letters based on specific 2 factual circumstances and a proposed rule that was abandoned. 3 Defendant was simply not on notice during the Class Period that its 4 labels did not comply with the FDA rule. 5 770. 6 regulations generally, to ambiguous statements about the 7 regulation. 8 2307, 2319 (2012) (holding that an isolated, ambiguous agency 9 statement did not fulfill the fair notice requirement when the AMC Entm't, 549 F.3d at These amount, as the Court found concerning pre-2012 FDA See FCC v. Fox Television Station, Inc., 132 S. Ct. United States District Court For the Northern District of California 10 government wanted to impose a large fine on a television network). 11 Plaintiffs' claims based on Defendant's "No MSG" labels predating 12 the November 19, 2012 clarification are DISMISSED WITH PREJUDICE. 13 14 iv. Plaintiffs' Non-California Purchases Finally, Defendant states that Plaintiffs' SAC seeks to expand 15 their case to include a nationwide putative class of consumers. 16 MTD at 22. 17 Plaintiffs sue only based on violations of California law, and the 18 Supreme Court of California has clarified that state statutes like 19 the UCL, FAL, and CLRA presumptively do not apply to occurrences 20 outside California. 21 4th 1191, 1207 (Cal. 2011)). 22 argument is better suited for the class certification stage, not a 23 motion to dismiss. 24 Defendant argues that such claims must fail, because Id. (citing Sullivan v. Oracle Corp., 51 Cal. Plaintiffs respond that Defendant's Opp'n at 24-25. Defendant is correct. California law presumes that the 25 legislature did not intend a statute to be "operative, with respect 26 to occurrences outside the state, . . . unless such intention is 27 clearly expressed or reasonably to be inferred from the language of 28 the act or from its purpose, subject matter or history." 22 Sullivan, 1 51 Cal. 4th at 1207 (citations and quotations omitted). With 2 regard to the UCL, FAL, and CLRA, non-California residents' claims 3 are not supported "where none of the alleged misconduct or injuries 4 occurred in California." 5 169 F. Supp. 2d 1119, 1126 (citing Norwest Mortg. Inc. v. Super. 6 Ct., 72 Cal. App. 4th 214, 222 (Cal. Ct. App. 1999)); see also In 7 re Toyota Motor Corp., 785 F. Supp. 2d 883, 918 (C.D. Cal. 2011). 8 In determining whether California law should apply to a certain 9 claim, courts consider facts like where the defendant is located, Churchill Village, LLC v. Gen. Elec. Co., United States District Court For the Northern District of California 10 where the class members are located, and where decisions about the 11 behavior in question were made. 12 at 917. 13 Defendant is located in Texas, and Plaintiffs have not alleged any 14 activity within California except their own purchase of the 15 Purchased Products. See In re Toyota, 785 F. Supp. 2d In this case, Plaintiffs are located in California, First, the Court is not persuaded by Plaintiffs' argument that 16 17 this issue should wait until the class certification stage. Class 18 allegations typically are tested on a motion for class 19 certification, not at the pleading stage. 20 Corp., C10-1210-TEH, 2010 WL 3077671, at *2 (N.D. Cal. Aug. 6, 21 2010). 22 pleadings to determine whether the interests of the absent parties 23 are fairly encompassed within the named plaintiff's claim." 24 Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982). 25 courts have struck class allegations where it is clear from the 26 pleadings that class claims cannot be maintained. 27 Apple Inc., 672 F. Supp. 2d 978, 990 (N.D. Cal. 2009). 28 /// See Collins v. Gamestop However, "[s]ometimes the issues are plain enough from the 23 Gen. Thus, some E.g., Sanders v. 1 Second, at this point, those claims fail as a matter of law 2 because nothing in Plaintiffs' complaint alleges that any of the 3 out-of-state purchases were directed from California or had 4 anything to do with California. 5 points amount to nothing more than conclusions of law without any 6 supporting facts. 7 California could assert the same California causes of action that 8 Plaintiffs do, but there is no plausible way for a non-California 9 citizen who purchased Defendant's Products outside California to United States District Court For the Northern District of California 10 Plaintiffs' allegations on these Non-California citizens who made purchases in bring these claims. Plaintiffs' California law claims based on activity occurring 11 12 in other states are all DISMISSED WITH PREJUDICE. In two amended 13 complaints, Plaintiffs have failed to give a plausible account of 14 how or why a non-California plaintiff could sue under California 15 tort law for purchases made outside the state from a Texan company 16 that, at most, advertises and sells its products in California. 17 18 V. CONCLUSION 19 For the reasons explained above, Defendant Frito-Lay North 20 America, Inc.'s motion to dismiss Plaintiffs Markus Wilson and Doug 21 Campen's second amended complaint is GRANTED in part and DENIED in 22 part. The Court orders as follows: 23 24 • are DISMISSED WITH PREJUDICE. 25 26 Plaintiffs' claims based on the Non-Purchased Products • Plaintiffs' claims based on the "All Natural" and "0 27 Grams Trans Fat" statements are undisturbed. 28 motion is DENIED as to those claims. 24 Defendant's 1 • Plaintiffs' UCL unlawfulness claim is DISMISSED WITH 2 PREJUDICE to the extent that it is based on misbranding 3 laws. 4 • Plaintiffs' "No MSG" claims are DISMISSED WITH PREJUDICE 5 to the extent that those claims are predicated on 6 activity predating the FDA's November 19, 2012 guidance. 7 8 • Plaintiffs' claims based on purchases that occurred outside California are DISMISSED WITH PREJUDICE. 9 United States District Court For the Northern District of California 10 IT IS SO ORDERED. 11 12 Dated: October 24, 2013 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25

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