Young v. Cree, Inc.
Filing
42
ORDER RE: MOTION TO DISMISS by Judge Yvonne Gonzalez Rogers granting in part and denying in part 31 Motion to Dismiss. (fs, COURT STAFF) (Filed on 4/9/2018)
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2
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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7
JEFF YOUNG,
Plaintiff,
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Re: Dkt. Nos. 31, 32
CREE, INC.,
Defendant.
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United States District Court
Northern District of California
ORDER RE: MOTION TO DISMISS
vs.
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CASE NO. 17-cv-06252-YGR
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Plaintiff Jeff Young brings this putative class action lawsuit against defendant Cree, Inc.
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(“Cree”) alleging that defendant engaged in an “unfair and deceptive practice of . . . promising
15
consumers” that Cree’s light-emitting-diode bulbs (the “LED Bulbs”) “will last for particularly
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long periods of time up to 35,000 hours” with a “100% Satisfaction Guarantee” and “yearly energy
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cost savings ranging from around $0.60 to $2 per blub per year” in violation of California’s Unfair
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Competition Law (“UCL”), Cal. Bus. Prof. Code §§ 17200, et seq. (Count I); (False Advertising
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Law (“FAL”), Cal. Bus. Prof. Code §§ 17500, et seq. (Count II); Consumers Legal Remedies Act
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(“CLRA”), Cal. Civ. Code §§ 1750, et seq. (Count III);1 fraudulent misrepresentation and
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concealment (Count V); negligent misrepresentation (Count VI); unjust enrichment (Count VII);
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breach of express and implied warranties (Count VIII);2 and negligent failure to test (Count IX).
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(Dkt. No. 1, Class Action Compliant (“CAC”).)
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1
Plaintiff has withdrawn his claim for breach of the covenant of good faith and fair dealing
(Count IV). (Dkt. No. 37, Opposition at 1.)
2
Plaintiff’s complaint designates two separate causes of action as “Count VII,” namely
claims for unjust enrichment and breach of express and implied warranties. In the interest of
clarity, the Court has re-designated the breach of express and implied warranties claim as “Count
VIII.”
1
Now before the Court is defendant’s motion to dismiss.3 (Dkt. No. 31, Motion to Dismiss
2
(“MTD”).) Having carefully considered the pleadings and fully-briefed motion, the hearing held
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on April 3, 2018, and for the reasons set forth below, the Court GRANTS IN PART and DENIES IN
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PART defendant’s motion as described below.
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I.
BACKGROUND
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As relevant here, the complaint alleges as follows:
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Defendant Cree “advertise[s], market[s], distribute[s], or s[ells]” LED Bulbs “to consumers
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throughout the United States.” (CAC ¶ 12.) “[O]n or around April of 2015” Young purchased
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three of defendant’s LED Bulbs at Walmart and paid “approximately $15-20 for each bulb.” (Id. ¶
32.) “Within months, all three [LED Bulbs] burned out even though [plaintiff] used them
11
United States District Court
Northern District of California
10
according to the instructions.” (Id. ¶ 32.)
“Cree’s packaging offers a ‘100% Satisfaction Guarantee’ for LED Bulbs and an estimated
12
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lifetime of between 15–32 years depending on the product. The packages further offer an
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estimated yearly energy cost savings ranging from $0.60 to $2 per bulb per year. Cree packaging
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also offers a ‘10 Year Warranty.’” (Id. ¶¶ 3, 27.) Moreover, Cree’s website “boast[s] . . . a 10
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year 100% satisfaction guarantee.” (Id. ¶ 4.) Plaintiff alleges that these “marketing efforts are
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made in order to—and do in fact—induce its customers to purchase the LED bulbs at a premium
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because consumers believe the Lightbulbs will last for far longer than their actual life.” (Id. ¶ 5.)
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Based thereon, plaintiff asserts “Cree’s claims regarding the longevity of the LED Lightbulbs are
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false.” (Id. ¶ 6.)
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II.
LEGAL FRAMEWORK
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A.
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Pursuant to Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon
24
Motion to Dismiss
which relief may be granted. Dismissal for failure to state a claim under Federal Rule of Civil
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3
Also before the Court is defendant’s request for judicial notice of the front and back
packaging for three types of Cree LED Blubs. (Dkt. No. 32.) In light of the lack of opposition,
the Court GRANTS defendant’s request for judicial notice, but does not accept the truth of any
matters asserted in the documents. The Court gives such documents their proper evidentiary
weight.
2
1
Procedure 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of
2
sufficient facts alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d
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1240, 1242 (9th Cir. 2011) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
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1988)). The complaint must plead “enough facts to state a claim [for] relief that is plausible on its
5
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face
6
“when the plaintiff pleads factual content that allows the court to draw the reasonable inference
7
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
8
(2009). If the facts alleged do not support a reasonable inference of liability, stronger than a mere
9
possibility, the claim must be dismissed. Id. at 678–79. Mere “conclusory allegations of law and
unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355
11
United States District Court
Northern District of California
10
F.3d 1179, 1183 (9th Cir. 2004). In ruling on a motion to dismiss, “the court must presume all
12
factual allegations of the complaint to be true and draw all reasonable inferences in favor of the
13
nonmoving party.” Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 984 (9th Cir. 2000).
14
Additionally, claims sounding in fraud are subject to the heightened pleading requirements
15
of Federal Rule of Civil Procedure 9(b). Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103–04
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(9th Cir. 2003). “In alleging fraud or mistake, a party must state with particularity the
17
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a
18
person’s mind may be alleged generally.” Fed. R. Civ. Proc. 9(b). “Averments of fraud must be
19
accompanied by the who, what, when, where, and how of the misconduct charged.” Kearns v.
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Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). These requirements “ensure that
21
allegations of fraud are specific enough to give defendants notice of the particular misconduct
22
which is alleged to constitute the fraud charged so that they can defend against the charge and not
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just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.
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1985).
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B.
Preemption
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Preemption is fundamentally a question of congressional intent. Wyeth v. Levine, 555
27
U.S. 555, 565 (2009). “Federal preemption occurs when: (1) Congress enacts a statute that
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explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law
3
1
occupies a legislative field to such an extent that it is reasonable to conclude that Congress left
2
no room for state regulation in that field.” Chae v. SLM Corp., 593 F.3d 936, 941 (9th Cir. 2010)
3
(internal quotation marks and citations omitted).
While the Court’s interpretation of a preemption statute “must begin with its text,” that
5
interpretation “does not occur in a contextual vacuum.” Medtronic, Inc. v. Lohr, 518 U.S. 470,
6
484–85 (1996); see Altria Group, Inc. v. Good, 555 U.S. 70, 76 (2008) (stating that, even “[i]f a
7
federal law contains an express pre-emption clause, it does not immediately end the inquiry
8
because the question of the substance and scope of Congress’ displacement of state law still
9
remains.”). In analyzing the issue, a court must begin with the presumption that unless a “clear
10
and manifest purpose of Congress” exists, federal acts should not supersede the historic police
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United States District Court
Northern District of California
4
powers of the states. Wyeth, 555 U.S. at 565; Lohr, 518 U.S. at 485. “Parties seeking to
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invalidate a state law based on preemption ‘bear the considerable burden of overcoming the
13
starting presumption that Congress does not intend to supplant state law.’” Stengel v. Medtronic,
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704 F.3d 1224, 1227–28 (9th Cir. 2013) (en banc) (quoting De Buono v. NYSA–ILA Med. &
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Clinical Servs. Fund, 520 U.S. 806, 814 (1997)).
16
Preemption is express where Congress has considered the issue of preemption and
17
included in the enacted legislation a provision explicitly addressing that issue. Valentine v.
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NebuAd, Inc., 804 F. Supp. 2d 1022, 1028 (N.D. Cal. 2011) (citing Cipollone v. Liggett Group,
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505 U.S. 504, 517 (1992)). In the absence of explicit preemptive language, congressional intent
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to preempt can be implied under two scenarios: field preemption and conflict preemption. First,
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field preemption occurs “where the scheme of federal regulation is ‘so pervasive as to make
22
reasonable the inference that Congress left no room for the States to supplement it.’” Valentine,
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804 F. Supp. 2d at 1028 (quoting Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98
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(1992)). Field preemption should not be found in the absence of persuasive reasons—either that
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the nature of the regulated subject matter permits no other conclusion, or that, without question,
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Congress has so ordained. Valentine, 804 F. Supp. 2d at 1028–29 (such preemption arises in
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only extraordinary circumstances). Second, conflict preemption arises when “compliance with
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both federal and state regulations is a physical impossibility.” Id. (internal citations omitted).
4
1
Conflict preem
mption may also exist wh “state la ‘stands as an obstacle to the
a
here
aw
s
e
2
acc
complishmen and execu
nt
ution of the full purposes and objecti
f
s
ives of Cong
gress.’” Id. (
(internal
3
cita
ations omitte
ed). Showin preemptio by imposs
ng
on
sibility is a “
“demanding defense.” W
Wyeth, 555
4
U.S at 573.
S.
5
C.
Energy Pol and Con
licy
nservation A
Act
6
The En
nergy Policy and Conserv
vation Act (t “EPCA”) establishes a national e
the
s
energy
7
con
nservation pr
rogram to re
educe energy use in the U
y
United State by creating various req
es
g
quirements
8
wit regard to (i) energy ef
th
fficiency, (ii) efficiency testing, (iii) operating co
)
osts, and (iv labeling
v)
9
req
quirements. 42 U.S.C. §§ 6291-6309 see also S Rep. No. 9
9;
S.
94-516, at 51 (1975), re
17
eprinted in
197 U.S.C.C.A 1956, 1957. Under the EPCA, LED bulb m
75
A.N.
,
manufacture must disc
ers
close certain
11
United States District Court
Northern District of California
10
inf
formation on their produc packaging 16 C.F.R. 305.15. Th product’s “principal d
n
ct
g.
.
he
display
12
pan must inc
nel”
clude the LE bulb’s es
ED
stimated annu energy c
nual
cost, “expres
ssed as ‘Estim
mated
13
Energy Cost’ in dollars and based on usage of 3 ho
n
d
u
ours per day and 11 cent ($0.11) per kWh.” 16
ts
r
14
C.F 305.15(b
F.R
b)(1). The package’s “L
p
Lighting Fact label mu further inc
ts”
ust
clude the est
timated
15
life
espan of each bulb. 16 C.F.R. 305.15(b)(3).
h
C
16
Illustrat example of the required disclos
tive
es
sures are dep
picted below
w:
17
Princip Display Panel
pal
Ligh
hting Facts L
Label
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19
20
21
22
23
24
The EPCA pro
ovides that th
hese required disclosures do not give rise to expr or impli
d
s
e
ress
ied
25
wa
arranties. Sp
pecifically, Section 6297(g) of the EP
S
PCA provide
es:
26
//
27
//
28
//
5
Any disclosure with respect to energy use, energy efficiency, or estimated annual
operating cost which is required to be made under the provisions of this part shall
not create an express or implied warranty under State or Federal law that such
energy efficiency will be achieved or that such energy use or estimated annual
operating cost will not be exceeded under conditions of actual use.
1
2
3
4
42 U.S.C. § 6297(g) (emphasis supplied).
5
III.
6
DISCUSSION
Defendant argues that plaintiff’s claims fail because the claims are (i) preempted by the
7
EPCA and, in any event, (ii) not sufficiently pled. Defendant also claims that Young lacks
8
standing to bring claims for alleged misrepresentations regarding certain types of LED Bulbs
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which he did not purchase.
A.
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United States District Court
Northern District of California
10
As an initial matter, the Court must determine whether plaintiff’s claims are preempted by
EPCA Preemption
12
the EPCA. As noted, the EPCA states that “[a]ny disclosure with respect to energy use, energy
13
efficiency, or estimated annual operating cost which is required to be made under the [EPCA] . . .
14
shall not create an express or implied warranty under State or Federal law.” 42 U.S.C. § 6297(g).
15
Several district courts interpreting Section 6297(g) have held that the EPCA preempts both
16
warranty and non-warranty claims which arise from defendant’s “disclosure[s] with respect to
17
energy use, energy efficiency, or estimated annual operating cost which [are] required to be made
18
under the [EPCA].” See Schwartz v. Vizio, Inc., 2017 WL 2335364, at *4 (C.D. Cal. 2017) (citing
19
42 U.S.C. § 6297(g)); Jurgensen v. Felix Storch, Inc., 2012 WL 2354247, at *7 (S.D.N.Y. 2012).
20
Stated differently, Section 6297(g) “expressly preempts all . . . claims [which] allege that
21
[consumer products] did not perform as promised on a federally-required label.” Id.
22
Schwartz is instructive. There, plaintiff brought warranty and non-warranty claims4
23
alleging that defendant’s representations regarding energy efficiency contained within a federally-
24
25
26
27
28
4
Plaintiff’s warranty claims included causes of action for breach of express warranty and
implied warranty of merchantability. Schwartz, 2017 WL 2335364, at *1.
Plaintiff’s non-warranty claims included causes of action for violations of Illinois’
Consumer Fraud and Deceptive Business Practices Act; Pennsylvania’s Unfair Trade Practices
and Consumer Protection Law; negligent misrepresentation; fraudulent concealment; intentional
misrepresentation; fraud; and unjust enrichment. Schwartz, 2017 WL 2335364, at *1.
6
1
req
quired energy label were misleading. Id. at *1. I granting d
y
.
In
defendant’s motion to di
ismiss, the
2
Sch
hwartz court held that pl
t
laintiff’s war
rranty claims were preem
s
mpted under the EPCA a the nonr
and
3
wa
arranty claim were simil
ms
larly preemp on the g
pted
ground that t non-warr
the
ranty claims were
4
“simply . . . bac
ckdoor” atte
empts to reca “a breach of warranty claim.” Id at *4 (inter
ast
h
y
d.
rnal
5
quo
otations omi
itted); see als Jurgensen 2012 WL 2354247, at *1 (finding plaintiff’s u
so
n,
t
g
unjust
6
enr
richment cla preempte because it was merely a “backdoo to a warr
aim
ed
t
y
or”
ranty claim); Gee v.
;
7
Vik
king Range Corp., WL 4416442, at *2 (N.D. Mi ss. 2008) (no
C
4
*
on-warranty claims barr because
y
red
8
the such claims were “inex
e
s
xtricably inte
ertwined with warranty c
h
claims which are barred by
h
9
§62
297(g)”).
10
Here, plaintiff asser his claim do not aris from state
p
rts
ms
se
ements which appear wit
h
thin the LED
D
United States District Court
Northern District of California
11
Bu
ulbs’ principa display pa
al
anels or Ligh
hting Facts la
abels but fro represent
om
tations which appear
h
12
elsewhere on th product packaging or on the inter
he
p
r
rnet. (See Op
pposition at 6.) Upon re
eview, the
13
Court finds three categories of alleged misrepresen
ntations, nam those w
mely
which (i) reite
erate
14
dis
sclosures req
quired to be made on the product’s pr
m
rincipal disp panel or Lighting Fa label;
play
r
acts
15
(ii) present info
)
ormation reg
garding comp
parative ene
ergy consum
mption, energ savings, a lifespan;
gy
and
16
and (iii) state th Cree’s pr
d
hat
roducts are “100% Satis
“
sfaction Gua
aranteed.” E
Examples of e
each
17
cat
tegory are de
epicted below
w.
18
Fir Category
rst
y
19
20
21
22
23
Sec
cond Catego
ory
24
25
26
27
† At $.011 per kWh when compared to 60W incan
A
c
o
ndescent, 30,000 hour lif
fetime.
28
7
1
Th
hird Categor
ry
2
3
4
5
6
7
* This product is guarantee to give 10
T
ed
00% perform
mance satisfa
action and is covered by a limited
wa
arranty. If within 5 years from the da of purcha you are n complete satisfied with the
w
s
ate
ase
not
ely
per
rformance of this produc return the product to C . . . [an Cree will send you a replacement
f
ct,
e
Cree
nd]
l
t
or at Cree’s option refund the original purchase pri
t
p
ice. Cree ma require a purchase receipt.
ay
8
1.
Firs Category: Reiteration of Federa
st
:
ns
ally-Requir Disclosu
red
ures
Several courts have held that st
l
e
tatements wh
hich merely reiterate the content of f
e
federally-
10
req
quired disclo
osures are pre
eempted. Se Cooper v. United Vac
ee
.
ccines, Inc., 117 F. Supp 2d 864,
p.
11
United States District Court
Northern District of California
9
871
1–872 (E.D. Wis. 2000) (adopting a “sensible an practical approach” w
nd
which “focus the
ses
12
pre
eemption issu upon the content and language of the represe
ue
f
entation at iss
sue” rather t
than the
13
phy
ysical placem of the representatio see also Kuiper v. A
ment
r
on);
American Cyanamid Co., 913 F.
,
14
Sup 1236, 12 (E.D. Wis. 1996) (fin
pp.
244
nding the rei
iteration of f
federally-req
quired label information
15
not actionable) Kanter v. Warner–Lam
t
);
W
mbert Co., 99 Cal. App. 4th 780, 797 (2002) (sta
9
7
atements
16
wh are “sim
hich
mply alternati explanations” of thos contained in federally mandated l
ive
se
d
y
labels are
17
pre
eempted).
18
p
aims are pree
empted to th extent that such claims arise from the first
he
t
Here, plaintiff’s cla
19
cat
tegory of alle
eged misrepr
resentations, namely tho statemen which me
ose
nts
erely reiterat the
te
20
inf
formation req
quired to be disclosed on the LED B
n
Bulbs’ princip display p
pal
panel or Ligh
hting Facts
21
lab pursuant to the EPCA 5 Such stat
bel
A.
tements incl
lude represen
ntations rega
arding the “e
estimated
22
23
5
24
25
26
27
28
Plaint argues th the first category of re
tiff
hat
c
epresentatio goes beyond the fede
ons
erallyreq
quired disclo
osures and is not preempt because these repres
ted
sentations om or alter th
mit
he
inf
formation wh appears in the Light
hich
s
ting Facts Pa
anel. For ex
xample, the L
Lighting Fac Panel
cts
states that the lifespan of th LED Bulb is “27.4 ye
l
he
b
ears” based o “3 hrs/day of use wh
on
y”
hereas the
cha
allenged repr
resentation states that th LED Bulb is “27+ yea rated lifetime.” Plain
s
he
b
ars
ntiff’s
arg
gument fails in light of th fact that the federally
he
y-required dis
sclosure and challenged
d
rep
presentation both address the “estima lifespan of the light bulb,” 16 C
s
ated
n
t
C.F.R. § 305.
.15(c), and
we displayed in close pro
ere
d
oximity on th LED Bulb packagin
he
b’s
ng.
8
1
lifespan of the light bulb.”6 See 16 C.F.R. § 305.15(c), 16 C.F.R. § 305.2(w); (CAC ¶ 16).
2
Accordingly, defendant’s motion to dismiss is GRANTED to the extent that plaintiff’s claims arise
3
from statements which simply reiterate federally-required disclosures.
2.
4
Second Category: Comparative Performance
5
With regard the second category, and, by contrast to mere reiterations, statements which
6
are “substantially different” from the federally-required disclosures are not preempted. Cooper,
7
117 F. Supp. 2d at 871–72; see also Taylor AG Industries v. Pure–Gro, 54 F.3d 555, 563 (9th Cir.
8
1995) (finding claims based on oral statements made by a distributor preempted because there was
9
no evidence that the statements “were inconsistent with or went beyond the labels”). These
include representations regarding energy consumption, lifetime energy savings, and lifespan as
11
United States District Court
Northern District of California
10
compared to competing products.
12
In re Ford is instructive. There, plaintiffs alleged that Ford made misleading comparisons
13
between Ford’s Fusion cars and competing hybrid vehicles using figures derived from federally-
14
mandated fuel efficiency disclosures. In re Ford Fusion and C–Max Fuel Economy Litig., 2015
15
WL 7018369 at *2–3 (S.D.N.Y. 2015). The court held that plaintiffs’ claims were preempted to
16
the extent that such claims arose from Ford’s presentation of federally-mandated fuel efficiency
17
estimates. Id. at *27. However, the court also found that claims based on Ford’s representations
18
which compared the fuel efficiency of Ford’s Fusion cars to that of Ford’s competitors were not
19
preempted on the ground that such statements “go beyond merely reporting the EPA-estimated
20
MPG.” Id. at *26; see also Yung Kim v. General Motors, LLC, 99 F. Supp. 3d 1096, 1104 (C.D.
21
Cal. 2015) (finding representations based on federally-mandated EPA estimates not preempted by
22
the EPCA because the representations could lead reasonable consumers to believe the vehicles
23
would be “able to achieve real-world mileage and tank range derived from those figures”). In
24
denying defendant’s motion to dismiss, the court highlighted that plaintiffs’ consumer protection
25
26
27
28
6
To the extent that the complaint alleges misrepresentations which convey the LED
Bulbs’ estimated lifespan in hours as opposed to years such statements are similarly preempted.
See Cooper, 117 F. Supp. 2d at 871–72. The simple arithmetic conversation of years to hours
does not change the content of the challenged representation.
9
1
claims “were not based on the disclosure of fuel economy or fuel operating costs, but rather [were]
2
based on the more general duty not to deceive,” which Ford violated by “portraying a false impression
3
about the ‘superior’ fuel economy of the [vehicles], beyond the mere disclosure of the EPA estimates.”
4
Id. at *24.
5
Here, plaintiff challenges several representations which tout the performance of Cree’s
6
LED Bulbs when compared to competing bulbs, including representations on Cree’s website that
7
its LED Bulbs will last “up to 3x as long as the cheap LED bulbs” and on the packaging which
8
indicates that customers will save $95-177 by using a Cree LED Bulb. (CAC ¶¶ 19–27.) Such
9
statements “go beyond merely reporting the EPA-estimated” bulb lifespan and convey an
allegedly “false impression about the superior” longevity and cost savings of Cree’s LED Bulbs.
11
United States District Court
Northern District of California
10
In re Ford Fusion, 2015 WL 7018369 at *24 (internal quotations omitted). These representations
12
give rise to a plausible inference that reasonable consumers would believe the Cree’s LED Bulbs
13
are “able to achieve real-world” lifespan and cost savings. See Yung Kim, 99 F. Supp. 3d at 1104.
14
Accordingly, defendant’s motion to dismiss is DENIED to the extent that such claims
15
challenge the second category of alleged misrepresentations, namely those that purport to compare
16
the longevity, energy consumption, and cost savings of defendant’s LED Bulbs to competitors’
17
LED and incandescent bulbs.
3.
18
19
Third Category: 100% Satisfaction Guaranteed
With regard to the third category, which includes representations that the LED Bulbs are
20
“100% Guaranteed[,]” such representations are not preempted. Such representations are not
21
required by EPCA and therefore fall outside the purview of Section 6297(g). See In re Ford, 2015
22
WL 7018369 at *1 (holding “any allegations that go beyond the mere disclosure . . . [of
23
information required by the statute], go beyond the scope of the EPCA”); see also True v. Honda
24
Motor Co., 520 F. Supp. 2d 1175, 1181 (C.D. Cal. 2007) (claims not preempted because the
25
challenged representations were not within the scope of a federally-mandated disclosure).
26
B.
27
Having determined that plaintiff’s claims are preempted only to the extent that such claims
28
Sufficiency of Allegations
arise from the first category of representations, the Court now turns to whether plaintiff’s claims
10
1
arising from non-preempted representations are sufficiently pled as to each category of alleged
2
misrepresentations.
3
4
5
1.
Second Category: Comparative Performance
a.
Claims Sounding in Fraud: UCL, FAL, CLRA, and Fraudulent
Misrepresentation and Concealment
Plaintiff alleges four causes of action involving allegations sounding in fraud, namely
6
claims under the UCL (Count I), FAL (Count II), and CLRA (Count III), and for fraudulent
7
misrepresentation and concealment (Count V). All four claims require plaintiff to allege a false or
8
misleading statement, scienter, intent, reasonable reliance, and damages. See Bank of the West v.
9
Valley Nat. Bank of Arizona, 41 F.3d 471, 477 (9th Cir. 1994) (citing Hackethal v. Nat Cas. Co.,
189 Cal. App. 3d. 1102, 1111 (1987)). In a deceptive advertising case involving allegations of
11
United States District Court
Northern District of California
10
fraud, “Rule 9(b) requires that the plaintiff(s) identify specific advertisements and promotional
12
materials; allege when the plaintiff(s) were exposed to the materials; and explain how such
13
materials were false or misleading.” Janney v. Mills, 944 F. Supp. 2d 806, 818 (N.D. Cal. 2013).
14
Defendant asserts that plaintiff fails to allege (i) Cree’s scienter and (ii) the circumstances
15
surrounding the alleged fraud including Young’s reliance.
16
With respect to defendant’s first argument, plaintiff alleges that defendant “designed,
17
formulated, tested, manufactured, inspected, distributed, marketed, supplied, and/or sold” the LED
18
Bulbs at issue. (CAC ¶ 125.) According to plaintiff, Cree claims on its website that it “designs
19
and tests its bulbs to last longer, with rated lifetimes equal to or exceeding Energy Star minimum
20
requirements.” (Id. ¶ 26.) These allegations, particularly those related to testing, are sufficient to
21
create a reasonable inference that Cree knew that the challenged representations were false. See
22
Kowalsky v. Hewlett–Packard Co., 2011 WL 3501714 (N.D. Cal. 2011) (finding plaintiff’s
23
allegation that defendant tested its products sufficient to create a plausible inference that defendant
24
had knowledge of a product defect); Avedisian v. Mercedes–Benz USA, LLC, 2013 WL 2285237,
25
at *7 (C.D. Cal. 2013) (same).
26
Turning to Cree’s second argument, plaintiff alleges that defendant knowingly made false
27
representations and concealed material facts regarding the “quality, durability, longevity and
28
benefits of [Cree’s] LED Lightbulbs.” (CAC ¶¶ 46–47, 48, 50, 57, 58, 66, 67, 70.) Plaintiff
11
1
identifies the specific advertisements and marketing materials which he claims are false and
2
misleading. (Id. ¶¶ 15, 16, 17, 19, 20, 21, 23, 24, 25, 27.) Next, plaintiff alleges that he was
3
exposed to the false representations when he purchased the LED Bulbs from Walmart in April of
4
2015. (Id. ¶ 32.) Further, he claims he would not have purchased the bulbs, or would not have
5
paid as much for them, absent the alleged misrepresentations. (Id. ¶¶ 50, 60, 68, 90, 97, 122.)
6
Plaintiff alleges that these representations are false and misleading because the LED Bulbs “do not
7
last nearly as long as advertised. (Id. ¶ 6.) However, plaintiff fails to plead his reliance and does
8
not identify the specific representations on which he relied.
9
Accordingly, defendant’s motion to dismiss is GRANTED with respect to plaintiff’s claims
under the UCL (Count I), FAL (Count II), CLRA (Count III), and for fraudulent misrepresentation
11
United States District Court
Northern District of California
10
and concealment (Count V) with leave to amend to plead plaintiff’s reliance and identify the
12
specific representations on which he relied.
b.
13
14
Negligence Claims
Plaintiff alleges two causes of action for negligence, namely negligent misrepresentation
15
(Count VI)7 and negligence in design based on Cree’s failure to test its LED Bulbs adequately
16
(Count IX). Defendant argues that both negligence claims are barred by the economic loss rule.
17
“The economic loss rule requires a purchaser to recover in contract for purely economic
18
loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken
19
contractual promise.” Ladore v. Sony Comput. Entm’t Am., 75 F. Supp. 3d 1065, 1074 (N.D. Cal.
20
2014) (quoting Tasion Communications v. Ubiquiti Networks, Inc., 2013 WL 4530470, at *3
21
(N.D. Cal. 2013)). “[T]he economic loss rule has been applied to bar a plaintiff's tort recovery of
22
economic damages unless such damages are accompanied by some form of physical harm (i.e.,
23
personal injury or property damage).” Id. (emphasis in original) (citing North Am. Chem. Co. v.
24
25
26
27
28
7
“In California, the elements of negligent misrepresentation are ‘(1) a misrepresentation
of a past or existing material fact, (2) made without reasonable ground for believing it to be true,
(3) made with the intent to induce another's reliance on the fact misrepresented, (4) justifiable
reliance on the misrepresentation, and (5) resulting damage.’” Yamauchi v. Cotterman, 84 F.
Supp. 3d 993, 1018 (N.D. Cal. 2015) (quoting Ragland v. U.S. Bank Nat. Assn., 209 Cal. App. 4th
182, 196 (2012)).
12
1
Superior Court, 59 Cal. App. 4th 764, 777 (1997)). “Put more precisely, in actions arising from
2
the sale or purchase of a defective product, plaintiffs seeking economic losses must be able to
3
demonstrate that either physical damage to property (other than the defective product itself) or
4
personal injury accompanied such losses; if they cannot, then they would be precluded from any
5
tort recovery in strict liability or negligence.” Id. (quoting North Am. Chem., 59 Cal. App. 4th at
6
780). The economic loss rule “prevents the law of contract and the law of tort from dissolving
7
into one another.” Robinson Helicopter Co., v. Dana Corp., 34 Cal. 4th 979, 988 (2004).
8
Several California courts and federal courts in this district have recognized an exception to
the economic loss rule. See Robinson Helicopter, 34 Cal. 4th at 989–93; JMP Securities LLP, v.
10
Altair Nanotechnologies Inc., 880 F. Supp. 2d 1029, 1043–44 (N.D. Cal. 2012). Specifically, a
11
United States District Court
Northern District of California
9
plaintiff seeking economic damages for a negligence claim “will [not] be barred by the economic
12
loss rule [where] the plaintiff alleges that the defendant made an affirmative representation, and
13
that the defendant’s representation exposed the plaintiff to independent personal liability.” Crystal
14
Springs Upland School v. Fieldturf USA, Inc., 219 F. Supp. 3d 962, 970 (N.D. Cal. 2016)
15
(dismissing negligent misrepresentation claim because plaintiff did not allege exposure to
16
independent personal liability); see also Westport Ins. Corp. v. Vasquez, Estrada and Conway
17
LLP, 2016 WL 1394360, at *5–7 (N.D. Cal. 2016) (claim for negligent misrepresentation barred
18
under the economic loss rule because the alleged tortious conduct was not separate from the
19
breach of contract); Nada Pac. Corp. v. Power Eng.g & Mfg., Ltd., 73 F. Supp. 3d 1206, 1224–25
20
(N.D. Cal. 2014) (same).8
21
22
23
24
25
26
27
28
8
Defendant raises two additional arguments in its motion regarding plaintiff’s negligence
actions. First, defendant argues that plaintiff cannot bring a claim for “negligence—failure to test”
because it is not a valid cause of action in California. This argument is without merit. California
courts have held that the “duty to test is a subpart of the other three duties [to safely manufacture,
adequately design, and appropriately warn].” Valentine v. Baxter Healthcare Corporation, 68 Cal.
App. 4th 1467, 1486 (1999); see also Gordon v. Aztec Brewing Co., 33 Cal. 2d 514, 520 (1949)
(finding “negligence in the defendant's failure to test”); Centeno v. Bayer HealthCare Pharm. Inc.,
2014 U.S. Dist. LEXIS 136234, at *8-9 (S.D. Ill. 2014) (applying California law and denying
dismissal of a negligence claim by finding that “failure to test” is a factual allegation supporting a
claim that defendants were negligent and brings it “within the ambit of Valentine, which
recognizes that testing and inspection duties may be tied to liability for manufacture, design, and
failure to warn, even if they are not maintainable as an independent duty”).
13
1
Here, plaintiff does not allege that he suffered “physical harm” or that he was exposed to
2
personal liability as a result of defendant’s alleged misrepresentations. Accordingly, defendant’s
3
motion to dismiss plaintiff’s claims for negligent misrepresentation (Count VI) and negligent
4
failure to test (Count IX) is GRANTED on the ground that such claims are barred by the economic
5
loss rule. Plaintiff is granted leave to file an amended complaint which alleges, if possible, that he
6
was exposed to “independent personal liability.”
c.
7
8
9
Unjust Enrichment
Defendant argues that plaintiff’s cause of action for unjust enrichment (Count VII) should
be dismissed because it is not a cause of action in California. Defendant’s argument fails as the
California Supreme Court has clarified that unjust enrichment is a valid cause of action in
11
United States District Court
Northern District of California
10
California. See Hartford Cas. Ins. Co. v. J.R. Mktg., L.L.C., 61 Cal. 4th 988, 1000 (2015)
12
(clarifying California law and allowing an independent claim for unjust enrichment).
13
14
15
16
Accordingly, defendant’s motion to dismiss plaintiff’s claim for unjust enrichment is
DENIED.
d.
Breach of Express and Implied Warranties
Defendant argues plaintiff’s warranty claim (Count VIII) should be dismissed on two
17
grounds. First, plaintiff fails to allege that he attempted to enforce the terms of the warranties at
18
issue. Second, Young lacks contractual privity because he purchased the LED Bulbs from a non-
19
party, namely Wal-Mart. The Court addresses each.
20
With respect to the first argument, Cree mischaracterizes plaintiff’s warranty claims. He
21
does not allege that defendant breached the express warranties included on Cree’s product
22
packaging. Rather, he alleges that Cree made representations concerning product life and energy
23
24
25
26
27
28
Second, defendant argues that plaintiff fails to allege detrimental reliance with respect to
the negligent misrepresentation claims. Defendant does not persuade. Plaintiff alleges that he
relied on defendant’s representations regarding the quality and longevity of defendant’s LED
Bulbs. (See CAC ¶¶ 1, 5, 50, 59, 67, 68, 90, 96.) In any event, an inference of reliance is
appropriate where the alleged misrepresentations are material. See Vasquez v. Superior Court, 4
Cal.3d 800, 814 (Cal. 1971).
14
1
2
savings which themselves give rise to express warranties regarding the same. (CAC ¶ 115).9
Turning to the second argument, “[u]nder California law, the general rule is that privity of
3
contract is required in an action for breach of either express or implied warranty and that there is
4
no privity between the original seller and a subsequent purchaser who is in no way a party to the
5
original sale.” In re Clorox Consumer Litig., 894 F. Supp. 2d 1224, 1236 (N.D. Cal. 2012)
6
(internal quotation marks omitted) (citing Burr v. Sherwin Williams Co., 42 Cal. 2d 682, 695 (Cal.
7
1954)). However, a “particularized exception[]” to the privity requirement exists as “when the
8
plaintiff relies on written labels or advertisements of a manufacturer.” Clemens v.
9
DaimlerChrysler Corp., 534 F.3d 1017, 1023 (9th Cir. 2008) (citing Burr, 42 Cal. 2d 682, 696
(1954); see also In re Ferrero Litig. 794 F. Supp. 2d 1107, 1118 (S.D. Cal. 2011). Here, plaintiff
11
United States District Court
Northern District of California
10
alleges misrepresentations regarding defendant’s product packaging, written labels, and
12
advertisements. (CAC ¶ 2.) Accordingly, privity of contract is not required. See Clemens, 534
13
F.3d at 1023. Defendant’s motion to dismiss plaintiff’s express and implied warranty claims
14
(Count VIII) is DENIED.
2.
15
16
Third Category: 100% Satisfaction Guaranteed
Plaintiff’s claims based on the third category of representations arise from allegations that
17
defendant’s LED Bulbs “are sold with packaging which indicates . . . ‘100% Satisfaction
18
Guaranteed.’” (CAC ¶ 15.) With respect to this category Punian illuminates. See Punian v.
19
Gillette Co., 2016 WL 1029607, at *6–8 (N.D. Cal. 2016). There, plaintiffs alleged that
20
defendant’s labels, which stated that Duralock Batteries were “GUARANTEED for 10 YEARS in
21
storage[,]” were misleading because they did not disclose possible leakage from the batteries
22
during that period. Id. at *3, 6. Plaintiff brought numerous claims but in granting defendant’s
23
motion to dismiss, the court found that “[i]n California the use of the term ‘guarantee’ generally
24
creates an express warranty . . . [which] is not a representation that a product has no defects, but
25
rather a promise to repair, replace or refund a failed product.” Id. (citing Cal. Civ. Code §
26
27
28
9
Pursuant to Cal. Com. Code § 2313(a), “[a]ny affirmation of fact or promise made by the
seller to the buyer which relates to the goods becomes part of the basis of the bargain creates an
express warranty that the goods shall conform to the affirmation or promise.”
15
1
2
1791.2(b); Hoey v. Sony Elecs. Inc., 515 F. Supp. 2d 1099, 1104 (N.D. Cal. 2007)).
Similarly, the “100% Satisfaction Guarantee[]” at issue here “is not a representation that a
3
product has no defects, but rather a promise to repair, replace or refund a failed product.” Id.
4
Young does not allege that Cree failed to “repair, replace or refund a failed product.” Id. Thus,
5
defendant’s motion to dismiss plaintiff’s claims based on the “100% Satisfaction Guarantee[]” is
6
GRANTED with leave to file an amended complaint to allege, if possible, defendant’s failure to
7
“repair, replace or refund a failed product.” 10 Id.
8
C.
9
Next, defendant argues that Young lacks standing to pursue claims arises from LED Bulbs
10
Standing
that he did not purchase. The Court does not agree.
United States District Court
Northern District of California
11
“[A] Plaintiff may have standing to assert claims for unnamed class members based on
12
products he or she did not purchase so long as the products and alleged misrepresentations are
13
substantially similar.” Brown v. Hain Celestial Grp., Inc., 913 F. Supp. 2d 881, 890 (N.D. Cal.
14
2012); see also Astiana v. Dreyer's Grand Ice Cream, Inc., 2012 WL 2990766, at *11 (N.D. Cal.
15
2012) (“the critical inquiry seems to be whether there is sufficient similarity between the products
16
purchased and not purchased”). “The majority of the courts that have carefully analyzed the
17
question hold that a plaintiff may have standing to assert claims for unnamed class members based
18
on products he or she did not purchase so long as the products and alleged misrepresentations are
19
substantially similar.” Miller v. Ghirardelli Chocolate Co., 912 F. Supp. 2d 861, 869 (N.D. Cal.
20
2012) (noting that “substantial similarity” could be ascertained by examining “product
21
composition” and “whether the alleged misrepresentations are sufficiently similar across
22
product[s]”).
23
Here, plaintiff alleges that he purchased three “100 Watt Standard A-Type” LED Bulbs.
24
(CAC ¶ 32.) The Court finds that Young has standing to assert claims with regard to two other
25
types of LED Bulbs, namely “Reflector (Flood/Spot)” and “Specialty” Bulbs, because plaintiff
26
alleges substantially similar misrepresentations concerning longevity and cost savings. (See CAC
27
10
28
At oral argument, plaintiff’s counsel seemed to suggest that the representation may be
circumstantial evidence of other claims. The court takes no position on that argument.
16
1
¶ 17 (identifying the three types of LED light bulbs manufactured by Cree as “Standard A-Type,
2
Reflector (Flood/Spot), and Specialty; ¶¶ 19–21 (alleged misrepresentations for Standard A-Type);
3
¶¶ 23–24 (alleged misrepresentations for Reflector); ¶ 25 (alleged misrepresentations for
4
Specialty).) Accordingly, defendant’s motion to dismiss on standing grounds is DENIED.
5
D.
Punitive Damages
6
Cree argues that plaintiff’s request for punitive damages under the CLRA fails because he
does not allege that “an officer, director, or managing agent of the corporation . . . consciously
8
disregarded, authorized, or ratified each act of oppression, fraud, or malice.” Cal. Civ. Code §§
9
3294(b); see Kanfer v. Pharmacare U.S., Inc., 142 F. Supp. 3d 1091, 1108 (S.D. Cal. 2015). The
10
Court concurs and finds that dismissal of plaintiff’s request for punitive damages under the CLRA
11
United States District Court
Northern District of California
7
is appropriate in this case.
Accordingly, defendant’s motion is GRANTED with regard to plaintiff’s request for
12
13
punitive damages under the CLRA with leave to amend to allege, if possible, that “an officer,
14
director, or managing agent of the corporation . . . consciously disregarded, authorized, or ratified
15
each act of oppression, fraud, or malice” now in accordance with this order or 60 days before the
16
close of discovery with leave of the Court should evidence be discovered to support the allegation.
17
Id.
18
IV.
19
20
21
22
CONCLUSION
For the reasons set forth above, the Court hereby GRANTS IN PART and DENIES IN PART
defendant’s motion to dismiss as follows:
1.
On the topic of preemption, the Court:
A.
GRANTS defendant’s motion to dismiss as to the first category of
23
representations, namely those that reiterate disclosures required to be
24
made on the product’s principal display panel or Lighting Facts label.
25
B.
DENIES as to the second category of representations, namely those that
26
present information regarding comparative energy consumption, energy
27
cost savings, and lifespan.
28
C.
DENIES as to the third category of representations, namely those that
17
1
present information regarding comparative energy consumption, energy
2
cost savings, and lifespan, namely those that state that Cree’s products
3
are “100% Satisfaction Guaranteed.”
4
2.
With respect to the legal sufficiency of the complaint on the second and third
5
categories of representations, the Court:
6
A.
GRANTS defendant’s motion on the fraud counts, namely Counts I, II,
7
III and V, with leave to amend to plead reliance and the specific
8
representations on which plaintiff relied.
B.
9
GRANTS defendant’s motion on the negligence-based counts, namely
Counts VI and IX, with leave to amend regarding whether plaintiff was
11
United States District Court
Northern District of California
10
exposed to “independent personal liability.”
12
C.
DENIES defendant’s motion as to Count VII for unjust enrichment.
13
D.
DENIES defendant’s motion as to Count VIII for breach of express and
14
implied warranties with respect to comparative product life and energy
15
savings. However, the motion as to a claim based on “100%
16
Satisfaction Guaranteed” is GRANTED with leave to allege, if possible,
17
defendant’s failure to “repair, replace or refund a failed product.”
18
3.
Defendant’s motion based on standing is DENIED.
19
4.
Defendant’s motion with respect to punitive damages is GRANTED with leave to
20
amend now in accordance with this order or 60 days before the close of discovery
21
with leave of the Court should evidence support the allegation.
22
Plaintiff shall file an amended complaint within 21 days of this Order. Defendant shall file
23
its response within 21 after plaintiff’s filing.
24
This terminates Docket Nos. 31, 32.
25
IT IS SO ORDERED.
26
27
Dated: April 9, 2018
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE
28
18
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