Ries et al v. Hornell Brewing Company, inc. et al

Filing 95

ORDER GRANTING IN PART AND DENYING IN PART 79 MOTION TO DISMISS. Signed by Judge Jeremy Fogel on 8/25/2011. (jflc2, COURT STAFF) (Filed on 8/25/2011)

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**E-Filed 8/25/2011**

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
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LAUREN RIES and SERENA ALGOZER,
individually and on behalf of themselves and
all others similarly situated,

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Plaintiffs,

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v.

Case No. 5:10-cv-01139-JF (PSG)
ORDER1 GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS
[re: dkt entry 79]

ARIZONA BEVERAGES USA LLC,
HORNELL BREWING COMPANY, INC.,
BEVERAGE MARKETING USA, INC.,
and FEROLITO, VULTAGGIO & SONS, INC.,
Defendants.

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Pursuant to Fed. R. Civ. P. 12(b)(6), Defendant Arizona Beverages (“Arizona”) moves to

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dismiss Plaintiffs’ claims for lack of particularity. Plaintiffs’ First Amended Complaint (“FAC”)

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alleges violations of California’s Business and Professions Code §§ 17200 et seq. (Unfair

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Competition Law, or “UCL”), §§ 17500 et seq. (False Advertising Law, or “FAL”), and §§ 1750

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et seq. (Consumers Legal Remedies Act, or “CLRA”). Plaintiffs seek preliminary and permanent

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injunctive relief, corrective advertising, compensatory damages, disgorgement of profits, and

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attorneys’ fees.

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This disposition is not designated for publication in the official reports.

Case No. 5:10-cv-01139-JF (PSG)
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
(JFEX1)

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I. BACKGROUND

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In this consumer class action, Plaintiffs allege that Arizona’s beverages, which contain

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high fructose corn syrup (“HFCS”), citric acid or both, are falsely and deceptively labeled and

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branded as “Natural,” “All Natural,” and “100% Natural.” FAC ¶ 29. They assert that HFCS,

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which is produced by processing corn starch into corn syrup and then adding enzymes that

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change the glucose to fructose, is not a natural product. Id. at ¶ 24. They also allege that the

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HFCS molecules in Arizona’s products are not extracted from natural sources, but instead are

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created through enzymatically catalyzed chemical reactions in factories. Id. at ¶ 30. Similarly,

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Plaintiffs allege that the citric acid in many of Arizona’s beverages is artificially produced by a

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chemical process in which certain strains of the mold Aspergillus niger feed on a sucrose or

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glucose-containing medium. Id. at ¶¶ 32, 33.

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Arizona previously moved to dismiss Plaintiffs’ original complaint, asserting among

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other things that the fraud claims were pled with insufficient specificity to satisfy Fed. R. Civ. P.

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9(b). This Court denied that motion with respect to Plaintiffs’ claims arising out of allegedly

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false advertising involving those labels that were appended to the pleading, and it granted

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Arizona’s motion to dismiss, with leave to amend, claims for false advertising based on other

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forms of advertising, or on labels not actually before the court. Order p. 7. Arizona contends

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that because the FAC does not include any additional labels or examples of advertising,

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Plaintiffs’ claims should be limited to those that survived Arizona’s previous motion to dismiss.

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Mot. to Dismiss at 1-2.

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II. LEGAL STANDARD
Under Fed. R. Civ. P. Rule 8(a), a plaintiff must plead her claim with sufficient

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specificity to “give the defendant fair notice of what the [...] claim is and the grounds upon which

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it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). “Dismissal under Rule 12(b)(6)

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is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to

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support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Center, 521 F.3d 1097, 1104

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(9th Cir. 2008). For purposes of a motion to dismiss, “all allegations of material fact are taken as

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true and construed in the light most favorable to the nonmoving party.” Cahill v. Liberty Mutual
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Case No. 5:10-cv-01139-JF (PSG)
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
(JFEX1)

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Ins. Co., 80 F.3d 336, 337-338 (9th Cir. 1996). However, “[w]hile a complaint attacked by a

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Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation

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to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions,

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and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S.

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544, 555 (2007) (internal citations omitted). “To survive a motion to dismiss, a complaint must

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contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

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face.’ A claim has facial plausibility when the plaintiff pleads factual content that allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

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Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (internal citations omitted). Leave to amend must

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be granted unless it is clear that the complaint’s deficiencies cannot be cured by amendment.

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Lucas v. Department of Corrections, 66 F.3d 245, 248 (9th Cir. 1995).

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Under Fed. R. Civ. P. 9(b), “[i]n all averments of fraud or mistake, the circumstances

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constituting fraud or mistake shall be stated with particularity.” However, intent, knowledge, and

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other conditions of the mind may be averred generally. Fed. R. Civ. P. 9(b). A complaint meets

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this standard if it alleges “‘the time, place, and content of the alleged fraudulent

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misrepresentation or omission; the identity of the person engaged in the fraud; and the

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circumstances indicating falseness’ or ‘the manner in which [the] representations [or omissions]

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were false and misleading.’” Genna v. Digital Link Corp., 25 F. Supp. 2d 1038 (N.D. Cal. 1997)

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(brackets in original) (quoting In re GlenFed Sec. Litig., 42 F.3d 1541, 1547-58 n.7 (9th Cir.

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1994)). The amount of particularity required for pleading fraud generally depends on the amount

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of access the pleader has to the specific facts. See, e.g., Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d

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993, 999 (9th Cir. 2010). Conclusory allegations that a defendant’s conduct was fraudulent is

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insufficient. In re Worlds of Wonder Securities Litigation, 694 F. Supp. 1427, 1432 (N.D. Cal.

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1988). This practice allows an early and informed response from the party defending against

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such accusations. Swartz v. KPMG LLP., 476 F.3d 756, 764 (9th Cir. 2007).

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III. DISCUSSION
Although the Court granted Arizona’s earlier motion except with respect to the specific
labels appended to the original complaint, nothing in that ruling was intended to preclude
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Case No. 5:10-cv-01139-JF (PSG)
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
(JFEX1)

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Plaintiffs from asserting other properly pled claims in an amended complaint. The Court

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concludes that the FAC sufficiently pleads fraudulent and deceptive advertising with respect to

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any labels that allege that Arizona’s beverages are “All Natural” and “100% Natural.” The FAC

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identifies clearly the additional types of beverages of which the labels appended to the original

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complaint are representative, and Plaintiffs allege specifically that these additional beverages are

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labeled in a manner that is substantially identical to that of examples attached to the original

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complaint. These allegations are not inherently implausible and are sufficient for purposes of

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Rule 9(b).

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Although the FAC omits Plaintiffs’ earlier claims with respect to Arizona’s

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representations of fruit content in its beverages, it retains claims from the original complaint that

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allege fraudulent and deceptive advertising other than in beverage labels, such as in Internet

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advertising and “other promotional materials.” FAC ¶¶ 57, 60, 70. As it did with the original

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complaint, the Court concludes that these claims are not sufficiently pled. In Von Koenig v.

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Snapple Beverage Corp., 713 F. Supp. 2d 1066 (E.D. Cal. 2010), the court concluded that the

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plaintiffs’ allegations arising out of labels on the defendant’s drink products satisfied Rule 9(b)

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where labels were attached, and where plaintiffs alleged but for the deceptive labels, they would

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have purchased alternative drink products during a period of four years. Von Koenig, 713 F.

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Supp. 2d at 1077 (E.D. Cal. 2010). At the same time, however, the court granted the defendant’s

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motion to dismiss claims that were based only on generalized allegations regarding unspecified

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commercial advertisements and marketing. Id. at 1078.

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Here, the FAC fails to (1) identify any specific Internet advertising offering Arizona’s

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beverages for sale; (2) identify any specific “other promotional materials” that falsely and

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deceptively advertise Arizona’s beverages as “All Natural” or “100% Natural;” and (3) allege

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when and where the named Plaintiffs were exposed to such other materials. To the extent that

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Plaintiffs’ claims are based on advertising and promotional materials other than beverage labels,

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Arizona’s motion to dismiss once again will be granted, with leave to amend.

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Case No. 5:10-cv-01139-JF (PSG)
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
(JFEX1)

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IV. ORDER
Good cause therefor appearing, IT IS HEREBY ORDERED that the motion to dismiss is

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GRANTED IN PART, WITH LEAVE TO AMEND, and DENIED IN PART. Any amended

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complaint must be field within thirty (30) days of the date of this order.

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DATED: 8/25/2011
JEREMY FOGEL
United States District Judge

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Case No. 5:10-cv-01139-JF (PSG)
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
(JFEX1)