Waldman v. New Chapter, Inc.

Filing 15

MEMORANDUM AND ORDER granting in part and denying in part 6 Motion to Dismiss. For the reasons set forth herein, Defendant's motion to dismiss is GRANTED IN PART AND DENIED IN PART. Plaintiff's first, second, and third causes of action are dismissed. Plaintiff's fourth and fifth causes of action are dismissed to the extent that they are predicted on a metric system theory, but are not dismissed to the extent that they assert a slack fill theory. Plaintiff may, however, replead these causes of action to properly allege a metric system theory. So Ordered by Judge Joanna Seybert on 5/19/10. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK --------------------------------------X ANNA WALDMAN, Plaintiff, -againstNEW CHAPTER, INC., Defendant. --------------------------------------X APPEARANCES: For Plaintiff: Harry I. Katz, Esq. Harry I. Katz, P.C. 61-25 Utopia Parkway Fresh Meadows, NY 11365 For Defendants: David Paul Kasakove, Esq. Bryan Cave LLP 1290 Aveune of the America New York, NY 10104 MEMORANDUM & ORDER 09-CV-3514 (JS) (MLO)

SEYBERT, District Judge: Anna Waldman, on behalf of herself and others

similarly situated, filed a putative class action against New Chapter, Inc., alleging that New Chapter misled consumers by listing their "Berry Green" product's weight in grams rather than ounces, and by including too much empty space ("slack

fill") in the product's packaging. dismiss.

New Chapter has moved to

For the following reasons, that motion is GRANTED IN

PART AND DENIED IN PART.

BACKGROUND In 2009, Plaintiff purchased a box of Berry Green, a "Spoonable Whole-Food." is sold by net weight. lists only its metric Compl. ¶ 12; Pl. Ex. 2.1 Berry Green Berry Green its weight Pl.

Compl. ¶ 1; Pl. Ex. 2. weight (180 grams), not

according to the U.S. Customary or "imperial unit" system. Ex. 2.

Berry Green comes in a box that is 65/8 inches tall. The box contains a jar that is 55/8 inches tall. And the jar itself is only half-filled with the

Compl. ¶ 12. Compl. ¶ 15. product.

Compl. ¶ 16. Plaintiff claims that "most consumers in the United

States" are unfamiliar with the metric system.

Compl. ¶¶ 7, 19.

But contrary to Plaintiff's claim in her opposition brief, the Complaint does not allege that Plaintiff herself is unfamiliar with the metric system. package's contains, size, in Plaintiff further contends that the to the into amount of product "that it the

relation the

misleads

consumer

believing

consumer is buying more than is actually contained in the jar." Compl. ¶ 4. know when To that end, Plaintiff alleges that she did not she purchased the product that she was "only

purchasing an amount of the product that was less than half the

1

Exhibit 2 is makes numerous great detail. actual package,

an actual Berry Green package. The Complaint references to this package, describing it in Thus, the Court may take judicial notice of the even on a motion to dismiss. 2

size of the box . . . and/or less than half the size of the jar in which the product was contained." that "[h]ad Compl. ¶ 40. And

Plaintiff

further

alleges

defendant

adequately

disclosed the true amount of the product, plaintiff would not have purchased defendant's product." This suit followed. DISCUSSION2 I. Standard Of Review On A Motion To Dismiss In deciding FED. R. CIV. P. 12(b)(6) motions to dismiss, the Court applies a "plausibility standard," which is guided by "[t]wo working principles," Ashcroft v. Iqbal, __ U.S. __, 129

S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). accept all allegations in to the as First, although the Court must and draws all reasonable "tenet" is

true,

inferences "inapplicable

plaintiff's

favor

this thus,

legal

conclusions";

"[t]hreadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Harris, 572 F.3d at 72

Plaintiff's first cause of action asserts relief under the Food Packaging and Labeling Act ("FPLA") and regulations promulgated thereunder, based on Defendant's failure to list Berry Green's weight in U.S. Customary units, such as ounces. See Compl. ¶¶ 27-32 (citing 15 U.S.C. § 1453, 16 C.F.R. § 500). But Plaintiff now concedes that the FPLA does not confer a private right of action. Thus, this cause of action is DISMISSED. The Court will, however, continue to consider the well-pled factual allegations found in Compl. ¶¶ 27-32, to the extent they have relevance to Plaintiff's other causes of action. 3

2

(quoting Ashcroft); Operating Local 649 Annuity Trust Fund v. Smith 2010). Barney Fund Management LLC, 595 F.3d 86, 91 (2d Cir.

Second, only complaints that state a "plausible claim Id. Determining whether

for relief" can survive Rule 12(b)(6).

a complaint does so is "a context specific task that requires the reviewing court Id. to draw on its judicial experience and

common sense." II.

Breach Of Contract Claim Plaintiff's second cause of action alleges a breach that of

Defendant's

misleading

packaging

constituted

contract, or a breach of the covenant of good faith and fair dealing. Defendant claim responds because that Plaintiff cannot bring a

contract-based Defendant.

Plaintiff

lacked

privity

with

The Court agrees. One may not maintain a contract action against a party

with

whom

it

lacks

privity.

See

M.

Paladino,

Inc.

v.

J.

Lucchese & Sons Contracting Corp., 247 A.D.2d 515, 516 (2d Dep't 1998). Under and New a York law, no or privity indirect exists between a

manufacturer

downstream

purchaser.

See,

generally, 3 N.Y. Jur. 2d Sales § 233 ("implied warranties of merchantability and fitness for a particular purpose do not run from a manufacturer to a remote purchaser, not in privity with the manufacturer"). To that end, New York courts consistently

reject contract-based claims brought by indirect purchasers or 4

lessees

against But

manufacturers.3 none of these

This

general

rule

has

some For

exceptions.

exceptions

apply

here.

example, downstream purchasers can bring express warranty claims premised on a manufacturer's "sales literature, product

brochures and advertisements." 28 N.Y. PRAC., CONTRACT LAW § 19:4. But here, Plaintiff does not allege that Defendant ever

expressly warranteed that the product's volume approximated that of its package. Likewise, implied warranty claims for personal See 28 N.Y. PRAC.,

injury do not require contractual privity. CONTRACT LAW § 19:22.

But here, Plaintiff alleges only "economic Id.

loss," not personal injury.

Because Plaintiff neither pleads facts suggesting that she had privity with Defendant, nor facts indicating that an exception to contractual privity applies, Plaintiff's breach of contract claim must be dismissed. III. Common Law Fraud Plaintiff's third cause of action asserts common law fraud.
3

To plead common law fraud, Plaintiff must allege: (1) a

See, e.g., Jesmer v. Retail Magic, Inc., 55 A.D.3d 171, 173, 182-183, 863 N.Y.S.2d 737, 739, 744-45 (2d Dep't 2008) (rejecting contract claims brought by "a dissatisfied end user of a computer system . . . against the system's manufacturer . . . where the end user did not purchase the system from the manufacturer"); Comsewogue Union Free School Dist. v. AlliedTrent Roofing Systems, Inc., 272 A.D.2d 360, 361, 707 N.Y.S.2d 657, 658 (2d Dep't 2000); Ofsowitz v. Georgie Boy Mfg., Inc., 231 A.D.2d 858, 858, 647 N.Y.S.2d 887, 888 (4th Dep't 1996); DiCintio v. DaimlerChrysler Corp., 713 N.Y.S.2d 808, 812 (N.Y. Sup. Ct., N.Y. County 2000). 5

representation of material fact; (2) falsity; (3) scienter; (4) reliance; and (5) injury. See Small v. Lorillard Tobacco Co., Under

Inc., 94 N.Y.2d 43, 57, 720 N.E.2d 892, 898 (N.Y. 1999).

FED. R. CIV. P. 9(b), Plaintiff "must state with particularity the circumstances constituting fraud or mistake." To that end,

Plaintiff must: (1) specify the alleged fraudulent statements; (2) identify the speaker; (3) state where, when and to whom the statements were made; and (4) explain why the statements were fraudulent. See Mills v. Polar Molecular Corp., 12 F.3d 1170, "Malice, intent, knowledge, and other Fed.

1175 (2d Cir. 1993).

conditions of a person's mine may be averred generally." R. Civ. P. 9(b).

But Plaintiff "must still plead the events In re

which they claim give rise to an inference of knowledge."

DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677, 695 (2d Cir. 2009). Here, Defendant contends that Plaintiff does not plead fraud because Plaintiff "cannot point to a single representation of material fact that was false." Plaintiff argues that Berry Def. Br. at 12. Green's packaging In response, implicitly

represented that it contained more product than it actually did. In this regard, the Court notes that New York courts have, on occasion, recognized fraud claims premised on implied or

implicit representations. & Co., Inc., 47 N.Y.2d

See Bankers Trust Co. v. J. V. Dowler 128, 137, 6 390 N.E.2d 766, 770, 417

N.Y.S.2d 47, 52 (N.Y. 1979); Imaging, P.C., 882 N.Y.S.2d

AIU Ins. Co. v. Deajess Medical 812, 820 (N.Y.
AND

Sup.

Ct.,

Nassau

County 2009); 60A N.Y. JUR. 2D FRAUD

DECEIT § 90.

Thus, the

Court turns to whether the Complaint pleads: (1) that Berry Green's packing contained implicit misrepresentations; (2) what these implicit misrepresentations were; and (3) that these

misrepresentations were material. With Complaint contained respect to (1), the that Court Berry agrees Green's that the

sufficiently implicit

pleads

packaging the

misrepresentations.

Specifically,

Complaint alleges that Berry Green's packaging "makes it appear that the consumer is buying more than what is actually sold." Compl. ¶ 1. In other words, the Complaint alleges that

consumers assume that the size of a product's packaging bares a reasonable contains. fill, Berry relationship to how much product the packaging

Thus, by including too much empty space or slack Green's packaging implicitly represents that it

contains "more" than it actually does. This leads to (2): by alleging that Defendant

represented that the box contains "more" Berry Green than it actually does, what does the Complaint allege is actually being misrepresented? Taken in context, "more" cannot mean weight,

because the box accurately discloses that the product weighs 180 grams. Nor can "more" mean servings, because the box accurately 7

discloses that it contains 30 servings. Complaint alleges that Berry Green's

Rather, at most, the packaging implicitly

misrepresents the product's volume and density.

After all, if

Berry Green was less dense, then 180 grams of product might, in fact, fill the unnecessarily large jar it came in. The question then turns to (3): does the Complaint plead facts to suggest that this misrepresentation was material? And the answer is no. Plaintiff pleads nothing to suggest that

she, or other class members, cared about Berry Green's density. Nor does Plaintiff plead any facts indicating that Berry Green's unexpectedly higher density deluded her, or other class members, into thinking that Berry Green's box contained more than the 30 servings it expressly listed. plead facts sufficient Thus, Plaintiff has failed to to establish the alleged

misrepresentation's materiality.

See Gaidon v. Guardian Life

Ins. Co. of America, 94 N.Y.2d 330, 350, 725 N.E.2d 598, 607, 704 N.Y.S.2d 177, 186 (N.Y. 1999) (finding that defendants'

alleged misrepresentation, although sufficient to plead a cause of action under N.Y. GEN. BUS. L. § 349, did not rise to the level of fraud). And, accordingly, Plaintiff's common law fraud claim

must also be dismissed.

8

IV.

Unjust Enrichment4 Plaintiff's fifth cause of action asserts unjust

enrichment.

"[T]he essential inquiry in any action for unjust

enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." Sperry v. Crompton Corp., 8 N.Y.3d 204, 215-

216, 863 N.E.2d 1012, 101 (N.Y. 2007). Here, fails to plead Defendant unjust principally argues that Plaintiff does not

enrichment

because

Plaintiff

allege that it had "some of type of direct dealing or actual, substantive relationship with a defendant." Def. Br. at 19

(citing Redtail Leasing, Inc. v. Bellezza, 95-CV-5191, 1997 WL 603496, *8 (S.D.N.Y. 1997). Defendant accurately describes New But this is

York law in 1997, as the S.D.N.Y. understood it.

not the law today, as promulgated by New York's own courts.

4

For subject matter jurisdiction reasons, the Court considers Plaintiff's unjust enrichment claim before Plaintiff's fourth cause of action, which depends upon New York statutes. The unjust enrichment claim applies to the entire putative claim, whereas the New York statutory claim covers only New York purchasers. Here, Plaintiff predicates subject matter jurisdiction on the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d), which imposes a $5 million amount in controversy requirement. There is no dispute that Plaintiff meets this requirement if she represents a nationwide class. But, based on the declaration submitted by Mark Galvin, New Chapter's President and Chief Financial Officer, the Court has serious doubts about whether a New York-only class would meet CAFA's threshold. Thus, if the Court dismissed all of Plaintiff's nationwide claims, it would likely lack subject matter jurisdiction over Plaintiff's remaining state law claims. 9

Today,

New

York

law

does

not

require

an

unjust

enrichment

plaintiff to plead "direct dealing," or an "actual, substantive relationship" with the defendant. plaintiff's attenuated." relationship Sperry, 8 with N.Y.3d a at It merely requires that the defendant 215-216. not For be "too a

example,

product's indirect purchaser cannot assert an unjust enrichment claim against an entity that manufactured one of that product's ingredients. See Id. (tire purchaser could not assert unjust

enrichment claim against manufacturer who produced chemical that went into tire's rubber); State ex rel. Spitzer v. Daicel

Chemical Industries, Ltd., 42 A.D.3d 301, 304, 840 N.Y.S.2d 8, 12 (1st Dep't 2007) (no unjust enrichment claim against food additives manufacturer, because "end users" were "too attenuated from the producers of the chemicals which are among the

ingredients of those products").

But the indirect purchaser can

assert such an unjust enrichment claim against the manufacturer of the product A.D.3d itself. 39, For instance, N.Y.S.2d in Cox v. Microsoft Dep't

Corp., 8

40-41,

778

147,

149 (1st

2004), the First Department permitted an indirect purchaser of Microsoft's enrichment. computer See also software to sue v. Microsoft for unjust

Bildstein

MasterCard

International,

Inc., 03-CV-9826I, 2005 WL 1324972, *5 (S.D.N.Y. 2005) (credit card user stated unjust card enrichment through 10 an claim against Mastercard, Here,

despite

receiving

issuing

bank).

Plaintiff is an indirect Berry Green purchaser who is suing Berry Green's manufacturer. of a Berry Green ingredient. She is not suing the manufacturer Thus, much like the Cox plaintiff,

she is not "too attenuated" from Berry Green to maintain an unjust enrichment claim. N.Y.S.2d at 149.5 Defendant enrichment claim also argues that Plaintiff's received the unjust exact Sperry, 8 N.Y.3d at 215-216; Cox, 778

fails

because

Plaintiff

amount of product listed on the package ­ 180 grams and 30 tablespoon-sized servings. Thus, Defendant argues that "equity

and good conscience" do not require it to remit any of the purchase disagrees. price. For purposes of this motion, the Court

Under New York law, it is "contrary to equity and

good conscience" to enable a party to benefit from misleading representations. See Firestone v. Miroth Const. Co., 215 A.D.

564, 565, 214 N.Y.S. 239, 240 (1st Dep't 1926); see also Jermyn Defendant also relies heavily on Gale v. International Business Machines Corp., 9 A.D.3d 446, 781 N.Y.S.2d 45, 47 (2d Dep't 2004), which affirmed dismissal of an unjust enrichment claim brought by an indirect purchaser of a hard disk drive against the hard drive's manufacturer. But Defendant misreads Gale. Gale did not dismiss the plaintiff's complaint on the grounds that plaintiff was an indirect purchaser. Rather, Gale dismissed the complaint based on a minor pleading defect ­ the Here, Plaintiff failure to name the hard drive's seller. Id. has named the seller: a Whole Foods Market in Manhasset, New York. Pl. Ex. 4. And, although Plaintiff did not specifically plead this fact in the Complaint, the Court can take judicial notice of it, because Plaintiff relied upon her Whole Foods receipt in bringing suit. See Kahn v. Oppenheimer & Co., Inc., 08-CV-11368, 2009 WL 4333457, *2 (S.D.N.Y. 2009). 11
5

v. Best Buy Stores, L.P.,

256 F.R.D. 418, 423 (S.D.N.Y. 2009)

(certifying a class action asserting, among other things, an unjust enrichment claim premised on a misleading advertisement). Here the Court sufficiently pleads that 214 Defendant N.Y.S. at made 240.

"misleading

representations."

Firestone,

Specifically, the Complaint alleges that Berry Green's packaging contained empty space or slack fill. 17. Compl. ¶¶ 1, 2, 4, 6, 16,

Slack fill is "misleading" if it is: (1) "nonfunctional"

(i.e., not for a valid purpose); and (2) the container "does not allow the consumer to fully view its contents." 100.100(a).6 21 C.F.R. §

Drawing reasonable inferences in Plaintiff's favor, Specifically, the

the Complaint pleads both of these prongs.

Complaint alleges that Defendant included the slack fill "to mislead the consumer," and that the packaging "is geared to making the customer believe that he/she is buying more of the product." Compl. ¶¶ 17, 19. Misleading consumers is not a See 21

valid reason to package a product with slack fill. C.F.R. § 100.100(a)(1-6). packaging "does not allow

And, unquestionably, Berry Green's the consumer to fully view its

The Court takes judicial notice of 21 C.F.R. § 100.100(a). See In re Bayer Corp. Combination Aspirin Prods. Mktg. & Sales Practices Litig., 09-MD-20232010, U.S. Dist. LEXIS 31021, *26-27 (E.D.N.Y. Mar. 30, 2010) (taking "judicial notice of regulations and their contents to measure the standard of defendant's behavior"). 12

6

contents." misleading

Pl. Ex. 2.7

It follows then that Plaintiff has pled sufficient to state an unjust

representations

enrichment claim predicated on a slack fill theory. Plaintiff's unjust enrichment claim predicated on a metric system theory does not in fare as well. this Contrary motion, to the

Plaintiff's

representations

opposing

Complaint never pleads that Plaintiff is unfamiliar with the metric system. And, without such a factual pleading, Plaintiff

cannot legitimately allege that it is "against equity and good conscience to permit the defendant to retain what is sought to be recovered." Sperry, 8 N.Y.3d at 215-216. Thus, to the

extent that the fifth cause of action seeks recovery based on Berry Green listing its weight only in grams, not ounces, the claim is dismissed. The Court does, however, grant Plaintiff

leave to file an Amended Complaint to correct this deficiency.8

7

Berry Green's packaging consists of a purple and green cardboard box, which encloses a dark brownish jar. There is no way to see inside the box, much less the jar enclosed within.
8

The Court's leave for Plaintiff to file an Amended Complaint should not be misinterpreted as a sign that the Court would be willing to certify a class action based on the metric system theory. Although the Court does not pre-judge the issue, Plaintiff's metric system claims would likely raise significant individual issues concerning each consumer's knowledge and understanding of metric weights. Millions of Americans have immigrated from, lived in, or travelled extensively to metric system countries. And many more have gained familiarity with the metric system through school or work. Given these individual issues, it is difficult to comprehend how such a class action could proceed. Alternatively, should Plaintiff 13

V.

N.Y. Gen. Bus. Law §§ 349, 350 Plaintiff's fourth cause of action seeks relief under

N.Y. Gen. Bus. Law §§ 349, 350.

Section 349 precludes, among

other things, "[d]eceptive acts or practices in the conduct of any business, trade or commerce." other things, "[f]alse Section 350 precludes, among in the conduct of any

advertising

business, trade or commerce." sections in turn. A. § 349

The Court addresses each of these

To state a § 349 claim, a plaintiff must allege that the defendant has engaged "in an act or practice that is

deceptive or misleading in a material way and that plaintiff has been injured by reason thereof." omitted). Small, 94 N.Y.2d claims at 55

(citations

and

quotations

Defendant

that

Plaintiff has failed to meet that standard. wrong. First, as discussed above,

But Defendant is packaging is

Defendant's

"misleading" for purposes of this motion.

See supra at __.

Second, Plaintiff alleges that that packaging "gives the false impression actually that the consumer and thus is buying more than they that are the

receiving;"

sufficiently

pleads

wish to limit the applicable class to the metric ignorant, it is difficult to imagine how to ascertain such a class. 14

packaging was "misleading in a material way."9

And finally,

Plaintiff alleges that, had she understood "the true amount of the product," she "would not have purchased" it. Thus, Plaintiff has properly alleged injury. Compl. ¶ 42. Accordingly,

Plaintiff's § 349 claim survives Defendant's motion.10 B. § 350 Defendant claim. not an also seeks to dismiss Plaintiff's § 350

First, Defendant argues that Berry Green's packaging is "advertisement" within the statute's meaning. But

Defendant is wrong.

As an initial matter, N.Y. Gen. Bus. Law §

350-a expressly defines "advertisement" to include "labeling." Thus, the statute includes claims made on a product's package. In addition, the limited authority on point suggests that

excessive slack fill states a claim for false advertising under § 350. Specifically, in Mennen Co. v. Gillette Co., 565 F.

Supp. 648, 655 (S.D.N.Y. 1983), Judge Milton Pollack rejected plaintiff's claims that defendant violated §§ 349, 350 by

selling deodorant in a box "larger than physically required by New York law recognizes that a statement can be materially misleading without being a material misrepresentation. See Gaidon, 94 N.Y.2d at 344-350 ("misleading" representations "created unrealistic expectations" about financial product, sufficient to state a § 349 claim, but, although defendant made "misrepresentations," these did not "rise[] to the level of fraud"). Accordingly, so does this Court.
10 9

Again, the Court permits the § 349 claim to survive only on the slack fill theory. Plaintiff, however, may file an Amended Complaint to sufficiently plead a metric system theory. 15

the size of the primary container." trial, not a motion to dismiss. finding that plaintiff failed to

But he did so after a bench And he did so based on his submit sufficient evidence

showing that "the size of the box has any capacity to deceive." Id. By implication then, Judge Pollock recognized slack fill

claims as cognizable under §§ 349, 350, and denied relief based on plaintiff's lack of evidence, not the legal impossibility of plaintiff's pleading. Here, of course, Plaintiff does not yet She need only

need to submit evidence to support her claims.

set forth sufficient factual allegations to render these claims "plausible." And she has done so. Accordingly, Plaintiff's §

350 slack fill claim survives Defendant's motion.11

Again, Plaintiff may re-plead the metric system theory if she so wishes.
11

16

CONCLUSION Defendant's motion to dismiss is GRANTED IN PART AND DENIED IN PART. Plaintiff's first, second, and third causes of Plaintiff's fourth and fifth causes of

action are dismissed.

action are dismissed to the extent that they are predicted on a metric system theory, but are not dismissed to the extent that they assert a slack fill theory. Plaintiff may, however, re-

plead these causes of action to properly allege a metric system theory. SO ORDERED. /s/ JOANNA SEYBERT Joanna Seybert, U.S.D.J. Dated: Central Islip, New York May 19 , 2010

17