Segedie et al v. The Hain Celestial Group, Inc. et al
OPINION & ORDER re: 25 MOTION to Dismiss filed by The Hain Celestial Group, Inc. For the foregoing reasons, Defendant's motion to dismiss is GRANTED in part and DENIED in part. The claims for breach of implied warranty of merch antability; deceit and/or misrepresentation, fraudulent concealment, and constructive fraud in violation of common law and California Civil Code §§ 1709, 1573, et seq.; negligent misrepresentation under New York law; and unjust enrichment u nder California law, as well as all claims based on products not identified in the Complaint, are DISMISSED. All other claims survive. Defendant shall have until June 22, 2015 to file responsive pleadings. The parties are directed to schedule a confe rence with Magistrate Judge Lisa Margaret Smith in accordance with ECF No. 17. The Court respectfully directs the Clerk to terminate the motion at ECF No. 25. SO ORDERED. Does #1-99 answer due 6/22/2015; The Hain Celestial Group, Inc. answer due 6/22/2015. (Signed by Judge Nelson Stephen Roman on 5/7/2015) (mml)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
LEAH SEGEDIE and DMITRIY SHNEYDER, on
behalf of themselves and all others similarly
-againstOPINION & ORDER
THE HAIN CELESTIAL GROUP, INC. and JOHN:
NELSON S. ROMAN, United States District Judge
Leah Segedie and Dmitriy Shneyder ("Plaintiffs"), on behalf of themselves and all others
similarly situated, bring this putative class action against the Hain Celestial Group, Inc. ("Hain
Celestial" or "Defendant") and unnamed co-defendants. Hain Celestial moves to dismiss
pursuant to Rules 8, 9, and 12(b)(6) of the Federal Rules of Civil Procedure, on the basis that the
claims concerning organic products are preempted by the Organic Foods Production Act of 1990,
7 U.S.C. §§ 6501-6523 ( "OFPA"); that the Court should defer to the primary jurisdiction of the
United States Department of Agriculture ("USDA") or Food and Drug Administration ("FDA")
with respect to claims concerning organic and natural products, respectively; that all claims lack
merit; that all claims fail to meet the applicable pleading standards; and that Plaitniffs lack
standing to bring claims concerning products they never purchased. For the following reasons,
the motion is GRANTED in patt and DENIED in patt.
STANDARD ON A MOTION TO DISMISS
To survive a motion to dismiss, a complaint must supply "factual allegations sufficient
‘to raise a right to relief above the speculative level.’” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,
493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
In other words, the complaint must allege “enough facts to state a claim to relief that is plausible
on its face.” Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 321 (2d Cir. 2010) (quoting
Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In applying this standard, a
court should accept as true all well-pleaded factual allegations, but should not credit “mere
conclusory statements” or “[t]hreadbare recitals of the elements of a cause of action.” Id.
Plaintiffs are alleged purchasers of certain “Earth’s Best” brand food, body care, and
home care products produced and sold by Hain Celestial. (Compl. ¶¶ 20-30, ECF No. 1.)
Plaintiffs claim that these products were all misleadingly labeled as “organic,” “natural,” or “all
natural,” in violation of various state statutes and common law doctrines.
Plaintiffs identify 62 food products 1 and 12 body care products labeled “organic” (the
“Organic Products”) that contain ingredients that applicable law allegedly prohibits in organic
products, rendering the label false and misleading (the “Organic Claims”). (Id. ¶¶ 51-52.)
Plaintiffs specifically challenge 47 ingredients, and by reference to product labels attached to the
Complaint, tie each Organic Product to its challenged ingredient(s). (See id. ¶ 52, Ex. 1.)
For purposes of this Factual Background section, the Court has counted different flavor or scent varieties
of a product as separate products (e.g., Banana flavored Sesame Street Crunchin’ Blocks and Honey Graham
flavored Sesame Street Crunchin’ Blocks were counted as two products). However, the Court expresses no view at
this time whether these products are separate for any legal purposes, such as issues relating to class certification.
Plaintiffs also identify seven food products and eight body care and home care products
labeled “natural” or “all natural” (the “Natural Products”). (Id. ¶ 63.) Plaintiffs claim that each
Natural Product contains one or more of some 72 artificial or synthetic ingredients, allegedly
rendering the “natural” or “all natural” representation false and misleading (the “Natural
Claims”). (Id. ¶¶ 61-62, 64.) Again by reference to product labels attached to the Complaint,
Plaintiffs tie each Natural Product to its challenged ingredient(s). (See id. Ex. 1.)
Plaintiffs allege that they and the putative class members saw the “organic,” “natural,” or
“all natural” representations and made purchases in reliance on those representations. (Id. ¶¶ 23,
27, 90-94, 97-104.) Plaintiffs allege that if the products were not misleadingly labeled, they
would not have purchased the products, would not have purchased as much of the products, or
would not have paid the price premium that natural and organic products command. (Id.
¶¶ 29-30, 105-07.) Specifically, Segedie allegedly purchased six of the Organic Products and
two of the Natural Products from retailers including Whole Foods in Westlake Village, CA and
Von’s in Simi Valley, CA, on numerous occasions from February 2009 until 2013. (Id.
¶¶ 20-21, 26.) Shneyder allegedly purchased three of the Organic Products in or around April to
September 2011 from Babies “R” Us in Wappingers Falls, NY. (Id. ¶ 22.) Although Segedie
and Shneyder allege that they personally purchased only eleven products, they purport to sue on
behalf of all persons in the United States who purchased any alleged falsely labeled Earth’s Best
product “includ[ing] but . . . not limited to” the 89 products specifically listed in the Complaint.
(Id. ¶¶ 51, 63, 109.)
Plaintiffs assert that Defendants are liable under N.Y. Gen. Bus. Law § 349, the
California Organic Products Act, Cal. Health & Safety Code §§ 110810-110959, the California
Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq., the California False Advertising
Law, Cal. Bus. & Prof. Code § 17500 et seq., the California Unfair Competition Law, Cal. Bus.
& Prof. Code § 17200 et seq., Cal. Civ. Code §§ 1709, 1573 et seq., and the common law of New
York and California for breach of express warranty, breach of implied warranty, fraud,
negligence, negligent misrepresentation, and unjust enrichment. (Id. ¶¶ 124-217.)
Defendant asserts that the OFPA preempts the Organic Claims. Because federal law is
“the supreme Law of the Land,” U.S. Const. art. VI, cl. 2, “Congress has the power to preempt
state law,” Arizona v. United States, 132 S. Ct. 2492, 2500 (2012). In interpreting the presence
and scope of preemption, a court starts with the “assumption that the historic police powers of
the States were not to be superseded by the Federal Act unless that was the clear and manifest
purpose of Congress.” Wyeth v. Levine, 555 U.S. 555, 565 (2009). But in every preemption
case, “the purpose of Congress is the ultimate touchstone.” Id. (internal quotation marks
“The Supreme Court has recognized three typical settings in which courts will find that
Congress intended to preempt state law.” In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab.
Litig., 725 F.3d 65, 96-97 (2d Cir. 2013), cert. denied sub nom. Exxon Mobil Corp. v. City of
New York, N.Y., 134 S. Ct. 1877 (2014). First, when Congress expressly provides that a federal
statute overrides state law, courts will find state law preempted if, applying standard tools of
statutory construction, the challenged state law falls within the scope of congressional intent to
preempt. See, e.g., Medtronic, Inc. v. Lohr, 518 U.S. 470, 484 (1996). Second, when Congress
legislates so comprehensively in one area as to “occupy the field,” courts may infer from the
federal legislation that Congress intended to preempt state law in that entire subject area. Crosby
v. Nat’l Foreign Trade Council, 530 U.S. 363, 372 (2000). “Third, when neither of the first two
categories applies but state law directly conflicts with the structure and purpose of a federal
statute, [courts] may conclude that Congress intended to preempt the state law.” MTBE, 725
F.3d at 96-97. Courts may find a conflict with preemptive effect only in two circumstances:
first, when “compliance with both federal and state regulations is a physical impossibility”
(“impossibility preemption”), and second, when the state law “stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress” (“obstacle
preemption”). Arizona, 132 S. Ct. at 2501 (internal quotation marks omitted); see also MTBE,
725 F.3d at 97.
A brief overview of the OFPA and its regulatory history is warranted.
The OFPA and its Regulatory History
The purpose of the OFPA is: “(1) to establish national standards governing the marketing
of certain agricultural products as organically produced products; (2) to assure consumers that
organically produced products meet a consistent standard; and (3) to facilitate interstate
commerce in fresh and processed food that is organically produced.” 7 U.S.C. § 6501.
Legislative history is in accord. See S. Rep. No. 101 357 (1990), reprinted in 1990
U.S.C.C.A.N. 4656, 4943-45. To accomplish these objectives, the OFPA directed the USDA to
establish national standards governing products marketed as “organic.” Id. § 6503. The USDA
published its final rule implementing the OFPA in 2000, creating the National Organic Program
(“NOP”). See National Organic Program, 65 Fed. Reg. 80,548 (Dec. 21, 2000) (codified at 7
C.F.R. pt. 205). The NOP regulations govern the use of the term “organic” in the labeling and
marketing of agricultural and processed products. See, e.g., 7 C.F.R. § 205.300-.301. As one
court has pointed out, “The NOP provisions governing the production, marketing, and labeling of
‘organic’ products are complex, detailed, and specific.” All One God Faith, Inc. v. Hain
Celestial Grp., Inc., No. C 09-03517, 2011 WL 4433817, at *2 (N.D. Cal. Sept. 22, 2011).
The OFPA and NOP regulations prohibit the sale or labeling of any product as “organic”
unless the product has been certified as such by an accredited certifying agent. 7 U.S.C.
§§ 6504-6505, 6514(a), 6515, 6519; see also, e.g., 7 C.F.R. § 205.302(c). Certifying agents are
private actors who are accredited by the Administrator (“Administrator”) of the USDA
Agricultural Marketing Service (“AMS”). See 7 U.S.C. §§ 6502(3), 6513; 7 C.F.R. §§ 205.400,
NOP regulations also establish an enforcement scheme. Both the NOP’s Program
Manager (“Program Manager”) and accredited certifying agents are empowered to investigate
certified operations suspected of noncompliance and to suspend or revoke a certification. 7
C.F.R. §§ 205.660(a), (b)(1), 205.661(a); see also 7 U.S.C. § 6519(b). Operations found to have
sold or labeled products in violation of the OFPA or NOP face civil penalties of up to $10,000
per violation and the possibility of a 5-year prohibition from re certification. 7 U.S.C.
§ 6519(c)(1), (3); 7 C.F.R. §§ 3.91(b)(1)(xxxvii), 205.662(f)(2), (g)(1). Any adverse action by a
certifying agent or the Program Manager—e.g., a denial of an application for certification, a
proposed suspension or revocation, or an actual suspension or revocation—is appealable to the
Administrator. 7 C.F.R. § 205.680(a), (c); see also 7 U.S.C. § 6520(a). Final decisions are then
appealable to U.S. district courts. 7 U.S.C. § 6520(b). However, if the Administrator reverses a
denial of certification, the certifying agent that denied the application has no right to appeal that
decision. 7 C.F.R. § 205.681(a)(1).
Finally, the NOP’s website invites the public to report noncompliance to the NOP
Compliance and Enforcement Division of the AMS. Compliance and Enforcement, Nat’l
Organic Prog. (last modified June 5, 2013), http://tinyurl.com/krdy9bt; see also Nat’l Organic
Prog., NOP 4001, Complaint Handling Procedure, (2011), available at
http://tinyurl.com/l2m5uvv. A certifying agent or the Compliance and Enforcement Division
may then investigate the complaint and take appropriate action—e.g., issuing a notice of
noncompliance. NOP 4001, supra, at 3-4, 6. Apart from this provision, the OFPA and NOP are
silent on relief for consumers. There is no mechanism to provide restitution or any other remedy
to consumers harmed by violations of the OFPA or NOP regulations.
The OFPA Does Not Preempt the Organic Claims
The Eighth Circuit appears to be the first and only circuit court to have addressed the
preemptive scope of the OFPA in relation to state consumer protection claims. See In re Aurora
Dairy Corp. Organic Milk Mktg. & Sales Practices Litig., 621 F.3d 781 (8th Cir. 2010). Aurora,
on which Defendant heavily relies, was a multi-district, consolidated action in which plaintiffs
asserted state law claims against, inter alia, an organic-certified dairy producer and the retailers
that sold its milk. Id. at 787-88. Plaintiffs alleged that representations made in the labeling and
marketing of the milk, including that the milk was “organic,” was free from hormones and
pesticides, and came from humanely treated cows, were misleading because the dairy producer
failed to comply with the OFPA and NOP. Id. at 789-90.
The Eighth Circuit first concluded that the OFPA did not preempt any of the plaintiffs’
claims through express preemption or field preemption. See id. at 792-94. Those analyses are
straightforward in this case; the Court likewise finds that none of the instant claims are barred by
express or field preemption for the reasons set forth in the Eighth Circuit’s opinion. See id. The
Eighth Circuit did not separately address the impossibility branch of conflict preemption, but
Defendant here does not argue that compliance with both the OFPA and any state law is
physically impossible (nor could it).
The Aurora court found that the relevant congressional objectives for purposes of
obstacle preemption were those expressed in § 6501: “(1) to establish national standards
governing the marketing of certain agricultural products as organically produced products; (2) to
assure consumers that organically produced products meet a consistent standard; and (3) to
facilitate interstate commerce in fresh and processed food that is organically produced.” 7
U.S.C. § 6501; Aurora, 621 F.3d at 794 & n.3. The court then drew a line between two types of
claims. First, it held that the OFPA does not preempt claims that do not “interfere with” the
certification decision but nonetheless touch on facts crucial to the certification decision—e.g.,
claims based sale of the milk as free from antibiotics and hormones or as produced by humanely
treated cows. Aurora, 621 F.3d at 797-98. The court held that these types of claims posed no
obstacle to the accomplishment of any congressional objectives. Id. at 797-99.
Second, the court held that the OFPA preempts claims directly challenging the
certification decision—i.e., claims challenging the sale of the milk as “organic.” Id. at 796-97.
The opinion advanced two justifications for this conclusion. First, the court reasoned that this
type of claim, if allowed to proceed, could lead to inconsistencies and fragmentation of the
national standards as courts adopted “possibly conflicting interpretations of the same provisions
of the OFPA and NOP,” resulting in an increase in “consumer confusion and troubled interstate
commerce.” Id. Second, the court found that the structure and remedial scheme of the OFPA
suggest that state claims challenging a certification are preempted, because: (1) § 6505(a)(1)(A)
specifically allows “a person [to] sell or label an agricultural product as organically
produced . . . if such product is produced and handled in accordance” with the OFPA and NOP;
(2) the only penalty for noncompliance provided is a civil penalty of up to $10,000 for
knowingly selling or labeling a product as organic in violation of the OFPA, see § 6519(a); and
(3) allowing consumers to challenge the certification would conflict with the role of the
certifying agent set forth in § 6503(d). Id.
The claims in the instant case fall squarely within the latter category, which Aurora found
preempted. However, the Court finds Aurora unpersuasive for the following reasons. As the
Second Circuit emphasized, obstacle preemption is “only an intermediate step down the road to
impossibility preemption.” MTBE, 725 F.3d at 101. Obstacle preemption precludes only those
state laws that pose an “actual conflict” with an overriding federal purpose and objective. Mary
Jo C. v. N.Y. State & Local Ret. Sys., 707 F.3d 144, 162 (2d Cir. 2013). What constitutes a
“sufficient obstacle” is “a matter of judgment, to be informed by examining the federal statute as
a whole and identifying its purpose and intended effects.” Id. (internal quotation marks omitted).
But “the conflict between state law and federal policy must be a sharp one.” Marsh v.
Rosenbloom, 499 F.3d 165, 178 (2d Cir. 2007) (internal quotation marks omitted). “The burden
of establishing obstacle preemption, like that of impossibility preemption, is heavy: the mere
fact of tension between federal and state law is generally not enough to establish an obstacle
supporting preemption, particularly when the state law involves the exercise of traditional police
power.” MTBE, 725 F.3d at 101-02 (quoting Madeira v. Affordable Hous. Found., Inc., 469
F.3d 219, 241 (2d Cir. 2006)) (internal quotation marks and alterations omitted). There is no
preemption unless “the repugnance or conflict is so direct and positive that the two acts cannot
be reconciled or consistently stand together.” Id.
Geier v. American Honda Motor Co., 529 U.S. 861, 881 (2000), illustrates the type of
conflict that warrants a finding of obstacle preemption. In Geier, the Supreme Court held that
state tort claims premised on a car manufacturer’s failure to install airbags were preempted by a
federal regulation that did not require airbags for all cars. Id. The Department of Transportation
had promulgated a rule that provided car manufacturers with a range of choices among passive
restraint devices, only one of which was airbags. Id. at 875. Rejecting an “all airbag” standard,
the agency had called for a gradual phase-in of a mix of passive restraints in order to spur
technological development and win consumer acceptance. Id. at 879. Because the plaintiff’s
claim was that car manufacturers had a duty to install airbags, allowing a “no-airbag” tort suit to
proceed would necessarily have required all manufacturers in the jurisdiction to install airbags on
all cars. Id. at 881. This presented an obstacle to achieving “the variety and mix of devices that
the federal regulation sought” and the “gradual phase-in” of passive restraint devices in car
In light of the objectives expressed in § 6501, legislative history, and the structure of the
OFPA as a whole, permitting the Organic Claims to proceed would not present a “sharp” conflict
with congressional purposes that rises above the level of mere “tension.” MTBE, 725 F.3d at
101-02. First, allowing the Organic Claims to proceed directly advances the second purpose of
the OFPA: “to assure consumers that organically produced products meet a consistent standard.”
7 U.S.C. § 6501. Next, while it is true that Congress also sought to establish “national
standards” and facilitate interstate commerce, the Organic Claims do not present a “sharp”
obstacle to the accomplishment of those objectives, because the Organic Claims are not premised
on a “reasonable consumer” theory that diverges from the national organic standards. Rather, the
suit seeks to enforce those national standards. The Court is mindful of the risk that, over time
and across many lawsuits, different courts might interpret the same standards differently. But
Congress in the OFPA (1) delegated certification decisions to certifying agents—of which there
are “[n]early 100” 2—whose interpretations of organic standards surely must diverge to some
extent, and (2) expressly assigned U.S. district courts an interpretive role, albeit through the lens
As of April 14, 2015. See List of USDA-Authorized Organic Certifying Agents by State of Operation,
USDA (Apr. 14, 2015), available at http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5100383.
of arbitrary-and-capricious review, see 7 U.S.C. § 6520(b); Chevron, U.S.A., Inc. v. Natural Res.
Def. Council, Inc., 467 U.S. 837, 844 (1984). The mere presence of a risk of judicial interpretive
divergence cannot be repugnant to congressional objectives, because these provisions show that
Congress contemplated some degree of divergence. In considering the instant claims, a court in
any jurisdiction would be interpreting the same standards, with appropriate deference to
published USDA regulations and interpretations. See Chevron, 467 U.S. at 844; Auer v.
Robbins, 519 U.S. 452, 461 (1997); Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). Nothing
suggests that the divergence among courts will be so great as to create an “obstacle” to the
establishment of national standards and facilitation of interstate commerce vis-à-vis the
pre-OFPA landscape; Defendants have thus failed to carry their “heavy” burden of showing a
conflict “so direct and positive that the two [laws] cannot be reconciled or consistently stand
together.” MTBE, 725 F.3d at 101-02. If Plaintiffs were seeking to enforce a definition of
“organic” based on something other than federal regulatory compliance, then this Court might
find such a state cause of action to be in conflict with congressional objectives. But that is not
the case here.
The Court also finds that Aurora’s analysis of the OFPA’s structure and remedial scheme
is at odds with the Supreme Court’s decision in Wyeth. See 555 U.S. at 555. The Supreme Court
held that a plaintiff’s failure-to-warn claims alleging a drug label’s inadequacy were not
preempted even though the label had been approved by the FDA pursuant to the Food, Drug, and
Cosmetic Act and implementing regulations. Id. at 581. The Court rejected the drug company’s
argument that “[o]nce the FDA has approved a drug’s label, a state-law verdict may not deem the
label inadequate,” noting that “Congress did not provide a federal remedy for consumers harmed
by unsafe or ineffective drugs, [and that Congress] may have also recognized that state-law
remedies further consumer protection by motivating manufacturers to produce safe and effective
drugs and to give adequate warnings.” Id. at 573-74. Ultimately, the Court held that permitting
the failure-to-warn suit to proceed did not present an obstacle to the accomplishment of the
federal objective, which was “to bolster consumer protection against harmful products.” Id. at
In accordance with Wyeth, this Court rejects the premise that once a certifying agency has
passed on a product’s organic status, a state-law verdict may not deem the sale or labeling of that
product as “organic” false or misleading. As in Wyeth, Congress here did not provide a federal
remedy for consumers duped into purchasing falsely labeled organic products. The OFPA is
completely silent on the rights of aggrieved purchasers. And although the NOP (without explicit
direction from Congress) has instituted an avenue for private citizens to file complaints against
noncompliant operations, there is no mechanism to provide restitution or any other remedy to
purchasers harmed by falsely labeled products. This Court has previously ruled that “state law
causes of action are not preempted where they merely provide a damages remedy for claims
premised on a violation of federal law that does not itself provide a private right of action.”
Koenig v. Boulder Brands, 995 F. Supp. 2d 274, 283 (S.D.N.Y. 2014). That principle holds true
here. The Court sees nothing in the structure and remedial scheme of the OFPA, the
congressional objectives expressed in § 6501, or legislative history to suggest that Congress
intended to eliminate all remedies for aggrieved purchasers of organic products.
Furthermore, Congress has demonstrated elsewhere in the OFPA that it knows how to—
and is willing to—preempt state law. Section 6507 expressly preempts state organic certification
regimes, permitting states to enact “more restrictive” certification programs that are
“not . . . inconsistent” with the OFPA, but only with USDA approval and oversight. See 7
U.S.C. § 6507. Tellingly, Congress did not expressly preempt state tort claims, consumer
protection statutes, or common law claims in § 6507. This is “powerful evidence” that Congress
did not impliedly intend to do so. POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2237
(2014); Wyeth, 555 U.S. at 575; In re Tribune Co. Fraudulent Conveyance Litig., 499 B.R. 310,
318 (S.D.N.Y. 2013); see also Freightliner Corp. v. Myrick, 514 U.S. 280, 288 (1995)
(explaining that an express definition of the preemptive reach of a statute, while not foreclosing
implied preemption entirely, “supports a reasonable inference . . . that Congress did not intend to
pre-empt other matters”); cf. Geier, 529 U.S. at 869-74.
For all of the foregoing reasons, the Court concludes that the Organic Claims are not
preempted by the OFPA or NOP regulations, joining in those courts that have reached a similar
conclusion, see Jones v. ConAgra Foods, Inc., 912 F. Supp. 2d 889, 895 (N.D. Cal. 2012);
Brown v. Hain Celestial Grp., Inc., No. C 11-03082 LB, 2012 WL 3138013, at *17 (N.D. Cal.
Aug. 1, 2012).
The Organic Claims are legally sufficient. In contrast to foods labeled “100% organic,”
which are not at issue here, foods labeled “organic” need not be composed entirely of organic
ingredients. See 7 C.F.R. § 205.301. OFPA regulations state that up to 5% by weight of a
product labeled “organic” may be composed of non-organic ingredients listed on the National
List of Allowed and Prohibited Substances (the “National List”), which is maintained in Subpart
G of the NOP regulations. Id. § 205.301(b); see also 7 U.S.C. § 6517. If a non-organic
ingredient is not on the National List, it cannot appear in an organic product in any quantity
(unless it qualifies for some other exception). The parties’ dispute primarily concerns one item
on the National List: “Synthetics allowed: . . . Nutrient vitamins and minerals, in accordance
with 21 C.F.R. 104.20, [sic] Nutritional Quality Guidelines For Foods.” 7 C.F.R. § 205.605(b).
Defendant argues that this is an open-ended exception that encompasses all of the
challenged ingredients, rendering the Organic Claims fatally flawed. The nutrient vitamins and
minerals exception references 21 C.F.R. § 104.20, which articulates the FDA’s fortification
policy. Subsections (b) through (d) of the fortification policy state that foods may be fortified
with the 21 specific substances listed in 21 C.F.R. § 104.20(d)(3) under certain limited
conditions—e.g., to restore nutrients lost during processing, see id. § 104.20(c). Subsections (b)
through (d), then, are not open-ended. However, 21 C.F.R. § 104.20(f) provides: “Nutrient(s)
may be added to foods as permitted or required by applicable regulations established elsewhere
in this chapter.” Subsection (f) is arguably broader than subsections (b) through (d), because it is
not expressly limited to the nutrients listed in subsection (d)(3). Therefore, Defendant’s
argument hinges on the interpretation of subsection (f)—is it open-ended, or is it limited in any
way meaningful to this litigation?
In a letter to the USDA dated April 14, 2011 for the purpose of “clarification of the Food
and Drug Administration Fortification Policy,” the FDA explained that subsection (f) extends
only to substances permitted or required to be added to foods pursuant to regulations pertaining
to a common or usual name, 21 C.F.R. pt. 102, a standard of identity, 21 C.F.R. pts. 130-169, or
nutritional quality guideline, 21 C.F.R. § 104.47. See Letter from Barbara O. Schneeman,
Director, Office of Nutrition, Labeling, and Dietary Supplements, FDA to Miles V. McEvoy,
Deputy Admin., NOP at 3 & n.4 (Apr. 14, 2011) [hereinafter FDA Letter], available at
http://tinyurl.com/oszlkvx; Sunset Review (2012) for Nutrient Vitamins and Minerals, 77 Fed.
Reg. 1980, 1983-85 (proposed Jan. 12, 2012) [hereinafter NOP Proposed Rule]. In other words,
subsection (f) does not permit indiscriminate fortification of foods with, for example, AHA,
DHA, taurine, or inositol simply because the FDA has deemed them “Generally Recognized as
Safe.” NOP Proposed Rule, supra, at 1983-85. The FDA also explained that infant formula is
not within the scope of § 104.20 at all, as the FDA’s nutritional policies for infant formula are
codified at 21 C.F.R. pt. 107. Id. Although not relevant here, the FDA further explained that its
fortification policy has now expanded beyond subsections (d)(3) and (f) to also include an
additional six nutrients listed in 21 C.F.R. § 101.9(c)(8)(iv). Id.
An agency’s interpretation of its own regulation is controlling unless “plainly erroneous
or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461 (1997). The FDA’s
interpretation meets this standard. Subsection (f) uses the phrase, “Nutrient(s) may be added to
foods as permitted or required by applicable regulations established elsewhere in this chapter.”
21 C.F.R. § 104.20(f). The scope of “regulations established elsewhere in this chapter” is
ambiguous, at best. It is not inconsistent with the language or plainly erroneous for the FDA to
limit “regulations established elsewhere” to just those pertaining to a common or usual name, 21
C.F.R. pt. 102, a standard of identity, 21 C.F.R. pts. 130-169, or nutritional quality guideline, 21
C.F.R. § 104.47. The FDA has explained that the policy behind § 104.20—the “rational addition
of nutrients to foods,” 21 C.F.R. § 104.20(a), “based on the best available scientific data,”
Addition of Nutrients, 45 Fed. Reg. 6314, 6317 (Jan. 25, 1980) (codified at 21 C.F.R. pt. 104)—
supports this conclusion, as does the fact that the proposed rule issued for public comment was
originally limited to those specific types of regulations. It is also reasonable for the FDA to
construe the fortification policy to exclude infant formula because the FDA has a separate policy
concerning infant formula. See 21 C.F.R. pt. 107.
Defendant attempts to rely on a contrary interpretation of subsection (f) that the NOP
expressed in an April 2007 opinion letter, which the NOP has since disavowed. 3 Whereas the
FDA’s interpretation of 21 C.F.R. § 104.20(f) is entitled to Auer deference because the FDA
promulgated that regulation, the NOP’s is not. Even if the Court were to frame the question as
whether to defer to the NOP’s interpretation of the nutrient vitamins and minerals exception, an
agency interpretation is entitled to less deference where, as here, it has been inconsistent over
time. Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2166 (2012); Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504, 515 (1994). And even so, the NOP now agrees that its
April 2007 interpretation was wrong and the FDA’s interpretation is correct. NOP Proposed
Rule, supra, at 1984 (“However, the NOP incorrectly interpreted FDA’s fortification policy,
codified at 21 CFR 104.20 [sic], and allowed substances that are not authorized under the current
reference in the NOP regulations.”). As the NOP explained in its Proposed Rule:
Over the last ten years, the NOP incorrectly allowed a broad allowance of “accessory
nutrients” that [sic] is not aligned with the codified allowance for nutrient vitamins and
minerals in organic products, as confirmed by FDA’s clarification of the scope of the
fortification policy. In practice, added ingredients, which are considered GRAS . . . , but
are not designated as essential vitamins and minerals per FDA, are being added to organic
products based upon an incorrect NOP interpretation of FDA fortification policy.
In 2007 and 2008, the NOP issued two opinion letters interpreting the FDA fortification policy in
conflicting fashion. These letters have not been made available to the Court but are described in the NOP’s
proposed rule. See NOP Proposed Rule, supra, at 1981-82. First, the NOP opined in an April 3, 2007 letter that
arachidonic acid (“ARA,” an omega 6 fatty acid), docosahexaenoic acid (“DHA,” an omega 3 fatty acid), sterols,
and taurine, which are not listed in 21 C.F.R. § 104.20(d)(3), nonetheless fell within subsection (f), and were
therefore permitted in foods labeled organic pursuant to the nutrient vitamins and minerals exception on the National
List. Id. The NOP reasoned that subsection (f) was not limited to the nutrients listed in subsection (d)(3), and the
ingredients at issue were permitted under other FDA regulations as Generally Recognized as Safe food additives.
Id. Then, in a 2008 opinion letter, the NOP determined that luteic acid was not permitted in foods labeled organic
pursuant to the nutrient vitamins and minerals exception. Id. In direct conflict with the April 2007 letter, the NOP
reasoned that subsection (f) of the FDA’s fortification policy was limited to the nutrients listed in subsection (d)(3).
Id. The NOP acknowledged that its April 2007 interpretation was erroneous as early as April 2010. Miles McEvoy,
Deputy Admin., Nat’l Organic Prog., Action Memorandum for the Chairman of the National Organic Standards
Board at 3 (Apr. 26, 2010), available at http://tinyurl.com/ktrweos.
Id. at 1984. In other words, the NOP has simply declined to enforce the prohibition against
synthetic “accessory nutrients.” But the regulations as written and as interpreted by the NOP and
FDA still undeniably prohibit ingredients such as synthetic AHA, DHA, taurine, and inositol in
organic products. Congress could not have been clearer in mandating that the NOP may permit
additional nutrients to be added to organic foods only by amending the National List through
notice-and-comment rulemaking (except in certain emergency situations not applicable here):
The National List . . . shall be based upon . . . proposed amendments to the National List
developed by the National Organic Standards Board. . . . The Secretary may not include
exemptions for the use of specific synthetic substances in the National List other than those
exemptions contained in the . . . Proposed Amendments to the National List. . . . Before
. . . making any amendments to the National List, the Secretary shall publish . . . any
Proposed Amendments to the National List in the Federal Register and seek public
comment on such proposals. The Secretary shall include in such Notice any changes to
such proposed list or amendments recommended by the Secretary. . . . After evaluating all
comments received concerning the . . . Proposed Amendments to the National List, the
Secretary shall publish the final National List in the Federal Register, along with a
discussion of comments received.
7 U.S.C. § 6517. An “organic” labeling representation that violates the regulations can still be
misleading even if the NOP declines to enforce the specific regulations it violates.
The interim rule that Defendant cites does not compel a different conclusion. See Sunset
Review (2012) for Nutrient Vitamins and Minerals, 77 Fed. Reg. 59,287 (Sept. 27, 2012)
[hereinafter NOP Interim Rule]. The OFPA provides that all items on the National List expire
after five years unless the National Organic Standards Board reviews and renews them. 7 U.S.C.
§ 6517(e). The NOP Interim Rule simply re-authorized the existing nutrient vitamins and
minerals exception on the National List as written, “without change,” because it was scheduled
to expire a month later. NOP Interim Rule, supra, at 59,287, 59,289. The NOP explained that it
was still reviewing and considering comments on a proposed amendment to the exception, but
wanted to avoid the “widespread disruption to the organic market that would occur if the
allowance for any synthetic vitamins and minerals were to sunset (‘expire’).” Id. at 59,289. The
NOP Interim Rule changed nothing. Even so, the rule did not go through the
notice-and-comment process prescribed by 7 U.S.C. § 6517, and therefore cannot have the effect
of amending the National List or otherwise expanding an exception.
To summarize, Defendant’s arguments in favor of dismissal rely on the existence of an
open-ended exception for nutrient vitamins and minerals. But the exception is not open-ended;
rather, it is limited to the nutrients listed in 21 C.F.R. § 104.20(d)(3) and the FDA’s
interpretation of subsection (f). Therefore, Plaintiffs have alleged a plausible claim that
inclusion of the challenged ingredients in foods labeled “organic” is misleading.
Furthermore, there is an alternative, independent basis to deny Defendant’s motion as to
the Organic Claims. Even if Defendant’s interpretation of 21 C.F.R. § 104.20 were correct, the
Court could not accept Defendant’s blanket factual assertion that all of the challenged
ingredients are nutrient vitamins or minerals. Defendant submits no evidence—judicially
noticeable or otherwise—to support this assertion. To accept Defendant’s argument, the Court
would need to take Defendant’s word over allegations in the Complaint, which the Court must
accept as true on a motion to dismiss.
Defendant argues that the Natural Claims lack merit because Plaintiffs (1) do not advance
a cognizable theory of deception and (2) do not rely on a plausible, objective definition of
“natural.” Under all of the applicable statutes and common law doctrines the “reasonable
consumer” standard governs whether a representation is misleading. See Williams v. Gerber
Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (concerning the CLRA, UCL, and FAL); Oswego
Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 26 (1995)
(concerning the NYGBL). “Whether a reasonable consumer would be deceived by a product
label is generally a question of fact not amenable to determination on a motion to dismiss.” Ham
v. Hain Celestial Grp., Inc., No. 14-CV-02044-WHO, 2014 WL 4965959, at *3 (N.D. Cal. Oct.
3, 2014). “However, in rare situations a court may determine, as a matter of law, that the alleged
violations of the UCL, FAL, and CLRA are simply not plausible.” Id.
The Complaint alleges facts that, if true, establish that the “natural” representations were
plausibly misleading to a reasonable consumer, misled Plaintiffs, and caused Plaintiffs harm.
The Complaint alleges that Defendant labeled the challenged products as “natural” or “all
natural,” that Defendant knew and intended that consumers would rely on that representation,
that Plaintiffs relied on the representation in making their purchases and understood it to mean
that the products were free from synthetic ingredients, and that the challenged products contained
It is not unreasonable as a matter of law to expect that a product labeled “natural” or “all
natural” contains only natural ingredients. 4 E.g., Wilson v. Frito-Lay N. Am., Inc., No. 12-1586,
2013 WL 1320468, at *13 (N.D. Cal. Apr. 1, 2013) (“[A] reasonable consumer could interpret a
bag of chips claiming to have been ‘Made with ALL NATURAL Ingredients’ to consist
exclusively of natural ingredients, contrary to the reality described in the nutrition box.”); cf. Ault
v. J.M. Smucker Co., No. 13 CIV. 3409 PAC, 2014 WL 1998235, at *6 (S.D.N.Y. May 15, 2014)
(“[I]t is not unreasonable, as a matter of law, for a consumer to believe that non-organic foods
labeled as ‘All Natural’ do not possess GMOs.”).
To the extent that Pelayo v. Nestle USA, Inc., No. 13-5213, 2013 WL 5764644, at *4 (C.D. Cal. Oct. 25,
2013) (dismissing claims in part on the basis that a reasonable consumer would not be duped into believing he was
purchasing “natural” pasta from “Ravioli trees and Tortellini bushes”), is to the contrary, that case is nonbinding and
distinguishable. Plaintiffs offer a different understanding of “natural” than the plaintiff in Pelayo offered, and even
so, the weight of authority has shifted away from Pelayo, Garcia v. Kashi Co., No. 12-21678, 2014 WL 4392163, at
*17 (S.D. Fla. Sept. 5, 2014); Surzyn v. Diamond Foods, Inc., No. 14-0136, 2014 WL 2212216, at *3-4 (N.D. Cal.
May 28, 2014); Jou v. Kimberly-Clark Corp., No. 13-03075, 2013 WL 6491158, at *8 (N.D. Cal. Dec. 10, 2013).
This is true even though foods labeled “organic” may lawfully contain some synthetic
ingredients. There is no rigid hierarchy that makes “natural” a more permissive label than
“organic” in all respects as a matter of law. See Ham, 2014 WL 4965959, at *3. A jury might
find that is so, but the Court cannot at this stage.
This is also true even if the synthetic ingredients are listed by name on the products’
packaging in an ingredient list. See Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008)
(“We disagree with the district court that reasonable consumers should be expected to look
beyond misleading representations on the front of the box to discover the truth from the
ingredient list in small print on the side of the box.”); Wilson, 2013 WL 1320468, at *13 (“Even
though the nutrition box could resolve any ambiguity, the Court cannot conclude as a matter of
law, in the context of a Rule 12(b)(6) motion, that no reasonable consumer would be deceived by
the ‘Made with ALL NATURAL Ingredients’ labels.”). A jury may ultimately find that the
appearance of ingredients that are obviously synthetic on an ingredient list undercuts Plaintiff’s
theory of deception. But again, the Court cannot make this determination at this stage.
Plaintiffs’ Natural Claims also survive despite Plaintiffs’ failure to define “natural” for
other purposes. Ham, 2014 WL 4965959, at *3. But see Pelayo, 2013 WL 5764644, at *4
(imposing a requirement that that the plaintiffs propose a plausible, objective definition of
“natural”). A fortiori, it is enough that Plaintiffs allege that “natural” communicates the absence
of synthetic ingredients. (See Compl. ¶¶ 58-59.) Likewise, the FDA’s and USDA’s respective
policies concerning “natural,” while potentially relevant, are not controlling. This applies
equally to Hain Celestial’s own definition as expressed in SEC filings. (See Compl. ¶¶ 56-57.)
Ultimately, the question is one of reasonableness, which cannot be resolved on a Rule 12(b)(6)
To be clear, the Court is not establishing a rule of law that foods labeled “natural” may
not contain synthetic ingredients—far from it. The alleged presence of synthetic ingredients
merely brings the claim of deception into the realm of plausibility. “The plausibility standard is
not akin to a probability requirement.” Brazil v. Dole Food Co., No. 12-1831, 2013 WL
1209955, at *14 (N.D. Cal. Mar. 25, 2013). Whether the labels would mislead a reasonable
consumer is a question of fact for the jury.
Plaintiffs have also adequately alleged injury by claiming that they paid a price premium
that they would not have paid if the products were not labeled “natural” or “all natural.” (See
Compl. ¶ 105b.) Ackerman v. Coca-Cola Co., No. CV-09-0395 (JG), 2010 WL 2925955, at *23
(E.D.N.Y. July 21, 2010) (“Injury is adequately alleged under GBL §§ 349 or 350 by a claim that
a plaintiff paid a premium for a product based on defendants’ inaccurate representations.”
(citations omitted)); Samet v. Procter & Gamble Co., No. 12-1891, 2013 WL 3124646, at *3
(N.D. Cal. June 18, 2013) (holding likewise with respect to California statutes).
Specificity or Particularity
The parties dispute whether the heightened pleading standard in Rule 9(b) of the Federal
Rules of Civil Procedure applies to some or all of Plaintiffs’ claims. That question is immaterial
because Plaintiffs’ claims are pled with particularity even under that standard. By alleging the
“who, what, when, where, and how of the misconduct,” Plaintiffs have pled sufficient facts to
allow Defendant an adequate opportunity to defend. Aguilar v. Boulder Brands, Inc., No. 1201862, 2013 WL 2481549, at *4 (S.D. Cal. June 10, 2013). The Complaint alleges that Hain
Celestial sold products through certain identified retailers, identifies the products purchased and
the time periods of those purchases, identifies the specific challenged representations, identifies
by name the specific challenged ingredients, ties the challenged ingredients to each product by
reference to the products’ ingredient labels, and explains why those ingredients render the
product labels misleading. Finally, Plaintiffs allege that they would not have purchased the
products, purchased as much of the products as they purchased, or paid the premium that
“organic” and “natural” products command had Defendant not misleadingly labeled the products.
However, the Complaint also states that “Falsely Labeled Organic Products” include “but
are not limited to” the products listed by name in the Complaint. (Compl. ¶¶ 50, 52.) At a
minimum, even under the more permissive Rule 8(a) standard, a plaintiff challenging a product
label as misleading must at least identify the product and the misleading label. No plaintiff in
any court should be able to bring a consumer protection claim on behalf of unidentified
purchasers of unidentified products. Accordingly, to the extent that the Complaint purports to
assert claims based on unidentified products, those claims are dismissed.
“The primary jurisdiction doctrine is ‘relatively narrow’ in scope.” In re Frito-Lay N.
Am., Inc. All Natural Litig., No. 12-MD-2413 RRM RLM, 2013 WL 4647512, at *7 (E.D.N.Y.
Aug. 29, 2013) (citing Goya Foods, Inc. v. Tropicana Prods., Inc., 846 F.2d 848, 851 (2d Cir.
1988)). Courts consider four factors: “(1) whether the question at issue is within the
conventional experience of judges or whether it involves technical or policy considerations
within the agency’s particular field of expertise; (2) whether the question at issue is particularly
within the agency’s discretion; (3) whether there exists a substantial danger of inconsistent
rulings; and (4) whether a prior application to the agency has been made.” Ellis v. Tribune
Television Co., 443 F.3d 71, 82-83 (2d Cir. 2006).
Primary jurisdiction does not bar the Organic Claims. Notwithstanding the USDA’s
expertise in its own regulations, the core issues here—whether the labels violate OFPA
regulations and whether those violations reasonably misled consumers—are amenable to judicial
resolution. Cf. Ackerman, 2010 WL 2925955, at *14 (“The question whether defendants have
violated FDA regulations and marketed a product that could mislead a reasonable consumer is
one courts are well-equipped to handle, and is not an appropriate basis for invoking the primary
jurisdiction doctrine.”). There is no suggestion that Defendant’s compliance with OFPA
regulations is a matter of USDA discretion, as the USDA cannot retroactively amend the organic
regulations. There is little danger of inconsistent rulings because the USDA is not
“contemplating the same issue”—the Organic Claims seek to hold Defendant to existing
regulations, not proposed regulations. Finally, neither party claims that there is an application to
the USDA on any key issue. See Goya, 846 F.2d at 851; Ault, 2014 WL 1998235, at *5
(declining to apply the primary jurisdiction doctrine in a food-labeling case). The USDA’s
longstanding uncertainty on the scope of the exception for nutrient vitamins and minerals is not a
basis to defer to the USDA. Cf. Brown, 2012 WL 3138013, at *17.
Nor does primary jurisdiction bar the Natural Claims. Various district judges, including
the undersigned, have repeatedly rejected this very argument in identical circumstances. See,
e.g., Goldemberg, 8 F. Supp. 3d at 477-78; Ham, 2014 WL 4965959, at *6; Frito-Lay, 2013 WL
4647512, at *7. Although the issues in this case might involve some degree of agency
discretion, this does not outweigh the other three factors, which counsel against deferring to the
FDA. Goldemberg, 8 F. Supp. 3d at 477-78. The Court rejects Defendant’s assertion that the
FDA will imminently regulate the term “natural.” The FDA has declined to adopt formal
rulemaking to define “natural” despite repeated applications by various stakeholders.
“Bow[ing]” to its primary jurisdiction “would plainly be unavailing.” Bd. of Educ. v. Harris,
622 F.2d 599, 607 (2d Cir. 1979). As with the Organic Claims, the issues here are “within the
traditional realm of judicial competence.” Frito-Lay, 2013 WL 4647512, at *8.
Miscellaneous Theories of Liability
Plaintiffs have declined to pursue their theories of breach of implied warranty of
merchantability (Seventh Cause of Action) and deceit or misrepresentation, fraudulent
concealment, and constructive fraud in violation of common law and California Civil Code
§§ 1709, 1573, et seq. (Eighth Cause of Action). Accordingly, those claims are dismissed.
Plaintiffs’ negligent misrepresentation claim under New York law is dismissed for failure
to plead any cognizable special relationship with Defendant. Naughright v. Weiss, 826 F. Supp.
2d 676, 688 (S.D.N.Y. 2011) (“To allege a special relationship, [the plaintiff] must establish
something beyond an ordinary arm’s length transaction.”). Defendant’s obligation to label
products truthfully does not arise from any special relationship. There is nothing approximating
privity between the parties. Accordingly, the claims for negligence and/or negligent
misrepresentation under New York law must be dismissed. As Defendant does not address
California law of negligent misrepresentation, that claim survives.
Unjust enrichment is not available as an independent cause of action under California
law. See Durrell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1370 (2010). Plaintiffs do not
appear to disagree. Accordingly, the claim for unjust enrichment under California law must be
dismissed. As Defendant does not address New York law of unjust enrichment, that claim
survives. The analysis of Texas state law in Defendant’s papers is irrelevant.
The Court has considered Defendant’s arguments relating to Plaintiffs’ breach of
warranty claims and finds them unpersuasive.
The Court will address Defendant’s class standing arguments, including whether
NECA-IBEW Health & Welfare Fund v. Goldman, Sachs & Co., 693 F.3d 145 (2d Cir. 2012),
which the Court will faithfully apply as the law in this circuit (despite Defendant’s citation to
numerous nonbinding cases calling its reasoning into doubt), permits named plaintiffs to bring
claims concerning products they never purchased. The Court simply notes at this time that
Plaintiffs' own allegations suggest that the "set of concerns" for different products are a far cry
from "nearly identical." DiMuro v. Clinique Labs., LLC, 572 F. App'x 27, 29 (2d Cir. 2014)
("Here, by contrast, each of the seven different products have different ingredients, and Clinique
made different advertising claims for each product."). (E.g., Comp!.
ii 74 ("Hain Celestial knows
that consumers believe that natural vitamins have better absorption rates and/or are otherwise
superior to synthetic vitamin supplements."); id.
ii 79 ("Instead, these ingredients are artificial.
Some are also known or suspected toxins, carcinogens, and/or environmental hazards .... "); id.
For the foregoing reasons, Defendant's motion to dismiss is GRANTED in pmt and
DENIED in part. The claims for breach of implied warranty of merchantability; deceit and/or
misrepresentation, fraudulent concealment, and constructive fraud in violation of common law
and California Civil Code§§ 1709, 1573, et seq.; negligent misrepresentation under New York
law; and unjust emichment under California law, as well as all claims based on products not
identified in the Complaint, are DISMISSED. All other claims survive. Defendant shall have
until June 22, 2015 to file responsive pleadings. The patties are directed to schedule a
conference with Magistrate Judge Lisa Margaret Smith in accordance with ECF No. 17. The
Court respectfully directs the Clerk to terminate the motion at ECF No. 25 .
White Pfains, New York
United States District Judge
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