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Leonhart v. Nature's Path Foods, Inc.

United States District Court, N.D. California, San Jose Division

November 21, 2014

SUSAN LEONHART, Plaintiff,
v.
NATURE'S PATH FOODS, INC, Defendant

For Susan Leonhart, individually and on behalf of all others similarly situated, Plaintiff: Colin Harvey Dunn, LEAD ATTORNEY, PRO HAC VICE, Clifford Law Offices, P.C., Chicago, IL; Pierce Gore, LEAD ATTORNEY, Ben F. Pierce Gore, Pratt & Associates, San Jose, CA.

For Nature's Path Foods, Inc, Defendant: William Lewis Stern, LEAD ATTORNEY, Claudia Maria Vetesi, Lisa Ann Wongchenko, Morrison & Foerster LLP, San Francisco, CA.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS; GRANTING LEAVE TO AMEND AS TO CERTAIN CLAIMS; AND GRANTING MOTION TO STAY AS TO ECJ CLAIMS [Re: ECF 47]

BETH LABSON FREEMAN, United States District Judge.

Plaintiff Susan Leonhart brings this putative class action against Defendant Nature's Path Foods, Inc., alleging that many of Defendant's food products are " misbranded" and labeled in a misleading fashion. Defendant moves to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of Article III standing and under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Alternatively, Defendant requests that the litigation be stayed under the primary jurisdiction doctrine.[1] The Court has considered the briefing and the oral argument presented at the hearing on August 21, 2014. For the reasons discussed below, the motion to dismiss is GRANTED IN PART AND DENIED IN PART, leave to amend is GRANTED as to certain claims, and the motion to stay is GRANTED as to claims based upon products containing evaporated cane juice (" ECJ").

I. BACKGROUND

Defendant is a privately owned organic food company that sells its food products in grocery and other retail stores throughout the United States. Plaintiff alleges that she bought two of Defendant's products, EnviroKidz Panda Puffs cereal and Heritage Flakes cereal (" Purchased Products"), that were " misbranded" and labeled in a " misleading" fashion. According to Plaintiff, a product is " misbranded" if its labeling violates applicable state and/or federal laws. SAC ¶ 6. Plaintiff claims that misbranded products may not legally be sold or possessed and have no economic value. Id. Under an alternative theory, Plaintiff claims that a product's label is " misleading" if it deceives consumers regarding the product's ingredients or characteristics. SAC ¶ 7.

Plaintiff brings this putative nationwide class action on behalf of all individuals who bought Purchased Products between February 4, 2009 and the present. She also asserts putative class claims on behalf of all individuals who bought a variety of Defendant's other products that Plaintiff herself did not buy (" Unpurchased Products"). Plaintiff filed her original complaint in February 2013 and a first amended complaint (" FAC") as of right in May 2013. The FAC asserted claims under three California consumer statutes -- the Unfair Competition Law (" UCL"), Cal. Bus. & Prof. Code § 17200, the False Advertising Law (" FAL"), Cal. Bus. & Prof. Code § 17500, and the Consumers Legal Remedies Act (" CLRA"), Cal. Civ. Code § 1750 -- as well as a restitution claim based upon unjust enrichment and quasi-contract. Judge Davila dismissed the FAC with leave to amend in a written order filed March 31, 2014 (" March 2014 Order"). Judge Davila concluded inter alia that Plaintiff lacked Article III standing to assert claims based upon Unpurchased Products because she had not alleged that the Unpurchased Products were substantially similar to the Purchased Products; Plaintiff's misbranding theory was not viable; and Plaintiff's claims based upon allegations of misleading labeling did not meet the requirements of Federal Rules of Civil Procedure 9(b) and 12(b)(6). See March 2014 Order, ECF 36.

The case thereafter was reassigned to the undersigned judge. Plaintiff filed the operative second amended complaint (" SAC") in May 2014, reasserting the same claims set forth in the FAC as well as six new claims under California common law for a total of thirteen claims: (1) Section 17200 -- Unlawful Business Practices; (2) Section 17200 -- Unfair Business Practices; (3) Section 17200 -- Fraudulent Business Practices; (4) Section 17500 -- Misleading and Deceptive Advertising; (5) Section 17500 - Untrue Advertising; (6) Consumer Legal Remedies Act; (7) Restitution based on Unjust Enrichment/Quasi-Contract; (8) Breach of the Implied Warranty of Merchantability; (9) Common Count of Money Had and Received; (10) Declaratory Judgment; (11) Breach of Express Warranty; (12) Negligent Misrepresentation; and (13) Negligence.

Defendant contends that Plaintiff cannot establish Article III standing with respect to claims based upon Unpurchased Products; Plaintiff has failed to state a claim with respect to Purchased Products; and the action should be dismissed or stayed under the doctrine of Primary Jurisdiction.

II. LEGAL STANDARD

A. Rule 12(b)(1)

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) raises a challenge to the Court's subject matter jurisdiction. See Fed.R.Civ.P. 12(b)(1). " Article III . . . gives the federal courts jurisdiction over only cases and controversies." Public Lands for the People, Inc. v. United States Dep't of Agric., 697 F.3d 1192, 1195 (9th Cir. 2012) (internal quotation marks and citation omitted). " The oft-cited Lujan v. Defenders of Wildlife case states the three requirements for Article III standing: (1) an injury in fact that (2) is fairly traceable to the challenged conduct and (3) has some likelihood of redressability." Id. at 1195-96 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). If these requirements are not satisfied, the action should be dismissed for lack of subject matter jurisdiction. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 109-10, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

B. Rule 12(b)(6)

" A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted 'tests the legal sufficiency of a claim.'" Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not " accept as true allegations that contradict matters properly subject to judicial notice" or " allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it " must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible when it " allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

III. DISCUSSION

A. Plaintiff's Excess Pages

At the hearing, the Court noted that Plaintiff had filed an oversized brief in violation of local rules limiting opposition briefs to twenty-five pages of text absent express court order permitting excess pages. See Civ. L.R. 7-3(a), 7-4(b). The Court hereby STRIKES pages 26-30 of Plaintiff's brief.[2]

B. Judicial Notice

Defendant seeks judicial notice of three documents: (a) Plaintiff's initial disclosures, (b) the FDA's " Notice of Reopening of Comment Period for Draft Guidance for Industry on Ingredients Declared as Evaporated Cane Juice, " and (c) a table of ECJ cases filed across the country. The request is DENIED with respect to Plaintiff's initial disclosures, as they do not contain facts that " can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). The request is GRANTED with respect to the FDA Notice, see Graybill v. Wells Fargo Bank, N.A., 953 F.Supp.2d 1091, 1093 n.2 (N.D. Cal. 2013) (court may take judicial notice of " records reflecting official acts of the Executive Branch"), and the table of cases insofar as Defendant wishes the Court to be aware of those rulings, see Duckett v. Godinez, 67 F.3d 734, 741 (9th Cir. 1995) (holding that judicial notice is appropriate with respect to federal court and state court proceedings).

Plaintiff has not sought judicial notice, but she has appended a photograph of Panda Puffs packaging to her opposition. The photograph is offered in opposition to Defendant's Rule 12(b)(6) that Plaintiff's factual allegations regarding labeling are insufficient. The Court may not rely upon such extrinsic evidence to deny a Rule 12(b)(6) motion to dismiss.[3] Such evidence will be considered for the limited purpose of determining whether amendment is possible.

C. Unpurchased Products

Defendant seeks dismissal of all claims based upon Unpurchased Products for lack of Article III standing. " Courts in this district have adopted three diverging approaches for analyzing standing to pursue claims for nonpurchased products." Figy v. Frito-Lay North America, Inc., Case No. 13-3988 SC, F.Supp.2d, 2014 WL 3953755, at *4 (N.D. Cal. Aug. 12, 2014) (collecting cases). Under the first approach, the court dismisses all claims based upon unpurchased products. Id. Under the second " middle ground" approach, the court concludes that substantial similarity between purchased and unpurchased products is sufficient to satisfy Article III requirements as to claims based upon unpurchased products. Id. Finally, under the third approach, the court concludes that as long as the plaintiff has Article III standing to sue for purchased products, any questions regarding standing to sue for unpurchased products should be left for resolution at the class certification stage. Id.

This Court adopts the middle ground approach. The question presented by Defendant's motion, then, is whether Plaintiff has alleged facts establishing that the Unpurchased Products are so substantially similar to the Purchased Products as to satisfy Article III requirements. " Factors that other courts have considered include whether the challenged products are of the same kind, whether they are comprised of largely the same ingredients, and whether each of the challenged products bears the same alleged mislabeling." Wilson v. Frito-Lay North America, Inc., 961 F.Supp.2d 1134, 1141 (N.D. Cal. 2013).

Judge Davila dismissed Plaintiff's claims based upon Unpurchased Products for lack of Article III standing after concluding that " Plaintiff does not allege that the products are substantially similar beyond having the same labeling statements." March 2014 Order at 8, ECF 36. Plaintiff has not cured this defect. The SAC lists approximately eighty Unpurchased Products that loosely could be categorized as breakfast foods but that cover a wide spectrum including cold cereals, hot cereals, granolas, pancake mix, bars, toaster pastries, and waffles. See SAC ¶ 5. The SAC does not set forth the products' ingredients nor does it provide any specificity as to the products' labeling. Those allegations are insufficient to meet Article III requirements. Compare Wilson, 961 F.Supp.2d at 1141 (Article III requirements not met with respect to eighty-five unpurchased snack products where plaintiffs took " no time to explain how each of the eighty-five new Products are actionably mislabeled") with Figy, 2014 WL 3953755, at *5 (Article III requirements met when purchased and unpurchased products were different shapes of pretzel) and Morgan ...


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