United States District Court, Northern District of California
A.P. DEAUVILLE, LLC, Plaintiff,
ARION PERFUME AND BEAUTY, INC., Defendant.
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS COUNTERCLAIMS
CHARLES R. BREYER, UNITED STATES DISTRICT JUDGE.
A.P. Deauville, LLC ("Plaintiff") brought federal and state law claims for false advertising and unfair competition against Arion Perfume & Beauty, Inc. ("Arion") and Does 1 through 10 (collectively, "Defendants"). Defendants filed counterclaims against Plaintiff. See SAA (dkt. 38) at 10-22. The Court today held a hearing on Plaintiffs motion to dismiss Defendants' counterclaims. See generally MTD (dkt. 47). As explained below, the Court GRANTS IN PART and DENIES IN PART Plaintiffs motion to dismiss.
Plaintiff "produces, markets, and sells Power Stick brand deodorant, antiperspirant, body spray, and body wash[, ] which it sells exclusively at value-priced retailers." Compl. (dkt. 1) ¶ 9. Defendants sell "European American Design ("EAD") men's deodorant, deodorant spray, and body wash products[, ] . . . which compete with Plaintiffs [products]." Id. ¶¶ 11-13. Plaintiff claims that the EAD product labels "contain false and misleading statements or otherwise fail to meet the requirements for product labeling in the United States, " that consumers are "likely to be misled and deceived[, ]" and that Defendants' false and misleading labeling "is damaging to the reputation, goodwill, and sales of Plaintiff. . . ." Id. ¶¶ 13, 29-30.
Defendants assert in their counterclaims that Plaintiffs Power Stick products also contain false or misleading statements, and that Plaintiffs Power Stick Cool Blast product does not comply with numerous Food & Drug Administration ("FDA") regulations. SAA at 11-17. Significantly, Defendants claim that Plaintiffs Power Stick product labels are misleading because the statement "Made in the U.S.A. of U.S. and/or imported ingredients" is ambiguous. Id. at 11. Defendants assert that consumers will believe that the Power Stick products contain domestic ingredients when, because of the "and/or" language, there is no guarantee that any ingredients are domestic. Id. Because the Federal Trade Commission ("FTC") only requires language that clarifies the origin of a product's ingredients if the product is not all, or virtually all, comprised of domestic parts, Defendants contend that Plaintiffs use of qualifying language gives rise to an inference that the Power Stick products contain more than a de minimis amount of foreign content. Id. at 11-14. Plaintiff also advertises online using statements such as "Why we are made in America[, ]" without clarifying whether the product ingredients are domestic or foreign. Id. at 11-13. Defendants maintain that because Plaintiffs use of qualifying language on the Power Stick product labels gives rise to an inference that the products contain more than a de minimis amount of foreign content, Plaintiffs unqualified statements violate FTC guidelines and fail to adequately prevent consumer deception. Id.
On July 23, 2014, Plaintiff brought suit against Defendants, alleging violations of the Lanham Act and California Business and Professions Code sections 17200 and 17500. See generally Compl. On August 29, 2014, Defendants filed an answer, see generally Answer (dkt. 12), which Defendants amended on September 19, 2014 to include counterclaims against Plaintiff, see generally FAA (dkt. 29). On October 10, 2014, Plaintiff filed a motion to dismiss Defendants' counterclaims. See generally MTD FAA (dkt. 34). On October 24, 2014, Defendants amended their counterclaims. See SAA at 10-22. Plaintiff now moves to dismiss Defendants' amended counterclaims. See generally MTD.
II. LEGAL STANDARD
A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. Ileto v. Glock. Inc.. 349 F.3d 1191, 1199-1200 (9th Cir. 2003) (citing Fed.R.Civ.P. 12(b)(6)). Dismissal is proper if a complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). To survive dismissal, a complaint must contain factual allegations sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twomblv. 550 U.S. 544, 555 (2007)). When determining plausibility, allegations pertaining to material facts are accepted as true for purposes of the motion and construed in the light most favorable to the non-moving party. Wyler-Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). If dismissal is ordered, the plaintiff should be granted leave to amend unless it is clear that the claims could not be saved by amendment. Swartz v. KPMG LLP, 476 F.3d 756, 760 (9th Cir. 2007).
Plaintiff moves to dismiss Defendants' counterclaims, which allege false advertising in violation of the Lanham Act § 43(a) and California Business and Professions Code, § 17500 et seq., and unfair competition in violation of California Business and Professions Code § 17200 et seq. See generally MTD; SAA. Specifically, Defendants argue that: (1) the statement "Made in the U.S.A. of U.S. and/or imported ingredients" on all of Plaintiff s Power Stick products is misleading; (2) Plaintiffs use of unqualified statements of U.S. origin in its advertising is misleading; and (3) Plaintiffs Power Stick Cool Blast product violates numerous FDA labeling requirements. See SAA at 10-21.
As explained below, Defendants fail to state a claim for false advertising and so the Court will GRANT Plaintiffs motion to dismiss the first two causes of action with prejudice. Because Defendants' third cause of action, specifically as it relates to Power Stick Cool Blast's alleged labeling violations, states a plausible claim, the Court will DENY Plaintiffs motion to dismiss Defendants' unfair competition claim.
A. U.S. Origin Claims
Plaintiff moves to dismiss Defendants' first and second causes of action, which allege that Plaintiffs U.S. origin statements are misleading. See generally MTD; SAA at 19-20. Plaintiff argues that Defendants do not have any factual basis for their claims. MTD at 7-8; Reply (dkt. 51) at 4-6. Defendants argue that they state a claim based on Plaintiffs use of "and/or" language and its use of both unqualified and qualified statements of U.S. origin. Opp'n (dkt. 50) at 4-6.
The parties primarily dispute whether Defendants have adequately stated a false advertising claim under Lanham Act § 43(a), Defendants' first cause of action.See generally SAA; MTD; Opp'n. Plaintiff argues that, because its products contain no more than a de minimis amount of foreign content, both its unqualified and qualified statements of U.S. origin comply with the FTC's guidelines and are not misleading to consumers. MTD at 7-8; Reply at 4-6. Plaintiff goes on to argue that whether Plaintiff complies with the FTC guidelines is not provably false and that, without any other factual basis supporting Defendants' claim, Defendants cannot maintain a private right of action requiring Plaintiff to substantiate its statements. Id. Defendants argue that Plaintiffs products contain more ...