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Brown v. The Hain Celestial Group, Inc.

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

May 26, 2015

ROSMINAH BROWN, et al., Plaintiffs,
v.
THE HAIN CELESTIAL GROUP, INC., Defendant.

ORDER GRANTING PARTIAL SUMMARY JUDGMENT [Re: ECF Nos. 244, 296]

LAUREL BEELER, Magistrate Judge.

INTRODUCTION

1.

This is a consumer-products mislabeling case. The plaintiffs allege that defendant Hain Celestial Group sold two lines of cosmetics whose front labels used the word "organic, " but that did not contain at least 70% organic ingredients as required by the California Organic Products Act ("COPA"), Cal. Health & Safety Code § 110810 et seq. For this alleged violation, the plaintiffs bring claims under COPA itself and under two general California remedial statutes: the Unfair Competition Law ("UCL"), Cal. Bus. & Profs. Code §§ 17200-10; and the Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code §§ 1750-84. ( See generally 1st Am. Compl. - ECF No. 68 at 16-22.)[1], [2] The court has certified two plaintiff classes (corresponding to the two Hain product lines) under federal procedural Rule 23(b)(3). (ECF No. 269 at 33.)

The plaintiffs now bring two summary-judgment motions on five issues of California law. The rather abstract nature of those motions permits this analysis to travel on a concise review of the facts. The plaintiffs allege that they bought various Hain cosmetic products under the brand names Avalon Organics and Jason. [3] The word "organic" obviously appears in the very name of - and so was on the front labels of - Avalon Organics products. And, for some time, Jason products carried the front-label tagline, "Pure, Natural, and Organic." Cosmetics in both lines underwent reformulations during the class period, as well as relabeling that (among other things) removed the "Pure, Natural, and Organic" tagline from Jason products.

It is undisputed that, before they were reformulated or relabeled, at least some Hain cosmetics were labeled and sold as "organic" without meeting COPAs organic-content requirement. The plaintiffs' summary-judgment motions reach only such products. They reach those products, moreover, in the abstract. This limitation is important. The parties do not agree on which specific products are "cosmetics" under COPA. They do not agree on which specific products fell short of COPAs 70% minimum. But such disagreements are immaterial to the present inquiry. The plaintiffs are not now seeking to establish that any specific product violated COPA, the UCL, or the CLRA; they are instead seeking to fix a handful of somewhat abstract doctrinal propositions that (they say) will apply to any cosmetic product that is later proved to have been "sold, labeled, or represented as organic" ( see Cal. Health & Safety Code § 110838(a)) without containing at least 70% organic content. The court's analysis and holdings are thus equally limited. The reasoning and conclusions below confirm aspects of California law (as the court understands them) but do not yet apply to any specific Hain products. Much less does the court hold that any specific product violated COPA, the UCL, or the CLRA.

2.

The plaintiffs' first motion (ECF No. 244) asks the court to summarily decide that: 1) Hain violated COPA by selling any cosmetic that used one of the front-label organic representations (the Avalon Organics brand name, or the Jason "Pure, Natural, and Organic" tagline) but had less than 70% organically produced ingredients; and 2) COPA violations are "predicate unlawful acts" under the UCL's unlawful prong. The plaintiffs' second motion (ECF No. 296) asks the court to rule that: 3) Representations on COPA-violating products are per se "material" under the UCL; 4) Such representations are per se deceptive under the UCL's fraud prong; and 5) Material misrepresentations create a "presumption of classwide reliance" under the CLRA.

The core of the plaintiffs' motions may be slightly recast as posing the following questions: If Hain's products were mislabeled and thus violated COPA, what doctrinal consequences follow? Are the plaintiffs correct that a COPA violation alone establishes materiality and likely deception under the UCL, and reliance under the CLRA? Those conclusions are striking and their impact potentially far-reaching. From a mislabeling, after all, the plaintiffs effectively argue that most of their case is proved. This is the most complicated part of the analysis; but Ninth Circuit and California law seem to compel the conclusion that the plaintiffs are correct. Infra, Analysis, Parts III-IV.

The court held a hearing on the plaintiffs' motions on March 19, 2015. ( See ECF No. 309.) After carefully considering the parties' arguments and the governing law, for the reasons below, the court grants the plaintiffs' motions.

* * *

SUMMARY-JUDGMENT LAW

I. RULE 56

The court must grant a motion for summary judgment if the movant shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Material facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49. Federal courts sitting in diversity normally apply the substantive law of the forum state. E.g., Nelson v. Int'l Paint Co., 716 F.2d 640, 643 (9th Cir. 1983).

II. THE PLAINTIFFS' MOTIONS ARE A PROPER USE OF RULE 56

The plaintiffs' motions are unusually abstract. They essentially ask the court to agree with several key points of law. Or, put differently, they ask the court to confirm key aspects of California doctrine. They do not seek or claim to prove that any given product violated COPA. The plaintiffs expressly limit their motion in this way. They do not, in other words, ask the court to summarily decide liability - though the legal points on which they seek decision would significantly advance their case. This makes Hain uncomfortable. Hain essentially complains that it should not be pinned to legal determinations before it knows which products, and how many products, the plaintiffs can prove violated COPA and so are ultimately at issue.

Hain's discomfort is understandable. The plaintiffs' summary-judgment motions apply obvious tactical pressure. Nevertheless, this is an appropriate use of summary judgment. Rule 56 provides: "A party may move for summary judgment, identifying each claim or defense - or the part of each claim or defense - on which summary judgment is sought." Fed.R.Civ.P. 56(a) (emphasis added). If the movant shows that it is "entitled to judgment as a matter of law, " then the court "shall enter summary judgment." Id. Modern courts applying the express language of Rule 56 seem comfortable entertaining partial summary judgments of the type sought here. See, e.g., Pound v. Airosol Co., 368 F.Supp.2d 1158 (D. Kan. 2004) (court entered summary judgment holding that pesticide sales - if the plaintiffs could prove that any were made - would violate Clean Air Act); France Stone Co. v. Charter Twp. of Monroe, 790 F.Supp. 707, 710 (E.D. Mich. 1992) (allowing partial summary-judgment motion "upon one issue in one of [plaintiff's] claims").

An important function of Rule 56 is to streamline cases for trial. This case features a slightly dizzying array of products and labels. The parties themselves have not yet agreed on which specific products and labels are implicated by the classes' claims. Resolving now those legal issues that can be resolved now will reduce the number of questions that remain unanswered, will streamline any later trial, and will help the parties and the court to better focus on the disputes that remain. The ultimate liability questions - centering on whether specific products were at least 70% organic - will surely be more fact-intensive. If we can resolve clearer issues now, and get them out of the way, so much the better. Rule 56 allows for that.

At the hearing, Hain suggested that having to face this type of partial summary-judgment motion deprives it of due process, because it wrongly shifts to Hain the burden of proving that its products did not violate COPA. Hain also argued that ruling on the plaintiffs' motions would constitute an impermissible advisory opinion. The court agrees on neither count. The plaintiffs will ultimately have to prove that specific products indeed violated COPA: that they were "sold, labeled, or represented as being organic" but did not contain at least 70% organic ingredients. No one has suggested otherwise. There is no burden-shifting here and no disruption of normal judicial process. Furthermore, as just noted, Rule 56 expressly contemplates partial summary-judgment motions, and case law recognizes that such motions can pose abstract, doctrinal issues for decision as a matter of law, while other aspects of a claim are suspended for later decision. Hain agreed at the hearing that the plaintiffs' motions effectively present a "case-management" question: i.e., an administrative opportunity to pare off certain issues now in order to streamline later stages of this case. To the extent that it is a case-management issue, the decision to entertain the plaintiffs motions is within the court's discretion. Finally, Hain itself suggested that the court could properly consider partial summary-judgment motions that teed up other questions not dissimilar in kind from those that the plaintiffs now ask. Hain agreed that the court could entertain motions to rule classes of products as falling inside or outside COPA. (Products with certain characteristics are soaps and not cosmetics, for example.) That is not so different from the questions raised in the plaintiffs' present motions. The court does not see why the product-type questions that Hain condones should be appropriate for Rule 56 analysis, while the more purely doctrinal issues that the plaintiffs pose should be forbidden. The plaintiffs' motions reflect a proper use of Rule 56 and the court proceeds to consider them.

ANALYSIS

I. MISLABELED HAIN PRODUCTS TRIGGER COPA - DEFERENCE TO CDPH

The relevant part of COPA provides that, "Cosmetic products sold, labeled, or represented as organic or made with organic ingredients shall contain, at least 70 percent organically produced ingredients." Cal. Health & Safety Code § 110838(a). The plaintiffs first move the court to hold that Hain violated COPA by selling any product that used a variant of the word "organic" on the label but had less than 70% organically produced ingredients. Hain responds that this conclusion is foreclosed by a February 2013 "notice of resolution" from the California Department of Public Health ("CDPH"). In Hain's view, the court should "defer" to that letter.

The court discussed this letter at length in its order of February 10, 2014, which denied Hain's motion for summary judgment. (ECF No. 172.) There, Hain had asked the court to hold that, with its letter, the CDPH had found that Hain's labels complied with COPA and thus barred the plaintiffs' claims. ( See ECF No. 156.) In brief, the CDPH's February 2013 letter was the culmination of a process in which Hain, responding to the agency's inquiry, sent the CDPH several hundreds of pages of documents consisting of product labels, product formulas, and organic certificates for Hain products. Among this material was a chart showing that Hain would be discontinuing all but two Jason products. Hain also sent the CDPH the pre-2011 ( i.e., pre-reformulation) labels and formulas for four Avalon Organics products: three of these are not at issue in this case, while the fourth was being discontinued. ( See ECF No. 172 at 4-7.) Sometime later, Hain described or sent the CDPH samples of revised Avalon Organics and Jason labels. The new Avalon Organics labels (Hain told the CDPH) now stated that the products conformed to "ANSI/NSF-305" organic-content standards (which means that they are not at issue in this case). The new Jason labels no longer carried the "Pure, Natural, and Organic" tagline. ( See id. at 9-10.) The CDPH's "notice of resolution" letter acknowledged the Avalon Organics certification and the removal of the Jason tagline. It suggested that these products did not use the word "organic" so as to trigger COPA and stated that the CDPH "consider[ed] the matter resolved." ( Id. )

This court held that the CDPH letter did not bar the plaintiffs' claims that the term "organic" on the Hain products triggered COPA and that, if such a product contained less than 70% organic ingredients, then it violated COPA. The CDPH inquiry was ex parte and too "informal" to have a preclusive effect, this court held, amounting only to the agency's decision not to further investigate. ( Id. at 16-23.)

Hain now argues that the CDPH letter (ECF No. 164-11) warrants "deference" - enough that the court should find that no Hain product violated, or even "triggered, " COPA by using the term "organic" on its front label. ( See ECF No. 228 at 15-20; ECF No. 303 at 7.)

The court does not agree. The court stands by the reasons that led it to refuse to give the CDPH letter preclusive effect barring the plaintiffs' claims. ( See ECF No. 172.) That letter was informal and ex parte. It was more a record of the agency's decision not to inquire further than it was a quasi-judicial adjudication or quasi-legislative rulemaking. The analysis and answer are not importantly different now, where Hain asks the court only to "defer" to the CDPH letter, rather than give it full-blown preclusive effect.

Federal courts applying state law apply state rules about judicial deference to administrative decisions. See Alvarez v. IBP, Inc., 339 F.3d 894 (9th Cir. 2003). The seminal California case on judicial deference to administrative agencies is Yamaha Corp. of Am. v. State Bd. of Equalization, 19 Cal.4th 1 (1998). Among other things, Yamaha rejected the idea that an agency's interpretation of a statute is entitled to the same "great deference" that normally attends its "quasi-legislative, " rulemaking function. See id. at 6-7. Whether and how much a court should defer to an administrative interpretation is above all "contextual." Id. at 7. "The standard for judicial review of agency interpretation of law is the independent judgment of the court, giving deference to the determination of the agency appropriate to the circumstances of the agency action." Id. at 8 (emphases in Yamaha ). There are "two broad categories of factors relevant to a court's assessment of the weight due an agency's [statutory] interpretation." Id. at 12. The first are "those indicating that the agency has a comparative interpretive advantage over the courts." Id. The second are those indicating that the agency's decision is "probably correct." Id. at 12-13.

Both considerations militate for giving the CDPH letter little deference. This case presents a question of straightforward statutory interpretation in plain English. This is not the CDPH applying technical expertise to interpret an exotic statutory term. Its "notice of resolution" involves no "special familiarity with satellite legal and regulatory issues." See id. at 11. The agency thus has no "comparative interpretive advantage" over the court. To the contrary: Given that the court's workaday job consists largely of reading and applying statutes, it probably has the interpretive advantage over the CDPH. Nor do the circumstances suggest that the CDPH is "probably correct." Reading COPA's very comprehensible language, it would seem that the CDPH baldly erred if it held that a product labeled "organic" but having less than 70% organic ingredients does not trigger COPA. (That is not the conclusion that the CDPH reached, but that is the effect that the plaintiffs would give it here.) Such a product would seem to be exactly what triggers COPA. California and Ninth Circuit cases emphasize that it is the judiciary's constitutional role to interpret statutes; that is not the primary domain of administrative agencies. Even when deferring to administrative agencies, cases remind us, a court is doing only that: giving agency decisions due consideration in the course of reaching its own conclusion. See id. at 8. When, as here, the statute needs no technical interpretation outside a court's normal expertise, then the agency's construction of a statute is due little if any deference.

* * *

II. COPA VIOLATIONS ARE UCL "UNLAWFUL" PREDICATES

The plaintiffs next move the court to hold that, as matter of law, COPA violations are "predicate unlawful acts" under the UCL term that outlaws "any unlawful... business act or practice." See Cal. Bus. & Profs. Code § 17200. This "unlawful prong" of the UCL "incorporates other laws to make them actionable." Jordan v. Paul Fin., LLC, 745 F.Supp.2d 1084, 1098 (N.D. Cal. 2010). "Generally, 2017violation of almost any law may serve as a basis for a UCL claim." Id. (quoting in part Plascencia v. Lending 1st Mortg., 259 F.R.D. 437, 448 (N.D. Cal. 2009) (citing in turn Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000)). Hain does not contest this particular aspect of the ...


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