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Hadley v. Kellogg Sales Co.

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

March 21, 2017

STEPHEN HADLEY, Plaintiff,
v.
KELLOGG SALES COMPANY, Defendant.

          ORDER GRANTING DEFENDANT'S MOTION TO DISMISS RE: DKT. NO. 44

          LUCY H. KOH, United States District Judge

         Plaintiff Stephen Hadley (“Plaintiff) brings the instant suit against Defendant Kellogg Sales Company (“Defendant”) for allegedly misleading statements on Defendant's food product packaging. Before the Court is Defendant's Motion to Dismiss. ECF No. 44 (“Mot.”). Having considered the parties' briefing, the relevant law, and the record in this case, the Court GRANTS Defendant's Motion to Dismiss.

         I. BACKGROUND

         A. Factual Background

         Defendant is a “multi-billion dollar food company that manufactures, markets, and sells a wide variety of cereals and bars, among other foods.” ECF No. 27, First Amended Complaint (“FAC”) ¶ 109. Defendant is allegedly “the world's leading producer of cereal.” Id. Defendant allegedly has “positioned itself in the market as a purportedly ‘healthy' brand of processed food, by using various labeling statements to suggest its foods, especially its cereals and bars, are healthy choices.” Id. ¶ 113.

         Plaintiff “has been a frequent cereal eater for many years.” Id. ¶ 366. Over the past several years, Plaintiff has purchased Defendant's breakfast cereals and cereal bars. Id. ¶ 367-68. During that time period, Plaintiff allegedly “tried to choose healthy options, and has been willing to pay more for cereals he believes are healthy.” Id. at 366.

         This case concerns statements on the packaging for breakfast cereals and cereal bars sold by Defendant that allegedly indicate that Defendant's products are healthy when “excess sugar” allegedly causes those products to be unhealthy. Plaintiff alleges that twelve of Defendant's product lines are sold with misleading packaging. See FAC ¶¶ 122-23. Those product lines are (1) Kellogg's Raisin Bran, (2) Kellogg's Krave, (3) Kellogg's Frosted Mini-Wheats, (4) Kellogg's Smart Start - Original Antioxidants, (5) Kellogg's Crunchy Nut, (6) Nutri-Grain Cereal Bars, (7) Nutri-grain Soft-Baked Breakfast Bars, (8) Nutri-Grain Oat & Harvest Bars, (9) Nutri-Grain Harvest Hearty Breakfast Bars, (10) Nutri-Grain Fruit Crunch Granola Bars, (11) Nutri-Grain Crunch Crunchy Breakfast Bars, and (12) Nutri-Grain Fruit & Nut Chewy Breakfast Bars. Id. Some of these product lines have multiple variants such that there are 53 products total that Plaintiff alleges are being sold with packaging that is misleading. Id.

         In general, Defendant's products are alleged to contain 10 to 19 grams of total sugar per serving and are 20 to 40% sugar by calorie. Id. However, the FAC indicates that there is a difference between “total sugar, ” which is composed of all sugar in a product, including those provided by fruit, and “added sugar, ” which is composed of sugar that does not naturally occur in the ingredients of the product. Id.

         The FAC alleges that the consumption of added sugar (as opposed to total sugar) can have significant health impacts on individuals. Specifically, the FAC alleges that people in the United States consume excess added sugar, that people can become addicted to added sugar, and that excess added sugar consumption is linked to metabolic syndrome, type 2 diabetes, cardiovascular disease, liver disease, obesity, inflammation, high cholesterol, hypertension, Alzheimer's disease, and some cancers. FAC ¶¶ 9-108. This link allegedly has been shown in multiple studies where the subjects of the study consumed 35 to 75 grams of added sugar (the amount of sugar in 1 to 2 cans of soda) per day. Id.

         Moreover, the FAC alleges that the American Heart Association (“AHA”) has found that a person is “safe” to consume up to 5% of his or her daily calories in added sugar, which amounts to approximately 25 grams of added sugar on a 2000 calorie diet. Id. ¶ 25. On the other hand, the United States Food and Drug Administration (“FDA”) has concluded that the Daily Recommended Value (“DRV”) of added sugars is 10% of a person's daily calories, or approximately 50 grams of added sugar. Based on these values, Plaintiff alleges that Defendant's products have a higher percentage of total sugar per serving (20-40% of total calories per serving) than the daily “safe” percentage of added sugar recommended by the AHA or the DRV recommended by the FDA. Id. The FAC does not explain why the per-serving total sugar percentage in the products should be compared to the recommended daily added sugar consumption percentage suggested by the AHA and the FDA.

         Plaintiff alleges that the packaging for Defendant's products contains multiple statements touting the health and wellness benefits of consuming Defendant's products. For example, the packaging for Defendant's products contains statements like “Heart Healthy, ” “Great taste that does your heart good, ” “Start with a healthy spoonful, ” “Invest in your health invest in yourself, ” “nutritious, ” “Good source of whole grains, ” and “good source of fiber.” FAC ¶¶ 127-219.

         As an example, Plaintiff alleges that Raisin Bran contains the following “health and wellness” claims:

a. “HEART HEALTHY”
b. “Kellogg's Heart Healthy Selection”
c. “GREAT TASTE THAT DOES YOUR HEART GOOD”
d. “HEART HEALTHY / Whole grains can help support a healthy lifestyle.”
e. “ HEART HEALTH / Kellogg's Raisin Bran / With crispy bran flakes made from whole grain wheat, all three varieties of Kellogg's Raisin Bran are good sources of fiber.”
f. “Start with a healthy Spoonful”
g. “Invest in your health invest in yourself
h. “Get health & nutrition tips at Kelloggs.com/HealthyInvestments”
i. “Kellogg's offers a full breakfast portfolio that features essential nutrients to help you start right and make the most of every day.” [picturing Raisin Bran]
j. “NUTRIENTS FOR EVERY DAY / Kellogg's breakfasts offer the nutrients our bodies want to work and feel their best.”
k. “A serving of Kellogg's cereals with one cup of low-fat milk offers a tasty combination of carbs and protein that helps recharge your body. Protein helps you rebuild and carbs help you refuel.”
l. “A great way to START THE DAY / A breakfast of Kellogg's cereal and milk is nutritious at its most delicious. Every spoonful has grains to help recharge your body. So go ahead, pour your favorite bowl of crunchy goodness. It just fuels right!”
m. “Goodness of Simple Grain”
n. Whole Grains Council Stamp
o. “FIBER / Fiber, like bran fiber, plays a very important party in your digestive health and overall well-being.”
p. “MADE WITH REAL FRUIT”
q. “REAL FRUIT / Delicious raisins add a sweetness you'll love to every morning”
r. “BREAKFAST BRAINPOWER”

Id. ¶ 128. In contrast, other products such as Defendant's Nutri-Grain Fruit Crunch Granola Bars and Nutri-Grain Crunch Crunchy Breakfast Bars contain only a single challenged statement: “MADE WITH Real Fruit.” Id. ¶ 280.

         B. Procedural History

         On August 29, 2016, Plaintiff filed a complaint. ECF No. 1. On October 31, 2016, Defendant filed a motion to dismiss. ECF No. 22. In lieu of filing a response, on November 14, 2016, Plaintiff filed a First Amended Complaint. ECF No. 27 (“FAC”). The FAC alleged five causes of action including (1) violation of the California False Advertising Law (“FAL”), (2) violation of the California Consumers Legal Remedies Act (“CLRA”), (3) violation of the California Unfair Competition Law (“UCL”) under the fraudulent, unfair, and unlawful prongs, (4) breach of express warranty, and (5) breach of the implied warranty of merchantability. Id.

         On December 8, 2016, Defendant filed the instant motion to dismiss the FAC. ECF No. 44 (“Mot.”). On January 5, 2017, Plaintiff filed an opposition, ECF No. 49 (“Opp'n”), and on January 19, 2017, Defendant filed a reply, ECF No. 50 (“Reply”).

         II. LEGAL STANDARD

         A. Rule 8(a)

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). The United States Supreme Court has held that Rule 8(a) requires a plaintiff to plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6) motion, a court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

         However, a court need not accept as true allegations contradicted by judicially noticeable facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and the “court may look beyond the plaintiffs complaint to matters of public record” without converting the Rule 12(b)(6) motion into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor is a court required to “‘assume the truth of legal conclusions merely because they are cast in the form of factual allegations.'” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord Iqbal, 556 U.S. at 678. Furthermore, “a plaintiff may plead herself out of court” if she “plead[s] facts which establish that [s]he cannot prevail on h[er] . . . claim.” Weisbuch v. Cty. of LA., 119 F.3d 778, 783 n.1 (9th Cir. 1997) (internal quotation marks and citation omitted).

         B. Rule 9(b)

         Claims sounding in fraud or mistake are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), which requires that a plaintiff alleging fraud “must state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b); see Kearns v. Ford Motor Co, 567 F.3d 1120, 1124 (9th Cir. 2009). To satisfy Rule's 9(b)'s heightened standard, the allegations must be “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege “an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (internal quotation marks omitted). “The plaintiff must set forth what is false or misleading about a statement, and why it is false.” In re Glenfed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in Ronconi v. Larkin, 253 F.3d 423, 429 n.6 (9th Cir. 2001).

         C. Leave to Amend

         If the Court determines that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “should be freely granted when justice so requires, ” bearing in mind that “the underlying purpose of Rule 15 ... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotation marks omitted). Nonetheless, a court “may exercise its discretion to deny leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of amendment.'” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

         III. DISCUSSION

         The main thrust of Plaintiff s FAC is that Defendant represents that its products are healthy even though Defendant's products contain excess, unhealthy amounts of added sugar. Defendant challenges Plaintiffs causes of action by arguing that (1) Plaintiffs causes of action under the FAL, the CLRA, and the UCL fail because Plaintiff has inadequately alleged fraud, (2) Plaintiffs cause of action fails under the unlawful prong of the UCL because Plaintiff has not adequately alleged a violation of any law or regulation, (3) the statements on Defendant's packaging are puffery, and therefore cannot create an express warranty, and (4) that the implied warranty of merchantability has not been violated. Defendant also argues that Plaintiff does not have standing to seek injunctive relief. Plaintiff and Defendant both include requests for judicial notice in support of the instant motion. The Court first addresses the parties' requests for judicial notice and then addresses each of the above arguments in turn.

         A. Requests for Judicial Notice

         The Court first addresses Defendant's request for judicial notice, ECF No. 45, and Plaintiffs request for judicial notice, ECF No. 49-1. The Court may take judicial notice of matters that are either “generally known within the trial court's territorial jurisdiction” or “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). Public records, including judgments and other publicly filed documents, are proper subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir. 2007) (“[Courts] may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue.”); Rothman v. Gregor, 220 F.3d 81, 92 (2d Cir. 2000) (taking judicial notice of a filed complaint as a public record).

         However, to the extent any facts in documents subject to judicial notice are subject to reasonable dispute, the Court will not take judicial notice of those facts. See Lee v. City of L.A, 250 F.3d 668, 689 (9th Cir. 2001) (“A court may take judicial notice of matters of public record . . . But a court may not take judicial notice of a fact that is subject to reasonable dispute.”) (internal quotation marks omitted), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

         In ECF Number 45, Defendant requests judicial notice of the following documents:

• An image of the packaging for Kellogg's Raisin Bran during the alleged class period;
Food Labeling; General Requirement for Health Claims for Food, 58 Fed. Reg. 2478 (Jan. 6, 1993);
Food Labeling: Nutrient Content Claims, Definition of Term: Healthy, 59 Fed. Reg. 24232 (May 10, 1994);
Food Labeling: Added Sugars; Availability of Citizen Petition, 65 Fed. Reg. 39414 (June 26, 2000);
Food Labeling: Revision of the Nutrition and Supplement Facts Labels, 81 Fed. Reg. 33742 (May 27, 2016);
• Food Labeling: Revision of the Nutrition and Supplement Facts Labels, 79 Fed. Reg. 11880 ...

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