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Petkevicius v. NBTY, Inc.

United States District Court, S.D. California

March 24, 2017

PAIGE PETKEVICIUS, on behalf of herself and all others similarly situated, Plaintiff,
NBTY, INC., et al., Defendants.


          Hon. Cathy Ann Bencivengo United States District Judge.

         This matter is before the Court following an order to show cause as to the Court's subject matter jurisdiction. Both parties responded in writing to the Court's order, and the Court held oral argument on March 24, 2017. For the reasons set forth below, the case is dismissed for lack of subject matter jurisdiction.

         I. Background

         This case arises out of Defendants' alleged false statements about the health benefits of Gingko biloba. It originated as two separate lawsuits. On October 17, 2014, Plaintiff Paige Petkivicius filed a complaint against Defendant Rexall Sundown, Inc. (“Rexall”) that was assigned case number 14-CV-2482-CAB-RBB in this Court (the “Rexall Complaint”). This Rexall Complaint alleged that Rexall manufactures Gingko biloba products and that the labels of those products falsely represent that Gingko biloba “supports healthy brain function, ” “helps support memory, especially occasional mild memory problems associated with aging, ” and “helps maintain healthy circulation.” [Case No. 14cv2482, Doc. No. 1 at ¶¶ 1-3.] In reality, according to the complaint, “[a]ll available, reliable, scientific evidence demonstrates that the Gingko biloba products have no efficacy at all . . .” [Id. at ¶ 2 (emphasis in original).] The Rexall Complaint asserted claims for (1) violation of California's unfair competition law (the “UCL”), California Business & Professions Code § 17200 et seq., (2) violation of California's Consumer Legal Remedies Act (“CLRA”), California Civil Code § 1750 et seq., and (3) breach of express warranty, on behalf of a putative multistate class of purchasers of Rexall's Gingko biloba product. [Id. at ¶ 36.]. The prayer for relief asked for actual, punitive and statutory damages, restitution, disgorgement, declaratory and injunctive relief, and attorneys' fees and costs. [Id. at pp. 17-18.]

         The Rexall Complaint stated that the “Court has original jurisdiction pursuant to [the Class Action Fairness Act (“CAFA”), ] 28 U.S.C. § 1332(d)(2). The matter in controversy, exclusive of interest and costs, exceeds the sum or value of $5, 000, 000 and is a class action in which there are in excess of 100 class members and many members of the Class are citizens of a state different from Defendant.” [Id. at ¶ 7] The complaint also alleged that Plaintiff is a California citizen [Id. at ¶ 10], while Rexall is a Florida corporation with its principal place of business in New York [Id. at ¶ 12]. The complaint alleged that Petkevicius paid approximately $18.00 for the Gingko biloba product she purchased [Id. at ¶ 11], and that the putative class members “have been harmed in the amount they paid for the product.” [Id. at ¶ 5.] The complaint did not contain any factual allegations as to the total damages suffered by the putative class, but alleged that “Rexall manufacturers, advertises, markets and distributes Ginkgo Biloba products to thousands of customers across the country.” [Id. at ¶ 13.]

         Several weeks later, on November 3, 2014, Petkevicius initiated this action with a complaint against Defendants NBTY, Inc. and Nature's Bounty, Inc. (the “Nature's Bounty Complaint”). The Nature's Bounty Complaint was almost identical to the Rexall Complaint. Plaintiff alleged that NBTY and Nature's Bounty manufacture Gingko biloba products and make identical or almost identical false statements about the health effects of those products. It contained the same jurisdictional allegations, defined the multistate class similarly, asserted identical claims, and prayed for the same relief.

         Nature's Bounty and Rexall are both indirect wholly-owned subsidiaries of NBTY [Doc No. 7; Doc. No. 9 in 14cv2482.], and they are all represented by the same counsel. On December 19, 2014, the three entities jointly moved the Judicial Panel on Multidistrict Litigation to consolidate Plaintiff's two lawsuits with a third lawsuit filed by Alison Wilson against Nature's Bounty and NBTY that was pending in the Central District of California. [Doc. No. 3.] The motion asserted that all three lawsuits “share a central factual issue- whether Plaintiff can establish through scientific studies or otherwise that the Gingko biloba product claims are false. . . .” [Doc. No. 3-1 at 12.] On April 2, 2015, the MDL Panel denied Defendants' motion. [Doc. No. 16.]

         While Defendants' motion before the MDL panel was pending, Petkevicius and Wilson jointly filed the first amended complaint (“FAC”) in this action. [Doc. No. 11.] The FAC named NBTY, Nature's Bounty and Rexall as defendants and was based on the same or similar allegations of false and misleading statements on the labels of Gingko biloba products about its effectiveness. Like the prior complaints, the FAC claimed the Court has jurisdiction pursuant to CAFA and that “the amount in controversy exceeds the sum of $5, 000, 000, exclusive of interest and costs.” [Id. at ¶ 9.] The FAC repeats the allegation that the putative class was “harmed in the amount they paid for the Gingko biloba products”, [Id. at ¶ 7], but unlike the Nature's Bounty and Rexall Complaints, the FAC is silent as to the amounts Petkevicius and Wilson paid for the products in question. The FAC adds an allegation that “Defendants sell thousands of units of the Gingko biloba Products nationally per month . . . .” [Id. at ¶ 28.]

         The FAC identified four products marketed and distributed by Nature's Bounty, and two products marketed and distributed by Rexall. [Id. at ¶¶ 15-16.] The FAC alleges that NBTY manufactures and markets all of the Gingko biloba products in question. [Id. at ¶ 14.] The FAC also alleges that each defendant “was the agent, employee, representative, partner, joint venture, and/or alter ego of the other Defendants . . .” in connection with the alleged wrongdoing. [Id. at ¶ 17.] It stated that Plaintiffs sought to represent two classes, a California class, and a multistate Class. [Id. at ¶ 60.] The FAC asserted three separate UCL claims (one each for unlawful, unfair, and fraudulent business practices), a CLRA claim, a claim under California's False Advertising Law (“FAL”), California Business & Professions Code § 17500 et seq., and a breach of express warranty claim, and prayed for the same relief as the original Rexall and Nature's Bounty Complaints. On February 10, 2016, the parties stipulated to the dismissal of Wilson's claims against Defendants, leaving Petkevicius as the only representative plaintiff.

         On September 15, 2016, the Court granted Defendants' motion to dismiss the FAC's injunctive relief claims and the claims on behalf of a multistate class for lack of Article III standing. [Doc. No. 79.] The order gave leave to amend to renew the multistate claims with a new named plaintiff who had standing, but no amendment was filed. Petkevicius then filed a motion to certify only a California class.

         Upon review of the briefs and evidence related to Plaintiff's motion to certify a California class, it became apparent to the Court that Defendants' California retail sales of Gingko biloba products at the time the original complaints were filed may not have exceeded $5, 000, 000. Accordingly, the Court ordered Plaintiff to show cause as to why the case should not be dismissed for lack of subject matter jurisdiction. The order instructed Plaintiff to address: (1) the relevant time period for calculating the amount in controversy; (2) what amounts should be included in the amount in controversy, including whether amounts related to the claims dismissed for lack of standing should be included; and (3) if the amount in controversy is only equal to the California retail sales of the class products within the class period at the time the complaint was filed, whether the $5, 000, 000 requirement is satisfied. Both parties responded in writing to the Court's order arguing that CAFA's jurisdictional minimum is satisfied.

         II. Discussion

         Although both parties argue that the CAFA jurisdictional minimum is satisfied, they do so on slightly different grounds. Defendants argue: (1) that the amounts attributable to the multistate class that the Court dismissed for lack of standing should be included in the amount in controversy; and (2) that even if only the California class damages are considered, the Court should include damages related to putative class member purchases that occurred after the complaint was filed, which, along with attorneys' fees, would put the total amount in controversy over $5, 000, 000. For her part, Petkevicius does not argue that damages attributable to the multistate class should be included in the amount in controversy. Instead, she argues, like Defendants, that the relevant amounts for calculating the amount in controversy include damages related to purchases after the complaints were filed. In addition, Petkevicius argues that punitive damages and attorneys' fees must be included in the calculation.

         A. Burden of Proof for CAFA Jurisdiction

         Pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), federal district courts have original subject matter jurisdiction over class actions in which a member of the plaintiff class is a citizen of a state different from any defendant and the aggregate matter in controversy exceeds $5, 000, 000, exclusive of interest and costs. 28 U.S.C. § 1332(d)(2). The only question here is whether the amount in controversy exceeded $5, 000, 000 when the lawsuit was filed.

         The overwhelming majority of decisions concerning CAFA jurisdiction involve cases removed to federal court by defendants. This is likely because most class action defendants prefer to be in federal court and therefore do not contest subject matter jurisdiction in the rare instances where a plaintiff files a state law class action in federal court.[1] Thus, while the law applicable to determining the existence CAFA jurisdiction in the context of a motion to remand filed by a plaintiff has become clearer in recent years, there is hardly any authority evaluating the existence of CAFA jurisdiction in class actions originally filed in federal court.

         To remove a case pursuant to CAFA, “a defendant's notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S.Ct. 547, 554 (2014). “But evidence establishing the amount is required where . . . defendant's assertion of the amount in controversy is contested by plaintiffs. In such a case, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” Ibarra v. Manheim Investments, Inc., 775 F.3d 1193, 1197 (9th Cir. 2015) (citations and internal quotation marks omitted). “CAFA's requirements are to be tested by consideration of real evidence and the reality of what is at stake in the litigation, using reasonable assumptions underlying the defendant's theory of damages exposure.” Ibarra, 775 F.3d at 1198. “[A] defendant cannot establish removal jurisdiction by mere speculation and conjecture, with unreasonable assumptions.” Id. at 1197. Usually, “[t]he removal statute is strictly construed, and any doubt about the right of removal requires resolution in favor of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). However, “Congress intended CAFA to be interpreted expansively.” Ibarra, 775 F.3d at 1197. Thus, “no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” Dart, 135 S.Ct. at 554.

         Of course, this case was originally filed here, not removed by the defendant. Thus, Plaintiff argues that her burden is less than that faced by a defendant seeking to remove a class action based on CAFA. The Court disagrees and holds Plaintiff to the same burden for establishing CAFA jurisdiction as it would hold a defendant who removed the case to this Court and faced a motion to remand from the plaintiff. In other words, the Court evaluates the allegations related to the amount in controversy in the complaint here in the same ...

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