United States District Court, N.D. California, San Jose Division
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO DISMISS [RE: ECF 16]
LABSON FREEMAN, United States District Judge
is a state as well as a state of mind. When adults want to
escape the mainland, they can go to their local grocery
store, purchase a package of Kona Brewing Company beer, and
feel as though they are transported to the beaches of Hawaii.
This case is about the importance of where that beer actually
is brewed. Plaintiffs Theodore Broomfield, Sara Cilloni, and
Simone Zimmer (collectively, “Plaintiffs”) allege
on behalf of themselves and three putative classes of
consumers, that Defendant Craft Brew Alliance, Inc.
(“CBA”), doing business as Kona Brewing Company,
intentionally misleads consumers into believing that Kona
Brewing Company beer (“Kona beer”) is exclusively
brewed in Hawaii.
the Court is CBA's Motion to Dismiss Plaintiffs'
Consolidated Class Action Complaint. Motion to Dismiss
(“Mot.”), ECF 16; Consolidated Complaint
(“Compl.”), ECF 15. Plaintiffs filed an
opposition to CBA's motion to dismiss on May 26, 2017.
(“Opp'n”), ECF 21. CBA filed a reply on June
9, 2017. (“Reply”), ECF 23. The Court heard oral
argument on August 3, 2017 and thereafter took the matter
under submission. The Court has reviewed the parties'
briefing, the oral argument of counsel, and the robust legal
authority involving food and drink labeling. For the reasons
below, the Court GRANTS IN PART and DENIES IN PART CBA's
Motion to Dismiss.
Craft Brew Alliance, Inc. (“CBA”) is a publicly
traded conglomerate that acquired Kona Brewing Company
(“Kona”) in 2010. Compl. ¶ 18. Prior to its
acquisition by CBA, Kona had been brewing its beer in Hawaii
since the company started in 1994. Id. ¶ 17.
The Kona brand includes a variety of beer that references
Kona's Hawaiian origins, including “Longboard
Island Lager, ” “Big Wave Golden Ale, ”
“Fire Rock Pale Ale, ” “Wailua Wheat Ale,
” “Hanalei Island IPA, ” “Castaway
IPA, ” “Lavaman Red Ale, ”
“Lemongrass Luau, ” “Koko Brown, ”
and “Pipeline Porter.” Id. ¶ 22.
Kona has a Hawaiian brewery that makes its draft beer sold in
Hawaii, all of its bottled and canned beer, as well as its
draft beer sold outside of Hawaii, are brewed in the states
of Oregon, Washington, New Hampshire, and Tennessee.
Id. ¶¶ 1, 19. Plaintiffs allege that Kona
beer is packaged and marketed in a manner that is intended to
mislead reasonable consumers seeking to purchase a
Hawaiian-made beer. See, e.g., Id. ¶¶
23-25 (“In essence, Defendants intentionally mislead
consumers into believing that a small brewery in Hawaii -
which it owns and operates - brews all of the Kona Brewing
Co. Beers that Defendants sell on the mainland.”).
take issue with a number of representations on the packaging
of Kona beer. The Consolidated Complaint contains various
images of the packaging for six-packs and twelve-packs of
beer to support Plaintiffs' arguments that CBA intended
to create the impression that Kona beer is brewed in Hawaii
and exported to the continental United States. See
generally, Compl. For example, on the top of the box for
twelve-packs of Kona beer there is an image of a map of
Hawaii which marks the location of the Kona Brewing Co.
Brewery on the Big Island. Id. ¶¶ 26, 32.
The packaging of the twelve-packs also includes the
statement: “We invite you to visit our brewery and pubs
whenever you are in Hawaii.” Id. As for the
bottles of Kona beer themselves, an image of the Hawaiian
island chain and the phrase “Liquid Aloha” are
embossed on the front of each bottle. Id.
packaging for each variety of beer is further adorned with
its own Hawaiian-related images, including orchid flowers,
volcanoes, palm trees, surfers, canoes, waterfalls, and hula
dancers to match the theme of whichever beer is being
marketed and sold. Id. ¶¶ 28-73. Each type
of beer has its own slogan printed on the handle of the
six-pack, such as “Thirst's Up!” on the
package for Longboard Island Lager, “Catch a
Wave!” for Big Wave Golden Ale, and “Crack Open
Aloha!” for Koko Brown. Id. ¶¶ 30,
35, 70. Depending on the type of beer, the bottom of the
package for the six-pack includes the image of a Hawaiian
island, such as Oahu, the Big Island, or Molokai, next to a
narrative and a description of the specific beer.
Id. ¶¶ 31, 36, 41, 46, 51, 56. Plaintiffs
allege that the only address listed on the packaging is
“75-5629 Kuakini Highway, Kailua-Kona, Hawaii
96740.” Id. ¶¶ 32, 37, 42, 47, 52,
57, 60, 64, 67; but see CBA's Request for
Judicial Notice (“RJN”), ECF 17, Exhibit E
(Island Hopper Variety twelve-pack includes list of five
brewing locations next to address in Kona, Hawaii).
Plaintiffs assert that these “prominent references to
and images of Hawaiian landmarks, traditions, history, and
culture, taken in isolation and as a whole, are clearly
designed to create the false impression that the Kona Brewing
Co. Beers are brewed in Hawaii.” Id. ¶
and apart from the representations on the beer packaging,
Plaintiffs allege throughout the Complaint that CBA
misrepresents Kona beer as “craft beer” when it
is not. See, e.g., id. ¶¶ 115,
116, 133. Plaintiffs base their assertion on statements made
by a CBA executive on an earnings call in 2016 that discussed
how “the Kona brand plays like a craft brand imported
from Hawaii.” Id. ¶ 75. Moreover,
CBA's 10-K filing with the Securities and Exchange
Commission (“SEC”) states that “Kona
Brewing is one of the most distinctive craft brewers with a
broad portfolio of beers that reflect a uniquely Hawaiian
flavor profile, a recognized track record in sustainable
business practices, and deep ties to its local community as
Hawaii's oldest and largest craft brewery.”
Id. ¶¶ 78, 79. None of the Plaintiffs
alleges that they relied on these “craft brew”
Plaintiff Theodore Broomfield alleges that he purchased a
twelve-pack of Kona's Longboard Island Lager from
Walgreens in San Francisco. Id. ¶ 12. Plaintiff
Sara Cilloni alleges that she regularly purchased Longboard
Island Lager, most recently purchasing a six-pack in San
Jose. Id. ¶ 13. Plaintiff Simone Zimmer alleges
that she regularly purchased packages of Kona beer, including
the Island Hopper Variety twelve-pack, which includes a
selection of Kona beer. Id. ¶ 14. All three
Plaintiffs allege that they saw and relied on the
representations on the packaging of Kona beer, which varied
based on the type of beer they purchased. Id.
¶¶ 12, 13, 14. Specifically, Plaintiffs allege they
relied on the image of the map of the Hawaiian Islands which
marks the location of the Kona Brewing Company Brewery on the
Big Island. Id. Plaintiffs allege they believed the
beer was brewed in Hawaii, and they would not have purchased
Kona beer (or would have paid significantly less for it) had
they known the beer was actually brewed in the continental
United States. Id.
allege that CBA has intentionally capitalized on
consumers' willingness to pay more for goods that are
from Hawaii. See id. ¶ 82. These allegedly
unfair and deceptive practices have harmed Plaintiffs and the
purported classes of purchasers of Kona beer by causing them
to pay a “premium” for Kona beer they bought
under the mistaken belief that it was brewed in Hawaii.
Id. ¶ 96. Plaintiffs seek to enjoin CBA from
continuing to deceptively package Kona beer, and sue for
damages. Id. ¶ 97.
putative class action is brought pursuant to Rule 23 of the
Federal Rules of Civil Procedure and consists of three
classes: (1) a Nationwide Class of “[a]ll persons in
the United States who purchased any of the Kona Brewing Co.
Beers within the relevant statute of limitations periods,
” (2) a California Subclass of “[a]ll persons,
who are California residents who purchased any of the Kona
Brewing Co. Beers, or who purchased any of the Kona Brewing
Co. Beers within the State of California, during the relevant
statute of limitations periods, ” and (3) a California
Consumer Subclass of “[a]ll persons, who are California
residents who purchased any of the Kona Brewing Co. Beers, or
who purchased any of the Kona Brewing Co. Beers within the
State of California, for personal, family, or household
purposes during the relevant statute of limitations
periods.” Id. ¶ 99. Plaintiffs assert
nine causes of action against CBA arising from its marketing
and sale of Kona beer. Specifically, Plaintiffs seek to
represent the California consumer subclasses against CBA for
the following causes of action (“COA”): violation
of California's Consumer Legal Remedies Act
(“CLRA”), Cal. Civ. Code §§ 1750,
et seq. (First COA); unlawful, unfair, and
fraudulent business practices in violation of
California's Unfair Competition Law (“UCL”),
Cal. Bus. & Prof. Code § 17200, et seq.
(Second COA); false and misleading advertising in violation
of California's False Advertising Law
(“FAL”), Cal. Bus. & Prof. Code § 17500,
et seq. (Third COA); breach of express
warranty (Fourth COA); and breach of implied warranty (Fifth
COA). Plaintiffs also seek to represent the California
subclasses as well as the broader nationwide class of
consumers on claims for the following causes of action:
common law fraud (Sixth COA); intentional misrepresentation
(Seventh COA); negligent misrepresentation (Eighth COA); and
restitution based on quasi-contract/unjust enrichment (Ninth
COA). See generally Compl. This Court has
jurisdiction pursuant to 28 U.S.C. § 1332(a) and (d).
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 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (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.
motion to dismiss, the Court's review is limited to the
face of the complaint and matters judicially noticeable.
MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th
Cir. 1986); N. Star Int'l v. Ariz. Corp.
Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). However,
under the “incorporation by reference” doctrine,
the Court also may consider documents which are referenced
extensively in the complaint and which are accepted by all
parties as authentic. In re Silicon Graphics, Inc. Sec.
Litig., 183 F.3d 970, 986 (9th Cir. 1999), abrogated
on other grounds by S. Ferry LP, No. 2 v.
Killinger, 542 F.3d 776, 784 (9th Cir. 2008).
Leave to Amend
deciding whether to grant leave to amend, the Court must
consider the factors set forth by the Supreme Court in
Foman v. Davis, 371 U.S. 178 (1962), and discussed
at length by the Ninth Circuit in Eminence Capital, LLC
v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2009). A
district court ordinarily must grant leave to amend unless
one or more of the Foman factors is present: (1)
undue delay, (2) bad faith or dilatory motive, (3) repeated
failure to cure deficiencies by amendment, (4) undue
prejudice to the opposing party, and (5) futility of
amendment. Eminence Capital, 316 F.3d at 1052.
“[I]t is the consideration of prejudice to the opposing
party that carries the greatest weight.” Id.
However a strong showing with respect to one of the other
factors may warrant denial of leave to amend. Id.
REQUEST FOR JUDICIAL NOTICE
turning to CBA's motion to dismiss the Consolidated
Complaint, the Court addresses CBA's Request for Judicial
Notice (“RJN”), ECF 17. CBA requests the Court to
take judicial notice of the earlier-filed complaints in each
action that were eventually consolidated into the instant
case. ECF 17, Exhibits A, B. Plaintiffs oppose this request
and argue that the Consolidated Class Action Complaint is the
operative complaint which “supersedes” the
earlier complaints. ECF 22. CBA also requests judicial notice
of images of the packaging for five varieties of Kona beer.
ECF 17, Exhibits C-G. Plaintiffs do not oppose CBA's
request for judicial notice of the product packaging.
Exhibits C through G are properly subject to judicial notice
because they are incorporated by reference into the
Consolidated Complaint. See Knievel v. ESPN, 393
F.3d 1068, 1076 (2005). As for Exhibits A and B, though the
Court may take judicial notice of public records, the
original Broomfield and Cilloni complaints will not be
noticed “for the truth of the matter asserted
therein.” In re Bare Escentuals, Inc. Sec.
Litig., 745 F.Supp.2d 1052, 1067 (N.D. Cal. 2010);
see also M/V Am. Queen v. San Diego Marine Const.
Corp., 708 F.2d 1483, 1491 (9th Cir. 1983). The Court
does not take judicial notice of the legal reasoning or
disputed facts contained in publicly filed court records, but
rather considers only the existence of such allegations and
arguments. See, e.g., Lee v. City of Los Angeles,
250 F.3d 668, 690 (9th Cir. 2001) (permitting a court to take
judicial notice of another court's opinion, but not the
truth of the facts recited therein).
argues that the Court should take judicial notice of the
original Broomfield and Cilloni complaints for more than
their existence. See generally RJN Reply, ECF 24.
CBA asks the Court to compare the “conflicting reliance
allegations” made in the Consolidated Complaint with
the allegations in the original complaints. Id. 3.
In fact, throughout its motion to dismiss, CBA repeatedly
relies on allegations in the original Broomfield and Cilloni
complaints that are not present in the Consolidated
Complaint. See, e.g., Mot. 5-6
(“Plaintiffs' Consolidated Complaint conspicuously
deletes all references to and images of Kona
labels…along with references to Kona's
website.”). This is improper. CBA contends that the
Court need not “blindly accept the allegations in the
pleadings as true if [the] allegations are contradicted by
uncontested facts set forth in…facts that are included
in materials that can be judicially noticed.” RJN 3
(citing Yang v. Dar Al-Handash Consultants, 250 Fed.
App'x 771, 772 (9th Cir. 2007)). However, none of the
cases cited by CBA involves a court taking judicial notice of
conflicting allegations in a complaint that was subsequently
amended or superseded by an operative complaint. This is
because the Ninth Circuit recognizes the
“well-established doctrine that an amended pleading
supersedes the original pleading.” Ferdik v.
Bonzelet, 963 F.2d 1258, 1262 (9th Cir. 1992), as
amended (May 22, 1992); see also Loux v. Rhay,
375 F.2d 55, 57 (9th Cir. 1967) (“The amended complaint
supersedes the original, the latter being treated thereafter
as nonexistent.”) (citing cases), overruled in part
by Lacey v. Maricopa County, 693 F.3d 896, 928 (9th Cir.
2012). This doctrine prevents the Court from comparing the
allegations in Plaintiffs' original complaints to those
in the operative Consolidated Complaint in deciding CBA's
motion to dismiss. See Williams v. Cty. of Alameda,
26 F.Supp.3d 925, 936 (N.D. Cal. 2014) (“[T]he Court
will not consider any facts in the first amended complaint
(“FAC”) that are not pled in the SAC.”)
issue CBA raises regarding the conflicting allegations in
Plaintiffs' earlier complaints could certainly become
relevant as evidence against Plaintiffs, but it is not proper
for the Court to consider the truth or weigh the credibility
of such evidence in connection with a motion to dismiss.
Id. (“While prior pleadings may be
admissible in evidence against the pleader, the
Court is bound to accept as true allegations in the operative
pleading on a motion to dismiss and generally cannot consider
evidence outside the pleadings without converting a motion to
dismiss into a motion for summary judgment.”) (internal
citations omitted). At this stage, the Court takes judicial
notice of the original complaints for their existence only,
including the figures and images of Kona beer product labels
referenced in the original complaints. Plaintiffs are
incorrect that the Court cannot take judicial notice of the
images of the Kona beer labels in the original complaints,
which are a matter of public record and not subject to
reasonable dispute. Opp'n 3. However, the Court will not
consider Plaintiffs' allegations of reliance on such
labels in the original complaints.
foregoing reasons, CBA's request for judicial notice is
moves to dismiss the Consolidated Complaint on multiple
grounds. First, CBA argues that Plaintiffs' claims are
not plausibly alleged because the representations on the
packaging for Kona beer are, at most, non-actionable puffery
or are qualified by a clear disclaimer. Mot. 9-11.
Specifically as to the claims under California's consumer
protection statutes, CBA argues the claims are not plausible
because no reasonable consumer would be misled by the
packaging. See Mot. 11-14. Second, CBA contends that
Plaintiffs have failed adequately to allege claims for common
law fraud, intentional misrepresentation, and negligent
misrepresentation. See id. 14-16. Third, CBA argues
that Plaintiffs' breach of express and implied warranty
causes of action must fail because Plaintiffs do not allege
facts to establish a promise that Kona beer was brewed
exclusively in Hawaii. See id. 16-18. Fourth, CBA
argues that Plaintiffs lack standing to pursue injunctive
relief under California's consumer protection statutes.
See id. 18-20. Fifth, CBA challenges Plaintiffs'
ability to obtain equitable relief when an adequate remedy at
law is available. See id 20-21. Finally, CBA takes
aim at the putative nationwide class and asserts that
Plaintiffs lack standing to bring claims on behalf of
out-of-state consumers for violations of their state laws,
and that claims by out-of-state consumers likewise fail for
lack of personal jurisdiction over CBA. See id.
21-24. The Court addresses CBA's motion to dismiss with
respect to each category of Plaintiffs' claims in turn
Actionable Misrepresentations and the Reasonable Consumer
outset, CBA argues that all of Plaintiffs' claims must be
dismissed because the images and statements on the packaging
for Kona beer are at most “mere puffery” and are
not actionable misrepresentations. Mot 9. CBA goes on to
argue that all of Plaintiffs' claims are based on the
same “defective premise” that a reasonable
consumer would be misled into believing that the Kona beer he
or she purchased was brewed exclusively in Hawaii.
Id. CBA's argument that no reasonable consumer
would be misled by the beer packaging is appropriately
directed toward Plaintiffs' first three causes of action
for violations of California's consumer protection
statutes. For the reasons below, the Court finds that
Plaintiffs have adequately alleged that certain
representations on the six- and twelve-pack packaging of Kona
beer are actionable misrepresentations that are likely to
deceive a reasonable consumer into thinking that the beer was
brewed in Kona, Hawaii. Therefore, CBA's motion to
dismiss on the grounds that Plaintiffs have not alleged
actionable misrepresentations and that no reasonable consumer
would be misled by the packaging is DENIED.
first three causes of action in the Consolidated Complaint
are for violations of California consumer protection
statutes: the CLRA, UCL and FAL. See generally
Compl. The CLRA prohibits unfair methods of competition and
unfair or deceptive acts or practices; the UCL prohibits
unlawful, unfair or fraudulent business acts or practices;
and the FAL prohibits unfair, deceptive, untrue, or
misleading advertising. Williams v. Gerber Prods.
Co., 552 F.3d 934, 938 (9th Cir.2008) (citing Cal.
Civ.Code § 1770, Cal. Bus. & Prof.Code §§
17200 and 17500). Claims under the CLRA, UCL and FAL are
governed by the “reasonable consumer” test, under
which a plaintiff must show that “members of the public
are likely to be deceived.” Williams, 552 F.3d
at 938; Consumer Advocates v. Echostar Satellite
Corp., 113 Cal.App.4th 1351, 1360 (2003). CBA separates
their position into two parts: (1) the representations on the
packaging of Kona beer are not actionable because they are
either puffery or are objectively true; and (2) no reasonable
consumer would be misled by the representations. These
arguments are interrelated under the applicable reasonable
consumer test. As such, the Court considers them
the reasonable consumer standard, Plaintiffs must allege
facts to show that the alleged misrepresentations are
“likely to deceive” reasonable consumers.
Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir.
1995); see also Lavie v. Procter Gamble Co., 105
Cal.App.4th 496, 508 (2003). Because the “reasonable
consumer” inquiry is an objective standard, claims may
be dismissed as a matter of law where an alleged statement
amounts to “mere puffery” or “in the
context, is such that no reasonable consumer could be
misled” in the manner claimed by the plaintiff.
Haskell v. Time, Inc., 857 F.Supp. 1392, 1399 (E.D.
Cal. 1994) (citing Cook, Perkiss and Liehe, Inc. v. N.
Cal. Collection Serv. Inc., 911 F.2d 242, 245 (9th Cir.
have recognized that the deceptive nature of a business
practice under California's consumer protection statutes
is usually a question of fact that is inappropriate for
decision on demurrer or a motion to dismiss. See Dumas v.
Diageo PLC, No. 15-cv-1681, 2016 WL 1367511, at *3 (S.D.
Cal. April 6, 2016) (citing Williams, 552 F.3d at
938); see also Linear Technology Corp. v. Applied
Materials, Inc., 152 Cal.App.4th 115, 134-35 (2007)
(“Whether a practice is deceptive, fraudulent, or
unfair is generally a question of fact which requires
‘consideration and weighing of evidence from both
sides' and which usually cannot be made on