Liou v. Organifi, LLC, 3:20-cv-01077

Background

Plaintiff Glenn Liou purchased Organifi Green Juice online (Jan. 29, 2019) and sued Organifi, LLC and Andrew Canole alleging false/misleading product benefit statements and related consumer claims (warranty, CLRA, UCL, restitution).
Defendants asserted that Liou agreed to website Terms & Conditions (T&C) containing a class‑action waiver and arbitration clause, and moved to compel arbitration and stay litigation.
The T&C linked on the site identified Fit Life TV LLC (FLT) as the contracting party and did not name Organifi or Canole as parties to the agreement.
The court held Organifi and Canole are not parties to the T&C (so cannot invoke its arbitration clause) and also found defendants waived any right to compel arbitration by litigating the case in court for ~15 months before seeking arbitration.
On the Rule 12(b)(6) motion, the court denied dismissal of the implied‑warranty claim and allowed CLRA/UCL claims to proceed only as to a subset of the alleged 20 “Benefit Statements” (¶32(d) and ¶32(p)–(t)); it dismissed with prejudice the other 14 Benefit Statements as impermissible lack‑of‑substantiation claims. The request for injunctive relief was permitted.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Can Organifi/Canole compel arbitration under the website T&C?	Liou: he did not assent to or was not bound by the T&C as to defendants.	Organifi/Canole: Liou agreed to T&C at checkout; T&C include arbitration/class waiver covering this dispute.	Held: No — T&C are between user and FLT, not Organifi/Canole; defendants are not parties and cannot invoke arbitration.
2. Even if compelled, did parties delegate arbitrability to an arbitrator?	Liou: delegation clause inapplicable because defendants are not parties to T&C.	Defs: Paragraph 16 incorporates AAA/JAMS rules, so arbitrability is for the arbitrator.	Held: Irrelevant — delegation analysis moot because defendants are not parties to the T&C.
3. Did defendants waive the right to compel arbitration by litigating?	Liou: defendants litigated extensively (demurrers, motions to dismiss, discovery) and delayed raising arbitration, causing prejudice.	Defs: contended they retained arbitration right and could raise it later.	Held: Waiver found — defendants knowingly litigated for ~15 months, engaged in acts inconsistent with arbitration, and caused prejudice; motion to compel denied.
4. Are Liou's substantive claims plausibly pleaded (warranty, CLRA/UCL, injunctive relief)?	Liou: SAC adds factual allegations (Green Juice is a powdered supplement, not a juice; identifies which benefit statements lack clinical support; alleges intent to repurchase under truthful labeling).	Defs: moved to dismiss previously dismissed theories and many benefit‑based claims as insufficient/lack of substantiation.	Held: Partially — implied‑warranty claim survives; CLRA/UCL claims survive only as to certain Benefit Statements (¶32(d) and ¶32(p)–(t)); fourteen other Benefit Statement claims dismissed with prejudice; injunctive relief permitted.

Key Cases Cited

Momot v. Mastro, 652 F.3d 982 (9th Cir. 2011) (FAA enforces private arbitration agreements as contracts)
Ashbey v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320 (9th Cir. 2015) (party seeking to compel arbitration must show valid agreement and that dispute falls within its scope)
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (U.S. 1985) (FAA mandates district courts to direct parties to arbitration when agreement exists)
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (resolve doubts about arbitrability in favor of arbitration)
United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (U.S. 1960) (arbitration clause should not be denied unless plainly inapplicable)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rules that interfere with arbitration agreements)
Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) (non‑signatory generally cannot invoke arbitration unless state law permits enforcement)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (threshold question of arbitrability is for courts unless parties clearly and unmistakably delegate it)
Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015) (incorporation of arbitration rules can show clear delegation)
Martin v. Yasuda, 829 F.3d 1118 (9th Cir. 2016) (elements for waiver of arbitration: knowledge, inconsistent acts, prejudice)