This matter comes before the Court on Talking Rain Beverage Company Inc.'s
I. PROCEDURAL BACKGROUND
On November 9, 2018, Plaintiffs filed a consumer class action complaint against Talking Rain, seeking damages and equitable relief for the alleged false and misleading labeling on Defendant's Sparkling Ice products. [Doc. No. 1, at ¶¶ 1-7.] The complaint alleges violations of California's False Advertising Law ("FAL") Business & Professions Code § 17500, et seq. ; the Unfair Competition Law, Business & Professions Code § 17200, et seq. ("UCL"); California's Consumers Legal Remedies Act, California Civil Code § 1750, et seq. ("CLRA"); fraud by omission; negligent misrepresentation; breach of express warranties; and breach of implied warranties.
On January 28, 201, Plaintiffs filed the First Amended Complaint ("FAC"). [Doc. No. 12.] The FAC asserts FAL, UCL, CLRA, fraud by omission; negligent misrepresentation; breach of express warranties; and breach of implied warranties against Defendant for misrepresenting and misleading consumers regarding the Sparkling Ice beverages (the "Products").
Further, the FAC alleges that Defendant's labeling and advertising scheme is deliberately intended to give consumers the false impression that the Products are composed only of natural flavors and contain no artificial colors or flavors. [Id. at ¶ 16.] In order to perpetuate the alleged misrepresentation, the label prominently displays a "naturally flavored designation," and omits the legally required "artificially flavored" disclosure, yet an ingredient
Plaintiffs seek to represent a nationwide class consisting of "all U.S. citizens who purchased the Products in their respective state of citizenship on or after January 1, 2012 and until the Class is certified, for personal use and not for resale, excluding Defendant and Defendant's officers, directors, employees, agents and affiliates, and the Court and its staff." [Id. at ¶ 75.] Plaintiffs also seek to represent a California Class defined as "all California citizens who made retail purchases of the Products in California on or after January 1, 2012 and until the Class is certified, for personal use and not for resale, excluding Defendant and for Defendant's officers, directors, employees, agents and affiliates, and the Court and its staff." [Id. at ¶ 76.] The FAC's Prayer for Relief includes, among other things, an order enjoining Defendant's deceptive and unfair practice, requiring it to "conduct corrective advertising," restitution, disgorgement and an award of actual and punitive damages. [Id. at 28-20.
On February 11, 2018, Defendant moved to dismiss Plaintiffs' FAC pursuant to Federal Rules of Civil Procedure 12(b)(1) and Rule 12(b)(6). [Doc. No. 18.] Plaintiffs filed an opposition to the motion [Doc. No. 18] and Defendant filed its reply [Doc. No. 19]. Along with their motions, both parties filed requests for Judicial Notice.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(1) allows a party to move to dismiss based on the court's lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Plaintiffs have the burden of establishing that the court has subject matter jurisdiction over an action. Assoc. of Med. Colls. v. U.S. ,
Under Rule 12(b)(6), a party may bring a motion to dismiss based on the failure to state a claim upon which relief may be granted. A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly ,
Even under the liberal pleading standard of Rule 8(a)(2), which requires only that a party make "a short and plain statement of the claim showing that the pleader is entitled to relief," a "pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' " Ashcroft v. Iqbal ,
III. DISCUSSION
Defendant moves to dismiss all of Plaintiffs claims on the grounds that federal regulations expressly preempt Plaintiffs' claims. Defendant also seeks dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. In addition, Defendant moves to dismiss Plaintiffs' nationwide class claims pursuant to Federal Rule of Civil Procedure 12(b)(1). The Court will address each of Defendant's arguments in turn.
A. Preemption Issues
First, Defendant asserts that Plaintiffs are seeking to impose duties on Talking Rain that are different than those imposed by federal law and move for dismissal on these grounds, arguing Plaintiffs' state law claims "would effectively require defendants to include additional or different information on a federally approved label." [Doc. No. 14-1 at 19.] In opposition, Plaintiffs counter that their claims are all based on violations of California's Sherman Law, which is identical to the Federal Food, Drug and Cosmetic Act ("FDCA"), and are therefore not preempted.
The FDCA,
California's Sherman Law provides "[a]ll food labelling regulations and any amendments to those regulations adopted pursuant to the federal act, in effect on January 1, 1993, or adopted on or after that date shall be the food regulations of this state." CAL. HEALTH & SAFETY CODE § 110100. "Since California's Sherman Law adopts the FDCA without modification, its identical to the FDCA and can't be preempted by the FDCA." Branca v. Bai Brands, LLC , Case No.: 3:13-cv-00757-BEN-KSC,
1. Should Product be Labeled as "Artificially Flavored"
Defendant argue that all of Plaintiffs' claims fail to the extent they are premised on the theory that Talking Rain improperly omitted the words "artificial flavoring" from the front label. In support, Defendant asserts that the FAC offers nothing more than conclusory allegations that the malic acid found in the Sparkling Ice beverages is used as an artificial flavor or a characterizing flavor as defined by the regulations, concluding that "all eight of Plaintiffs' state law causes of action are impermissibly premised, shotgun-style, on this theory." [Doc. No. 14-1 at 19.]
Plaintiffs counter that the FAC sufficiently alleges that testing has confirmed the presence of the synthetic d-1 malic acid, which is an artificial flavoring ingredient, in the Products and that the d-1 malic acid is used to give the Products a tart, fruity taste. [Doc. No. 18 at 12-13.] Further, Plaintiffs assert that the FAC adequately alleges Peach Nectarine, Pomegranate Blueberry and Grape Raspberry Products are characterizing flavors under both sets of regulations and that the synthetic d-1 malic acid used in the Products "stimulates, resembles and reinforces the characterizing fruit flavors for the Products." [Id. at 15.]
Federal regulations define artificial flavor or flavoring to mean "any substance, the function of which is to impart flavor, which is not derived from a spice, fruit or fruit juice, vegetable or vegetable juice, edible yeast, herb, bark, bud, root, leaf or similar plant material, meat, fish, poultry, eggs, dairy products, or fermentation products thereof."
Here, Plaintiffs plausibly alleged that the malic acid used in the Products is not the natural form of the L-malic acid that occurs naturally in various types of fruits and vegetables. [Doc. No. 12 at ¶¶ 27-36.] To support their allegations Plaintiffs have tested the Product and identified the malic acid used in the beverages as the synthetic industrial flavoring chemical called d-1 malic acid. [Id. at ¶¶ 27-36.] And Plaintiffs have alleged that the Sparkling Ice beverages contain this additional artificial flavoring ingredient to stimulate and reinforce the characterizing flavors. [Id. at ¶¶ 26, 27(a)
Based on the above, Defendant's contention that the FAC lacks well-pled facts that the malic acid in the Sparkling Ice beverages functions as an "artificial flavor" and not a pH control agent or flavor enhancer is unavailing. See , e.g. , Branca ,
2. Should Ingredient List Refer to "Malic Acid" by Its Specific Name
Defendant also argues that all of Plaintiffs' claims fail to the extent they are based on how the term "malic acid" is identified in the ingredient list on the Products. Defendant maintains by using the common "malic acid" name in the list of ingredients it has sufficiently complied with the labeling requirements. [Doc. No. 14-1 at 24-26.] In support, Defendant references the FDA's labeling course summary wherein it was explained that "although
Section 342(i)(2) of the FDCA expressly provides that a food will be deemed misbranded unless the label bears "the common or usual name of each ingredient."
The regulations require labels to list ingredients by the common or usual names. See Branca ,
At this stage of the proceedings, the Court cannot say that Plaintiffs' argument is preempted. See Allred ,
B. Sufficiency of Plaintiffs' Allegations
Second, Defendant contends that Plaintiffs have failed to plead sufficient facts to support their claims, or with the requisite specificity, required by Federal Rules of Civil Procedure 8(a) and 12(b)(6).
1. CLRA, FAL & UCL Claims
Defendant makes two arguments in favor of dismissal of these claims. [Doc. No. 14-1 at 29-31.] First, Defendant asserts that Plaintiffs have failed to explain how its purported violations of FDA labeling violations are misleading to a reasonable consumer. Second, Defendant contends that because the underlying federation regulatory violation claims fail, Plaintiffs' claims based on the regulatory violations are also meritless. In opposition, Plaintiffs counter that the FAC contains sufficient allegations and since the
In order to protect its citizens from unfair, deceptive or fraudulent business practices California has enacted a number of consumer protection statutes. The CLRA prohibits "unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any customer." CAL. CIV. CODE § 1770(a). Similarly, the UCL prohibits any "unlawful, unfair or fraudulent business act or practice," and the FAL prohibits any "unfair, deceptive, untrue or misleading advertising."
Whether a business practice is deceptive will usually be a question of fact not appropriate for determination at the pleadings stage. Williams ,
As held above, the Court cannot determine at this stage whether the Products advertising was false or misleading. If it is determined at a later stage in this litigation that Plaintiffs are correct and Talking Rain should disclose its Products contain an "artificial flavor," then it follows that a reasonable consumer would likely be deceived by the Sparkling Ice's label which states "Naturally Flavored Sparkling Water." [Doc. No. 12 at 5.] See e.g. Allred ,
2. Claim Under the "Unlawful" Prong of the UCL
Defendant moves to dismiss Plaintiffs' claim under the unlawful prong of the UCL on the grounds that Plaintiffs underlying theories are meritless. [Doc. No. 14-1 at 30.] But, as set forth above, Plaintiffs have stated claims for violations of the CLRA and FLA, therefore these claims may serve as the predicate violations for a claim under the UCL's "unlawful" prong. Zeiger v. WellPet, LLC ,
3. Claim Under the "Unfair" Prong of the UCL
Defendant moves to dismiss Plaintiffs' claim under the unfair prong of the UCL because Plaintiffs have failed to tether Talking Rain's conduct to any violation of public policy nor demonstrated that its failure to disclose the information was substantially injurious, immoral, or unethical. [Doc. No. 14-1 at 30-31.]
Determining what constitutes an "unfair" practice under California law is in flux with federal courts applying two tests, a tethering test and a balancing test, under the UCL "Unfair" prong.
Here, Plaintiffs allege the labels on the Products misled reasonable consumers and deceived class members and Plaintiffs into paying a premium price for the product. Plaintiffs also cite to a study indicating how consumers are willing to pay more for foods perceived as natural, and claim all of this was done in order for Defendants to realize higher profit margins. [Doc. No. 12 at ¶¶ 8, 52, 71, 129.] It is also alleged that Defendant's utility of selling its Products to consumers who otherwise would not purchase an artificially-flavored food product "is small and far outweighed by the gravity of the harm inflicted on California's consumers." [Id. at ¶ 129.] Further, Plaintiffs allege that they have tethered Talking Rain's conduct to a California Health and Safety Regulation, section 110740.
Assuming the truth of Plaintiffs allegations, the Court cannot conclude that Defendant's allegedly misleading and deceptive labeling practices are not unfair, as the harm to the consumer appears to outweigh
4. Fraud by Omission Claim on Behalf of California Class
Defendant moves to dismiss the fraud by omission claim asserting that Plaintiffs have not adequately alleged that Talking Rain had a duty to disclose that the beverages contained artificial flavors or that it knew that the labels were false. [Doc. No. 14-1 at 26-28.] Because the Court has held that Plaintiffs pled a violation of FDA flavor regulations, see supra III.A.1 , the argument for dismissal on the duty to disclose ground is unavailing.
"The elements of a cause of action for fraud in California are (a) misrepresentation (false representation, concealment, or nondisclosure): (b) knowledge or falsity (or scienter): (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Davis v. HSBC Bank Nevada, N.A. ,
Plaintiffs' theory of fraud is that Defendant deliberately intended to give consumers the false impression that the Products are composed only of natural flavors and contain no artificial colors or flavors by including pictures of fruit on the front label of its Products and including the words "Naturally Flavored Sparkling Water with Antioxidants and Vitamins." [Doc. No. 12 at ¶¶ 16, 17, 18.] See Twombly ,
The Court finds that the FAC adequately alleges that the Products are not what they purport to be and that a reasonable consumer will be deceived by such statements. See Deutsch v. Flannery ,
5. Negligent Misrepresentation Claim on Behalf of California Class
Defendant seeks to dismiss the negligent misrepresentation claim on the grounds that Plaintiffs have not alleged an actionable misrepresentation or facts to show that it was "careless" and the economic loss doctrine bars Plaintiffs' claim. [Doc. No. 14-1 at 28-29.]
To successfully allege a negligent misrepresentation claim requires a plaintiff allege: (1) a misrepresentation of a past or existing material fact; (2) made without reasonable grounds for believing it to be true; (3) made with the intent to induce another's reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation;
"The economic loss rule 'requires a purchaser to recover in contract for a purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise." Takano v. Procter & Gamble Co. , No. 2:17-cv-00385-TLN-AC,
Here, Plaintiffs have set forth numerous paragraphs outlining how Defendant misrepresented that the Products were flavored only with natural ingredients when in fact they contained an undisclosed artificial flavor, d-1-malic acid. [Doc. No. 12 at ¶¶ 6-8, 16-26, 38, 28.] Relying on the misrepresentations on the label, and believing they were buying naturally flavored sparkling water, Plaintiff Augustine purchased the Product at a Ralph's store in San Diego County, California in 2018 and Plaintiff Garfinkel purchased the Product at a Ralph's store in West Hollywood, California in 2018. [Id. at ¶¶ 63, 65.] Finally, the FAC asserts that testing has confirmed that d-1 malic acid, which is a synthetic industrial chemical used to confer a "tart, fruity" flavor to food products, was used in the Products. [Id. at ¶¶ 28-36, 27(a)-26(a), 45-47.]
For pleading purposes, Plaintiffs have adequately alleged that Defendant had knowledge that the Products contained artificial flavors while representing that they were all natural. Plaintiffs relied on the misrepresentation to their detriment. Accordingly, for the reasons set forth above, Plaintiffs have adequately pled their misrepresentation claim. Accordingly, the motion to dismiss this claim is denied .
6. Breach of Express Warranties Claim on Behalf of California Class
Defendant moves to dismiss the breach of express warranties claim arguing that the claim does not adequately identify any warranty or breach thereof and asserting that even if the "naturally flavored" representation" constitutes a warranty, Plaintiffs have failed to allege a subsequent breach because they do not dispute that the Products contain natural flavors. [Doc. No. 14-1 at 31-32.]
To successfully allege a breach of express warranties under California Commercial Code § 2313 requires a plaintiff must allege: (1) the exact terms of the warranty, (2) reasonable reliance thereon, and (3) breach. See Williams v. Beechnut Nutrition Corp. ,
Plaintiffs allege that the Peach Nectarine Product's front label representations, by the use of the words "naturally flavored," misleadingly suggest the Product contains no artificial flavors and is naturally flavored with fruits such as peaches or nectarines. [Doc. No. 12 at ¶¶ 150, 151.] Further, Plaintiffs allege that the label was "an affirmative representation of the Products composition" and was an express warranty that was breached by Defendant because the Peach Nectarine Product is artificially flavored with d-1 malic acid and does not contain nectarines or nectarine juices. [Id. at ¶¶ 46, 47, 152, 153.] Additionally, Plaintiffs have alleged that they purchased the Products but did not receive goods as warranted by Talking Rain. [Id. at ¶ 155.]
"Whether the label actually provided a warranty and is likely to deceive a consumer are not appropriate questions to decide on a dismissal motion." Branca ,
7. Breach of Implied Warranty on Behalf of California Class
Relying on Viggiano v. Hansen Natural Corp. ,
California's Commercial Code provides "[u]nless excluded or modified [ ], a warranty that goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. CAL. COM. CODE § 2314(1). For goods to be a merchantable, at a minimum, they must be adequately contained, labeled and packaged with the contents conforming "to the promises, or affirmations of fact made on the container or label."
Here, Plaintiffs' breach of implied warranty claim is based on alleged affirmative representations made by Defendant on the labeling of the beverage. Therefore, the claim is not based on the alleged failure by Defendant to conform to the intended purpose of its ordinary use, as Talking Rain suggests. Rather, Plaintiffs have pled that the Products misrepresent that they are "naturally-flavored" sparkling water when the Products in fact contain the artificial flavor d-1 malic acid, which is not disclosed. [Doc. No. 12 at ¶¶ 159-166, 170.] Thus, the Court finds Plaintiffs have adequately stated a claim for breach of the implied warranty. See Branca ,
C. Plaintiff's Common Law Claims on Behalf of the Proposed Nationwide Class
Third, Defendant seeks to dismiss the fraud by omission, negligent misrepresentation, breach of express warranties, and breach of implied warranties claims Plaintiffs bring on behalf of the nationwide class. [Doc. No. 14-1 at 33-35.] Defendant contends that Plaintiffs, who are residents of California and only purchased the Products in California, lack standing to assert claims on behalf of a nationwide class under Rule 12(b)(1) to enforce the laws of any other state. In the alternative, Defendant seeks dismissal pursuant to Federal Rule 12(b)(6) asserting there is no way to determine of the multi-state claims have been adequately pled absent the identification of the relevant state laws.
The Court finds Defendant's lack of specificity argument in favor of dismissal to be persuasive.
Plaintiffs failure to identify which state laws govern their common law claims means the claims brought on behalf of the nationwide class have not been adequately pled. Accordingly, the motion to dismiss the fraud by omission, negligent misrepresentation, breach of express warranties and breach of implied warranties claims brought on behalf of a nationwide class is granted . Plaintiffs are granted leave to amend the FAC to assert the applicable state laws.
IV. CONCLUSION
For the reasons explained above, Defendant's motion is GRANTED IN PART AND DENIED IN PART . [Doc. No. 14.] The Court orders as follows:
1. Defendant's motion to dismiss the California Class claims is DENIED ;
2. Defendant's motion to dismiss the fraud by omission, negligent misrepresentation, breach of express warranties and breach of implied warranties Nationwide Class claims is GRANTED WITH LEAVE TO AMEND ; and
3. Plaintiffs' claims brought on behalf of a nationwide class are DISMISSED WITHOUT PREJUDICE . Plaintiffs have up to an includingMay 3, 2019, to file a second amended complaint addressing the issues related to the claims being brought on behalf of the nationwide class. If Plaintiffs intend to file a second amended complaint that re-assert these claims, Plaintiffs shall file a notice with the Court stating that intention on or before April 19, 2019. If Plaintiffs do not file a notice with the Court by April 19, 2019, Defendant shall file its answer to the FAC within the limits established by the Federal Rules of Civil Procedure.
It is SO ORDERED .
Notes
The Sparking Ice beverage products at issue include the following flavor varieties: (1) Sparkling Ice Peach Nectarine; (2) Sparking Ice Black Raspberry; (3) Sparkling Ice Grape Raspberry; (4) Sparkling Ice Pomegranate Blueberry; (5) Sparkling Ice Ginger Lime; (6) Sparkling Ice Black Cherry; (7) Sparkling Ice Strawberry Watermelon; and (8) Sparkling Ice Coconut Pineapple. [Doc. No. 12 at ¶ 6.]
Plaintiff Augustine's product purchases are limited to Pomegranate Blueberry, Grape Raspberry and Black Cherry flavors and Plaintiff Garfinkle's flavor purchases are limited to the Peach Nectarine and Black Cherry Sparkling Ice products. [Id. at ¶¶ 62, 64.]
Document numbers and page references are to those assigned by CM/ECF for the docket entry.
Talking Rain asks the Court to take judicial notice of five exhibits: (a) FDA, Overview of Food Ingredients, Additives & Colors ; (b) FDA, Regulatory Info ; (c) FDA, Generally Recognized as Safe (GRAS); (d) an excerpt for the FDA's A Food Labeling Guide; and (e) The Chemical Company, Malic Acid. [Doc. No. 15.] Talking Rain moves for judicial notice under Federal Rule of Evidence 201(b), (c)(2), on the grounds that the FDA documents and publications are posted on a government agency website and that The Chemical Company document has been incorporated by reference into the FAC. [Id. ] Plaintiffs in turn, seek judicial notice of the Order Denying Defendant's Motion to Dismiss in Young v. Neurobrands, LLC , Case No. 4:18-cv-05907-JSW (N.D. Cal. Feb 19, 2019) [Doc. No. 18-1.] Neither party has opposed the others' request or challenged the documents' authenticity. Accordingly, the Court takes judicial notice of Defendant's Exhibits A, D, E, F and Plaintiffs' Exhibit 1. See Gerritsen v. Warner Bros. Entm't, Inc. ,
There are two paragraphs mis-numbered as 27, and 26, between paragraphs 36 and 38 on page 8 of the complaint.
Any violation of the FAL necessarily violated the UCL. Williams v. Gerber Products Co. ,
Under the balancing test, "courts consider the business practice's 'impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer,' and 'weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim.' " Becerra v. Gen. Motors, LLC. ,
Finding the Rule 12(b)(6) argument persuasive, the Court declines to address Defendant's alternative argument for dismissal of the nationwide class claims.