ANDREW BLOCK, individually and on behalf of all others similarly situated, Plaintiff, vs. LIFEWAY FOODS, INC., Defendant.
Case No. 17 C 1717
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
September 6, 2017
MATTHEW F. KENNELLY, District Judge
MATTHEW F. KENNELLY, District Judge:
Andrew Block has filed a class action complaint against Lifeway Foods, Inc., alleging that the company made fraudulent misrepresentations while marketing its kefir products. Lifeway has moved to dismiss all seven counts in Block‘s complaint. For the reasons stated below, the Court dismisses counts 4 and 5 and otherwise denies Lifeway‘s motion.
Background
The Court takes the facts from the allegations in Block‘s complaint.
Lifeway is an Illinois corporation that manufactures and distributes products such as smoothie drinks, cheese, and supplements. The company focuses on providing probiotic and nutritious foods. Its “flagship” product is kefir, “a tart and tangy cultured milk smoothie that is high in protein, calcium, and vitamin D.” Am. Compl. ¶¶ 20–21. Lifeway‘s website states that all of its kefir products are 99% lactose-free. Labels for its kefir products—such as the plain, low-fat kefir—likewise state that the product is 99%
In February 2017, Block purchased Lifeway‘s plain, low-fat kefir from a grocery store in McHenry County. Block wished to purchase a product that contained “little to no lactose” and chose Lifeway‘s kefir based on the company‘s statements that it is 99% lactose-free. He later learned that the kefir actually contains close to 4% lactose, which is similar to the percentage of lactose in regular milk. Further, Block alleges that Lifeway knew that its plain, low-fat kefir is not 99% lactose-free and that the company deliberately made false or misleading statements while advertising the product in order to charge a premium for a lactose-free product. In doing so, Block points to a study Lifeway funded that was conducted at the Ohio State University in 2003 which allegedly determined that Lifeway‘s kefir drinks contained approximately 4% lactose. Id. ¶ 29.
Block then filed this class action complaint against Lifeway. He alleges that he and others were misled by Lifeway‘s misrepresentations regarding its plain kefir and that they would have purchased other “99% lactose-free” products had they known Lifeway‘s kefir contained 4% lactose. Am. Compl. ¶ 9. Block proposes certification of three classes:
National Class: All persons within the United States who purchased and consumed the Plain Kefir from the beginning of any applicable limitations period through the date of class certification (the “National Class” or the “Class“).
Consumer Fraud Multi-State Class: All persons in the States of California, Florida, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Rhode Island, Washington and Wisconsin who purchased and consumed the Plain Kefir from the beginning of any applicable limitations period through the date of class certification (the “Consumer Fraud Multi-State Class“).[ ]
Illinois Sub-Class: All persons in Illinois who purchased and consumed
the Plain Kefir from the beginning of any applicable limitations period through the date of class certification (the “Illinois Sub-Class“).
Id. ¶ 44.
Block brings seven claims against Lifeway. In count 1, he alleges on behalf of the proposed national class that Lifeway‘s false statements regarding its plain kefir violate the
Discussion
Lifeway has moved to dismiss each of the counts in Block‘s class action
When considering a motion to dismiss, the Court takes as true all well-pled facts and views them in the light most favorable to the plaintiff. Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). The plaintiff must “plead sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 395 (7th Cir. 2009) (internal quotation marks omitted). Further, Block‘s fraud-based claims are subject to the heightened pleading requirements of
A. Classes
Block proposes three classes: a national class, a consumer fraud multi-state class, and an Illinois sub-class. He also alleges three counts of statutory consumer fraud in the alternative based on each proposed class. Which of these claims proceeds will depend on which (if any) proposed class the court ultimately certifies. At this stage,
1. National class (count 1)
Lifeway argues that Block cannot pursue an
The Seventh Circuit has indicated, however, that the question of whether unnamed potential plaintiffs can pursue claims under the
Further, the impropriety of considering at this stage whether the claims of unnamed potential plaintiffs can proceed under the
2. Consumer fraud multi-state class (count 2)
Lifeway next challenges Block‘s proposed consumer fraud multi-state class. It contends that Block, a resident of Illinois, lacks standing to pursue claims of non-Illinois residents under the consumer fraud laws of other states. Block argues that this argument “conflates Article III standing with the typicality, commonality and predominance inquiries required by Rule 23, which are not addressed at the pleading stage.” Pl.‘s Resp. in Opp‘n to Def.‘s Mot. to Dismiss Pl.‘s First Am. Class Action Compl. at 1.
Courts in this district disagree regarding whether a named plaintiff‘s ability to bring claims under the laws of other states should be resolved at the motion to dismiss stage or during class certification. See In re Herbal Supplements Mktg. & Sales Practices Litig., No. 15-CV-5070, 2017 WL 2215025, *6 (N.D. Ill. May 19, 2017)
Block, the only named plaintiff, has adequately alleged the elements of standing. He alleges that he purchased Lifeway‘s kefir based on the company‘s statements that it is 99% lactose-free and that he would not have done so had he known that the statements were false. Thus he has adequately that he “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).
The Court agrees with judges in this district who have likened Lifeway‘s challenge to an attack on Block‘s “ability under Rule 23 to represent the multi-state class“—a question best left for class certification—rather than a question of standing. Halperin v. Int‘l Web Servs., LLC, 123 F. Supp. 3d 999, 1009 (N.D. Ill. 2015)
B. ICFA and common-law fraud claims (counts 1, 3, and 6)
Block asserts two claims of consumer fraud under the
1. Restatement of breach of contract claim
“A breach of a contractual promise, without more, is not actionable under the
But a promise to perform future conduct can give rise to a claim of fraud “if the
The Court also recognizes that in some other cases, consumers have brought consumer fraud claims against food manufacturers based on discrepancies between the quality of the food and the manufacturer‘s representations that are so minor as to be immaterial. Block‘s allegation that Lifeway‘s plain, low-fat kefir contains 4%—instead of less than 1%—lactose may seem on its face to constitute a similarly immaterial discrepancy. But Block alleges that he purchased Lifeway‘s kefir because it is nearly lactose-free and he wanted the health benefits that come from not consuming lactose. Products with 4% lactose—such as regular milk—are anything but lactose-free. Thus this alleged difference in percentage of lactose is not marginal or immaterial. Further, Lifeway does not seek dismissal on this basis.
The Court therefore denies Lifeway‘s motion to dismiss counts 1 and 3 on the ground that these claims merely restate a breach of contract claim.
2. Actual damage
In order to pursue a claim under the
Lifeway argues that, to allege damages, Block must do more than allege that he would not have purchased the kefir had he known about the fraudulent statements. Mem. of Law in Support of Def.‘s Mot. to Dismiss Pl.‘s First Am. Class Action Compl. at 10. In doing so, Lifeway cites cases from this district such as Sabo v. Wellpet, LLC, No. 16 C 8550, 2017 WL 1427057 (N.D. Ill. Apr. 21, 2017), to argue that Block must expressly state that he paid more for Lifeway‘s kefir than he would have paid for a product that was not 99% lactose-free. The Court first notes that other cases from this district are not binding. Further, Lifeway misstates the holding of Sabo. Although the court did note that the plaintiff in that case did not allege that the defendant charged more for its products based on its fraudulent representations, the court also emphasized that the plaintiff “does not allege that he would not have bought defendant‘s [ ] products had he known” the company‘s representations were false. Sabo, 2017 WL 1427057 at *3.
Finally, Lifeway argues that Block has failed to allege actual damage because he has not expressly alleged that Lifeway charges more for its kefir because of the representation that it is 99% lactose-free. But Block alleges that consumers pay a high premium for kefir products that they otherwise would not pay if they purchased a gallon of regular milk with the same amount of lactose. Id. ¶ 21. He also alleges that Lifeway advertises that its kefir is 99% lactose-free in order “to pump sales of its ‘kefir’ products.” Id. ¶ 23. Block has therefore adequately alleged that Lifeway is able to charge the same price for 32 ounces of kefir that consumers pay for 128 ounces of milk—despite the fact that they have the same percentage of lactose—only because the company represents that its kefir is 99% lactose-free.
The Court therefore denies Lifeway‘s motion to dismiss counts 1, 3, and 6 on this ground.
3. Causation
Finally, Lifeway argues that Block failed to adequately allege causation because he does not say that he read either the website or the product labels that contained the alleged misrepresentation. But Block is required to allege only that he purchased the kefir based on Lifeway‘s misrepresentations and that he would not have purchased it if he had known otherwise. See Capiccioni v. Brennan Naperville, Inc., 339 Ill. App. 3d 927, 938, 791 N.E.2d 553, 562 (2003). Block alleges that, “[w]hen [he] purchased the Plain Kefir, he relied upon Lifeway‘s aforementioned representations that the Plain Kefir
C. Breach of warranty claims (counts 4 & 5)
Lifeway contends that the Court must dismiss Block‘s claims for breach of express and implied warranties because he failed to notify Lifeway of his claims. In order to recovery for breach of warranty under Illinois law, the buyer “must directly notify the seller of the troublesome nature of the transaction or be barred from recovering.” Id. at 492, 675 N.E.2d at 589; see also
Block contends that Lifeway had actual notice of the fact that its plain, low-fat kefir was not 99% lactose-free by virtue of the study it funded that concluded that its kefir products contain 4% lactose. But Block must allege more than simply that Lifeway was generally aware of problems with the particular product line. Anthony v. Country Life Mfg., LLC, 70 F. App‘x 379, 384 (7th Cir. 2003). He must allege that Lifeway was apprised of the trouble with the particular product that he purchased. Id. As the Illinois Supreme Court has described it, “it is essential that the seller be notified that this
The Court recognizes that other judges in this district have considered similar facts and concluded that a company‘s awareness that an entire product line does not conform to its representations about the product is sufficient to allege actual knowledge. See, e.g., Stella v. LVMH Perfumes & Cosmetics USA, Inc., 564 F. Supp. 2d 833, 837 (N.D. Ill. 2008) (Bucklo, J.). This Court is not bound by those rulings and, respectfully, believes that they run contrary to the principles outlined in Connick and Anthony. In Connick, the plaintiff alleged that the defendant had actual knowledge of the product‘s alleged safety risks because the defendant was aware of a report by Consumers Union, a consumer watchdog organization, that rated the product as “not acceptable” based on safety concerns. Connick, 174 Ill. 2d at 488, 493, 675 N.E.2d at 588, 590. The court concluded that this report and other articles regarding the product‘s safety were insufficient to provide the defendant with actual knowledge “of the alleged breach of the particular products purchased by the named plaintiffs in this lawsuit.” Id. at 494, 675 N.E.2d at 590. The court reached this conclusion despite the fact that the Consumers Union report specifically identified the very safety risk that named plaintiffs complained of in their suit. Id. at 488–89, 675 N.E.2d at 588. The purpose of this strict notice requirement, the court said, is to give effect to the UCC‘s preference that a breach that
Because the Court is granting Lifeway‘s motion to dismiss count 5 based on lack of notice, it is unnecessary to consider Lifeway‘s argument that Block‘s claim for breach of implied warranty also fails due to lack of privity.
D. Unjust enrichment (count 7)
Lifeway argues that Block cannot bring a claim of unjust enrichment because he alleges the existence of a contract by virtue of his claims of breach of warranty. Illinois courts have held that “where there is a specific contract that governs the relationship of the parties, the doctrine of unjust enrichment has no application.” Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575, 604, 836 N.E.2d 681, 704 (2005). Thus a plaintiff may not recover on both a claim of unjust enrichment and a claim that relies on the existence of a contract, such as breach of warranty. But a plaintiff may plead claims based on the existence of a contract and a claim of unjust enrichment in the alternative, even though he may not ultimately recover under both theories. Id. Thus Block is permitted to plead unjust enrichment as long as he does not “include allegations of an express contract . . . in the count[ ] for unjust enrichment.” Id. Block‘s complaint expressly states that he brings his unjust enrichment claim in the alternative to his breach of warranty claims.
Lifeway also argues that, because Block‘s unjust enrichment claim is premised on the same allegations of deception underlying his fraud claims, Block‘s failure to state a claim for fraud also defeats his claim for unjust enrichment. But as discussed above, Block has sufficiently alleged his claims of fraud. The Court denies Lifeway‘s motion to dismiss count 7.
E. Injunctive relief
Lifeway also asks the Court to strike Block‘s request for injunctive relief for lack of standing. It argues that, because Block is now aware that Lifeway‘s kefir is not 99% lactose-free, he does not face any likelihood of future injury from Lifeway‘s statements.
The Court declines to address Lifeway‘s request at this stage of the proceedings. Block‘s request for injunctive relief is not a “claim“—it is a request for relief that is one part of many claims. Block requests both an injunction and damages for six of his seven claims and requests only restitution for his unjust enrichment claim. Thus a determination in Lifeway‘s favor would not result in dismissal of Block‘s suit or even of any particular claim.
Further, although an individual plaintiff ordinarily must demonstrate standing for
Conclusion
For the foregoing reasons, the Court grants Lifeway‘s motion to dismiss [dkt. no. 22] counts 4 and 5 but otherwise denies the motion.
MATTHEW F. KENNELLY
United States District Judge
Date: September 6, 2017