THIS MATTER comes before the Court on: (i) the Defendants' Request for Judicial Notice in Support of Motion to Dismiss, filed November 18, 2016 (Doc. 71)("First JN Motion"); (ii) Defendants' Second Motion for Judicial Notice in Support of the Motion to Dismiss the Consolidated Amended Complaint, filed February 23, 2017 (Doc. 91)("Second JN Motion"); (iii) Defendants' Third Motion for Judicial Notice in Support of the Motion to Dismiss the Consolidated Amended Complaint, filed May 30, 2017 (Doc. 109)("Third JN
FACTUAL BACKGROUND
The Court takes the facts from the Amended Complaint. As the Court must, it accepts all factual allegations in the Amended Complaint as true for the purposes of a motion to dismiss. See Bell Atl. Corp. v. Twombly,
Santa Fe Tobacco is a New Mexico corporation that sells Natural American Spirit cigarettes and uniformly advertises them as "Natural" and "100% Additive Free." Amended Complaint ¶¶ 1, 24, 40, at 1, 12, 15. Those same descriptors appear on Natural American cigarettes' packaging. Amended Complaint ¶ 4, at 2. The twelve named Plaintiffs believed that, based on those terms and others, Natural American cigarettes were "safer and healthier" than other cigarettes. Amended Complaint ¶¶ 12-23, at 4-11. Because of that belief, the Plaintiffs purchased Natural American cigarettes at a premium over other cigarettes. See Amended Complaint ¶¶ 11-23, at 3-11.
Reynolds American-Santa Fe Tobacco's parent corporation-is heavily involved in Natural American cigarette advertising, and approves "all decisions" that Santa Fe Tobacco makes "with respect to the marketing, design, and composition." Amended Complaint ¶ 28, at 12. Reynolds American actively monitors the publications in which Natural American cigarettes are advertised. See Amended Complaint ¶ 28, at 12-13. Santa Fe Tobacco's and Reynolds American's assets are identical, and Reynolds American "essentially controls" Santa Fe Tobacco's business initiatives, capital expenditures, and financial operations. Amended Complaint ¶ 35, at 13-14.
Natural American advertisements from 2013 through 2015 include images of water and plants, along with statements like: "When you work with the best materials, you don't need to add anything else. That's why we use only tobacco and water. We stick with premium quality, whole leaf natural tobacco that's 100% additive-free for a very simple reason-it's all we need." Tobacco & Water Advertisement at 113-114, filed November 18, 2016 (Doc. 71-1)("Tobacco & Water Advertisement"). See Complaint ¶ 43, at 17-21. Advertisements from that period also state in large bold writing, "100% ADDITIVE-FREE NATURAL TOBACCO ," and advertisements include, in smaller writing, "No additives in our tobacco does NOT mean a safer cigarette." Tobacco and Water Advertisement (all caps, bold, and emphasis in original); Complaint ¶ 43, at 17-21(all caps, bold, and emphasis in original). In 2015, the Defendants launched a nationwide advertising campaign and targeted Sports Illustrated, Time, Field and Stream, Southern Living, Architectural Digest, Vanity Fair, and US Weekly magazines. See Amended Complaint ¶ 44, at 21. Regarding that advertising campaign, a spokesman for Santa Fe Tobacco explained: "The aim is to drive brand awareness, highlight Natural American Spirit's 100-percent additive-free natural tobacco proposition." Amended Complaint ¶ 45, at 21-22.
Natural American cigarettes are the most expensive major brand of cigarette. See Complaint ¶ 88, at 36. Reynolds American explains that the higher price stems from "its use of all natural, additive-free tobacco." Complaint ¶ 89, at 36 (citing Reynolds American, Inc. Form 10-Q United States Securities and Exchange Commission Filing for the Quarterly Period Ended March 31, 2016, available at http://s2.q4cdn.com/129460998/files/doc_financials/2016/RAI-Q116-10-Q.pdf (last visited Oct. 28, 2017)). Despite their higher price, Natural American cigarette sales increased eighty-six percent from 2009 through 2014, while cigarette sales in the United States of America declined overall by seventeen percent. See Amended Complaint ¶ 45, at 22. Its market share during a similar period
The Plaintiffs cite numerous studies regarding the popularity and consumer perceptions of cigarettes branded as "natural." Amended Complaint ¶¶ 50-54, at 23-27.
Neither the Plaintiffs nor the Defendants allege that Natural American cigarettes are in any way safer than other cigarettes. See Amended Complaint ¶ 59, at 29. One scientific study, according to the Plaintiffs, found that Natural American blue box cigarettes contain the highest level of polycyclic aromatic hydrocarbons
Although labeled as "additive free," the Defendants add menthol in certain varieties of Natural American cigarettes. See Amended Complaint ¶ 68, at 31. Natural American cigarettes are also "flue-cured," meaning that the Defendants process the tobacco with heat to secure the sugars, which synthetically lowers the cigarette smoke's pH
PROCEDURAL BACKGROUND
The Plaintiffs brought thirteen separate actions in eight federal district courts, alleging similar liability theories. See In re Santa Fe Nat. Tobacco Co. Mktg. & Sales Practices Litig.,
1. The Motion to Dismiss.
The Defendants move to dismiss all claims under rule 12(b)(6) of the Federal Rules of Civil Procedure. See MTD at 1. The Defendants marshal ten arguments in favor of full or partial dismissal: (i) the Consent Order preempts the Plaintiffs' claims; (ii) the First Amendment shields the Defendants from liability; (iii) state statutory safe harbors protect the Defendants from the Plaintiffs' unfair and deceptive practice claims; (iv) the unfair and deceptive practice claims fail, because the Defendants' statements do not mislead a reasonable consumer; (v) the unjust-enrichment claims fail, because the Defendants' cigarette advertising is not misleading; (vi) unjust-enrichment is improperly pled, because the Plaintiffs either have a legal remedy or state law otherwise bars the claims; (vii) the Defendants did not
Before addressing the Defendants' arguments, some context to the Plaintiffs' claims would aid in understanding the issues before the Court. The Plaintiffs allege that the Defendants packaging, labeling, and advertising deceived them in three ways. The three theories of deception are as follows:
(1) The Safer-Cigarette Theory : the Plaintiffs argue that the use of the terms organic, natural, and additive-free mislead tobacco consumers into believing that Natural American cigarettes are safer and healthier. See Amended Complaint ¶¶ 4-8, 47-66, at 2-3, 22-31; MTD at 22-24.
(2) The Menthol Theory : the Plaintiffs argue that, by labeling Natural Americans cigarettes with menthol "additive-free" and "natural," the Defendants mislead menthol consumers, because menthol is an additive. See Amended Complaint ¶¶ 10, 67-69 at 3, 31-32; MTD at 24-25.
(3) The Unprocessed-Cigarette Theory : the Plaintiffs argue that, by labeling Natural American cigarettes as Natural, the Defendants mislead consumers into believing that Natural American cigarettes are not subjected to rigorous engineering processes during production. See Amended Complaint ¶¶ 9, 70-74, at 3, 32-33; MTD at 25.
Turning to the Defendants' arguments, first, the Defendants assert that the Consent Order preempts the Plaintiffs' state law claims premised on the Safer-Cigarette Theory. See MTD at 6-7. According to the Defendants, the Consent Order "authorized Santa Fe [Tobacco]'s use of 'Additive Free' and all other 'substantially similar terms' (such as 'Natural')" in Santa Fe Tobacco's advertisement, as long as it also disclosed in those advertisements that no additives does not mean a safer cigarette. MTD at 6-7.
The Defendants also declare that the Consent Order is not a "minimum 'floor' that state law can supplant." MTD at 14. They argue that the FTC, in making its determination, reconciled "competing interests"-the speaker's right to make truthful representations versus the consumers' right not to be misled-and that the Plaintiffs seek, with their state claims, to undercut the balance that the FTC struck. MTD at 14. According to the Defendants, the Consent Order, thus, does not set a floor, but creates a scale that the Supremacy Clause prevents from tipping toward the Plaintiffs. See MTD at 14.
The Defendants also assert that the FDA's Warning Letter does not undermine
Second, the Defendants argue that the First Amendment shields them from liability. See MTD at 20. The Defendants contend that the First Amendment is relevant here, even though it typically protects speakers only from government action, because the First Amendment protects speakers also from state tort suits "that seek to stifle or punish protected speech." MTD at 20 (citing Snyder v. Phelps,
The Defendants argue that their speech is "lawful" and "not misleading." MTD at 21. First, they aver that adult cigarette usage is lawful. See MTD at 21 (citing Lorillard Tobacco Co. v. Reilly,
The Defendants next contend that there is not a substantial interest in silencing their speech, because it is truthful and the Government has no interest in preventing truthful speech. See MTD at 27. They also argue that preventing the Defendants from using "natural" and "additive-free" does not materially advance the Plaintiffs' interest in preventing consumer deception, because the FTC-mandated disclosure already prevents deception, so imposing liability will not "further advance their interest ... to a material degree ." MTD at 28-29 (emphasis in original). Finally, the Defendants argue that the relief requested is not narrowly tailored, because an additional disclosure would suffice. See MTD at 29-30.
Third, the Defendants argue that state safe harbors shield them from the Plaintiffs' statutory claims. See MTD at 30. The Defendants argue that the California, Colorado, Florida Count 1, Illinois, Massachusetts, Michigan, New York, Ohio, and Washington claims fail, because federal law-specifically, the Consent Order-permits the Defendants' advertising, and the various states' safe harbors foreclose liability for conduct that federal law permits. See MTD at 31-35, 37-39. The Defendants also argue that the New Jersey and North Carolina claims fail, because those states' safe harbors preclude liability for conduct that has been concretely or pervasively regulated, and, according to the Defendants, the Consent Order "deal[t] specifically, concretely, and pervasively" with their advertising. MTD at 35-36, 38.
Fourth, the Defendants aver that fourteen of the Plaintiffs' nineteen state statutory claims fail, because their advertising is not false or misleading to a reasonable consumer. See MTD at 39-40. The Defendants contend that a reasonable consumer would not believe that Natural American cigarettes are healthier than other cigarettes based on the "Natural" and "Additive-Free" labeling, because the labeling disclaims that their cigarettes are safer than other cigarettes. MTD at 42-46. Regarding the Menthol Theory, the Defendants also argue that "a reasonable consumer ... could not have been misled into believing that [Natural American] cigarettes labeled 'menthol' on the package would not contain menthol." MTD at 46 (emphasis in original). Finally, the Defendants argue that a reasonable consumer would not believe that the tobacco in Natural American cigarettes was unprocessed even though Natural American cigarettes are labeled as "Natural," because "virtually all manufactured products undergo some form of processing." MTD at 47-48 (emphasis in original).
The Defendants also assert that four of the Plaintiffs' statutory claims fail, because the relevant statutes do not provide relief under these circumstances. See MTD at 49. They contend that: (i) the injunctive relief requested under the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510, is inappropriate, because
Fifth, the Defendants contend that the unjust-enrichment claims fail, because the Plaintiffs have not alleged any misleading conduct. See MTD at 52. As an initial matter, the Defendants argue that the three transferor courts' choice-of-law approaches dictate that the laws of the twelve states where the Plaintiffs purportedly purchased their cigarettes govern the unjust-enrichment analysis. See MTD at 53-54. According to the Defendants, the unjust-enrichment claims fail, because the "Plaintiffs received precisely what they paid for-cigarettes made with additive-free, natural tobacco-and so there is no injustice to be remedied." MTD at 53.
Sixth, the Defendants argue that ten of the twelve unjust-enrichment claims fail, because the Plaintiffs have an adequate legal remedy-a state law damages claim. See MTD at 55. The Defendants also argue that the Michigan, New Jersey, North Carolina, and Ohio unjust-enrichment claims fail, because the Plaintiffs do not allege that they directly purchased the Natural Americans from any of the Defendants. See MTD 60-61. The Defendants also argue that the New Jersey unjust-enrichment claim fails, because it sounds in tort, and the New York unjust-enrichment claim fails, because it duplicates the Plaintiffs' statutory claims. See MTD at 62-63.
Seventh, the Defendants argue that they did not breach an express warranty by selling menthol cigarettes. See MTD at 64. They argue that, under California and New York Law, a breach of an express warranty requires the Plaintiffs to have reasonably relied on a warranty, and the Plaintiffs did not do so here. See MTD at 64. The Defendants also argue that the Plaintiffs' breach-of-express-warranty claims fare no better under Colorado, Florida, Illinois, New Jersey, New Mexico, or North Carolina law, because those states require a court to read the "alleged express warranties" in conjunction with "potentially limiting language." MTD at 65. They argue that, thus, the "menthol" language "necessarily modified any warranty," such as the "Additive-Free tobacco" warranty to mean that "the product, in fact, contains menthol." MTD at 66.
Eighth, the Defendants argue that the express warranty claims fail under California, Florida, Illinois, New Mexico, New York, and North Carolina law, because the Plaintiffs did not give the Defendants notice before filing suit. See MTD at 66. The Defendants assert that Florida, Illinois, and New York law preclude the express warranty claims, because "privity is required," and the Plaintiffs cannot establish privity. MTD at 67.
Ninth, the Defendants argue that the Plaintiffs' request for injunctive relief is rendered moot. See MTD at 68. The Defendants maintain that, because they have entered a Memorandum of Agreement with the FDA, see Memorandum of Agreement, under which Santa Fe Tobacco
Tenth, the Defendants assert that the Court lacks personal jurisdiction over Reynolds American with respect to the five Plaintiffs'
2. The Response .
The Plaintiffs responded by filing the Plaintiffs' Opposition to Defendants' Motion to Dismiss the Consolidated Amended Class Action Complaint and Incorporated Memorandum of Law, filed April 6, 2017 (Doc. 98)("Response"). First, they contend that the Consent Order does not impliedly preempt their claim based on the Safer-Cigarette Theory, because: (i) the FTC's governing statute states that "remedies provided in this section are in addition to, and not in lieu of, any other remedy or right of action provided by state or federal law," Response at 7, (emphasis omitted)(citing 15 U.S.C. § 57b(e) ); and (ii) the Supreme Court rejected the same arguments that the Defendants bring, namely that an FTC Consent Order requiring a disclosure on a tobacco product impliedly preempts a state deceptive practices claim, see Response at 9 (citing Altria Group, Inc. v. Good,
The Plaintiffs also aver that the First Amendment does not protect the Defendants from liability. See Response at 16. They argue broadly that dismissing their false and misleading marketing claims is inappropriate on a motion to dismiss as "such a determination [of falsehood] is for the trier of fact." Response at 16-17. The Plaintiffs also argue that the Central Hudson test does not apply to sellers or manufacturers who lie about a product in advertising. See Response at 18 (citing Fed. Trade Comm'n v. Wellness Support Network, Inc., No. 10-4879,
The Plaintiffs next contend that no safe harbors protect the Defendants from liability. See Response at 23. First, they argue that, in Altria II, the Supreme Court determined that "FTC consent orders only 'enjoin enforcement' of
The Plaintiffs argue that, even if the Consent Order governed the packaging, the Consent Order would not shield the Defendants from liability. See Response at 28. They aver that the Defendants "buried the [required] disclaimer in small text to avoid" consumer attention, flouting the Consent Order's "equal text size requirement"
The Plaintiffs argue that the Consent Order does not trigger any state safe harbors,
Addressing some of the Defendants' state-specific arguments, the Plaintiffs argue that they are entitled to injunctive relief under Illinois law, because there is a "continuing risk to reasonable consumers." Response at 55. They also aver that, contrary to the Defendants' contention, they are not required to give pre-suit notice under Ohio law, because pre-suit notice is a procedural rule inapplicable in federal court. See Response at 59. They continue that, even if pre-suit notice was required, they satisfy the requirement, because their Amended Complaint provides sufficient written notice. See Response at 60. Responding to the Defendants' argument that the Plaintiffs do not have standing under Ohio law to sue under ODTPA, the Plaintiffs argue that the statute's express language grants them standing and that courts have affirmed that position. See Response at 61 (citing Schumacher v. State Auto Mut. Ins. Co.,
The Plaintiffs continue that they have properly pled their unjust-enrichment claim. See Response at 62.
The Plaintiffs also aver that they properly pled their breach-of-express-warranty claims. See Response at 72. They contend that product labels create "actionable express warranties," that the Defendants breached an express warranty by adding menthol to their "additive-free" cigarettes, and, alternatively, that dismissal is premature. Response at 72. They also say that the Defendants had adequate pre-litigation notice of the breach-of-express-warranty claims, because their Amended Complaint put the Defendants on notice, the Defendants "have not been prejudiced, and they had an opportunity to cure the defect-they knew that their claims that their menthol cigarettes are '100% Additive Free' are false." Response at 73 (citing Amended Complaint ¶ 68, at 30). The Plaintiffs add that, even if they did not meet the pre-suit notice requirement, they meet several state law exceptions to the notice requirement. See Response at 74. They argue that: (i) under New York law, no notice is required for suits involving goods that people consume; (ii) under California law, the notice requirement is inapplicable against manufacturers with whom consumers have not dealt; and (iii) under North Carolina and Illinois law, filing a lawsuit meets the notice requirement. See Response at 74-75.
The Plaintiffs argue that the Memorandum of Agreement does not render moot their injunctive relief request, because the Memorandum of Agreement exists outside the Amended Complaint's four corners. See Response at 76. They also contend that the Memorandum of Agreement does not cover the Plaintiffs' request that the term natural be removed from their packaging and labeling, so injunctive relief cannot be rendered moot. See Response at 76.
Finally, the Plaintiffs contend that the Court has personal jurisdiction over Reynolds American. See Response at 77. They argue that Reynolds American has substantial involvement in the activities giving rise to their claims. See Response at 78. They contend that: (i) Reynolds American has an integrated system where executives amongst the three Defendants collaborated; (ii) Reynolds American essentially controls Santa Fe Tobacco's operations, and the two entities share assets and board members; (iii) Santa Fe Tobacco's employees are considered Reynolds American employees; and (iv) Reynolds American is involved in and controls Santa Fe Tobacco's advertising campaign. See Response at 78 (citing Amended Complaint ¶¶ 29, 35-36, at 13-14). They conclude that, because of Reynolds American's active participation in its subsidiaries, the Court has "specific personal jurisdiction over [the] parent company"-Reynolds American. Response at 79.
3. The Reply.
On May 30, 2017, the Defendants replied to the Plaintiffs' Response. See Defendants' Reply in Support of Motion to Dismiss the Consolidated Amended Complaint at 1, filed May 30, 2017 (Doc. 107)("Reply"). The Defendants maintain
Turning to their First Amendment arguments, the Defendants maintain their previous arguments, see Reply at 10-13, and contend that the Plaintiffs' argument that Central Hudson does not apply to false or misleading advertising is flawed, because the Defendants found only one unpublished decision supporting that argument and that decision does not explain why the First Amendment protects commercial speech limitations imposed via government regulation, but leaves exposed the same speech via a lawsuit, see Reply at 11 n.7. The Defendants also argue that the Plaintiffs address only one of Central Hudson 's factors. See Reply at 13. They continue that the Plaintiffs' argument as to that one factor is flawed, because the Defendants' speech is not deceptive. See Reply at 13.
The Defendants' reassert their arguments that state safe harbors shield them from liability, because the Consent Order permits their conduct. See Reply at 14. The Defendants also argue that the term "natural" falls within the Consent Order's purview, because an FTC letter confirms that "natural" is substantially similar to "additive free." Reply at 15 (citing MTD at 8). The Defendants also assert that, contrary to the Plaintiffs' position, the Court can conclude, on a rule 12(b)(6) motion, whether a reasonable consumer would be misled. See Reply at 20 (citing Fink v. Time Warner Cable,
Turning to the Plaintiffs' unjust-enrichment claims, the Defendants argue that the Plaintiffs may not plead an unjust-enrichment claim in the alternative to a legal claim. See Reply at 27. First, the Defendants contend that the Plaintiffs' reliance on express-contract cases where the contract's existence was at issue doom their unjust-enrichment-in-the-alternative theory, because those cases do not speak to available statutory remedies. See Reply at 27. Second, the Defendants aver that courts have rejected unjust-enrichment-in-the-alternative theories in similar circumstances. See Reply at 28 (citing In re Ford Tailgate Litig., No. 11-2953,
The Defendants also contend that the Plaintiffs failed to give the requisite pre-suit notice for their breach-of-express-warranty claims. See Reply at 34. Regarding state specific statutes, the Defendants argue that general knowledge of general facts giving rise to the lawsuit are insufficient under Illinois law to provide notice. See Reply at 35. They also contend that the exceptions to notice that the Plaintiffs invoke under Illinois, North Carolina, and New York Law are inapplicable, because those exceptions apply only in personal injury cases. See Reply at 35. The Defendants argue that, similarly, California's exception applies only to tort cases and not to contract cases. See Reply at 36.
Regarding the Plaintiffs' requested injunctive relief, the Defendants note that they have not finalized changes to their label. See Reply at 37-38. The Defendants argue, however, that the requested relief is still rendered moot, because the label changes will occur by December, 2017, "long before this case reaches judgment." Reply at 38. See Reply at 37-38. Regarding the voluntary-cessation doctrine, the Defendants argue that the Plaintiffs have pointed to no supportable reason to suggest that the Defendants would resume their prior labeling in the future. See Reply at 38. From that premise, the Defendants conclude that the voluntary cessation doctrine is inapplicable. See Reply at 38.
Finally, the Defendants argue that the Plaintiffs conceded that the Court does not have general personal jurisdiction over Reynolds American. See Reply at 39. They also argue that the Plaintiffs' allegations do not rise to the level needed for specific jurisdiction, because they do not plausibly support that Reynolds American benefitted from some purposive conduct directed at the forum state sufficient to establish consent to the forum's jurisdiction. See Reply at 39. They also argue that the Plaintiffs' cannot impute Santa Fe Tobacco's contacts onto Reynolds American, because Reynolds American does not have control or de facto dominance over Santa Fe Tobacco. See Reply at 39-40. The Defendants argue that there is no exception to the normal jurisdictional rules for tobacco companies. See Reply at 40. They conclude that, therefore, the Court does not have personal jurisdiction over Reynolds American. See Reply at 40.
4. The June 9, 2017 Hearing.
The Court held a hearing on June 9, 2017. See Transcript of Motion Proceedings (taken June 9, 2017), filed June 16, 2017 ("June Tr."). Taking each argument in turn, the Defendants began by arguing that FTC Consent Orders, even in light of Altria II , still have preemptive effect. See June Tr. at 15:11-17 (Biersteker). The Defendants maintain, as they argued in their Reply, that Altria II applies only to the consent order at issue in Altria II and not
The Plaintiffs responded that caselaw clearly signals that the Consent Order does not preempt their claims. See June Tr. at 25:2-26:6 (Reese)(citing Pueblo of Pojoaque v. New Mexico,
The Defendants responded that the Plaintiffs' statutory interpretation is flawed, because a different section governs FTC consent decrees. See June Tr. at 33:10-13 (Biersteker). The Defendants continued that, although the United States Court of Appeals for the First Circuit, in Good v. Altria,
Turning full-force to the reasonable consumer arguments, the Defendants contended that the Court can consider whether the contested advertising language is deceptive or misleading as a matter of law under rule 12(b)(6), and the Court agreed. See June Tr. at 39:4-9 (Court, Schultz). The Defendants maintained their position from their briefing that no reasonable consumer would believe that additive-free menthol cigarettes would not contain menthol. See June Tr. at 40:19-23 (Schultz). The Court responded with an analogy and
The Plaintiffs responded that there is a body of caselaw ruling that a reasonable consumer is not required to turn around a label to verify whether a representation on the front is truthful. See June Tr. at 51:25-52:7 (Wolchansky). The Plaintiffs also argued that consumers may not know much about menthol. See June Tr. at 79:18-24 (Wolchansky). The Plaintiffs added that, even if the Court accepts the Defendants' argument that tobacco is separate from the menthol while the cigarette remains unsmoked, it is still disingenuous to suggest that the tobacco is additive-free when, "the minute that you light that cigarette," the menthol, the chemicals, and "everything in that cigarette goes into your mouth and into your lungs." June Tr. at 53:18-54:4 (Wolchansky). The Plaintiffs explained that menthol is an "organic molecule ... derived from mint," although it "it can [also] be synthesized chemically in a lab," June Tr. at 64:13-16 (Schlesinger), it "acts as an anesthetic,"
The Plaintiffs argued that the natural, additive-free, and organic advertising misleads consumers into believing Natural Americans are safer or healthier. See June Tr. at 65:19-24 (Wolchansky). They contended that the disclaimer "does not mean that the front of the pack isn't misleading," June Tr. at 67:5-6 (Wolchansky), because the disclaimer is "buried,"
Returning to the Menthol Theory, the Court, again emphasized its concerns that the one-hundred-percent additive-free labeling misleads consumers. See June Tr. at 87:5-6 (Court). It also posited that the "100% Additive-Free" and "Natural Tobacco" labeling is not on one line, but two lines, and that the Plaintiffs might argue that the labeling conveys two separate messages. June Tr. at 87:12-22 (Court). The Defendants disagreed and argued that the labeling conveys one message. See June Tr. at 87:23-88:1 (Schultz). The Court also noted that the package's disclaimer focuses only on the advertising's additive term "and doesn't really address the issue about the natural" term. June Tr. at 89:23-24 (Court). See June Tr. at 89:9-24 (Court). It further noted that the advertising disclaimers diverge from the packaging disclaimers. See June Tr. at 91:2-10 (Court). The Defendants rejoined that the FTC Consent Order does not require a packaging disclaimer, so, by inserting any disclaimer at all, they went beyond FTC's requirements. See June Tr. at 91:23-92:3 (Schultz). The Defendants added that the Amended Complaint does not address the FTC disclaimer, and argued that a reasonable consumer looks at both the advertising labels and the disclaimer. See June Tr. at 92:13-93:3 (Schultz). They also argued that the disclaimer does not contradict the natural or additive-free language, but "helps to amplify the meaning." June Tr. at 94:4-9 (Schultz). They continued that "natural" is a word with no meaning under the reasonable consumer standard, because "it can have different meanings in different contexts," so it cannot have a "safer cigarette" meaning that the Plaintiffs ascribe to it. June Tr. at 96:1-9 (Schultz).
The Court disagreed and thought that natural had some meaning, otherwise corporations would not use it on products, but it was not convinced that the natural term necessarily signals to a reasonable consumer that the cigarettes are safer. See
Turning to the common-law claims, the Defendants argued that rule 8(b) does not allow the Plaintiffs to plead unjust enrichment in the alternative, because a federal rule of civil procedure cannot alter state substantive law. See June Tr. at 144:14-18 (Biersteker). They explained that equity fills in the gaps that legal remedies leave, and that, because the Plaintiffs have an available legal remedy from the state statutes, unjust enrichment is improperly pled. See June Tr. at 145:8-21 (Biersteker). The Defendants concluded that there is no dispute that legal statutory remedies exist. See June Tr. at 146:7-8 (Biersteker).
5. The Supplemental Brief .
On June 30, 2017, the Plaintiffs filed a supplemental brief addressing several issues raised during the June Hearing. See Plaintiffs' Supplemental Brief in Opposition to Defendants' Motion to Dismiss and Consolidated Amended Class Action Complaint and Incorporated Memorandum of Law at 1, filed June 30, 2017 (Doc. 117)("Supp. Brief"). They assert three arguments: (i) whether a reasonable consumer is misled is typically a fact question that survives a motion to dismiss; (ii) the Defendants' disclaimer arguments are misplaced; and (iii) they have adequately pled their complaint to survive the rule 12(b)(6) standard. See Supp. Brief at 1-4. First, they assert that the Court's function is not to weigh the evidence, but to assess whether the Plaintiffs have plausibly stated a claim. See Supp. Brief. at 4 (citing Walker v. THI of N.M. at Hobbs Ctr.,
Second, the Plaintiffs argue that consumers are misled notwithstanding the disclaimer. See Supp. Brief at 11 (citing Amended Complaint ¶ 52, at 25). They contend that, under longstanding false advertising law, representations must be viewed in the context of the packaging or advertising as a whole, see Supp. Brief. at 11 (citing Penrod Ricard USA, LLC v. Bacardi U.S.A., Inc.,
Third, the Plaintiffs clarify that they do not argue that natural is misleading "simply because manufacturing steps must be taken to put their tobacco in cigarette form"; rather, they argue that the Defendants manufacturing processes do not conform to a reasonable consumers' understanding of the natural term. Supp. Brief at 13. They maintain that the term natural is misleading, because Natural Americans undergo flue-curing processing, artificial blending, and engineering to boost nicotine. See Supp. Brief at 14 (citing Amended Complaint ¶¶ 63-66, 72-73, at 30, 32-33). They conclude, thus, that it is plausible that a reasonable consumer would believe that Natural American cigarettes were less chemically enhanced and less nicotine-laced than other cigarettes. See Supp. Brief at 14.
6. The Supplemental Response .
The Defendants responded to the Supp. Brief on July 14, 2017. See Defendants' Response to Plaintiffs' Supplemental Brief at 1, filed July 14, 2017 (Doc. 124)("Supp. Resp."). The Defendants argue that the Court can, and must, rule on the reasonable consumer arguments on a Motion to Dismiss. See Supp. Resp. at 2-3 (citing Fink v. Time Warner Cable,
7. The July Hearing.
The Court held a hearing on July 20, 2017. See Transcript of Motion Proceedings (taken July 20, 2017), filed August 10, 2017 (Doc. 126)("July Tr."). The Defendants argued that, as to four states' laws, the Plaintiffs' unjust-enrichment claims fail, because the Plaintiffs do not properly allege that the advertising conveys a direct benefit to the Defendants. See July Tr. at 35:6-17 (Biersteker). They add that unjust enrichment is a "gap filler," and it is likely that those four states' laws narrow the unjust-enrichment remedy, "because numerous legal remedies already exist for consumers who have suffered as a result of deceptive advertising." July Tr. at 11-17 (Biersteker). The Plaintiffs rejoined that, as to Michigan, the direct benefit element is no longer required. See July Tr. at 37:10-18 (Wolchansky)(citing In re Automotive Parts Antitrust Litig.,
Regarding the pre-suit notice requirement for the express warranty claims, the Defendants admitted that the Amended Complaint alleges that the Plaintiffs performed "all conditions precedent to Defendants' liability," July Tr. at 41:3-6 (Biersteker)(quoting Amended Complaint ¶ 456, at 104), but the Defendants contended that the Amended Complaint's allegation is "legally insufficient," July Tr. at 41:13-14 (Biersteker). The Defendants added that filing the Amended Complaint is insufficient for pre-suit notice in Illinois, North Carolina, and New York. See July Tr. at 43:11-14 (Biersteker). They argue that the Plaintiffs' cases to the contrary are personal injury cases, so are inapplicable here. See July Tr. at 43:14-15 (Biersteker); id. at 44:12-18 (Biersteker). The Plaintiffs countered that their Amended Complaint serves as pre-suit notice as do the FDA and FTC letters on these issues, see July Tr. at 48:12-13 (Wolchansky), and that "there is unquestionably knowledge here," July Tr. at 49:25-50:1 (Wolchansky).
Turning to the privity requirement, the Defendants admitted that three states grant an exception to the privity requirement, see July Tr. at 45:14-15 (Biersteker), but the Defendants averred that courts routinely dismiss express warranty claims "based on product packaging and labels," which involve economic loss, as here, July Tr. at 45:15-18 (Biersteker). The Plaintiffs rejoined that recent federal Florida cases have denied motions to dismiss for breaches of express warranties on similar facts. See July Tr. at 50:2-52:4 (Wolchansky)(citing Hill v. Hoover,
Turning to the injunctive relief requested, the Defendants conceded that the
The Court asked the Defendants whether, in light of the Plaintiffs' supplemental argumentation that, based on studies that terms, such as natural, mislead many consumers, it should reconsider its earlier inclination that the Plaintiffs' safer-cigarette theory is flawed. See July Tr. at 67:2-16 (Court); id. at 27:25-68:8 (Court). The Defendants countered that the studies, which the Plaintiffs present, do not stand for the proposition that the Plaintiffs suggest that they support. See July Tr. at 68:13-19 (Schultz). The Plaintiffs rejoined that, although they cite only one study in their Amended Complaint, there are numerous studies supporting their position and that they will file those studies with the Court. See July Tr. at 74:7-16 (Wolchansky).
8. Continued Oral Argument.
On July 21, 2017, the Plaintiffs filed a Notice of Filing Hearing Exhibit, filed July 21, 2017 (Doc.125), which includes their Continued Oral Argument on Defendants' Motion to Dismiss, see Continued Oral Argument on Defendant's Motion to Dismiss, filed July 21, 2017 (Doc. 125-1)("Cont. Arg."). The Plaintiffs argue that a 2016 study supports their argument that Natural American cigarettes' disclaimers ineffectively warn consumers. See Cont. Arg. at 3 (citing Misperceptions, at 1-4). The Plaintiffs explain that the study concludes that many Natural American cigarette smokers believe that Natural American cigarettes are less harmful than other cigarettes, and, thus, the disclaimer ineffectively corrects consumers' perceptions. See Cont. Arg. at 3-4 (noting that 63.9 percent of Natural American cigarette smokers believe their brand is less harmful). The Plaintiffs also cite a 2007 study for the proposition that "consumers frequently conclude 'natural' cigarettes must be healthier, and tobacco companies have understood this for decades." Cont. Arg. at 4 (citing Patricia McDaniel & Ruth E. Malone, I Always Thought they were all Pure Tobacco: American Smokers' Perceptions of "Natural" Cigarettes and Tobacco Industry Advertising Strategies, 16 Tobacco Control e7 (2007), available at http://www.ncbi.nlm.gov/pmc/articles/PMC2807204/ ). They continue that a 2004 survey demonstrates that sixty percent of smokers think that removing additives makes cigarettes safer. See Cont. Arg. at 5 (citing K.M. Cummings, Are Smokers Adequately Informed About the Health Risks of Smoking and Medicinal Nicotine?, Nicotine & Tobacco Research 6(3): S333-340 (2004)). They also aver that Reynolds American market research confirms that consumers believe that the additive-free descriptor conveys a safer or healthier message, and that a 2016 study reveals
The Plaintiffs also argue that several cases, not previously cited, support their position. See Cont. Arg. at 3, 10-19. For example, the Plaintiffs cite to Discount Tobacco City & Lottery, Inc.,
Regarding their unjust-enrichment claims, the Plaintiffs argue that their allegations are viable in every state for various reasons. See Cont. Arg. at 23. They argue that: (i) it is premature to dismiss their unjust-enrichment claims at the rule 12(b)(6) stage in Massachusetts, Michigan, North Carolina, and Washington; (ii) their claims satisfy the requisite elements in New Jersey and New York; (iii) their Colorado claim may proceed as a restitution-based remedy; (iv) no New Mexico statute expressly bars their New Mexico claim; and (v) Ohio law allows the Plaintiffs to plead their unjust-enrichment claim in the alternative. See Cont. Arg. at 23. They also argue that, under New Jersey, North Carolina, and Ohio unjust-enrichment law, they do not need to show that the Defendants receive a direct benefit. See Cont. Arg. at 26-28 (citing Metric Constructors, Inc. v. Bank of Tokyo-Mitsubishi, Ltd.,
9. Supplemental brief on the Memorandum of Agreement.
On November 29, 2017, the Defendants filed a supplemental brief concerning the Memorandum of Agreement. See Santa Fe Natural Tobacco Company's Supplemental Brief in Support of Motion to Dismiss Responding to the Court's Question Regarding Status of Agreement with FDA Regarding NAS Product Labeling and Advertising, filed November 29, 2017 (Doc. 136)("Supp. Brief on Mem."). The Defendants argue that they complied with the
LAW REGARDING RULE 12(b)(6)
Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes a court to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true." Mobley v. McCormick,
A complaint need not set forth detailed factual allegations, yet a "pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action" is insufficient. Ashcroft v. Iqbal,
To survive a motion to dismiss, a plaintiff's complaint must contain sufficient facts that, if assumed to be true, state a claim to relief that is plausible on its face. See Bell Atl. Corp. v. Twombly,
"[P]lausibility" in this context must refer to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs"have not nudged their claims across the line from conceivable to plausible." The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.
Robbins v. Oklahoma,
"When a party presents matters outside of the pleadings for consideration, as a general rule 'the court must either exclude the material or treat the motion as one for summary judgment.' " Brokers' Choice of America, Inc. v. NBC Universal, Inc.,
In Gee v. Pacheco,
The Court has previously ruled that, when a plaintiff references and summarizes statements from defendants in a complaint for the purpose of refuting the statements in the complaint, the Court cannot rely on documents the defendants attach to a motion to dismiss which contain their un-redacted statements. See Mocek v. City of Albuquerque, No. Civ. 11-1009,
On the other hand, in a securities class action, the Court has ruled that a defendant's operating certification, to which plaintiffs refer in their complaint, and which is central to whether the Plaintiffs' adequately alleged a loss, falls within an exception to the general rule, so the Court may consider the operating certification when ruling on the defendant's motion to dismiss without converting the motion into one for summary judgment. See Genesee Cty. Emps.' Retirement Sys. v. Thornburg Mortg. Secs. Trust 2006-3,
Rule 201 of the Federal Rules of Evidence allows a court to, at any stage of the proceeding, take notice of "adjudicative" facts that fall into one of two categories: (i) facts that are "generally known within the territorial jurisdiction of the trial court;" or (ii) facts that are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b), (f). "Adjudicative facts are simply the facts of the particular case." United States v. Wolny,
LAW REGARDING PREEMPTION
Article VI, clause 2, of the Constitution provides that the United States of America's laws "shall be the Supreme Law of the Land; ... any Thing in the Constitution or Laws of any state to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. Consistent with the Supremacy Clause, the Supreme Court has "long recognized that state laws that conflict with federal law are 'without effect.' " Altria II,
Pre-emption may be either expressed or implied, and is compelled whether Congress' command is explicitly stated in the statute's language or implicitly containedin its structure and purpose. Absent explicit pre-emptive language, we have recognized at least two types of implied pre-emption: field pre-emption, where the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, and conflict pre-emption, where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.
Gade v. Nat'l Solid Wastes Mgmt. Assoc.,
As noted, preemption may be express or implied. See Gade v. Nat'l Solid Wastes Mgmt. Assoc.,
[i]n all pre-emption cases, and particularly in those in which Congress has legislated ... in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.
Medtronic, Inc. v. Lohr,
Congress' intent, of course, primarily is discerned from the language of the preemption statute and the statutory framework surrounding it. Also relevant, however, is the structure and purpose of the statute as a whole, as revealed not only in the text, but through the reviewing court's reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law.
Medtronic, Inc. v. Lohr,
Implied conflict preemption is found when it is impossible for a private party to comply with both state and federal requirements, see English v. General Elec. Co.,
Obstacle preemption is one form of implied preemption. Crosby v. Nat'l Foreign Trade Council,
[s]erves as a limiting principle that prevents federal judges from running amok with our potentially boundless (and perhaps inadequately considered) doctrine of implied conflict pre-emption based on frustration of purposes-i.e., that state law is preempted if it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.
The Supreme Court has begun to back away from finding implied preemption based on an alleged conflict with the purposes underlying federal regulations. In 2003, the Supreme Court issued a unanimous decision in Sprietsma v. Mercury Marine,
The decision in 1990 to accept the subcommittee's recommendation to take no regulatory action left the law applicable to propeller guards exactly the same as it had been before the subcommittee began its investigation. Of course, if a state common-law claim directly conflicted with a federal regulation promulgated under the Act, or if it were impossible to comply with any such regulation without incurring liability under state common law, pre-emption would occur. This, however, is not such a case.
In Altria II , the Supreme Court again considered the implied preemption doctrine and rejected the Defendants' obstacle-preemption argument that the FCLAA, preempted a similar state act, Maine's Unfair Practices Act, Me. Rev. Stat. Ann., Tit. 5, § 207 (2008). See
In Wyeth v. Levine,
it is not impossible for Wyeth to comply with its state and federal law obligations and that Levine's common-law claims do not stand as an obstacle to the accomplishment of Congress' purposes in the [Federal Food, Drug, and Cosmetic Act,21 U.S.C.A. §§ 301 , 321, 331 - 337, 341 - 350, 361 - 364, and 381 - 399 ;21 C.F.R. § 201.80 (e) ("FDCA") ].
Wyeth v. Levine,
I write separately, however, because I cannot join the majority's implicit endorsement of far-reaching implied pre-emption doctrines. In particular, I have become increasingly skeptical of this Court's "purposes and objectives" pre-emption jurisprudence. Under this approach, the Court routinely invalidates state laws based on perceived conflicts with broad federal policy objectives, legislative history, or generalized notions of congressional purposes that are not embodied within the text of federal law. Because implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution, I concur only in the judgment.
Under the vague and potentially boundless doctrine of purposes and objectives preemption ... the Court has pre-empted state law based on its interpretation of broad federal policy objectives, legislative history, or generalized notions of congressional purposes that are not contained within the text of federal law ... Congressional and agency musings, however, do not satisfy the Art. I, § 7 requirements for enactment of federal law and, therefore, do not pre-empt state law under the Supremacy Clause.
Moreover, the Supreme Court has put renewed emphasis on the presumption against preemption. See Bates v. Dow Agrosciences, LLC,
The Tenth Circuit has recognized federal preemption of state law in three categories: (i) when a federal statute expressly preempts state law ("express preemption"); (ii) where Congress intends to occupy a field ("field preemption"); and (iii) to the extent that a state law conflicts with a federal law ("conflict preemption"). Colo. Dept. of Pub. Health and Env't., Hazardous Materials and Waste Mgmt. Div. v. United States,
LAW REGARDING DIVERSITY JURISDICTION AND ERIE
Under Erie Railroad Co. v. Tompkins,
LAW REGARDING ERIE AND THE RULES ENABLING ACT
"In diversity cases, the Erie doctrine instructs that federal courts must apply state substantive law and federal procedural law." Racher v. Westlake Nursing Home Ltd. P'ship,
LAW REGARDING SEVERANCE UNDER RULE 21
A district court may sever a case under Rule 21 to "transfer one action while retaining jurisdiction over the other." Chrysler Credit Corp. v. Country Chrysler, Inc.,
[T]he court must weigh carefully whether the inconvenience of splitting the suit outweighs the advantages to be gained from the partial transfer [and] should not sever if the defendant over whom jurisdiction is retained is so involved in the controversy to be transferred that partial transfer would require the same issue to be litigated in two cases.
Liaw Su Teng v. Skaarup Shipping Corp.,
LAW REGARDING THE FIRST AMENDMENT
"Congress shall make no law ... abridging the freedom of speech." U.S. Const. amend. I. This clause-the Free
1. The First Amendment and State Action.
For most of American history, enforcing the common law was not thought to implicate state action. See Daniel J. Solove & Neil M. Richards, Rethinking Free Speech and Civil Liability,
[I]t is self evident that, unless all things are held in common, some persons must have more property than others, it is from the nature of things impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights.
Coppage v. Kansas,
The short of the matter is ... the action of the States to which the [Fourteenth] Amendment has reference, includes action of state courts and state judicial officials. Although, in construing the terms of the Fourteenth Amendment, differences have from time to time been expressed as to whether particular types of state action may be said to offend the Amendment's prohibitory provisions, it has never been suggested that state court action is immunized from the operation of those provisions simply because the act is that of the judicial branch of the state government.
The state action doctrine as applied to judicial enforcement of statutory and common-law claims has limits. See Solove & Richards, Rethinking Free Speech and Civil Liability,
It is, of course, a commonplace that the constitutional guarantee of free speech is a guarantee only against abridgement by government, federal or state. Thus, while statutory or common law may in some situations extend protection or provide redress against a private corporation or person who seeks to abridge the free expression of others, no such protection or redress is provided by the Constitution itself.
Hudgens v. N.L.R.B.,
The Supreme Court has also stated that private party conduct may be deemed state action when the "conduct allegedly causing the deprivation of a federal right may be fairly attributable to the State." Lugar v. Edmondson Oil Co., Inc.,
In Lugar v. Edmondson Oil Co., Inc., the Supreme Court explained that the two prongs merge when the claim is "directed against a party whose official character is such as to lend the weight of the State to his decisions," whereas they remain distinct
In Lugar v. Edmondson Oil Co., Inc., the Supreme Court determined that the plaintiff's allegation that the defendants unlawfully deprived the plaintiff of his property without due process under state law failed to state a claim under
For a private individual to be acting under color of state law, the deprivation of a federal right "must be caused by the exercise of some right or privilege created by the State or by a rule of conduct imposed by the state or by a person for whom the State is responsible," and "the party charged with the deprivation must be a person who may fairly be said to be a state actor ... because he is a state official, because he has acted together with or has obtained significant aid from state officials, or because his conduct is otherwise chargeable to the State." Lugar v. Edmondson Oil Co.,
Congress did not, in using the term "under the color of state law," intend to subject private citizens, acting as private citizens, to a federal lawsuit whenever they seek to initiate a prosecution or seek a remedy involving the judicial system. To hold otherwise would significantly disregard one purpose of the state action requirement, which is to "preserve[ ] an area of individual freedom by limiting the reach of federal law and federal judicial power." Lugar ,, 457 U.S. at 936.... Instead, in enacting § 1983, Congress intended to provide a federal cause of action primarily when the actions of private individuals are undertaken with state authority. See 102 S.Ct. 2744 id. ... Thus, absent more, causing the state, or an arm of the state, to initiate a prosecution or serve process is insufficient to give rise to state action.
How v. City of Baxter Springs,
The Tenth Circuit has described the determination of state action as "particularly fact-sensitive, so the circumstances must be examined in their totality." Marcus v. McCollum,
On the other hand, leaving the determination of state action to the jury has shown to be ill-advised. The cases in which the acts of private entities have been held to constitute state action or to be under color of law, and cases in which they have not, tend to be distinguished "by fine shadings in the sometimes complex interrelationships that develop between the state and private bodies." Adams v. Vandemark,
The Supreme Court has articulated four different tests for courts to use in determining whether conduct by an otherwise private party is state action: (i) the public-function test; (ii) the nexus test; (iii) the symbiotic-relationship test; and (iv) the joint-action test. See Johnson v. Rodrigues (Orozco),
Under the nexus test, state action is present if the state has ordered the private conduct, or "exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State."
Under the symbiotic-relationship test, state action is present if the state "has so far insinuated itself into a position of interdependence" with a private party that "it must be recognized as a joint participant in the challenged activity." Burton v. Wilmington Parking Authority,
The applicable decisions clearly establish no bright-line rule for determining whether a symbiotic relationship exists between a government agency and a private entity. Questions as to how far the state has insinuated itself into the operations of a particular private entity and when, if ever, the operations of a private entity become indispensable to the state are matters of degree.
Gallagher v. Neil Young Freedom Concert,
State action exists under the joint-action test if the private party is a "willful participant in joint action with the State or its agents." Dennis v. Sparks,
In Gallagher v. Neil Young Freedom Concert, the Tenth Circuit surveyed several instances in which courts have
We have applied the joint action test in several cases involving allegations that private citizens acted in concert with police officers in making arrests. In both Carey v. Continental Airlines Inc.,(10th Cir. 1987), and Lee v. Town of Estes Park, 823 F.2d 1402 (10th Cir. 1987), we held that citizens who made complaints to police officers that resulted in arrests were not state actors. We found nothing in the record in either case from which we could infer that the allegedly unconstitutional arrests "resulted from any concerted action, whether conspiracy, prearranged plan, customary procedure, or policy that substituted the judgment of a private party for that of the police or allowed a private party to exercise state power." Carey, 820 F.2d 1112 . In both cases, the record indicated that the police officers had made an independent decision to make the challenged arrest. In contrast, in Lusby v. T.G. & Y. Stores, Inc., 823 F.2d at 1404, 1429 (10th Cir. 1984), cert. denied, 749 F.2d 1423 , 474 U.S. 818 , 106 S.Ct. 65 (1985), we concluded that a store security guard who reported a suspected shoplifter to the police was a state actor. We noted that the officer that made the arrest did not make an independent investigation but relied on the judgment of the security guard. In Coleman v. Turpen, 88 L.Ed.2d 53 (10th Cir. 1982) (per curiam), we applied the joint action test by focusing on the manner in which the alleged constitutional deprivation was carried out. There, the plaintiff challenged the seizure and sale of his property and named as defendants not only state officials but also the wrecking company that towed his truck and subsequently sold it. We found the company to be a state actor because it had "jointly participated in seizing the truck by towing it away" and because the company's sale of the plaintiff's property was "an integral part of the deprivation." 697 F.2d 1341 Id. at 1345 .
Gallagher v. Neil Young Freedom Concert,
2. Commercial Speech.
The Supreme Court's First Amendment decisions create a rough hierarchy in the constitutional protection of speech. See Snyder v. Phelps,
The Supreme Court, in Central Hudson, provided the analytical framework to determine what kind of commercial speech is entitled to First Amendment protection. See Central Hudson,
The First Amendment's concern for commercial speech is based on the informational function of advertising. Consequently, there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity. The government may ban forms of communication more likely to deceive the public than to inform it, or commercial speech related to illegal activity.
Central Hudson,
If a court determines that the speech is commercial, lawful, and not deceptive, the Court proceeds to a three-part balancing test. See Central Hudson,
As a threshold inquiry under Central Hudson, we must determine whether the particular advertisement is protected speech-i.e., whether it concerns lawful activity and is not misleading. If not, the speech may be freely regulated. Protected commercial speech may also be regulated, but only if the government can show that (1) it has a substantial state interest in regulating the speech, (2) the regulation directly and materially advances that interest, and (3) the regulation is no more extensive than necessary to serve the interest.
Revo,
When applying the Central Hudson test, the Supreme Court and the Tenth Circuit have identified several substantial governmental interests in regulating speech. See Central Hudson,
Central Hudson 's third step-determining whether the speech restriction directly and materially advances the asserted government interest-requires more than just "mere speculation or conjecture" that the speech restriction will advance the interest. Lorillard Tobacco Co. v. Reilly,
[w]e do not, however, require that "empirical data come ... accompanied by a surfeit of background information. ... [W]e have permitted litigants to justify speech restrictions by reference to studies and anecdotes pertaining to different locales altogether, or even, in a case applying strict scrutiny, to justify restrictions based solely on history, consensus, and "simple common sense."
Lorillard Tobacco Co. v. Reilly,
In considering the final factor-that the regulation is no more extensive than necessary to serve the governmental interest-the Supreme Court has cautioned that it is not a "least-restrictive-means requirement." Board of Trustees of the State University of New York v. Fox,
What our decisions require is a " 'fit' between the legislature's ends and the means chosen to accomplish those ends," a fit that is not necessarily perfect, but reasonable; that represents not necessarily the single best disposition but one whose scope is "in proportion to the interest served," that employs not necessarily the least restrictive means but, as we have put it in the other contexts discussed above, a means narrowly tailored to achieve the desired objective.
Board of Trustees of State University of the New York v. Fox,
There it suffices if the law could be thought to further a legitimate governmental goal, without reference to whether it does so at inordinate cost. Here we require the government goal to be substantial, and the cost to be carefully calculated. Moreover, since the State bears the burden of justifying its restrictions, it must affirmatively establish the reasonable fit we require.
Board of Trustees of the State University of New York v. Fox,
In Lorillard Tobacco Co. v. Reilly, for example, the Supreme Court determined that a tobacco advertising ban within 1,000 feet of schools or playgrounds in Massachusetts was not reasonably fitted to the legislature's goal-preventing minors' tobacco use. See Lorillard Tobacco Co. v. Reilly,
In some geographical areas, these regulations would constitute nearly a complete ban on the communication of truthful information about smokeless tobacco and cigars to adult consumers. The breadth and scope of the regulations, and the process by which the Attorney General adopted the regulations, do not demonstrate a careful calculation of the speech interests involved.
STATE LAW REGARDING UNFAIR AND DECEPTIVE PRACTICES
1. California Law.
The California Unfair Competition Law,
"A UCL action is equitable in nature; damages cannot be recovered.... We have stated under the UCL, "[p]revailing plaintiffs are generally limited to injunctive relief and restitution." In re Tobacco II Cases,
UCL liability is subject to a safe harbor. See Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Telephone Co.,
2. Colorado Law.
The Colorado Consumer Protection Act,
in the course of the person's business ... the person:
(e) Knowingly makes a false representation as to the characteristics, ingredients, uses, benefits, alterations, or quantities of goods, food, services, or property;
....
(g) Represents that goods, food, services, or property are of a particular standard, quality or grade ... if he knows or should know they are of another.
(1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of defendant's business, vocation, or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property; (4) that the plaintiff suffered injury in fact to a legally protected interest; and (5) that the challenged practice caused the plaintiff's injury.
Hall v. Walter,
The CCPA does not apply to "[c]onduct in compliance with the orders or rules of, or a statute administered by, a federal, state, or local governmental agency." Colo. Rev. Code § 6-1-106(1)(a). "The plain meaning of the exclusion section of the [Colorado Consumer Protection Act] is that conduct in compliance with other laws will not give rise to a cause of action under section 6-1-106(1)(a)." Showpiece Homes Corp. v. Assurance Co. of America,
3. Florida Law.
The Florida Deceptive and Unfair Trade Practices Act,
4. Illinois Law.
The Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/2 ("ICFA"), prohibits
unfair or deceptive acts or practices, including but not limited to the use ... of any deception, fraud, ... misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment ... in the conduct of any trade or commerce ... whether any person has in fact been misled, deceived or damaged thereby.
815 Ill. Comp. Stat. 505/2. "[T]rade and commerce mean the advertising, offering for sale, sale, or distribution of any services and any property ... and shall include any trade or commerce directly or indirectly affecting the people of this State." 815 Ill. Comp. Stat. 505/(1)(f) (quotations omitted). To sustain a claim under the ICFA, a plaintiff must show "(1) a deceptive act or practice by the defendant, (2) the defendant's intent that the plaintiff rely on the deception, (3) the occurrence of the deception in a course of conduct involving trade or commerce, and (4) actual damage to the plaintiff that is (5) a result of the deception." De Bouse v. Bayer,
The ICFA does not apply, however to "[a]ctions or transactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this State or the United States." 815 Ill. Comp. Stat. 505/10b(1). "The plain language of section 10b(1) requires that two separate conditions be present before a claim is barred." Price v. Philip Morris, Inc.,
The Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510/2 ("IUDTPA"), similarly prohibits deceptive practices performed "in the course of his or her business" that
(5) represents that goods or services have ... benefits ... that they do not have;
....
(7) represents that goods or services are of a particular standard [or] quality;
....
(9) advertises goods or services with intent not to sell them as advertised; and
....
(12) engages in any other conduct which similarly creates a likelihood of confusion or misunderstanding.
815 Ill. Comp. Stat. 510/2(a)(5),(7),(9),(12).
IUDTPA does not apply to "conduct in compliance with orders or rules of or a statute administered by a Federal, state or local governmental agency." 815 Ill. Comp. Stat. 510/4(1). The Supreme Court of Illinois, in Price v. Phillip Morris, concluded that, for the same reasons articulated above, an FTC consent order specifically authorizing conduct bars Plaintiffs' claims under 815 Ill. Comp. Stat. 510/4(1). See Price v. Phillip Morris, Inc.,
Because we have concluded that the 1971 and 1995 consent orders provided specific authorization to all industry members to engage in the conduct permitted by the orders, these orders fall within the scope of [
815 Ill. Comp. Stat. 510/4(1) ], even though [Philip Morris] was not a party to either consent order.
5. Massachusetts Law.
Massachusetts law prohibits "unfair or deceptive acts or practices in the conduct of any trade or commerce." Mass. Gen. Laws Ch. 93A, § 2(a). To establish a claim under Mass. Gen. Laws Ch. 93A, § 2, a private plaintiff must show: "(1) that the defendant engaged in an unfair method of competition or committed an unfair or deceptive act or practice ... (2) a loss of money or property suffered as a result; and (3) a causal connection between the loss suffered and the defendant's unfair or deceptive method, act, or practice. Auto Flat Car Crushers, Inc.,
Historically, the standard test for deception prohibited by the FTC Act was whether the act or practice had the capacity or tendency to deceive the general public, rather than whether it was relied on or resulted in actual deception.... The FTC later clarified that test as follows: "if, first, there is a representation, omission, or practice that, second, is likely to mislead consumers acting reasonably under the circumstances, and third, the representation, omission, or practice is material." Matter of Cliffdale Assocs., Inc.,, 165 (1984). This standard, more difficult to satisfy because it depends on the likely reaction of a reasonable consumer rather than an ignoramus, appears to have been applied by Federal courts ever since. 103 F.T.C. 110
Aspinall v. Philip Morris Cos., Inc.,
Mass. Gen. Laws Ch. 93A has a safe harbor, which reads: "Nothing in this Chapter shall apply to transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth of the United States." Mass. Gen. Laws Ch. 93A, § 3.
A defendant's burden in claiming the exemption "is a difficult one to meet. To sustain it, a defendant must show more than the mere existence of a related or even overlapping regulatory scheme that covers the transaction. Rather, a defendant must show that such scheme affirmatively permits the practice which is alleged to be unfair or deceptive."
Commonwealth v. Fremont Inv. & Loan,
6. Michigan Law.
The Michigan Consumer Protection Act,
(a) Causing a probability of confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services.
....
(c) Representing that goods or services have ... characteristics, ingredients, uses, benefits, or quantities that they do not have.
....
(e) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
....
(g) Advertising or representing goods or services with intent not to dispose of those goods or services as advertised or represented.
....
(s) Failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.
....
(z) Charging the consumer a price that is grossly in excess of the price at which similar property or services are sold.
The MCPA does not apply, however, to "transaction[s] or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States."
7. New Jersey Law.
Under the New Jersey Consumer Fraud Act,
use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged.
The NJCFA is subject to a judicially created exception. See Lemelledo v. Beneficial Mgmt. Corp. of America,
It must be convinced that the other source or sources of regulation deal specifically, concretely, and pervasively with the particular activity, implying a legislative intent not to subject parties to multiple regulations that, as applied, will work at cross-purposes. We stress that the conflict must be patent and sharp, and must not simply constitute a mere possibility of incompatibility. If the hurdle for rebutting the basic assumption of applicability of the CFA to covered conduct is too easily overcome, the statute's remedial measures may be rendered impotent as primary weapons in combatting clear forms of fraud simply because those fraudulent practices happen alsoto be covered by some other statute or regulation.
8. New Mexico Law.
The New Mexico Unfair Practices Act,
an act specifically declared unlawful pursuant to the Unfair Practices Act, a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services ... by a person in the regular course of the person's trade or commerce, that may, tends to or does deceive or mislead any person.
A claim under the NMUPA has four elements:
First, the complaining party must show that the party charged made an "oral or written statement, visual description or other representation" that was either false or misleading. Second, the false or misleading representation must have been "knowingly made in connection with the sale, lease, rental or loan of goods or services in the extension of credit or ... collection of debts." Third, the conduct complained of must have occurred in the regular course of the representer's trade or commerce. Fourth, the representation must have been of the type that "may, tends to or does, deceive or mislead any person."
Stevenson v. Louis Dreyfus Corp.,
9. New York Law.
New York's Consumer Protection from Deceptive Acts and Practices,
NYCPDAP has a safe harbor that precludes
any such action ... that the act or practice is, or if in interstate commerce would be, subject to and complies with the rules and regulations of, and the statutes administered by, the federal trade commission or any official department, division, commission or agency of the United States as such rules, regulations or statutes are interpreted by the federal trade commission or such department, division, commission or agency or the federal courts.
10. North Carolina Law.
Under North Carolina law, "unfair or deceptive acts or practices in or affecting commerce, are declared unlawful."
The Supreme Court of North Carolina has eschewed applying
11. Ohio Law.
The OCSPA mandates that "[n]o supplier shall commit an unfair or deceptive act or practice in connection with a consumer transaction."
For a class-action plaintiff to state a claim under the OCSPA, the plaintiff must allege pre-litigation notice. See Marrone v. Philip Morris USA, Inc.,
12. Washington Law.
The Washington Consumer Protection Act,
The WCPA does not apply "to actions or transactions otherwise permitted, prohibited or regulated under laws administered by ... any other regulatory body or officer acting under statutory authority of this state or the United States."
LAW REGARDING UNJUST ENRICHMENT
"A person who is unjustly enriched at the expense of another is subject to liability in restitution." Restatement (Third) of Restitution and Unjust Enrichment § 1. "[T]he paradigm case of unjust enrichment is one in which the benefit on one side of the transaction corresponds to an observable loss on the other." Restatement (Third) of Restitution and Unjust Enrichment § 1, cmt. a. "The usual consequence of a liability in restitution is that the defendant must restore the benefit in question or its traceable product, or else pay money in the amount necessary to eliminate unjust enrichment." Restatement (Third) of Restitution and Unjust Enrichment § 1, cmt. a.
1. California Law.
Under California law, "[a]n individual who has been unjustly enriched at the expense of another may be required to make restitution." Hartford Cas. Ins. Co. v. J.R. Marketing, L.L.C.,
2. Colorado Law.
"A person is unjustly enriched when he benefits as a result of an unfair detriment to another." Lewis v. Lewis,
"[E]quity will not act if there is a plain, speedy, adequate remedy at law." Szaloczi v. John R. Behrmann Revocable Trust,
3. Florida Law.
"The elements of an unjust enrichment claim are 'a benefit conferred upon a defendant by the plaintiff, the defendant's appreciation of the benefit, and the defendant's acceptance and retention of the benefit under circumstances that make it inequitable for him to retain it without paying the value thereof.' " Fla. Power Corp. v. City of Winter Park,
4. Illinois Law.
"The theory of unjust enrichment is based on a contract implied in law." People ex rel. Hartigan v. E. & E. Hauling, Inc.,
In adjudicating an unjust-enrichment claim against a tobacco company, the Seventh Circuit recounted:
The Plaintiffs' unjust enrichment theory rests on the allegation that they had a legal right to know about the true nature and hazards of cigarettes. The plaintiffs assert that the defendants violated this right by failing to disclose the full truth about cigarettes and that this failure to disclose was to the Plaintiffs' detriment; and that Defendants' retention of the benefit-the cigarette revenue-violates the fundamental principles of justice, equity, and good conscience. It is crucial to note that the plaintiffs do not allege that they suffered any harm, that they relied on the Defendants' marketing, or that they would have acted differently had the defendants been truthful about the cigarettes they were selling. In fact, not only do the plaintiffs not make these allegations, but the plaintiffs also explicitly disavow any such allegations, claiming that they are entirely unnecessary to support their theory of unjust enrichment. In other words, the plaintiffs assert that their unjust enrichment claim does not require proof of deception, causation, or actual harm with regard to individual members of the plaintiff class.
Cleary v. Phillip Morris Inc.,
since the plaintiffs disclaim any need to allege either personal damages, deception, or reliance with regard to any member of the class, it is difficult to see how the Defendants' retention of the revenue paid by a consumer is to that consumer's detriment. According to the plaintiffs, the class of people with a valid unjust enrichment claim would include the consumer who bought cigarettes and was never injured in any manner by his purchase. It would include the consumer who was satisfied by his cigarette purchase and planned to continue purchasing cigarettes. It would include the consumer who would not have acted any differently had he been fully informed about cigarettes, but bought them anyway regardless of the Defendants' marketing. It would include the consumer who was not deceived by the marketing because he was personally aware of the true nature of cigarettes, but still bought cigarettes despite their addictive and harmful nature-or even because of it.
Cleary v. Phillip Morris Inc.,
5. Massachusetts Law.
"A plaintiff asserting a claim for unjust enrichment must establish not only that the defendant received a benefit, but also that such a benefit was unjust, 'a quality that turns on the reasonable expectations of the parties.' " Metropolitan Life Ins. Co. v. Cotter,
6. Michigan Law.
"Even though no contract may exist between two parties, under the equitable doctrine of unjust enrichment, '[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other.' " Kammer Asphalt Paving Co., Inc. v. East China Tp. Schools,
7. New Jersey Law.
"To establish a claim for unjust enrichment, 'a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust.' " Lliadis v. Wal-Mart Stores, Inc.,
8. New Mexico Law.
To prevail in unjust enrichment, "one must show that: (1) another has been knowingly benefitted at one's expense (2) in a manner such that allowance of the other to retain the benefit would be unjust." Ontiveros Insulation Co. v. Sanchez,
Unjust enrichment is "a quasi-contract claim and contemplates an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties." Georgia Malone & Co., Inc. v. Rieder,
10. North Carolina Law.
Under North Carolina law, unjust enrichment is established when "a party [has] conferred a benefit on the other party," the benefit is measurable, is not gratuitous, and is not "conferred by an interference in the affairs of the other party in a manner that is not justified in the circumstances." Booe v. Shadrick,
11. Ohio Law.
"Unjust enrichment occurs when a person 'has and retains money or benefits which in justice and equity belong to another.' " Johnson v. Microsoft Corp.,
12. Washington Law.
"Unjust enrichment occurs when one retains money or benefits which in justice and equity belong to another." Young v. Young,
LAW REGARDING BREACHES OF EXPRESS WARRANTIES
Under the Uniform Commercial Code ("UCC"), there are three ways in which a seller can make an express warranty. See UCC § 2-313(1).
Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
UCC § 2-313(1)(a)-(c). An express warranty does not need to include "formal words such as warrant or guarantee," and the seller does not need to have "a specific intention to make a warranty." UCC § 2-313(2). Relevant to this Memorandum Opinion and Order, California, Colorado, Florida, Illinois, New Jersey, New Mexico, New York, and North Carolina have adopted the UCC § 2-313. See
The Supreme Court of California has noted that "[t]he key under [the UCC] is that the seller's statements-whether fact or opinion-must become part of the basis of the bargain." Hauter v. Zogarts,
The basis of the bargain requirement represents a significant change in the law of warranties. Whereas plaintiffs in the past have had to prove their reliance upon specific promises made by the seller ( Grinnell v. Charles Pfizer & Co. (1969), 440, 274 Cal.App.2d 424 ), the Uniform Commercial Code requires no such proof. 79 Cal.Rptr. 369
Hauter v. Zogarts,
2. Colorado Law.
Under Colorado law, it is not "necessary for an express warranty that 'the seller use formal words such as 'warrant' or 'guarantee' or that he have a specific intention to make a warranty.' " Palmer v. A.H. Robins Co., Inc.,
A buyer must "notify" the seller "within a reasonable time after he discovers or should have discovered any breach ... or be barred from any remedy."
The notice requirement in a breach of warranty action serves three purposes: (1) affording the seller an opportunity to correct any defect; (2) affording the seller an opportunity to prepare for negotiation and litigation; and (3) providing the seller a safeguard against stale claims being asserted after it is too late to investigate them.
Palmer v. A.H. Robins Co., Inc.,
3. Florida Law.
Florida Law states:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise; (b) [a]ny description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description; and (c) [a]ny sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
4. Illinois Law.
"[A]n express warranty ... obligates the seller to deliver goods that conform to the affirmation, promise, description, sample or model." Mydlach v. DaimlerChrysler Corp.,
A buyer "must within a reasonable time after he discovery or should have discovered any breach notify the seller of the breach or be barred from any remedy." 810 Ill. Comp. Stat. 5/2-607(3)(a). "In general, buyers ... must directly notify the seller of the troublesome nature of the transaction or be barred from recovering for a breach of warranty." Connick v. Suzuki Motor Co., Ltd.,
5. New Jersey Law.
"[T]o state a claim for breach of express warranty under New Jersey Law, [a] plaintiff must allege (1) [the defendant] made an affirmation of fact, promise, or description about the produce; (2) this affirmation of fact, promise, or description became part of the basis of the bargain for the product; and (3) the product ultimately did not conform to the affirmation of fact, promise, or description." In re Avandia Marketing Sales Practices & Products Liability Litig.,
6. New Mexico Law.
Under New Mexico law, a seller expressly warrants goods in a commercial transaction when it (i) makes an affirmation of fact or promise to the buyer "which relates to the goods and becomes part of the basis of the bargain"; (ii) describes the goods in a way that "is made part of the basis of the bargain"; or (iii) provides a "sample or model which is made part of the basis of the bargain."
In Bellman v. NXP Semiconductors USA, Inc.,
7. New York Law.
New York does not require the plaintiff to rely on the truth of the warrant for liability to attach. See CBS Inc. v. Ziff-Davis Pub. Co.,
8. North Carolina Law.
An express warranty breach "occurs when the goods fail in any respect to conform to the express warranty given [by] the seller." Alberti Manufactured Homes, Inc.,
Authority from most other jurisdictions holds that a purchaser who relies upon a manufacturer's representations can recover for breach of an express warranty despite lack of privity. The bound procedure whereby the purchaser claims against the retailer, the retailer against the distributor, and the distributor, in turn, against the manufacturer, is unnecessarily expensive and wasteful. We find no reason to inflict this drain on the court's time and the litigant's resources when there is an express warranty directed by its terms to none other than the plaintiff purchaser.
Kinlaw v. Long Mfg. N.C., Inc.,
LAW REGARDING PERMANENT INJUNCTIONS
To attain a permanent injunction, a plaintiff must demonstrate:
(i) that it has suffered an irreparable injury; (ii) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (iii) that, considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted; and (iv) that the public interest would not be disserved by a permanent injunction.
eBay, Inc. v. MercExchange, LLC,
"A district court may find irreparable harm 'based upon evidence suggesting that it is impossible to precisely calculate the amount of damage plaintiff will suffer.' " Southwest Stainless, LP v. Sappington,
Injunctive relief requested is subject to Article III mootness. See WildEarth Guardians v. Public Service Co. of Colorado,
Like Article III standing, mootness is oft-cited as a constitutional limitation on federal court jurisdiction. E.g. , Building & Constr. Dep't v. Rockwell Int'l Corp. ,, 1491 (10th Cir. 1993) ("Constitutional mootness doctrine is grounded in the Article III requirement that federal courts only decide actual, ongoing cases or controversies).... But although issues of mootness often bear resemblance to issues of standing, their conceptual boundaries are not coterminous.... [T]he Supreme Court has historically recognized what are often called 'exceptions' to the general rule against consideration of moot cases, as where a plaintiff's status is 'capable of repetition yet evading review,' S. Pac. Terminal Co. v. Interstate Commerce Comm'n , 7 F.3d 1487 , 219 U.S. 498 , 31 S.Ct. 279 (1911), or where a defendant has ceased the challenged action but it is likely the defendant will 'return to his old ways'-the latter often referred to as the voluntary cessation exception, United States v. W.T. Grant Co. , 55 L.Ed. 310 , 632, 345 U.S. 629 , 73 S.Ct. 894 (1953). 97 L.Ed. 1303
Lucero v. Bureau of Collection Recovery, Inc.,
LAW REGARDING PERSONAL JURISDICTION
When contested,
1. Burden of Proof.
As already noted, the Plaintiff bears the burden of proving personal jurisdiction. See Wenz v. Memery Crystal,
2. Due Process and Personal Jurisdiction.
The personal-jurisdiction due process analysis is two-fold. See Fabara v. GoFit, LLC,
General jurisdiction is based on an out-of-state defendant's "continuous and systematic" contacts with the forum state, and does not require that the claim be related to those contacts. Specific jurisdiction, on the other hand, is premised on something of a quid pro quo : in exchange for "benefitting" from some purposive conduct directed at the forum state, a party is deemed to consent to the exercise of jurisdiction for claims related to those contacts.
Dudnikov v. Chalk & Vermilion Fine Arts, Inc.,
For a court to exercise specific jurisdiction " 'the suit' must 'aris[e] out of or relat[e] to the defendant's contacts with the forum ." Bristol-Myers,
Although agreements alone are likely to be insufficient to establish minimum contacts, " 'parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other state for the consequences of their activities.' " TH Agric. & Nutrition, LLC v. Ace Eur. Grp. Ltd.,
General personal jurisdiction jurisprudence has "followed a markedly different trajector[y]" than specific personal jurisdiction. Daimler AG v. Bauman,
If [the defendant] is found to have the requisite minimum contacts with [the forum state], then we proceed to the second step in the due process analysis: ensuring that the exercise of jurisdiction over him does not offend "traditional notions of fair play and substantial justice."See World-Wide Volkswagen Corp. v. Woodson,, 292, 444 U.S. 286 , 100 S.Ct. 559 (1980) (quoting 62 L.Ed.2d 490 Int'l Shoe Co. v. Washington, , 316, 326 U.S. 310 , 66 S.Ct. 154 (1945) ). [The defendant] bears the burden at this stage to "present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." See Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 90 L.Ed. 95 , 1080 (10th Cir. 2008). We consider the following five factors, ... in deciding whether the exercise of jurisdiction would be fair: 514 F.3d 1063
(1) the burden on the defendant, (2) the forum state's interests in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effectual relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states or foreign nations in furthering fundamental social policies.
Id. (brackets omitted); see also OMI Holdings, Inc.,149 F.3d at 1095 (applying these factors in a case involving a Canadian corporation). "[T]he reasonableness prong of the due process inquiry evokes a sliding scale: the weaker the plaintiff's showing on minimum contacts, the less a defendant need show in terms of unreasonableness to defeat jurisdiction." TH Agric. & Nutrition, LLC,(internal quotation marks and brackets omitted). 488 F.3d at 1292
Marcus Food Co. v. DiPanfilo,
Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.
Bristol-Myers,
In Silver v. Brown,
the blog is closer to an informative website than a commercial website. No services are offered, and Brown is not collectingrevenue from the website. Brown does not interact with the people who post information on the blog. Brown, to the Court's knowledge, did not solicit negative postings on the website. Further, even though people in New Mexico can view the website, the blog is not a website that is directed solely at the people of New Mexico. The number of people who can access the website in New Mexico in comparison to those who are able to access the website throughout the world, or even in the United States, according to the statistics that Silver provided at the hearing, is nominal.
On appeal, the Tenth Circuit affirmed the Court's holding as to McMullen, but reversed its decision as to Brown. See Silver v. Brown,
In several other recent cases, the Court grappled with whether it could assert general or specific jurisdiction over non-individual entities. In Fabara v. GoFit, LLC,
In Diener v. Trapeze Asset Management, Inc., No. 15-0566,
Finally, in Resource Associates Grant Writing & Evaluation Servs., Inc. v. Southampton Union Free School Dist.,
ANALYSIS
First, the Court concludes that it may properly consider all of the documents the Defendants request to be judicially noticed on a rule 12(b)(6) Motion, except the FTC Letter, because the United States has not publically recognized that document as its own. It concludes that the remaining documents may be properly considered, because they are either referenced in the Amended Complaint or are matters of public record. Second, the Court concludes that it lacks personal jurisdiction over Reynolds American vis-à-vis the Plaintiffs' claims brought in a non-North Carolina forum, because Reynolds American's involvement with its subsidiary, Santa Fe Tobacco-e.g., its asset and board member overlap-is not so extensive as to make Santa Fe Tobacco Reynolds American's alter ego. Nevertheless, it will exercise its authority under
I. THE COURT MAY PROPERLY CONSIDER ALL BUT ONE DOCUMENT THAT THE DEFENDANTS HAVE SUBMITTED WITHOUT CONVERTING THE MOTION INTO ONE FOR SUMMARY JUDGMENT.
The Defendants move for judicial notice of eighteen items, and they are:
(1) The 2000 FTC Complaint filed against Santa Fe Tobacco. See In the Matter of Santa Fe Natural Tobacco Company, Inc., No. C-3952 Complaint ("FTC Complaint"), filed November 18, 2016 (Doc. 71-1)("First JN Motion Exhibits"); First JN Motion Exhibits at CM/ECF 2-4.
(2) Natural American Spirit Advertising attached to the FTC Complaint. See In the Matter of Santa Fe Natural Tobacco Company, Inc., No. C-3952, Exhibits A-C, filed November 18, 2016 (Doc. 71-1)("FTC Complaint's exhibits"); First JN Motion Exhibits at CM/ECF 6-8. The FTC Complaint's exhibits appear to be photocopied advertisings from magazines, and they advertise Natural American cigarettes as 100% free of chemical additives and natural.
(3) The Consent Order. See First JN Motion Exhibits at CM/ECF 10-19.
(4) An FTC press release announcing a proposed settlement agreement between the FTC and Santa Fe Tobacco. See FTC Accepts Settlements of Charges that "Alternative" Cigarette Ads are Deceptive, issues April 27, 2000, filed November 18, 2016 (Doc. 71-1)("Press Release 1"); First JN Motion Exhibits at CM/ECF 21-23.
(5) An FTC press release announcing a proposed settlement agreement concerning Reynolds American's no-additive advertising. See FTC Accepts Settlement of Charges that Ads for Winston "No Additive" Cigarettes are deceptive, issued March 3, 1999, filed November 18, 2016 (Doc. 71-1)("Press Release 2");
First JN Motion Exhibits at CM/ECF 25-27.
(6) An Assurance of Voluntary Compliance between Reynolds American and various States Attorneys General. See Assurance of Voluntary Compliance, (dated March 1, 2010), filed November 18, 2016 (Doc. 71-1)("Assurance of Voluntary Compliance"); First JN Motion at Exhibits at 29-49.
(7) Letter from Lisa Kopchik, an FTC attorney, to Robin Sommers, Santa Fe Tobacco's CEO, dated September 22, 1997. See Advertising for Natural American Cigarettes File Number 972-3235, dated September 22, 1997, filed November 18, 2016 (Doc. 71-1)("FTC Letter"); First JN Motion Exhibits at CM/ECF 51-57.
(8) A Food and Drug Administration Center for Tobacco Products Warning Letter to Santa Fe Tobacco, dated August 27, 2015. See Warning Letter, dated; First JN Motion at CM/ECF 59-62.
(9)-(15) Reproductions of Natural American cigarette labeling. See Natural American Spirit Dark Green 84mm CPB at CM/ECF 64-69, dated August 13, 2015, filed November 18, 2016 (Doc. 71-1)("Dark Green Label"); Natural American Spirit Blue 84mm CPB at CM/ECF 71-76, dated August 13, 2015, filed November 18, 2016 (Doc. 71-1)("Blue Label"); Natural American Spirit Gold 84 mm CPB at CM/ECF 78-83, dated August 13, 2015, filed November 18, 2016 (Doc. 71-1)("Gold Label"); Natural American Spirit Turquoise 84mm CPB at CM/ECF 85-90, dated August 13, 2015, filed November 18, 2016 (Doc. 71-1)("Turquoise Label"); Natural American Spirit Green 84mm CPB at CM/ECF 92-97, dated August 13, 2015, filed November 16, 2016 (Doc. 71-1)("Green Label"); Natural American Spirit Yellow 84 mm CPB at CM/ECF 99-104, dated August 13, 2015, filed November 18, 2016 (Doc. 71-1)("Yellow Label"); Natural American Spirit Perique Robust 84 mm CPB at CM/ECF 106-111, dated August 13, 2015, filed November 18, 2016 (Doc. 171-1)("Perique Label"), (collectively "Natural American Labels"); First JN Motion Exhibits at CM/ECF 64-111.
(16) Natural American Tobacco and Water Advertising. See Tobacco & Water Advertisement; First JN Motion Exhibits at 113-14.
(17) Memorandum of Agreement. See Second JN Motion at 1; Second JN Motion Exhibit at CM/ECF 2-3.
(18) Request for Informal Staff Guidance Regarding Santa Fe Natural Tobacco Company's Consent Order (FTC Dkt. No. C-3952) dated May 9, 2017, filed May 30, 2017 (Doc. 109-1)("Staff Guidance Request"); Third JN Motion Exhibit at CM/ECF 2-4.
The Plaintiffs argue that items 17 and 18 are not judicially noticeable, but do not contest the first sixteen items. See Plaintiffs' Response in Opposition to Defendants' Second Motion for Judicial Notice at 2-4, filed April 6, 2017 (Doc. 97)("Second JN Resp."); Plaintiffs' Response in Opposition to Defendants' Third Motion to Take Judicial Notice at 1-2, filed June 7, 2017
Initially, the Court judicially notices the FTC Complaint, the FTC Complaint's Exhibits, the Consent Order, Press Release 1, Press Release 2, the Assurance of Voluntary Compliance, and the Warning Letter. The FTC Complaint, the FTC Complaint's Exhibits, and the Consent Order are matters of public record, so may be judicially noticed. See Hodgson v. Farmington City,
The Court also judicially notices Press Release 1, Press Release 2, the Assurance of Voluntary Compliance, and the Warning Letter, because they are available on a governmental website.
The Court also concludes that it can consider the Natural American Labels and the Tobacco & Water Advertisement without converting the motion into one for summary judgment, because the Amended Complaint incorporates those documents by reference. The Amended Complaint, in fact, reproduces pictures of the labeling and the advertising that the Defendants seek to introduce. See Amended Complaint ¶¶ 40, 43, at 15, 19-21; First JN Motion at 4 (explaining that the Defendants seek to produce more legible pictures of the labeling and the second page of an advertisement featured in the Amended Complaint). Moreover, Natural American cigarette's labeling and advertising is central to this case and the Plaintiffs have not disputed those documents' authenticity, so the Court may properly consider them without converting the MTD into one for summary judgment. See Jacobsen v. Deseret Book Co.,
The Memorandum of Agreement is judicially noticeable. The Plaintiffs contend that the Memorandum of Agreement cannot be a matter of public record, because it is not published in the Federal Registry, it is not a government report, or a government press release, and it is stamped "Confidential-Not for Public Disclosure." Second JN Resp. at 2-3. The Defendants rejoin that, by producing a copy of the Memorandum of Agreement in response to a Freedom of Information Act ("FOIA") request, the FDA made the document a matter of public record. See Second JN Reply at 1. The Court concludes that the Memorandum of Agreement is a matter of public record, despite its confidential label and even though it is still not publically available online, because the FOIA disclosure makes the document "capable of accurate and ready determination by resort to [a] source[ ] whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). See
The Plaintiffs also argue, however, that, even if the document is judicially noticeable, the Defendants want the Court to judicially notice the Memorandum of Agreement's contents for their truth value-"a task inappropriate at the 12(b)(6) stage." Second JN Resp. at 4. In their MTD, the Defendants cite the Memorandum of Agreement to support their argument that injunctive relief is rendered moot, because they have already taken steps to the stop the actions that, purportedly, entitle the Plaintiffs to injunctive relief. See MTD at 68-69. The Court agrees with the Plaintiffs that it cannot consider the contents of the Memorandum of Agreement for the truth of the matters asserted therein. See Tal v. Hogan,
Finally, the Court judicially notices the Staff Guidance Request. In the document, the FTC advises the Defendants that it cannot say whether the phrases "Tobacco Ingredients: Tobacco and Water" and "Tobacco Filler Ingredients: Tobacco and Water" trigger the Consent Order's disclosure requirement, because the legal analysis turns on "an examination of the entire advertisement," so it cannot offer legal advice regarding the two phrases in a vacuum. Staff Guidance Request at 2. The FTC warns, however, that those phrases likely trigger the Consent Order's disclosure obligation. See Staff Guidance Request at 2. The FTC also notes that, if the Defendants modified their disclosure to "Natural American Spirit cigarettes are not safer than other cigarettes," the FTC would not recommend an enforcement action "as long as the disclosure was displayed clearly and prominently." Staff Guidance Request at 3 (emphasis in original). The Court judicially notices the Staff Guidance Request, because it is available on the FTC's website.
The Defendants argue that the Court has jurisdiction only over those claims against Reynolds American filed in North Carolina, because Reynolds American is headquartered and incorporated there, and Reynolds American otherwise lacks the minimum contacts necessary for specific or general jurisdiction in the other forums. See MTD at 71, 73-74. They also aver that the Plaintiffs cannot impute Reynolds American's subsidiaries' contacts onto it, because Reynolds American does not substantially controls its subsidiary's day-to-day activities. See MTD at 76-77.
The Court's jurisdiction in an MDL is coextensive with the transferor courts' jurisdiction. See, e.g., In re Automotive Refinishing Paint Antitrust Litig.,
The Defendants argue that asserting personal jurisdiction over the claims filed against Reynolds American outside of North Carolina would violate Due Process. See MTD at 72. The personal-jurisdiction due process analysis is two-fold. See Fabara v. GoFit, LLC,
General jurisdiction is based on an out-of-state defendant's "continuous and systematic" contacts with the forum state, and does not require that the claim be related to those contacts. Specific jurisdiction, on the other hand, is premised on something of a quid pro quo : in exchange for "benefitting" from some purposive conduct directed at the forum state, a party is deemed to consent to the exercise of jurisdiction for claims related to those contacts.
Dudnikov v. Chalk & Vermilion Fine Arts, Inc.,
The test for general personal jurisdiction turns on whether the defendant is "at home" within the forum state. Daimler AG v. Bauman,
The Court agrees with the Defendants that it cannot assert general personal jurisdiction over Reynolds American except for the Plaintiffs' claims that were filed in
The Court also agrees with the Defendants that it cannot assert specific personal jurisdiction over Reynolds American regarding the remaining Plaintiffs' claims. The specific-jurisdiction inquiry is also a two-part test: "[F]irst ... the out-of-state defendant must have purposefully directed its activities at residents in the forum state, and second, ... the plaintiff's injuries must arise out of' defendant's forum-related activities." Dudnikov v. Chalk & Vermilion Fine Arts, Inc.,
Reynolds American's alleged activities-"intimate[ ] involve[ment] in the marketing, advertising, and overall business development of Natural American cigarettes," Amended Complaint ¶ 27, at 12-do not establish that it directed its activities at the non-North Carolina states. See Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Co-op,
Nor may Reynolds American's subsidiaries' contacts be substituted for the ones that Reynolds American lacks. To impute a subsidiary's contacts onto a parent, the subsidiary must be the parent's general agent or alter ego. See Benton v. Cameco Corp.,
Although the Court lacks personal jurisdiction as to those claims, there is still the question of the appropriate remedy. The Court notes that it can, under rule 21, sever the defective claims filed against Reynolds American and transfer that action to a North Carolina federal court, if the transfer "is in the interest of justice."
There are three factors that the Court must consider on an "interests of justice" analysis: (1) whether the claims would be time barred; (2) the claims' merit; and (3) whether the original action was filed in good faith rather than after the Plaintiff realized or should have realized that the forum was improper. See Trujillo v. Williams,
As to the final factor, the Plaintiffs allege that the statute of limitations is equitably tolled under the discovery rule, i.e., the named and unnamed Plaintiffs could not have known of the deception, so the limitations period does not trigger until the plaintiffs discover the deception, and because the Defendants concealed their deception. See Amended Complaint ¶¶ 96-102, at 38-39. They also allege that the Defendants are estopped from relying on a statute of limitation defense, because the Defendants actively concealed "the true nature, quality, and character" of Natural American cigarettes. Amended Complaint ¶ 104, at 29. See id. at ¶¶ 103-05, at 39. The Court does not assess the merits of those allegations, but it notes that the applicable statute-of-limitations period for the consumer protection statutes, unjust-enrichment claims, and express warranty claims range from two to six years. See, e.g., Ohio Rev. Code Ann. 1345.10 ("An action ... may not be brought more than two years after the occurrence of the violation ...."); Mich. Comp. Laws 445.911(7) ("An action under this section shall not be brought more than 6 years after the occurrence ...."); Halver v. Welle,
The Court accordingly will sever the claims, creating a new action, and transfer that new action under
III. THE CONSENT ORDER DOES NOT PREEMPT THE PLAINTFFS' CLAIMS PREMISED ON THE SAFER-CIGARETTE THEORY.
The Defendants move to dismiss the Plaintiffs' claims, asserting that federal law impliedly preempts the state-law claims premised on the Safer-Cigarette Theory. See MTD at 6. The Court first considers below express preemption and then turns to implied preemption. It ultimately concludes that the Consent Order does not preempt the Plaintiffs' claims.
A. THE FCLAA DOES NOT EXPRESSLY PREEMPT THE PLAINTIFFS' CLAIMS, BECAUSE THE PLAINTIFFS ALLEGE DECEPTION.
In analyzing preemption, there is an "assumption that the historic police powers of the States [are] not to be superseded by [federal law] unless that was the clear and manifest purpose of Congress." Medtronic, Inc. v. Lohr,
While neither party raises express preemption under FCLAA or under the FTC's authority over advertising and promotion, the Court deems it prudent to discuss the FCLAA. In 1965, Congress enacted the FCLAA in response to the Surgeon General's conclusion that cigarette smoking is harmful. See Cipollone v. Liggett Grp., Inc.,
The FCLAA's labeling requirement, along with its preemption provisions, demonstrate Congress' intent that the FCLAA's mandated warnings are necessary and sufficient to promote Congress' goal. See Altria II,
Unlike state-law obligations concerning the warning necessary to render a product "reasonably safe," state-law proscriptions on intentional fraud rely on a single, uniform standard: falsity. Thus, [the FCLAA's express preemption clause] "based on smoking and health," fairly but narrowly construed does not encompass the more general duty not to make fraudulent statements.
Cipollone v. Liggett Group Inc.,
B. THE CONSENT ORDER DOES NOT IMPLIEDLY PREEMPT THE PLAINTIFFS' CLAIMS.
Implied conflict preemption occurs where "compliance with both federal and state regulations is a physical impossibility," Fla. Lime & Avocado Growers, Inc. v. Paul,
The Defendants do not argue that it is impossible to comply with both the Consent Order and state law. See MTD at 9-15. Instead, they contend that state law liability erects an obstacle to a federal objective. See MTD at 9-15. The Court concludes that the Consent Order does not impliedly preempt the Plaintiffs' claims for four reasons. First, the Consent Order cannot preempt state law, because it was not subject to the APA's or the FTC Act's rigorous procedural requirements for promulgating regulations. Second, even if a consent order could preempt state law without going through the APA or FTC procedural requirements, an agreement not to enforce a federal law does not evince intent to preclude all state law liability. Third, assuming that the Consent Order had preemptive effect, it would only bind parties to the agreement, so the consent order would only prohibit the plaintiffs from bringing suit against Santa Fe Tobacco. Finally, if the Consent Order had preemptive effect, it would only preempt the Plaintiffs' claims that target Natural American advertising and not their labeling, because the Consent Order does not govern labeling.
The Supreme Court has ruled that federal regulations preempt state laws. See Capital Cities Cables, Inc. v. Crisp,
The Courts of Appeals do not, however, uniformly hold that consent orders grant preemptive effect. For example, the Fifth Circuit, relying on a United States Court of Appeals for the Eleventh Circuit case, has ruled that, "[a]s far as preemption is concerned, a voluntary consent decree has the same effect on state law as does a voluntary affirmative action program-none." Dean v. City of Shreveport,
Because neither the state nor the consumers were parties to the FTC's case, it is hard to understand how the decree could blot out their claims based on state law. Whether the decree has such an effect should depend on whether it was adopted by the agency as its own policy following the procedures the APA requires; then the preemption would come from substantive rules rather than the parties' assent.
Wabash Valley Power Ass'n, Inc. v. Rural Electrification Admin.,
Unlike many other exercises of agency authority, formal rulemaking comes with a host of procedural protections under the Administrative Procedure Act ("APA"), such as notice of the proposed rule, an opportunity for interested parties to participate, a statement of the basis and purpose of any rule adopted, and its publication in the Federal Register.5 U.S.C. § 533 (2007). Limiting the preemptive power of federal agencies to exercises of formal rulemaking authority, then, ensures that the states will have enjoyed these protections before suffering the displacement of their laws. See, e.g., Wabash Valley Power Ass'n,903 F.2d at 453-54 ; Richard J. Pierce, Jr., Regulation, Deregulation, Federalism and Administrative Law,46 U. Pitt. L.Rev. 607 , 664-65 (1985).
Good v. Altria Grp., Inc.,
Regularity of procedure-whether it be the rulemaking and adjudicatory procedures of the APA or others which Congress may provide for a particular purpose-not only ensures that state law will be preempted only by federal law, as the Supremacy Clause provides, but also imposes a degree of accountability on decisions which will have the profound effect of displacing state laws, and affords some protection to the states that will have their laws displaced and to citizens who may hold rights or expectations under those laws.
Fellner v. Tri-Union Seafoods, L.L.C.,
The Court finds the First, Third, Fifth, Seventh, and Eleventh Circuits' reasoning persuasive and concludes that the Consent Order should not and does not preempt state law. A voluntary agreement-in short, a contract-between two parties, even when one is a federal agency, cannot "blot out" a dual sovereign's law without procedural safeguards. Wabash Valley Power Ass'n, Inc. v. Rural Electrification Admin.,
Even if, however, a consent order could preempt state law, this Consent Order still fails to preempt the Plaintiffs' claim. The preemption analysis' guiding star is the FTC's intent and purpose. See Medtronic, Inc. v. Lohr,
In analyzing those arguments, the Court proceeds with the backdrop of the presumption against preemption. The Defendants highlight the press release to contend that the Consent Order's purpose is to authorize the contested descriptors, or, potentially, to explain that the terms cannot be deceptive with the disclosure included.
Assuming, however, that the Consent Order's purpose is, as the Defendants' contend, to authorize the contested terms, the Plaintiffs' claims are still not preempted. Altria II offers the appropriate guidance. In that case, the Supreme Court considered the implied preemption doctrine and rejected the Defendants' obstacle-preemption claim that the FCLAA preempted a state statute similar to the statutes at issue in this case, Maine's Unfair Practices Act, Me. Rev. Stat. Ann., Tit. 5, § 207 (2008). See
The FTC Consent Order at issue in Altria II is similar to the Consent Order here. See In the Matter of American Brands, Inc.,
[R]espondent American Brands, Inc.... cease and desist from:
Stating in advertising that any cigarette manufactured by it, or the smoke therefrom, is low or lower in "tar" by use of the words "low," "lower," or "reduced" or like qualifying terms, unless the statement is accompanied by a clear and conspicuous disclosure.
In the Matter of American Brands, Inc.,
IT IS ORDERED that ... [t]hese disclosures shall be displayed ... in any advertisement that, through the use of such phrases as no additives, no chemicals, additive-free, chemical-free, chemical-additive-free, 100% tobacco, pure tobacco, or substantially similar terms, represents that a tobacco product has no additives or chemicals.
Consent Order at 5. The Defendants argue that the two Consent Orders' texts materially differ in that the Altria II order is "purely prohibitive, requiring the respondent to 'cease and desist from' " using descriptors unless a disclosure accompanies them, Reply at 4 (quoting In the Matter of American Brands, Inc.,
The language difference between the two orders is not enough to distinguish this case from Altria II . Both consent orders prohibit descriptors unless a mandated disclosure accompanies them. Alternatively, using the Defendants' chosen rhetoric, both Consent Orders authorize those descriptors if a disclosure accompanies them. That authorization was insufficient for the Supreme Court in Altria II, so cannot be sufficient for the Court here. The Defendants' attempt to distinguish Altria II ultimately pivots on the Consent Orders' slightly different language-the Altria II consent order phrases its order in terms of ceasing and desisting, and the Consent Order does not. Although the language enjoining the conduct might be slightly stronger in the Altria II order, the effect of the two orders is the same-prohibiting conduct, unless a disclosure accompanies it. That language difference does not persuade the Court that the FTC's "clear and manifest purpose" with the Consent Order was to supplant all state law deception claims, whereas the FTC had no such purpose with the Altria II consent order. Medtronic, Inc. v. Lohr,
The Defendants' other attempt to distinguish Altria II is equally unpersuasive. They argue that Altria II 's reasoning relies, in part, on decades of post-consent-order enforcement actions demonstrating that the FTC had no policy authorizing the descriptors at issue in Altria II. See Reply at 4-5. They argue that, in contrast, here, no such history exists. See Reply at 5. In Altria II, however, the Supreme Court's historical analysis had no bearing on its consent-order analysis; rather, the Supreme Court conducted a historical analysis to rebut the tobacco companies' argument that the FTC has a longstanding regulatory policy of authorizing the use of "light" and "low tar" descriptors. See Altria II,
Assuming, however, that the Consent Order preempts the Plaintiffs' claims premised on the Safer-Cigarette Theory, they would only preempt those claims against Santa Fe Tobacco. A consent order cannot impliedly preempt claims against third parties. See Altria II,
Finally, even if the Consent Order preempts the Plaintiffs' Safer-Cigarette Theory, it would preempt that claim only vis-à-vis the Defendants' advertisements, and not the Defendants' cigarette packaging and labeling. The Consent Order applies only to "advertisements." Consent Order at 4, [at 13 on CM/ECF] ("[R]espondent ... shall display in advertisements ...."). The Defendants urge the Court to overlook the conspicuous absence of "packaging and labeling" from the Consent Order, because the "FTC could have imposed restrictions on [Natural American cigarette] packaging, but chose not to-evidencing a conclusion that packaging did not present cause for concern." Reply at 10. The Court declines to read in the phrase "packing and labeling" into the Consent Order. The preemption test hinges on the agency's intent, which primarily turns on the Consent Order's language and structure. See Medtronic, Inc. v. Lohr,
Because the Defendants do not specify which preemption doctrine they are invoking, the Court considers both express and implied preemption. First, the OFPA and
Impossibility and obstacle preemption similarly do not bar the Plaintiffs' organic-based claims. The OFPA allows products to be labeled organic if they are "produced and handled without the use of synthetic chemicals," and are produced on land that has not been exposed to synthetic chemicals for at least three years preceding harvest of the product.
[P]reemption of state consumer protection law may actually diminish consumer confidence that organic products meet consistent standards as consumers become aware that otherwise meritorious claims are being preempted because the certifying agent has not suspended the certification in spite of clear facts to the contrary. Similarly, although broad factual preemption may increase organic production in the short term, consumers may well elect to avoid paying the premium for organic products upon realizing preemption grants organic producers a de facto license to violate state fraud, consumer protection, and false advertising laws with relative impunity, because the OFPA's only remedy for noncompliance is recourse to the USDA for revocation of certification and possibly for a civil penalty.
In re Aurora,
IV. DECEPTIONS BASED ON THE PLAINTIFFS' SAFER-CIGARETTE AND MENTHOL THEORIES MISLEAD A REASONABLE CONSUMER, BUT DECEPTIONS PREMISED ON THE UNPROCESSED-CIGARETTE THEORY DO NOT.
The Defendants contend that fourteen of the Plaintiffs' nineteen
The plaintiffs articulate three theories of deception. These theories have already been discussed, see supra at 1132-33, but, in brief summary, the three theories are:
(1) The Safer-Cigarette Theory : the Plaintiffs argue that the use of the terms organic, natural, and additive-free mislead tobacco consumers into believing that Natural American cigarettes are safer and healthier. See Amended Complaint ¶¶ 4-8, 47-66, at 2-3, 22-31; MTD at 22-24.
(2) The Menthol Theory : the Plaintiffs argue that, by labeling Natural Americans cigarettes with menthol "additive-free" and "natural," the Defendants mislead menthol consumers, because menthol is an additive. See Amended Complaint ¶¶ 10, 67-69 at 3, 31-32; MTD at 24-25.
(3) The Unprocessed-Cigarette Theory : the Plaintiffs argue that, by labeling Natural American cigarettes as Natural, the Defendants mislead consumers into believing that Natural American cigarettes are not subjected to rigorous engineering processes during production. See Amended Complaint ¶¶ 9, 70-74, at 3, 32-33; MTD at 25.
The Defendants marshal three attacks against the Plaintiffs' three theories of deception. See MTD at 42-49. First, they argue the Safer-Cigarette Theory is implausible, because a reasonable consumer would read the disclaimer stating that "no additives does NOT mean a safer cigarette" and would understand from that disclaimer that Natural American cigarettes
At the outset, the Court determines that it is plausible that a reasonable consumer, seeing the terms organic, natural, and additive free, would erroneously believe that Natural American cigarettes are safer or healthier than other cigarettes. In pleading their Safer-Cigarette Theory, the Plaintiffs rely heavily on several social science studies, which conclude that Natural American smokers are far more likely to believe that their brand is healthier than other cigarette brands, because of those descriptors. See Amended Complaint ¶¶ 50-54, at 23-27; Supp. Arg. at 4-6. For example, one study concludes that "[n]early 1 million US adult smokers prefer" Natural American cigarettes and they "are 22 times more likely than other smokers to believe that their brand is less harmful than other cigarette brands," leading the study authors to conclude that Natural American smokers may choose that brand because of the "descriptors organic, natural, and additive free on product packaging and advertising." Amended Complaint ¶ 52, at 25 (citing Misperceptions at 3). As surely as a Ph.D. cannot be swapped for an Article III commission, an academic study cannot take the place of the Court's judgment on a rule 12(b)(6) motion. See Ashcroft v. Iqbal,
The Court concludes that, nevertheless, the Plaintiffs' allegations, accepted as true, advance their Safer-Cigarette Theory
The Defendants do not contest that the descriptors convey to a reasonable consumer that Natural American cigarettes are healthier than other cigarettes. Rather, they contend that the disclaimer cures any deception. See MTD at 42-46. The Plaintiffs rejoin that a reasonable consumer is still misled, because the packaging's disclaimer is hidden. See Response at 44 (citing e.g., Williams v. Gerber Products Co.,
The Plaintiffs also contend that the disclosure is hidden, tucked under barcode, so a reasonable consumer cannot be expected to find it. The Court agrees with this argument to a point.
Cigarettes are often sold, however, in a manner such that a consumer cannot inspect the packaging in detail before purchasing, e.g., the cigarettes are kept locked in a display next to or behind the counter. The display shows the cigarette pack's front, but not the sides or back. A store clerk sometimes does not even hand the cigarette pack to the consumer before purchase, but places the pack directly in a shopping bag. Based on this, even though a reasonable consumer would inspect other items before purchase, it is not clear that they would have the opportunity to inspect Natural American cigarettes' labeling. Accordingly, the Court cannot conclude that the package's disclosure would cure a deception inflicted upon a reasonable consumer.
The Plaintiffs do not argue that a reasonable consumer would miss the disclosures on the Defendants' advertising, see Response at 43, and the Court concludes that a reasonable consumer would read and comprehend the advertising disclosures. Unlike the packaging, the advertisement's disclaimer is in a prominent location boxed over the Surgeon General's Warning, and a reasonable consumer would spot it easily. See Tobacco & Water Advertisement at 114 on CM/ECF.
Although a reasonable consumer would understand from the disclosure that the lack of additives does not make Natural American cigarettes healthier, that disclaimer says nothing about the natural or organic descriptors. As explained above, those two terms have an independent connotation that a product is healthier or safer. See, e.g., Discount Tobacco City & Lottery, Inc. v. United States,
Natural American's additive-free descriptor on menthol cigarettes also misleads a reasonable consumer. The crux of the Defendants' arguments against the Plaintiffs' Menthol Theory is that a reasonable consumer would know that menthol cigarettes contain menthol-an additive. See MTD at 46. From that premise, they argue that an additive-free descriptor would not be deceptive, because a reasonable consumer knows that she is purchasing a menthol cigarette. See MTD at 46. That argument assumes, however, that a reasonable consumer is so secure in her knowledge that menthol is an additive that an express representation to the contrary, on a heavily regulated product, see Phillip Morris, Inc. v. Reilly,
The ingredient's list on the product's back, which itemizes tobacco and menthol separately, does not dispel the deception. Without an unambiguous signal that the ingredients list is countermanding another representation on the package, "reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging." Williams v. Gerber Products Co.,
The Defendants argue that the First Amendment shields them from all liability. See MTD at 20. Their First Amendment defense fails, however, for two reasons. First, the state action doctrine precludes the claims premised on contract-related theories. Second, the tort-related claims may proceed, because those claims pass the Central Hudson balancing test. The Court considers each in turn.
A. THE STATE ACTION DOCTRINE PRECLUDES THE DEFENDANTS' FIRST AMENDMENT DEFENSE FOR THE PLAINTIFFS' CONTRACT-RELATED CLAIMS, BECAUSE CONSENSUAL CONTRACTUAL RELATIONS DO NOT IMPLICATE STATE ACTION.
"Congress shall make no law ... abridging the freedom of speech." U.S. Const. amend. I.
For most of American history, enforcing the common law was not thought to implicate state action. See Daniel J. Solove & Neil M. Richards, Rethinking Free Speech and Civil Liability,
The state action doctrine as applied to judicial enforcement of common-law claims has limits. See Solove & Richards, Rethinking Free Speech and Civil Liability,
It is, of course, a commonplace that the constitutional guarantee of free speech is a guarantee only against abridgement by government, federal or state. Thus, while statutory or common law may in some situations extend protection or provide redress against a private corporation or person who seeks to abridge the free expression of others, no such protection or redress is provided by the Constitution itself.
Hudgens v. N.L.R.B.,
Several United States Courts of Appeals have determined that state action is also not implicated when a court adjudicates a dispute between two parties that arises from a consensual contractual relationship. See, e.g., United Egg Producers v. Standard Brands, Inc.,
In sum, state action exists if the dispute is tort-related or if the rights arise from a state statute, but does not exist if the dispute arises from a contractual relationship or involves common-law property rights, unless a non-judicial state actor is involved or if racial discrimination is implicated. One way to conceive of the state action test is to question whether consent existed for the underlying private relationship at issue. If yes, there is no state action. If no, state action exists.
With that test in mind, the state statutory claims implicate state action. See Cardtoons, L.C. v. Major League Baseball Players Ass'n,
B. THE FIRST AMENDMENT DOES NOT PRECLUDE THE STATUTORY AND UNJUST-ENRICHMENT CLAIMS BASED ON THE PLAINTIFFS' THREE THEORIES, BECAUSE NATURAL AMERICAN CIGARETTES' DESCRIPTORS ARE INHERENTLY OR ARE IN FACT MISLEADING.
The speech at issue is commercial speech. As noted previously, the Supreme
There is a four-part test to determine whether the First Amendment shields commercial speech from governmental intervention. First, a court must determine "whether the particular advertisement is protected speech-i.e. , whether it concerns lawful activity and is not misleading." Revo,
In considering the threshold inquiry-whether the speech concerns lawful activity and is not misleading-there is a distinction between inherently misleading speech, in-fact misleading speech, and potentially misleading speech. See In re R.M.J.,
"Natural," "organic," and "additive-free" descriptors attached to Natural American cigarettes are not inherently misleading under Central Hudson and Revo with respect to the Safer-Cigarette Theory. Natural, organic, and additive-free do not, inherently,
The Menthol Theory, however, imposes liability for inherently misleading speech. This analysis diverges from the above, because additive-free's meaning exists in direct conflict with the menthol's presence in the cigarette. Menthol is an additive. Therefore an additive-free cigarette cannot have menthol. It is not possible for some other cigarette manufacturer to produce a menthol cigarette that is additive free and truthfully advertise it as such.
To rebut that conclusion, the Defendants argue that the menthol is added to the cigarette filters, and not the tobacco, so the additive-free natural tobacco label is truthful, because the menthol is not added to the tobacco. See MTD at 24. The Defendants admit, however, that, when the cigarette is smoked, inevitably the menthol intermingles with the tobacco. See June Tr. at 43:19-23 (Court, Schultz). See June Tr. at 43:6-8 (Schultz). The Court concludes that this eventual commingling makes the menthol modifier inherently misleading. The Court cannot see how another cigarette manufacturer could create a cigarette with menthol in the filter that never commingles with the tobacco. The Defendants' final argument that any misunderstanding could be dispelled through a new disclosure, see MTD at 24-25, misapprehends the inherently misleading test. The Court cannot assume in new disclosures otherwise no speech would be inherently misleading. Any assumed disclosure could cure deception with a simple explanation that the inherently misleading speech is a lie.
Finally, the descriptors are not inherently misleading with respect to the Unprocessed-Cigarette Theory. The analysis largely mirrors the Safer-Cigarette Theory analysis above. It is possible that a cigarette manufacturer could create a cigarette, label it natural, and not subject it to rigorous engineering processes. As explained, a cigarette company could harvest the tobacco, roll it up without adding anything to it, and sell it. Accordingly, under Revo , that modifier is not inherently misleading.
Those conclusions do not end the Court's analysis, however. A court may also forego the remaining Central Hudson factors if the commercial speech is, in fact, misleading. See In re R.M.J.,
Assuming that the Defendants' representations vis-à-vis the Menthol Theory were not inherently misleading, they were in fact misleading. Menthol cigarettes were also uniformly advertised and packaged as "additive-free." See Amended Complaint ¶¶ 42-43, at 16. See also Dark Green Label; Green Label. As explained above, the terms menthol and "additive-free" are at odds. The Court concludes it is plausible that the plaintiffs were deceived pursuant to the Menthol Theory.
The Court also concludes that the Plaintiffs were deceived pursuant to their Unprocessed-Cigarette Theory. The Unprocessed-Cigarette Theory's nub is that the term natural suggests that Natural American cigarettes are subjected to fewer engineering processes than other cigarettes. The Amended Complaint lacks allegations that the plaintiffs believed that Natural American cigarettes were less processed than other cigarettes. See Amended Complaint ¶¶ 12-23, at 4-11. Nevertheless, the Court concludes that it is plausible that the term "natural" alone would lead these particular plaintiffs, although not a reasonable consumer, to believe that Natural American cigarettes are subjected to fewer engineering processes than other cigarettes.
Assuming that the three theories are not inherently or factually misleading, those theories satisfy Central Hudson's intermediate scrutiny threshold. If speech is potentially misleading or not misleading, the state may regulate the speech as long as "the government can show that (1) it has a substantial state interest in regulating the speech, (2) the regulation directly and materially advances that interest, and (3) the regulation is no more extensive than necessary to serve the interest." Revo,
When adjudicating the Central Hudson test, the Supreme Court and the Tenth Circuit have identified several substantial governmental interests in regulating speech. See Central Hudson,
The Plaintiffs argue that there is a substantial governmental interest in protecting consumers from misleading speech, see Response at 19, 21, and the Court agrees that this interest suffices, see Central Hudson,
Central Hudson's next step-determining whether the speech restriction directly and materially advances the asserted government interest-requires more than just "mere speculation or conjecture" that the speech restriction will advance the interest. Lorillard Tobacco Co. v. Reilly,
[w]e do not, however, require that "empirical data come ... accompanied by a surfeit of background information. ... [W]e have permitted litigants to justify speech restrictions by reference to studies and anecdotes pertaining to different locales altogether, or even, in a case applying strict scrutiny, to justify restrictions based solely on history, consensus, and "simple common sense."
Lorillard Tobacco Co. v. Reilly,
Similarly, here, the Plaintiffs have alleged that several studies indicate that consumers connect natural, organic, and additive-free with a healthier product, see Amended Complaint ¶¶ 50-54, 23-27, so implementing an injunction requiring the Defendants to remove those terms or awarding money damages, which would likely lead to the Defendants removing or modifying those terms, would advance the government's interest in protecting consumers from that deceptive speech. Comparable reasoning holds true in the Menthol and Unprocessed-Cigarette Theory contexts as well, because removing or modifying the additive-free and natural terms directly targets the deception and would relieve it entirely. A consumer would not believe that a cigarette is additive-free or natural without those terms present. The Defendants contend, however, that money damages or an injunction do not materially advance the interest in protecting consumers from deception, because: (i) the pre-existing disclosures cure any deception whether Natural American cigarettes are safer or healthier; and (ii) the menthol labeling puts menthol purchasers on notice that they are purchasing cigarettes with additives, even though the cigarettes are labeled with "no additives." In sum, they argue that there is no deception. Regarding the pre-existing disclosures, again, the disclosures refer only to the "no additive" descriptor, and not the "organic" or "natural" descriptors, so an injunction or damages would still materially advance the government's interest in dissuading deception arising from the natural and organic adjectives. Moreover, while disclosures or disclaimers usually dispel some deception, some representations are so misleading that disclaimers cannot dispel the misleading information, see Pearson v. Shalala,
In considering the final factor-that the regulation is no more extensive than necessary to serve the governmental interest-the Supreme Court has cautioned that it is not a "least-restrictive-means requirement." Board of Trustees of State University of New York v. Fox,
VI. THE STATE STATUTES' SAFE HARBORS, EXCEPT FOR ILLINOIS' DO NOT BAR RELIEF.
The Defendants contend that the state statutes the Plaintiffs invoke are subject to safe harbors, which protect conduct that federal law or policy authorizes from liability. See MTD at 31. They contend that the Consent Order authorizes the descriptors challenged, so the Plaintiffs' claims are barred. See MTD at 31. The Court concludes that the Illinois statutes bar the Plaintiff's claims insomuch as they are premised on the "additive-free" descriptor, but the remaining state statutes do not.
A. CALIFORNIA'S SAFE HARBOR DOES NOT BAR RELIEF.
The Supreme Court of California has determined that the UCL is
In Cel-Tech the Supreme Court of California explained that "the Legislature's mere failure to prohibit an activity does not prevent a court from finding it unfair," and that, conversely, "courts may not use the unfair competition law to condemn actions the Legislature permits." Cel-Tech,
Bearing that test in mind, the Court concludes that the Supreme Court of California would rule that the Consent Order does not authorize the Defendants' allegedly misleading conduct. Although the context suggests that the Consent Order permits the descriptors, the Consent Order's degree of permission is dispositive. As already explained, the Consent Order does not expressly authorize conduct; it states only that the agency will not to bring an enforcement action. An agreement not to enforce conveys, at best, a minimum level of approval and, at worst, indifference. Moreover, a consent order is far more fragile than express legislative authorization. Agencies might disagree, as the FDA and FTC have in this case, or the agency may later change its position for some other reason. Accordingly, an agreement not enforce does not amount to permission. This conclusion is in accord with other federal and State Supreme Court cases. See, e.g., United States v. Philip Morris USA Inc.,
B. COLORADO'S, FLORIDA'S, MASSACHUSETTS', MICHIGAN'S, NEW JERSEY'S, NEW MEXICO'S, NEW YORK'S, NORTH CAROLINA'S, AND WASHINGTON'S SAFE HARBORS DO NOT BAR RELIEF.
The Defendants also contend that Colorado, Florida, Massachusetts, Michigan, New Jersey, New Mexico, New York, North Carolina, and Washington law bar relief for largely the same reason that California law does. See MTD at 32-39. Each of those states provides a safe harbor similar to California's. See Colo. Rev. Code § 6-1-106(1)(a);
1. Colorado Law Does Not Bar Relief.
The CCPA does not apply to "[c]onduct in compliance with the orders or rules of, or a statute administered by, a federal, state, or local governmental agency." Colo. Rev. Code § 6-1-106(1)(a). The Supreme Court of Colorado has ruled that, "given the broad remedial purpose of the CCPA," the safe harbor "exempts only those actions that are 'in compliance' with other laws" and that "[c]onduct amounting to deceptive or unfair trade practices, however, would not appear to be in 'compliance' with other laws." Showpiece Homes Corp. v. Assurance Co. of America,
the purpose of the exemption is to insure that a business is not subjected to a lawsuit under the Act when it does something required by law, or does something that would otherwise be a violation of the Act, but which is allowed under other statutes or regulations. It is intended to avoid conflict between laws, not to exclude form the Act's coverage that is regulated by another statute or agency.
Showpiece Homes Corp. v. Assurance Co. of America,
2. Florida Law Does Not Bar Relief.
FDUTPA does not apply to "[a]n act or practice required or specifically permitted by federal or state law."
3. Massachusetts Law Does Not Bar Relief.
Mass. Gen. Laws Ch. 93A has a safe harbor, which reads: "Nothing in this Chapter shall apply to transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth of the United States." Mass. Gen. Laws Ch. 93A, § 3. In a factually similar case, the Supreme Judicial Court of Massachusetts determined that an FTC consent order only enjoined conduct and, therefore, "the defendants point to nothing approaching a showing that the FTC affirmatively permitted the use of descriptors." Aspinall II,
4. Michigan Law Does Not Bar Relief.
The MCPA does not apply to "transaction[s] or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States."
5. New Jersey Law Does Not Bar Relief.
The NJCFA is subject to a judicially created exception. See Lemelledo,
6. New Mexico Law Does Not Bar Relief.
The NMUPA shields "actions or transactions expressly permitted under laws administered by a regulatory body of New Mexico or the United States."
The New Mexico False Advertising Law notes that "it shall be a complete defense that the advertisement is subject to and complies with the rules and regulations of, and the statutes administered by the federal trade commission."
7. New York Law Does Not Bar Relief.
8. North Carolina Law Does Not Bar Relief.
In Ellis v. Northern Star Co., the Supreme Court of North Carolina recognized that, "[i]n limitation, we have held that certain transactions already subject to pervasive and intricate statutory regulation, such as securities transactions, were not intended by the legislature to be included within the scope of [
9. Ohio Law Does Not Bar Relief.
10. Washington Law Does Not Bar Relief.
The WCPA does not apply "to actions or transactions otherwise permitted, prohibited or regulated under laws administered by ... any other regulatory body or officer acting under statutory authority of this state or the United States."
C. ILLINOIS SAFE HARBORS BAR RELIEF FOR CONDUCT THE CONSENT ORDER SPECIFIES.
Although the Court concludes broadly that the Consent Order does not establish a safe harbor for the Defendants' conduct under other States' law, the Supreme Court of Illinois dictates a different outcome.
D. THE COURT DISMISSES IN PART THE IUDTPA CLAIM AND THE OHIO STATUTORY CLAIMS FOR INDEPENDENT STATE REASONS.
The Defendants argue that the Plaintiffs' IUDTPA, TCCWNA, OCSPA, and ODTPA claims fail for independent state reasons. The Court concludes that the Plaintiffs have adequately pled their TCCWNA claim, but that the other three claims fail. The Court considers each claim in turn.
1. The IUDTPA Claim for Injunctive Relief Fails, Because the Plaintiffs Will Not Suffer a Future Harm From the Deception at Issue.
The Defendants argue that the Plaintiffs' claim for injunctive relief under IUDTPA fails, because the Plaintiffs cannot allege likelihood of future harm to themselves. See MTD at 49-50. According to the Defendants, now that the Plaintiffs know of the deception, the Defendants' sales and marketing practices cannot ever harm them again. See MTD at 50. In so arguing, the Defendants rely on several cases, including a Seventh Circuit decision, which ruled that, under IUDTPA, "[s]ince [the plaintiff] is now aware of [the defendant's deceptive] sales practices, he is not likely be harmed by the practices in the future," and, therefore, the plaintiff "is not
IUDTPA provides that "[a] person likely to be damaged by a deceptive trade practice of another may be granted injunctive relief upon terms that the court considers reasonable." 815 Ill. Comp. Stat. 510/3. The Supreme Court of Illinois has agreed with the Defendants' reasoning and has ruled that plaintiff consumers who know of the purported deception "can avoid it," and, thus, "are not persons who are likely to be damaged by the Defendants' conduct in the future." Glazewksi v. Coronet Ins. Co.,
The Plaintiffs counter that, although the class representatives know of the deception, putative class members can still be deceived, so they still have standing to sue. See Response at 55 (citing Leiner v. Johnson & Johnson Consumer Cos.,
2. The Plaintiffs Have Adequately Pled their TCCWNA Claim, Because They Have Plausibly Alleged a Predicate Violation Under the NJCFA.
The Defendants argue that the Plaintiffs' TCCWNA claim fails, because
3. The Plaintiffs have not Pled OSCPA's Substantive Notice Requirement, so the Court Dismisses the OSCPA Claim.
Under the OSCPA, a consumer qualifies for class-action relief only when a supplier acts in the face of prior notice that its conduct was deceptive. See Marrone v. Philip Morris USA, Inc.,
Here, the Plaintiffs have not pled a specific court decision or Attorney General adopted rule to put the Defendants on notice. See Amended Complaint ¶¶ 395-411, at 95-98. The Plaintiffs contend, however, that such notice requirement is inapplicable here, because the requirement is procedural, so "ha[s] no effect in federal court." Response at 59 (citing Erie R.R. v. Tompkins,
"In diversity cases, the Erie doctrine instructs that federal courts must apply state substantive law and federal procedural law." Racher,
Rule 23 does not directly conflict with the Ohio class-action pre-suit notice requirement. Rule 23 governs when a federal court may certify a class action. Fed. R. Civ. P. 23. Rule 23, however, does not purport to create a class action's only requisite procedural elements. Rule 23(b)'s language is framed permissively: "A class action may be maintained ...." Fed. R. Civ. P. 23(b) (emphasis added). Accordingly, both the federal conditions and the state condition can be met, so rule 23 and Ohio's pre-suit notice law may exist "side by side." Racher,
Under Erie , "federal courts sitting in diversity apply state substantive law and federal procedural law." Gasperini v. Center for Humanities, Inc.,
4. The Plaintiffs' ODTPA Claim Fails, Because Consumers Do Not Have Standing to Sue Under That Statute.
The Defendants argue that the ODTPA claim fails, because many Ohio Courts have concluded that the statute does not grant consumers standing to sue. See MTD at 52. The Plaintiffs counter that, notwithstanding the cases to the contrary, the statute's express language "affirmatively grants the plaintiffs standing" as other federal courts have recognized. Response at 61. The statute provides that: "A person who is injured by a person who commits a deceptive trade practice ... may commence a civil action."
VII. THE PLAINTIFFS' NEW JERSEY AND OHIO UNJUST-ENRICHMENT CLAIMS FAIL, BECAUSE THE PLAINTIFFS CANNOT PLEAD A REMUNERATION FOR THE NEW JERSEY CLAIM AND THEY CANNOT PLEAD A DIRECT BENEFIT FOR THE OHIO CLAIM.
The Defendants argue that the some or all of the Plaintiffs unjust-enrichment claims fail for four reasons. First, the Defendants argue that all of the unjust-enrichment claims fail, because the plaintiffs have not pled an injustice-there was no deception. See MTD at 52. Second, they assert that nine of twelve unjust-enrichment claims fail, because the Plaintiffs have an adequate legal remedy. See MTD at 53. Third, they contend that four of twelve fail, because the Plaintiffs did not directly confer a benefit to the Defendants. See MTD at 53. Finally, they conclude that two of twelve claims fail for state-specific reasons. See MTD at 53. The Court determines that the Plaintiffs have pled an injustice, and that unjust enrichment may be pled in the alternative under rule 8. The New Jersey and Ohio claims fail, however, for state specific reasons.
A. THE PLAINTIFFS HAVE PLED AN INJUSTICE, BECAUSE THERE ARE TWO PLAUSIBLE THEORIES OF DECEPTION.
The Defendants argue that the Plaintiffs have failed to plausibly allege a deception, so the Plaintiffs' unjust-enrichment claims fail, because there has been no injustice. See MTD at 54-55. The Court concludes, however, that there are two plausible theories of deception. See supra at 1227-37. Accordingly, the Defendants' argument fails as to the Safer-Cigarette and Menthol Theories. The Court dismisses the Plaintiffs' unjust-enrichment claims to the extent that they rely on the Unprocessed-Cigarette Theory.
B. THE PLAINTIFFS UNJUST-ENRICHMENT CLAIMS MAY BE PLED IN THE ALTERNATIVE EVEN THOUGH AN ADEQUATE LEGAL REMEDY MAY EXIST UNDER THE STATUTORY SCHEME.
The Defendants argue that, under Colorado, Florida, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, and Washington law, the Plaintiffs' unjust-enrichment claims fail, because the Plaintiffs' have an adequate and available legal remedy.
There is no binding Tenth Circuit precedent construing pleading in the alternative equitable claims under the Federal Rules of Civil Procedure, so the Court writes on a clean slate. Rule 8(d)(2) provides that: "A party may set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single count or defense or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient." Fed. R. Civ. P. 8(d)(2). Rule 8(d)(3) states: "A party may state as many separate claims or defenses as it has, regardless of consistency." Fed. R. Civ. P. 8(d)(3). Some United States District Courts have concluded that equitable claims premised on the same factual deception as a consumer protection claims are not, under rule 8, alternative theories of relief. See In re Ford Tailgate Litig., No. 11-2953,
Nevertheless, the Court must consider whether rule 8(d) allows plaintiffs to plead equitable theories in the alternative regardless whether state law precludes such a pleading. Many United States District Courts have held that rule 8 governs, unless state law provides an exclusive remedy. See, e.g., In re Light Cigarettes Marketing Sales Practices Litigation,
With that backdrop in mind, the Court concludes that, under Shady Grove, the court must apply rule 8(d). Rule 8(d) allows expansive alternative pleading and state law prohibits alternative pleading of equitable claims if there is an adequate remedy at law, so the two are in conflict. See, e.g., Szaloczi v. John R. Behrmann Revocable Trust,
The Court concludes that the state laws at issue serve only to eliminate duplicative pleading, so rule 8 applies. Surveying the consumer protection statutes at issue, none bar common-law equitable relief. See
Under rule 8(d), the Court will not dismiss the Plaintiffs' equitable claims at this stage, because rule 8(d)(3)'s plain language allows them. It reads: "A party may state as many separate claims or defenses as it has, regardless of consistency." Fed. R. Civ. P. 8(d)(3). Rule 8(d)(2) also provides that claims may be pled in the alternative. See Fed. R. Civ. P. 8(d)(2). The Plaintiffs may, therefore, plead both equitable and legal relief, although they may not, under state law, ultimately recover under both theories. See In re Dial Complete Marketing and Sales Practices Litig.,
C. IF RULE 8 DID NOT APPLY, THE FLORIDA, MASSACHUSETTS, MICHIGAN, NEW JERSEY, NEW YORK, NORTH CAROLINA, AND WASHINGTON CLAIMS WOULD FAIL, BECAUSE THE PLAINTIFFS HAVE AN ADEQUATE LEGAL REMEDY, BUT THE OHIO AND COLORADO CLAIMS WOULD NOT.
Although the Court concludes that the Plaintiffs may plead their equitable claims
1. The Colorado Unjust-Enrichment Claim Would Succeed Regardless of Rule 8, Because the Plaintiffs Request a Remedy Unavailable Under the Statute.
The Supreme Court of Colorado has ruled that "equity will not act if there is a plain, speedy, adequate remedy at law." Szaloczi v. John R. Behrmann Revocable Trust,
2. The Florida Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy Under FDUTPA.
Florida law prohibits equitable relief if "a plain, adequate and complete remedy at law exists." Greenfield Villages v. Thompson,
The Court concludes that the Florida court's rulings that the adequate-legal-remedy doctrine does not apply to unjust enrichment provide no sound reasoning for such a bright-line exception. See, e.g., Williams v. Bear Stearns & Co.,
3. The Massachusetts Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy under Mass. Gen. Laws Ch. 93A.
"An equitable remedy for unjust enrichment is not available to a party with an adequate remedy at law."
4. The Michigan Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy under MCPA.
According to the Supreme Court of Michigan, "[L]egislative action that provides an adequate remedy by statute precludes equitable relief." Tkachik v. Mandeville,
5. The New Jersey Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy Under NJCFA.
"[E]quitable principles of estoppel or unjust enrichment ... cannot be invoked to subvert [a] statutory scheme." Slurzberg v. City of Bayonne,
The New York Court of Appeals has ruled that unjust enrichment does not lie if the "plaintiffs have an adequate remedy at law." Samiento v. World Yacht Inc.,
7. The North Carolina Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy Under North Carolina Law.
"The court's equitable intervention is obviated when an adequate remedy at law is available to the plaintiff." Embree Const. Group, Inc. v. Rafcor, Inc.,
8. The Ohio Unjust-Enrichment Claim Prevails, Because the Plaintiffs' Legal Remedy Under OSCPA Is Not Complete or Adequate.
"To bring a cause within the jurisdiction of a court of equity, it is requisite that the primary right involved be an equitable right as distinguished from a legal right, or that the remedy at law as to
9. The Washington Unjust-Enrichment Claim Would Fail, Because the Plaintiffs Have an Adequate Legal Remedy Under WCPA.
"Equitable relief is available only if there is no adequate legal remedy." Orwick v. City of Seattle,
D. THE COURT DISMISSES THE NEW JERSEY UNJUST-ENRICHMENT CLAIM, BECAUSE THE PLAINTIFFS CANNOT PLEAD REMUNERATION.
The Court concludes that the Plaintiffs' New Jersey unjust-enrichment
E. THE COURT DISMISSES THE OHIO UNJUST-ENRICHMENT CLAIM, BUT NOT THE MICHIGAN, NEW JERSEY, OR NORTH CAROLINA UNJUST-ENRICHMENT CLAIMS, FOR THE INDEPENDENT REASON THAT THE PLAINTIFFS HAVE NOT ALLEGED A DIRECT BENEFIT.
The Defendants move to dismiss the Michigan, New Jersey, North Carolina, and Ohio unjust-enrichment claims for the independent reason that the Plaintiffs do not allege that the Defendants received a direct benefit from the Plaintiffs. See MTD at 60. The Plaintiffs, however, allege that the Defendants "received a direct benefit" from the Plaintiffs "in the form of a price premium, increased sales, and increased market share." Amended Complaint ¶¶ 282, 310, 390, 422, at 75, 80-81, 95, 99. The Court determines that the Supreme Courts of Michigan, New Jersey, and North Carolina would accept the Plaintiffs' allegations of an indirect benefit from increased market share, but that the Supreme Court of Ohio would not. Accordingly, the Ohio unjust-enrichment claim fails for the independent reason that the defendants received no direct benefit.
1. Increased Market Share Satisfies Michigan's Indirect-Benefit Requirement.
Under Michigan Law, the Defendants must receive a benefit, but it need not be direct. See Kammer Asphalt Paving Co., Inc. v. East China Tp. Schools,
The Court also concludes that, based on the Amended Complaint's allegations, the Defendants plausibly received a benefit in the form of increased market share. See Amended Complaint ¶¶ 282, 310, 390, 422, at 75, 80-81, 95, 99. The Plaintiffs contend that the Defendants launched an aggressive marketing campaign in 2015 to highlight "Natural American Spirit's 100-percent additive-free natural tobacco proposition," Amended Complaint ¶ 44, at 21-22, and sold 900 million more cigarettes in 2015 than 2014 for a total of 4.8 billion cigarettes, Amended Complaint ¶ 45(c), at 22. Although the Amended Complaint does not indicate how large the cigarette market is overall, it is plausible that the sale of 900 million more cigarettes would result in increased market share. It is unclear if the Plaintiffs made similar market-share allegations in the cases that the Defendants' cite. Accordingly, the Court concludes that the Supreme Court of Michigan would not dismiss the unjust-enrichment claim for a lack of a direct benefit.
2. Increased Market Share Satisfies New Jersey's Unjust-Enrichment Test.
The Supreme Court of New Jersey has not determined whether a direct-benefit requirement exists for unjust-enrichment claims, but a New Jersey appellate court has recognized that unjust enrichment "involve[s] some direct relationship between the parties." Callano v. Oakwood Park Homes Corp.,
Accordingly, this Court finds that where a plaintiff alleges that a defendant manufacturer has made false claims or misrepresentations directed for the purpose of generating retail sales, and where those retails sales could have the effect of increasing the amount of wholesale sales to the manufacturer, it is plausible that a plaintiff can show evidence of a sufficiently direct relationship between the parties under New Jersey law.
3. North Carolina's Unjust-Enrichment Requirement is satisfied.
The Supreme Court of North Carolina has not determined whether unjust enrichment requires a direct benefit. The Court of Appeals of North Carolina, however, has ruled that a plaintiff must show that "she conferred a benefit directly on defendant." Effler v. Pyles,
4. The Plaintiffs Do Not Satisfy Ohio's Direct-Benefit Test.
The Supreme Court of Ohio has clearly stated that "an indirect purchaser cannot assert a common-law claim for restitution and unjust enrichment against a defendant without establishing that a benefit had been conferred upon the defendant by the purchaser." Johnson v. Microsoft Corp.,
VIII. THE COURT DISMISSES THE PLAINTIFFS' FLORIDA, ILLINOIS, AND NEW YORK EXPRESS WARRANTY CLAIMS.
The Defendants move to dismiss the Plaintiffs' express warranty claims for three reasons. First, they argue that limiting language modifies any express warranty so that there was no breach. Second, they argue that a subset of the express warranty claims must be dismissed, because the Plaintiffs failed to allege the requisite pre-litigation notice. Finally, they aver that another subset of the express warranty claims must be dismissed, because the Plaintiffs have not alleged privity of contract. The Court concludes that the Defendants have not identified limiting language to the express warranties, but it dismisses the Florida, Illinois, and New York claims, because the Plaintiffs have either failed to allege pre-litigation notice or privity.
A. THE DEFENDANTS HAVE NOT IDENTIFIED LIMITING LANGUAGE IN THE EXPRESS WARRANTIES THAT WOULD QUALIFY THOSE CLAIMS FOR DISMISSAL.
The Plaintiffs contend that the cigarettes' product labels, including the descriptors at issue-i.e., additive-free, natural, and organic-create an actionable express warranty. See Response at 72. The Defendants argue that, under California and New York law, the express warranty claims fail for the same reasons that the packaging and advertising would not mislead a reasonable consumer. See MTD at 64-65. The Court declines to adopt that line of reasoning for the same reasons it rejected their reasonable consumer arguments as articulated above.
The Defendants also argue that California, Colorado, Florida, Illinois, New Jersey, New York, New Mexico, and North Carolina law foreclose the express warranty claims, because warranties must be read as "reasonabl[y] consistent with potentially limiting language." MTD at 65 (citing
B. THE FLORIDA, ILLINOIS, AND NEW YORK EXPRESS WARRANTY CLAIMS FAIL, BECAUSE THE AMENDED COMPLAINT CANNOT SERVE AS THE REQUISITE PRE-LITIGATION NOTICE.
The Defendants' argue that the Plaintiffs failed to give pre-litigation notice in California, Florida, Illinois, New Mexico, New York, and North Carolina. See MTD at 66. Under those states' laws, a buyer must, "within a reasonable time after he or she discovers or should have discovered any breach, notify the seller of breach or be barred from any remedy."
Under California law, a buyer must, "within a reasonable time after he or she discovers or should have discovered any breach, notify the seller of breach or be barred from any remedy."
Florida law states: "The buyer must within a reasonable time after he or she discovers or should have discovered any breach notify the seller of breach or be barred from any remedy."
Illinois law similarly requires a buyer to give notice to the seller of a breach within a reasonable time or be barred from recovery. See 810 Ill. Comp. Stat. 5/2-607(3)(a). This notice is not required when "(1) the seller has actual knowledge of the defect of the particular product; or (2) the seller is deemed to have been reasonably notified by the filing of the buyer's complaint." Connick v. Suzuki Motor Co., Ltd.,
New Mexico also prohibits express warranty claims absent notice to the seller within a reasonable time. See
a person notifies or gives notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it.... The content of the notification need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched.... The notification which saves the buyer's rights under this article need only be such as informs the seller that the transaction is claimed to involve a breach, and thus opens the way for normal settlement through negotiation.
State ex Rel Concrete Sales & Equip. Rental Co., Inc. v. Kent Nowlin Const., Inc.,
New York law requires that the buyer provide notice to the seller within a reasonable time after discovering the breach of an express warranty. See
North Carolina also requires that the buyer give notice within a reasonable time after the buyer discovers the breach
C. THE COURT DISMISSES THE FLORIDA AND ILLINOIS EXPRESS WARRANTY CLAIMS FOR LACK OF PRIVITY.
The Defendants argue that the Court should dismiss the Plaintiffs' express warranty claims from Florida, Illinois, and New York for lack of privity. See MTD at 67. The Plaintiffs rejoin that there is an exception to the privity requirement under all three states' laws for labeling deceptions. See Response at 75. The Court of Appeals of New York has concluded that privity is not required against a manufacturer or the advertiser for economic loss, so the Court does not dismiss the Plaintiffs' New York claim on that ground. See Randy Knitwear, Inc. v. American Cyanamid Co.,
The Supreme Courts of Florida and Illinois have not decided the issue.
The Supreme Court of Florida's jurisprudence regarding privity has been relatively murky. In Manheim v. Ford Motor Co.,
IX. THE PLAINTIFFS' REQUESTS FOR INJUNCTIVE RELIEF ARE NOT RENDERED MOOT.
The Plaintiffs request an injunction prohibiting the Defendants from advertising Natural American cigarettes as natural and additive free. See Amended Complaint ¶ 159, at 50, Prayer for Relief ¶ C, at 105. The Defendants argue that the Plaintiffs' request is rendered moot, because the Defendants have entered into a Memorandum of Agreement with the FDA, which requires them to cease using those terms, except for the natural term in their brand name. See MTD at 68; Memorandum of Agreement ¶¶ 1-2, at 1. The Plaintiffs counter that their requested injunction extends to enjoining the Natural American brand name, so the Memorandum of Agreement does not entirely render moot their request. See Response at 76. They also contend that the Memorandum of Agreement is subject to an ongoing lawsuit in the United States District Court for the Southern District of Florida, which, if successful, would invalidate the Memorandum of Agreement. See July Tr. at 60:3-13 (Wolchansky); id. at 61:3-12 (Wolchansky);
Injunctive relief requests are subject to Article III mootness. See WildEarth Guardians v. Public Service Co. of Colorado,
Like Article III standing, mootness is oft-cited as a constitutional limitation on federal court jurisdiction. E.g. , Building & Constr. Dep't v. Rockwell Int'l Corp. ,, 1491 (10th Cir. 1993) ("Constitutional mootness doctrine is grounded in the Article III requirement that federal courts only decide actual, ongoing cases or controversies).... But although issues of mootness often bear resemblance to issues of standing, their conceptual boundaries are not coterminous.... [T]he Supreme Court has historically recognized what are often called 'exceptions' to the general rule against consideration of moot cases, as where a plaintiff's status is 'capable of repetition yet evading review,' S. Pac. Terminal Co. v. Interstate Commerce Comm'n , 7 F.3d 1487 , 219 U.S. 498 , 31 S.Ct. 279 (1911), or where a defendant has ceased the challenged action but is likely the defendant will 'return to his old ways'-the latter often referred to as the voluntary cessation exception, United States v. W.T. Grant Co. , 55 L.Ed. 310 , 632, 345 U.S. 629 , 73 S.Ct. 894 (1953). 97 L.Ed. 1303
Lucero v. Bureau of Collection Recovery, Inc.,
As already noted, mootness is subject to the voluntary-cessation exception. See Brown v. Buhman,
The Memorandum of Agreement would render moot the Plaintiffs' requested injunctive relief, except for an injunction on the term Natural in the brand name. See Utah Animal Rights Coalition v. Salt Lake City Corp.,
IT IS ORDERED that: (i) the Defendants' Request for Judicial Notice in Support of Motion to Dismiss, filed November 18, 2016 (Doc. 71) is granted in part and denied in part; (ii) the Defendants' Second Motion for Judicial Notice in Support of The Motion to Dismiss the Consolidated Amended Complaint, filed February 23, 2017 (Doc. 91) is granted; (iii) the Defendants' Third Motion for Judicial Notice in Support of the Motion to Dismiss the Consolidated Amended Complaint, filed May 30, 2017 (Doc. 109) is granted; and (iv) the requests in the Defendants' Motion to Dismiss the Consolidated Amended Complaint and Incorporated Memorandum of Law, filed February 23, 2017 (Doc. 90) are granted in part and denied in part. The Court: (i) judicially notices the 2000 FTC Complaint filed against Santa Fe Tobacco, In the Matter of Santa Fe Natural Tobacco Company, Inc., No. C-3952 Complaint, filed November 18, 2016 (Doc. 71-1); the Native American Spirit Advertising attached to the FTC Complaint, In the Matter of Santa Fe Natural Tobacco Company, Inc., No. C-3952, Exhibits A-C, filed November 18, 2016 (Doc. 71-1); the Decision and Order, In the Matter of Santa Fe Natural Tobacco Company, Inc., No. C-3952, filed November 18, 2016 (Doc. 71-1); FTC Accepts Settlements of Charges that "Alternative" Cigarette Ads are Deceptive, issued April 27, 2000, filed November 18, 2016 (Doc. 71-1); FTC Accepts Settlement of Charges that Ads for Winston "No Additive" Cigarettes are deceptive, issued March 3, 1999, filed November 18, 2016 (Doc. 71-1); Assurance of Voluntary Compliance, (dated March 1, 2010), filed November 18, 2016 (Doc. 71-1); Warning Letter, dated August 27, 2015, filed November 18, 2016 (Doc. 71-1); Memorandum of Agreement Between The United States Food and Drug Administration's (FDA) Center for Tobacco Products (CTP) and RAI Services Company (RAIS)/Santa Fe Natural Tobacco Company, Inc. (Santa Fe), (dated January 19, 2017), filed February 23, 2017 (Doc. 91-1)("Memorandum of Agreement"); Request for Informal Staff Guidance Regarding Santa Fe Natural Tobacco Company's Consent Order (FTC Dkt. No. C-3952) dated May 9, 2017, filed May 30, 2017 (Doc. 109-1); (ii) severs and transfers the Plaintiffs' claims, which were not originally brought in a North Carolina forum against Reynolds American Inc., to the Middle District of North Carolina; (iii) dismisses with prejudice California Count
Notes
There are twelve named Plaintiffs in this action: Jacques-Rene Hebert and Albert Lopez, citizens of the State of Illinois; Sara Benson, a citizen of the State of Colorado; Justin Sproule and Joshua Horne, citizens of the State of Florida; Abigail Emmons and Ceyhan Haskal, citizens of the State of New Mexico; Rudolph Miller and Charlene Blevins, citizens of the State of North Carolina; Carol Murphy, a citizen of the State of Idaho; Robert Litwin, a citizen of the State of Maryland; and Francisco Chavez, a citizen of the State of California. See Amended Complaint ¶¶ 12-23, at 4-11, filed January 12, 2017 (Doc. 82).
The Amended Complaint notes that, in 2007, researchers at the University of California performed a study regarding the ways in which smokers "down-play the risks" by determining that "natural" cigarettes are safer or healthier than other cigarettes containing chemicals. Amended Complaint ¶ 50, at 23 (quoting McDaniel, Patricia A. & Ruth E. Malone, "I Always Thought They Were All Pure Tobacco": American Smokers' Perceptions of "Natural" Cigarettes and Tobacco Industry Advertising Strategies, 16(6) Tobacco Control (2007), available at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2807204/. The study, according to the Plaintiffs, concludes that tobacco companies seek to alleviate smokers' concerns about health by modifying products and describing them as "natural." Amended Complaint ¶ 51, at 22-23. The Amended Complaint notes that a study from the Schroeder Institute, a non-profit that researches tobacco and policy with a goal of reducing tobacco use, observes that consumers rely on companies' branding of cigarettes as " 'natural, organic, and additive free,' " so such branding possibly encourages consumers to try a product that they otherwise would not try or to switch to Natural American cigarettes rather than quitting smoking. Amended Complaint ¶ 52, at 24 (quoting Pearson, Jennifer L., et al., Misperceptions of harm among Natural American Spirit smokers: results from wave 1 of the Population Assessment of Tobacco and Health (PATH) study (2013-2014) at 1, Tobacco Control (Dec. 6, 2016)("Misperceptions"). The study further finds, according to the Plaintiffs, that 8.3 percent of other cigarette brand smokers believe that their brand is "less harmful than other brands" whereas 63.9 percent of Natural American smokers believe that their brand is less harmful. Amended Complaint ¶ 52, at 24 (quoting Misperceptions, at 1). Additionally, the study determines that Natural American smokers believe their brand is less harmful, because the branding has "natural" and "additive free" descriptors. Amended Complaint ¶ 52, at 25 (citing Misperceptions, at 1). In a recent survey of 1000 smokers in the United States, sixty percent believe that cigarettes without additives are safer to smoke than other cigarettes, and seventy-three percent think that cigarettes containing additives are more dangerous than cigarettes that do not contain additives. See Amended Complaint ¶ 53, at 25-26 (citing Cummings, K.M., et al., Are smokers adequately informed about the health risks of smoking and medicinal nicotine?, Nicotine & Tobacco Research 6(3), 333-340 (2004)).
Polycyclic aromatic hydrocarbons are "the sooty part of smoke or ash." Polycyclic Aromatic Hydrocarbons (PAHs), Wisconsin Department of Health Services (March 13, 2017) available at https://www.dhs.wisconsin.gov/chemical/pah.htm (last accessed October 27, 2017).
Cadmium and mercury are both heavy metals that have adverse health effects. See Amended Complaint ¶ 62, at 30. Cadmium is a carcinogen that is linked to chronic obstructive pulmonary disease and nephrotoxicity -a toxicity of the kidneys. See Amended Complaint ¶ 62, at 30.
Free-base nicotine is a basic form of nicotine that is more volatile, particularly when smoked. See Amended Complaint ¶ 64, at 30. Free-base nicotine is therefore more quickly absorbed into the lungs when smoking, and as a result, reaches the brain faster. See Amended Complaint ¶ 64, at 30. Elevated concentrations of free-base nicotine do not arise naturally. See Amended Complaint ¶ 66, at 31.
pH is a measure of hydrogen ion concentration in a solution, and signals a solution's acidity or alkalinity. See Anne Marie Helmenstine, pH Definition and Equation in Chemistry, Chemistry Glossary Definition of pH at 1 (August 31, 2017) available at https://www.thoughtco.com/definitionof-ph-in-chemistry-604605.
The Court now has sixteen separate actions before it. See In Re Santa Fe Natural Tobacco Co. Marketing and Sales Practice Litig.,
Section 1407(c) provides as follows:
The panel shall give notice to the parties in all actions in which transfers for coordinated or consolidated pretrial proceedings are contemplated, and such notice shall specify the time and place of any hearing to determine whether such transfer shall be made.... The panel's order of transfer shall be based upon a record of such hearing at which material evidence may be offered by any party to an action pending in any district that would be affected by the proceedings under this section, and shall be supported by findings of fact and conclusions of law based upon such record.
The Defendants also argue that their use of the term "organic" does not give rise to liability, because the United States Department of Agriculture regulations govern the use of the term "organic," and the Assurance of Voluntary Compliance requires the Defendants to disclose that "Organic Tobacco does NOT mean a safer cigarette." MTD at 12 n.3 (emphasis in original).
The Memorandum of Agreement reads in relevant part:
[The FDA's Center for Tobacco Products ("CTP") ] and Santa Fe [Tobacco] agree to the following steps and conditions:
1. Santa Fe will remove the phrase "Additive-Free" from all Natural American Spirit cigarette product labels, labeling, advertising, and promotional materials.
2. Santa Fe will remove the term "natural" from all Natural American Spirit cigarette product labels, labeling advertising, and promotional materials, except as provided in Paragraph Three (3) below.
....
CTP recognizes that Santa Fe will need to coordinate with its vendors to print and implement new product labeling and advertising. However, CTP expects that this process would be completed and that changes to the labels, labeling, advertising, and promotional materials would be implemented within seven (7) months from the date Santa Fe receives in writing the agreement reached between FTC and FDA regarding the necessity, and, if applicable, wording of a disclosure, and the process for effectuating it, as a result of the discussions among Santa FE, FTC, and FDA. Following the seven (7) month deadline, Santa Fe will not utilize the terms "additive free" or "natural" except as allowed under Paragraph 3 of this Agreement on the labels, labeling, advertising, or promotional materials for Natural American Spirit cigarette products.
....
3. Santa Fe may retain the use of the term "Natural" in the "Natural American Spirit" brand name and trademarks.
....
If Santa Fe agrees to the conditions outlined above, CTP will commit to not initiating enforcement action against Santa Fe related to the August 27, 2015 Warning Letter during the Seven (7) month timeframe set forth in Paragraph 2.
Memorandum of Agreement ¶¶ 1-3, at 1-3.
Under the voluntary-cessation doctrine, a request for injunctive relief is not rendered moot when the party voluntarily stops the challenged conduct. See Brown v. Buhman,
Those five Plaintiffs are: Sproule, Miller, Haskal, Litwin, and Blevins.
The Consent Order reads in relevant part that:
[T]his provision shall not prohibit respondent from truthfully representing, through the use of such phrases as "no additives," "no chemicals," "additive-free," "chemical-free," "chemical-additive-free," "100% tobacco," "pure tobacco," or substantially similar terms, that a tobacco product has no additives or chemicals, where such representation is accompanied by the disclosure mandated by this provision.
Consent Order at 5 [at 14 on CM/ECF].
The Consent Order requires the Defendants to "display in advertisements as specified below, clearly and prominently, the following disclosures (including the line breaks, punctuation, bold font and capitalization illustrated:
In cigarette advertisements:
No additives in our tobacco does NOT mean a safer cigarette
In advertisement for any other tobacco product:
No additives in our tobacco does NOT mean safer."
Consent Order at 4 [at 13 on CM/ECF] (emphasis in original).
The Plaintiffs agree with the Defendants that the substantive law of the state in which the cigarettes are purchased governs the unjust-enrichment claims. See Response at 62. The Court concludes that both parties are correct and applies the law of the forum in which the cigarettes were purchased.
The Warning Letter reads, in pertinent part:
Your product labeling for Natural American Spirit cigarettes, which uses the descriptors "Natural" and "Additive Free," represents explicitly and/or implicitly that the products or their smoke do not contain or are free of a substance and/or that the products present a lower risk of tobacco related disease or are less harmful than one or more other commercially marketed tobacco products. As such, these products are modified risk tobacco products. As such, these products are modified risk tobacco products. Because these products are sold or distributed to customers in the United States without an appropriate FDA order in effect under section 911(g) of the FD & C Act (21 U.S.C. § 387k(g) ), these products are adulterated under section 902(8) of the FD & C Act (21 U.S.C. § 387b(8) )
....
The violations discussed in this letter do not necessarily constitute an exhaustive list. You should immediately correct the violations that are referenced above, as well as violations that are the same as or similar to those stated above, and take any necessary actions to bring your tobacco products into compliance with the FD & C Act.
Warning Letter at 2-3.
Nard v. City of Okla. City is an unpublished Tenth Circuit opinion, but the Court can rely on an unpublished Tenth Circuit opinion to the extent its reasoned analysis is persuasive in the case before it. See 10th Cir. R. 32.1(A), 28 U.S.C. ("Unpublished opinions are not precedential, but may be cited for their persuasive value."). The Tenth Circuit has stated: "In this circuit, unpublished orders are not binding precedent, ... and ... citation to unpublished opinions is not favored.... However, if an unpublished opinion ... has persuasive value with respect to a material issue in a case and would assist the court in its disposition, we allow a citation to that decision." United States v. Austin,
There may be a conflict between the United States Courts of Appeals regarding which rule governs a district court's review of preemption arguments. The United States Court of Appeals for the Fifth Circuit has noted that preemption is not a jurisdictional question, so rule 12(b)(1) is inappropriate. See Fisher v. Halliburton,
Federal preemption is an affirmative defense that a defendant must plead and prove. Unless the complaint itself establishes the applicability of a federal-preemption defense-in which case the issue may properly be the subject of a Rule 12(b)(6) motion-a defendant should ordinarily raise preemption in a Rule 12(c) motion for judgment on the pleadings or a Rule 56 motion for summary judgment.
Fisher v. Haliburton,
The United States Court of Appeals for the Ninth Circuit, however, has affirmed a case's dismissal on preemption grounds under rule 12(b)(1) without comment as to the appropriateness of that rule to preemption arguments. See Cedars-Sinai Medical Center v. National League of Postmasters of U.S.,
Justice Thomas, writing for the five-to-four majority in PLIVA, Inc. v. Mensing,
In performing its Erie -mandated duty to predict what a state supreme court would do if faced with a case, see Comm'r v. Estate of Bosch,
The Supreme Court of the United States has addressed what the federal courts may use when there is not a decision on point from the state's highest court:
The highest state court is the final authority on state law, but it is still the duty of the federal courts, where the state law supplies the rule of decision, to ascertain and apply that law even though it has not been expounded by the highest court of the State. An intermediate state court in declaring and applying the state law is acting as an organ of the State and its determination, in the absence of more convincing evidence of what the state law is, should be followed by a federal court in deciding a state question. We have declared that principle in West v. American Telephone and Telegraph Co. ,, 311 U.S. 223 , 61 S.Ct. 179 (1940), decided this day. It is true that in that case an intermediate appellate court of the State had determined the immediate question as between the same parties in a prior suit, and the highest state court had refused to review the lower court's decision, but we set forth the broader principle as applicable to the decision of an intermediate court, in the absence of a decision by the highest court, whether the question is one of statute or common law. 85 L.Ed. 139
....
We have held that the decision of the Supreme Court upon the construction of a state statute should be followed in the absence of an expression of a countervailing view by the State's highest court, and we think that the decisions of the Court of Chancery [the New Jersey trial court] are entitled to like respect as announcing the law of the State.
....
The question has practical aspects of great importance in the proper administration of justice in the federal courts. It is inadmissible that there should be one rule of state law for litigants in the state courts and another rule for litigants who bring the same question before the federal courts owing to the circumstance of diversity of citizenship. In the absence of any contrary showing, the rule [set forth by two New Jersey trial courts, but no appellate courts] appears to be the one which would be applied in litigation in the state court, and whether believed to be sound or unsound, it should have been followed by the Circuit Court of Appeals.
Fid. Union Trust Co. v. Field,
In determining the proper weight to accord Tenth Circuit precedent interpreting New Mexico law, the Court must balance the need for uniformity between federal court and state court interpretations of state law with the need for uniformity among federal judges. If the Court adheres too rigidly to Tenth Circuit case law, ignoring changes undergone by a state's law in the ensuing years, then parties litigating state-law claims will be subject to a different body of substantive law, depending on whether they litigate in state court or federal court. This result frustrates the purpose of Erie , which held that federal courts must apply state court interpretations of state law, rather than their own, in part so that parties achieve a consistent result regardless of the forum. This consideration pulls the Court toward according Tenth Circuit precedent less weight and according state court decisions issued in the ensuing years more weight. On the other hand, when the state law is unclear, it is desirable for there to at least be uniformity among federal judges as to its proper interpretation. Otherwise, different federal judges within the same circuit-or even the same district, as district courts' decisions are not binding, even upon themselves-would be free to adopt differing interpretations of a state's law. This consideration pulls the Court towards a stronger respect for vertical stare decisis, because a Tenth Circuit decision on point-regardless whether it accurately reflects state law-at least provides consistency at the federal level, so long as federal district judges are required to follow it.
The Court must decide how to weigh Tenth Circuit case law against more-recent state court decisions, choosing a point on the spectrum between the two extremes: rigidly adhering to Tenth Circuit precedent unless there is intervening case law directly on point from the state's highest court, on one end; and independently interpreting the state law, regarding the Tenth Circuit precedent as no more than persuasive authority, on the other. In striking this balance, the Court notes that it is generally more concerned about systemic inconsistency between the federal courts and the state courts than it is about inconsistency among federal judges. Judges, even those within a jurisdiction with ostensibly identical governing law, sometimes interpret and apply the law differently from one another; this inconsistency is part and parcel of a common-law judicial system. More importantly, litigants seeking to use forum selection to gain a substantive legal advantage cannot easily manipulate such inconsistency: cases are assigned randomly to district judges in this and many federal districts; and, regardless, litigants cannot know for certain how a given judge will interpret the state law, even if they could determine the judge's identity pre-filing or pre-removal. All litigants know in advance is that whomever federal district judge they are assigned will look to the entirety of the state's common law in making his or her determination-the same as a state judge would. Systemic inconsistency between the federal courts and state courts, on the other hand, not only threatens the principles of federalism, but litigants may more easily manipulate the inconsistency. When the Tenth Circuit issues an opinion interpreting state law, and the state courts subsequently shift away from that interpretation, litigants-if the district courts strictly adhere to the Tenth Circuit opinion-have a definite substantive advantage in choosing the federal forum over the state forum, or vice versa.
The Court further notes that district courts may be in a better position than the Tenth Circuit to be responsive to changes in state law. Tenth Circuit decisions interpreting a particular state's law on a specific issue are further apart in time than the collective district courts' are. More importantly, the Tenth Circuit does not typically address such issues with the frequency that the state's courts themselves do. Accordingly, Tenth Circuit precedent can lag behind developments in state law-developments that the district courts may be nimble enough to perceive and adopt. Additionally, much of the benefit of having a consistent Tenth Circuit-wide interpretation of a particular state's law is wasted. Other than Oklahoma, every state encompassed by the Tenth Circuit contains only one federal judicial district, and there is relatively little need for federal judges in Wyoming and Kansas to have a uniform body of New Mexico law to which to look. Last, the Court notes, respectfully, that district courts may be in a better position than the Tenth Circuit to develop expertise on the state law of the state in which they sit. Every federal judicial district in the nation, except the District of Wyoming, covers at most one state. It is perhaps a more workable design for each district court to keep track of legal developments in the state law of its own state(s) than it is for the Tenth Circuit to monitor separate legal developments in eight states.
Having outlined the relevant considerations, the Court concludes that the proper stance on vertical stare decisis in the context of federal court interpretations of state law is as follows: the Tenth Circuit's cases are binding as to their precise holding-what the state law was on the day the opinion was published-but lack the positive precedential force that its cases interpreting a federal statute or the Constitution of the United States of America possess. A district court considering a state law issue after the publication of a Tenth Circuit opinion on point may not come to a contrary conclusion based only on state court cases available to and considered by the Tenth Circuit, but it may come to such a conclusion based on intervening state court cases.
When interpreting state law, the Tenth Circuit does not and cannot issue a case holding that x is the law in New Mexico; it holds that the proper interpretation of New Mexico law, at the time the opinion is released, is x . Its holdings are descriptive, not prescriptive-interpretive, not normative. Because federal judicial opinions lack independent substantive force on state law issues, but possess such force regarding federal law issues, the Court concludes that the following is not an unfair summary of the judicial interpretive process: (i) when interpreting federal law, the federal appellate courts consider the existing body of law, and then issue a holding that both reflects and influences the body of law; that holding subsequently becomes a part of the body of law; but (ii) when interpreting state law, the federal appellate courts consider the existing body of law, and then issue a holding that only reflects the body of law; that holding does not subsequently become a part of the body of law. The federal district courts are bound to conclude that the Tenth Circuit's reflection of the then-existing body of law was accurate. The question is whether they should build a doctrine atop the case and use the existence of the Tenth Circuit's case to avoid any responsibility to independently consider the whole body of state law that exists when the time comes that diversity litigants raise the issue in their courtrooms. Giving such effect to the Tenth Circuit's interpretations of state law is at tension with Erie , giving independent substantive effect to federal judicial decisions-i.e., applying federal law-in a case brought in diversity.
The purpose of Erie is well-known and simple, and the Court should not complicate it beyond recognition: it is that the same substantive law governs litigants' cases regardless whether they are brought in a federal or state forum. For simplicity's sake, most courts have settled on the formulation that "the federal court must attempt to predict how the states' highest court would rule if confronted with the issue." Moore's § 124.22[3] (citing Comm'r v. Estate of Bosch,
The Erie doctrine results in federal cases that interpret state law withering with time. While cases interpreting federal law become more powerful over time-forming the groundwork for doctrines, growing upward from one application (Congress may create a national bank) to many (Congress may set quotas on wheat-growing for personal consumption), expanding outward from the general (states must grant criminal jury trials) to the specific (the jury need not be twelve people, nor must it be unanimous)-federal cases interpreting state law often become stale. New state court cases-even when not directly rebuking the federal court's statement of law-alter the common-law legal landscape with their dicta, their insinuations, and their tone. The Supreme Court, which picks its cases sparingly and for maximum effect, almost never grants certiorari to resolve issues of state law.
The Court's views on Erie , of course, mean little if the Tenth Circuit does not agree. In Wankier v. Crown Equipment Corp.,
[w]here no controlling state decision exists, the federal court must attempt to predict what the state's highest court would do. In performing this ventriloquial function, however, the federal court is bound by ordinary principles of stare decisis . Thus, when a panel of this Court has rendered a decision interpreting state law, that interpretation is binding on district courts in this circuit, and on subsequent panels of this Court, unless an intervening decision of the state's highest court has resolved the issue.
Wankier v. Crown Equip. Corp,
It is difficult to know whether Judge McConnell's limitation of "intervening decision" to cases from the highest state court was an oversight or intentional. Most of the Tenth Circuit's previous formulations of this rule have defined intervening decisions inclusively as all subsequent decisions of "that state's courts," a term which seems to include trial and intermediate appellate courts. Even Koch v. Koch Industries, Inc.,
In the absence of intervening Utah authority indicating that a plaintiff is not required to prove a safer, feasible alternative design, we are bound to follow the rule of Allen [v. Minnstar, Inc.,(10th Cir. 1993), a Tenth Circuit case interpreting an issue of Utah law], as was the district court. "Following the doctrine of stare decisis, one panel of this court must follow a prior panel's interpretation of state law, absent a supervening declaration to the contrary by that state's courts or an intervening change in the state's law." Koch v. Koch Indus., Inc., 8 F.3d 1470 . 203 F.3d at 1231
Wankier v. Crown Equip. Corp.,
Regardless whether the decision to limit the intervening authority a district court can consider was intentional, the Tenth Circuit has picked it up and run with it. In Kokins v. Teleflex, Inc., the Tenth Circuit, quoting Wankier v. Crown Equipment Corp., refused to consider an opinion from the Court of Appeals of Colorado holding directly the opposite of an earlier Tenth Circuit interpretation of Colorado law. See Kokins v. Teleflex, Inc.,
Although In re R.M.J., considered commercial speech "in the context of advertising for professional services," In re. R.M.J.,
Justice Marshall subsequently suggested, more broadly, that "[s]tates may prohibit actually or inherently misleading commercial speech entirely." Peel v. Attorney Registration and Disciplinary Com'n of Ill.,
The Court is aware that, under Erie , it is not bound to follow Court of Appeals of Ohio if the Court concludes that the Supreme Court of Ohio would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of Ohio's decision in Shumaker v. Hamilton Chevrolet, Inc., however, because the Court has found no indication that the Supreme Court of Ohio would apply a contrary rule.
The Court is aware that, under Erie, it is not bound to follow Court of Appeals of Colorado if the Court concludes that the Supreme Court of Colorado would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of Colorado's decision in Harris Grp., Inc. v. Robinson, however, because the Court has found no indication that the Supreme Court of Colorado would apply a contrary rule.
The Court is aware that, under Erie, it is not bound to follow the Appeals Court of Massachusetts if it concludes that the Supreme Judicial Court of Massachusetts would decide the issue differently. See supra n.21. The Court will follow the Appeals Court of Massachusetts' decision in Santagate v. Tower, however, because the Court has found no indication that the Supreme Judicial Court of Massachusetts would apply a contrary rule.
The Court is aware that, under Erie, it is not bound to follow the Court of Appeals of Michigan if it concludes that the Supreme Court of Michigan would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of Michigan's decision in Landstar Express America, Inc. v. Nexteer Automotive Corp., however, because the Court has found no indication that the Supreme Court of Michigan would apply a contrary rule.
The Court is aware that, under Erie, it is not bound to follow the Court of Appeals of New Mexico if it concludes that the Supreme Court of New Mexico would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of New Mexico's decision in Ontiveros Insulation Co. v. Sanchez, however, because the Court has found no indication that the Supreme Court of New Mexico would apply a contrary rule.
As the Tenth Circuit has explained, "when a panel of this Court has rendered a decision interpreting state law, that interpretation is binding on district courts in this circuit, and on subsequent panels of this Court, unless an intervening decision of the state's highest court has resolved the issue." Wankier v. Crown Equip. Corp.,
Other states have adopted the UCC § 2-313. The Court lists the states above, because those states are the only states at issue on the express warranty claims in this case.
The Court is not bound to follow a Third Circuit decision on matters of state law, but the Court concludes that it will follow this decision, because it has found no indication that the Supreme Court of New Jersey would apply a contrary rule, and because the Third Circuit has more experience with New Jersey law than the Court.
The Court is not bound to follow a Second Circuit decision on matters of state law, but the Court concludes that it will follow this decision, because it has found no indication that the Court of Appeals of New York would apply a contrary rule, and because the Second Circuit has more experience with New York law than the Court.
Personal jurisdiction can be waived. See Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,
See https://www.ftc.gov/sites/default/files/documents/cases/2000/06/santafecmp.htm (FTC Complaint); https://www.ftc.gov/sites/default/files/documents/cases/2000/06/santafeexhibitsac.pdf (FTC Complaint's Exhibits); https://www.ftc.gov/sites/default/files/documents/cases/2000/06/santafe.do.htm (Consent Order).
See https://www.ftc.gov/news-events/press-releases/2000/04/ftc-accepts-settlements-charges-alternative-cigarette-ads-are (Press Release 1); https://www.ftc.gov/news-events/press-releases/1999/03/ftc-accepts-settlement-charges-ads-winston-no-additive-cigarettes (Press Release 2);https://oag.ca.gov/system/files/attachments/press_releases/n1865_santa_fe_natural_tobacco_coagreement.pdf (Assurance of Voluntary Compliance); https://www.fda.g ov/ICECI/EnforcementActions/WarningLetters/2015/ucm459778.htm (Warning Letter). Although the Assurance of Voluntary Compliance is from a state agency's website, documents from those sources are also properly judicially noticed. See New Mexico ex rel. Richardson v. Bureau of Land Management,
See https://www.ftc.gov/system/files/documents/advisory_opinions/letter-mary-engleassociate-director-division-advertising-practices-mark-s-brown-esq/rai-santa _fe_staff_advisory_ op inion_and_incoming_request_5-9-17.pdf.
Although language in Daimler AG v. Bauman suggests that general jurisdiction over a corporation could be asserted in states where the Defendant corporation is not incorporated or headquartered in the state, see Daimler AG v. Bauman,
The Court notes two federal cases that have held that an MDL transferee court may not transfer claims under
Some academic commentators have suggested a similar holding. See Peter L. Strauss, Publication Rules in the Rulemaking Spectrum: Assuring Proper Respect for An Essential Element,
The Defendants' reliance on Mulford v. Altria Grp. Inc.,
The Supreme Court's holding here is somewhat ambiguous. The wording suggests two possible readings. First, it could mean that all non-parties to the agreement can pursue state law claims against all parties and non-parties to the agreement without the consent order preempting their claims. Under that reading, the Plaintiffs' claims would not be preempted, because they were not parties to the Consent Order. The other plausible reading is that non-parties claims against parties to the agreement can be preempted, but nonparties claims against non-parties cannot be preempted. The Court concludes that the second reading is the Supreme Court's most likely meaning. The first meaning limits a consent order's preemptive effect to such a degree that a consent order would almost never preempt state law claims. Although the Court concludes that consent orders should have limited preemptive effect, it determines that it is unlikely that the Supreme Court would make such an expansive holding without more elaboration.
If the Consent Order preempts the Plaintiffs' Safer-Cigarette Theory claims, it would encompass the claims premised on the word natural. The Court concludes that natural is a "substantially similar term" to "additive-free," because natural's plain meaning would suggest that a tobacco product "has no additives or chemicals." Consent Order at 5. See Black's Law Dictionary at 1126 (9th Ed. 2009)("Brought about by nature as opposed to artificial means. Inherent; not acquired or assumed.").
The Supreme Court of California has not determined the standard for the California CFAL, or CCLRA. The Ninth Circuit's state law interpretations bind Ninth Circuit district courts absent "any subsequent indication from the [state supreme court] that our interpretation was incorrect." Kona Enterp., Inc. v. Estate of Bishop,
The Supreme Court of North Carolina has not determined the standard for North Carolina General Statute 75-1.1. The Court concludes, however, that the Supreme Court of North Carolina would adopt a reasonable consumer standard, because it has signaled that it would use federal courts' interpretations of the FTC Act,
The Court is aware that, under Erie, it is not bound to follow Court of Appeals of Ohio if it concludes that the Supreme Court of Ohio would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of Ohio's decision in Struna v. Convenient Food Mart, however, because the Court has found no indication that the Supreme Court of Ohio would apply a contrary rule.
The Plaintiffs rejoin that whether a reasonable consumer would be deceived is a question of fact ordinarily not decided on a Motion to Dismiss. See Response at 39-42 (citing Williams v. Gerber Prods. Co.,
Jou v. Kimberly-Clark Corp. stands for the broader proposition that no side-packaging writing can cure deceptive labeling on the front. See
As explained above, Menthol is an organic molecule derived from mint. See June Tr. at 13-15 (Schlesinger).
Perique tobacco is a type of tobacco associated with Louisiana.
In concluding that the Safer-Cigarette and Menthol Theory may proceed, the Court notes a recent decision in which the Seventh Circuit, reviewing an opinion that the Honorable Lynn Adelman, United States District Judge for the Eastern District of Wisconsin wrote, reversed a district court's class-action settlement approval arising from Subway sandwich's purportedly deceptive conduct. See In re: Subway Footlong Sandwich Marketing and Sales Practices Litigation,
It is the Court's understanding that Subway never filed a motion to dismiss. See In re Subway Footlong Sandwich Marketing and Sales Practices Litig., No. 13-2439,
In any case, even at 30,000 feet, given that the Court is allowing two of the Plaintiffs' theories to proceed, the Court concludes that the Court should not dismiss the case as "utterly worthless" that "should ... [be] dismissed out of hand." Subway
The First Amendment is applicable to the states and their state legislatures via the Fourteenth Amendment's due process clause. See Virginia State Bd. of Pharm. v. Virginia Citizens Consumer Council, Inc.,
The Court notes here that many menthol users are young, inexperienced smokers. See Michael Freiberg, The Minty Taste of Death: State and Local Options to Regulate Menthol in Tobacco Products,
The Supreme Court of California has not determined whether the safe harbor should be extended to the CLRA and California's False Advertising Law. The Court concludes that the Supreme Court of California would extend the safe harbor to those two laws, because the great weight of authority interpreting those laws has extended the safe harbor to them, and the Supreme Court of California's rationale for creating a safe harbor to the UCL, i.e., the UCL's sweeping scope cannot be used to contradict the Legislature's express legislation to the contrary, applies with equal force to the CLRA and the False Advertising Law.
The Court also notes that the Supreme Court, in Altria II, rejected the reasoning used in Flanagan v. Altria Grp., Inc., albeit in its preemption analysis and not in a MCPA analysis.
The Court disagrees with that court's conclusions for the reasons articulated in its analysis under California law, but is nevertheless bound by the Supreme Court of Illinois.
The Court notes the Plaintiffs' argument that Illinois' courts' interpretations gut the statute, because a plaintiff suing under IUDTPA will always know of the deception by the time he brings suit, so will never qualify for injunctive relief. That conclusion is false, because some deceptive conduct leads to repeated, hard-to-verify harms, such as deceptive billing practices. See Brennan v. AT & T Corp., No.04-0433,
The Court notes that some Ohio federal courts have concluded that Ohio's class-action pre-suit notice requirement directly conflicts with rule 23. See e.g., McKinney v. Bayer Corp.,
The Court recognizes that Plaintiffs pursuing unjust enrichment may also seek a legal remedy, which would obviate the available legal remedy argument. See Restatement (Third) of Restitution and Unjust Enrichment. The Plaintiffs, however, seek an equitable remedy with their unjust-enrichment claims. See Amended Complaint ¶¶ 175, 193, 215, 248, 265, 288, 314, 341, 373, 394, 426, 449, at 54, 57, 62, 68, 71, 76, 81, 86, 91, 95, 99-100, 103.
In their MTD, the Defendants argue that the New Mexico unjust-enrichment claim failed for the same reason, see MTD at 58, but in their Reply, they withdrew argument on that ground, see Reply at 27 n.17.
In so ruling, the Court notes its Abraham v. WPX Energy Production, LLC,
The Court also concludes that the Defendants' argument that the unjust-enrichment claim must be independently dismissed in New York as duplicative fails, because of rule 8. The New York State rule is procedural, because it deals with duplicative pleading, so rule 8 governs.
The Court acknowledges a Court of Appeals of Colorado decision that notes, in dicta, that the CCPA "does not preclude class members from bringing an action for actual damages." Robinson v. Lynmar Racquet Club, Inc.,
The Court is aware that, under Erie , it is not bound to follow the Appeals Court of Massachusetts if it concludes that the Supreme Judicial Court of Massachusetts would decide the issue differently. See supra n.21. The Court will follow the Appeals Court of Massachusetts' decision in Santagate v. Tower, however, because the Court has found no indication that the Supreme Judicial Court of Massachusetts would apply a contrary rule.
For Illinois, the Court does not adopt the argument for state specific reasons explained below.
The Court is aware that, under Erie, it is not bound to follow Court of Appeals of California if it concludes that the Supreme Court of California would decide the issue differently. See supra n.21. The Court will follow the Court of Appeals of California's decisions in David v. Winn Automotive, Inc. and Cardinal Health 301, Inc. v. Tyco Electronics Corp., however, because the Court has found no indication that the Supreme Court of California would apply a contrary rule.
The Defendants cite In re Mentor Corp. ObTape Transobturator Slings Products Liability Litig., No. 12-0238,
Some federal cases suggest that Randy Knitwear, Inc. v. American Cyanamid Co. is no longer good law, because the New York legislature ratified the UCC after the decision. See Koenig v. Boulder Brands, Inc.,
The Supreme Court of Illinois expressly declined to address the issue. See Collins Co., Ltd. v. Carboline Co.,