TRACY SIMPSON ET AL. v. CHAMPION PETFOODS USA, INC. ET AL.
CIVIL ACTION No. 2:18-CV-74 (WOB-CJS)
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF KENTUCKY NORTHERN DIVISION AT COVINGTON
This proposed class action involves alleged misrepresentations on the package labeling for dog food. Plaintiffs allege in particular that Defendant Champion Petfoods, Inc. misrepresented the quality of its premium dry dog food by labeling it as containing “fresh, raw, or dehydrated ingredients” that are “regional” and “deemed fit for human consumption prior to inclusion.”
Plaintiffs assert the following six (6) counts:
- Count I: Violation of the Kentucky Consumer Protection Act,
KRS § 367.120 et seq. - Count II: Violation of the Virginia Consumer Protection Act of 1977,
Va. Code § 59.1-196 et seq. - Count III: Breach of express warranty under Kentucky law,
KRS § 355.2-313 - Count IV: Breach of express warranty under Virginia law,
Va. Code § 8.2-313 - Count V: Breach of implied warranty
- Count VI: Fraudulent omission
- Count VII: Unjust enrichment
On January 8, 2019, this Court heard oral argument on Defendants’ first motion to dismiss. At the end of the hearing, Plaintiffs’ counsel made an oral request to amend the complaint. (Doc. 26). That request was granted. This matter is now before the Court on Defendants’ motion to dismiss the amended complaint (Doc. 32). The Court dispenses with oral argument at this stage because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. Accordingly, the matter is ripe for disposition.
For the reasons that follow, Defendants’ motion to dismiss will be granted in part and denied in part.
FACTUAL AND PROCEDURAL BACKGROUND
Defendant Champion Petfoods LP owns and controls Defendant Champion Petfoods USA, Inc. (collectively “Champion“). Champion manufactures, markets, and sells premium-priced dog food throughout the United States, including in Kentucky and Virginia, where, respectively, Plaintiff Tracy Simpson and Danika Lolles purchased Champion‘s dog food from various third-party pet food stores. (Doc. 29, ¶¶ 6-11).
Champion‘s dry dog food products are sold under two brand names: “Orijen” and “Acana,” both of which contain substantially similar representations on the package label. Id. at ¶¶ 1, 11, 15.
A. Representations on the Package Label
Orijen Original is labeled on the front of the package as “BIOLOGICALLY APPROPRIATE™ DOG FOOD,” a purported
On the back of the package, featured prominently under the caption “TRUSTED EVERYWHERE,” it reads:
ORIJEN IS THE FULLEST EXPRESSION OF OUR BIOLOGICALLY APPROPRIATE™ AND FRESH REGIONAL INGREDIENTS COMMITMENT. ORIJEN ORIGINAL features unmatched inclusions of free-run poultry, wild-caught fish and whole nest-laid eggs—sustainably farmed or fished in our region and delivered daily, FRESH or RAW and preservative-free, so they‘re bursting with goodness and taste.
(Doc. 32-2 at 2) (emphasis in original); (Doc. 29, ¶ 13). The package label also represents that Orijen contains “NO RENDERED POULTRY, FISH OR MEAT MEALS,” and instead, “features richly nourishing ratios of poultry, organs and cartilage” and “FRESH, RAW or DEHYDRATED ingredients, from minimally processed poultry fish and eggs that are deemed fit for human consumption prior to inclusion in our foods.” (Doc. 32-2 at 1-2) (emphasis added); (Doc. 29, ¶ 13). Although these statements speak in general terms, consumers are invited to “[r]ead [the] ingredients” in the list conspicuously printed on the package.2
The package further represents the origin of the product ingredients. Under the heading “FRESH REGIONAL INGREDIENTS” it states: “GROWN CLOSE TO HOME – We focus on local ingredients that are ethically raised by people we know and trust, and delivered to our kitchens fresh or raw each day.” (Doc. 32-2 at 2); (Doc. 29, ¶ 13). This theme is reinforced by two similar statements: (a) “INGREDIENTS WE LOVE FROM PEOPLE WE KNOW AND TRUST“; and (b) “FRESH OR RAW INGREDIENTS FROM LOCAL FARMS AND WATERS.” (Doc. 32-2 at 2); (Doc. 29, ¶ 13). In the same vein, under the heading “NEVER OUTSOURCED,” the label notes that the product is “PREPARED EXCLUSIVELY IN OUR DOGSTAR KITCHENS – We don‘t make foods for other companies and we don‘t allow our foods to be made by anyone else.” (Doc. 32-2 at 2); (Doc. 29 at 7). And more particularly, “MADE IN OUR USA KENTUCKY KITCHENS” is printed on the package. (Doc. 32-2 at 1-2); (Doc. 29, ¶ 13).
B. Allegations as to the Falsity of Champion‘s Representations
Plaintiffs allege that Champion‘s representations are false and deceptive. First, Plaintiffs claim Champion‘s products contain “high levels of heavy metals.” (Doc. 29, ¶ 25). As factual backing for this assertion, Plaintiffs reference Champion‘s own public disclosure, the “White Paper,” and include a table from that publication listing the average concentration of arsenic, lead, cadmium, and mercury in the finished product of Acana and Orijen Original.
Plaintiffs’ version of the table omits the column that purports to provide the maximum tolerable limits (“MTLs“) set by the Food and Drug Administration (“FDA“) and the National Research Council (“NRC“)—which indicates that the heavy metals in Champion‘s products are substantially below the MTLs.
Notwithstanding, Plaintiffs aver that the reported concentrations of these metals “are excessive,” “not suitable for consumption by humans and are not of the quality represented to consumers,” and therefore “render Champion‘s representations . . . false and misleading.” (Doc. 29, ¶¶ 26, 30). In support, Plaintiffs cite to the FDA‘s “Total Diet Study”4 and include a table with figures from the study indicating the concentration of the heavy metals found in chicken, turkey, and eggs consumed by humans. Id. at ¶ 28.5 The table, however, omits fish, which according to the package label, constitutes 2.5 pounds of the 11 pounds of “fresh, raw, or dehydrated animal ingredients” in a 13-pound bag of Orijen Original. Id.; (Doc. 32-2 at 2).
Second, Plaintiffs allege that Champion‘s products: (1) are “made primarily from animal byproducts“; (2) “contain ingredients of an inferior quality than those represented” and that Champion “knowingly uses expired ingredients“; (3) include ingredients that are “heavily processed“; (4) contain “meal ingredients and fats” obtained from “unsanitary pet food rendering facilities around the world” or rendering facilities that also process “animals that died by means other than slaughter and diseased or spoiled meats“; (5) contain “a variety of ingredients that are frozen“; (6) “routinely” include “‘regrinds’ (i.e., items that were not fit to be sold after their original preparation)“; (7) are “contaminated with excessive quantities of hair (for one ingredient, Champion‘s own specification allows for 30 grams per pound to consist of hair), insects, plastic ear tags from livestock, feathers, and bones“; (8) lack “nutritious muscle meats” and instead “include cartilage, bone, [and] filtering organs“;6 and (9) incorporate ingredients that arrive with bills of lading designating it as “INEDIBLE” and “NOT FOR HUMAN CONSUMPTION.” (Doc. 29, ¶¶ 2, 16-17, 21-24).
Lastly, Plaintiffs allege Champion misrepresented that it uses “regional” ingredients from “PEOPLE WE TRUST.” Id. at ¶¶ 2, 18-19. Plaintiffs aver this is false because: (1) Champion “imports most of its ingredients from outside the Commonwealth of Kentucky,” a “substantial portion” of which “are imported from outside the United States and from as far away as New Zealand, Morocco, Denmark, and Peru,” and “the few ingredients Champion sources from Kentucky are first shipped
In short, Plaintiffs allege that contrary to the package labeling, the “ingredients” prior to inclusion in Champion‘s products “are not suitable for consumption by humans and are not of the quality represented to consumers.” Id. at ¶¶ 21, 30. According to Plaintiffs, their injury stems from the fact that they believed Champion‘s products were “healthy, quality product[s] for [their] pet[s],” and they paid a premium price they would not have paid had they been aware of the alleged facts pertaining to Champion‘s products. Id. at ¶¶ 3, 6-7. They seek compensation for their loss and classwide treatment for the thousands of estimated class members in Kentucky and Virginia. Id. at ¶¶ 31, 33.
LEGAL STANDARD
The Federal Rules of Civil Procedure require that pleadings, including complaints, contain a “short and plain statement of the claim showing that the pleader is entitled to relief.”
A complaint may be deficient for failure “to state a claim upon which relief can be granted.”
On a Rule 12(b)(6) motion to dismiss, “all factual allegations in the complaint must be presumed to be true” and the court must draw all “reasonable inferences” in favor of the non-moving party. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008) (citation omitted); Erickson v. Pardus, 551 U.S. 89, 94 (2007). To that end, a court must judge the sufficiency of a complaint under a two-pronged approach: (1) disregard all “legal conclusions” and “conclusory statements“; and (2) determine whether the remaining “well-pleaded factual allegations,” accepted as true, “plausibly give rise to entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678-81 (2009).
Accordingly, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). A claim becomes plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. That is, the plaintiff‘s “[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (internal citations omitted). If, from the well-pleaded facts, the court cannot “infer more than the mere possibility of misconduct, the complaint has alleged—but has not ‘show[n]‘—‘that the pleader is entitled to relief.‘” Iqbal, 556 U.S. at 679 (quoting
I. Materials Properly Before the Court
On a motion to dismiss, materials outside the pleadings are generally not considered.
Here, the White Paper published by Champion, the FDA Diet Study, and the package label are referenced in the First Amended Complaint (the “Complaint“) and are central to Plaintiffs’ claims. (Doc. 29, ¶¶ 13-15, 25-28; id. at 11 n.1). That Plaintiffs did not attach these documents as exhibits to the Complaint is irrelevant. Stein, 873 F.3d at 528 (plaintiff‘s failure to attach compensation policy to complaint did not preclude its consideration in resolving Rule 12(b)(6) motion because it was “central to plaintiffs’ case” in that it was referenced in the complaint).
“While documents integral to the complaint may be relied upon, even if they are not attached or incorporated by reference, it must also be clear that there exist no material disputed issues of fact regarding the relevance of the document.” Ouwinga v. Benistar 419 Plan Servs., 694 F.3d 783, 797 (6th Cir. 2012) (citation and internal quotation marks omitted). Plaintiffs do not dispute the validity of the White Paper. But, “[o]ther than the raw numbers,” Plaintiffs do dispute the statements and MTLs in the White Paper. (Doc. 35 at 6-7).
Therefore, the Court may not consider information in the White Paper beyond the data included in the Complaint. Mediacom Southeast LLC v. BellSouth Telcoms., Inc., 672 F.3d 396, 399 (6th Cir. 2012) (court could not refer to the settlement agreement even though it was referred to in the complaint because the parties disputed the “factual contents” of the settlement agreement and “[i]t would seem improper for the district court to credit the factual recitations in the agreement—a self-serving document drafted by the defendant . . . and to thus reject the well-pleaded facts in the complaint“); Burns v. United States, 542 F. App‘x 461, 466 (6th Cir. 2013) (plaintiff disputed “the validity of the statements in the document relied upon by Defendant“).
By contrast, there is no dispute as to the factual contents of the package label or the validity of the FDA Diet study. As such, these documents are properly before the Court and may be considered. Therefore, in deciding Champion‘s motion, if the allegations of the Complaint are “contradicted by documents attached to or necessarily implicated by the pleadings, the latter controls over the former and a Rule 12(b)(6) dismissal may be based on the documents.” See, e.g., 2 JAMES WM. MOORE ET AL., MOORE‘S FEDERAL PRACTICE § 12.34(2) (Matthew Bender 3d ed. 2018) (emphasis added) [hereinafter “MOORE‘S“]; Kreipke v. Wayne State Univ., 807 F.3d 768, 782 (6th Cir. 2015) (written instrument contradicted
II. Champion‘s Motion to Dismiss
The parties evidently agree that Kentucky law applies to Plaintiff Simpson‘s claims and Virginia law applies to Plaintiff Lolles’ claims.7 But there is no constitutional problem “in applying [another state‘s] law if it is not in conflict with that of any other jurisdiction connected to this suit.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 816 (1985) (citation omitted).
In this matter, the privity requirement is the only real difference between Virginia and Kentucky law. Otherwise, there is no conflict. As such, the sufficiency of Simpson‘s and Lolles’ claims will be evaluated, respectively, under Kentucky and Virginia law where the claim asserted implicates the privity requirement.
A. The Kentucky Consumer Protection Act (“KCPA“) (Count I)
In Count I, Simpson alleges Champion violated the KCPA,
The KCPA was enacted “to give Kentucky consumers the broadest possible protection for allegedly illegal acts.” Stevens v. Motorists Mut. Ins. Co., 759 S.W.2d 819, 821 (Ky. 1988). It prohibits “[unconscionable], false, misleading, or deceptive acts or practices in the conduct of any trade or commerce.”
Champion argues that the KCPA requires privity. (Doc. 32 at 12-14). Plaintiffs disagree and cite to a handful of federal district court cases. (Doc. 35 at 10). The Court agrees with Champion. “An action under the KCPA requires privity of contract between the parties.” PNC Bank, N.A. v. Merenbloom, Nos. 15-6361, 16-5277, 2017 WL 3973962, at *3 (6th Cir. June 16, 2017) (citing Skilcraft Sheetmetal, Inc. v. Ky. Mach., Inc., 836 S.W.2d 907, 909 (Ky. Ct. App. 1992)). Simpson‘s KCPA claim therefore fails because she lacks privity with Champion.
Skilcraft is the seminal Kentucky case interpreting the scope of
The Skilcraft court concluded that:
[A] subsequent purchaser may not maintain an action against a seller with whom he did not deal or who made no warranty for the benefit of the subsequent purchaser. The language of the statute plainly contemplates an action by a purchaser against his immediate seller. . . The legislature intended that privity of contract exist between the parties in a suit alleging a violation of the Consumer Protection Act. We find distinguishable situations such as that presented in Ford Motor Co. v. Mayes, Ky. App., 575 S.W.2d 480 (1978), where the defendant (Ford Motor Company) provides warranties to the ultimate purchaser to repair the item purchased.
836 S.W.2d at 909 (emphasis added).
Despite the clear holding in Skilcraft requiring privity, one district court, Naiser v. Unilever United States, Inc., 975 F. Supp. 2d 727 (W.D. Ky. 2013), broke ranks in 2013. Id. at 743 (citing Skilcraft, 836 S.W.2d at 909). Naiser interpreted the last sentence of the above excerpt from Skilcraft and held that a plaintiff may also bring a KCPA claim where a defendant has “made valid express warranties for Plaintiffs’ benefit.” Naiser, 975 F. Supp. at 743; see id. at 740.
Naiser overextends the intent of the Kentucky legislature and the holding in Skilcraft. Indeed, only a few courts have followed Naiser. Bosch v. Bayer Healthcare Pharms., Inc., 13 F. Supp. 3d 730, 750-51 (W.D. Ky. 2014); Miller v. Coty, Inc., No. 3:14-cv-00443, 2018 WL 1440608, at *14 (W.D. Ky. Mar. 22, 2018).9
“[W]here a state appellate court has resolved an issue to which the high court has not spoken,” the Sixth Circuit instructs courts to “treat [those] decisions . . . as authoritative absent a strong showing that the state‘s highest court would decide the issue differently.” Hisrich v. Volvo Cars of N. Am., Inc., 226 F.3d 445, 448 n.3 (6th Cir. 2000) (citation and internal quotation marks omitted). Here, nothing suggests that the Kentucky Supreme Court would apply any rule other than that which is stated in Skilcraft. This Court therefore declines to follow Naiser and will instead adhere to Skilcraft.
Indeed, after Skilcraft, numerous Kentucky Courts of Appeals have cited Skilcraft and interpreted the text of the KCPA “to mean that an individual must be a purchaser with privity of contract in order to have standing to bring an action under the [KCPA].” E.g., Williams v. Chase Bank USA, N.A., 390 S.W.3d 824, 829 (Ky. Ct. App. 2012); Arnold v. Microsoft Corp., No. 2000-CA-002144, 2001 WL 1835377, at *7 (Ky Ct. App. Nov. 21, 2001); Potter v. Bruce Walters Ford Sales, Inc., 37 S.W.3d 210, 213 (Ky. Ct. App. 2000); Keaton v. G.C. Williams Funeral Home, Inc., 436 S.W.3d 538, 546 (Ky. Ct. App. 2013) (“Claims may only be brought under the KCPA by individuals who personally purchase goods or services from a merchant.“).
The Sixth Circuit and the majority of the federal district courts have also followed suit in holding that privity is required under the KCPA. See, e.g., Yonts v. Easton Tech. Prods., Inc., 676 F. App‘x 413, 420 (6th Cir. 2017) (rejecting the argument that a second-hand purchaser may sue a manufacturer because “[i]f a consumer so far removed from the manufacturer could claim express-warranty or KCPA protection, . . . [the statutory] limitations would be meaningless“); Merenbloom, 2017 WL 3973962, at *3.10 Thus, Naiser is an outlier.11
Here, Simpson is not in privity with Champion. Simpson did not purchase dog food products from Champion. Rather, as the Complaint plainly states, Simpson “purchased Orijen dry dog food products . . . from various pet food stores” in Kentucky. (Doc. 29, ¶ 6). Because Simpson‘s allegations do not involve “an action by a purchaser against his immediate seller,” Simpson lacks privity of contract. Therefore, Simpson has no claim under the KCPA. Count I accordingly will be dismissed with prejudice.
B. The Virginia Consumer Protection Act (“VCPA“) (Count II)
The VCPA prohibits “fraudulent acts or practices committed by a supplier in connection with a consumer transaction.”
To state a claim under the VCPA, a plaintiff must allege: “(1) fraud, (2) by a supplier, (3) in a consumer transaction.” Enomoto v. Space Adventures, Ltd., 624 F. Supp. 2d 443, 456 (E.D. Va. 2009). In misrepresentation cases, a plaintiff must also prove “the elements of reliance and damages.” Owens v. DRS Auto. Fantomworks, Inc., 764 S.E.2d 256, 260 (Va. 2014); Curtis v. Propel Prop. Tax Funding, LLC, No. 3:16-cv-00731-JAG, 2018 WL 717006, at *3 (E.D. Va. Feb. 5, 2018).12 All of these elements must be pled with particularity in accordance with
Defendants contend Lolles has failed to allege reliance. Here, Lolles alleges she purchased Champion‘s products “because she believed they were healthy, quality products for her pet” and otherwise would not have done so “if she was aware that the representations of Champion” were “false and deceptive.” (Doc. 29, ¶ 7). This allegation, coupled with the specific statements Lolles identified on the package label and the allegations regarding how these statements constitute misrepresentations, is sufficient to satisfy the demands of Rule 9. Id. at ¶¶ 13-30. Accordingly, Count II stands.
C. Simpson‘s Breach of Express Warranty Claim (Count III)
Express warranties are created under Kentucky law by: (1) an “affirmation of fact or promise” or “description of the goods“; (2) “made by the seller to the buyer“; (3) “which relates to the goods“; and (4) “becomes part of the basis of the bargain.”
The defect in Count III is not whether Champion‘s package label constitutes puffery or a commendation of the goods. The problem, again, is that Simpson‘s breach of warranty claim is foreclosed by the privity requirement under Kentucky law.
i. Simpson Lacks Privity
The Sixth Circuit in applying Kentucky law succinctly summarized the privity requirement in warranty claims:
Under Kentucky law, liability for breach of warranty is governed by the terms of the contract and statutory provisions of Kentucky‘s Uniform Commercial Code. Williams v. Fulmer, 695 S.W.2d 411, 413 (Ky. 1985). [Where] there [i]s no contract between the [parties], Kentucky Revised Statute § 355.2-318 controls [the] cause of action. Under this statute, claims for breach of express or implied warranties may proceed only where there is privity between the parties. Real Estate Mktg. v. Franz, 885 S.W.2d 921, 926 (Ky. 1994).
Waterfill v. Nat‘l Molding Corp., 215 F. App‘x 402, 405 (6th Cir. 2007) (emphasis added) (holding that “privity existed only between [defendant] and its distributors, who were the immediate purchasers of its [product].“). This statement of the law is underscored by the standards pronounced in the cases the Waterfill Court cited.
In Williams v. Fulmer, the Kentucky Supreme Court explained that “[i]f liability is based on sale of the product, it can be extended beyond those persons in privity of contract only by some provision of the
Then, in Real Estate Mktg. v. Franz, 885 S.W.2d 921 (Ky. 1994), the Kentucky Supreme Court declined to follow other states that had abolished the privity requirement, and instead, reaffirmed the privity requirement in a purely commercial
case. Id. at 925–26. There, defendant built a home and sold it; the purchasers then sold the home to plaintiffs. Id. at 922. When plaintiffs noticed mold, mildew, and warped flooring, they sued the defendant-homebuilder. Id. Citing to Williams v. Fulmer, the Franz Court rejected plaintiffs’ breach of warranty claim and stated the following:
[T]his Court is not prepared, as a matter of judicial policy, to extend the theory of a warranty implied in law beyond the kind of warranty statutorily created in Kentucky’s version of the U.C.C. A step of this nature is a public policy to be decided by the legislature. We find no public policy to extend warranty protection in the U.C.C.
Id. at 926. The court’s holding is unequivocal.
Here, as noted above, it is clear from the face of the Complaint that Simpson lacks privity. Moreover, Simpson cannot shoehorn her warranty claim into the broader protections under
ii. The Naiser Case
In support of her breach of warranty claim, Simpson again urges this Court to follow Naiser, (Doc. 35 at 12–13), which allowed a breach of express warranty
First, Naiser is readily distinguishable by its facts. There, the plaintiffs suffered personal injuries, whereas Simpson’s alleged injury is purely economic. Moreover, in contrast to the misrepresentations in Naiser, here, the package label does not contain any variant of the phrase “no heavy metals.” But that is the core premise of Simpson’s claim. To reach the result Simpson urges the Court to reach, one must read more information into the package labeling than what it states. See Strayhorn v. Wyeth Pharms., Inc., 737 F.3d 378, 395 (6th Cir. 2013) (finding no merit to express-warranty claims where plaintiff attacked adequacy of drug label, rather than a false affirmation).
Second, Naiser is based on an unsupported extension of Kentucky law. Naiser cited to two of the same cases discussed above, Waterfill v. Nat’l Molding Corp., 215 F. App’x 402, 405 (6th Cir. 2007) and Williams v. Fulmer, 695 S.W.2d 411 (Ky. 1985), but ignored Real Estate Mktg. v. Franz, 885 S.W.2d 921 (Ky. 1994). See Naiser, 975 F. Supp. 2d at 738, 740. Naiser erroneously assumed that because “Kentucky courts have not considered any cases involving direct representations to consumers,” it was authorized to proceed to “consider how other jurisdictions have dealt with such promises.” Id. at 739–40. In doing so, the Naiser Court disregarded a clear statement of Kentucky law in binding precedent simply because the cases were not factually identical.
Lastly, Naiser grossly misapprehended three cases applying Kentucky law. 975 F. Supp. 2d at 738–40. The three cases being Levin v. Trex Co., Inc., No. 3:10-cv-692–CRS, 2012 WL 7832713 (W.D. Ky. Mar. 5, 2012); Williams v. Volvo-White, 2003 WL 22681457 (Ky. App. Nov. 14, 2003); and Gooch v. E.I. Du Point de Nemours & Co., 40 F. Supp. 2d 863 (W.D. Ky. 1999).
In the first case, Levin v. Trex Co., Inc., a consumer purchased decking materials from a retailer and later sued the manufacturer, alleging breach of express warranty. The warranty at issue was provided by the manufacturer and explicitly stated that it ran to the “‘individual residential homeowner’ purchasing the product” and that “[t]his warranty gives you specific legal rights.” 2012 WL 7832713, at *2 (W.D. Ky. Mar. 5, 2012). The district court noted that while Kentucky law normally requires buyer-seller privity to maintain a cause of action for breach of warranty, it “anticipate[d] that Kentucky courts would hold that an express warranty action could be maintained in [a] case, where the manufacturer’s written warranty expressly stated that its warranty ran directly to the intended consumer, the ‘individual residential homeowner.’” Id. at *3. Thus, Levin held that plaintiff’s claim could proceed “based on Plaintiff‘s position as the expressly intended beneficiary of the warranty issued by Defendant.” Id. at *4.
In Naiser, however, the defendant had made no representation comparable to that in Levin, i.e., that its warranties ran directly to the intended consumer. Yet the Naiser Court expanded Levin’s rationale to
The second case, Williams v. Volvo-White, No. 2002-CA-001469-MR, 2003 WL 22681457, at *3 (Ky. App. Nov. 14, 2003), involved used trucks the plaintiff had purchased. Id. at *1. The Kentucky Court of Appeals assumed that plaintiff had privity as a subsequent purchaser so as to limit the extent of the manufacturer’s warranty, which stated that the buyer’s remedy is “limited to repair or replacement of the part or component which is determined defective in normal use.” Id. at *3. But Naiser leveraged Williams to expand, rather than limit, the scope of liability.
Finally, in Gooch v. E.I. Du Point de Nemours & Co., 40 F. Supp. 2d 863 (W.D. Ky. 1999), plaintiff used a herbicide he had purchased from a retailer, which allegedly caused plaintiff’s corn not to produce. Id. at 865–67. In addition to the product label, which stated that DuPont warranted the product to be “reasonably fit for the purpose stated in the Directions for Use,” plaintiff had “engaged in several conversations with DuPont’s field representative . . . who informed him that [the product] was a good product to control rhizome johnson grass.” Id. at 866–67. The court held that the disclaimers on the label did not exclude DuPont’s warranty that the product was “reasonably fit” for the intended purpose of “control[ing] johnson grass . . . without harming the crop upon which it is applied.” Id. at 869. Gooch does not contain the word “privity,” much less any discussion of Kentucky’s privity requirement. Naiser acknowledges as much in citing Gooch and included the parenthetical: “not discussing the privity requirement, but applying Kentucky law and allowing an express warranty action by a consumer against a manufacturer where no buyer-seller relationship existed but the consumer relied on warranties that were made by the manufacturer on the product’s label.” 975 F. Supp. 2d at 740.
In short, Naiser is not supported by binding precedent and is premised on overly broad interpretations of other cases applying Kentucky law. Principles of federalism, therefore, dictate that Naiser should not be followed.
“When sitting in diversity jurisdiction, this court must follow the controlling decision of the [forum’s] highest state court. But if the ‘state’s highest court has not spoken on a precise issue,’ this court must follow a decision of the state appellate court, published or unpublished, ‘unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.‘” E.g., Am. Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am., 895 F.3d 455, 460 n.1 (6th Cir. 2018) (quoting Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 517 (6th Cir. 2001)); see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 76–79 (1938); AllState Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454 (6th Cir. 2001). The Sixth Circuit’s repeated admonition in this area has long been the following:
[F]ederal courts “must proceed with caution” when making pronouncements about state law. Sitting in diversity, [courts] are “not commissioned to take a position regarding the advisability or fairness of the state rule to be applied, but must determine the issue as would the highest court of the state.” [A] [c]ourt’s proper reluctance to speculate on any trends of state law applies with special force to a plaintiff in a diversity case, like this one, who has chosen to litigate his state law claim in federal court. Furthermore,
“when given a choice between an interpretation of [state] law which reasonably restricts liability, and one which greatly expands liability, [courts] should choose the narrower and more reasonable path.”
Combs v. Int’l Ins. Co., 354 F.3d 568, 577 (6th Cir. 2004) (emphasis added); id. at 577–78 (“[F]ederal courts sitting in a diversity case are in ‘a particularly poor position . . . to endorse [a] fundamental policy innovation . . . . Absent some authoritative signal from the legislature of the courts of [the state], we see no basis for even considering the pros and cons of innovative theories . . . .” (alterations in original) (quoting Dayton v. Peck, Stow & Wilcox Co. (Pexto), 739 F.2d 690, 694 (1st Cir. 1984))). Naiser did not adhere to these principles of federalism.
In the interest of federal-state comity, the Court finds that the appropriate course is to decline to expand Kentucky law based on speculation regarding trends in the law and perceptions of fairness. As such, the Kentucky Supreme Court’s strict application of the privity requirement applies here.
Accordingly, because Simpson is not in privity with Champion, Simpson’s express warranty claim (Count III) must be dismissed. Waterfill, 215 F. App’x at 405 (holding that “privity existed only between [defendant] and its distributors, who were the immediate purchasers of its [product].“); see also Loeb v. Champion Petfoods USA, Inc., No. 18-cv-494, 2018 WL 2745254, at *8 (E.D. Wisc. Aug. 7, 2018) (dismissing class action express warranty claim on a motion to dismiss because Wisconsin law required privity).14
D. Lolles’ Breach of Express Warranty Claim (Count IV)
Unlike Kentucky, Virginia has abolished the privity requirement in actions “resulting from negligence” (
Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer or seller of goods to recover damages for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the goods from the defendant, if the plaintiff was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods . . .
Express warranties are created as provided in
E. Breach of Implied Warranty (Count V)
Under Virginia and Kentucky law, “a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.”
With respect to Lolles’ implied warranty claim, at this preliminary stage it cannot be said that Champion’s products, in fact, “conform to the promises or affirmations of fact made on the container or label . . .”
On the other hand, Simpson’s implied warranty claim must be dismissed under Kentucky law for lack of privity. Kentucky law is clear that a plaintiff alleging “a claim based upon an implied warranty must establish that [they] enjoyed privity of contract with the defendant-seller against whom the implied warranty claim is asserted.” Sims v. Atrium Medical Corp., No. 4:17-cv-00160, 2018 WL 4997049, at *7 (W.D. Ky. Oct. 15, 2018) (quoting Brown Sprinkler Corp. v. Plumbers Supply Co., 265 S.W.3d 237, 240 (Ky. App. 2007) (citing Compex Int’l Co., Ltd. v. Taylor, 209 S.W.3d 462, 465 (Ky. 2006))); Waterfill, 215 F. App’x at 405 (”[C]laims for breach of express or implied warranties may proceed only where there is privity between the parties.” (emphasis added)).
Even if this Court were to follow Naiser with respect to Simpson’s breach of express warranty claim, the holding in Naiser “had no impact on the privity of contract requirement with respect to implied warranty causes of action.” Bosch v. Bayer Healthcare Pharms., Inc., 13 F. Supp. 3d 730, 749 (W.D. Ky. 2014); cf. supra Part II.C.ii. As such, implied warranties in Kentucky do not extend beyond the buyer-seller relationship. Compex, 209 S.W.3d at 465; Bosch, 13 F. Supp. 3d at 748.
Compex is the last word from the Kentucky Supreme Court on the issue of privity in implied warranty claims. In Compex, the Kentucky Supreme Court was clear that privity is a strict requirement for implied warranty claims. There, the court considered an implied warranty claim against the manufacturer of a chair plaintiffs had purchased from a retailer, K-Mart. Id. at 463. The court rejected a myriad of policy arguments and underscored that the Kentucky “legislature expressly established the privity requirement.” Id. at 465 (citing Commonwealth ex rel. Cowan v. Wilkinson, 828 S.W.2d 610, 614 (Ky. 1992) (“It is beyond the power of a court to vitiate an act of the legislature on the grounds that public policy promulgated therein is contrary to what the court considers to be in the public interest.“)). In the end, the Kentucky Supreme Court reversed the court of appeals, and dismissed the implied warranty claim because the plaintiffs had not purchased the chair directly from Compex. Id. at 463, 465; see also Bridgefield Cas. Ins. Co. v. Yamaha Motor Mfg. Corp. of Am., 385 S.W.3d 430, 434 (Ky. Ct. App. 2012) (following the rule in Compex).
Here, as in Compex, there is no dispute that Simpson purchased Champion’s products at various retail stores, and thus no buyer-seller relationship exists. (Doc. 29, ¶ 6). The cases Simpson cites to support the proposition that privity is not required all involved Michigan law, and therefore are inapplicable. (Doc. 35 at 19). This is because Kentucky law is well-settled: An implied warranty claim cannot proceed where privity is absent.
Accordingly, the Court will dismiss Simpson’s claim under Count V.
F. Fraudulent Omission (Count VI)
In Count VI, Plaintiffs assert a fraudulent omission claim on the basis that Champion represented its products as containing ingredients that are “fresh or raw and preservative free” but knew and failed to disclose that the dog food is “contaminated with excessive quantities of arsenic, lead, cadmium, and mercury.” (Doc. 29, ¶¶ 89–91, 93).
“Fraud by omission is not the same, at law, as fraud by misrepresentation, and has substantially different elements” because fraud by omission “is grounded in a duty to disclose.” Giddings & Lewis, Inc. v. Indus. Risk Insurers, 348 S.W.3d 729, 747 (Ky. 2011) (citation and internal quotation marks omitted). A fraudulent omission claim, however, must still be pled in accordance with
The required elements to state a claim for fraudulent omission under Kentucky and Virginia law are almost identical.17 Under Kentucky law, a plaintiff must show: (1) “a duty to disclose the material fact at issue“; (2) failure to disclose; (3) reliance; and (4) damages. Morris Aviation, LLC v. Diamond Aircraft Indus., 536 F. App’x 558, 568 (6th Cir. 2013) (quoting Giddings, 348 S.W.3d at 747). Virginia law requires the same.18 Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 629 (4th Cir. 1999) (noting that under Virginia law, “silence does not constitute fraud in the
absence of a duty to disclose” and fraud by omission “always involves deliberate nondisclosure designed to prevent another from learning the truth“).
Whether there exists “a duty to disclose is a matter of law for the court.” Giddings, 348 S.W.3d at 747 (citing, inter alia, Restatement (Second) of Torts § 551 cmt. m (1977)). Plaintiffs’ claim is doomed because Champion was under no duty to disclose the presence of naturally occurring heavy metals in its products.
Kentucky recognizes a duty to disclose in only four circumstances: “1) fiduciary relationship; 2) statutory requirement; 3) ‘when a defendant has partially disclosed material facts to the plaintiff but created the impression of full disclosure‘; and 4) ‘where one party to a contract has superior knowledge and is relied upon to disclose same.‘” Morris, 536 F. App’x at 568 (quoting Giddings, 348 S.W.3d at 747–48). Virginia law imposes a duty to disclose in similar limited circumstances.19
Here, Plaintiffs allege Champion “had a fiduciary duty to disclose” because it was “in a superior position of knowledge of the true state of the facts” regarding its products. (Doc. 29, ¶ 92). The Court disagrees.
First, Plaintiffs are conflating two separate scenarios that give rise to a duty to disclose. Second, although Plaintiffs allege that a fiduciary duty exists, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal quotation marks omitted). Indeed, Plaintiffs’ legal conclusion is absurd. “[T]he duty arising from a confidential or fiduciary relationship or a duty provided by statute, are plainly inapplicable to the commercial sales transaction in this case.” Giddings, 348 S.W.3d at 747–48. And “courts have been careful not to apply the other three circumstances so broadly as to transform everyday, arms-length business transactions into fiduciary relationships.” Morris, 536 F. App’x at 568 (citations and internal quotation marks omitted) (observing inter alia, that under Kentucky law, the “superior knowledge” duty requires privity).20 Otherwise, every manufacturer
grocer would be in a fiduciary relationship with every consumer.
That leaves Plaintiffs’ argument that Champion’s package labeling “created the impression of full disclosure.” (Doc. 35 at 21–22). But the representations on Champion’s packaging are not the type of “partial disclosure” that gives rise to a duty to disclose every facet of the product’s makeup. The fact that heavy metals naturally exist in organic proteins and in high concentrations in fish, see FDA Diet Study, supra note 4, belies Plaintiffs’ logic that Champion had a duty to disclose this information.21
Champion did not claim that its products were free from any heavy metals and any inference to the contrary reads too much into Champion’s representations. Rather, Champion’s labeling conveys that its products are made from “biologically
appropriate,” “high quality ingredients fit for human consumption.” (Doc. 29, ¶¶ 16, 66, 74). But a “company is not required to volunteer [information] simply because it makes statements about the high quality of its products and terms of its warranties.” Morris, 536 F. App’x at 560, 569 (no duty to disclose the investigation of the company and its financial problems when sales agents boasted of the “quality and reliability” of its warranties in the course of plaintiff purchasing one of its airplanes, despite that two weeks later the company declared bankruptcy and voided the warranties). Under Plaintiffs’ theory, virtually any information not included on a package’s label would amount to a failure to disclose.
Moreover, it is axiomatic that “mere silence does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other.” Giddings, 348 S.W.3d at 749 (quoting Bryant v. Troutman, 287 S.W.2d 918, 920–21 (Ky. 1956)). Here, Champion publicly published—on the internet—the “White Paper” in May 2017, a year before
Thus, by ordinary diligence and attention, Plaintiffs should have known that anything containing fish might also contain high concentrations of heavy metals. “[I]t is the [Plaintiffs’] own folly if [they] neglected to do so,” and therefore they are “remediless.” Republic Bank & Trust Co. v. Bear Stearns & Co., 683 F.3d 239, 255 (6th Cir. 2012) (quoting Mayo Arcade Corp. v. Bonded Floors Co., 41 S.W.2d 1104, 1109 (Ky. 1931)); Harris v. Dunham, 127 S.E.2d 65, 73 (Va. 1962) (“The common law affords to everyone reasonable protection against fraud in dealing, but does not go to the romantic length of giving indemnity against the consequences of indolence and folly, or a careless indifference to the ordinary and accessible means of information.“).
For all these reasons, Plaintiffs’ fraudulent omission claim fails.
G. Unjust Enrichment (Count VII)
In Kentucky, to sustain a claim for unjust enrichment a plaintiff must establish three elements: “(1) [a] benefit conferred upon defendant at plaintiff’s expense; (2) a resulting appreciation of benefit by defendant; and (3) inequitable retention of that benefit without payment for its value.” Superior Steel, Inc. v. Ascent at Roebling’s Bridge, LLC, 540 S.W.3d 770, 778 (Ky. 2017) (quoting Furlong Dev. Co. v. Georgetown-Scott Cty. Planning & Zoning Comm’n, 504 S.W.3d 34, 39–40 (Ky. 2016)); see also Firestone v. Wiley, 485 F. Supp. 2d 694, 704 (E.D. Va. 2007) (same under Virginia Law). Plaintiffs’ claim fails on the first element.
“Kentucky courts have consistently found that the first element not only requires a benefit be conferred upon the defendant, but also that the plaintiff be the party conferring that benefit.” Pixler v. Huff, No. 3:11-CV-00207-JHM, 2011 WL 5597327, at *11 (W.D. Ky. Nov. 17, 2011) (collecting cases); 2815 Grand Realty Corp. v. Goose Creek Energy, Inc., No. 7:08-CV-186, 2010 WL 4313582, at *4 (E.D. Ky. Oct. 26, 2010) (requiring a direct conferral of a benefit). In other words, the plaintiff “must show that he conferred a benefit directly upon [defendants].” Lewis v. Jones, No. 6:17-CV-38, 2018 WL 5043773, at *5 (E.D. Ky. Oct. 17, 2018).
Virginia courts seem to follow the same rationale: An indirect benefit or a benefit to a third party is simply insufficient to sustain an unjust enrichment claim. See, e.g., Tao of Sys. Integration v. Analytical Servs. & Materials, Inc., 299 F. Supp. 2d 565, 576 (E.D. Va. 2004) (“To bring an action to recover monies received by the defendant from a third party, a plaintiff must demonstrate that he had a preexisting right to that fund.“).22
Accordingly, Plaintiffs’ unjust enrichment claim will be dismissed.
IV. CONCLUSION
The claims Simpson has asserted against Champion fail under Kentucky law. The only remaining claims in this case are those arising under Virginia law that pertain to Lolles and the proposed class of Virginia plaintiffs she intends to represent (Counts II, IV, and V). As a result, “the interests of justice” and the “convenience of the parties and witnesses” suggest that it would be appropriate to transfer this action pursuant to
Accordingly, the parties are hereby notified that the Court is considering a sua sponte transfer of the case based on the various factors to be weighed. Moore v. Rohm & Haas Co., 446 F.3d 643, 647 (6th Cir. 2006).
V. ORDER
Consistent with the accompanying Memorandum Opinion, it is hereby
ORDERED that:
- Defendants’ motion to dismiss the amended complaint (Doc. 32), is GRANTED IN PART and DENIED IN PART;
- All of Plaintiff Tracy Simpson’s claims (Counts I, III, V, VI, and VII), are DISMISSED WITH PREJUDICE;
- Plaintiff Danika Lolles’ claims under Counts VI and VII are DISMISSED WITH PREJUDICE; and
-
The parties shall file simultaneous briefs by Monday, July 8, 2019, addressing the appropriateness of transferring this action under 28 U.S.C. § 1404(a) .
This 21st day of June 2019.
William O. Bertelsman
United States District Judge
Notes
“Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by KRS 367.170, may bring an action . . . to recover actual damages. The court may, in its discretion, award actual damages and may provide such equitable relief as it deems necessary or proper. Nothing in this subsection shall be construed to limit a person‘s right to seek punitive damages where appropriate.
A seller‘s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty.
Consider the following two tables. The first table is the data from the FDA Diet Study and the second is the data from the White Paper. Both documents are cited in the Complaint and the figures below have been converted from mg/kg to ug/kg as stated in the Complaint, i.e., (mg/kg) x (1,000) = (ug/kg).
| Chicken | Eggs | Turkey | Salmon Fillet | Tuna (canned) | Total | |
|---|---|---|---|---|---|---|
| Arsenic | 3 | 0 | 6 | 293 | 999 | 1301 |
| Cadmium | 0.3 | 0 | 0.1 | 1 | 15 | 16.4 |
| Lead | 0 | 0.4 | 0 | 0 | 1 | 1.4 |
| Mercury | 0 | 0.1 | 0.1 | 21 | 136 | 157.2 |
| Champion’s Dog Food | |
|---|---|
| Arsenic | 890 |
| Cadmium | 90 |
| Lead | 230 |
| Mercury | 20 |