Cigarettes Cheaper! et al v. State Board of Equalization et al
Filing
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ORDER signed by Judge John A. Mendez on 6/27/11 GRANTING 10 Joinder filed by Costco Wholesale Corporation. Costco Wholesale Corporation terminated. (Matson, R)
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Daveed A. Schwartz (SBN 200046)
dschwartz@lockelord.com
LOCKE LORD BISSELL & LIDDELL LLP
500 Capitol Mall, Suite 1800
Sacramento, CA 95814
Telephone: 916-930-2621
Facsimile: 916-471-0428
Attorneys for Defendant
COSTCO WHOLESALE CORPORATION
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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CIGARETTES CHEAPER!, a California
corporation, and THE CUSTOMER COMPANY, a
California corporation,
Plaintiffs,
v.
CASE NO. 2:11-CV-00631-JAM-EFB
STATE BOARD OF EQUALIZATION, an agency
of the State of California, ALTRIA GROUP, INC., a
Virginia corporation, COSTCO INC., and COSTCO
WHOLESALE CORPORATION, a Washington
corporation,
Defendants.
Hearing Date: June 15, 2011
Time: 9:30 am
Courtroom: 6
ORDER GRANTING COSTCO
WHOLESALE CORPORATION’S
MOTION TO DISMISS
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Action Filed: January 18, 2011
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ORDER
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Defendant Costco Wholesale Corporation (“Costco”) joined Costco INC’s Motion to
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Dismiss. On June 15, 2011, Costoc’s Motion to Dismiss came on for hearing before the
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Honorable John A. Mendez. After reviewing all pleadings in support of and in opposition to the
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Motion, and after considering the oral arguments of counsel, the Court hereby GRANTS
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Costco’s Motion and DISMISSES this action against Costco WITH PREJUDICE.
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Plaintiffs’ attempt to maintain a sales tax refund suit against Costco fails as a matter of
law for the following independent reasons:
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I.
Plaintiffs Have Failed To Meet The Standing Requirements of Article III.
Standing is a threshold requirement to maintain a lawsuit in federal court. U.S. Const.
art. III, § 2; Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The “irreducible
-1(PROPOSED) ORDER GRANTING COSTCO WHOLESALE CORPORATION’S MOTION TO DISMISS
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constitutional minimum” for standing requires the plaintiff to allege an injury-in-fact that is: (1)
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“fairly traceable” to the defendant’s allegedly unlawful conduct; and (2) likely to be redressed by
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the requested relief. Lujan, 504 U.S. at 560-561, 590. Plaintiffs have failed to meet their burden
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of demonstrating Article III standing. The alleged wrongdoing, including making the tax rulings
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which Plaintiffs dispute, assessment of a purportedly unlawful sales tax, and collection of the
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disputed tax, was exclusively within the control of the State Board of Equalization (the “BOE”)
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and not Costco.
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At most, Plaintiffs allege that Costco cooperated with the state taxing authority in
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providing relevant sales information. See, e.g., Complaint, ¶ 10. However, Costco’s cooperation
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with the BOE is not only authorized, it is required under California law and therefore cannot
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serve as the basis of a claim against Costco. Cal. Rev. & T. Code § 7055. Plaintiffs’ allegations
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are, therefore, inadequate to establish Article III standing as a matter of law.1
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II.
Plaintiffs Have Failed To State A Claim Against Costco.
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Plaintiffs’ failure to allege a cognizable legal theory supported by well pled facts
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provides an independent basis to dismiss with prejudice. Relying only on legal conclusions and
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without the benefit of any legal authority, Plaintiffs attempt to allege two claims against Costco
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under California Business and Professions Code § 17200 et seq. (“Section 17200”). First,
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Plaintiffs’ attempt to convert this tax refund case into a Section 17200 claim is barred by Article
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XIII, § 32 of the California Constitution and fails as a matter of law. See, e.g., Woosley v. State
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of Cal., 3 Cal. 4th 758, 792 (1992). Plaintiffs cannot use Section 17200 to either expand the
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scope of allowable remedies in a tax refund case or to circumvent the constitutional and statutory
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restraints that California law places on tax refund suits. Instead, “the sole legal avenue for
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resolving tax disputes is a post-payment refund action” against the BOE. State Bd. of
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Equalization v. Superior Court, 39 Cal. 3d 633, 638 (1985).
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Second, Plaintiffs have failed to allege facts sufficient to pass Rule 12(b)(6) scrutiny
under the principles set forth in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) and Bell Atlantic Corp.
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Under the same analysis, Plaintiffs lack statutory standing under Section 17200. See, e.g., In re Tobacco II Cases,
46 Cal. 4th 298, 305-06 (2009) (plaintiff must suffer injury-in-fact and lose money or property “‘as a result of’”
unfair competition).
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v. Twombly, 550 U.S. 544 (2007). Plaintiffs’ Complaint makes conclusory allegations that
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Costco’s conduct is “unfair,” “deceptive” and that it constitutes “price-fixing,” but such labels
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need not be accepted as true on a motion to dismiss. See, e.g., Oestreicher v. Alienware Corp.,
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544 F. Supp. 2d 964, 968 (N.D. Cal. 2008), aff’d, 322 Fed. Appx. 489 (9th Cir. Apr. 2, 2009)
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(courts need not “accept as true allegations that are conclusory, legal conclusions, unwarranted
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deductions of fact or unreasonable inferences.”). Because Plaintiffs’ Complaint does not contain
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sufficient factual matter, accepted as true, which states a claim to relief that is plausible,
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dismissal is warranted. See Iqbal, 129 S. Ct. at 1949.
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III.
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Plaintiffs Fail to Allege Fraud With Rule 9(b) Particularity.
Where a Section 17200 plaintiff alleges fraud, a complaint must satisfy Federal Rule of
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Civil Procedure 9(b) by stating with particularity the circumstances constituting fraud by
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articulating “the who, what, when, where, and how of the misconduct alleged.” See Kearns v.
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Ford Motor Co., 567 F.3d 1120, 1126-27 (9th Cir. 2009). By alleging here that the defendants
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engaged in a “deceptive business practice” (Compl. ¶¶ 39-49), Plaintiffs seemingly allege a
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violation of the “fraudulent” prong of Section 17200. Accordingly, Plaintiffs’ allegations of
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fraudulent conduct must satisfy Rule 9(b) standards. A complaint satisfies Rule 9(b) if it alleges
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“‘with particularity’ the time and place of the fraud, the statements made and by whom made, an
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explanation of why or how such statements were false or misleading when made, and the role of
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each defendant in the alleged fraud.” See, e.g., Snyder v. Ford Motor Co., 2006 WL 2472187, at
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*2 (N.D. Cal. Aug. 24, 2006) (citations omitted). Thus, “[w]here the allegations in support of a
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claim fail to satisfy the heightened pleading requirements of Rule 9(b), the claim is subject to
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dismissal.” Id., at *2 (citing Vess v. Ciba-Geigy Corp USA, 317 F.3d 1097, 1107 (9th Cir. 2003)
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(holding, inter alia, that where a plaintiff cannot possibly cure Rule 9(b) deficiencies by alleging
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other facts, dismissal without leave to amend it is not an abuse of discretion).
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Plaintiffs fail to articulate their allegations of fraud against Costco with requisite Rule
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9(b) particularity, nor could they on amendment. In claiming that Costco in particular engaged
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in a deceptive business practice, Plaintiffs vaguely allege only that Costco “assisted” the BOE’s
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auditing of certain retailers by providing the BOE with unspecified “selective retail data.”
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Compl. ¶ 47. The Complaint thereby fails to satisfy Rule 9(b), without limitation, because it
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fails to identify such “selective retail data” with any particularity, fails to state when Costco
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supposedly provided the BOE with such “selective retail data,” and fails to allege with
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particularity how Costco’s having provided such “selective retail data” to the state’s taxing
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authority could possibly constitute “deceptive” or “fraudulent” conduct within the meaning of
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Section 17200. As such, Plaintiffs’ allegation that Costco engaged in a “deceptive business
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practice” is dismissed for failure to comply with Rule 9(b) pleading standards.
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IV.
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Plaintiffs Allege Only That Costco Engaged in Lawful Conduct.
The California Supreme Court has instructed that a defendant’s compliance with an
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express provision of law requiring or allowing certain activity precludes a claim for violation of
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Section 17200 based on the same activity. See, e.g., Cel-Tech Comm., Inc. v. Los Angeles
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Cellular Tel. Co., 20 Cal. 4th 163, 184 (1999); see also Lazar v. Hertz Corp., 69 Cal. App. 4th
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1494,1505-06 (1999) (“A business practice cannot be unfair if it is permitted by law. [Citation.]
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[Section 17200] does not apply if the Legislature has expressly declared the challenged business
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practice to be lawful in other statutes.”), Under Cel-Tech and similar authority, Costco’s alleged
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conduct in providing sales data to the BOE cannot possibly serve as the basis for a violation of
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Section 17200. Plaintiffs, therefore, have failed to state a claim upon which relief can be
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granted, and their Complaint against Costco is therefore dismissed on this basis as well.
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V.
Amendment Would Be Futile.
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Leave to amend is properly denied where amendment would be futile. Cal. Architectural
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Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1472 (9th Cir. 1987) (futility is a
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valid reason for denying leave to amend). Amendment would be futile here because: (1)
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Plaintiffs lack standing and the only remedy available to them is a tax refund suit against the
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BOE (see Lujan, 504 U.S. at 560-561, 590 (harm caused by Defendant required for Article III
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standing); United Food And Commercial Workers Unions, Employers Health and Welfare Fund
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v. Philip Morris, Inc., 223 F.3d 1271, 1275 (11th Cir. 2000) (leave to amend properly denied on
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futility grounds because proffered cause of action failed to state a claim under applicable state
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law)); (2) Plaintiffs’ Complaint relies only on threadbare allegations and legal conclusions (see
-4(PROPOSED) ORDER GRANTING COSTCO WHOLESALE CORPORATION’S MOTION TO DISMISS
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Ruiz v. Mort. Elec. Registration Sys., Inc., No. CIV. S-09-0780 FCD, 2009 WL 2390824, *10
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(E.D. Cal. Aug. 3, 2009)); and (3) Plaintiffs have failed to cite any legal authority to oppose
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Costco’s Motion meaningfully (see Allen v. Dollar Tree Stores, Inc., No. C 10-4492 WHA, 2011
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WL 198148, *1 (N.D. Cal. Jan. 20, 2011) (dismissing action without leave to amend where
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“plaintiff fail[ed] to cite a single legal authority in response to defendant’s motion to dismiss”
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and instead relied on implausible legal conclusions)).
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IV.
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Conclusion
For the foregoing reasons, the Court hereby GRANTS Costco’s Motion and
DISMISSES this action against Costco WITH PREJUDICE.
IT IS SO ORDERED.
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Dated: June 27, 2011
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/s/ John A. Mendez____________
The Honorable John A. Mendez
United States District Court Judge
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