Richard Hall v. Diamond Foods, Inc., No. 3:2014cv02148 - Document 33 (N.D. Cal. 2014)
Court Description: ORDER DENYING DEFENDANT'S MOTION TO DISMISS; VACATING HEARING. Signed by Judge Maxine M. Chesney on October 21, 2014. (mmclc1, COURT STAFF) (Filed on 10/21/2014)
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Richard Hall v. Diamond Foods, Inc. Doc. 33 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 For the Northern District of California United States District Court 10 11 RICHARD HALL, No. C-14-2148 MMC Plaintiff, 12 ORDER DENYING DEFENDANT’S MOTION TO DISMISS; VACATING HEARING v. 13 DIAMOND FOODS, INC, 14 Defendant. 15 / 16 17 Before the Court is defendant Diamond Foods, Inc’s “Motion to Dismiss First 18 Amended Class Action Complaint,” filed September 2, 2014. Plaintiff Richard Hall has filed 19 opposition; defendant has not filed a reply. Having read and considered the papers filed in 20 support of and in opposition to the motion, the Court deems the matter suitable for decision 21 on the parties’ respective written submissions, VACATES the hearing scheduled for 22 October 24, 2014, and rules as follows. 23 In the First Amended Complaint (“FAC”), plaintiff alleges that the packaging of 24 certain of defendant’s products contain false and misleading statements. By the instant 25 motion, defendant argues the FAC is subject to dismissal to the extent the claims are 26 based on the packaging of its Reduced Fat Sea Salt Chips product. Specifically, 27 defendant argues, plaintiff has not sufficiently alleged standing, has not complied with Rule 28 9(b) of the Federal Rules of Civil Procedure, and has not alleged sufficient facts to satisfy Dockets.Justia.com 1 the reasonable consumer test applicable to plaintiff’s claims. The Court considers 2 defendant’s arguments, in turn. 3 A. Standing 4 Plaintiff alleges the packaging of Reduced Fat Sea Salt Chips “features the words 5 ‘40% reduced fat potato chips’ prominently in a green band across the front center of the 6 brown bag.” (See FAC ¶ 13). According to plaintiff, such representation is “false and 7 deceptive” because the product is “actually only reduced in fat by 33 percent” when 8 compared to “regular Kettle Brand chips” (see FAC ¶¶ 45, 46), and because defendant’s 9 use of “regular potato chips” as the “reference food” is not identified in “immediate 10 proximity” to the challenged statement (see FAC ¶ 39-41). Defendant argues plaintiff has 11 failed to allege sufficient facts to establish his standing to assert claims based on the 12 above-referenced allegations, under either Article III or under the three statutes on which 13 he relies, specifically, (1) the Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code 14 §§ 1750-1784, (2) § 17200 of the California Business & Professions Code, and (3) § 17500 15 of the Business & Professions Code. 16 To establish “Article III standing,” a plaintiff must have “suffered an injury in fact” that 17 is “fairly traceable to the challenged conduct” and is “likely to be redressed by a favorable 18 decision.” See Mazza v. American Honda Motor Co., 666 F.3d 581, 594 (9th Cir. 2012) 19 (internal quotation and citation omitted). To establish standing under the CLRA, a plaintiff 20 must have incurred “damage” as a result of the defendant’s challenged conduct, see 21 Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1107 (9th Cir. 2013) (quoting Cal. Civ. Code 22 § 1780(a)), and, to establish standing under § 17200 and § 17500, a plaintiff must have 23 “suffered injury in fact” and “lost money or property” as a result of the defendant’s 24 challenged conduct, see id. at 1103-04 (quoting Cal. Bus. & Prof. Code §§ 17204, 17535). 25 Where a plaintiff alleges a defendant has made misleading statements in connection with a 26 product, the plaintiff satisfies Article III by establishing that, acting in reliance on the 27 statements, he “bought [the product] when [he] otherwise would not have done so,” see 28 Mazza, 666 F.3d at 595, and, similarly, satisfies the statutory standing requirements of the 2 1 CLRA, § 17200, and § 17500 by establishing he “would not have made the purchase but 2 for the misrepresentation,” see Hinojos, 718 F.3d at 1107-08. 3 Here, plaintiff alleges sufficient facts to satisfy the above-referenced standards. In 4 particular, plaintiff alleges that “[b]efore purchasing” Reduced Fat Sea Salt Chips, he “relied 5 only upon the statement ‘40% reduced fat potato chips,’ which appeared in a large bright 6 green band across the middle of the principle display panel” (see FAC ¶ 50), that he 7 understood the statement to mean Reduced Fat Sea Salt Chips “were reduced in fat by the 8 stated percentage compared with [d]efendant’s regular Sea Salt Chips or other regular 9 kettle chips” (see FAC ¶ 51), and that he “would not have purchased [Reduced Fat Sea 10 Salt Chips] but for the identified representation[ ]” (see id.). Although, as defendant 11 observes, plaintiff does not specifically allege that he read the statement, the Court finds it 12 reasonable to infer from his express allegation of reliance thereon that he in fact first read 13 it. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001) (holding, when deciding motion 14 to dismiss, “all material allegations of the complaint are accepted as true, as well as all 15 reasonable inferences to be drawn from them”). 16 Accordingly, the claims based on Reduced Fat Sea Salt Chips are not subject to 17 dismissal for lack of standing. 18 B. Rule 9(b) 19 Pursuant to Rule 9(b), “[a]verments of fraud must be accompanied by the who, what, 20 when, where, and how of the misconduct charged.” See Vess v. Ciba-Geigy Corp. USA, 21 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation and citation omitted). Defendant 22 argues plaintiff has not sufficiently alleged facts to meet the “what” and “when” 23 requirements of Rule 9(b).1 24 Defendant argues plaintiff fails to sufficiently allege “what” was represented to him, 25 because, defendant asserts, defendant has used “different labels” for the product and 26 plaintiff has not pleaded “with specificity whether the label he read and purchased 27 1 28 Defendant contends, and plaintiff has not disputed, that all of his claims must be pleaded in conformity with Rule 9(b) of the Federal Rules of Civil Procedure. 3 1 contained some or all of the disputed statements.” (See Def.’s Mot. at 8:27-28). The Court 2 disagrees. As noted above, plaintiff has identified the precise statement on which he relied. 3 Additionally, plaintiff has attached to the FAC a photograph of the front portion of the 4 packaging, which portion contains the statement on which he alleges he relied. (See FAC 5 Addendum 3.) 6 Second, defendant argues, plaintiff fails to sufficiently allege “when” the subject 7 statement was made, as plaintiff does not allege the particular date on which he purchased 8 the product. With respect to claims challenging labels of products, however, numerous 9 district courts have found the “when” requirement satisfied where a plaintiff has identified 10 the time frame in which the product with the challenged label was available for sale. See, 11 e.g., Ang v. Bimbo Bakeries USA, Inc., 2013 WL 5407039, *2-3 (N.D. Cal. September 23, 12 2013) (holding plaintiffs satisfied Rule 9(b)’s “when” requirement by alleging challenged 13 labels were placed on products for sale “since March 18, 2008 and through the defined 14 Class Period”) (citing other cases finding similar allegations sufficient for purposes of Rule 15 9(b)); Von Koenig v. Snapple Beverage Corp., 713 F. Supp. 2d 1066, 1077 (E.D. Cal. 16 2010) (holding, for purposes of Rule 9(b), plaintiff sufficiently established “time” 17 requirement by alleging that “between March 4, 2005 and March 4, 2009, defendant used 18 terms such as ‘All Natural’ and other similar terms in labeling its drink products”); see also 19 Janney v. General Mills, 944 F. Supp. 2d 806, 817-18 (N.D. Cal. 2013) (holding plaintiffs 20 satisfied Rule 9(b) where, with respect to time, complaint alleged each plaintiff purchased 21 product with challenged label “during the class period”). The Court agrees with the 22 holdings in such cases with respect to pleading the time of the challenged statement. 23 Here, plaintiff alleges defendant made the challenged statement “[t]hroughout the class 24 period” (see FAC ¶ 2)2 and that he purchased the subject product “[d]uring the class 25 period” on a date prior to September 16, 2013 (see FAC ¶¶ 48, 52), which allegations the 26 27 28 2 Plaintiff alleges the “class period” began “four years prior to the filing of the Complaint,” and “continue[s] to the present.” (See FAC ¶ 53.) Given the initial complaint was filed on May 9, 2014, the class period began May 9, 2010. 4 1 2 Court finds sufficient. Accordingly, the claims based on Reduced Fat Sea Salt Chips are not subject to 3 dismissal for failure to comply with Rule 9(b). 4 C. Reasonable Consumer Test 5 A false advertising claim, whether brought under the CLRA, § 17200, or § 17500, is 6 “governed by the ‘reasonable consumer’ test.” See Williams v. Gerber Products Co., 552 7 F.3d 934, 938 (9th Cir. 2008). “Under the reasonable consumer standard, [the plaintiff] 8 must show that members of the public are likely to be deceived.” Id. (internal quotation and 9 citation omitted). Defendant argues plaintiff has failed to allege sufficient facts to support a 10 finding that members of the public are likely to be deceived by the challenged “40% 11 reduced fat potato chips” statement. 12 In that regard, defendant requests the Court take judicial notice of the entirety of the 13 packaging, which, defendant asserts, includes the following three statements that would 14 preclude members of the public from interpreting the challenged statement in the manner 15 alleged by plaintiff, and, instead, would cause members of the public to understand the 16 challenged statement to make a comparison between Reduced Fat Sea Salt Chips and 17 regular potato chips: (1) the phrase “40% less fat than regular potato chips,” located at 18 what appears to be the very bottom of the front of the packaging (see Def.’s Req. for 19 Judicial Notice, filed September 2, 2014, Ex. B); (2) the phrase “[t]hese Sea Salt Chips 20 have bold flavor, hearty crunch and 40% less fat than regular potato chips,” located on 21 what appears to be the back of the packaging next to the ingredient list (see id.); and 22 (3) the following language, which appears to be located on the back of the packaging 23 above the ingredient list: Kettle Brand® Reduced Fat Potato Chips 6 g. fat* Regular Potato Chips 10 g. fat* *per serving 24 25 26 27 28 (see id.). The Court finds defendant’s argument premature at the pleading stage. First, as plaintiff points out, defendant has not authenticated the copy of the packaging it has 5 1 offered, and, consequently, the Court declines to take judicial notice of the proffered copy. 2 See Woods v. Carey, — Fed. Appx. —, 2014 WL 2268046 (9th Cir. May 30, 2014) 3 (declining to take judicial notice of “unauthenticated” transcript of proceeding). Second, 4 even assuming defendant’s request for judicial notice were granted, the text on the 5 packaging is presented by defendant in a manner in which a consumer would not view it, 6 namely, as a flat one-sided sheet of paper, as opposed to the manner in which it ordinarily 7 would be viewed while on a store shelf containing potato chips. See Brown v. Hain 8 Celestial Group, Inc., 913 F. Supp. 2d 881, 893 (N.D. Cal. 2012) (declining to take judicial 9 notice of “proof”; agreeing with party opposing judicial notice that such exhibit, which 10 “portray[ed] the principal display panel, the information panel and the ingredients list side- 11 by-side,” constituted “a distortion of the way in which consumers actually see the [p]roducts’ 12 labeling”). Lastly, the text on which defendant relies is, in each instance, set forth in type 13 smaller than the challenged statement and not located near the center of the front of the 14 packaging, where the challenged statement is placed. See Williams, 552 F.3d at 939 15 (reversing dismissal of false advertising claim where district court had found “package as a 16 whole” was not deceptive; holding reasonable consumers should not be “expected to look 17 beyond misleading representations on the front of the [packaging] to discover the truth from 18 the ingredient list in small print on the side of the box”). 19 Defendant further argues that, even if a reasonable consumer would interpret the 20 challenged statement in the manner asserted by plaintiff, the statement as so understood is 21 not misleading. In support of said argument, defendant first points to plaintiff’s allegation 22 that Reduced Fat Sea Salt Chips have, in actuality, 33% less fat than defendant’s regular 23 version of Sea Salt Chips (see FAC ¶ 45), and then concludes a reasonable consumer 24 would not be “misled by a seven percent (at most) variation in reduced fat” (see Def.’s Mot. 25 at 13:15-19). In other words, according to defendant, a statement that a product has 40% 26 less fat than the reference food does not differ materiality from a statement that such 27 product has 33% less fat than the reference food. The Court declines to make, as a matter 28 of law, a finding to that effect. See Williams, 552 F.3d at 938 (holding “whether a business 6 1 practice is deceptive will usually be a question of fact not appropriate for decision on 2 demurrer”). 3 4 Accordingly, the claims based on Reduced Fat Sea Salt Chips are not subject to dismissal for failure to allege sufficient facts to satisfy the reasonable consumer test. CONCLUSION 5 6 For the reasons stated above, defendant’s motion to dismiss is hereby DENIED. 7 IT IS SO ORDERED. 8 9 Dated: October 21, 2014 MAXINE M. CHESNEY United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7
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