VP Racing Fuels, Inc., v. General Petroleum Corporation,, No. 2:2009cv02067 - Document 13 (E.D. Cal. 2009)
Court Description: MEMORANDUM and ORDER granting in part and denying in part 7 Motion to Dismiss signed by Judge Morrison C. England, Jr on 11/25/09: Plaintiff may file a Second Amended Complaint, should it choose to do so, not later than twenty (20) days following the date this Memorandum and Order is electronically filed. (Kaminski, H)
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VP Racing Fuels, Inc., v. General Petroleum Corporation, Doc. 13 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 VP RACING FUELS, INC, a Texas corporation, No. 2:09-cv-02067-MCE-GGH 12 Plaintiff, 13 v. MEMORANDUM AND ORDER 14 15 GENERAL PETROLEUM CORPORATION, a California corporation, and DOES 1 through 100, inclusive, 16 Defendants. 17 18 ----oo0oo---- 19 Plaintiff VP Racing Fuels (“Plaintiff”) seeks injunctive and 20 monetary relief from Defendant General Petroleum Corporation 21 (“Defendant”) for False Advertising in violation of both the 22 Lanham Act, 15 U.S.C. § 1125(a) and California Business and 23 Professions Code §§ 17500 et seq., and for Unfair Competition in 24 violation of California Business and Professions Code §§ 17200 et 25 seq. 26 misrepresentations of the octane rating of racing fuel 27 distributed throughout California by Defendant. 28 /// Plaintiff’s claims against Defendant stem from alleged 1 Dockets.Justia.com 1 Presently before the Court is Defendant’s Motion to Dismiss 2 for failure to state a claim upon which relief can be granted, 3 pursuant to Fed. R. Civ. P. 12(b)(6), on the grounds that 4 Plaintiff’s Claims are preempted by the Petroleum Marketing 5 Practices Act, 15 U.S.C. §§ 2801-2841, or, in the alternative, 6 for failure to plead fraud with particularity under Fed. R. Civ. 7 P. 9(b). 8 Dismiss is granted in part and denied in part.1 For the reasons set forth below, Defendant’s Motion to BACKGROUND 9 10 Plaintiff, a Texas corporation authorized to do business in 11 California, sells racing fuels in California, including street 12 legal 100 Octane fuel. 13 its principal place of business in California, distributes racing 14 fuel in California under the Sunoco brand, including Sunoco’s 100 15 Octane product, known as 260 GT™. 16 Defendant “sold or caused to be sold 97 Octane fuel that has been 17 represented and marketed to consumers to be 100 Octane.” 18 ¶ 13.) Defendant, a California corporation with Plaintiff contends that (Compl. 19 Plaintiff alleges that in June 2009, it collected samples of 20 allegedly 100 Octane fuel from ten fueling stations in California 21 (“Subject Locations”). 22 distributor responsible for the 100 Octane fuel offered for sale 23 at the Subject Locations. 24 /// 25 /// Plaintiff alleges that Defendant is the 26 27 28 1 Because oral argument would not be of material assistance, the Court ordered this matter submitted on the briefs. E.D. Cal. Local Rule 78-230(h). 2 1 Plaintiff avers that laboratory testing and analysis showed that 2 “[n]one of the evidentiary samples tested from the Subject 3 Locations were validated as 100 Octane. 4 taken at the Subject Locations, despite being portrayed and sold 5 as ‘100 Octane’ tested at 97 Octane or below.” 6 The evidentiary samples (Compl. ¶ 12.) Plaintiff alleges that Defendant, willfully and 7 intentionally, misrepresented the nature, characteristics and 8 qualities of Defendant’s product in its labeling, marketing and 9 product displays. Plaintiff further claims that Defendant 10 “caused these literally false statements to enter interstate 11 commerce and such statements have actually and materially 12 deceived a substantial number of consumers, and have a continuing 13 tendency to further deceive consumers.” 14 Plaintiff also alleges that as a direct competitor of Defendant, 15 Plaintiff “has been harmed by consumer reliance upon such 16 misrepresentations, which has enabled Defendants to price their 17 100 Octane produce below the true market value of bona fide, 100 18 Octane fuel ... [and] has resulted in competitive harm and has 19 unfairly diverted sales to Defendants.” 20 (Compl. ¶ 18.) (Compl. ¶ 31.) Plaintiff filed the present action on July 27, 2009, 21 alleging federal and state law claims for false advertising and a 22 state law unfair competition claim. 23 dismiss all of Plaintiff’s claims for failure to state a claim, 24 on the grounds that such claims are preempted by federal law, or 25 in the alternative, for failure to plead fraud with 26 particularity. 27 /// 28 /// 3 Defendant now moves to STANDARD 1 2 On a motion to dismiss for failure to state a claim under 3 Rule 12(b)(6), all allegations of material fact must be accepted 4 as true and construed in the light most favorable to the 5 nonmoving party. 6 337-38 (9th Cir. 1996). 7 failure to state a claim “‘unless it appears beyond doubt that 8 plaintiff can prove no set of facts in support of her claim that 9 would entitle her to relief.’” Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, A complaint will not be dismissed for Yamaguchi v. Dep’t of the Air 10 Force, 109 F.3d 1475, 1480 (9th Cir. 1997) (quoting Lewis v. Tel. 11 Employees Credit Union, 87 F.3d 1537, 1545 (9th Cir. 1996). 12 Federal Rule of Civil Procedure 8(a)(2) requires only “a 13 short and plain statement of the claim showing that the pleader 14 is entitled to relief,” in order to “give the defendant fair 15 notice of what the . . . claim is and the grounds upon which it 16 rests.” 17 Ed. 2d 80 (1957). 18 liberality in pleading is fraud or mistake, which instead 19 requires a heightened standard. 20 party must state with particularity the circumstances 21 constituting fraud or mistake.” 22 added); Desaigoudar v. Meyercord, 223 F.3d 1020, 1022-23 (9th 23 Cir. 2000) (Fraud must be pled “with a high degree of 24 meticulousness.”). 25 /// 26 /// 27 /// 28 /// Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 2 L. One exception to this general policy of In alleging fraud or mistake, “a Fed. R. Civ. P. 9(b) (emphasis 4 1 If the court grants a motion to dismiss a complaint, it must 2 then decide whether to grant leave to amend. 3 “freely give” leave to amend when there is no “undue delay, bad 4 faith[,] dilatory motive on the part of the movant...undue 5 prejudice to the opposing party by virtue of...the amendment, 6 [or] futility of the amendment....” Fed. R. Civ. P. 15(a); Foman 7 v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is 8 only denied when it is clear that the deficiencies of the 9 complaint cannot be cured by amendment. 10 The court should DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). ANALYSIS 11 12 A. Preemption 13 Defendant contends that Title II of the Petroleum Marketing 14 Practices Act (“PMPA”), 15 U.S.C. §§ 2821-2824, preempts both the 15 state and federal law claims presented by Plaintiff. 16 further argues that in the absence of express preemption, 17 conflict and/or obstacle preemption bars those claims. 18 claims that because the PMPA does not contain a private right of 19 action but rather allegedly gives the Federal Trade Commission 20 exclusive authority to enforce its provisions, Plaintiff cannot 21 rely on the general statutes proscribing unfair business 22 practices to state a private claim not permitted by the PMPA. 23 Defendant Defendant The Court will first set forth the principles of preemption 24 before applying such principles to the facts of this case. 25 /// 26 /// 27 /// 28 /// 5 1. 1 2 General Preemption Principles Under the Supremacy Clause in the Constitution, state laws 3 that conflict with federal law are without effect. Altria Group, 4 Inc. v. Good, 129 S. Ct. 538, 543, 172 L. Ed. 2d 398 (2008) 5 (“Article VI, cl. 2, of the Constitution provides that the laws 6 of the United States ‘shall be the supreme Law of the Land; ... 7 any Thing in the Constitution of Laws of any state to the 8 Contrary notwithstanding.’”). 9 within the authority it possesses under the Constitution, is The Federal Government, acting 10 empowered to preempt state laws to the extent it is believed that 11 such an action is necessary to achieve its purposes. 12 York v. FCC, 486 U.S. 57, 63-64, 108 S. Ct. 1637, 100 L. Ed. 2d 13 48 (1988). 14 See New Congress may indicate preemptive intent through a statute’s 15 express language or through its structure and purpose. Altria, 16 129 S. Ct. at 543. 17 preemption clause does not immediately end the inquiry; “the 18 question of the substance and scope of Congress’ displacement of 19 state law remains.” 20 scope of the statute indicates that Congress intended federal law 21 to occupy the legislative field, or if there is an actual 22 conflict between state and federal law. 23 Irrespective of the variety of preemption at issue, the Court is 24 guided by the rule that “‘[t]he purpose of Congress is the 25 ultimate touchstone’ in every pre-emption case.” 26 /// 27 /// 28 /// However, the presence of an express Id. Preemption may also be inferred if the 6 Id. (citation omitted). 1 Id. (citations omitted); City of Auburn v. United States, 154 2 F.3d 1025, 1031 (9th Cir. 1998) (“[T]he pivotal question is not 3 the nature of the state regulation, but the language and 4 congressional intent of the specific federal statute.” (citations 5 omitted)). 6 Because the States are independent sovereigns in our federal 7 system, the federal courts have long presumed that Congress does 8 not cavalierly preempt state-law causes of action. 9 Agrosciences LLC, 544 U.S. 431, 449, 125 S. Ct. 1788, 161 L. Ed. 10 2d 687 (2005) (citations and quotations omitted); Altria, 129 S. 11 Ct. at 543 (“When addressing questions of express or implied pre- 12 emption, we begin our analysis ‘with the assumption that the 13 historic police powers of the States [are] not to be superseded 14 by the Federal Act unless that was the clear and manifest purpose 15 of Congress.’” (citation omitted)). 16 particular force when Congress has legislated in a field 17 traditionally occupied by the States. 18 Therefore, when the text of a preemption clause is susceptible to 19 more than one plausible reading, courts ordinarily “accept the 20 reading that disfavors pre-emption.” 21 Bates v. Dow This assumption applies with Altria, 129 S. Ct. at 543. Bates, 544 U.S. at 449. The Court begins by first noting that the States have 22 traditionally occupied the area of regulating petroleum products. 23 In California, the laws relating to petroleum products were first 24 enacted in 1931 and are found in the California Business and 25 Professions Code, Division 5, Chapters 14 and 15. 26 that further define and implement the laws are found in the 27 California Code of Regulations, Title 4, Division 9, Chapters 6, 28 7, and 8. 7 Regulations 1 Therefore, there is a strong presumption that state law claims 2 are not to be superseded unless that was the clear and manifest 3 purpose of Congress. 4 The Court will now examine the language and congressional 5 intent, including the legislative history, of the PMPA before 6 turning to whether the PMPA preempts Plaintiff’s claims. 2. 7 Petroleum Marketing Practices Act 8 In June 1978, Congress enacted the Petroleum Marketing 9 Practices Act (“PMPA”),2 title II of which regulates the testing 10 and disclosure of the octane rating of gasoline, as well as the 11 determination, certification, and display of octane ratings.3 12 Under the PMPA, every gasoline refiner who distributes fuel in 13 commerce must determine the octane rating of such gasoline, in 14 accordance with FTC guidelines, and certify this rating to any 15 entity to whom the gasoline is distributed. 16 (2008). 17 the octane rating to the next recipient, based either on its own 18 determination or on the certification it received from its 19 distributor. 20 /// 15 U.S.C. § 2822(a) Then, each entity in the distribution chain must certify 15 U.S.C. § 2822(b). 21 22 23 24 2 The PMPA was enacted on June 19, 1978. Only Title II of the PMPA is germane to this case; all references to the PMPA pertain only to Title II, unless otherwise noted, which is codified at 15 U.S.C. §§ 2821-2824. 3 25 26 27 28 The stated purpose of the PMPA is “to require the testing, certification and posting of the octane rating of gasoline sold at retail and the display on any new automobile of the proper octane rating for that automobile.” S. Rep. No. 95-731, at 1 (“[T]he Act ... [is] to encourage conservation of automotive gasoline and competition in the marketing of such gasoline by requiring that information regarding the octane rating of automotive gasoline be disclosed to consumers ....”). 8 1 And finally, each gasoline retailer must then display, in a clear 2 and conspicuous manner, at the point of sale to the ultimate 3 purchaser, the octane rating of the gasoline, based either on its 4 own determination or on that certified to it by the distributor. 5 15 U.S.C. § 2822(c). 6 7 As initially codified, Section 204 of the PMPA set forth a broad express preemption clause: 8 12 To the extent that any provision of this subchapter applies to any act or omission, no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to such act or omission, unless such provision of such law or regulation is the same as the applicable provision of this subchapter. 13 15 U.S.C. § 2824 (1988), amended by 15 U.S.C. § 2824 (1992) 14 (emphasis added). 15 omission to which the provisions of the title also apply was 16 preempted unless the provision of state law was “the same as” the 17 applicable provision of the title. 18 (1978), as reprinted in 1978 U.S.C.C.A.N. 873, 903. 19 Section 203 delegates to the Federal Trade Commission (“FTC”) the 20 procedural, investigative, and enforcement powers and does not 21 provide for a private right of action, unlike Title I of the 22 PMPA.4 23 state law and precluded enforcement action by the state. 24 /// 25 /// 9 10 11 Thus, state law dealing with any act or 15 U.S.C. § 2823. S. Rep. No. 95-731, at 45 Furthermore, Therefore, the PMPA preempted most 26 4 27 28 Title I of the PMPA provides: “If a franchisor fails to comply with the requirements of section 2802, 2803, or 2807 of this title, the franchisee may maintain a civil action against such franchisor.” 15 U.S.C. § 2805. 9 1 2 In 1992, Congress amended the PMPA. As amended, the current preemption clause reads: 3 (a) To the extent that any provision of this subchapter applies to any act or omission, no State or any political subdivision thereof may adopt or continue in effect, except as provided in subsection (b) of this section, any provision of law or regulation with respect to such act or omission, unless such provision of such law or regulation is the same as the applicable provision of this subchapter. (b) A State or political subdivision thereof may provide for any investigative or enforcement action, remedy, or penalty (including procedural actions necessary to carry out such investigative or enforcement actions, remedies or penalties) with respect to any provision of law or regulation permitted by subsection (a) of this section. 4 5 6 7 8 9 10 11 15 U.S.C. § 2824 (2008) (as amended by H.R. 776, 102d Cong. 12 (1992)) (emphasis added). 13 Congress’ intent in amending the PMPA was to provide “the 14 states more authority to enforce octane posting requirements.” 15 H.R. Rep. No. 102-474(I), at 151 (1992), as reprinted in 1992 16 U.S.C.C.A.N. 1954, 1974. 17 year investigation by the General Accounting Office (GAO) 18 estimated that “nine percent of a nationwide sample of gasoline 19 sold in 1988 was mislabeled by at least half an octane point, the 20 amount considered a significant violation.” 21 Congress found that although vested with the authority, the 22 Federal government had failed to test or enforce gasoline octane 23 compliance since 1981. 24 attempts to prosecute octane labeling violations are hampered 25 because the Petroleum Marketing Practices Act (PMPA) preempts 26 many effective state enforcement procedures.” 27 /// 28 /// H.R. 776 was introduced after a two- Id. Id. Further, Congress recognized that “states’ 10 Id. 1 Ultimately, H.R. 776 “allow[ed] states broader authority to 2 enforce octane mislabeling and posting on their own ....” Id. 3 (“In short, this legislation ... recognizes that motorists have a 4 right to know that they are getting what they pay for, and that 5 dealers have a right to know that their competitors are not 6 cheating. 7 legislation gets them out of the way and allows the states to do 8 the job.”). 9 certain existing restrictions in the PMPA on state enforcement The Federal government has not enforced the law; the Congress further explained, “[u]nder this section, 10 would be repealed. 11 enforce octane mislabeling and posting. 12 any investigative or enforcement act necessary to enforce octane 13 posting requirements under [the PMPA].” 14 States would be allowed broader authority to States could provide for Id. at 220. Therefore, currently under the PMPA, for any act or omission 15 covered by the PMPA, so long as the state law is not different 16 from or in addition to the requirements under the PMPA, the state 17 law can be used to enforce the PMPA and is not preempted by such. 18 19 The Court now turns to Plaintiff’s state law claims to assess whether or not they are “the same as” PMPA’s requirements. 3. 20 21 Unfair Competition Claim Plaintiff’s Second Claim is for violation of California’s 22 Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 23 et seq. 24 fraudulent business act or practice and unfair, deceptive, untrue 25 or misleading advertising and any act prohibited by [Cal. Bus. & 26 Prof. Code §§ 17500 et seq.].” 27 /// 28 /// This statutory scheme prohibits any “unlawful, unfair or Cal. Bus. & Prof. Code § 17200. 11 1 “By proscribing ‘any unlawful’ business practices, section 17200 2 ‘borrows’ violations of other laws and treats them as unlawful 3 practices that the unfair competition law makes independently 4 actionable.” 5 Cellular Telephone Co., 20 Cal.4th 163, 180 (1999) (internal 6 quotations and citations omitted). 7 UCL, thus, effectively turns a violation of the underlying law 8 into a per se violation of the UCL. 9 Cal.4th 939, 950 (2002); Cel-Tech Communications, 20 Cal.4th at 10 11 Cel-Tech Communications, Inc. v. Los Angeles The “unlawful” prong of the See Kasky v. Nike, Inc., 27 180. Plaintiff alleges that Defendant is “competing unfairly by 12 knowingly selling fuel that is misrepresented to consumers as 100 13 Octane when it is not.” 14 Plaintiff’s claim must fail because the PMPA does not provide for 15 a private right of action for its violation but rather gives the 16 FTC the enforcement authority, and thus the courts have no 17 authority to enforce any violations of the PMPA. 18 further argues that “any state law version of the PMPA can only 19 be enforced by the state or by state agencies.” 20 (Compl. ¶ 23.) Defendant argues that Defendant (Def.’s Mtn 6.) First, Plaintiff is not attempting to bring an action under 21 the PMPA; therefore, the fact that the PMPA does not provide a 22 private right of action is not determinative. Furthermore, 23 Defendant’s interpretation of the preemption clause is too narrow 24 and would have this Court ignore the 1992 amendment to the PMPA’s 25 express preemption clause. 26 “[a] State or political subdivision thereof may provide for any 27 investigative or enforcement action, remedy, or penalty ... 28 permitted ....” The statute currently provides that 15 U.S.C. § 2824(b) (emphasis added). 12 1 The legislative history set forth above makes it clear that 2 Congress amended Title II of the PMPA to allow States the 3 authority to enforce octane disclosure requirements. 4 Here, the State of California has provided that any unlawful 5 business practices, including violations of laws for which there 6 is no direct private right of action, may be redressed by private 7 action under the UCL; it is not necessary that the predicate law 8 provide for private civil enforcement. 9 Inv. v. High-Line Medical Instruments, Co., 933 F.Supp. 918 (C.D. See Summit Technology, 10 Cal. 1996) Furthermore, Defendant has not indicated any 11 authority for the proposition that the courts are not a political 12 subdivision of the State. 13 Defendant further argues that the state law UCL cause of 14 action is not “the same as” the applicable provision of the PMPA, 15 and thus are expressly preempted by such. 16 Co., 248 A.D.2d 246, 671 N.Y.S.2d 218 (N.Y. App. Div. 1998) the 17 Supreme Court, Appellate Division of New York held that 18 plaintiffs’ claims were “preempted by the Petroleum Marketing 19 Practices Act, Octane Disclosure in that the preemption clause 20 bans any State ‘provision of any law or regulation’ that is not 21 the same as the Federal provisions.” 22 omitted). 23 express preemption, we would find implied preemption, in that 24 State standards setting stricter requirements for the posting of 25 information regarding octane level ‘would unavoidably result in 26 serious interference with the “accomplishment and execution of 27 the full purposes and objectives of Congress.”’” Id. (citation 28 omitted). In Jurman v. Sun Id. (internal citations The Court further explained: “Were we not to find 13 1 Here, we are not dealing with an attempt to set stricter 2 standards. Instead, the pertinent issue in this case is whether 3 to allow the State to enforce the Federal standard. 4 UCL “adopts” the underlying law for purposes of the action, then 5 the predicate law here, PMPA, would be “the same as” the PMPA.5 6 Plaintiff alleges that Defendant is “competing unfairly by 7 knowingly selling fuel that is misrepresented to consumers as 100 8 Octane when it is not.” 9 claim then that Defendant knowingly mis-certified the octane (Compl. ¶ 23.) Because the Plaintiff appears to 10 rating of the gasoline it distributed to Sunoco retailers. 11 presumably could have occurred for any number of reasons, 12 including an intentional violation of the PMPA, or simply because 13 the octane rating certified to Defendant by its refiner was 14 inaccurate. 15 This Defendant also argues that, in the absence of express 16 preemption, Plaintiff’s UCL claim should be impliedly preempted. 17 However, there is no conflict in complying with both the PMPA and 18 the UCL; compliance with the PMPA would mean that there is no 19 violation of underlying law. 20 Congress did not intend to regulate the entire field as it 21 amended Section 204 of the PMPA to allow states to provide for 22 any enforcement action for violations. 23 /// Furthermore, it is evident that 24 25 26 27 28 5 Furthermore, violations of the legislative requirements were enforceable by the FTC as unfair or deceptive trade practices under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 2823(e). Section 5 states: “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” 15 U.S.C. § 45. 14 1 Accordingly, the Court finds that Plaintiff’s Second Claim 2 for Unfair Competition, pursuant to Cal. Bus. & Prof. Code § 3 17200, is not preempted by Title II of the PMPA. 4. 4 5 False Advertising Claim Plaintiff’s Third Claim is for False Advertising under 6 California Business and Professions Code §§ 17500 et seq. 7 (“FAL”). 8 It is unlawful for any ... corporation ... to make or disseminate or cause to be made or disseminated before the public in this state, ... in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, including over the Internet, any statement, ... which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading .... 9 10 11 12 13 Section 17500 provides: Cal. Bus. & Prof. Code § 17500 (emphasis added). 14 Defendant again argues that the provisions of section 17500 15 are not “the same as” the PMPA and thus Plaintiff’s claim must 16 fail. 17 octane level that Plaintiff complains about. 18 act of intentionally misrepresenting the octane level that 19 Plaintiff takes issue. 20 “making or condoning the posting of signage, placards, displays, 21 and other public outcries or proclamations that misrepresented 22 the true octane level of the products they sold and/or caused to 23 be sold to the public.” 24 advertisement is unlawful only if the advertiser knows, or in the 25 exercise of reasonable care should know, of its false or 26 misleading character. 27 /// 28 /// However, it is not the act of certifying or displaying the Rather, it is the Plaintiff alleges that Defendant is (Compl. ¶ 28.) 15 A false or misleading 1 Defendant argues that under the PMPA, a distributor, such as 2 Defendant, need not know the actual octane of the fuel it 3 distributes and may, instead, rely on the refiner’s stated octane 4 level. 5 not have knowledge of the actual octane rating. 6 complained of is the misleading/false advertising, not the 7 certification or display of the octane rating. 8 regulate the act of advertising petroleum products. 9 the PMPA does not expressly preempt Plaintiff’s false advertising Here, however, Plaintiff is alleging that Defendant did Here, the “act” The PMPA does not Therefore, 10 claim because the express preemption clause only pertains “[t]o 11 the extent that any provision of this subchapter applies to any 12 act or omission.” 13 15 U.S.C. § 2824. Furthermore, Plaintiff’s state law false advertising claim 14 is not impliedly preempted, either through conflict or 15 obstruction. 16 not, however, intended to authorize intentionally deceptive or 17 misleading identification of automotive gasoline. 18 the case if the trademark to be utilized were ‘100 Octane’ and 19 this trademark were to be utilized to identify automotive 20 gasoline with an octane rating of less than 100 under the 21 statutory definition.” 22 Congress did not intend for the PMPA to regulate the entire field 23 of petroleum marketing. As Congress noted, “This rule of construction is S. Rep. No. 95-731, at 30. Such would be Therefore, 24 The Court in Alvarez v. Chevron Corp., No. CV 09-3343-GHK 25 (CWX), 2009 U.S. Dist. LEXIS 94377 (C.D. Cal. Sept. 30, 2009), 26 recently held that the PMPA did preempt the plaintiffs’ 27 California false advertising claim. 28 /// 16 1 The Court also dismissed the plaintiffs’ California unfair 2 competition claim, but not on the grounds of preemption. 3 However, Plaintiff’s claim here is factually distinguishable from 4 that in Alvarez. 5 misled consumers by making untrue statements and failing to 6 disclose .... [that] the initial 0.2 -0.3 gallons of such motor 7 fuel sold had a lower octane rating due to the residual fuel 8 remaining in the fuel dispensing system from a prior customer who 9 had purchased a lower grade of motor fuel.” In Alvarez, the plaintiff claimed “[d]efendants Alvarez, 2009 U.S. 10 Dist. LEXIS 94377 at *13. 11 plaintiff’s false advertising claim was preempted because “we 12 cannot require Defendants to disclose more information than is 13 expressly required by these provisions.” 14 however, Plaintiff is not requesting that Defendant disclose more 15 information than required, only that Defendant’s disclosure be 16 accurate and truthful. 17 The Alvarez court found that Id. at *15. Here, Accordingly, Plaintiff’s Third Claim for False Advertising, 18 pursuant to Cal. Bus. & Prof. Code § 17500, is not preempted by 19 Title II of the PMPA. 20 21 The Court will now turn to Plaintiff’s federal Lanham Act Claim to determine whether the PMPA preempts that claim. 5. 22 23 Lanham Act Claim Plaintiff’s First Claim is for false advertising in 24 violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 25 1125(a)(1)(B). 26 /// 27 /// 28 /// 17 1 Section 43(a) prohibits the use of false designations of origin, 2 false descriptions, and false representations in the advertising 3 and sale of goods and services.6 4 F.2d 1093, 1106. 5 Waits v. Frito-Lay, Inc., 978 When two federal statutes conflict, federal statutory 6 construction requires that specific statutory frameworks take 7 precedence over more general prohibitions. 8 222 F.3d 1184, 1192 (9th Cir. 2000) (“Where both a specific and a 9 general statute address the same subject matter, the specific one 10 takes precedence regardless of the sequence of the enactment, and 11 must be applied first.”). 12 whenever possible, a court should interpret two seemingly 13 inconsistent statutes to avoid a potential conflict. 14 ex rel. Sacramento Metropolitan Air Quality Management Dist. v. 15 United States, 215 F.3d 1005, 1012 (9th Cir. 2000) (“The courts 16 are not at liberty to pick and choose among congressional 17 enactments, and when two statutes are capable of co-existence, it 18 is the duty of the courts, absent a clearly expressed 19 congressional intention to the contrary, to regard each as 20 effective.” (citation omitted)). 21 /// Accord In re Padilla, It is also well established that, California 22 23 24 25 26 27 28 6 15 U.S.C. § 1125(a): Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act. 18 1 For the following reasons, the Court finds that the Lanham Act 2 Section 43(a) and title II of the PMPA are not capable of co- 3 existence and thus the more specific provisions of the PMPA must 4 prevail. 5 In order to state a claim for false advertising under the 6 Lanham Act, 15 U.S.C. § 1125(a), a plaintiff must plead: (1) in 7 commercial advertisements, defendant made false statements of 8 fact about its own or another’s product; (2) those advertisements 9 actually deceived or have the tendency to deceive a substantial 10 segment of their audience; (3) such deception is material, in 11 that it is likely to influence the purchasing decision; (4) the 12 defendant caused its misrepresentation to enter interstate 13 commerce; and (5) plaintiff has been or is likely to be injured 14 as a result of the foregoing either by direct diversion of sales 15 from itself to defendant, or by lessening of the goodwill which 16 its products enjoy with the buying public. 17 Broadcasting Co., 330 F.3d 1170 (9th Cir. 2003). 18 falsity within the meaning of the Lanham Act, a plaintiff must 19 show that the statement was literally false, either on its face 20 or by necessary implication, or that the statement was literally 21 true but likely to mislead or confuse consumers. 22 Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). 23 Rice v. Fox To demonstrate Southland Sod The specific provisions of the PMPA allow the distributor to 24 rely on the certification it received from the supplier. 15 25 U.S.C. § 2822. 26 /// 27 /// 28 /// 19 1 Because knowledge of falsity is not a prerequisite to a finding 2 of a violation under Section 43(a) of the Lanham Act, a defendant 3 could be in complete compliance with the PMPA, by relying on its 4 refiner’s certification of the octane rating, and still be in 5 violation of Section 43(a). 6 inaccurate certification would necessarily be in violation of 7 Section 43(a) for any advertisements it makes in accordance with 8 such certification because the statements would be literally 9 false. A defendant who has relied on an In other words, a defendant could unknowingly make false 10 advertisements in accordance with the PMPA certification chain 11 and unwittingly violate Section 43(a). 12 be held liable for “performing a duty which the law at that time 13 required him to perform.” 14 280, 300 (9th Cir. 1959) (reversed on unrelated grounds). 15 Allowing a Section 43(a) claim would nullify the safe harbor 16 provision of the PMPA. 17 Metropolitan Air Quality Management Dist., 215 F.3d at 1013 (“It 18 is fundamental that a general statutory provision may not be used 19 to nullify or to trump a specific provision, irrespective of the 20 priority of enactment.”). However, a person cannot Accord Hoffman v. Halden, 268 F.2d See California ex rel. Sacramento 21 Accordingly, Plaintiff’s Section 43(a) Lanham Act Claim is 22 preempted by the PMPA and as such is dismissed with prejudice.7 23 /// 24 /// 25 7 26 27 28 The Court notes that Plaintiff’s Complaint asserts federal jurisdiction based on federal question, 28 U.S.C. § 1331, and diversity jurisdiction, 28 U.S.C. § 1332(a)(1). Therefore, while there is no longer a federal question, the Court retains jurisdiction over this matter pursuant to diversity jurisdiction. 20 1 The Court now turns to Defendant’s argument that even if 2 Plaintiff’s state law claims are not preempted by the PMPA, such 3 claims should nevertheless be dismissed for failure to allege the 4 deceptive practices at issue with sufficient particularity. B. 5 6 Pleading Fraud with Particularity Defendant argues that all of Plaintiff’s claims essentially 7 sound in fraud and thus must be plead with particularity under 8 Federal Rule of Civil Procedure 9(b) to survive a motion to 9 dismiss. Defendant’s main contention is that Plaintiff’s 10 allegations do not identify any misrepresentation made by 11 Defendant, much less any basis for inferring that Defendant 12 knowingly made such misrepresentations. 13 that the time, place, content and parties to any supposed 14 misrepresentation are not alleged by Plaintiff. 15 asserts that its claims are not based in fraud, but even if they 16 are, sufficient facts have been alleged to survive the heightened 17 pleading standard. 18 Defendant further argues Plaintiff The California Supreme Court has held “[t]he requirement 19 that fraud be pleaded with specificity ... does not apply to 20 causes of action under the consumer protection statutes,” 21 specifically referring to Sections 17200 and 17500. 22 Children’s Television, Inc. v. General Foods Corp., 35 Cal.3d 23 197, 212 n.11, superseded on other grounds by statute in Gartin 24 v. S&M NuTec LLC, 245 F.R.D. 429 (C.D. Cal. 2007). However, the 25 Ninth Circuit recently addressed the subject: 26 /// 27 /// 28 /// 21 Committee on 1 Kearns’s first argument – that Rule 9(b) does not apply to California’s consumer protection statutes because California courts have not applied rule 9(b) to the Consumer Protection Statutes, which include the CLRA and UCL – is unavailing. It is well-settled that the Federal Rules of Civil Procedure apply in federal court, “irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.” Vess [v. Ciba-Geigy Corp. USA], 317 F.3d [1097,] at 1103 .... The UCL prohibits “unlawful, unfair or fraudulent business act[s] or practice[s]” and “unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. Rule 9(b)’s particularity requirement applies to these state-law causes of action. Vess, 317 F.3d at 1102-05.... 2 3 4 5 6 7 8 9 14 While fraud is not a necessary element of a claim under ... UCL, a plaintiff may nonetheless allege that the defendant engaged in fraudulent conduct. Id. at 1103. A plaintiff may allege a unified course of fraudulent conduct and rely entirely on that course of conduct as the basis of that claim. In that event, the claim is said to be ‘grounded in fraud’ or to ‘sound in fraud,’ and the pleading ... as a whole must satisfy the particularity requirement of Rule 9(b). Id. at 1103-04. 15 Kearns v. Ford Motor Corp., 567 F.3d 1120, 1125 (9th Cir. 2009). 10 11 12 13 16 Reviewing the Complaint, Plaintiff alleges that Defendant 17 engaged in a fraudulent course of conduct (i.e., knowingly 18 misrepresenting the Octane level of the gasoline that it 19 distributed) and such conduct resulted in violations of the UCL 20 and FAL. 21 CLAIMS,” Plaintiff alleges that Defendant “has thus defrauded an 22 unknown number of consumers whom have paid for what they believed 23 to be 100 Octane racing fuel, when in fact what they received was 24 97 Octane or less.” 25 Plaintiff further alleges under the same heading that Defendant 26 “has defrauded consumers in the manner alleged ....” 27 14 (emphasis added).) 28 /// Under the heading “FACTUAL ALLEGATIONS COMMON TO ALL (Compl. ¶ 13 (emphasis added).) 22 (Compl. ¶ 1 These allegations are specifically incorporated by reference in 2 Plaintiff’s state law claims under the UCL and FAL. 3 22, 26.) 4 Second Claim (UCL) that “[D]efendants are competing unfairly by 5 knowingly selling fuel that is misrepresented to consumers as 100 6 Octane when it is not.” 7 Likewise, Plaintiff’s Third Claim (FAL) alleges that Defendant 8 “knew, or by the exercise of reasonable care should have known, 9 that the statements were untrue or misleading.” (Compl. ¶¶ Furthermore, Plaintiff specifically alleges under its (Compl. ¶ 23 (emphasis added.) (Compl. ¶ 28.) 10 Therefore, the Court finds that Plaintiff’s state law claims are 11 “grounded in fraud” and thus must be pleaded with particularity. 12 The Court now turns to Plaintiff’s state law claims to 13 determine whether Plaintiff has satisfied this heightened 14 pleading standard. 1. 15 16 Unfair Competition Claim California’s Business and Professions Code § 17200 (“UCL”) 17 defines unfair competition as “unlawful, unfair or fraudulent 18 business act or practice and unfair, deceptive, untrue or 19 misleading advertising and any act prohibited by [Cal. Bus. & 20 Prof. Code §§ 17500 et seq.].” 21 cause of action for unfair competition under the UCL, a plaintiff 22 must allege either: (1) an unlawful act; (2) an unfair act; (3) a 23 fraudulent act; or (4) false advertising. Therefore, in order to state a 24 Plaintiff alleges that Defendant’s practices constitute 25 unfair competition because “(1) they are unlawful, unfair or 26 fraudulent, and (2) they involve unfair, deceptive, untrue or 27 misleading advertising ....” 28 /// (Compl. ¶ 24.) 23 1 Thus, it appears that Plaintiff is attempting to state a cause of 2 action under each prong. 3 of these in turn, except false advertising, which the Court will 4 discuss separately in Section 2 below. a. 5 6 Therefore, the Court will examine each Unlawful Act “Unlawful” practices are practices “forbidden by law, be it 7 civil or criminal, federal, state, or municipal, statutory, 8 regulation, or court-made.” 9 App. 4th 832, 838-39 (1994) (citing People v. McKale, 25 Cal.3d Saunders v. Superior Court, 27 Cal. 10 626, 632 (1979)). 11 “unlawful” business act or practice under the UCL, a plaintiff 12 must allege facts sufficient to show a violation of some 13 underlying law. 14 To state a cause of action based on an McKale, 25 Cal.3d at 635. As noted above, Plaintiff’s Lanham Act claim is preempted 15 and thus the Lanham Act cannot be the predicate law for 16 Plaintiff’s UCL claim. 17 Plaintiff’s state law false advertising claim fails as well. 18 Plaintiff has not identified any other predicate law in its 19 complaint whereby Defendant’s actions may be found “unlawful,” 20 Plaintiff has failed to state a cause of action under the 21 “unlawful” prong of the UCL. b. 22 23 Furthermore, as explained below, Unfair Act As A business act or practice is “unfair” when the conduct 24 “threatens an incipient violation of an antitrust law, or 25 violates the policy or spirit of one of those laws because its 26 effects are comparable to a violation of the law, or that 27 otherwise significantly threatens or harms competition.” 28 /// 24 1 Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co., 20 2 Cal.4th 163, 187 (1999). 3 on an “unfair” business act or practice, a plaintiff must allege 4 facts showing the “unfair” nature of the conduct and that the 5 harm caused by the conduct outweighs any benefits that the 6 conduct may have. 7 App. 3d 735, 740 (1980) (“[S]ince the complaint is unlikely to 8 reveal defendant’s justification, if th[e] pleading states a 9 prima facie case of harm, ... the defendant should be made to 10 To sufficiently plead an action based Motors, Inc. v. Times Mirror Co., 102 Cal. present its side of the story.”). 11 Plaintiff alleges that Defendant’s conduct “has enabled 12 Defendants to price their 100 Octane product below the true 13 market value of bona fide, 100 Octane fuel.” 14 Plaintiff further alleges that such practice “has resulted in 15 competitive harm and has unfairly diverted sales to Defendant[].” 16 (Id.) 17 sufficiently alleged harm such that Defendant should be made to 18 answer. 19 under the “unfair” prong of the UCL. Therefore, the Court concludes that Plaintiff has As such, Plaintiff properly states a cause of action c. 20 21 (Compl. ¶ 31.) Fraudulent Act A “fraudulent” business act or practice is one in which 22 members of the public are likely to be deceived. 23 Inc., 158 Cal. App. 4th 847, 849 (2008); Olsen v. Breeze, Inc., 24 48 Cal. App. 4th 608, 618 (“‘Fraudulent,’ as used in the statute, 25 does not refer to the common law tort of fraud but only requires 26 a showing members of the public ‘are likely to be deceived.’” 27 (citation omitted)). 28 /// 25 Hall v. Time, 1 Thus, in order to state a cause of action based on a “fraudulent” 2 business act or practice, the plaintiff must allege that 3 consumers are likely to be deceived by the defendant’s conduct. 4 Committee on Children’s Television, Inc. v. General Foods Corp., 5 35 Cal.3d 197, 212 (1983). 6 Plaintiff alleges that Defendant is the distributor of 100 7 Octane fuel at Sunoco retail locations throughout California. 8 (Compl. ¶ 9.) 9 Plaintiff procured numerous samples of gasoline from 10 of these Plaintiff specifically alleges that in June 2009, 10 retail locations allegedly supplied by Defendant. 11 Furthermore, Plaintiff has expressly identified these 10 retail 12 locations, including the store names and locations. 13 Plaintiff further alleges that samples of gasoline portrayed and 14 sold as “100 Octane” taken from the Subject Locations tested as 15 97 Octane or below. 16 thus defrauded an unknown number of consumers whom have paid for 17 what they believed to be 100 Octane racing fuel, when in fact 18 what they received was 97 Octane or less.” 19 By reasonable inference, Plaintiff has alleged that Defendant’s 20 certification of the fuel rating as 100 Octane at the Subject 21 Locations likely misled consumers into believing that such fuel 22 was in fact 100 Octane, when in actuality, it was not. 23 finds that Plaintiff’s allegations are sufficiently particular to 24 give the Defendant fair notice of what the claim is and the 25 grounds upon which it rests. 26 (Compl. ¶ 12.) (Compl. ¶ 9.) (Id.) Plaintiff asserts “GP has (Compl. ¶ 13.) The Court As such, Plaintiff sufficiently states a cause of action 27 under the “fraudulent” prong of the UCL. 28 /// 26 1 Accordingly, Plaintiff has stated a cause of action under 2 the “unfair” and “fraudulent” prongs of the UCL, but not under 3 the “unlawful” prong. 4 dismissed with leave to amend to the extent that such claim is 5 based on the “unlawful” prong of the UCL. 6 7 Therefore, Plaintiff’s Second Claim is The Court now turns to Plaintiff’s claims of false advertising under the UCL and California’s False Advertising Law. 2. 8 9 False Advertising Claim California’s False Advertising Law (FAL) prohibits the 10 dissemination in any advertising media of any “statement” 11 concerning real or personal property offered for sale, “which is 12 untrue or misleading, and which is known, or which by the 13 exercise of reasonable care should be known, to be untrue or 14 misleading.” Cal. Bus. & Prof. Code § 17500. 15 “[T]o state a claim under either the UCL or the false 16 advertising law, based on false advertising or promotional 17 practices, ‘it is necessary only to show that “members of the 18 public are likely to be deceived.”’” In re Tobacco II Cases, 46 19 Cal.4th 298, 312 (2009) (quoting Kasky v. Nike, Inc., 27 Cal.4th 20 939, 951 (2002)).8 21 statements in the advertising are untrue or misleading, and (2) 22 defendant knew, or by the exercise of reasonable care should have 23 known, that the statements were untrue or misleading. 24 Lynam, 253 Cal. App. 2d 959, 965 (1967). 25 /// Accordingly, a plaintiff must allege: (1) People v. 26 8 27 28 A violation of the UCL’s fraud prong is also a violation of false advertising law (§ 17500 et seq.). Committee on Children’s Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 210 (1983). 27 1 The underlying element of a false advertising claim is some 2 type of advertising statement. See Tayag, 2009 U.S. Dist. LEXIS 3 33260, at *5-6 (“The content of the alleged misrepresentation is 4 necessary to state a claim, as is an allegation of what is false 5 or misleading about the statement.”). 6 any such factual allegation. 7 Complaint regarding advertisements is “Sunoco 260 GT 100, which 8 has the highest octane rating of any street legal fuel, is now 9 available at selected retail locations.” The Complaint is void of The only allegation in the (Compl. 3 n.1.) This 10 statement, however, was made by Sunoco, Inc., not Defendant, as 11 evidenced by the website address. (Compl. 3 n.1 12 (“http://www.sunocoinc.com/Site/Consumer/RaceFuels/260GT100Locati 13 ons/California.htm”).) 14 relationship between Sunoco, Inc. and Defendant whereby Defendant 15 could be held liable for the statement made by Sunoco, Inc. 16 Plaintiff has not alleged any Plaintiff alleges that Defendant, “in its labeling, 17 marketing and product displays, ha[s] misrepresented the nature, 18 characteristics, or qualities of [its] product by falsely 19 informing consumers that they are purchasing 100 Octane fuel, 20 when i[n] fact they are actually purchasing 97 or less Octane.” 21 (Compl. ¶ 17.) 22 “making or condoning the posting of signage, placards, displays, 23 and other public outcries or proclamations that misrepresent[] 24 the true octane level of the products they sold and/or caused to 25 be sold to the public.” 26 provided. 27 /// 28 /// Plaintiff further alleges that Defendant is (Compl. ¶ 28.) 28 No other facts are 1 As such, Plaintiff has not identified any advertisements by 2 Defendant but has merely asserted conclusory allegations that 3 Defendant made false statements in its advertising. 4 need not accept these conclusory allegations as true. 5 has not alleged any facts as to the substance or even existence 6 of these labeling, marketing and product displays. 7 the Court finds that Plaintiff has not satisfied heightened the 8 pleading standard. 9 The Court Plaintiff Therefore, Accordingly, Plaintiff’s state law false advertising claim, 10 under both the UCL and the FAL, is dismissed with leave to amend. 11 CONCLUSION 12 Based on the foregoing, Defendant’s Motion to Dismiss is 13 GRANTED with prejudice as to Plaintiff’s First Claim for 14 violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 15 1125(a)(1)(B). 16 Plaintiff’s Second Claim for unfair competition in violation of 17 Cal. Bus. & Prof. Code § 17200 et seq., to the extent such claim 18 is based on “unfair” or “fraudulent” practices, but GRANTED, 19 without prejudice, to the extent such claims are based on 20 “unlawful” practices or false advertising. 21 Dismiss is GRANTED without prejudice as to Plaintiff’s Third 22 Claim for false advertising in violation of Cal. Bus. & Prof. 23 Code § 17500. 24 /// 25 /// 26 /// 27 /// 28 /// Defendant’s Motion to Dismiss is DENIED as to 29 Defendant’s Motion to 1 Plaintiff may file a Second Amended Complaint, should it 2 choose to do so, not later than twenty (20) days following the 3 date this Memorandum and Order is electronically filed. 4 5 IT IS SO ORDERED. Dated: November 25, 2009 6 7 8 _____________________________ MORRISON C. ENGLAND, JR. UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30
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