Guttmann v. La Tapatia Tortilleria, Inc., No. 3:2015cv02042 - Document 44 (N.D. Cal. 2015)
Court Description: ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS 16 (Illston, Susan) (Filed on 11/18/2015)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 VICTOR GUTTMANN, Case No. 15-cv-02042-SI Plaintiff, 8 v. ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS 9 10 LA TAPATIA TORTILLERIA, INC., Re: Dkt. No. 16 Defendant. United States District Court Northern District of California 11 12 13 Defendant La Tapatia Tortilleria, Inc. moved to dismiss this putative class action on the 14 basis that plaintiff Victor Guttman lacked standing to assert the claims alleged in the complaint. 15 Dkt. 16 at 6-11. The Court issued an order examining this issue. Dkt. 32. The parties thereafter 16 engaged in limited discovery and filed supplemental briefs addressing Guttman’s ability to 17 advance the present lawsuit. Dkt. 37, 39. 18 The Court determines this motion is appropriate for resolution without oral argument and 19 VACATES the upcoming November 20, 2015 hearing pursuant to Civil Local Rule 7-1(b). For 20 the reasons set forth below, the Court hereby GRANTS in part defendant’s motion to dismiss, 21 with prejudice. 22 23 BACKGROUND 24 The Court issued a prior order in this case detailing the nature of Guttman’s complaint. 25 See Dkt. 32 at 1-2. In short, Guttman seeks to eradicate artificial trans-fat from food and, to that 26 end, has sued several manufacturers over artificial trans-fat and labeling. 27 Guttmann v. Quaker Oats Co., 752 F. Supp. 2d 1111 (N.D. Cal. 2010); Peviani, Guttmann v. 28 Hostess Brands, Inc., 750 F. Supp. 2d 1111, 1114 (C.D. Cal. 2010); Guttmann v. Ole Mexican See Chacanaca, 1 Foods, Inc., No. C 14-04845 (N.D. Cal.); Guttmann v. Nissin Foods (U.S.A.) Co., Inc., No. C 15- 2 00567 WHA, 2015 WL 4881073 (N.D. Cal. Aug. 14, 2015). 3 The present defendant is a manufacturer of tortilla products whose labels and/or packaging 4 allegedly contain the statement “0g Trans Fat.” Dkt. 1 ¶ 76. Guttman asserts that this product 5 label is false and misleading because La Tapatia’s products contain partially hydrogenated oils 6 (“PHO”), a form of trans-fat. Dkt. 1 ¶ 14. Guttman claims that he relied on La Tapatia’s false and 7 misleading product label when he purchased a package of La Tapatia’s PHO-containing tortilla 8 product once a month “over the past several years.” Dkt. 1 ¶¶ 10, 66, 69. Guttman’s complaint alleges causes of action for: (1) violation of California’s Unfair 10 Competition Law (“UCL”), California Business and Professions Code § 17200 et seq.; (2) 11 United States District Court Northern District of California 9 violation of California’s False Advertising Law (“FAL”), California Business and Professions 12 Code § 17500 et seq.; and (3) violation of California’s Consumers Legal Remedies Act 13 (“CLRA”), California Civil Code § 1750 et seq. 14 For the reasons explained below, the Court concludes that Guttman cannot plausibly plead 15 actual reliance under California’s UCL, FAL, or CLRA during the alleged period he purchased the 16 tortilla products because he was amply aware, given his litigation history: (1) that products 17 labeled as “0g Trans Fat” may in fact contain small amounts of trans-fat; (2) that FDA regulations 18 do not require trans-fat content to be declared in the nutrition-facts panel on a product label1; (3) 19 that PHO is a form of artificial trans-fat; and (4) that consumption of artificial trans-fat may pose 20 health risks. 21 Guttman’s complaint additionally alleges causes of action for breach of express warranty 22 and breach of implied warranty of merchantability. For the reasons explained below, the Court 23 concludes that Guttman has pled sufficient facts as to these causes of action to establish standing 24 at this stage of litigation. 25 26 27 1 28 However, “[i]f the serving contains less than 0.5 gram[s of trans-fat], the content, when declared, shall be expressed as zero.” 21 C.F.R. 101.9(c)(2)(ii). 2 LEGAL STANDARDS 1 2 3 1. Rule 12(b)(1) 4 A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant 5 to Federal Rule of Civil Procedure 12(b)(1). In considering a Rule 12(b)(1) motion, the Court “is 6 not restricted to the face of the pleadings, but may review any evidence, such as affidavits and 7 testimony, to resolve factual disputes concerning the existence of jurisdiction.” McCarthy v. 8 United States, 850 F.2d 558, 560 (9th Cir. 1988). If a plaintiff lacks standing under Article III of 9 the U.S. Constitution, then the court lacks subject matter jurisdiction, and the case must be 10 dismissed. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101-02 (1998). United States District Court Northern District of California 11 12 2. Rule 12(b)(6) and Rule 8(a)(2) 13 A defendant may also move to dismiss an action pursuant to Federal Rule of Civil 14 Procedure 12(b)(6). Rule 12(b)(6) tests the legal sufficiency of the claim stated in the complaint. 15 Ileto v. Glock Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). “To survive a motion to dismiss . . . 16 under Rule 12(b)(6), a complaint generally must satisfy only the minimal notice pleading 17 requirements of Rule 8(a)(2). Rule 8(a)(2) requires only that the complaint include ‘a short and 18 plain statement of the claim showing that the pleader is entitled to relief.’” Porter v. Jones, 319 19 F.3d 483, 494 (9th Cir. 2003) (quoting Fed. R. Civ. P. 8(a)(2)). 20 The Supreme Court has held that Rule 8(a) requires a plaintiff to plead “enough facts to 21 state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 22 (2007). However, a court need not accept as true allegations contradicted by judicially noticeable 23 facts. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). The Court may also look 24 beyond the plaintiff’s complaint to matters of public record without converting the Rule 12(b)(6) 25 motion into one for summary judgment. Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). 26 27 28 3. Rule 9(b) Claims sounding in fraud or mistake are subject to the heightened pleading requirements of 3 1 Federal Rule of Civil Procedure 9(b). This rule requires a plaintiff alleging fraud to “state with 2 particularity the circumstances constituting fraud.” 3 4 4. Leave to Amend 5 After a complaint is dismissed, leave to amend is ordinarily granted. See Fed.R.Civ.P. 15. 6 But leave to amend need not be granted if the amended complaint would not withstand a motion to 7 dismiss. See Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1298 (9th Cir. 1998). While “there 8 is a policy that favors allowing parties to amend their pleadings . . . a district court may properly 9 deny such a motion if it would be futile to do so.” Partington v. Bugliosi, 56 F.3d 1147, 1162 (9th 10 Cir. 1995). United States District Court Northern District of California 11 DISCUSSION 12 Defendant seeks dismissal of plaintiff’s complaint on standing grounds, arguing that 13 14 plaintiff is not an injured or deceived individual. Dkt. 39 at 1. 15 16 1. Article III Standing 17 “To satisfy Article III standing, a plaintiff must show (1) he has suffered an ‘injury in fact’ 18 that is concrete and particularized and actual or imminent, not conjectural or hypothetical; (2) the 19 injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed 20 to merely speculative, that the injury will be redressed by a favorable decision.” Braunstein v. 21 Arizona Dep’t of Transp., 683 F.3d 1177, 1184 (9th Cir. 2012) (citing Friends of the Earth, Inc. v. 22 Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000)). 23 24 2. UCL, FAL, and CLRA Standing 25 In addition to Article III’s requirements, the UCL, FAL, and CLRA all require a plaintiff 26 to demonstrate standing. See generally Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 326-330 27 (Cal. 2011) (discussing standing under the FAL, CLRA, and UCL); Meyer v. Sprint Spectrum 28 L.P., 45 Cal. 4th 634, 641 (Cal. 2009) (discussing standing under the CLRA). 4 A. 2 Standing under the FAL or CLRA requires a plaintiff to allege that he relied on the 3 defendant’s purported misrepresentation and suffered economic injury as a result. Kwikset, 51 4 Cal. 4th at 326 (“Proposition 64 requires that a plaintiff’s economic injury come ‘as a result of’ . . . 5 a violation of the false advertising law . . . . The phrase ‘as a result of’ in its plain and ordinary 6 sense means ‘caused by’ and requires a showing of a causal connection or reliance on the alleged 7 misrepresentation. . . . This commonsense reading of the language mirrors how we have 8 interpreted the same language in . . . the Consumers Legal Remedies Act.” (citations omitted)); see 9 also Cal. Bus. & Prof. Code § 17535 (directing that applicable government representative must 10 have suffered injury in fact and have lost money or property “as a result of a violation of this 11 United States District Court Northern District of California 1 FAL and CLRA Standing chapter” and clarifying that “[a]ny person may pursue representative claims or relief on behalf of 12 others only if the claimant meets the standing requirements of this section . . .”); Cal. Civ. Code 13 § 1780(a) (granting standing to consumers who have suffered damage “as a result of” a violation, 14 and imposing a requirement that a violation must “caus[e] or result[ ] in some sort of damage”). 15 16 B. UCL Standing (Fraudulent, Unlawful, Unfair Prongs) 17 The UCL defines unfair competition as “any unlawful, unfair or fraudulent business act or 18 practice . . . .” Cal. Bus. & Prof. Code § 17200. The enactment of Proposition 64 in California 19 limited private standing to any person who had suffered injury in fact and had lost money or 20 property “as a result of” unfair competition. See generally Kwikset, 51 Cal. 4th at 320-21 (citing 21 Cal. Bus. & Prof. Code § 17204). 22 To establish standing under the UCL’s fraud prong, a plaintiff must demonstrate that he 23 relied upon the allegedly fraudulent misrepresentation. In re Tobacco II Cases, 46 Cal.4th 298, 24 326 (Cal. 2009) (“[T]here is no doubt that reliance is the causal mechanism of fraud . . . [B]ecause 25 it is clear that the overriding purpose of Proposition 64 was to impose limits on private 26 enforcement actions under the UCL, we must construe the phrase ‘as a result of’ in light of this 27 intention to limit such actions.” (citations omitted)). 28 California courts have also extended this actual reliance requirement to claims under the 5 1 unlawful prong of the UCL that are based, as here, on allegations of misrepresentation and 2 deception. See Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1363 (Cal. Ct. App. 2010) 3 (“Construing the phrase ‘as a result of’ in Business and Professions Code section 17204 in light of 4 Proposition 64’s intention to limit private enforcement actions under the UCL, we conclude the 5 reasoning of Tobacco II applies equally to the ‘unlawful’ prong of the UCL when, as here, the 6 predicate unlawfulness is misrepresentation and deception.”). See Dkt. 1 at ¶ 120 (alleging that 7 defendant “made and distributed, in interstate commerce in this District, products that make false 8 or misleading statements of fact regarding its content”). Finally, courts have construed an actual reliance standing requirement to claims under the 10 unfair prong of the UCL if those claims sound in fraud. See In re Tobacco II Cases, 46 Cal. 4th at 11 United States District Court Northern District of California 9 326 n.17 (“We emphasize that our discussion of causation in this case is limited to such cases 12 where, as here, a UCL action is based on a fraud theory involving false advertising and 13 misrepresentations to consumers. . . . There are doubtless many types of unfair business practices 14 in which the concept of reliance, as discussed here, has no application." (emphasis added) (internal 15 citations omitted)); see also Kane v. Chobani, Inc., 973 F. Supp. 2d 1120, 1129 (N.D. Cal. 2014) 16 (“[T]he actual reliance requirement also applies to claims under the UCL’s unfair prong to the 17 extent such claims are based on fraudulent conduct.” (citations omitted)). Again, this is the case 18 with the present matter. See Dkt. 1 at ¶¶ 146, 147, 148 (alleging that defendant “leveraged its 19 deception” and employed “deceptive advertising” that was “false and misleading” to “induce 20 [p]laintiff and members of the [c]lass to purchase products that were of lesser value and quality 21 than advertised.”) 22 23 C. Discussion 24 Here, Guttman cannot plausibly show that he actually relied on La Tapatia’s alleged 25 misrepresentations that their tortilla products contained “0g Trans Fat” when he purchased the 26 products listing PHO as an ingredient. In his deposition, ordered for the limited purpose of 27 examining standing in this case, Guttman admitted that, as of 2010, he was aware of the following 28 facts: (1) products could be labeled “0g Trans Fat” if they contained less than 0.5 grams of trans6 1 fat per serving (Dkt. 39-3 at 13-14, 17, 25, 41); (2) PHO is a form of artificial trans-fat (id. at 14- 2 15, 21-22, 24, 42-43); (3) he could check the ingredients labels on food products to see if they 3 contained PHO (id. at 28-29); (4) trans-fat was linked to health risks (id. at 13, 26, 28, 41-42); (5) 4 he was aware of the dangers of consuming PHO as a trans-fat (id. at 26). Further, Guttmann 5 admitted that he actually did inspect some product labels to discern whether they contained trans- 6 fats. Id. at 28-29. Given Guttman’s extensive knowledge of trans-fats, the dangers of PHO, the FDA’s 8 labeling requirements, and the labeling practices of manufacturers, the Court concludes that 9 Guttman cannot plausibly claim that he relied on La Tapatia’s “0g Trans Fat” label when he 10 purchased the tortillas. This is not to say that no representative plaintiff can allege that he relied 11 United States District Court Northern District of California 7 on this allegedly misrepresentative label pursuant to the FAL, CLRA and/or UCL. This is merely 12 to say that Guttman cannot plausibly claim this element of standing required to pursue these 13 California causes of action. 14 Because Guttman cannot plausibly show that he relied on La Tapatia’s alleged 15 misrepresentations, he cannot allege legally sufficient facts upon which this Court can grant relief. 16 Accordingly, La Tapatia’s motion to dismiss on these causes of action pursuant to Rule 12(b)(6) is 17 granted with prejudice given the futility of an amendment to the pleadings in this case. Maya v. 18 Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011) (reasoning that lack of statutory standing 19 requires dismissal for failure to state a claim). 20 21 3. Breach of Express Warranty and Breach of Implied Warranty of Merchantability 22 Unlike claims under the UCL, FAL, or CLRA, there is no additional statutory standing 23 requirement for breach of express warranty and breach of implied warranty of merchantability 24 claims.2 At the motion to dismiss stage, Article III standing is adequately demonstrated through 25 26 27 28 2 Causes of action for breach of express warranty and breach of implied warranty of merchantability do not appear to require proof of reliance as a separate element. Weinstat v. Dentsply Int'l, Inc., 180 Cal. App. 4th 1213, 1227 (2010). ("The lower court ruling rests on the incorrect legal assumption that a breach of express warranty claim requires proof of prior reliance. While the tort of fraud turns on inducement, as we explain, breach of express warranty arises in 7 1 allegations of “specific facts plausibly explaining” why the standing requirements are met. 2 Barnum Timber Co. v. Envtl. Prot. Agency, 633 F.3d 894, 899 (9th Cir. 2011). The Court is 3 mindful that, when determining Article III standing, it must “accept as true all material allegations 4 of the complaint” and “construe the complaint in favor of the complaining party.” Davis v. Guam, 5 785 F.3d 1311, 1314 (9th Cir. 2015) (citations omitted). Notwithstanding the Court’s skepticism of the ultimate legal viability of Guttman’s 7 remaining claims, the Court concludes that he has alleged facts to show Article III standing: he 8 has alleged an injury fairly traceable to his alleged purchase of defendant’s products and a 9 favorable decision of this Court would redress such an injury. As the Court limited its discovery 10 order to eliciting facts on the issue of standing, it will refrain from drawing further legal 11 United States District Court Northern District of California 6 conclusions at this stage. 12 13 CONCLUSION 14 For the foregoing reasons the Court hereby GRANTS defendant’s motion to dismiss 15 plaintiff’s complaint pursuant to claims brought under the UCL, FAL, and CLRA with prejudice. 16 17 18 19 20 IT IS SO ORDERED. Dated: November 18, 2015 ______________________________________ SUSAN ILLSTON United States District Judge 21 22 23 24 25 26 the context of contract formation in which reliance plays no role."); Holmes Packaging Mach. Corp. v. Gingham, 252 Cal. App. 2d 862, 873 (1967) (implied warranties of merchantability and fitness for purpose do not arise from any agreement in fact of parties but are created by operation of law where requisite elements for creation of warranties exist). 27 28 8
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