Yu v. Dr Pepper Snapple Group, Inc. et al, No. 5:2018cv06664 - Document 40 (N.D. Cal. 2019)
Court Description: ORDER GRANTING IN PART WITH LEAVE TO AMEND AND DENYING IN PART 23 DEFENDANTS' MOTION TO DISMISS; GRANTING DEFENDANTS' REQUEST TO STAY ACTION. Signed by Judge Beth Labson Freeman on 6/18/2019. (blflc3S, COURT STAFF) (Filed on 6/18/2019)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 HAWYUAN YU, Plaintiff, 8 v. 9 10 11 DR PEPPER SNAPPLE GROUP, INC., et al., Defendants. United States District Court Northern District of California Case No. 18-cv-06664-BLF 12 ORDER GRANTING IN PART WITH LEAVE TO AMEND AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS; GRANTING DEFENDANTS’ REQUEST TO STAY ACTION [Re: ECF 23] On behalf of a putative class, Plaintiff Hawyuan Yu alleges that Defendants Dr Pepper 13 14 Snapple Group, Inc. (“Dr. Pepper”) and Mott’s, LLP (collectively, “Defendants”) mislead 15 consumers by selling apple juice and applesauce products with the representation “Natural” and/or 16 “All Natural Ingredients” that nonetheless contain trace amounts of a pesticide. Arising from this 17 allegation, Plaintiff asserts five state law causes of action and that this Court has subject matter 18 jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d). Now before the Court is Defendants’ motion to dismiss Plaintiff’s complaint pursuant to 19 20 Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), and to stay the action “[i]f outright 21 dismissal is not warranted.” See Notice of Motion, ECF 23. The Court heard oral argument on 22 Defendants’ motion on June 13, 2019 (“the Hearing”). For the reasons stated on the record at the 23 Hearing and as discussed below, Defendants’ motion is GRANTED IN PART WITH LEAVE TO 24 AMEND and DENIED IN PART, and Defendants’ request to stay the action is GRANTED. 25 26 I. BACKGROUND Plaintiff is an individual consumer and “citizen of [the County] of Santa Clara, California.” 27 Compl. ¶ 27. Defendant Dr. Pepper is incorporated in Delaware with its principal place of 28 business in Plano, Texas. Id. ¶ 31. Defendant Mott’s is a subsidiary of Dr. Pepper and is 1 incorporated in Delaware with its principal place of business in Rye Brook, New York. Id. ¶ 32. 2 Defendants sell several applesauce and apple juice products, including Mott’s Natural 3 Unsweetened Applesauce, Mott’s Healthy Harvest Applesauce, Mott’s Natural 100% Juice Apple 4 Juice, and other varieties of “Mott’s” brand applesauce and apple juice products that include the 5 representation “Natural” and/or “All Natural Ingredients” on the product package or label. See 6 id. ¶¶ 1, 5, 7. Defendants sell these products nationwide. Id. ¶¶ 10, 33. United States District Court Northern District of California 7 On multiple occasions, Plaintiff purchased Mott’s Natural Applesauce and Natural Apple 8 Juice at stores in San Jose, California. Compl. ¶ 28. Plaintiff alleges that in deciding to make 9 these purchases, Plaintiff saw, relied upon, and reasonably believed Defendants’ representations 10 that the products were “Natural” and made of “All Natural Ingredients.” Id. ¶ 29. Plaintiff further 11 alleges that he was “willing to pay more for Defendants’ Products because he expected the 12 Products to be free of insecticides and other unnatural chemicals.” Id. ¶ 30. 13 However, according to the complaint, Defendants’ applesauce and apple juice products 14 contain acetamiprid, a “synthetic and unnatural chemical.” See Compl. ¶¶ 10, 11. Acetamiprid is 15 a synthetic insecticide used in treating and harvesting crops, including fruits and vegetables. Id. 16 ¶¶ 12, 13. Acetamiprid is “legal” in connection with food products, insofar as its use is not 17 precluded and certain amounts of residuals are permitted to remain on fruits and vegetables. Id. 18 ¶ 13. Plaintiff’s primary theory of liability is not that the acetamiprid present in Defendants’ 19 products exceeds the legal limit, but instead that “[r]easonable consumers who see Defendants’ 20 representations that the Products contain ‘All Natural Ingredients’ or are ‘natural,’ would not 21 expect the Products to contain traces of a synthetic insecticide.” Id. ¶¶ 14, 15. 22 Plaintiff proposes a nationwide class of consumers who purchased Defendants’ products- 23 in-question, as well as a California subclass. See Compl. ¶¶ 66–81. Plaintiff filed this action on 24 November 1, 2018, asserting five causes of action: 25 26 27 28 (1) Unfair and Deceptive Acts and Practices under the California Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1750–1785 (on behalf of the California subclass); (2) Violation of California’s False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq. (on behalf of the California subclass); 2 (3) Violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code 1 §§ 17200 et seq. (on behalf of the California subclass); 2 3 (4) Breach of Express Warranty (on behalf of the nationwide class); and 4 (5) Unjust enrichment (on behalf of the nationwide class). 5 6 II. LEGAL STANDARD 7 A. 8 “To survive a motion to dismiss, a complaint must contain sufficient factual matter, 9 United States District Court Northern District of California See generally Compl. Rule 12(b)(6) accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 10 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When 11 considering such a motion, the Court “accept[s] factual allegations in the complaint as true and 12 construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. 13 Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). “Threadbare recitals of the 14 elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 15 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). 16 B. Rule 12(b)(1) “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of 17 18 Am., 511 U.S. 375, 377 (1994). As such, a federal court has an independent obligation to insure 19 that it has subject matter jurisdiction over a matter. See Fed. R. Civ. P. 12(h)(3); Snell v. 20 Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002). On a motion to dismiss pursuant to Rule 21 12(b)(1), which challenges a court’s subject matter jurisdiction over a claim, the burden is on the 22 plaintiff, as the party asserting jurisdiction, to establish that subject matter jurisdiction exists. 23 Kokkonen, 511 U.S. at 377. A facial jurisdictional challenge asserts that even if assumed true, 24 “the allegations contained in a complaint are insufficient on their face to invoke federal 25 jurisdiction.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). 26 III. 27 28 REQUEST FOR JUDICIAL NOTICE Defendants request judicial notice of the following: (1) copies of the Applesauce and Apple Juice Product labels depicted in Plaintiff’s complaint; (2) a Compliance Policy Guide from 3 1 the FDA regarding Labeling of Food Bearing Residues of Pesticide Chemicals; and (3) a letter 2 from Dr. Scott Gottlieb, FDA Commissioner, to U.S. Representative David Valadao. See 3 Defendants’ Request for Judicial Notice at 1, ECF 24. The Court is unaware of any opposition to 4 Defendants’ request for judicial notice. The Court may take judicial notice of documents referenced in the complaint, as well as United States District Court Northern District of California 5 6 matters in the public record. See Lee v. City of L.A., 250 F.3d 668, 688–89 (9th Cir. 2001), 7 overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125–26 (9th 8 Cir. 2002). In the context of food labels, courts regularly take judicial notice of product labels 9 when those product labels form the basis of the relevant causes of action. See, e.g., Barnes v. 10 Campbell Soup Co., 2013 WL 5530017, at *3 (N.D. Cal. July 25, 2013) (taking judicial notice of 11 photocopies of Campbell’s “100% Natural” soup labels). In addition, the Court may 12 take judicial notice of matters that are either “generally known within the trial court’s territorial 13 jurisdiction” or “can be accurately and readily determined from sources whose accuracy cannot 14 reasonably be questioned.” Fed. R. Evid. 201(b). Public records, including judgments and other 15 court documents, are proper subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 16 1035, 1041 (9th Cir. 2007). However, “[j]ust because the document itself is susceptible to judicial 17 notice does not mean that every assertion of fact within that document is judicially noticeable for 18 its truth.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). Here, Defendants’ request for judicial notice of (1) the copies of the applesauce and apple 19 20 juice product labels is GRANTED because Plaintiff’s complaint references and relies on these 21 labels. See Compl. ¶ 1, 5–7; Sipos Decl. ¶ 2, ECF 24-1; Barnes, 2013 WL 5530017, at *3. In 22 addition, Defendants’ request for judicial notice of (2) the FDA policy guide and (3) the FDA 23 Commissioner’s letter to Representative Valadao is GRANTED because these documents are 24 public documents. Lee, 250 F.3d at 688–89. 25 IV. 26 DISCUSSION Defendants move to dismiss Plaintiff’s complaint pursuant to Federal Rules of Civil 27 Procedure 12(b)(1) and 12(b)(6). See Notice of Motion, ECF 23. Defendants also request to stay 28 this action if it is not dismissed with prejudice. See Motion at 2, ECF 23. Specifically, 4 1 Defendants set forth the following six issues to be decided: 2 (1) whether Plaintiff’s consumer protection claims should be dismissed because the terms 3 “Natural” and “All Natural Ingredients” on the products-in-question do not cause a 4 reasonable consumer to believe that the products are free of any trace pesticides; 5 (2) whether Plaintiff’s breach of warranty and unjust enrichment claims should be dismissed for failure to state a claim; United States District Court Northern District of California 6 7 (3) whether Plaintiff’s claims are expressly preempted under federal law because there is 8 no “requirement” under federal law to disclose trace pesticides on product labels; 9 (4) whether the Court lacks subject matter jurisdiction under 21 U.S.C. § 346a(h)(5), 10 which commits review of the Environmental Protection Agency’s (“EPA”) established 11 tolerances for residual pesticides to the EPA and the U.S. Courts of Appeals; 12 (5) whether Plaintiff’s request for injunctive relief should be dismissed due to lack of Article III standing; and 13 14 (6) whether the case should be stayed on primary jurisdiction grounds, in deference to the 15 Food and Drug Administration’s (“FDA”) ongoing administrative proceedings to 16 define the term “natural.” 17 See Motion at 7. Plaintiff opposes as to all of the issues to be decided. See Opp’n at 3, ECF 32. 18 The Court addresses each issue in turn. As discussed below and at the Hearing, 19 Defendants’ motion to dismiss is GRANTED IN PART WITH LEAVE TO AMEND and 20 DENIED IN PART, and Defendants’ request to stay the action is GRANTED. 21 A. 22 Defendants argue that the product labels in question “are not misleading to a reasonable Reasonable Consumer 23 consumer” and that Plaintiff’s theory of deception—“that a ‘reasonable consumer’ interprets the 24 term ‘natural’ on a food label to mean that the product is ‘free’ [] of residual pesticides”—is “too 25 implausible to meet the ‘reasonable consumer’ standard.” See Motion at 8–9. Plaintiff responds 26 that reasonable consumers understand the term “natural” to mean free of synthetic pesticides, and 27 that in any event, what a reasonable consumer believes is a question of fact. See Opp’n at 4. 28 As discussed at the Hearing, the Court is concerned that Plaintiff’s theory is not plausible. 5 United States District Court Northern District of California 1 In other words, Plaintiff has failed to sufficiently allege facts demonstrating how or why a 2 reasonable consumer would be misled by the product labels in question. Under California law, to 3 meet the “reasonable consumer” standard, a plaintiff must sufficiently allege “‘that a significant 4 portion of the general consuming public or of targeted consumers, acting reasonably in the 5 circumstances, could be misled.’” See Ebner v. Fresh, Inc., 838 F.3d 958, 965 (9th Cir. 2016) 6 (quoting and citing California case law). Plaintiff has failed to meet this standard—that a 7 reasonable consumer would understand “natural” to have the definition attributed to it by Plaintiff. 8 I.e., Plaintiff does not sufficiently allege facts showing how or why a reasonable consumer would 9 understand “Natural” or “All Natural Ingredients” to mean the utter absence of residual pesticides, 10 which Plaintiff admits are on the order of 0.02 and 0.06 parts per million acetamiprid, 11 respectively, for the applesauce and apple juice products in question, see Compl. ¶ 39. 12 Plaintiff may amend as to the “reasonable consumer” theory. Accordingly, Defendants’ 13 motion to dismiss for failure to plausibly allege that a reasonable consumer would believe that the 14 products-in-question are free of any trace pesticides is GRANTED WITH LEAVE TO AMEND. 15 B. 16 Defendants argue that Plaintiff’s breach of warranty and unjust enrichment claims should 17 be dismissed for failure to state a claim because they depend on “an unreasonable construction of 18 the term allegedly breached [‘Natural’ or ‘All Natural Ingredients’]” or “depend on an implausible 19 theory of deception.” See Motion at 12. Defendants further argue that these two claims separately 20 fail because “both of these causes of action [are brought] on behalf of a putative nationwide class 21 but [do not] identify the applicable State law.” See id. at 13. 22 Breach of Warranty and Unjust Enrichment Claims For the reasons discussed with respect to Plaintiff’s “reasonable consumer” theory, 23 Defendants’ motion to dismiss Plaintiff’s breach of warranty and unjust enrichment claims is 24 hereby GRANTED WITH LEAVE TO AMEND. Turning to Defendants’ second argument for 25 dismissal of these two claims, the Court finds that at this stage Plaintiff need not identify which 26 states’ laws would apply to out-of-state plaintiffs. Accordingly, Defendants’ motion to dismiss the 27 breach of warranty and unjust enrichment claims on this latter ground is DENIED. 28 6 1 C. 2 Defendants next argue that Plaintiffs’ claims are expressly preempted by federal law. See 3 Motion at 13. The Nutrition Labeling and Education Act of 1990 (“NLEA”) preempts “any 4 requirement for the labeling of food . . . that is not identical to the [federal] requirement[s].” See 5 21 U.S.C. § 343-1(a)(2). Defendants contend that federal law “imposes no labeling requirement to 6 disclose the presence of trace pesticides on foods like [Defendants’] Products” and therefore that 7 Plaintiff’s claims seek to impose a “requirement” for food labeling that is “not identical” to the 8 federal requirements. See Motion at 13–14. Plaintiff counters that preemption does not apply here 9 because “[i]t is the use of the term ‘natural’ that is at issue, not a hypothetical affirmative 10 11 United States District Court Northern District of California Preemption obligation to disclose acetamiprid.” See Opp’n at 13. As discussed at the Hearing, the Court agrees with Plaintiff. The complaint is not directed 12 to a “labeling requirement” that would mandate the disclosure of acetamiprid, but instead to 13 whether “[r]easonable consumers who see Defendants’ representations that the Products contain 14 ‘All Natural Ingredients’ or are ‘natural,’ would [] expect the Products to [not] contain traces of a 15 synthetic insecticide.” Compl. ¶¶ 14, 15. In other words, Plaintiff’s theory of liability turns on 16 what a reasonable consumer would understand “Natural” to mean in the context of residual 17 pesticides present in the products. Thus, the federal food labeling requirements raised by 18 Defendants do not preempt Plaintiff’s claims. Accordingly, Defendants’ motion to dismiss 19 Plaintiff’s claims as preempted by federal law is DENIED. However, Plaintiff is required to 20 amend the complaint to specify that Plaintiff is not pleading that Defendants must label the 21 products-in-question as containing trace amounts of pesticide, but instead that Defendants should 22 remove the “Natural” representation on products that do contain such trace amounts or inform 23 consumers what “Natural” actually means. 24 D. 25 Defendants also contend that the Court lacks subject matter jurisdiction under 21 U.S.C. Residual Tolerances set by the EPA 26 § 346a(h)(5), which commits review of the Environmental Protection Agency’s (“EPA”) 27 established tolerances for residual pesticides to the EPA and the U.S. Courts of Appeals. See 28 Motion at 16–17. Plaintiff counters that Defendants are “recasting [Plaintiff’s] Complaint as an 7 1 attack on the established tolerances for acetamiprid” and that Plaintiff’s theories of liability and 2 recovery “will have no effect on the established tolerances for acetamiprid.” See Opp’n at 16–17. 3 For the reasons discussed with respect to preemption, the Court agrees with Plaintiff. The Court 4 does not read Plaintiff’s complaint to be “a challenge to the EPA’s established tolerances for 5 acetamiprid residue,” as Defendants contend, see Motion at 16. Accordingly, Defendants’ motion 6 to dismiss for lack of subject matter jurisdiction is DENIED. 7 E. 8 Next, Defendants argue that Plaintiff’s request for injunctive relief should be dismissed United States District Court Northern District of California 9 Standing for Injunctive Relief due to lack of Article III standing because “Plaintiff does not plead any future intention 10 whatsoever to buy [Defendants’] Products.” See Motion at 17. Plaintiff counters that “[h]is injury 11 in ongoing through his inability to trust the labels.” See Opp’n at 17. 12 In cases involving allegedly misleading labeling, standing for injunctive relief requires 13 some plausible allegation of the plaintiff’s intent to buy the product at issue in the future. See 14 Davidson v. Kimberly-Clark Corp., 873 F.3d 1103, 1116 (9th Cir. 2017), as amended on denial of 15 reh’g en banc, 889 F.3d 956 (9th Cir. 2018). Here, Plaintiff has failed to sufficiently allege intent 16 to purchase the products-in-question in the future. In other words, Plaintiff has not alleged that he 17 would purchase the products-in-question if the representation “Natural” or “All Natural 18 Ingredients” was removed. Accordingly, Defendants’ motion to dismiss Plaintiff’s request for 19 injunctive relief for lack of standing is hereby GRANTED WITH LEAVE TO AMEND. 20 F. 21 Lastly, Defendants argue that this action should be stayed “under the primary jurisdiction Staying this action under the Primary Jurisdiction Doctrine 22 doctrine, which applies because of ongoing FDA regulatory proceedings to define the term 23 ‘natural’ for food labeling.” See Motion at 18. Plaintiff counters that “resolution of this case does 24 not require the FDA’s expertise” and that “[t]he FDA is unlikely to issue guidance on the term 25 ‘natural.’” See Opp’n at 19–20. For the reasons discussed below and at the Hearing, the Court 26 finds that a stay of this action is warranted, but not one of indefinite length. 27 28 “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of 8 1 an administrative agency.” Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008). 2 The doctrine does not require that the court lack jurisdiction, but rather it is a “prudential” 3 doctrine, “under which a court determines that an otherwise cognizable claim implicates technical 4 and policy questions that should be addressed in the first instance by the agency with regulatory 5 authority over the relevant industry rather than by the judicial branch.” Id. The determination of 6 whether an action should be stayed pursuant to the primary jurisdiction doctrine is a matter for the 7 Court’s discretion. Syntek Semiconductor Co., Ltd. v. Microchip Tech. Inc., 307 F.3d 775, 781 8 (9th Cir. 2002). United States District Court Northern District of California 9 In the context of food labeling, the Ninth Circuit has held that “[t]he delineation of the 10 scope and permissible usage of the term[ ] ‘natural’ . . . in connection with food products 11 implicates technical and policy questions that should be addressed in the first instance by the 12 agency with regulatory authority over the relevant industry rather than by the judicial branch.” 13 Kane v. Chobani, LLC, 645 Fed. App’x 593, 594 (9th Cir. 2016) (internal quotation and citation 14 omitted). In Kane, the Ninth Circuit stayed the action “[g]iven the ongoing FDA proceedings 15 regarding the terms ‘natural’ and ‘evaporated cane juice.’” Id. Since that time, courts in this 16 District have stayed cases involving the word “natural” based on similar reasoning. See, e.g., 17 Rosillo v. Annie’s Homegrown, Inc., 2017 WL 5256345, at *4 (N.D. Cal. Oct. 17, 2017) (“For the 18 foregoing reasons, and after considering the relevant factors, the Court finds that it is appropriate 19 to stay this action pursuant to the primary jurisdiction. Accordingly this action is STAYED until 20 the FDA’s regulatory process regarding use of the term ‘natural’ on food labeling is completed.”). 21 The Court finds that a stay is warranted here under the relevant factors. FDA proceedings 22 remain open and active regarding the term “natural.” See 12/19/2018 FDA Commissioner Letter, 23 Ex. C to Sipos Decl., ECF 24-1. The December 19, 2018 letter from the FDA Commissioner 24 states that the “FDA recognizes this is an important matter for consumers and the food industry” 25 and that the FDA is “actively working” on the issue and that in 2019, the “FDA plans to publicly 26 communicate next steps regarding Agency policies related to ‘natural.’” See id. Accordingly, the 27 FDA’s regulatory process may shape the contours of the word “natural” as applied to food 28 labeling, an issue that permeates Plaintiff’s complaint. However, the Court recognizes Plaintiff’s 9 1 argument that guidance from the FDA may not be imminent, and therefore declines to impose an 2 indefinite stay. Rather, the Court hereby STAYS this action for a limited amount of time, through 3 the end of February 2020. 4 ORDER 5 For the foregoing reasons, IT IS HEREBY ORDERED that: 6 1. Defendants’ motion to dismiss Plaintiff’s complaint for failure to plausibly allege that a 7 reasonable consumer would believe that the products-in-question are free of any trace 8 pesticides is GRANTED WITH LEAVE TO AMEND. 9 10 11 United States District Court Northern District of California V. 12 13 14 15 16 17 2. Defendants’ motion to dismiss Plaintiff’s breach of warranty and unjust enrichment claims is GRANTED WITH LEAVE TO AMEND. 3. Defendants’ motion to dismiss Plaintiff’s claims as preempted by federal law is DENIED. 4. Defendants’ motion to dismiss Plaintiff’s claims for lack of subject matter jurisdiction under 21 U.S.C. § 346a(h)(5) is DENIED. 5. Defendants’ motion to dismiss Plaintiff’s request for injunctive relief for lack of standing is GRANTED WITH LEAVE TO AMEND. 6. Defendants’ request to stay this action is GRANTED, and this action shall be 18 STAYED through the end of February 2020 without prejudice to a request to continue 19 the stay. 20 7. Plaintiff’s amended complaint is due no later than 30 days after the stay expires. 21 8. Leave to amend is granted only as to Plaintiff’s existing claims; Plaintiff may not add 22 claims or parties without leave of the Court. 23 9. All discovery disputes are referred to the assigned magistrate judge. 24 10. The case management conference scheduled for August 8, 2019, is hereby RESET to 25 April 30, 2020. The joint case management statement shall be due April 23, 2020. 26 27 28 IT IS SO ORDERED. Dated: June 18, 2019 ______________________________________ BETH LABSON FREEMAN United States District Judge 10
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