Josten v. Rite Aid Corporation, No. 3:2018cv00152 - Document 25 (S.D. Cal. 2018)

Court Description: ORDER Granting 15 Defendant's Motion to Dismiss and Granting Plaintiff Leave to Amend. The first amended complaint is due by 12/11/2018. Signed by Judge Anthony J. Battaglia on 11/20/2018. (acc)

Download PDF

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 ROBERT JOSTEN, on Behalf of Himself and All Others Similarly Situated, Case No.: 18-cv-0152-AJB-JLB 14 v. ORDER GRANTING DEFENDANT’S MOTION TO DISMISS AND GRANTING PLAINTIFF LEAVE TO AMEND 15 RITE AID CORPORATION, (Doc. No. 15) 13 16 Plaintiff, Defendant. 17 18 Rite Aid moves to dismiss plaintiff Robert Josten’s complaint, asserting nearly 19 identical arguments made in its motion to dismiss filed in a related case, Stafford v. Rite 20 Aid Corp., 17-cv-1340-AJB-JLB, which the Court will refer to herein. The crucial missing 21 piece in Josten’s complaint, like Stafford’s, is his failure to plead tolling with specificity. 22 Because he fails to adequately plead tolling, several of his claims are DISMISSED. 23 However, the Court also GRANTS Josten leave to amend his complaint to cure these 24 deficiencies. Thus, the Court GRANTS Rite Aid’s dismissal motion. 25 I. BACKGROUND 26 The following facts are taken from Plaintiff’s complaint, (Doc. No. 1), and are 27 construed as true for the limited purpose of resolving the instant motion. See Brown v. Elec. 28 Arts, Inc., 724 F.3d 1235, 1247 (9th Cir. 2013) (reasoning that when considering a motion 1 18-cv-0152-AJB-JLB 1 to dismiss, courts presume the facts alleged by the plaintiff are true). 2 Plaintiff’s claims are all based on the assertion that he was forced to pay an inflated 3 copayment under his insurance plan because Rite Aid reported prescription drug prices to 4 his insurance carrier that were not its “usual and customary” (“U&C”) prices for those 5 drugs. (Doc. No. 1 ¶ 1.) About 90% of all United States citizens are now enrolled in private 6 or public health insurance plans that cover at least a portion of the costs of medical and 7 prescription drug benefits. (Id. ¶ 2.) A feature of most of these health insurance plans is the 8 shared cost of prescription drugs. (Id.) Typically, when a consumer fills a prescription for 9 a medically necessary prescription drug under his or her health insurance plan, the third- 10 party payor (“TPP”) pays a portion of the cost and the consumer pays the remaining portion 11 of the cost directly to the pharmacy in the form of a copayment, coinsurance, or deductible 12 payment. (Id.) 13 In an effort to control their prescription drug costs, many insurance companies and 14 TPPs require consumers to purchase generic prescription drugs when available because 15 generic drugs often cost less than the brand-name version. (Id. ¶ 3.) Plaintiff alleges that 16 he and the members of the Class are paying much more for certain generics than Rite Aid’s 17 cash-paying customers who fill their generic prescriptions through Rite Aid’s discount 18 generic drug program, called the “Rx Savings [P]rogram” (“Rx Program” or “RSP”), 19 without using health insurance. (Id. ¶ 4.) 20 The crux of his argument is that a pharmacy cannot charge a consumer, or report to 21 a TPP, a higher price for prescription drugs than the pharmacy’s U&C price. (Id. ¶ 45.) The 22 U&C price is referred to by Rite Aid and known throughout the pharmacy industry as the 23 price that the pharmacy most commonly charges the cash-paying public. (Id.) Plaintiff 24 alleges that Rite Aid, instead of complying with this requirement, maintains an undisclosed, 25 dual pricing scheme for the prescription drugs available through the Rx Program and 26 overcharges consumers like Plaintiff and the Class, in excess of Rite Aid’s actual U&C 27 prices for these generics. (Id. ¶ 6.) Thus, Plaintiff alleges that Rite Aid has knowingly and 28 intentionally reported artificially inflated U&C prices for RSP Generics on claims for 2 18-cv-0152-AJB-JLB 1 reimbursement submitted to TTP. (Id. ¶ 14.) 2 Plaintiff filed his complaint on January 23, 2018. (Doc. No. 1.) Plaintiff alleges 3 causes of action for violations of: (1) Negligent Misrepresentation; (2) Unjust Enrichment; 4 (3) Unfair Competition law (“UCL”) based on unfair acts and practices; (4) UCL based on 5 unlawful acts and practices; (5) Consumer Legal Remedies Act (“CLRA”); and (6) 6 Declaratory and Injunctive Relief. (Doc. No. 1.) In his prayer for relief, Plaintiff requests 7 the Court certify his action as a class action, award compensatory, consequential, and 8 general damages, grant permanent injunctive relief, and award statutory treble, punitive, or 9 exemplary damages, among other things. (Id. at 41–42.) 10 II. LEGAL STANDARD 11 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings 12 and allows a court to dismiss a complaint upon a finding that the plaintiff has failed to state 13 a claim upon which relief may be granted. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 14 2001). The court may dismiss a complaint as a matter of law for: “(1) lack of cognizable 15 legal theory or (2) insufficient facts under a cognizable legal claim.” SmileCare Dental 16 Grp. v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). 17 However, a complaint survives a motion to dismiss if it contains “enough facts to state a 18 claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 19 (2007). 20 Notwithstanding this deference, the reviewing court need not accept legal 21 conclusions as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). It is also improper for the 22 court to assume “the [plaintiff] can prove [he or she] has not alleged . . . .” Associated Gen. 23 Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 24 On the other hand, “[w]hen there are well-pleaded factual allegations, a court should 25 assume their veracity and then determine whether they plausibly give rise to an entitlement 26 to relief.” Iqbal, 556 U.S. at 679. The court only reviews the contents of the complaint, 27 accepting all factual allegations as true, and drawing all reasonable inferences in favor of 28 the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). 3 18-cv-0152-AJB-JLB 1 III. DISCUSSION 2 Rite Aid argues the complaint should be dismissed for the following reasons: 3 (1) Plaintiff failed to plead any element of the negligent misrepresentation claim, 4 (Doc. No. 15-1 at 11); (2) Plaintiff failed to plead CLRA and UCL standing, (Id. at 19); 5 (3) Plaintiff failed to plead a CLRA claim, (Id. at 22); (4) Plaintiff failed to plead a UCL 6 claim, (Id. at 23); (5) Plaintiff wrongfully makes a claim for unjust enrichment, (Id. at 27); 7 (6) Plaintiff failed to overcome third-party issues, (Id. at 27); and (7) some of Plaintiff’s 8 claims are time barred, (Id. at 28). 9 The Court will discuss the sufficiency of Josten’s negligent misrepresentation claim, 10 standing, and UCL claim, however, because the Court finds Josten did not sufficiently 11 plead equitable tolling, and grants leave to amend, the Court declines to analyze the 12 sufficiency of his CLRA or unjust enrichment claims. The Court urges the parties to review 13 its order in Stafford regarding those claims. 14 A. 15 First, Rite Aid argues Josten failed to plead a negligent misrepresentation claim. 16 (Doc. No. 15-1 at 11.) Negligent misrepresentation requires (1) a misrepresentation of a 17 material fact, (2) which is made without reasonable grounds for believing it to be true, (3) 18 with the intent to induce reliance on the misrepresented fact, (4) that justifiable reliance 19 occurs, and (5) resulting damage. Ragland v. U.S. Bank Nat’l Ass’n, 209 Cal. App. 4th 182, 20 196 (2012). 21 Negligent Misrepresentation i. Duty 22 Rite Aid makes identical arguments to a dismissal motion filed in Stafford v. Rite 23 Aid—a related case. (See Stafford, 17-cv-1340-AJB-JLB, Doc. No. 32-1 at 13.) Rite Aid 24 argues that there is no contractual obligations between Rite Aid, Josten, and Josten’s 25 medical insurance plans which give rise to a duty to disclose its pricing structure. 26 (Doc. No. 15-1 at 12.) Rite Aid also asserts that California’s Welfare & Institution Code 27 § 14105.455 also does not establish a duty. (Id. at 13.) Finally, Rite Aid states the National 28 Council for Prescription Drug Programs (“NCPDP”) also fails to establish a duty. 4 18-cv-0152-AJB-JLB 1 (Id. at 14.) 2 As the Court held in Stafford, a duty can arise under California law when 3 “information is given in a business or professional capacity for such a purpose.” Friedman 4 v. Merck & Co., 107 Cal. App. 4th 454, 481 (2003). Similarly, Rite Aid owes Josten a duty 5 since they are reporting pricing information in a commercial setting for a business purpose 6 by both selling the prescription drugs to consumers and reporting the pricing to the Rx 7 Program participants, third-party payors, and consumers. (See Stafford, 17-cv-1340-AJB- 8 JLB, Doc. No. 41 at 4.) That order also addressed Rite Aid’s other theories that no duty 9 arose and dismissed them. (Id. at 3–5.) Accordingly, the Court finds Josten plausibly pled 10 11 that a duty exists. ii. Misrepresentation or Intent to Deceive 12 Next, Rite Aid argues Josten “cannot allege any misrepresentation or intent to 13 deceive plaintiff by Rite Aid.” (Doc. No. 15-1 at 16.) Rite Aid asserts Josten “sets the 14 amount of his copayment,” and that “[t]he complaint lacks any facts to establish that Rite 15 Aid reported prices contrary to that obligation or an intent to deceive.” (Id. at 16–17.) 16 Moreover, Rite Aid argues Josten acknowledged in his complaint that anyone could 17 participate in the Rx Program and that information regarding the Program was widely 18 available, thus concluding there was no “active concealment or an affirmative 19 representation. . . .” (Id. at 17.) However, Josten is not arguing that Rite Aid concealed the 20 Rx Program pricing scheme, but that Rite Aid purposefully failed to report the Rx Program 21 prices thus inflating his copayment prices. To this end, the Court finds Josten plausibly 22 pled this element. (See, e.g., Doc. No. 1 ¶¶ 16, 12, 14.) 23 iii. Reasonable Reliance 24 Rite Aid asserts Josten failed to show reasonable reliance for three reasons. 25 (Doc. No. 15-1 at 17.) First, Rite Aid states Josten failed to plead that he relied on a 26 communicated price representation or that anything was communicated to an agent of his. 27 (Id.) Second, Josten cannot show detrimental reliance because Rite Aid publicly advertised 28 its Rx Program prices. (Id. at 17–18.) Third, Josten’s assumption that his copayment price 5 18-cv-0152-AJB-JLB 1 “would not be more than the RSP prices” is unsupported. (Id. at 18.) 2 Again, as stated in the Stafford order, reliance is a question of fact and inappropriate 3 for a motion to dismiss, or even a motion for summary judgment, unless the evidence only 4 supports one conclusion. See Cook, Perkiss & Liehe, Inc. v. Northern California Collection 5 Service, Inc., 911 F.2d 242, 245 (9th Cir. 1990); Honolulu Disposal Service, Inc. v. 6 American Ben. Plan Adm’rs, Inc., 433 F. Supp. 2d 1181, 1190 (D. Haw. 2006); 7 (Stafford, 17-cv-1340-AJB-JLB, Doc. No. 41 at 6). Rite Aid has not made such a 8 determinative showing. Further, Josten adequately pled reliance. (Doc. No. 1 ¶¶ 17, 103.) 9 iv. Damages 10 Rite Aid next alleges Josten failed to plead damages, stating “Plaintiff fails, 11 however, to allege any information about his insurance plan, including the manner in which 12 copayments are calculated, or the prescriptions he purchased.” (Doc. No. 15-1 at 18.) 13 However, Josten does plead the price he paid for generic prescriptions was more than the 14 U&C price. (Doc. No. 1 ¶ 16.) Second, Rite Aid argues that his “recognition that the RSP 15 program was available to him makes it implausible that any misrepresentation caused him 16 to pay ‘inflated’ co-payments.” (Doc. No. 15-1 at 18.) Thus, Rite Aid concludes, any 17 damages Josten suffered was because he chose to pay his prescription copayment price 18 rather than the Rx Program prices. (Id. at 18–19.) However, the core of Josten’s allegations 19 is that his prescription prices were inflated because of Rite Aid’s failure to include the Rx 20 Program pricing in reporting the U&C prices and that had the Rx Program prices been 21 included in the U&C pricing reporting, he would have paid a lower price. Thus, Josten has 22 alleged damages. 23 v. Economic Loss Doctrine 24 Finally, Rite Aid asserts the economic loss doctrine bars Josten’s claims. 25 (Doc. No. 15-1 at 19.) The Court discussed identical arguments in the Stafford order, 26 finding that although the majority of case law favors Rite Aid’s theory, courts have recently 27 held that negligent misrepresentation cases can proceed despite economic loss. (Stafford, 28 17-cv-13400AJB-JLB, Doc. No. 41 at 7–8.) Rite Aid can revisit this argument in summary 6 18-cv-0152-AJB-JLB 1 judgment. 2 B. 3 Rite Aid alleges Josten failed to plead standing under both the CLRA and the UCL, 4 alleging he failed to show he actually relied on a misrepresentation to his detriment. 5 (Doc. No. 15-1 at 19–20.) However, the Court found, supra pp. 5–6, that Josten plausibly 6 alleged both elements. Additionally, as stated in the Stafford opinion, the Ninth Circuit 7 recently held “[t]hough ‘a previously deceived plaintiff’ suing under the UCL, FAL, and 8 CLRA ‘may have standing to seek injunctive relief,’ the plaintiff must still show ‘that she 9 faces an imminent or actual threat of future harm caused by [the defendant’s] allegedly 10 false advertising.’” Lanovaz v. Twinings North America, Inc., 726 Fed. App’x 590, 590 11 (9th Cir. June 6, 2018) (quoting Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 970 12 (9th Cir. 2018)); (Stafford, 17-cv-1340-AJB-JLB, Doc. No. 41 at 9). Josten alleged he 13 “anticipates filling future prescriptions for RSP Generics at a Rite Aid pharmacy, and thus 14 faces the prospect of paying additional inflated amounts in the future if Rite Aid continues 15 its wrongful conduct.” (Doc. No. 1 ¶ 18.) Thus, Josten has standing under the CLRA and 16 the UCL. 17 C. 18 Rite Aid asserts that Josten impermissibly based his UCL claims on breaches of 19 contract. (Doc. No. 15-1 at 23.) Rite Aid includes three reasons why the UCL claims should 20 be dismissed: (1) his damages arise from a breach of contract, (Id. at 24); (2) he failed to 21 allege restitutionary damages, (Id. at 25); and (3) he failed to allege a basis for either an 22 unlawful or an unfair UCL claim, (Id. at 26–27). 23 CLRA and UCL Standing UCL Claim i. Damages Based on Breach of Contract 24 Rite Aid argues that while Josten has not alleged a contractual obligation for it to 25 report its U&C prices to include the Rx Program, even if he did, “it could only be 26 contractual and therefore not for the basis of a UCL claim.” (Id. at 23.) However, as the 27 Court stated in its Stafford order, “California’s statutory unfair competition laws broadly 28 prohibits unlawful, unfair, and fraudulent business acts.” (Stafford, 17-cv-1340-AJB-JLB, 7 18-cv-0152-AJB-JLB 1 Doc. No. 41 at 11–12) (citing Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 2 1134, 1143 (2003)).) Josten alleges such acts occurred here. 3 ii. Restitution 4 Next, Rite Aid alleges Josten is seeking benefit of the bargain damages when the 5 UCL only permits restitutionary damages. (Doc. No. 15-1 at 25.) “A UCL action is 6 equitable in nature; damages cannot be recovered.” Korea Supply Co., 29 Cal. 4th at 1144. 7 However, “an individual may recover profits obtained to the extent that these profits 8 represent monies given to the defendant or benefits in which the plaintiff has an ownership 9 interest.” Id. at 1148. “[A]n order for restitution is one ‘compelling a UCL defendant to 10 return money obtained through an unfair business practice to those persons in interest from 11 whom the property was taken, that is, to persons who had an ownership interest in the 12 property or those claiming through that person.’” Id. at 1149 (quoting Krause v. Trinity 13 Management Services, Inc., 23 Cal. 4th 116, 126–27 (2000) (superseded by statute on other 14 grounds)). 15 Here, Josten asserts he indeed is seeking restitutionary damages and not benefit of 16 the bargain damages. (Doc. No. 19 at 27–28.) “Plaintiff alleges that Rite Aid ‘overcharged’ 17 him ‘by improperly collecting inflated copayments, coinsurance, or deductible amounts’ 18 (¶14) and that he ‘would not have paid the inflated prices absent Rite Aid’s deception.’ 19 ¶17.” (Id. at 27.) Josten continues, “[t]hese amounts are not ‘expectation’ or ‘benefit of the 20 bargain’ damages [ ] because they reflect the wrongfully acquired portion of the 21 copayments charged by Rite Aid – not the difference in the value of the prescription drugs 22 promised and the value of the drugs received.” (Id.) Indeed, courts have held seeking 23 overpayments is a valid form of restitution under the UCL. Salvato v. Saxon Mortg. Servs., 24 Inc., 10-cv-1151-JAH-NLS, 2011 WL 13182854, at *4 (S.D. Cal. Mar. 30, 2011) (“Here, 25 Plaintiffs seek restitution for the overpayments made to Defendant. . . . As discussed above, 26 Plaintiffs are not precluded from seeking recovery of the overpayments. Accordingly, 27 Defendant’s motion to dismiss the UCL claim is DENIED.”). Thus, the Court finds Josten 28 has sought permissible damages under the UCL. 8 18-cv-0152-AJB-JLB 1 iii. Unlawful Claim 2 Rite Aid argues Josten fails to specify an underlying violation of some law. 3 (Doc. No. 15-1 at 25–26.) The UCL’s unlawful prong prohibits “anything that can properly 4 be called a business practice and that at the same time is forbidden by law.” Cel-Tech 5 Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). Thus, the 6 UCL allows injured consumers to “borrow[] violations from other laws by making them 7 independently actionable as unfair competitive practices.” Korea Supply Co., 29 Cal. 4th 8 at 1143. At this juncture, because the underlying negligent misrepresentation and CLRA 9 claims are dismissed due to tolling, Josten’s unlawful claim under the UCL must fail. Thus, 10 the Court DISMISSES this claim without prejudice pending Josten’s amended motion. 11 iv. Unfair Claim 12 Rite Aid argues Josten’s key accusations fail to show that Rite Aid acted in an 13 “unjustified” or “unscrupulous” way. (Doc. No. 15-1 at 26.) Rite Aid also points to Josten’s 14 admission that it “disclosed the RSP prices prominently on its website and that it provided 15 all customers, including those with private insurance, the option of avoiding the allegedly 16 higher copayments by purchasing at the RSP price.” (Id.) 17 The unfair prong has been defined in various ways, including practices which offend 18 public policy, are immoral or unethical, or are oppressive or substantially injurious to 19 consumers. McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457, 1473 (2006). An 20 unfair practice can also be one in which the utility of the practice is outweighed by a 21 victim’s harm. South Bay Chevrolet v. Gen. Motors Acceptance Corp., 72 Cal. App. 4th 22 861, 886–87 (1999). Finally, it has also been defined as “a practice that is (i) substantially 23 injurious to the consumer, where (ii) the injury is not outweighed by countervailing benefits 24 to consumers or competition, and (iii) the injury is not one that consumers themselves could 25 reasonably have avoided.” Pirozzi v. Apple, Inc., 966 F. Supp. 2d 909, 922 (N.D. Cal. 26 2013). 27 In response, Josten asserts “that Rite Aid’s practices violate California public policy 28 and are therefore unfair under the UCL.” (Doc. No. 19 at 29.) Josten also notes that if he 9 18-cv-0152-AJB-JLB 1 adequately alleged an unlawful claim, his unfair claim would be necessarily sufficiently 2 pled. (Id. (citing EchoStar Satellite Corp. v. NDS Group PLC, No. SA CV03-0950, 2008 3 WL 4596644, at *5 (C.D. Cal. Oct. 15, 2008).) 4 Although the Court finds his unlawful claim fails, his unfair claim has been 5 sufficiently pled. Taking Josten’s allegations as true, which the Court is required to do at 6 this stage, purposefully mischarging insured consumers a higher price by failing to report 7 the price it charges its cash-customers—thus setting a higher U&C price scheme—violates 8 public policy and is injurious to consumers. While the gravity of harm is merely increased 9 medicinal costs, on balance, there is no countervailing benefit to the public to have a dual 10 pricing-scheme. Moreover, Rite Aid would not suffer a significant burden or cost by 11 reporting the lower Rx Program prices to calculate the U&C prices. Courts have held such 12 pricing tiers violate the unfair prong. See Smith v. State Farm Mutual Automobile Ins. Co., 13 93 Cal. App. 4th 700, 719 (2001) (“Examples of unfair business practices include: charging 14 a higher than normal rate for copies of deposition transcripts (by a group of certified 15 shorthand reporters), where the party receiving the original is being given an undisclosed 16 discount as the result of an exclusive volume-discount contract with two insurance 17 companies [citation]. . . .”) (internal quotes omitted). Thus, the Court finds Josten has 18 sufficiently pled an unfair claim under the UCL. 19 20 D. Tolling of the CLRA, Unjust Enrichment, and Negligent Misrepresentation Claims 21 Defendant argues Plaintiff’s causes of action for CLRA, unjust enrichment, and 22 negligent misrepresentation are time-barred by their respective statutes of limitations. 23 (Id. at 21.) Plaintiff’s complaint alleges that the statute of limitations should be tolled 24 because Plaintiff and the Class members could not have discovered the alleged unlawful 25 activities at an earlier date by exercise of reasonable diligence because Rite Aid employed 26 deceptive practices and techniques of secrecy to avoid detection of its activities. 27 (Doc. No. 1 ¶ 89.) 28 “In a federal diversity action based on alleged violations of state law, the state statute 10 18-cv-0152-AJB-JLB 1 of limitations controls.” Adams v. I–Flow Corp., No. CV09–09550 R(SSx), 2010 WL 2 1339948, at *3 (C.D. Cal. Mar. 30, 2010) (citing Bancorp Leasing and Financial Corp. v. 3 Agusta Aviation Corp., 813 F.2d 272, 274 (9th Cir. 1987)). The statute of limitations for 4 the foregoing causes of action are as follows: (1) CLRA—three years, Cal. Civ. Code 5 § 1783; (2) unjust enrichment—three years, In re Maxim Integrated Prod., Inc., Deriv. Lit., 6 574 F. Supp. 2d 1046, 1072 (N.D. Cal. 2008); and (3) negligent misrepresentation—three 7 years, Cal. Civ. Proc. Code § 338(d). 8 Plaintiff alleges he has purchased generic versions of medications for personal use 9 from Defendant in California between 2014 and present. (Doc. No. 1 ¶ 16.) Thus, Plaintiff’s 10 CLRA, unjust enrichment, and negligent misrepresentation claims would be time-barred 11 in 2017. Plaintiff filed his complaint in 2018, a year after the statute of limitations for his 12 various claims. However, Josten alleges these claims should be tolled because he had 13 “neither actual nor constructive knowledge of the facts constituting their claims for relief 14 until recently.” (Id. ¶ 79.) In his opposition, he argues he is entitled to rely on the discovery 15 rule because Rite Aid’s purported misrepresentations were done in secret and could not 16 have been discovered earlier. (Doc. No. 19 at 30.) Additionally, Josten contends he could 17 not have discovered through the exercise of reasonable diligence, the existence of the 18 scheme at an earlier point in time. (Doc. No. 1 ¶ 80.) 19 “In order to invoke [the delayed discovery exception] to the statute of limitations, 20 the plaintiff must specifically plead facts which show (1) the time and manner of discovery 21 and (2) the inability to have made earlier discovery despite reasonable diligence.” In re 22 Conseco Ins. Co. Annuity Mktg. & Sales Practices Litig., No. C–05–04726 RMW, 2008 23 WL 4544441, at *8 (N.D. Cal. Sept. 30, 2008) (quoting Saliter v. Pierce Bros. Mortuaries, 24 81 Cal. App. 3d 292, 296 (1978)). “The burden is on the plaintiff to show diligence, and 25 conclusory allegations will not withstand demurrer.” E–Fab, Inc. v. Accountants, Inc. 26 Services, 153 Cal. App. 4th 1308, 1319 (2007) (quoting McKelvey v. Boeing North 27 American, Inc., 74 Cal. App. 4th 151, 160 (1999)). To rely on the delayed discovery rule, 28 “the plaintiff must plead facts showing: ‘(a) Lack of knowledge. [sic] (b) Lack of means of 11 18-cv-0152-AJB-JLB 1 obtaining knowledge (in the exercise of reasonable diligence the facts could not have been 2 discovered at an earlier date). [sic] (c) How and when he did actually discover the fraud or 3 mistake.’” Keilholtz v. Lennox Hearth Products Inc., No. C 08–00836 CW, 2009 WL 4 2905960, *3 (N.D. Cal. Sept. 8, 2009) (quoting General Bedding Corp. v. Echevarria, 947 5 F.2d 1395, 1397 (9th Cir. 1991)). 6 A plaintiff seeking to take advantage of the delayed discovery rule must plead “the 7 time and manner of discovery.” E–Fab, 153 Cal. App. 4th at 1319. Here, Josten fails to 8 allege the details of how he uncovered Rite Aid’s alleged scheme. He only states that he 9 had neither actual nor constructive knowledge of the facts constituting the claims for relief 10 until recently. (Doc. No. 1 ¶ 27.) Thus, his complaint does not adequately plead tolling 11 under the delayed discovery rule. The Court DISMISSES these claims with leave to 12 amend. Accordingly, the Court declines to analyze the sufficiency of Josten’s CLRA and 13 unjust enrichment claims, however, points the parties to its prior order in Stafford for 14 guidance. (See Stafford, 17-cv-1340-AJB-JLB, Doc. No. 41 at 9–11, 15–16.) 15 IV. LEAVE TO AMEND 16 Courts are urged to grant leave to amend freely when justice so requires. Fed. R. 17 Civ. P. 15(a)(2). Leave to amend should be granted if it appears possible that the plaintiff 18 can correct the complaint’s deficiency. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 19 701 (9th Cir. 1988). Thus, the Court GRANTS leave to amend the tolling section only so 20 Josten can allege specific facts concerning “the time and manner of discovery” in 21 accordance with the Court’s instruction herein. E–Fab, 153 Cal. App. 4th at 1319. 22 V. CONCLUSION 23 The Court GRANTS Rite Aid’s motion to dismiss. (Doc. No. 15.) The Court finds 24 Josten plausibly alleged claims for negligent misrepresentation and under the UCL’s unfair 25 prong. Further, Josten has alleged standing under the UCL and the CLRA. However, the 26 Court also finds that Josten failed to specifically allege the discovery of the scheme such 27 that his claims under the CLRA, for negligent misrepresentation, and unjust enrichment 28 cannot be tolled as currently pled. Accordingly, those claims are dismissed leaving his 12 18-cv-0152-AJB-JLB 1 UCL unlawful claim to be dismissed as well since he has not pleaded an underlying 2 violation. Nevertheless, the Court GRANTS Josten leave to amend. The first amended 3 complaint is due by December 11, 2018. 4 5 IT IS SO ORDERED. Dated: November 20, 2018 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 18-cv-0152-AJB-JLB

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.