Friday, January 04, 2013

Purchaser has standing to challenge "All-Natural" on multiple product flavors after buying one

Colucci v. ZonePerfect Nutrition Co., 2012 WL 6737800 (N.D. Cal.)

James Colucci and Kimberly Sethavanish sued ZonePerfect on behalf of a putative class, alleging that its “All–Natural Nutrition Bars,” were not in fact all-natural, in violation of the Magnuson-Moss Warranty Act and the usual California statutes, and also claiming common-law fraud and restitution based on quasi-contract.  They alleged that all of ZonePerfect’s nutrition bars contained at least one of ten allegedly non-natural ingredients, including ascorbic acid, cocoa processed with alkali, and xanthan gum.  

Sethavanish is engaged to Colucci, and while he was deployed in the military, she sent him a monthly care package, which at his request included two multi-bar packs per month, including the Chocolate Peanut Butter flavor.  Colucci allegedly believed and relied on the “all-natural” representation on the label when he asked Sethavanish to buy them for him; Sethavanish allegedly wouldn’t have agreed to buy the bars had they known the bars weren’t all-natural.

The court held that Sethavanish had standing as to all twenty bar flavors, but that Colucci lacked standing.  Even if she didn’t purchase each flavor, the key question for purposes of a class action was whether there was sufficient similarity between the products purchased and not purchased.  Though one court denied standing as to products that “differed from the purchased product in only minor, arguably trivial ways,” Dysthe v. Basic Research LLC, CV 09–8013 AG SSX, 2011 WL 5868307 (C.D. Cal. June 13, 2011) (denying standing as to an unbought weight-loss pill marketed as “Relacore” where plaintiff bought only “Relacore Extra,” which had only minor differences in packaging and ingredients; “[J]ust because an Old Fashioned and a Manhattan both have bourbon doesn't mean they're the same drink.”), other courts found standing as to “unbought products that differed only trivially from the purchased product, as well as to unbought products that differed fairly substantially,” such as Koh v. S.C. Johnson & Son, Inc., C–09–00927 RMW, 2010 WL 94265 (N.D. Cal. Jan. 6, 2010) (two cleaning sprays, one a window cleaner and the other carpet stain remover, both with the same allegedly false badge of eco-friendliness).  

The court didn’t resolve the tension between the cases because “the challenged products here are sufficiently similar under any test—more similar than the weight-loss pills in Dysthe and at least as similar as the ice cream brands in Dreyer's Grand. The different flavors of Defendant's nutrition bars are more or less fungible when viewed from the perspective of a consumer considering buying one or the other; any preference for one flavor versus another could rest only on personal idiosyncrasies of taste, diet, or allergy.”  Here, the products were all of the same kind: nutrition bars.  They had a uniform size and shape.  There were some differences in ingredients, but “the similarities are more striking: six of the nine challenged ingredients appear in all twenty nutrition bar flavors. Most importantly, all twenty flavors bear the same challenged label: ‘All–Natural Nutrition Bars.’”  Thus, Sethavanish had standing for both Article III and UCL purposes to sue for alleged mislabeling of all twenty nutrition bar flavors.

Colucci, however, did not.  He didn’t buy the products, nor were they purchased with money in which he had a legal interest.  He may have been the “beneficiary” of the purchases in a colloquial sense, but he wasn’t a third-party beneficiary as a matter of law.  “While it is not required for both parties to intend to benefit the third party, it is required that the promisor understand the promisee—here, Ms. Sethavanish—to have such intent. Even assuming that Defendant was the promisor (as compared to the retailer who actually Ms. Sethavanish the bars), nothing suggests that Defendant knew Ms. Sethavanish intended to benefit Mr. Colucci when she bought the bars or, indeed, knew of Mr. Colucci's existence.”

The Magnuson-Moss Warranty Act claim was also dismissed.  The court initially rejected ZonePerfect’s argument that plaintiffs failed to meet the jurisdictional requirements of the law, which provide that there’s no federal jurisdiction over actions brought on behalf of a class if the number of named plaintiffs is less than one hundred.  But that was irrelevant, since the court had federal jurisdiction as a result of CAFA (and of course this makes sense; ZonePerfect had actually removed the case from state court).  On the merits, though, the claim failed.  There was no alleged warranty of a “defect free” product: plaintiffs allged that “All-Natural” was a written representation that the bars were free of the defect of being synthetic or artificial.  “The identical argument has been rejected in many other cases…. Plaintiffs fail to marshal any persuasive authority that artificial or synthetic ingredients in otherwise unobjectionable food products amount to an actionable defect under the MMWA.”

ZonePerfect also argued that the state-law claims were conflict preempted, but the only authority it relied on had been vacated.  (Degelmann v. Advanced Med. Optics, Inc., 659 F.3d 835 (9th Cir.2011), vacated, 699 F.3d 1103 (9th Cir.2012)). In the absence of clear authority, the court declined to resolve the preemption argument at this time, though ZonePerfect could raise preemption arguments later.  

The court also rejected ZonePerfect’s Iqbal/Rule 9(b) challenge.  As to plausibility, the statutory claims turned on how a reasonable consumer would react to the label.  That issue is generally not resolvable on the pleadings.  As for the allegations subject to Rule 9(b), ZonePerfect argued that plaintiffs didn’t allege with particularity “how the purchased nutrition bars fell short of their advertised qualities, in other words, how the advertising was false. The suggestion is unavailing. Plaintiffs allege that the bars were labeled ‘All–Natural’ but in fact were not.” 

ZonePerfect argued that the central premise of the complaint was false—the “synthetic” ingredients were not in fact “unnatural” in the sense of not being found “in nature.”  Plaintiffs admitted that certain of the challenged ingredients are naturally occurring compounds (for instance, vitamins) or “common and normally expected to be in foods.”  This allegedly made the ingredients, “if not quite ‘natural,’ then not unnatural.”  This was a factual dispute not amenable to resolution at the pleading stage, despite ZonePerfect’s request for judicial notice of screenshots from the websites of purportedly health-conscious grocery stores mentioning ingredients used in ZonePerfect’s bars.  Though these allegedly showed that it was implausible that any reasonable consumer would be deceived by the “All-Natural” claim, that determination wasn’t appropriate on a motion to dismiss.  Plausibility is not probability.

The court also rejected ZonePerfect’s challenge to the CLRA claim.  ZonePerfect argued that the 30-day notice required prior to the commencement of a CLRA action for damages came too late because plaintiffs sent a demand letter on August 30, 2011 but then filed suit in California Superior Court on September 14, 2011.  But the action now before the court was filed on April 26, 2012, after a voluntary dismissal that had no preclusive effect; it was filed long after the 30-day notice period.  And the letter had sufficient detail to “give the manufacturer or vendor sufficient notice of alleged defects to permit appropriate corrections or replacements,” as required.

The court also declined to dismiss the claim for restitution based on quasi-contract, in the alternative to the tort claims.  Courts have been all over the map on whether a restitution claim is available in these circumstances.  Some say that restitution/unjust enrichment is not a cause of action but a remedy. Others say that it’s neither a claim nor a remedy, but a principle.  Still others say that it’s a cause of action, but one that can’t be pled alongside claims for breach of contract or tort.  Others disagree and find that it can be pled in those circumstances, but only as an alternative or fallback.  Others ignore the issue entirely and look at the elements of the claim.  “The outcome of some motions appears to have turned on the words used in the caption to describe the cause of action.”  (Heh.  I love restrained judicial annoyance.  Hmm, that came out wrong.  I don’t like annoyed judges as such!)  After its review of the cases, this court was persuaded that restitution/unjust enrichment claims can be pled as an alternative avenue of relief, but cannot afford relief if other claims do.

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