Opinion
Case No. 20-cv-02732-JST
2021-02-16
Steve DAILEY, Plaintiff, v. A&W CONCENTRATE COMPANY, et al., Defendants.
George Volney Granade, Reese LLP, Los Angeles, CA, Spencer Sheehan, Sheehan & Associates, P.C., Great Neck, NY, Sue Jung Nam, Michael Robert Reese, Reese LLP, New York, NY, for Plaintiff. Creighton R. Magid, Pro Hac Vice, Dorsey and Whitney LLP, Washington, DC, Kent Jeffrey Schmidt, Navdeep Kumar Singh, Dorsey & Whitney LLP, Costa Mesa, CA, for Defendants.
George Volney Granade, Reese LLP, Los Angeles, CA, Spencer Sheehan, Sheehan & Associates, P.C., Great Neck, NY, Sue Jung Nam, Michael Robert Reese, Reese LLP, New York, NY, for Plaintiff.
Creighton R. Magid, Pro Hac Vice, Dorsey and Whitney LLP, Washington, DC, Kent Jeffrey Schmidt, Navdeep Kumar Singh, Dorsey & Whitney LLP, Costa Mesa, CA, for Defendants.
ORDER DENYING MOTION TO DISMISS AND TERMINATING AS MOOT MOTION TO STAY DISCOVERY
Re: ECF Nos. 40, 49
JON S. TIGAR, United States District Judge
Before the Court are Defendants’ motion to dismiss the amended complaint, ECF No. 40, and Defendants’ motion to stay discovery pending resolution of the motion to dismiss, ECF No. 49. The Court will deny the motion to dismiss and terminate as moot the motion to stay discovery.
Plaintiff Steve Dailey brings this putative class action to challenge the use of "Made with Aged Vanilla" on Defendants’ A&W Root Beer and A&W Cream Soda products. The parties do not dispute that the Court has jurisdiction under 28 U.S.C. § 1332(d)(2).
In Sharpe v. A&W Concentrate Company , which concerns the same factual allegations at issue in this case, the district court concluded that it "cannot [be said] as a matter of law that no reasonable consumer would be misled by defendants’ labeling of its products." 481 F.Supp.3d 94, 100–06 (E.D.N.Y. Aug. 24, 2020). Defendants acknowledge that this case is "a near-duplicate" of Sharpe , ECF No. 40 at 6, but they argue that Sharpe is distinguishable because that court relied "on the Second Circuit's opinion in Mantikas v. Kellogg Co. , 910 F.3d 633 (2d Cir. 2018), which does not set forth the applicable law in this Circuit," ECF No. 50 at 6. However, Defendants identify only one purported difference in governing law: that, "[i]n the Ninth Circuit, ... a label statement truthfully asserting that a product contains a particular ingredient is not deceptive as a matter of law." Id. at 5.
This misstates the law. Contrary to Defendants’ representation, the Ninth Circuit has explained that "[t]he California Supreme Court has recognized that [California's consumer protection laws] prohibit not only advertising which is false, but also advertising which, although true , is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public." Williams v. Gerber Prods. Co. , 552 F.3d 934, 938 (9th Cir. 2008) (quotation marks, alteration marks, and citations omitted) (emphasis added). For the reasons stated in Sharpe , Plaintiffs’ allegations are sufficient to withstand a motion to dismiss.
Likewise, in one of the Northern District of California cases relied on by Defendants, the court noted that "Plaintiff correctly argues that a representation need not be false to mislead a reasonable consumer." Romero v. Flowers Bakeries, LLC , No. 14-cv-05189-BLF, 2016 WL 469370, at *7 (N.D. Cal. Feb. 8, 2016).
Defendants suggest that items for which they have requested judicial notice – in particular, the Allied Technologies test results referenced in the complaint and the Sharpe court's oral remark that "plaintiff does not have an expert to say ... I have confirmed there is no vanilla" in the challenged products – require a different conclusion. ECF No. 50 at 6-7. They do not, for at least the following reasons. First, the test results are not contrary to the complaint's allegations that three marker compounds allegedly used to authenticate the presence of real vanilla are not present in the disputed products. See ECF No. 17-2 at 15-18; ECF No. 33 ¶¶ 24-25. In addition, although a court may "take[ ] judicial notice of another court's opinion, it may do so not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity." Lee v. City of Los Angeles , 250 F.3d 668, 690 (9th Cir. 2001) (quotation marks and citation omitted). It would also be improper for the Court to consider expert testimony, or the impacts thereof, at the pleadings stage. Finally, even if there might be some amount of actual vanilla in the disputed products, that would not warrant dismissal of Plaintiffs’ claims; as noted above, California law protects consumers from truthful but misleading statements. Defendants’ argument regarding FDA regulations is unclear. They argue that there is no private right of action for alleged violations of FDA regulations, but Plaintiffs do not bring a claim under the regulations. To the extent Defendants are attempting to argue preemption, the Court denies their motion. See, e.g., Clancy v. The Bromley Tea Co. , 308 F.R.D. 564, 573-75 (N.D. Cal. 2013) (holding that federal law does not "preempt[ ] a California citizen from bringing suit to enforce the state's food labeling requirements, which are identical to the federal requirements").
Defendants also have not persuaded the Court that, as a matter of law, their labeling complies with FDA regulations and, in particular, 21 C.F.R. § 101.22(i)(2). In the regulation's notice and comment, the Commissioner concluded that "[d]esignation of a soft drink as a ... root beer ... does not constitute a flavor representation." 38 Fed. Reg. 33284, 33285 (Dec. 3, 1973). But this conclusion does not, as Defendants argue, mean that a "root beer" can have no "characterizing flavor"; it implies only that "root beer" is not itself that flavor. Section 101.22(i) states that a "flavor shall be considered the characterizing flavor" if:
the label, labeling, or advertising of a food makes any direct or indirect representations with respect to the primary recognizable flavor(s), by word, vignette, e.g., depiction of a fruit, or other means, or if for any other reason the manufacturer or distributor of a food wishes to designate the type of flavor in the food other than through the statement of ingredients.
21 C.F.R. § 101.22(i). On its face, this language would appear to apply to Defendants’ use of "Made with Aged Vanilla," and Defendants have not demonstrated that vanilla must only be considered an ingredient and cannot be a characterizing flavor of root beer or cream soda. Cf. 21 C.F.R. §§ 101.22(i)(1)-(2) (using vanilla as an example of a "characterizing flavor").
Finally, the Court rejects Defendants’ three standing arguments. First, Dailey has sufficiently alleged economic injury. Davidson v. Kimberly-Clark Corp. , 889 F.3d 956, 966 (9th Cir. 2018) ("To properly plead an economic injury, a consumer must allege that she was exposed to false information about the product purchased, which caused the product to be sold at a higher price, and that she would not have purchased the goods in question absent this misrepresentation." (quotation marks and citation omitted)). Second, he has sufficiently alleged standing to seek injunctive relief by alleging that he would purchase the products again in the future if they were not deceptively labeled. E.g., Vizcarra v. Unilever United States, Inc. , No. 4:20-cv-02777-YGR, 2020 WL 4016810, at *6 (N.D. Cal. July 16, 2020) ("[A]bsent injunctive relief, Vizcarra could suffer future injury because she would not know based on the ice cream's ‘natural vanilla’ labeling and marketing whether the ice cream's vanilla flavor is derived from the vanilla plant."). Third, it is premature to consider Dailey's ability to represent a class who purchased different products than he did. See Clancy , 308 F.R.D. at 569-71 (concluding that this question is more appropriately addressed as part of the class certification analysis).
The complaint could have more clearly alleged that the alleged misrepresentation caused the product to be sold at a premium, but this is a reasonable inference from the allegation that Dailey "would not have purchased the Product at a premium price or bought the Product at all" if he had known the truth. ECF No. 33 ¶ 43.
However, Dailey's allegation that he would purchase the products again if they "were reformulated such that the vanilla flavor came exclusively from the vanilla plant" is not sufficient to allege standing for injunctive relief. ECF No. 33 ¶ 43; see, e.g., Prescott v. Nestle USA, Inc. , No. 19-cv-07471-BLF, 2020 WL 3035798, at *6 (N.D. Cal. June 4, 2020) (dismissing claim for injunctive relief where "Plaintiffs have not alleged that they would purchase the Product absent the alleged misleading labeling" and instead "[made] clear that they do not wish to purchase ‘fake’ white chocolate"). Defendants argue that it is implausible that Dailey would purchase a non-reformulated product, but the complaint alleges that, if not for the allegedly misleading labeling, he "would not have purchased the Product at a premium price or bought the Product at all" – not that he definitely would not have purchased the product. ECF No. 33 ¶ 43.
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For the above reasons, Defendants’ motion to dismiss is denied. Defendants’ motion to stay discovery pending resolution of the motion to dismiss is terminated as moot.