ORDER GRANTING IN PART AND DENYING IN PART REQUEST FOR JUDICIAL NOTICE, GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS, AND DENYING MOTION TO STRIKE
ECF Nos., 36, 37, 38.
JON S. TIGAR, District Judge.
Before the Court is Defendant Seventh Generation, Inc.'s Motion to Strike, Motion to Dismiss Plaintiffs' Complaint, and Request for Judicial Notice. ECF Nos. 36, 37, 38. For the reasons stated below, the Court grants in part and denies in part Defendant's Request for Judicial Notice, grants in part and denies in part Defendant's Motion to Dismiss, and denies Defendant's Motion to Strike.
I. BACKGROUND
A. Factual History
For the purposes of deciding these motions, the Court accepts as true the following factual allegations from Plaintiffs' Complaint. ECF No. 1.
Defendant Seventh Generation, Inc. ("Seventh Generation") manufactures, markets, and sells cleaning supplies, paper products, and personal care products that are labeled "natural."
Plaintiffs Maggie Tsan and Erica Wildstein purchased the products because they "believed they were natural products."
Plaintiffs allege that Defendant labeled the products as "natural" to persuade consumers that the products only contained natural ingredients and that Defendant "profited enormously from its false and misleading marketing."
B. Procedural History
Plaintiffs commenced this action by filing a complaint on January 14, 2015. ECF No. 1. Defendant filed a Motion to Transfer Venue on February 27, 2015, ECF No. 18, and the motion was denied on June 17, 2015. ECF No. 33. Defendant filed its Motion to Strike, Motion to Dismiss Plaintiffs' Complaint, and Request for Judicial Notice on July 6, 2015. ECF. Nos. 36, 37, 38. Plaintiffs assert the following claims for relief: (1) violation of the Magnuson-Moss Warranty Act; (2) violation of the Consumers Legal Remedies Act, California Civil Code § 1750, et seq.; (3) deceptive advertising, pursuant to California Business & Professions Code § 17500, et seq.; (4) unfair business practices, pursuant to California Business and Professions Code § 17200 et seq.; (5) deceptive advertising, pursuant to Florida Statute § 501.201, et seq.; (6) breach of express warranty. ECF No. 1.
C. Jurisdiction
Plaintiffs assert, and Defendant does not deny, that Plaintiffs are citizens of the States of California and Florida and Defendant is a citizen of the State of Vermont.
II. REQUEST FOR JUDICIAL NOTICE
Although a court's review on a motion to dismiss is usually limited to the allegations in the pleadings, there are two exceptions to this general rule.
Seventh Generation requests that the Court take judicial notice of: (1) 7 C.F.R. § 3202.1; (2) 7 C.F.R. § 205.100; (3) the Natural Products Association ("NPA") Standard and Certification for Personal Care Products (available online), for the fact of its existence and not the truth of what it asserts; (4) the NPA Standard and Certification for Home Care Products (available online), for the fact of its existence and not the truth of what it asserts; and (5) the Declaration of Timothy John Fowler authenticating and attaching Exhibits 1-23, which are copies of Seventh Generation's product image files that include the front and back labels corresponding to the exhibits in the complaint. ECF No. 38 at 2.
Plaintiffs do not oppose the first four of Defendant's requests. The Court finds 7 C.F.R. § 3202.1 and § 205.100 appropriate for judicial notice as documents in the public record whose accuracy cannot reasonably be questioned.
Plaintiffs oppose Seventh Generation's request for judicial notice of Timothy John Fowler's declaration and the accompanying image files of front and back labels. ECF No. 45 at 1. They question the accuracy of the labels, arguing it is unclear if the Defendant's exhibits represent every label produced by Defendant and contend that there is no indication of the time periods the labels were used.
The Ninth Circuit has "recognized consistently that the district court may, but is not required to incorporate documents by reference." Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1159 (9th Cir. 2012). The incorporation by reference doctrine "is a narrow exception aimed at cases interpreting, for example, a contract. It is not intended to grant litigants license to ignore the distinction between motions to dismiss and motions for summary judgment."
Here, Plaintiffs strongly dispute the authenticity of the labels. ECF No. 45 at 2-3. Although there is a declaration accompanying the images, the Court nevertheless finds there is sufficient justification for Plaintiffs to dispute their authenticity. The images of the backs of the labels are proofs, contain dates that do not correspond to the front labels offered by Plaintiffs, and have approval boxes that are not checked. The Court therefore denies without prejudice Defendant's request for judicial notice of the declaration of Timothy John Fowler and the accompanying images.
III. MOTION TO DISMISS
Seventh Generation moves to dismiss Plaintiffs' complaint on several grounds: (1) Plaintiffs fail to allege a plausible theory of deception; (2) Plaintiffs' Magnuson-Moss Warranty Act ("MMWA") claim fails; (3) Plaintiffs fail to state their claims with specificity; and (4) Plaintiffs' express warranty claim fails as a matter of law. ECF No. 37 at i. The Court considers these arguments in turn.
A. Legal Standard
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Fed. R. Civ. P. 8(a)(2);
Fraud claims are subject to a heightened pleading standard. "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "Rule 9(b) demands that the circumstances constituting the alleged fraud `be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong."
B. Plausibility of Plaintiffs' Claims
Claims of false or misleading advertising and unfair business practice are governed by the "reasonable consumer" test.
It is a "rare situation" when courts ought to grant a motion to dismiss.
Seventh Generation argues that the present case is the "rare situation" in which the Court may conclude as a matter of law that a reasonable consumer would not be deceived. It first argues that its use of the word "natural" is not plausibly misleading when read in the context of the other representations on the labels. ECF No. 37 at 7. It contends that its product labels sufficiently provide a definition of "natural" because many of them use the USDA's "Certified Biobased" label on the front, and further explain what it means to be "natural" and "Biobased" on the back.
As an initial matter, because the Court has denied Defendant's motion for judicial notice regarding its images of back labels, it cannot consider much of the material on which Defendant's argument depends. Even setting this problem aside, however, the argument is unpersuasive. It is certainly possible that using a "Biobased" label or an ingredient list sufficiently explains (or disclaims) the word "natural" to a reasonable consumer, but this is an issue that should ultimately be resolved by the factfinder. The mere presence of such additional information is not enough to dismiss Plaintiffs' claims as a matter of law.
Next, Seventh Generation argues that Plaintiffs' proposed definition of "natural" as not containing any "synthetic, highly processed, and/or non-natural" ingredients is inherently implausible when applied to its products. ECF No. 37 at 12. It argues that "home cleaning and personal care products . . . plainly `do not exist in nature' — nor resemble any naturally occurring substances — but instead are self-evidently processed and manufactured."
The Court concludes that neither
In
Last, Defendant argues Plaintiffs' citation to the USDA and NPA definitions of "organic" and natural" are not helpful and may even be misleading because they apply to food products and not cleaning products. ECF No. 37 at 14. However, Plaintiffs look to USDA and NPA sources only for guidance as to what reasonable consumers would consider natural, ECF No. 1 ¶ 8-9, and allege that a reasonable consumer would consider products labeled "natural" to be free of "synthetic, highly processed, and/or non-natural ingredients."
Accordingly, the Court finds that Plaintiffs allege with sufficient plausibility that a reasonable consumer is likely to be deceived by the term "natural," and denies the motion to dismiss on these grounds.
C. Magnuson-Moss Warranty Act
Defendant seeks dismissal of Plaintiffs' Magnuson-Moss Warranty Act ("MMWA") claim, arguing that their products are not "defective" even if they are incorrectly labeled as "natural." ECF No. 37 at 19. Plaintiffs do not oppose this claim and voluntarily agree to dismiss their MMWA claims without prejudice. ECF No. 47 at 4 n.2. Accordingly, the Court grants Defendant's motion to dismiss without prejudice Plaintiff's MMWA claim and nationwide class allegations based upon that claim.
D. Specificity of the Pleadings
Defendant argues that Plaintiffs have failed to state their claims with the required specificity under Federal Rule of Civil Procedure 8(a)(2), as well as the heightened particularity necessary for claims related to fraud under Federal Rule of Civil Procedure 9(b). ECF No. 37 at 22.
1. Rule 9(b)
Federal Rule of Civil Procedure 9(b) requires that a party alleging fraud "must state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b); ECF No. 37 at 5. "Rule 9(b) demands that the circumstances constituting the alleged fraud `be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.'"
Here, Plaintiffs specify which of Seventh Generation's product labels contained misrepresentations, attach photograph exhibits of the challenged labels to the complaint, and include links and quotes from Defendant's website.
2. Rule 8(a)(2)
Both parties agree Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Fed. R. Civ. P. 8(a)(2);
E. Breach of Warranty
"[T]o prevail on a breach of express warranty claim, the plaintiff must prove (1) the seller's statements constitute an affirmation of fact or promise or a description of the goods; (2) the statement was part of the basis of the bargain; and (3) the warranty was breached."
The Court has already rejected the contention that Plaintiffs' allegations do not plausibly meet the reasonable consumer standard as a matter of law. Plaintiffs allege that the use of the word "natural" in Defendant's labeling "constitute express warranties and became part of the basis of the bargain between Plaintiffs and the Multi-State Class members . . . and Defendant." ECF No. 1 ¶ 93. Plaintiffs further allege that Defendant breached its duty because the products were not "natural." Id. ¶ 96. These allegations are sufficient to state a claim for breach of express warranty.
F. Punitive Damages Under the Consumer Legal Remedies Act
The parties agree that to sustain an action for punitive damages under the CLRA Plaintiffs must allege facts sufficient to show that the Defendant is guilty "of oppression, fraud, or malice." Cal. Civ. Code § 3294(a). "`Malice' means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others." Cal. Civ. Code § 3294(c)(1). "`Fraud' means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury." Cal. Civ. Code § 3294(c)(3).
Defendant argues that Plaintiffs failed to allege that Defendant acted maliciously. ECF No. 37 at 23. However, Plaintiffs state in their complaint that "Defendant knew, or reasonably should have known, that its representations concerning the Products are untrue and misleading, since they [sic] know how the Products and their ingredients are manufactured." ECF No. 1 ¶ 72. This is sufficient to allege malice.
Defendant also argues that Plaintiffs failed to allege that Defendant acted with the intent to deceive. ECF No. 37 at 23. It contends that its representations on its website that certain ingredients are synthetic undermine any claim of intent to defraud or injure.
IV. MOTION TO STRIKE
Federal Rule of Civil Procedure 12(f) authorizes the Court to "strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "The function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial . . ."
Seventh Generation requests that the Court strike four elements from Plaintiffs' complaint. First, it asks the Court to strike allegations concerning USDA regulations because the USDA regulations apply only to agricultural and meat products. ECF No. 36 at 4. Second, it requests that the Court strike information referring to standards from the Natural Products Association ("NPA") because the NPA is a private industry group, not a regulatory body.
The Court disagrees with Seventh Generation. These sources provide information as to what the word "natural" may mean to consumers as well as the ingredients that may be in Defendant's products. This information is clearly at least material to the question of how a reasonable consumer would interpret the word "natural" on Defendant's product labels. The motion to strike is therefore denied.
CONCLUSION
For the reasons explained above, the request for judicial notice is granted in part and denied without prejudice in part. The motion to dismiss is granted in regards to Plaintiffs' MMWA claims and denied in regards to all other claims. The motion to strike is denied.
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