Cheslow v. Ghirardelli Chocolate Company

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA

7 LINDA CHESLOW, et al., Case No. 19-cv-07467-PJH 8 Plaintiffs,

9 v. ORDER DENYING MOTION TO ALTER OR AMEND JUDGMENT 10 GHIRARDELLI CHOCOLATE COMPANY, Re: Dkt. No. 54 11 Defendant. 12

13 14 Before the court is plaintiffs’ motion to alter or amend judgment pursuant to 15 Federal Rule of Civil Procedure 59(e). The matter is fully briefed and suitable for 16 decision without oral argument. Having read the parties’ papers and carefully considered 17 their arguments and the relevant legal authority, and good cause appearing, the court 18 hereby rules as follows. 19 BACKGROUND 20 On September 19, 2019, plaintiffs Linda Cheslow and Steven Prescott (“plaintiffs”) 21 filed a complaint in Sonoma County Superior Court, which defendant Ghirardelli 22 Chocolate Co. (“Ghirardelli” or “defendant”) removed to federal court on November 13, 23 2019. Dkt. 1. The complaint asserted three causes of action: (1) violation of California 24 Unfair Competition Law Business & Professions Code § 17200 et seq.; (2) False and 25 Misleading Advertising in violation of Business & Professions Code § 17500 et seq.; and 26 (3) violation of California Consumer Legal Remedies Act, Civil Code § 1750 et seq. Dkt. 27 1-1. 1 dismissed the complaint with leave to amend. See Dkt. 34. On April 29, 2020, plaintiffs 2 filed their First Amended Complaint (“FAC”) alleging the same three causes of action as 3 the original complaint. Dkt. 36. On July 17, 2020, the court granted defendant’s second 4 motion to dismiss the FAC, dismissed the FAC with prejudice, (Dkt. 52), and entered 5 judgment on behalf of defendant, (Dkt. 53). Plaintiffs now seek to alter or amend the 6 court’s judgment. Dkt. 54. They have also filed a notice of appeal. Dkt. 55. 7 The court’s April 8th order contains a more thorough discussion of the factual 8 background of this case. Dkt. 34 at 2–4. For purposes of this order, plaintiffs seek to 9 certify a class action of all persons who purchased Ghirardelli’s “Premium Baking Chips 10 Classic White Chips” (the “product”) in the United States or, alternatively, in California. 11 FAC ¶¶ 1, 62. 12 DISCUSSION 13 A. Legal Standard 14 Rule 59(e) of the Federal Rules of Civil Procedure permits a party to seek an order 15 altering or amending a judgment. Rule 59(e) does not describe the conditions under 16 which a court should reconsider a prior decision, but under Ninth Circuit authority, it is 17 appropriate to alter or amend a judgment under Rule 59(e) if “(1) the district court is 18 presented with newly discovered evidence, (2) the district court committed clear error or 19 made an initial decision that was manifestly unjust, or (3) there is an intervening change 20 in controlling law.” United Nat. Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 780 21 (9th Cir. 2009) (quoting Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 22 2001)). 23 “Since specific grounds for a motion to amend or alter are not listed in the rule, the 24 district court enjoys considerable discretion in granting or denying the motion. However, 25 reconsideration of a judgment after its entry is an extraordinary remedy which should be 26 used sparingly.” McDowell v. Calderon, 197 F.3d 1253, 1255 n.1 (9th Cir. 1999) (per 27 curiam) (quoting 11 Charles Alan Wright et al., Fed. Practice & Proc., § 2810.1 (2d ed. 1 B. Analysis 2 Plaintiffs argue that the Ninth Circuit’s opinion in Moore v. Mars Petcare US, Inc., 3 966 F.3d 1007 (9th Cir. 2020), requires the court to alter or amend its judgment because 4 Moore represents new controlling authority issued after judgment that demonstrates the 5 court’s dismissal was in error. Mtn. at 2. Plaintiffs also contend that, independent of 6 Moore, the court committed clear error by conducting a Daubert hearing concerning 7 plaintiffs’ consumer survey and then discrediting the survey without actual briefing and 8 discovery. Id. 9 At the outset, the court notes that the primary basis for plaintiffs’ Rule 59(e) motion 10 is that Moore represents a change in controlling law. Indeed, in their reply brief, plaintiffs 11 contend that Moore changes Ninth Circuit law. Reply at 2. That contention is inaccurate. 12 As the Ninth Circuit noted, federal courts sitting in diversity apply state law, here 13 California law. Moore, 966 F.3d at 1016 (citing Hinojos v. Kohl’s Corp., 718 F.3d 1098, 14 1103 (9th Cir. 2013)). In this case, the controlling laws are California’s Unfair 15 Competition Law, False Advertising Law, and Consumer Legal Remedies Act and none 16 of those laws have changed. While in some cases the Ninth Circuit’s interpretation of 17 statutory law may represent a change in controlling law, Moore cites prior federal and 18 California appellate decisions and then applies those well-established precedents to the 19 particular facts of the case. Indeed, Moore explains that “[s]everal themes emerge from 20 cases evaluating the potential to mislead under the reasonable consumer test,” id. at 21 1017, and then proceeds to evaluate the facts “under [those] guidelines,” id. at 1018. 22 Thus, Moore represents an application of long-standing precedent rather than a change 23 in controlling law necessary to grant a Rule 59(e) motion. 24 However, Rule 59(e) also permits a court to alter or amend a judgment based on 25 clear error and it is plausible that Ninth Circuit authority could demonstrate that the 26 court’s application of California law to the facts of this case was clear error. Accordingly, 27 the court proceeds to consider the merits of plaintiffs’ motion. 1 that sold prescription pet food in packaging labeled “Prescription Diet,” among other 2 similar labels. 966 F.3d at 1013. In September 2012, the U.S. Food & Drug 3 Administration (“FDA”) published a draft compliance policy guidance, finalized in 2016, 4 that proposed a set of nine factors it would consider in determining whether to initiate an 5 enforcement action against pet food products labeled as intended for use in the 6 diagnosis, cure, mitigation, treatment or prevention of disease. Id. at 1014. Relying in 7 part on the compliance guidance, the plaintiffs alleged that the defendants 8 misrepresented that the prescription pet food “(1) qualified as some sort of drug or 9 medicine; (2) met a medical requirement for the pet; (3) had been evaluated by the FDA 10 as a drug; (4) had been evaluated by the FDA regarding its intended uses and effects; (5) 11 required a prescription per federal or state law; and (6) warranted a particular premium 12 price.” Id. at 1016. 13 On appeal from the district court’s order granting a Rule 12(b)(6) motion to 14 dismiss, the Ninth Circuit reversed, citing three reasons. First, common sense dictated 15 that a product requiring a prescription meant that the product was a medicine that 16 contained a drug or controlled substance, but the plaintiffs alleged there were no drugs or 17 controlled substance in the pet food. Id. at 1018. Second, in relying on an intervening 18 role played by veterinarians who prescribed the food, the district court erred because the 19 defendant manufacturers marketed to consumers, in addition to the veterinarians. Id. 20 The Ninth Circuit reasoned that even though the FDA’s 2016 compliance guidance 21 sanctioned the role of veterinarians in supervising the consumption of pet food, the FDA’s 22 compliance guidance did not signal the FDA’s authorization of the products, nor did it 23 authorize the defendants’ labeling and marketing representations. Id. at 1018–19. Third, 24 the court found persuasive the fact that the defendants violated three of the conditions 25 listed in the FDA’s compliance guidance, even though the guidance was non-binding and 26 no enforcement action had been brought by the FDA. Id. at 1019; see also id. at 1022 27 (Rawlinson, J., dissenting) (discussing non-binding nature of FDA’s compliance 1 With that summary in mind, the court turns to plaintiffs’ arguments. 2 1. Whether the Product Brand Name is Misleading 3 Plaintiffs, relying on Moore’s statement that brand names by themselves can be 4 misleading, argue that Ghirardelli’s brand name has a particular meaning to consumers, it 5 is synonymous with chocolate. Mtn. at 5. According to plaintiffs, deceptive brand names 6 like Ghirardelli require “little thought” of consumers and may be misleading where they 7 leave consumers susceptible to purchasing in reliance on the brand name and without 8 investigating the back of the box. Id. Plaintiffs would apply that reasoning here because 9 they purchased “Ghirardelli Classic White Chips” and were surprised to learn that there is 10 no white chocolate at all, even though other baking chips sold by Ghirardelli do contain 11 chocolate. Id. 12 Defendant asserts that Moore does not hold that brand names alone warrant 13 denial of a motion to dismiss. Opp. at 6. Rather, only when a brand name plausibly 14 supports a deception claim, can a plaintiff state a claim based on the brand name alone. 15 Id. 16 “[B]rand names by themselves can be misleading in the context of the product 17 being marketed.” Moore, 966 F.3d at 1018 (quoting Brady v. Bayer Corp., 26 Cal. App. 18 5th 1156, 237 Cal. Rptr. 683, 694 (Ct. App. 2018)). “Descriptive brand names require of 19 the consumer ‘little thought,’ which can make consumers susceptible to purchasing 20 because ‘they won’t have the time or interest to read about [the product] on [the] website 21 or the back of the box.’” Id. (alterations in original) (emphasis omitted) (quoting Brady, 22 237 Cal. Rptr. at 694). Moore cited an example from the California Court of Appeal’s 23 decision in Brady where “a product called ‘One a Day’ gummy vitamins, which required 24 two gummies a day for a full dosage, [was] explicitly misleading.” Id. (citing Brady, 237 25 Cal. Rptr. at 696–97). The Moore court applied this principle, reasoning that the brand 26 names “Prescription Diet” or an “Rx” symbol on the packaging were deceptive and 27 misleading because there were no drugs or controlled substances in them. Id. 1 meaning to consumers, i.e., that it is synonymous with chocolate. FAC ¶ 22. By itself, 2 however, Ghirardelli is not a descriptive brand name in the same way that “One a Day” 3 gummy vitamins or “Prescription Diet” affirmatively communicates something about the 4 product within the brand name itself. Ghirardelli’s product only communicates that it is 5 “Premium Baking Chips” and “Classic White Chips.” FAC ¶ 1. Nowhere does the front 6 panel of the product affirmatively communicate that it is chocolate. Indeed, Ghirardelli 7 removed references to “chocolate” from its logo to settle similar litigation involving the 8 company’s white chip products. See Miller v. Ghirardelli Chocolate Co., 912 F. Supp. 2d 9 861, 874 (N.D. Cal. 2012) (denying defendant’s motion to dismiss); Dkt. 14 at 5 10 (describing settlement terms). Therefore, this is not a situation where the brand name, by 11 itself, is misleading. 12 Next, plaintiffs contend that Moore holds that consumer deception is plausible 13 where a product lacks an ingredient that the product brand, label, and images suggest it 14 would contain. Mtn. at 5. According to plaintiffs, Moore also overrules the court’s factual 15 finding that it would be unreasonable to draw a specific qualitative message about a 16 product from an image on that product. Id. According to plaintiffs, they purchased the 17 product expecting chocolate and were surprised to learn that there was no white 18 chocolate at all. Id. 19 In Moore, the pet foods affirmatively advertised that they were “prescription pet 20 food” and had brand names such as “‘Prescription Diet’ or an ‘Rx’ symbol on the food 21 packaging.” 966 F.3d at 1018. Moore required two steps to find those affirmative 22 statements misleading. First, the court resorted to the dictionary to determine that the 23 “common sense” definition of “prescription” was one where the prescription “may be 24 considered a medicine that involves a drug or controlled substance.” Id. Second, using 25 its definition of prescription, the court reasoned that the product was misleading because 26 the products did not include a drug or controlled substance and thus failed to meet the 27 definition of prescription. Id. 1 affirmative representations are limited to “classic white chips” and “premium baking 2 chips.” This court previously determined that the definition of the adjective “white” does 3 not define the food, but rather defined the color of the food. Dkt. 34 at 9. In other words, 4 the phrase “white chips” does not imply white chocolate chips. Thus, unlike Moore, 5 defendant’s product does not suggest it would contain chocolate. 6 Nor does Moore say much about what inferences a reasonable consumer can 7 draw from an image on a package. Moore cites Williams, 552 F.3d at 939, as an 8 example of deceptive packaging where “[t]he product [was] called ‘fruit juice snacks’ and 9 the packaging pictures a number of different fruits, potentially suggesting (falsely) that 10 those fruits or their juices are contained in the product.” Here, the image on the front 11 label is of white chips and the product’s name is “classic white chips,” which is exactly 12 what is in the product. 13 In sum, plaintiffs’ arguments regarding the product’s label do not demonstrate 14 clear error. 15 2. Whether the Ingredient List Dispels any Consumer Deception 16 Next, plaintiffs argue that Moore rejects the court’s finding that the product’s 17 ingredient list dispels any consumer deception. Mtn. at 6. According to plaintiffs, if a 18 back label does not confirm the representations made on the front of the product, an 19 ingredient list does not defeat a plaintiff’s claim. Id. Plaintiffs contend that where the 20 front of the product is misleading, consumers are not required to investigate the back 21 label to determine the truth from the fine print of an ingredient list. Id. 22 Defendant counters that Moore recognizes that qualifiers in packaging can 23 ameliorate any tendency of the label to mislead. Opp. at 7. Further, defendant points out 24 that in Moore, the plaintiffs, rather than the defendants, relied on the ingredient lists in 25 their allegations to support their allegations that the ingredients in the prescription pet 26 food did not contain drug ingredients. Id. 27 Moore stated, “qualifiers in packaging, usually on the back of a label or in 1 (quoting Brady, 237 Cal. Rptr. 3d at 692). “If, however, ‘a back label ingredients list . . . 2 conflict[s] with, rather than confirm[s], a front label claim,’ the plaintiff’s claim is not 3 defeated.” Id. (alterations in original) (quoting Brady, 237 Cal. Rptr. at 693). The 4 standard articulated in Moore is no different than the standard cited by this court in its first 5 order granting defendant’s motion to dismiss. See Dkt. 34 at 13–14 (citing Williams, 552 6 F.3d at 939–40; Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016)); see also Skinner v. 7 Ken’s Foods, 53 Cal. App. 5th 938, 949 (Ct. App. 2020) (citing Brady for proposition that 8 the “ingredient list must confirm the expectations raised on the front, not contradict 9 them”). 10 Plaintiffs assert that Moore holds that ingredient lists cannot cure deceptive front 11 labels. This is true where the back label conflicts with a front label. Here, there is no 12 literal falseness on the product’s front label so this is not a case where the back label 13 conflicts with any affirmative statement on the front label. Williams is an example of a 14 conflict between the back label and the front label because in that case, the front label 15 affirmatively stated “fruit juice” next to images of fruit, yet fruit juice was not present on 16 the ingredient list. Williams, 552 F.3d at 939–40. Unlike Williams, there is no statement 17 such as “white chocolate chips” next to a picture of white chips. Without such a conflict, 18 Moore holds that a reasonable consumer can review the product’s ingredient list to dispel 19 or ameliorate any confusion that might be raised by references to white chips and 20 pictures of white chips on the front label. 21 Accordingly, the court did not err in finding that the product’s ingredient list could 22 dispel any potential deception. 23 3. Whether the Ingredient List Informs Consumers of the Presence or 24 Absence of White Chocolate 25 Next, plaintiffs argue that even if the court were to ignore Moore and require 26 consumers to view the ingredient list, Ghirardelli has failed to establish what on the 27 ingredient list dispels the deception caused by the front label. Mtn. at 7. The product’s 1 percentages of cacao fat and dairy that the FDA requires in a product in order to be 2 defined as white chocolate. Id. For example, products containing white chocolate are 3 not required to list “white chocolate” as an ingredient and many white chocolate products 4 do not. Id. Thus, it is impossible for a consumer to determine whether a product 5 contains at least 20% cacao fat and at least 3.5% milkfat by reading a product’s 6 ingredient list. Id. at 7–8. 7 “A Rule 59(e) motion may not be used to raise arguments or present evidence for 8 the first time when they could reasonably have been raised earlier in the litigation.” Kona 9 Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (citing 389 Orange St. 10 Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999)). Plaintiffs’ argument concerning 11 whether the ingredient list informs consumers of the presence of white chocolate could 12 have been raised earlier in the litigation and, as plaintiffs note, the argument does not rely 13 on Moore. Thus, the court does not consider plaintiffs’ argument advanced for the first 14 time in their Rule 59(e) motion. 15 4. Whether the Court Erred in Evaluating Plaintiffs’ Consumer Survey 16 Plaintiffs contend that the court inappropriately tested the reliability of their 17 consumer survey at the pleadings stage. Mtn. at 8. This kind of factual inquiry into a 18 party’s evidence is more appropriate for a separately noticed Daubert hearing. Id. 19 According to plaintiffs, survey evidence at the pleading stage is a useful tool in 20 determining the plausibility of plaintiffs’ claims. Id. 21 Defendant responds that because the allegations about the survey and the survey 22 itself were attached to complaint, they were, therefore fair game in assessing the legal 23 sufficiency of the survey-related allegations. Opp. at 8–9. Defendant asserts that the 24 court correctly decided that the consumer survey did not help plaintiffs state a claim 25 because plaintiffs failed to identify anything false or misleading about Ghirardelli’s 26 labeling or advertising in the first place. Id. at 9. 27 In its prior order granting defendant’s second motion to dismiss, the court 1 Even accepting the truth of the survey, the court followed the guidance of Becerra v. Dr. 2 Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019), in evaluating the persuasive effect 3 of a consumer survey alleged as part of a consumer false advertising complaint. The 4 Becerra court determined that, as applied to the facts of that case, the consumer survey 5 could not salvage the plaintiff’s claim. 945 F.3d at 1231. Similar to Becerra, the court 6 found plaintiffs’ consumer survey unpersuasive because the court had already 7 determined that plaintiffs failed to state a claim and the survey could not salvage 8 plaintiffs’ claims. Dkt. 52 at 10. 9 Becerra made no mention of the need for a Daubert hearing when assessing 10 whether a consumer survey alleges facts sufficient to plausibly state a claim. This was 11 the case even when the court quibbled with the survey’s methodology stating, “it [was] 12 difficult to tell what questions the survey asked to reach its conclusions.” Becerra, 945 13 F.3d at 1231. More importantly, the court determined that the survey did not address a 14 reasonable consumer’s understanding. Id. (“The survey does not address this 15 understanding or the equally reasonable understanding that consuming low-calorie 16 products will impact one’s weight only to the extent that weight loss relies on consuming 17 fewer calories overall.”). In other words, what a survey fails to address is relevant for 18 purposes of evaluating whether a complaint plausibly states a claim for relief. This court 19 followed a similar path: it assumed the truth of the survey’s allegations and found that the 20 survey did not address the ingredient list and could not, on its own, transform an 21 unreasonable understanding into a reasonable one. Dkt. 52 at 10–11. 22 Accordingly, the court did not err in finding plaintiffs’ consumer survey persuasive 23 in evaluating plaintiffs’ claims. 24 5. Other Supplemental Authority 25 Both parties have filed supplemental opinions that they contend are relevant to the 26 present motion. On August 26, 2020, plaintiffs filed a notice of recent decision, citing a 27 California Court of Appeal decision, Skinner v. Ken’s Foods, 53 Cal. App. 5th 938. Dkt. 1 opinions issued by the San Bernardino County Superior Court. Dkt. 62. Plaintiffs object 2 to this supplemental authority for several reasons. Dkt. 63. 3 Civil Local Rule 7-3(d)(2) permits counsel to bring to the court’s attention a 4 relevant judicial opinion published after the date the opposition or reply was filed but 5 before the noticed hearing date. No argument is permitted with the statement of recent 6 decision. 7 Plaintiffs’ supplemental authority was filed before their own reply brief and contains 8 argument. It therefore contravenes Local Rule 7-3(d)(2) and will not be considered 9 except to the extent that plaintiffs reference the case in their reply brief. Defendant’s 10 supplemental authority was filed after its opposition brief but before the noticed hearing 11 date on this motion. Plaintiffs’ objection does not contest whether the notice complied 12 with the Civil Local Rules and instead offers substantive arguments why the opinions are 13 distinguishable or inapplicable. Therefore, the court OVERRULES plaintiffs’ objection. 14 That said, the court agrees with plaintiffs that a state trial court decision is not binding 15 authority on this court and the opinions do not impact the court’s ruling. 16 CONCLUSION 17 In sum, reconsideration of a judgment after its entry is an extraordinary remedy 18 which should be used sparingly. McDowell, 197 F.3d at 1255 n.1. This is not a case 19 meriting such an extraordinary remedy. For the reasons stated, plaintiffs’ motion to alter 20 or amend the judgment is DENIED. 21 IT IS SO ORDERED. 22 Dated: October 29, 2020 23 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 24 United States District Judge 25 26 27