Cheslow v. Ghirardelli Chocolate Company

Opinion

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

v. ORDER DENYING MOTION TO ALTER OR AMEND JUDGMENT COMPANY, Re: Dkt. No. 54 Defendant.

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