1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 HENRY’S BULLFROG BEES, et al., No. 2:21-cv-00582-DJC-CKD 12 Plaintiffs, 13 v. ORDER
14 SUNLAND TRADING, INC., et al.,
15 Defendants. 16
17 This action involves a suit by three domestic honey producers who claim that 18 organizations involved in the import, certification, and sale of foreign honey have 19 conspired to import fake honey into the United States and sell it to consumers as real 20 honey. Defendants have filed multiple Motions to Dismiss including a Joint Omnibus 21 Motion to Dismiss in which they argue that the Second Amended Complaint (“SAC”) is 22 grounded in allegations of fraud but mostly consists of broad generalizations and thus 23 fails to meet the particularity requirement of Federal Rule of Civil Procedure 9(b). 24 For the reasons stated below, the Court grants Defendants’ Joint Omnibus 25 Motion to Dismiss (ECF No. 103). 26 //// 27 //// 28 //// 1 BACKGROUND 2 I. Factual Background 3 Plaintiffs are three U.S.-based honey producers who are suing several 4 organizations connected to the import, certification, and sale of foreign honey inside 5 the United States. Plaintiffs believe that this imported honey is “fake”, meaning that it 6 is honey that has been mixed with non-honey syrups or processed with resin 7 technology. Defendants Sunland Trading, Inc., Lamex Foods, Inc., and Odem 8 International Inc. (“Importer Defendants” collectively) allegedly knowingly import fake 9 honey into the United States to be packaged and sold within the United States by 10 Defendants Barkman Honey LLC and Dutch Gold Honey, Inc. (“Packer Defendants” 11 collectively) who are also aware the honey is fake. Defendant True Source Honey LLC 12 is a trade organization that Plaintiffs claim was created in response to prior scandals 13 involving foreign honey and was converted into a way to certify that honey was 14 ethically sourced. Plaintiffs allege that to conceal that their honey is of lower quality, 15 the Importer and Packer Defendants rely on Defendant True Source to mark their 16 imported honey as “True Source Certified” even though it is not “real” honey. 17 Defendants thereby mislead business and consumers. Defendant True Source is 18 allegedly aided in providing these fraudulent certifications by Defendant Intertek 19 Food Services GmbH (“Intertek”), a food testing lab, and Defendant NSF International 20 (“NSF”), an auditing organization, both of whom are employed by Defendant True 21 Source (collectively, the “Certifier Defendants”). 22 All Defendants who have appeared have filed a Joint Omnibus Motion to 23 Dismiss which has been fully briefed.1 (Joint Mot. (ECF No. 103); Opp’n to Joint Mot. 24 (ECF No. 110); Joint Reply (ECF No. 116).) Five Defendants have also filed other 25 1 Defendant Intertek Food Services GmbH has not appeared in this action. Plaintiffs previously 26 voluntarily dismissed “Intertek Testing Services, NA, Inc.” (see ECF Nos. 8, 9) but subsequently named Intertek Food Services GmbH as a defendant in their Second Amended Complaint (see SAC (ECF No. 27 98)). To date, Intertek Food Services GmbH has not appeared and did not join any of the motions filed by other Defendants. For simplicity, the Court’s utilizes the term “the Defendants” throughout this 28 order. Unless otherwise noted, such references do not include Intertek Food Services GmbH. 1 individual Motions to Dismiss which are also fully briefed. (See Dutch Gold Mot. (ECF 2 No. 102); Sunland Mot. (ECF No. 104); True Source Mot. (ECF No. 106); Odem Mot. 3 (ECF No. 107); Lamex Mot. (ECF No. 108).) The Court held oral argument on all these 4 motions on February 15, 2024, and took the matters under submission at that time. 5 (See 2/15/24 Tr. (ECF No. 140).) 6 LEGAL STANDARD 7 A party may move to dismiss for “failure to state a claim upon which relief can 8 be granted.” Fed. R. Civ. P. 12(b)(6). Where allegations of fraud are raised, Federal 9 Rule of Civil Procedure 9(b) imposes a heightened pleading standard. Fed. R. Civ. P. 10 9(b). “Rule 9(b) serves three purposes: (1) to provide defendants with adequate 11 notice to allow them to defend the charge and deter plaintiffs from the filing of 12 complaints ‘as a pretext for the discovery of unknown wrongs’; (2) to protect those 13 whose reputation would be harmed as a result of being subject to fraud charges; and 14 (3) to ‘prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the parties and 15 society enormous social and economic costs absent some factual basis.’” Kearns v. 16 Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). 17 Under Rule 9(b), when a claim or complaint is “grounded in fraud”, that claim or 18 complaint must satisfy the particularity requirement, which mandates that the plaintiff 19 “state with particularity the circumstances constituting fraud or mistake.” Kearns, 567 20 F.3d at 1127 (quoting Fed. R. Civ. P. 9(b)). This is a heightened standard that 21 obligates the plaintiff to “aver with particularity the circumstances constituting the 22 fraud.” In re GlenFed Sec. Litig., 42 F.3d 1541, 1547 (9th Cir. 1994) (en banc). This 23 requires that “the circumstances constituting the alleged fraud be specific enough to 24 give defendants notice of the particular misconduct . . . so that they can defend 25 against the charge and not just deny that they have done anything wrong.” Kearns, 26 567 F.3d at 1124. This generally means that parties must allege the “who, what, when, 27 where, and how” of the alleged fraud and misconduct at issue. Id. at 1126. Put 28 another way, “[Rule] 9(b) requires a pleader of fraud to detail with particularity the 1 time, place, and manner of each act of fraud, plus the role of each defendant in each 2 scheme.” Lancaster Cnty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th 3 Cir. 1991). These allegations must be “more than the neutral facts necessary to 4 identify the transaction.” Kearns, 567 F.3d at 1124 (emphasis in original) (internal 5 citation and quotation omitted). 6 Individual claims or an entire complaint may be “grounded” in fraud. Where an 7 entire complaint is grounded in fraud, the allegations therein must satisfy the 8 particularity requirement. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th 9 Cir. 2003); see Kearns, 567 F.3d at 1127. Rule 9(b) applies even where fraud is not a 10 traditional element of a claim if the plaintiff chooses to allege fraudulent conduct. 11 Vess, 317 F.3d at 1103. 12 DISCUSSION 13 I. The Second Amended Complaint is Grounded in Fraud 14 The allegations in the Second Amended Complaint (SAC (ECF No. 98)) are 15 grounded in fraud. See Vess, 317 F.3d at 1107. In the introduction to the SAC, 16 Plaintiffs claim that “[f]or years, Defendants have participated in a worldwide 17 conspiracy to defraud the United States honey market . . . .” (SAC ¶ 1.) Defendants’ 18 alleged intent to defraud underpins the entire SAC, including a full section within 19 Plaintiffs’ factual allegations entitled “Defendants’ Scheme to Defraud the United 20 States’ Honey Market” wherein Plaintiffs allege that the Certifier, Importer, and Packer 21 Defendants were all involved in a scheme to commit fraud. (SAC at 17–42.) The SAC 22 is centrally focused on and comprised of allegations that the Defendants engaged in a 23 joint concerted effort to defraud the United States honey market. As such, the 24 Complaint is grounded in fraud. See Vess, 317 F.3d at 1107. Plaintiffs do not contest 25 that the SAC is grounded in fraud and instead argue that they have satisfied the 26 requirements of Rule 9(b). (See Opp’n to Joint Mot. at 2.) The SAC is therefore 27 subject to the particularity requirement of Rule 9(b). 28 //// 1 II. The Second Amended Complaint Fails to Satisfy Rule 9(b) 2 Plaintiffs have failed to allege sufficient facts to satisfy the particularity 3 requirement of Rule 9(b). Plaintiffs allege that the Defendants are involved in a 4 scheme to import lower quality honey into the United States and present it as “real” 5 honey using the True Source certification. But the SAC lacks sufficient specific factual 6 allegations to support these claims of fraud. 7 While Plaintiffs need not provide “absolute particularity” including a precise 8 time frame, the details of a single specific transaction, or the methods used to carry 9 out the fraud, “[b]road allegations that include no particularized supporting detail do 10 not suffice . . . .” United States v. United Healthcare Ins., 848 F.3d 1161, 1180 (9th Cir. 11 2016). Plaintiffs must still provide the “who, what, when, where, and how” of the fraud 12 alleged so that Defendants have notice of the particular fraudulent conduct and can 13 defend against the charge. Benavidez v. County of San Diego, 993 F.3d 1134, 1145 14 (9th Cir. 2021). 15 Despite its length, the SAC is largely bare of non-conclusory allegations related 16 to the actual fraud alleged. Plaintiffs claim that the Defendants have conspired to 17 import fake honey but the SAC lacks any of the particularized details necessary to 18 support such claims. A large portion of the factual allegations in the SAC discuss the 19 creation of honey via maturation and ripening in the hive (SAC ¶¶ 18–28), the United 20 States honey market and worldwide honey production (id. ¶¶ 30–44), honey 21 adulteration techniques and methods for detection of “fake” honey (id. ¶¶ 45–58), and 22 the history and function of True Source Honey (id. ¶¶ 59–73, 75–78, 80). 23 Beyond this general background, Plaintiffs separate their allegations relevant to 24 the three groups of Defendants: Certifiers, Importers, and Packers. Even the 25 allegations related to specific Defendants fail to satisfy the particularity requirement as 26 they are either not directly related to Plaintiffs’ claims or do not provide specific 27 information relevant to the misconduct alleged. 28 //// 1 A. Certifier Defendants 2 For the Certifier Defendants, Plaintiffs include only two allegations that are 3 directly related to the alleged fraud. These are missing vital information necessary to 4 satisfy the particularity requirement of Rule 9(b) and cannot support Plaintiffs’ broad 5 claims. 6 Plaintiffs allege that Defendant NSF conducts “sham audits” which Defendant 7 True Source “enables . . . by providing . . . a PowerPoint presentation outlining cursory 8 auditing process it must use to ensure any exporter or packer will ‘pass’” (id. ¶ 97) but 9 do not provide any details about when or where these audits occurred, why they 10 constituted “sham” audits, when the alleged PowerPoint was provided, or what the 11 relevant contents of that PowerPoint were that “enabled” this behavior. 12 Similarly, Plaintiffs’ second relevant allegation is that Defendant NSF accepted a 13 bribe from a honey exporter who was seeking to ensure it would receive True Source 14 Certification. Yet the SAC lacks all of the necessary “who, what, when, where, and 15 how” details for this event. Instead, this allegation is relegated to a single sentence 16 with none of the additional information that would be necessary for Defendants to be 17 given a chance to mount a defense. Similarly, Plaintiffs later state that at a 2018 18 meeting of True Source, “NSF reported that it had observed extraneous syrups and 19 resin technology in Indian honey factories,” and was told not to include that in a report 20 by True Source. (SAC ¶ 103.) But again, Plaintiffs provide none of the information 21 necessary to satisfy the particularity requirement, nor is there a clear connection 22 between the alleged observations of NSF and the fraud alleged by Plaintiffs. 23 Plaintiffs also include several allegations that are, at best, of limited relevance to 24 their claim. These mostly concern allegations that the Certifier Defendants failed to 25 implement more effective testing methods to detect adulteration and their awareness 26 of the risk of adulterated honey. (SAC ¶¶ 89–94.) Other factual allegations that are of 27 minimal relevance include a presentation about the use of resin technology given at a 28 2015 True Source meeting by an individual later selected as Vice Chair of True Source 1 (SAC ¶ 100), a letter written in 2016 by an FDA chemist stating that honey treated with 2 resin “would not accurately identify food generally understand [sic] to be honey” (SAC 3 ¶ 101), and the removal of the previous True Source Vice Chair because he had 4 “begun presenting compelling evidence of adulteration in the international honey 5 market” (SAC ¶ 102). 6 In sum, the allegations against the Certifier Defendants consist of conclusory 7 statements, claims that are only tangentially relevant, and a few allegations that lack 8 any specific information. The SAC provides almost no information about Defendant 9 Certifiers’ actual alleged misconduct beyond a few allegations lacking in particularity. 10 The included factual allegations cannot satisfy the requirements of Rule 9(b) as they 11 fail to give the Defendants notice of the factual basis for what they are accused of such 12 that they can defend against the claim. See Kearns, 567 F.3d at 1124. 13 B. Importer Defendants 14 1. List of Shipments Received 15 The bulk of Plaintiffs’ factual allegations for the Importer Defendants is a list of 16 honey shipments each Importer Defendant allegedly received from foreign 17 producers. (Id. ¶¶ 121–125.) For each shipment, Plaintiffs use identical, generic 18 allegations that the honey exporter for each shipment was known to use fake or 19 adulterated honey and that the relevant Importer Defendant knew this to be the case. 20 (Id.) Plaintiffs do not include any specific factual basis for these claims, such as how 21 the honey was fake or adulterated2, how it was known that the particular shipment 22 contained fake honey, and how the Certifier and Importer Defendants would have 23 been aware of this. Thus, while the SAC may identify shipments, the SAC lacks any 24 meaningful particularized detail about the shipments. Plaintiff appears to have 25
26 2 As to each shipment, Plaintiffs allege the relevant Importer Defendant knew that the exporter’s honey “contained extraneous syrups and/or was processed with resin technology . . . .” (See, e.g., SAC 27 ¶ 121.a.) These are broad allegations that effectively amount to a claim that the honey in question was “fake” and lack any specificity. That Plaintiffs have alleged this for each shipment further crystalizes that 28 this is a general allegation. 1 attached a general boilerplate accusation to a list of foreign honey shipments. It is not 2 even clear that the alleged shipments were a part of the conspiracy alleged in the SAC 3 given Plaintiffs do not claim that any of the honey in these shipments was sold to the 4 Packer Defendants. Instead, the SAC only states that each shipment was “sold [by the 5 relevant Importer Defendant] . . . to various entities in the United States’ honey market, 6 including California.” (Id.) 7 Moreover, based on the allegations in the SAC, Plaintiffs’ belief that these 8 exporters produce fake or adulterated honey appears to be founded solely on the fact 9 that they are located in India, Vietnam, and Thailand. In identifying each Importer 10 Defendant, Plaintiffs state, “the honey purchased by [relevant Importer Defendant] 11 from India, Vietnam, and Thailand contains syrups and/or is processed with resin 12 technology . . .” and subsequently allege that Sunland’s President “admitted in 13 January 2010 that there is no white or extra light amber honey that originates from 14 India, Vietnam, or Thailand . . . .” (SAC ¶ 7.) Similarly, as to Lamex, Plaintiffs allege that 15 “[t]he honey purchased by Lamex from India, Vietnam, and Thailand contains 16 extraneous syrups and/or is processed with resin technology which changes the 17 honey’s fundamental composition. Lamex continues to import such “honey” from 18 those countries and has done so during the Class Period.” (Id. ¶ 8; see id. ¶ 9.) 19 Plaintiffs’ apparent assumption is that because a given shipment of honey 20 originated from India, Vietnam, or Thailand, it must necessarily contain fake honey. 21 Plaintiffs cannot satisfy the particularity requirement of Rule 9(b) simply by identifying 22 shipments of foreign honey that the Importer Defendants received with an attached 23 unsupported allegation that the exporter produces fraudulent honey, especially 24 where that claim is seemingly based solely on the country where that exporter resides. 25 Rule 9(b) requires that the complaint contain allegations covering the “who, what, 26 when, where, and how” of the fraud alleged. Benavidez, 993 F.3d at 1145. Plaintiffs 27 have only alleged the neutral facts of transactions. This is insufficient to give 28 Defendants the opportunity to respond to the misconduct alleged. Kearns, 567 F.3d 1 at 1126. Moreover, as alleged, Plaintiffs’ allegations that these shipments contain fake 2 or adulterated honey appear to be based on information and belief.3 Such allegations 3 do not satisfy the particularity requirements of Rule 9(b) without Plaintiffs stating a 4 factual basis for that belief. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 5 (9th Cir. 1989); Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993). To the extent 6 that the basis for the belief is a separate belief that India, Vietnam, and Thailand only 7 produce fake honey, that belief alone does not constitute a factual basis and is 8 unsupported except by a few disparate statements made over the course of a decade 9 by industry members. (See SAC ¶¶ 103, 114.) 10 Allowing Plaintiffs to proceed based on these bare allegations would force 11 Defendants to defend against claims that their honey was “fake” and that they had 12 defrauded the United States honey market without the ability to address specific 13 allegations. They would be forced to instead defend against far-reaching allegations 14 about the honey they import by simply denying wrongdoing rather than being able to 15 address the factual basis underlying the accusations. 16 2. Kejriwal Bee Care 17 At oral argument, Plaintiffs’ counsel indicated that the SAC had specifically 18 identified shipments to Defendants Sunland and Lamex from Kejriwal Bee Care India 19 (Pvt.) Ltd. (“Kejriwal Bee Care“) as containing fake or adulterated honey. (2/15/24 Tr. 20 at 40:10–13.) However, Plaintiffs’ counsel further clarified that this was solely based on 21 the claim that Prakash Kejriwal, who was allegedly involved in Kejriwal Bee Care in 22 some capacity, gave a presentation about resin technologies in January 2015 and 23 later was appointed Vice Chairman of True Source. (Id. at 40:29–41:3 (“So . . . he gives 24 3 At the beginning of the SAC, Plaintiffs state that “[b]ased on their own personal knowledge, or upon 25 information and belief, including the investigation of their counsel, Plaintiffs allege as follows . . . .” (SAC at 1.) Plaintiff does not thereafter specify which allegations are made on personal knowledge and 26 which are made on information and belief. In this particular instance, however, based on the generalized and repeated nature of the allegations related to each shipment as well as the apparent 27 underlying basis for these claims being an assumption that because the honey in these shipments was produced in certain countries of origin, it appears clear that the allegations that each of these 28 shipments contained fake or adulterated honey are made on information and belief. 1 the presentation. He shortly [sic] put on to the board. Becomes vice chair of True 2 Source. . . . And then in paragraph 121, we allege that some of the Defendants have 3 imported honey from Kejriwal Bee Care, so I think there is at least some direct [sic] 4 there.”) Such allegations are insufficient to satisfy Rule 9(b). 5 Even ignoring that these allegations are specific to only a single exporter, 6 Plaintiffs have failed to identify the details of the fraud they have alleged. In lieu of 7 such information, Plaintiffs simply assume, without factual support, that all honey 8 exported by Kejriwal Bee Care is fraudulent based on the presentation Mr. Kejriwal 9 gave in 2015, over two years prior to the start of the class period. That Mr. Kejriwal 10 once gave a presentation on the use of resin technology does not provide Defendants 11 notice of the particular claims against them such that they can prepare a defense to 12 the claim they committed fraud. Thus, while Plaintiffs identify these allegations as a 13 concrete example of adulterated honey being imported and sold by Defendants, in 14 reality, these allegations are still lacking in any specificity about the fraud alleged. 15 Plaintiffs’ allegations about the import of honey from Kejriwal Bee Care are the same 16 neutral allegations as to the other exporters, with only the vague additional haze of 17 Mr. Kejriwal’s presentation added. Thus, these allegations fail to satisfy Rule 9(b) for 18 precisely the same reasons as the other shipment allegations as there is no 19 meaningful difference between them. 20 3. Other Allegations Related to Importer Defendants 21 Beyond the listed shipments, the only other allegation in the SAC concerning 22 the Importer Defendants directly related to the alleged fraud is that in June 2018, 23 honey from Importer Defendant Odem was tested on the request of Packer 24 Defendant Barkman, and twenty-four samples originating from India “were found to 25 be adulterated with added sugar syrup.” (SAC ¶ 113.) This is a single allegation 26 without any supporting factual information such as how the tested honey was 27 obtained, why it was tested, how it was tested, who performed the testing, and how 28 1 many samples were tested.4 The exceedingly limited information on this testing, in 2 addition to the limited nature of the allegation itself (relating only to a single instance 3 of testing), means these allegations cannot satisfy the particularity requirement. 4 Even with the inclusion of additional information on this point, the requirement 5 of Rule 9(b) would not be met. This is not to say that such factual allegations would 6 not be relevant and the addition of such details would help the complaint comply with 7 Rule 9(b). But even if this were included, it would still not provide Defendants with 8 the full “‘. . . who, what, when, where, and how’ of the misconduct charged[,]” Kearns, 9 567 F.3d at 1124 (emphasis added), such that Defendants would be on notice of the 10 particular fraud alleged. As discussed below, see infra Discussion II.D, Plaintiffs 11 allegations concern a broad conspiracy between multiple tiers of defendants to 12 defraud the United States honey market over a period beginning in 2017. Even if 13 alleged with substantially more detail, the fact, taken as true, that Defendant Barkman 14 once requested testing of honey from Defendant Odem and found the tested honey 15 question to be adulterated, is insufficient to provide particularity as to the full scope of 16 the misconduct Plaintiffs have alleged. Defendants would be left in the same position 17 of defending against a generalized allegation that they had engaged in fraud in the 18 sale of honey without any of the specifics of the misconduct they purportedly 19 engaged in. 20 For these reasons, the allegations against the Importer Defendants fail to meet 21 the requirements of Rule 9(b). 22 //// 23
24 4 At oral argument, Plaintiffs’ counsel stated that 36 samples had been tested, resulting in a 75% positive rate for adulteration. This further emphasizes the importance of the particularity requirement 25 of Rule 9(b). Without clear allegations about what samples were tested, where they were sourced from, and which returned positive results, it is impossible for the Defendants to determine the factual basis of 26 the allegations that define the scope of Plaintiffs’ claims. Rather than being able to address particularized claims related to the specific honey that was adulterated, forming a defense that 27 considered the source of those specific honey samples, Defendant Odem would instead be forced to defend broad claims about the general legitimacy of their honey, despite some of the tested honey 28 being genuine and thus outside the scope of Plaintiffs’ claims. 1 C. Packer Defendants 2 Plaintiffs’ allegations on the Packer Defendants, Barkman and Dutch Gold, are 3 brief with little beyond conclusory statements that these defendants knowingly sold 4 fake or adulterated honey. The SAC includes only a handful of allegations about 5 specific events connected to the Packer Defendants. 6 For Defendant Barkman, Plaintiffs again note Barkman’s requested testing of 7 honey imported by Importer Defendant Odem. (Id. ¶ 135.) As already detailed, this 8 allegation lacks important details but, even if it were complete, would not satisfy Rule 9 9(b) by stating with particularity the details of the alleged misconduct given the 10 breadth of what Plaintiffs have alleged. See supra Discussion II.B.3. The inclusion of 11 an allegation that Defendant Barkman then turned to Defendant Intertek to perform 12 testing instead might also assist by hinting at impropriety. (see SAC ¶ 113.) But 13 again, this implication is insufficient to satisfy the particularity requirement by 14 providing the details of the misconduct alleged. Kearns, 567 F.3d at 1124. 15 In the description of the Packer Defendants in the section of the SAC identifying 16 the Parties, Plaintiffs also allege Dutch Gold honey was tested and found to “contain 17 extraneous non-honey syrups . . . .” (SAC ¶ 11.) Plaintiffs provide little to no 18 information about these tests either in this beginning section or the single sentence 19 where this test is later referenced in which Plaintiffs’ allegation is , in its entirety, “[i]n 20 September 2020, Dutch Gold ‘honey’ from Vietnam and India was tested by an 21 accredited laboratory and found to contain extraneous non-honey syrups, meaning it 22 is adulterated, fake honey.” (Id. ¶ 131.) Plaintiffs do not identify how the honey tested 23 was obtained, if the tested honey was sold to the public (and, if so, where and when it 24 was sold) or if it was tested before it reached consumers, who requested the testing, 25 and who performed the testing. Notably, the allegation at paragraph 131 includes 26 that the Dutch Gold honey in this test was “from Vietnam and India” though earlier in 27 the SAC, Plaintiffs state that “[o]ften, the honey put out by the Packer Defendants is 28 labeled (for example) as follows: ‘Product of the United States, Canada, Brazil, 1 Argentina and India.’” (See SAC ¶¶ 131, 83.) Thus, given Defendant Dutch Gold 2 apparently labels its honey with numerous countries of origin, it is extremely unclear 3 what the exact nature of the tested honey was given Plaintiffs have alleged it was 4 specifically sourced from Vietnam and India. Information about the details and 5 context of this testing is vital for Defendants’ ability to mount a meaningful defense 6 and the exact sort of information required by Rule 9(b). 7 Additionally, the allegation about the testing of Defendant Dutch Gold honey 8 fail to satisfy Rule 9(b) for similar reasons as the allegations regarding the testing of 9 Defendant Odem’s honey; they do not provide meaningful information about “‘the 10 who, what, when, where, and how’ of the misconduct charged.” Kearns, 567 F.3d at 11 1124 (emphasis added). This allegation, even with additional detail, would not 12 provide Defendants with sufficient notice so they can defend against the full breadth 13 of Plaintiffs’ claims. 14 D. The SAC Fails to Meet the Particularity Requirement of Rule 9(b) 15 Considered separately and as a whole, the allegations in the SAC fail to satisfy 16 the particularity requirement for a complaint grounded in fraud. Plaintiffs’ allegations 17 are largely conclusory claims and those that relate to concrete events are both 18 insufficient to support Plaintiffs’ claims alone and lack the necessary “who, what, when, 19 where, and how” of the alleged fraud. Kearns, 567 F.3d at 1126. Significantly, while 20 Plaintiffs admit that some allegations are made on information and belief, they avoid 21 noting which allegations are made on that basis by simply stating at the beginning of 22 the SAC that “[b]ased on their own personal knowledge, or upon information and 23 belief, including the investigation of their counsel, Plaintiffs allege as follows.” (SAC at 24 1.) “[A]llegations of fraud based on information and belief usually do not satisfy the 25 particularity requirements under rule 9(b).” Moore, 885 F.2d at 540. While the 26 allegations in the SAC are already insufficient to satisfy Rule 9(b), the failure to specify 27 what allegations have any real basis casts a shadow of uncertainty over the factual 28 basis for all of Plaintiffs’ claims. Even where Plaintiffs allegations could partially satisfy 1 the specificity required by Rule 9(b), such as with the testing of Defendant Odem’s 2 honey, see supra Discussion II.B.3, these allegations still fail to address the full scope 3 of the underlying claims with necessary particularity. 4 Plaintiffs’ claims are far-reaching and the sort that invoke the core purposes of 5 Rule 9(b). “Rule 9(b) serves three purposes: (1) to provide defendants with adequate 6 notice to allow them to defend the charge and deter plaintiffs from the filing of 7 complaints ‘as a pretext for the discovery of unknown wrongs’; (2) to protect those 8 whose reputation would be harmed as a result of being subject to fraud charges; and 9 (3) to ‘prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the parties and 10 society enormous social and economic costs absent some factual basis.’” Kearns, 567 11 F.3d at 1125. Plaintiffs allege the existence of a broad conspiracy spanning multiple 12 corporations and organizations that have acted with the intent to defraud the United 13 States honey market. To permit Plaintiffs to proceed on their limited relevant factual 14 allegations would frustrate each of those purposes. The SAC does not give 15 Defendants adequate notice to allow them to defend the charge and clearly serves as 16 an avenue for Plaintiffs to obtain discovery to discovery “unknown wrongs” by the 17 Defendants. The claims levied against Defendants also serve as a cloud over their 18 reputation. Finally, permitting this suit to proceed to discovery and beyond on the 19 minimal factual basis presented would impose substantial social and economic costs 20 on the parties and Court. 21 By failing to include specific factual allegations to support Plaintiffs’ claims, the 22 SAC violates both the particularity requirement of Rule 9(b) and the purposes 23 underlying it. Accordingly, the Court grants Defendant’s Joint Motion to Dismiss 24 based on Plaintiffs failure to meet the requirements of Rule 9(b). 25 III. Leave to Amend 26 Having granted leave to amend, the Court must now turn to whether leave to 27 amend is warranted. “In general, leave to amend is only denied if it is clear that 28 amendment would be futile and that the deficiencies of the complaint could not be 1 cured by amendment.” Cabo Distrib. Co. v. Brady, 821 F. Supp. 601, 608 (N.D. Cal. 2 1992) (cleaned up); see also Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en 3 banc) (“[A] district court should grant leave to amend . . . unless it determines that the 4 pleading could not possibly be cured by the allegation of other facts.”) (citation 5 omitted). 6 Plaintiffs’ prior complaint was dismissed based on its insufficiency under Rule 7 9(b). (See ECF No. 95.) District Judge Troy L. Nunley found that the prior complaint 8 “[did] not allege any degree of particularity that would allow the Defendants to 9 prepare a defense[,]” but granted Plaintiffs leave to file an amended complaint. (Id. at 10 6–7.) The SAC currently before the Court is notably similar to the complaint dismissed 11 by Judge Nunley. The only new non-conclusory allegations relevant to the alleged 12 fraud are brief and concern the alleged bribe accepted by NSF (see SAC ¶ 98) and the 13 testing of the Packer Defendants’ honey (see id. ¶¶ 10–11). None of the additions 14 provided in response to Judge Nunley’s order meet the requirements of Rule 9(b). 15 At oral argument on the present motion, the Court questioned Plaintiffs 16 regarding what they could add in a further amended complaint. Plaintiffs’ counsel 17 responded that they could add more information about the usage of resin 18 technologies and the harvesting of immature honey being “widely known”. (2/15/24 19 Tr. at 40:6–9.) Counsel later added:
20 [W]e can do, I think, at least a couple things: We can talk to 21 our witnesses and see, now that times has passed, how much more willing they are to allow us to put certain 22 additional details, like, for example, the laboratories into the Complaint. 23
24 I believe that we have some samples that could be — some additional samples that haven't been tested have just been 25 saved from some time ago that could be tested. We can add the PowerPoint presentation. We could certainly add 26 more information about the techniques and stuff going on 27 in terms of the resin and so forth. 28 1 (Id. at 43:9–19.) Even if it were included in an amended complaint, this information 2 would be insufficient to satisfy the particularity requirement. Plaintiffs were only able 3 to point to information about testing already performed or hypotheticals about 4 samples “from some time ago” that could be tested. While this might help resolve 5 some of the issues identified above, it does not come close to providing the details of 6 the fraud alleged to satisfy Rule 9(b). For example, even with the benefit of more 7 details about the testing of Defendant Odem’s honey, these allegations would only 8 provide supplementary information without going to the core of what Plaintiffs have 9 alleged. See supra Discussion II.B.3. 10 Plaintiffs’ claims are still of a large-scale conspiracy to commit fraud. The 11 potential inclusions on amendment fail to provide necessary “who, what, when, where, 12 and how” information, such that Defendants would be afforded the opportunity to 13 prepare a defense to the claims against them. And importantly, due to the transfer of 14 the case from Judge Nunley to the undersigned, Plaintiffs have had a significant 15 amount of time to continue to gather information to further bolster their complaint but 16 are unable to identify concrete meaningful additions that could be included in an 17 amended complaint. 18 Given Plaintiffs’ failure to fix the deficiencies of their complaint in their previous 19 amendment attempt and their inability to indicate how these issues could be cured 20 with further amendment, the Court will not grant leave to file a further amended 21 complaint as to the Defendants who joined in the Joint Omnibus Motion to Dismiss. 22 DEFENDANT INTERTEK 23 While Defendant Intertek has not appeared or joined the Motions to Dismiss 24 filed by the other defendants, the defects described above apply the equally to all 25 defendants. See Nasser v. Julius Sammann Ltd., No. 17-cv-0863-BTM-MDD, 2017 WL 26 3492164, at *2 (S.D. Cal. Aug. 15, 2017); see also Omar v. Sea-Land Serv., Inc., 813 27 F.2d 986, 991 (9th Cir. 1987). Thus, the Second Amended Complaint and this action 28 shall be dismissed in its entirety. 1 CONCLUSION 2 For the reasons stated above, IT |S HEREBY ORDERED that: 3 1. Defendants’ Joint Omnibus Motion to Dismiss (ECF No. 103) is GRANTED and 4 this action is dismissed with prejudice. 5 2. Defendants’ other pending Motions to Dismiss (ECF Nos. 102, 104, 106, 107, 6 108) as well as Defendants’ Motion to Stay (ECF No. 127) are DENIED AS 7 MOOT. 8 3. The Clerk of the Court is directed to close this case. This order resolves all 9 pending motions. 10 11 12 IT IS SO ORDERED. 13 | Dated: _September 12, 2024 “Daniel A CoD tto— Hon. Daniel alabretta 14 UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 | DJc1 - HBB21cv00582.MTD 22 23 24 25 26 27 28 17