Lopez v. Abbott Laboratories

• Court: District Court, S.D. California
• Decided: March 27, 2023
• Docket: 3:22-cv-00421
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 Case No. 3:22-cv-00421-L-RBB ROCIO LOPEZ, 11 Plaintiff, ORDER DENYING DEFENDANT’S 12 v. MOTION TO DISMISS 13 ABBOTT LABORATORIES, [ECF No. 15] 14 Defendant. 15

16 Pending before the Court is Defendant’s motion to dismiss this false advertising 17 action for failure to state a claim. Plaintiff filed an opposition and Defendant replied. 18 For the reasons which follow, Defendant’s motion is denied. 19 I. Background 20 Defendant sells baby and toddler food under brand names Similac and 21 PediaSure. The products prominently display a label stating that they are “Non-GMO” 22 with an asterisk to the statement “Ingredients not genetically engineered.” Plaintiff 23 alleges that this representation is false with or without the language in the asterisk 24 because the products in fact contain GMO ingredients. She further alleges that she and 25 other consumers purchased Defendant’s products at a premium in reliance on the 26 representations made on the label. The operative first amended complaint (ECF no. 27 11, “Compl.”), includes detailed allegations describing Defendant’s products and 28 ingredients, product labeling, and explains why the labels are deceptive. 1 Plaintiff alleges violation of California Unfair Competition Law, Cal. Bus. & 2 Prof. Code §§ 17200 et seq. (“UCL”); violation of California False Advertising Law, 3 id. §§ 17500 et seq. (“FAL”); violation of California Consumers Legal Remedies Act, 4 Cal. Civ. Code §§ 1750 et seq. (“CLRA”); breach of express warranty; breach of the 5 implied warranty of merchantability; unjust enrichment/restitution; negligent 6 misrepresentation; fraud; and fraudulent misrepresentation. She alleges California 7 statutory violations on behalf of a putative subclass of California consumers. The 8 remaining claims are alleged on behalf of a putative nationwide class of consumers, 9 including California subclass. Plaintiff seeks damages, restitution or other monetary 10 equitable relief, as well as declaratory and injunctive relief. The Court has federal 11 jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). 12 II. Discussion 13 In its Rule 12(b)(6)1 motion to dismiss Defendant contends that Plaintiff failed 14 to sufficiently allege any of her claims. A motion under Rule 12(b)(6) tests the 15 sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 16 Dismissal is warranted where the complaint lacks a cognizable legal theory. 17 Shroyer v. New Cingular Wireless Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). 18 Alternatively, a complaint may be dismissed if it presents a cognizable legal theory yet 19 fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, 20 Inc., 749 F.2d 530, 534 (9th Cir. 1984). 21 Generally, to plead essential facts a plaintiff must allege only “a short and plain 22 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 23 8(a)(2); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The 24 plaintiff must "plead[] factual content that allows the court to draw the reasonable 25 inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 26 556 U.S. 662, 678 (2009). Plaintiff’s allegations must provide “fair notice” of the 27

28 1 claim being asserted and the “grounds upon which it rests.” Bell Atl. Corp., 550 U.S. 2 at 555. 3 In reviewing a Rule 12(b)(6) motion, the Court must assume the truth of all 4 factual allegations and construe them most favorably to the nonmoving party. Huynh 5 v. Chase Manhattan Bank, 465 F.3d 992, 997, 999 n.3 (9th Cir. 2006). Legal 6 conclusions need not be taken as true merely because they are couched as factual 7 allegations. Bell Atl. Corp., 550 U.S. at 555. Similarly, “conclusory allegations of law 8 and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto v. 9 Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998). 10 Defendant moves for dismissal on several grounds, each of which is addressed 11 in turn below. 12 1. Sufficiency of the Allegations That the Product Label Was Misleading 13 Defendant maintains that Plaintiff did not sufficiently allege the product label 14 was misleading. The Court disagrees. 15 The standard for determining whether a defendant violated the UCL, FAL, or 16 CLRA by false advertising is essentially the same. Chapman v. Skype, Inc., 220 Cal. 17 App. 4th 217, 230 (2013). UCL prohibits any “unlawful, unfair or fraudulent business 18 act or practice.” Cal. Bus. and Prof. Code § 17200. The FAL prohibits any “unfair, 19 deceptive, untrue, or misleading advertising.” Cal. Bus. and Prof. Code § 17500. The 20 CLRA prohibits “deceptive acts or practices[,]” for example, misrepresenting the 21 source of goods, or representing that goods have characteristics or ingredients they do 22 not have, or representing that the goods are of a particular standard if they are of 23 another. Cal. Civ. Code § 1770(a). “[C]laims under these California statutes are 24 governed by the ‘reasonable consumer’ test[,]” which requires the plaintiff” to show 25 that members of the public are likely to be deceived.” Williams v. Gerber Prods. Co., 26 552 F.3d 934, 938 (9th Cir. 2008). “[T]hese laws prohibit not only advertising which 27 is false, but also advertising which, although true, is either actually misleading or 28 1 which has a capacity, likelihood or tendency to deceive or confuse the public.” Kasky 2 v. Nike, Inc., 27 Cal.4th 939, 951 (2002). 3 One of Plaintiff’s theories of false advertising is that although Defendant’s 4 product labels prominently state “Non-GMO” and “Ingredients not genetically 5 engineered[,]” they “are in fact loaded with ingredients derived from GM-crops such 6 as corn and soy[.]”2 (Compl. ¶ 3; see also id. ¶¶ 46, 49.) 7 One ingredient allegedly present in every product at issue is soy protein in the 8 form of soy protein isolate, which is derived through chemical processing of 9 soybeans.3 (Id. ¶¶ 46-47.) Two other common examples are soy oil and soluble corn 10 fiber, also derived by chemical processing from soybeans and corn, respectively. (Id. ¶ 11 47.) Plaintiff contends that the soybeans and corn used to manufacture these 12 ingredients are GMO because as of 2021 approximately 94% of soy and 92% of corn 13 grown in the United States were genetically modified. (Id. ¶¶ 16, 31.) Plaintiff 14 reasons that any ingredients derived from domestically produced corn or soybeans are 15 16 2 Defendant’s argument about the distinction between its two qualifiers, “Non- 17 GMO” and “Ingredients not genetically engineered,” is primarily directed to the dairy 18 ingredients in Defendant’s products. Because Defendant’s motion is disposed on alternative grounds, whether Defendant’s labeling is misleading with regard to the 19 dairy ingredients is not addressed in this order. 20 3 To the extent Defendant argues that there is a distinction between “Non-GMO” 21 and “Ingredients not genetically engineered” in the context of non-dairy ingredients 22 (see ECF 15-1, “Mot.” at 14), the argument is unavailing at the pleading stage. Defendant posits that a reasonable consumer would understand that a product labeled 23 as “Non-GMO” and “Ingredients not genetically engineered” could in fact contain 24 ingredients sourced or derived from genetically engineered plants. Although “the primary evidence in a false advertising case is the advertising itself[,]” Brockey v. 25 Moore, 107 Cal.App.4th 86, 100 (2003), “whether a business practice is deceptive will 26 usually be a question of fact not appropriate for decision at the pleading stage[,]” William, 552 F.3d at 938-39. Defendant’s argument is based on exceedingly subtle if 27 not counter-intuitive interpretation of its label. Accordingly, the Court declines to rule 28 as a matter of law that a reasonable consumer would interpret the label as Defendant does in its motion. 1 “highly likely” to be genetically modified. (Id. ¶ 17.) Defendant argues that these 2 allegations amount to nothing more than guesswork and are therefore insufficient. 3 At the pleading stage, a plaintiff must provide sufficient factual allegations to 4 show that the pleader is entitled to relief. Bell Atl., 550 U.S. at 555. Although 5 "detailed factual allegations" are not required, they must be sufficient to "raise a right 6 to relief above the speculative level on the assumption that all the allegations in the 7 complaint are true (even if doubtful in fact)[,]" id., and must be sufficient to “allow[] 8 the court to draw the reasonable inference that the defendant is liable for the 9 misconduct alleged[,]” Iqbal, 556 U.S. at 678. However, plaintiffs are generally not 10 expected to provide evidence in support of their claims at the pleading stage, Durnford 11 v. MusclePharm Corp., 907 F.3d 595, 604 n.8 (9th Cir. 2018), Cafasso, U.S. ex rel. v. 12 Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011), nor are they 13 required to plead the “probability” of their entitlement to relief, Iqbal, 556 U.S. at 678. 14 Plaintiff’s allegation that the sources of soy- and corn-based ingredients were 15 genetically engineered crops, based on the fact that nearly all of these crops in the 16 United States are genetically engineered, is sufficient to raise the allegation beyond the 17 speculative level. Whether Defendant’s ingredients were in fact derived from 18 genetically modified crops is a question to be resolved based on evidence rather than 19 pleadings. 20 Defendant next contends that Plaintiff’s allegations of falsity do not meet the 21 heightened pleading requirements of Rule 9(b). Rule 9(b) requires that “[i]n alleging 22 fraud . . . a party must state with particularity the circumstances constituting fraud[.]” 23 Rule 9(b) applies to Plaintiff’s consumer protection claims because they are grounded 24 in fraud. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125, 1127 (9th Cir. 2009) 25 (applying Rule 9(b) to UCL and CLRA claims). 26 To meet the heightened pleading requirement of Rule 9(b), Plaintiff’s 27 allegations must be “specific enough to give defendants notice of the particular 28 misconduct so that they can defend against the charge and not just deny that they have 1 done anything wrong.” Vess v. Ciba-Geigy, Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2 2003). “This means the plaintiff must allege the who, what, when, where, and how of 3 the misconduct charged, including what is false or misleading about a statement, and 4 why it is false.” United States ex rel. Swoben v. United HealthCare Ins. Co., 848 F.3d 5 1161, 1180 (9th Cir. 2016). However, it “does not require absolute particularity or a 6 recital of the evidence.” Id. 7 The Complaint identifies specific product labels and the statements on the labels 8 she claims are misleading. (See, e.g., Compl. ¶¶ 49-61.) It also explains Plaintiff’s 9 theory why the statements are misleading. (See, e.g., id. ¶¶ 16, 17, 31.) This is 10 sufficient to state with particularity the circumstances constituting fraud. 11 Accordingly, Plaintiff has sufficiently alleged at least one factual theory in 12 support of her CLRA, FAL, and UCL4 claims. 13 2. Breach of the Implied Warranty of Merchantability 14 Like the false advertising claims, Plaintiff’s claim alleging breach of the implied 15 warranty of merchantability is based on the contention Defendant’s products did not 16 conform to the description on the product label. (Compl. ¶ 121.) This is a valid theory 17 of breach under California Commercial Code section 2314(2)(f). (“Goods to be 18 merchantable must be at least such as [¶] [c]onform to the promises or affirmations of 19 fact made on the container label[.]”). 20 3. Unjust Enrichment and Restitution 21 Defendant argues that Plaintiff cannot state a claim for unjust enrichment 22 because it is not a standalone cause of action under California law. Assuming without 23 deciding if Defendant’s statement of California law is correct, the argument is 24 insufficient for dismissal at the pleading stage. In a consumer false advertising action 25 an unjust enrichment claim on the theory alleged here, i.e., that the defendant was 26

27 4 Because Plaintiff has sufficiently alleged CLRA and FAL violations, she has 28 also alleged a UCL violation. See Kwikset Corp. v. Super. Ct. (Benson), 51 Cal.4th 310, 326 (2011) (unlawful business practice). 1 unjustly enriched through false and misleading product labeling, the Court may 2 construe the claim as a quasi-contract claim for restitution. See Astiana v. Hain 3 Celestial Group, Inc., 783 F.3d 753, 762 (9th Cir. 2015). Because Plaintiff adequately 4 alleged that Defendant was unjustly enriched through false advertising, she has 5 sufficiently alleged a quasi-contract claim for restitution. (See, e.g., Compl. ¶¶ 34, 36 6 & n.34-35, 85, 131-36.) 7 Defendant next argues that Plaintiff “lacks standing to seek equitable relief” 8 because she did not allege that she lacks an adequate remedy at law, but instead seeks 9 equitable relief in addition to damages. (ECF 15-1, “Mot.” at 21.) Defendant’s 10 reliance on Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020), in 11 support of this argument is unavailing because Sonner is distinguishable. 12 On the eve of trial after four years of litigation the plaintiff in Sonner voluntarily 13 dismissed her CLRA claim for damages in order to avoid the jury and seek the same 14 amount as restitution at bench trial. Sonner, 971 F.3d at 837-38. The resulting 15 amended complaint was dismissed because the plaintiff could not show that damages 16 were unavailable to her. Id. at 838, 844. 17 Unlike Sonner, this case is at the pleading stage. Rule 8(d)(2) allows the 18 plaintiff to 19 set out 2 or more statements of a claim ... alternatively or hypothetically, 20 either in a single count ... or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient. 21

22 Fed. R. Civ. Proc. 8(d)(2). Accordingly, a plaintiff can allege legal and equitable 23 claims in the alternative. Astiana, 783 F.3d 753, 762-63. 24 Sonner does not purport to negate this. The plaintiff in Sonner moved to amend 25 the complaint to reallege her claim for damages. Denial of leave to amend was 26 affirmed as within the district court’s discretion due to the procedural history of the 27 case. Sonner, 971 F.3d at 845. Because the instant case is at the pleading stage and 28 not on the eve of trial, Plaintiff can allege legal and equitable claims in the alternative. 1 4. Negligent Misrepresentation 2 Defendant argues that Plaintiff’s negligent misrepresentation claim is barred by 3 the economic loss rule. In the sale of goods arena, “[c]onduct amounting to a breach 4 of contract becomes tortious only when it also violates a duty independent of the 5 contract arising from principles of tort law.” Robinson Helicopter Co., Inc. v. Dana 6 Corp., 34 Cal.4th 979, 989 (2004). One of the circumstances when the economic loss 7 rule does not bar tort damages is “where the contract was fraudulently induced” or “the 8 breach is accompanied by a traditional common law tort, such as fraud[, or] the means 9 used to breach the contract are tortious, involving deceit[.]” Id. at 989-90. Because 10 the gravamen of this action is that Plaintiff was induced to purchase Defendant’s 11 products by false or misleading product labeling, Defendant’s economic loss argument 12 is rejected. 13 5. Claims Based on Purchases Outside of California 14 Defendant argues that Plaintiff lacks Article III standing to bring claims on 15 behalf of non-California putative class members who purchased Defendant’s products 16 outside California and whose claims are asserted under the laws of other states. “In a 17 class action, standing is satisfied if at least one named plaintiff meets the 18 requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) 19 (en banc). To establish Article III standing a plaintiff must allege three elements: 20 (1) [the plaintiff] has suffered an “injury in fact” that is (a) concrete and 21 particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; 22 and (3) it is likely, as opposed to merely speculative, that the injury will 23 be redressed by a favorable decision.

24 Friends of the Earth, Inc. v. Laidlaw Envtl. Servs.. Inc., 528 U.S. 167, 180-81 (2000). 25 Plaintiff alleged that she purchased Defendant’s product and paid a premium price 26 based on an allegedly false or misleading product label. (Compl. ¶¶ 7-8.) This is 27 sufficient to allege Article III standing at the pleading stage. See Briseno v. Conagra 28 Foods, Inc., 844 F.3d 1121, 1131 (9th Cir. 2017) (“Class representatives must establish 1 standing by, for example, showing that they bought the product or used the service at 2 issue.”). 3 Defendant next maintains that the Court lacks “personal jurisdiction over claims 4 relating to Non-California purchases.” (Mot. at 24.) Defendant does not maintain that 5 the Court lacks personal jurisdiction over Plaintiff’s own claims. Before a class is 6 certified, the putative class members who purchased Defendant’s products outside of 7 California are not yet parties to this case. See Gibson v. Chrysler Corp., 261 F.3d 927, 8 940 (9th Cir. 2001) (“a class action, when filed, includes only the claims of the named 9 plaintiff”). Accordingly, a motion to dismiss their putative claims for lack of personal 10 jurisdiction is premature. Moser v. Benefytt, Inc., 8 F.4th 872, 877-88 (9th Cir. 2021). 11 To the extend Defendant seeks to avoid this issue by asserting the same 12 argument as a motion to strike under Rule 12(f) (see Mot. at 24 (citing Moser, 8 F.4th 13 at 878 n.2)), the argument is unavailing. Striking class allegations at the pleading stage 14 is appropriate when class certification can be resolved without discovery. Vinole v. 15 Countrywide Home Loans, Inc., 571 F.3d 935, 942 (9th Cir. 2009). Defendant has 16 presented no reason why personal jurisdiction issues over out-of-state claims could be 17 resolved on pleadings alone. “[T]he better and more advisable practice for a District 18 Court to follow is to afford the litigants an opportunity to present evidence as to 19 whether a class certification [is] maintainable.” Id. at 942. 20 Finally, Defendant seeks dismissal of claims based on out-of-state purchases 21 under Rule 8 because Plaintiff does not “identify which state’s common law she seeks 22 to invoke.” (Mot. at 23.) Plaintiff asserts express warranty, implied warranty of 23 merchantability, unjust enrichment/restitution, negligent misrepresentation, fraud, and 24 fraudulent misrepresentation on behalf of the California subclass and the nationwide 25 class. As discussed above, Plaintiff has alleged sufficient facts under Rules 8(a)(2) and 26 9(b). Beyond these requirements, “[t]he pleadings need not identify any particular 27 legal theory under which recovery is sought.” Crull v. GEM Ins. Co., 58 F.3d 1386, 28 1391 (9th Cir. 1995). I. Conclusion 2 For the reasons stated above, Defendant’s motion is denied. 3 IT IS SO ORDERED. 4 5 || Dated: March 27, 2023

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