1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 NEA VIZCARRA, Case No. 23-cv-00468-PCP
8 Plaintiff, ORDER DENYING IN PART MOTION 9 v. TO DISMISS AND DENYING MOTION TO STRIKE 10 MICHAELS STORES, INC., Re: Dkt. No. 26, 34 Defendant. 11
12 13 Plaintiff Nea Vizcarra alleges that defendant Michaels Stores, Inc. deceptively advertises 14 its products as discounted when in fact they are always available for at least 20% less than the 15 purported “regular” price. She brings several claims on behalf of herself and a proposed class. 16 Michaels moves to dismiss Ms. Vizcarra’s complaint under Federal Rule of Civil Procedure 17 12(b)(6) and to strike her class allegations under Rule 12(f). For the reasons set forth below, 18 Michaels’ motion to dismiss is denied as to all of Ms. Vizcarra’s claims except for her unjust 19 enrichment claim. The motion to strike is also denied. Michaels separately requests judicial notice 20 of several court documents and webpages. That request is granted. Ms. Vizcarra is granted leave to 21 amend and may file a revised complaint by February 2, 2024. 22 I. Background 23 The following facts from Ms. Vizcarra’s amended complaint are accepted as true for the 24 purposes of evaluating Michaels’ Rule 12(b)(6) motion to dismiss. 25 Michaels sells arts and crafts and home decor products on its website and in its stores. On 26 Michaels.com, Michaels’ entire inventory is always available at a discount of at least 20% off of 27 the “regular” listed prices. Michaels prominently advertises these discounts on its homepage, 1 example, on January 31, 2023, a prominent red banner at the top of the Michaels.com homepage 2 advertised “20% off regular price purchases.” On search and product pages that month, the text 3 “Save 20% with code 22MADEBYYOU” appeared in red text immediately below list prices. Some of 4 the discount codes are time limited. But Ms. Vizcarra alleges that at least one sitewide discount 5 code offering at least 20% off of all merchandise is always offered. She has included screenshots 6 of Michaels’ website from every month between January 2021 and February 2023 showing that 7 20% discounts were available each time. Similar discounts are offered in stores via coupons that 8 are available both online and in stores. The upshot is that Michaels’ products are always 9 available—in store and online—for at least 20% off the prices Michaels characterizes as “regular.” 10 Ms. Vizcarra purchased several items from Michaels.com on November 28, 2022. She 11 used a sitewide discount code advertising “40% off all regular price purchases,” and also 12 purchased several items that were individually on sale for steeper discounts. On January 19, 2023, 13 she purchased more items, this time from a Michaels store in Salinas, California. At the time, 14 Michaels was advertising “20% off all regular price purchases” with a coupon that was “valid 15 through January 28, 2023.” Some of the items she purchased in-store were on sale for even greater 16 discounts. Her receipt indicated she saved $11.65. Ms. Vizcarra says that in purchasing the 17 discounted items, she understood that she was purchasing items that regularly (including before 18 the advertised promotion) retailed at the published “regular” price, that this published price was 19 the market value of the products she was buying, and that she was receiving the items at a 20 comparatively reduced price that was not always available. She says she would not have made the 21 purchases if she had known that the products were not discounted as advertised. 22 Ms. Vizcarra brought this action on February 1, 2023 and filed an amended complaint on 23 May 3, 2023. She brings the action on behalf of a putative nationwide class of people who 24 “purchased one or more Michaels Products advertised at a discount on Defendant’s website or in- 25 store,” as well as on behalf of a similar California subclass. Michaels has moved to dismiss the 26 amended complaint. The Court held a hearing on Michaels’ motion on November 9, 2023. 27 1 II. Legal Standards 2 Under Rule 8, a complaint must include a “short and plain statement of the claim showing 3 that the pleader is entitled to relief,” with allegations that are “simple, concise, and direct.” Rule 4 9(b) sets a higher standard for certain claims: A party “alleging fraud or mistake … must state 5 with particularity the circumstances constituting fraud or mistake,” although “[m]alice, intent, 6 knowledge, and other conditions of a person’s mind may be alleged generally.” The pleading must 7 be “specific enough to give defendants notice of the particular misconduct … so that they can 8 defend against the charge and not just deny that they have done anything wrong.” Vess v. Ciba- 9 Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). 10 Rule 12(b)(6) governs dismissal for “failure to state a claim upon which relief can be 11 granted.” A complaint must “plausibly suggest” that the plaintiff is entitled to relief, meaning the 12 pleaded “factual content … allows the court to draw the reasonable inference that the defendant is 13 liable.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 681 (2009). The Court must “accept all factual 14 allegations in the complaint as true and construe the pleadings in the light most favorable to the 15 nonmoving party.” Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1029–30 (9th Cir. 2009). 16 Rule 12(f) allows the Court to “strike ... any redundant, immaterial, impertinent, or 17 scandalous matter.” A motion to strike is a drastic remedy. These motions are generally disfavored 18 and not granted unless the moving party can clearly show that the challenged material could not 19 possibly relate to the controversy and that allowing it to remain would cause significant prejudice. 20 See, e.g., Lee v. City of San Jose, No. 23-CV-00778-PCP, 2023 WL 7376823, at *2 (N.D. Cal. 21 Nov. 8, 2023); Digit. Verification Sys., LLC v. Foxit Software Inc., 21-CV-08529-YGR, 2022 WL 22 2800081 (N.D. Cal. Jan. 11, 2022); Freeman v. ABC Legal Servs., Inc., 877 F. Supp. 2d 919, 923 23 (N.D. Cal. 2012); 5C Wright & Miller, Fed. Prac. & Proc. Civ. § 1382 (3d ed.) (collecting cases). 24 III. Analysis 25 For the reasons set forth below, Michaels’ motion to dismiss is denied as to all of Ms. 26 Vizcarra’s claims except her unjust enrichment claim. The motion to strike the class allegations is 27 also denied. Michaels’ separate request for judicial notice is granted. 1 A. Motion To Dismiss 2 1. Ms. Vizcarra States a Former Price Advertising Claim Under the FAL. 3 Ms. Vizcarra’s first cause of action includes a claim under Section 17501 of the California 4 || False Advertising Law (FAL). Section 17501 governs the practice of “former price” advertising 5 and provides: “‘No price shall be advertised as a former price of any advertised thing, unless the 6 || alleged former price was the prevailing market price as above defined within three months next 7 || immediately preceding the publication of the advertisement or unless the date when the alleged 8 former price did prevail is clearly, exactly and conspicuously stated in the advertisement.” Cal. 9 || Bus. & Prof. Code § 17501. 10 The upshot of Ms. Vizcarra’s allegations is that in stores and online, all Michaels products 11 are always available for two prices: the regular list price and a discounted price that is always at 12 || least 20% lower. Ms. Vizcarra alleges that the coupon code needed to secure the 20% discount is 13 widely and prominently advertised, including on the Michaels.com homepage, search results 14 || pages, and individual product pages, as well as in stores. A customer that does not use the coupon 15 || will not receive the sitewide 20% discount. The screenshot included in Ms. Vizcarra’s complaint 16 and discussed by Michaels in its motion to dismiss shows an example of how this advertising is 3 17 typically presented:
21 || Sener eeeineeece $19, 99> eercnn two a a Save 20% with code 22MADEBYYOU seeDelail:
23 24 || Dkt. No. 26, at 11; Dkt. No. 34, at 15. This advertising and pricing mechanism essentially presents 25 a customer with two choices. Option 1: Add the item to your cart, check out, and pay $19.99. 26 Option 2: Add the item to your cart, enter the prominently displayed discount code, check out, and 27 || pay $15.99 (i.e., 20% off). 28
1 Michaels is correct that in this example, $19.99 is a current price of a 16-ounce Green 2 Eucalyptus Bunch (one of two current prices, to be precise). Based on this, Michaels contends that 3 it “advertises current—not former—prices” and that its “alleged discounting … is not subject to 4 Section 17501.” Dkt. No. 34, at 16. But Michaels makes an important logical leap—namely, that a 5 current price cannot also be a former price. 6 On its surface this argument makes some intuitive sense; advertisements commonly 7 display a former price in order to demonstrate that the current price is lower. But it is not hard to 8 imagine circumstances where a merchant might instead want to emphasize the fact that former and 9 current prices are the same: perhaps to emphasize that prices have stayed flat despite inflation, for 10 example, or to suggest that items never go on sale and customers therefore might as well buy now 11 rather than wait for a deal. Nothing in the text of the statute suggests that a former price must be 12 different from a current price, and Michaels has not provided authority for that proposition. 13 Here, if Michaels had listed $19.99 as the current price of a eucalyptus bunch but had 14 included a red label below stating, “This item was formerly only available at the regular price but 15 is now also available at a 20% discount by entering a coupon code,” that would clearly suggest 16 that the listed current price was also being presented as the former price of the product. The 17 essence of Ms. Vizcarra’s complaint is that, in context, Michaels’ pricing creates exactly this 18 impression, albeit less explicitly. The question here is not whether Michaels’ list prices are current 19 prices (they clearly are), but rather whether it has presented its “regular” prices in a way that 20 suggests they are also former prices.1 21 It is clear that Michaels’ advertising does not explicitly identify its “regular” or pre- 22 discount current prices as “former” prices. But Section 17501 does not require explicit labelling. 23 1 Importantly, the question presented is not whether all discount codes or coupons—which give 24 customers the opportunity to choose between a higher current price and a lower current price— constitute former price advertising within the scope of Section 17501. The question is simply 25 whether it is possible to offer a discount code or coupon scheme in a way that presents the higher current price as a former price—and in this case, whether Michaels has done so. Michaels 26 speculates that if its scheme falls within Section 17501, “then the availability of a grocery store club member to obtain a discount through entry of his or her club identifier would create a 27 ‘former’ price.” Dkt. No. 39, at 11. But that conclusion does not follow. Coupons offered in 1 “A reasonable consumer does not need language such as, ‘Formerly $9.99, Now 40% Off $9.99,’ 2 or, ‘40% Off the Former Price of $9.99,’ to reasonably understand ‘40% off’ to mean 40% off the 3 former price of the product.” Knapp v. Art.com, Inc., No. 16-CV-00768-WHO, 2016 WL 4 3268995, at *4 (N.D. Cal. June 15, 2016). Courts have construed strikethrough prices as 5 representing former prices despite “[t]he lack of specific words indicating the regular price.” 6 Munning v. Gap, Inc., No. 16-CV-03804-TEH, 2016 WL 6393550, at *4 (N.D. Cal. Oct. 28, 7 2016). And in Knapp, the Court held that a perpetual coupon pricing scheme very similar to 8 Michaels’ could constitute former price advertising within the meaning of Section 17501:
9 Art.com asserts that section 17501 does not apply because Art.com’s 10 sales require consumers to enter a coupon code to obtain the advertised sale price, meaning that its sales merely compare “two 11 current prices”—i.e., the coupon price and the non-coupon price—not a former non-sale price and a current sale price. I am not convinced. 12 Knapp has plausibly alleged that the “40% off” language he viewed objectively qualifies as former price advertising within the meaning 13 of section 17501, and that he subjectively interpreted the language as 14 advertising a discount from Art.com’s former prices. Against this backdrop, it is not clear why it matters that he was required to enter a 15 coupon code to obtain the advertised 40 percent discount. As described in the [complaint], the requirement that a consumer enter a 16 coupon code to obtain the advertised discount is merely a routine, procedural step in the purchase transaction and is not material to 17 whether Art.com’s advertising constitutes former price advertising 18 under section 17501.
19 Moreover, I am skeptical that section 17501 cannot be applied to a comparison between a current coupon price and a current non-coupon 20 price, merely because both prices are currently available to consumers. Art.com cites no on-point authority to support its position 21 that a former price under section 17501 must be one that is not 22 currently offered, and thus cannot be a currently offered “regular” or “non-sale” price. 23 24 Knapp, 2016 WL 3268995, at *5 & n.4 (cleaned up). 25 This analysis is equally applicable here. Ms. Vizcarra’s allegations are sufficient to suggest 26 that Michaels’ advertising could convey to a reasonable consumer that the non-discounted list 27 price is a “former” price under the meaning of Section 17501. At the pleading stage, it is clearly 1 suggest to a reasonable consumer that that the listed non-discount price is the price a customer 2 would previously have had to pay and that comparable discounts are not always available. And as 3 the Court in Knapp convincingly explained, there is no reason why the fact that the higher price is 4 also currently offered means it cannot also be understood as a former price. 5 Michaels does not dispute that the allegations in Ms. Vizcarra’s complaint are sufficient to 6 establish a Section 17501 violation under the logic of Knapp. But Michaels argues that Knapp is 7 an outlier that has been superseded by an intervening California appellate court decision, People v. 8 Superior Court (J.C. Penney Corp.), 34 Cal. App. 5th 376 (2019). In particular, Michaels points to 9 two aspects of the Knapp decision it says conflict with J.C. Penney (a decision which is persuasive 10 but not necessarily binding authority as to the content of California law). 11 First, according to Michaels, “Knapp ruled a plaintiff need not identify prices charged by 12 other retailers to establish a defendant’s prices are higher than the ‘prevailing market price’ so 13 long as a plaintiff alleges that a defendant sells at a percentage lower than ‘prevailing market 14 prices.’ But J.C. Penney and subsequent cases make clear that an item’s ‘prevailing market price’ 15 is determined by the actual sales prices of ‘similar goods’ and the ‘same goods’ on the ‘open local 16 market.’” Dkt. No. 39, at 10. Michaels is correct that J.C. Penney addresses the definition of 17 “prevailing market price” under Section 17501. See 34 Cal. App. 5th at 411. But Knapp does not 18 conflict with J.C. Penney because Knapp is not about the definition of “prevailing market price.” 19 Instead, Knapp addresses what a plaintiff must plead in order to establish that the advertised 20 former price was not the prevailing market price. Knapp’s holding that a plaintiff “does not need 21 to identify prices charged by other retailers to plausibly establish that … advertised former prices 22 are higher than prevailing market prices,” 2016 WL 3268995, at *5, is entirely consistent with a 23 definition of “prevailing market price” that is based on the “common or predominant price among 24 the sellers in the market where the item is advertised,” J.C. Penney, 34 Cal. App. 5th at 412. In 25 other words, while a plaintiff must eventually determine the prices charged by other sellers in the 26 market where an item is advertised in order to prove the prevailing market price, they need not 27 identify the actual prices charged by other retailers in order to state a claim. 1 Michaels also argues that the California court in J.C. Penney “caution[ed] that the statute is 2 to be strictly construed due to its imposition on protected speech.” Dkt. No. 39, at 10. But J.C. 3 Penney reversed the lower court’s determination that Section 17501 is unconstitutionally vague 4 and declined the real parties’ invitation to construe Section 17501 narrowly “as targeting only 5 nonprotected commercial speech.” 34 Cal. App. 5th at 396. Instead, the court “conclude[d] that the 6 prohibition, properly construed, bans a considerable amount of commercial speech protected under 7 the First Amendment and the free speech provision of the California Constitution.” Id. at 397–98. 8 The court concluded that the real parties had failed to show that this regulation was unjustified and 9 held that their free speech challenge therefore failed (at least at the demurrer stage). Id. at 398–99. 10 Here, Ms. Vizcarra has plausibly alleged that Michaels presents its pricing and discounts in 11 a way that could suggest to a reasonable consumer that the “regular” (i.e., higher current price) is 12 also a former price. The next question under Section 17501 is whether “the alleged former price 13 was the prevailing market price … within three months next immediately preceding the 14 publication of the advertisement.” 15 The complaint alleges that most products Michaels sells are “exclusive” or “private brand” 16 products sold only by Michaels, but that it also sells at least some non-exclusive products.2 Dkt. 17 No. 26, at 22. In her complaint, Ms. Vizcarra alleges that all Michaels products—be they exclusive 18 or non-exclusive—are always available for two prices. Drawing all reasonable inferences in her 19 favor, the Court can presume that most consumers, when confronted with two prices including a 20 lower price that can be obtained with negligible additional effort, will opt for the lower price. Ms. 21
22 2 Michaels argues that the alleged private label or “exclusive” products are not actually exclusive because at least some of the products are also sold on marketplaces like Amazon.com and 23 Walmart.com by third-party sellers. See Dkt. No. 34, at 21–22. The Court takes judicial notice of the existence and contents of the webpages Michaels has submitted which show certain Michaels 24 private brand products for sale on Amazon.com and Walmart.com. But the existence of these listings does not refute Ms. Vizcarra’s allegations that most of Michaels’ products are exclusive 25 private label products. Any product—exclusive or non-exclusive—can of course be re-sold on online marketplaces or elsewhere. Whether these disputed products are exclusive or non-exclusive 26 products and how their prevailing market prices should be calculated are ultimately questions of fact. At the pleading stage the Court must take Ms. Vizcarra’s allegations as true and draw all 27 inferences in her favor. The screenshots Michaels has submitted do not necessarily contradict Ms. 1 Vizcarra’s allegations are therefore sufficient to plausibly establish that the prevailing market price 2 of products sold at Michaels is the lower, discounted price, while Michaels’ advertising presents 3 the higher non-discounted price as a former price. This is true even for any non-exclusive 4 products, because the Court can infer for purposes of the present motion that Michaels would not 5 continually sell products for prices at least 20% less than the market rates at which those products 6 are offered elsewhere. See also Knapp, 2016 WL 3268995, at *5 (“Knapp does not need to 7 identify prices charged by other retailers to plausibly establish that Art.com’s advertised former 8 prices are higher than prevailing market prices.”).3 Under Rule 8 and Rule 12(b)(6), these 9 allegations are sufficient to state a violation of Section 17501.4 10 2. Ms. Vizcarra Adequately Pleads FAL, UCL, and CLRA Advertising Claims. 11 12 In addition to the Section 17501 claims discussed above, Ms. Vizcarra also claims in her 13 first cause of action that Michaels has violated Section 17500 of the FAL. In her second cause of 14 action, she seeks damages and an injunction under the California Consumer Legal Remedies Act 15 (CLRA). And in her third cause of action, she claims that Michaels has violated the unlawful, 16 deceptive, and unfair prongs of California’s Unfair Competition Law (UCL). Michaels argues, and 17 Ms. Vizcarra does not dispute, that these claims are subject to Rule 9(b). 18 Section 17500 of the FAL broadly prohibits knowingly or negligently making “untrue or 19 misleading” statements in conjunction with the intentional sale of goods or services. The UCL 20 prohibits “any unlawful, unfair or fraudulent business act or practice,” as well as any “unfair, 21 deceptive, untrue or misleading advertising” and any act prohibited by the FAL. Cal. Bus. & Prof. 22 Code § 17200. The California Supreme Court has emphasized that “any violation of the false 23 advertising law necessarily violates the UCL.” Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002) 24 3 While there are different methods for determining the prevailing market price of exclusive and 25 non-exclusive products, that distinction is of limited relevance at the pleading stage, when Ms. Vizcarra does not need to allege the actual prevailing market price but only plausibly allege that 26 the purported former price was not the actual prevailing market price during the three preceding months. 27 4 While some claims under the False Advertising Law may be subject to Rule 9(b)’s heightened 1 (cleaned up). Finally, the CLRA prohibits a wide range of “unfair methods of competition and 2 unfair or deceptive acts or practices,” including: 3 • “Representing that goods or services have sponsorship, approval, characteristics, 4 ingredients, uses, benefits, or quantities that they do not have or that a person has a 5 sponsorship, approval, status, affiliation, or connection that the person does not have,” 6 Cal. Civ. Code § 1770(a)(5); 7 • “Advertising goods or services with intent not to sell them as advertised,” id. 8 § 1770(a)(9); and 9 • “Making false or misleading statements of fact concerning reasons for, existence of, or 10 amounts of, price reductions,” id. § 1770(a)(13). 11 As its name suggests, the CLRA authorizes consumers harmed by prohibited conduct to bring an 12 action for damages and injunctive relief, provided they first comply with certain notice 13 requirements when seeking damages. Cal. Civ. Code §§ 1780, 1782. 14 Claims under the FAL, UCL, and CLRA “are governed by the ‘reasonable consumer’ 15 test.” Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008). Importantly, the UCL 16 and FAL “prohibit not only advertising which is false, but also advertising which, although true, is 17 either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse 18 the public. Thus, to state a claim under either the UCL or the false advertising law, based on false 19 advertising or promotional practices, it is necessary only to show that members of the public are 20 likely to be deceived.” Kasky, 27 Cal. 4th at 951. “California courts … have recognized that 21 whether a business practice is deceptive will usually be a question of fact not appropriate for 22 decision on demurrer.” Williams, 552 F.3d at 938. The question is ultimately whether a plaintiff 23 “could plausibly prove that a reasonable consumer would be deceived.” Id. at 940. 24 Here, Ms. Vizcarra has alleged facts that could plausibly establish that Michaels’ 25 advertising is false, misleading, or capable of deceiving or confusing the public. The essence of 26 her allegations, described in more detail above, is that Michaels’ advertised sales, discounts, and 27 coupons are not as good as they might at first appear because its products are always on sale and 1 advertisements cannot be misleading because, “while discounts may be available, that does not 2 mean that all consumers are aware of them or undertake the required affirmative steps to take 3 advantage of them,” and that as a result, the allegation that coupons or discounts are always 4 available “does not mean that the products are ‘never’ offered at the ‘regular’ or ‘prevailing 5 market price.’” Dkt. No. 34, at 18. That may be the case, but even advertisements which are 6 technically true can still be misleading, deceptive, or confusing and thus violate the FAL. Ms. 7 Vizcarra’s allegations plausibly suggest that this could be true, and they therefore suffice at the 8 pleading stage. Whether reasonable consumers are actually likely to be deceived by Michaels’ 9 advertising is a question of fact that must be resolved at a later stage. 10 Ms. Vizcarra’s UCL claims are closely related to her FAL claims and are also therefore 11 sufficient. The deceptive advertising prong of the UCL uses the same “reasonable consumer” test 12 as the FAL (which it also explicitly incorporates), and Ms. Vizcarra’s UCL deception claim 13 therefore suffices for the same reason. The adequately pleaded FAL violation also serves as a 14 sufficient predicate for a violation of the unlawful prong of the UCL. Finally, while there appears 15 to be some variation among California courts over what test applies to consumer claims under the 16 unfair prong of the UCL, the hard questions arise when conduct that is not otherwise proscribed is 17 nevertheless alleged to be unfair. Here, where the factual allegations are sufficient to plausibly 18 allege violations of the FAL and other prongs of the UCL, those same allegations also sufficiently 19 state an unfairness prong claim under the UCL, including under the more stringent test that 20 “requires the allegedly unfair business practice be ‘tethered’ to a legislatively declared policy.” 21 See Belton v. Comcast Cable Holdings, LLC, 151 Cal. App. 4th 1224, 1239 (Cal. Ct. App. 1st. 22 Dist. 2007). 23 Michaels also argues that even if Ms. Vizcarra’s claims satisfy Rule 8, her fraud-based 24 claims are insufficiently pleaded under Rule 9(b). In its reply brief, Michaels focuses on two 25 purported deficiencies. First, Michaels argues that Ms. Vizcarra has failed to plead “investigatory 26 facts” regarding the prevailing market prices at other retailers for the products alleged to be non- 27 exclusive, as well as for the allegedly exclusive products. Dkt. No. 39, at 12–14. However, as Ms. 1 products at issue. See Dkt. No. 38, at 14. Those claims are adequately pleaded for the reasons 2 described above. The non-Section 17501 FAL claims, as well as the UCL and CLRA claims, do 3 not necessarily depend on what prices other retailers charge for the products Michaels sells. Ms. 4 Vizcarra therefore does not need to allege pricing at other retailers in order to adequately state a 5 claim that Michaels’ own advertising is false, misleading, deceptive, or confusing. 6 Michaels also argues that Rule 9(b) requires Ms. Vizcarra to allege that she investigated 7 the pricing history at Michaels for each of the specific items she purchased. If Ms. Vizcarra’s 8 complaint had asserted that advertised discounts specific to individual products were false or 9 misleading, then product-specific individualized investigation might be required. But Ms. Vizcarra 10 alleges a blanket pricing practice in which always-available coupons offer a perpetual discount of 11 at least 20% off the “regular” list prices of all items. Even under Rule 9(b), there is no reason to 12 require Ms. Vizcarra to individually investigate and track the prices of every Michaels product (or 13 at least the ones she purchased) when the investigation she has already conducted suggests that 14 “site-wide discounts of at least 20% were always available” during a two-year timeframe. Dkt. No. 15 26, at 19–20. Assuming her allegations are true, as is required, then these discounts would clearly 16 apply to all Michaels products during the investigated time period. This is more than “specific 17 enough to give defendants notice of the particular misconduct” Ms. Vizcarra alleges and therefore 18 suffices under Rule 9(b). See Vess, 317 F.3d at 1106. 19 Finally, Michaels argues that Ms. Vizcarra has not complied with the CLRA’s notice 20 requirements and that the CLRA damages claim must therefore be dismissed. The CLRA provides 21 that a plaintiff may file an action for injunctive relief and, at least 30 days after filing that action 22 and notifying the defendant of the alleged violation, amend their complaint to include a request for 23 damages. See Cal. Civ. Code § 1782(a), (d). Here, Ms. Vizcarra sent a CLRA demand letter on 24 January 25, 2023. On February 1, 2023, she filed her initial complaint in this action, which did not 25 include a claim for damages under the CLRA. See Dkt. No. 1, at 18. In the complaint, Ms. 26 Vizcarra stated: “If Defendant does not fully correct the problem for Plaintiff and for each member 27 of the California Subclass within 30 days of receipt, Plaintiff and the California Subclass will seek 1 present amended complaint including a CLRA damages claim. Dkt. No. 26. Michaels faults Ms. 2 Vizcarra for “ma[king] no attempt to engage in settlement of her claim” and for waiting more than 3 the 30-day minimum to file her amended complaint, arguing that these actions do not “accord with 4 the purpose of the CLRA’s notice requirements.” Dkt. No. 39, at 18–19. But Michaels’ arguments 5 have no basis in the statute, with which Ms. Vizcarra thoroughly complied. The CLRA damages 6 claims will not be dismissed. 7 In sum, Michaels’ motion is denied as to the FAL, UCL, and CLRA claims asserted in Ms. 8 Vizcarra’s first three causes of action. 9 3. Ms. Vizcarra States a Claim for Intentional Misrepresentation. 10 Ms. Vizcarra’s ninth cause of action is a claim for intentional misrepresentation. Michaels 11 argues this claim should be dismissed under the economic loss doctrine, which holds that a 12 plaintiff who suffered “purely economic loss due to disappointed expectations” may recover only 13 in contract—not tort—unless the plaintiff “can demonstrate harm above and beyond a broken 14 contractual promise.” Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988 (2004). 15 But one class of contract cases where the California Supreme Court has recognized that tort 16 damages are permitted is “where the contract was fraudulently induced.” Id. at 989–90 (quoting 17 Erlich v. Menezes, 21 Cal. 4th 543, 551–52 (1999)); see also White v. FCA US LLC, 22-cv-00954- 18 BLF, 2022 WL 3370791, at *5 (N.D. Cal. Aug. 16, 2022) (“Properly pled, claims for fraudulent 19 inducement fall under their own ‘well-recognized exception to the economic loss rule.’”). 20 Ms. Vizcarra argues that her claim is not subject to the economic loss rule because it is 21 based in fraudulent inducement: She alleges that she would not have purchased Michaels’ goods 22 in the first place absent Michaels’ alleged misrepresentations, and claims that having purchased 23 the products at all is a separate tort injury distinct from her disappointed economic expectations 24 regarding their monetary value. Because these allegations include an element of fraudulent 25 inducement, they are not barred by the economic loss rule and are sufficient to state a claim for 26 intentional misrepresentation. 27 Ms. Vizcarra’s complaint also includes a claim for negligent misrepresentation that Ms. 1 4. Ms. Vizcarra States Claims for Breach of Contract and Warranty. 2 Ms. Vizcarra’s fourth cause of action is for breach of contract. She claims that she and 3 class members entered a contract with Michaels in which they would pay Michaels for the 4 products, and Michaels in turn would provide products that had market values equal to the non- 5 discounted list prices while providing a discount. Michaels argues that there was no breach 6 because it provided products having the specified list price and provided the specified discount 7 from that price. The parties clearly disagree over the terms of the purported contract, how 8 Michaels’ products should be valued, and whether Ms. Vizcarra and other customers received the 9 discounts they were promised. But these are fact disputes. For purposes of Rule 12(b)(6), Ms. 10 Vizcarra has stated a breach of contract claim: She alleges a specific agreement and says that she 11 upheld her end while Michaels did not and that she was harmed as a result. That is enough. 12 Ms. Vizcarra’s fifth cause of action is for breach of express warranty. Under California 13 law, “[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the 14 goods and becomes part of the basis of the bargain creates an express warranty that the goods shall 15 conform to the affirmation or promise,” as does “[a]ny description of the goods which is made part 16 of the basis of the bargain creates an express warranty that the goods shall conform to the 17 description.” Cal. Com. Code § 2313. Here, Ms. Vizcarra alleges that Michaels represented that its 18 products had a market value equal to the regular non-discounted list price, and that this was part of 19 the basis for the bargain. As with the contract claims, Michaels responds that there was no breach. 20 Michaels also argues that Ms. Vizcarra has failed to specify the “exact” warranty terms at issue 21 and does not identify any deficiencies in the quality of the products she purchased. But as required 22 by the statute, Ms. Vizcarra has alleged a description of the goods (not only their price but also the 23 promised discount) and claims that the description was part of the basis of the bargain. At the 24 pleading stage, that suffices. See Munning, 2016 WL 6393550, at *8. 25 Ms. Vizcarra’s sixth cause of action is for breach of implied warranty. Michaels’ 26 arguments regarding the sufficiency of that claim are the same as its arguments regarding the 27 express warranty claim, and fail for the same reasons. 1 5. Ms. Vizcarra Does Not State a Claim for Unjust Enrichment. 2 Ms. Vizcarra’s seventh cause of action is a claim for quasi-contract/unjust enrichment. In 3 California, “there is not a standalone cause of action for ‘unjust enrichment.’” Astiana v. Hain 4 Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015). Rather, “unjust enrichment” and 5 “restitution” can serve as “the theory underlying a claim that a defendant has been unjustly 6 conferred a benefit through mistake, fraud, coercion, or request,” the return of which “is the 7 remedy typically sought in a quasi-contract cause of action.” Id. 8 In support of her quasi-contract claim, Ms. Vizcarra alleges that Michaels’ “false and 9 misleading advertising” caused her to purchase Michaels products and “pay a price premium,” and 10 that Michaels therefore “received a direct and unjust benefit” at her expense. Dkt. No. 26, at 40. It 11 is unclear from the facts alleged in the complaint, however, how Michaels’ use of price discounts 12 resulted in payment of a price premium to Michaels by Ms. Vizcarra—which is a necessary 13 element of her claim for restitution. Wrongful conduct does not provide a basis for restitution 14 unless there is a benefit unjustly retained by the defendant at the plaintiff’s expense. See 15 Weitzenkorn v. Lesser, 40 Cal. 2d 778, 794 (1953) (“Quasi contractual recovery is based upon 16 benefit accepted or derived for which the law implies an obligation to pay. ‘Where no benefit is 17 accepted or derived there is nothing from which such contract can be implied.’”). 18 In any event, Ms. Vizcarra’s existing complaint suffers from a more obvious problem. “An 19 action based on an implied-in-fact or quasi-contract cannot lie where there exists between the 20 parties a valid express contract covering the same subject matter.” Rutherford Holdings, LLC v. 21 Plaza Del Rey, 223 Cal. App. 4th 221, 231 (2014). At the pleading stage, this means that “a 22 plaintiff may not plead the existence of an enforceable contract and simultaneously maintain a 23 quasi-contract claim unless the plaintiff also pleads facts suggesting that the contract may be 24 unenforceable or invalid.” Saroya v. Univ. of the Pac., 503 F. Supp. 3d 986, 998 (N.D. Cal. 25 2020).5 In her existing complaint, Ms. Vizcarra has not pleaded that the contract she alleges she 26 had with Michaels is unenforceable or invalid or explained why the facts she has alleged could 27 1 render the contract unenforceable. For that reason, her quasi-contract/unjust enrichment claim is 2 dismissed with leave to amend. 3 B. Motion To Strike 4 Michaels also moves to strike Ms. Vizcarra’s class allegations under Rule 12(f), or 5 alternatively, to dismiss all non-California claims. The gist of Michaels’ argument is that Ms. 6 Vizcarra’s class claims are so overbroad that the asserted class is not certifiable and the class 7 allegations should therefore be stricken. 8 Rule 23 requires the Court to determine whether to certify a class at an “early” time, so the 9 Court is certain to consider these questions at some point soon. But Rule 12(f) only allows the 10 Court to strike material that is “redundant, immaterial, impertinent, or scandalous.” Although the 11 Court recognizes there is some variance among district courts on this question, the Court concurs 12 with those that have concluded that “Rule 12(f) motions to strike are not the proper vehicle for 13 seeking dismissal of class allegations.” See Tasion Commc’ns, Inc. v. Ubiquiti Networks, Inc., No. 14 C-13-1803 EMC, 2014 WL 1048710, at *3 (N.D. Cal. Mar. 14, 2014) (collecting cases). Michaels 15 will have the opportunity to challenge class certification, but its motion to strike the class 16 allegations under Rule 12(f) at the pleading stage is denied. 17 Alternatively, Michaels asks for dismissal of the non-California claims because Ms. 18 Vizcarra does not have standing to assert state law claims on behalf of a nationwide class. Here, 19 none of Ms. Vizcarra’s claims invoke the laws of states other than California. And whether 20 California law may be used on a class-wide basis will require a detailed choice of law analysis and 21 consideration of whether “the interests of other states … outweigh California’s interest in having 22 its law applied.” Mazza v. Am. Honda Motor Co., 666 F.3d 581, 590 (9th Cir. 2012). This, too, is a 23 question for class certification; the parties have not briefed these questions in detail and the Court 24 will not endeavor to untangle the potentially complicated choice of law questions at this early 25 stage. See, e.g., Urban v. Tesla, _ F. Supp. 3d _, No. 22-cv-07703-PCP, 2023 WL 6796021, at *4 26 (N.D. Cal. Oct. 13, 2023). Accordingly, Michaels’ motion to dismiss Ms. Vizcarra’s nationwide 27 class claims is also denied. 1 C. Request for Judicial Notice 2 Michaels has requested judicial notice of several court filings and fourteen webpages. The 3 court filings are clearly noticeable under Federal Rule of Evidence 201(b) and the Court takes 4 || notice of these documents. The Court also takes notice of the webpages, as discussed in note 2 5 above. 6 || IV. Conclusion 7 Ms. Vizcarra’s unjust enrichment claim is dismissed with leave to amend. Michaels’ 8 motion to dismiss is denied as to all other claims. The motion to strike is denied. The request for 9 || judicial notice is granted. An amended complaint, if any, is due February 2, 2024. If Ms. Vizcarra 10 || does not file an amended complaint by that date, Michaels’ response to the existing complaint will 11 be due February 23, 2024. 12
IT IS SO ORDERED.
15 || Dated: January 5, 2024 16 Za. , A 3 = 17 P. Casey Pitts 18 United States District Judge 19 20 21 22 23 24 25 26 27 28