GEORGE H. KING, District Judge.
Beatrice Herrera, Deputy Clerk.
This matter is before us on Defendants Hyland's, Inc. ("Hyland's"), Standard Homeopathic Laboratories, Inc., and Standard Homeopathic Company's (collectively, "Defendants") Motion to Dismiss Complaint ("Motion"). We have considered the papers filed in support of and in opposition to this Motion and deem this matter appropriate for resolution without oral argument. L.R. 7-15. As the Parties are familiar with the facts, we will repeat them only as necessary. Accordingly, we rule as follows.
On a motion to dismiss, we accept the allegations of the Complaint as true and construe them in the light most favorable to the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009). Plaintiff Enzo Forcellati ("Plaintiff), a New Jersey resident, states that Defendants "represent[] that [their] homeopathic Cold and Flu Remedies offer children `Fast acting,' `Safe & Effective,' `Multi-symptom' relief from cold and flu symptoms, including runny
Defendants move to dismiss the CAC for the following reasons: First, Defendants argue that based on the Ninth Circuit's opinion in Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir.2012), Plaintiff "lacks standing to assert claims under California's consumer protection laws, for himself or on behalf of a putative nationwide class." (Mot. 1). Second, Defendants argue, also pursuant to Mazza, that "Plaintiff cannot certify a nationwide class for alleged violations of consumer protection laws." (Id. at 2). Third, Defendants argue that Plaintiff lacks standing to assert claims regarding any products that he did not use.
In order to survive dismissal for failure to state a claim, a complaint must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). It must contain factual allegations sufficient
Defendants argue that under the Ninth Circuit's decision in Mazza, 666 F.3d 581, "the variances in state laws overwhelm any common issues and, as a result, neither the predominance of common issues nor the superiority requirements for class certification under F.R.C.P. 23(b)(3) can be met." (Mot. 22). We find Defendants' argument to be unripe at this stage of litigation. Mazza did not purport to hold that nationwide classes are, as a matter of law, uncertifiable under California's consumer protection laws, which is unsurprising given the case-specific nature of choice-of-law analysis. Indeed, the court made clear that its holding was cabined to the facts before it, holding: "Under the facts and circumstances of this case, we hold that each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." Id. at 594. Importantly, Mazza (and nearly every other case cited by Defendants) undertook a class-wide choice-of-law analysis at the class certification stage, rather than the pleading stage at which we find ourselves. Until the Parties have explored the facts in this case, it would be premature to speculate about whether the differences in various states' consumer protection laws are material in this case. See Pokorny v. Quixtar, Inc., 601 F.3d 987, 995 (9th Cir.2010) (noting that California's choice-of-law rules require courts to find that there is a "material difference" between the laws of different states on the basis of the facts presented in each case).
Additionally, once the relevant facts of the case have been explored during discovery, it is possible that Plaintiff could narrow or define the class in such a way at the class certification stage to make any differences between applicable laws immaterial. Moreover, should choice-of-law analysis appear to pose problems at the class certification stage, Plaintiff could seek to certify subclasses of putative class members from individual states or subclasses of class members from groups of states with consumer protection laws that are not materially different.
Courts rarely undertake choice-of-law analysis to strike class claims at this early stage in litigation. See In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litigation, 758 F.Supp.2d 1077, 1096 (S.D.Cal.2010) ("In a putative class action, the Court will not conduct a detailed choice-of-law analysis during the pleading stage."). We likewise
Defendants argue that, as a resident of New Jersey, Plaintiff lacks standing to bring consumer protection claims under California law. Defendants contend that "the Ninth Circuit recently recognized in Mazza" that "a plaintiff or class member's consumer protection claims must be brought under the laws of the state where the consumer received alleged misrepresentations or omissions which resulted in the consumer transaction at issue." (Mot. 5). Defendants appear to misunderstand the concept of standing. As noted by the court in Mazza, "standing requires that (1) the plaintiff suffered an injury in fact ... (2) the injury is fairly traceable to the challenged conduct, and (3) the injury is likely to be redressed by a favorable decision." 666 F.3d at 594-95 (quoting Bates v. United Parcel Svc., Inc., 511 F.3d 974, 985 (9th Cir.2007)). Defendants do not argue that any of the Article III standing requirements are not met. Instead, Defendants' argument appears to be that choice-of-law analysis precludes Plaintiff from pursuing his claims under California law. To this extent, Defendants appear to conflate two issues: the extraterritorial application of California consumer protection laws (or the ability of a nonresident plaintiff to assert a claim under California law), and choice-of-law analysis (or a determination that, based on policy reasons, non-forum law should apply).
Whether a nonresident plaintiff can assert a claim under California law is a constitutional question based on whether California has sufficiently significant contacts with the plaintiff's claims. See id. at 589-90 (noting that "[s]uch a showing is necessary to ensure that application of California law is constitutional"). Plaintiff alleges that Defendants are headquartered in Los Angeles, California. Therefore, application of California law poses no constitutional concerns. See Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365, 379 (N.D.Cal.2010) ("Defendants are headquartered in California and their misconduct allegedly originated in California. With such significant contacts between California and the claims asserted by the class, application of the California consumer protection laws would not be arbitrary or unfair to defendants."). Accordingly, Plaintiff certainly can assert a claim under California law, and it is Defendant's burden to defeat the presumption that California law applies and to "show[] a compelling reason justifying displacement of California law." Rasidescu v. Midland Credit Mgmt., Inc., 496 F.Supp.2d 1155, 1159 (S.D.Cal.2007).
In arguing that choice-of-law analysis requires "Plaintiff [to] seek relief under his home state's consumer protection laws," Defendants do not even discuss the differences between the consumer protection laws of New Jersey and California, let alone address whether these differences are material based on the facts and circumstances of this case. Instead, Defendants rather generically argue that numerous courts, including the Ninth Circuit in
Additionally, Defendants cite numerous cases holding that differences between California consumer protection laws and the consumer protection laws of other states preclude class certification. See, e.g., Mazza, 666 F.3d 581; In re Hitachi Television Optical Block Cases, No. 08cv1746 DMS (NLS), 2011 WL 9403 (S.D.Cal. Jan. 3, 2011); Gianino v. Alacer Corp., 846 F.Supp.2d 1096 (C.D.Cal.2012); Kowalsky v. Hewlett-Packard Co., No. 5:10-cv-02176-LHK, 2012 WL 892427 (N.D.Cal. Mar. 14, 2012). These cases are unhelpful in determining whether Plaintiff as an individual may assert claims against Defendants under California law. See Speyer v. Avis Rent a Car System, Inc., 415 F.Supp.2d 1090, 1094 (S.D.Cal.2005) (noting that "courts generally consider only claims of named plaintiffs in ruling on [a] motion to dismiss ... prior to class certification"). These cases are also unhelpful in determining whether the differences between California consumer protection law and New Jersey consumer protection law, as opposed to other states' consumer protection laws, are material based on the facts of this case.
Defendants' briefing on the issues pertinent to this case — that is, whether Plaintiff's individual claims asserted under California law should be dismissed — is therefore inadequate for us to conclude that California law should be displaced on the facts of this case. Merely citing other courts' choice-of-law analyses, based on the facts before those courts, fails to discharge Defendants' burden of showing a "compelling reason" justifying the displacement of California law on Plaintiff's claims. Accordingly, Defendants' Motion is
Defendants argue that Plaintiff cannot assert claims as to the entire category of Defendants' "Cold and Flu Remedies" and instead may only assert these claims with respect to the one product within that category that Plaintiff alleges to have purchased — Defendants' Cold `n Cough product. We disagree. Although the district courts within this circuit have not been entirely consistent on this issue, we agree with the numerous recent decisions that have concluded that Defendants' argument is better taken under the lens of typicality or adequacy of representation, rather than standing. See Donohue v. Apple, 871 F.Supp.2d 913, 921-22, No. 11-cv-05337
Plaintiff alleges that "Defendants expressly warranted that Hyland's Cold and Flu remedies were effective and would provide fast acting, multi-symptom relief for the symptoms of the common cold and flu." (CAC ¶ 104). These purported express warranties were communicated on the packaging of Defendants' products. (Id. ¶¶ 45-50). Plaintiff alleges that "Defendants breached this warranty because Hyland's Cold and Flu Remedies are neither fast acting nor effective treatments for the cold or flu or any symptoms thereof." (Id. ¶ 105).
"[T]o prevail on a breach of express warranty claim, the plaintiff must prove (1) the seller's statements constitute an `affirmation of fact or promise' or a `description of the goods'; (2) the statement was `part of the basis of the bargain'; and (3) the warranty was breached." Weinstat v. Dentsply Int'l, Inc., 180 Cal.App.4th 1213, 1227, 103 Cal.Rptr.3d 614 (2010) (quoting Keith v. Buchanan, 173 Cal.App.3d 13, 20, 220 Cal.Rptr. 392 (1985)). Defendants' argument as to why Plaintiff's breach of express warranty fails is not entirely clear. First, Defendants assert that Plaintiff has failed to identify any false "affirmation of fact or promise." Defendants' argument appears to be that its packaging statements can only be false if they are construed to guarantee that the products "will work without fail for everyone, every time," which is a guarantee that they do not make. (Mot. 10; see also Reply 12 ("As the Product does not provide any express or implied warranty that it will work 100% of the time for everyone, Plaintiff's warranty claims fail.")). Defendants appear to misunderstand Plaintiff's claim. In asserting his breach of express warranty claim, Plaintiff does not complain that Defendants' Cold and Flu Remedies guarantee a 100% success rate but were unsuccessful when he used them. Instead, Plaintiff complains that Defendants' packaging statements are in fact false — that the products cannot and do not provide fast acting relief, and that they are never and cannot be effective in treating cold and flu symptoms. As noted by Judge Dolly Gee in rejecting Defendants' argument in a similar action involving other homeopathic products, "Plaintiff[] allege[s] that Defendants' products will not work at any time for anyone because they either lack
Defendants' second argument is even less clear and is based on compliance with regulatory requirements. Defendants appear to argue that their packaging statements are mere "indication for use statement[s] required under federal law in order for consumers to understand the conditions for which the drug is intended," rather than express promises or guarantees. (Mot. 11). Although we do not purport to pass judgment on whether regulatory compliance would immunize Defendants from liability — an argument Defendants do not actually make — we dispute their characterization of the alleged packaging statements as "indication for use statements." One can indicate "the general pharmacological category(ies) or the principal intended action(s) of [a] drug" as Defendants argue is required by regulations, (id.), without stating that the product is "safe and effective," (CAC ¶ 16), "relieves fevers and chills," (id. ¶ 48), or "fast acting," (id. ¶ 2). Indeed, one could merely state that its product is "intended for treatment of cold and flu symptoms." We also reject Defendants' opaque attempt to vaguely reference regulatory compliance without explicitly making any argument on the basis of these federal regulations.
In light of the foregoing, Defendants' Motion is
To succeed on an implied warranty claim, a plaintiff must demonstrate that the products are not "fit for the ordinary purposes for which such goods are used" or fail to "[c]onform to the promises or affirmations of fact made on the container or label." Cal. Civ.Code § 1791.1(a)(2), (4). Plaintiff alleges that Defendants' products are not "merchantable or fit for the purpose they were sold" — the fast and effective treatment of cold and flu remedies. (Id. ¶ 110). Defendants argue that Plaintiff's implied warranty claim "fails for the same reasons his express warranty claim fails" — the "claim is premised simply on the assertion that the Product did not work for him." (Mot. 14). Defendants also argue that their products are intended for use as homeopathic drugs, and "there are no allegations that the Product is not fit for its intended use ... as a homeopathic drug." (Id.).
Defendants again appear to misunderstand Plaintiff's claims. Plaintiff alleges that Defendants' products are not effective at all. The fact that Defendants' products contain the word "homeopathic" on the packaging, along with statements that the products provide safe, effective, and fast-acting relief for cold and flu symptoms, does not immunize Defendants from liability if their products are entirely ineffective in treating cold and flu symptoms, as Plaintiff alleges. Accordingly, Defendants' Motion is
Defendants' argue that Plaintiff's Magnuson-Moss Act claim fails because the Act only applies to "consumer products,"
The Magnuson-Moss Act defines "consumer product" as "any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed)." 15 U.S.C. § 2301(1). While the Act does not enumerate any particular "consumer products," numerous courts have discussed FTC regulations articulating such examples as "boats, photographic film and chemicals, clothing, appliances, jewelry, furniture, typewriters, motor homes, automobiles, mobile homes, vehicle parts and accessories, stereos, carpeting, small aircraft, toys, and food." Kemp v. Pfizer, Inc., 835 F.Supp. 1015, 1024 (E.D.Mich.1993) (quoting Magnuson-Moss Warranty Act: Implementation and Enforcement Policy, 40 Fed.Reg. 25,721, 25,722 (1975)); accord Boelens v. Redman Homes, Inc., 748 F.2d 1058, 1062 n. 6 (5th Cir.1984); Russo v. NCS Pearson, Inc., 462 F.Supp.2d 981, 998 (D.Minn.2006). Although over-the-counter cold and flu medications are not enumerated in FTC regulation examples, they certainly appear to fit within the broad definition contained in the Magnuson-Moss Act — tangible goods that are "normally used for personal, family, or household purposes."
In Kanter, the case cited by Defendants, the plaintiffs sued the manufacturers of an over-the-counter head lice treatment and alleged "that the product labels contain false and misleading statements about the effectiveness of the drugs." 99 Cal. App.4th at 784, 122 Cal.Rptr.2d 72. The plaintiffs asserted, inter alia, a claim for breach of warranty under the Magnuson-Moss Act. The California Court of Appeal cobbled together three statutes to conclude that the defendants' products were not "consumer products" within the meaning of the Magnuson-Moss Act:
Id. (some citations omitted). We respectfully disagree with the California Court of Appeal that parity of reasoning requires the two statutes, with different definitions, to be interpreted similarly. First, the cases upon which the court relied discussed products that could not reasonably be considered goods that are "normally used for personal, family, or household purposes." 15 U.S.C. § 2301(1). In Goldsmith, the court discussed whether a testicular prosthesis was a "consumer product" under the Magnuson-Moss Act. 913 F.Supp. at 57. Goldsmith relied on Kemp, which contemplated whether a prosthetic heart valve was a "consumer product" covered by Magnuson-Moss. 835 F.Supp. at 1024. Notably, the court in Goldsmith concluded that such a product was not a "consumer product" covered by the Magnuson-Moss Act because it was "not the type of product normally used for consumer purposes by the general public. Goods that are not customarily available to the ordinary person are not consumer products." Id. While these courts discussed the FDCA's definition of consumer product, it is difficult to imagine how they possibly could have concluded that medical prostheses could have been covered by the Magnuson-Moss Act irrespective of their express exclusion from the FDCA's definition. As the court noted in Kemp, such products are certainly not "normally used" within a household.
Second, we do not consider the FDCA's definition of "consumer product" to be conclusive, or even compelling for determining whether a good is a "consumer product" under Magnuson-Moss. The FDCA defines "consumer product," in pertinent part, as follows:
15 U.S.C. § 2052(a)(5). Accordingly, "consumer product" is defined much differently in the FDCA than the Magnuson-Moss Act, and it expressly excludes products that clearly fall within Magnuson-Moss. For example, the FDCA excludes food, boats, and motor vehicles — products that are expressly included as consumer products in the FTC's regulations interpreting Magnuson-Moss. Therefore, a product's express exclusion from the definition of "consumer product" in the FDCA does not compel a similar interpretation of the Magnuson-Moss Act where the product is otherwise a good "normally used for personal, family, or household purposes."
Third, there may be very good reasons for "consumer product" to be defined differently in Consumer Product Safety Act (as part of the FDCA) and the Magnuson-Moss Act. The Consumer Product Safety Act is primarily concerned with the safety of various products, and thus it may make sense to exclude products whose safety is regulated by agencies other than the Consumer Product Safety Commission — products like vehicles, food, and drugs. This helps to prevent conflicting or inconsistent regulatory requirements. In contrast, Magnuson-Moss is less focused on safety and more focused on ensuring that products do not have misleading claims as to the efficacy of those products. Thus, it may not be a significant concern if goods considered "consumer products" under Magnuson-Moss are regulated by other agencies with regard to those products' safety. This is perhaps evidenced by the FTC's interpretation of Magnuson-Moss as including vehicles and food, even though the safety of those products are regulated by other acts. Accordingly, Defendants have provided no compelling reason for why we should interpret these two different definitions to be co-terminous, and there appear to be very good reasons not to (not the least of which is the fact that FTC regulations expressly include products that are excluded from the definition in the FDCA).
Defendants have not engaged in a sufficiently comprehensive analysis of these two statutes, their interpretive regulations, and the regulatory structure of the agencies governing over-the-counter medications for us to conclude that over-the-counter homeopathic medications are not "consumer products" under Magnuson-Moss. Accordingly, they have not borne their burden at this stage of litigation of demonstrating that Plaintiff's Magnuson-Moss Act claim should be dismissed as a matter of law. We hereby
Defendants argue that Plaintiff's unjust enrichment claim fails because unjust enrichment is a remedy, rather than a freestanding claim. Although state and federal courts are somewhat inconsistent in their characterization of unjust enrichment under California law, we agree with Defendants that the majority of state and federal district courts in California do not recognize unjust enrichment as a freestanding claim. See, e.g., Levine v. Blue Shield of Cal., 189 Cal.App.4th 1117, 1138, 117 Cal.Rptr.3d 262 (2010) ("Although some California courts have suggested the
To prevail on his NSCFA claim, Plaintiff must establish "1) unlawful conduct by defendant[s]; 2) an ascertainable loss by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss." Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557, 964 A.2d 741 (2009); see also N.J.S. 56:8-19 ("Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefor in any court of competent jurisdiction."). Unlawful conduct may include an affirmative act, a knowing omission, or a regulatory violation. See Cox v. Sears Roebuck & Co., 138 N.J. 2, 17, 647 A.2d 454 (1994). Defendants first argue that "Plaintiff has failed to allege any unlawful conduct by Defendants" because he merely complains that the product did not work for him, and "no drug, OTC or prescription, can be expected to be effective 100% of the time for everyone." (Mot. 17). As discussed at length above, this argument betrays a misunderstanding of Plaintiff's allegations. Plaintiff does not merely complain that the products did not work for him; he claims that they are entirely ineffective for all consumers because they contain insufficient active ingredients to deliver on Defendants' promises of "fast acting" and "effective" relief. Plaintiff adequately pleads that Defendants made fraudulent representations on the packaging materials of their Cold and Flu Remedies products. This fulfills the "unlawful conduct" requirement for pleading a NJCFA claim. See Mendez v. Avis Budget Grp., Inc., No. 11-6537(JLL), 2012 WL 1224708, at *13 (D.N.J. Apr. 10, 2012) ("An affirmative act includes unconscionable commercial practices, deception, fraud and misrepresentation.").
Second, Defendants argue that Plaintiff has "failed to adequately plead an ascertainable loss." (Mot. 17). Defendants assert that "Plaintiff merely alleges that he purchased the Product and, without any explanation or details, he makes the conclusory
The ascertainable loss element of an NJCFA claim requires that the Plaintiff plead "a loss that is 'quantifiable or measurable[,' not] `hypothetical or illusory.'" Lee v. Carter-Reed Co., LLC, 203 N.J. 496, 522, 4 A.3d 561 (2010) (quoting Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248, 872 A.2d 783 (2005)). The ascertainable loss can be based on one of at least three recognized theories, recently summarized by the District of New Jersey:
Hammer v. Vital Pharmaceuticals, Inc., No. 11-4124, 2012 WL 1018842, at *8 (D.N.J. Mar. 26, 2012).
Plaintiff clarifies in his Opposition that he relies on the "out-of-pocket" theory, as he claims that Defendants' products are nothing more than "flavored water or sugar tablets." (Opp'n 22-23). Because he is relying on the "out-of-pocket" theory, rather than the "loss-in-value" theory, Plaintiff argues that pleading the loss in purchase price is sufficient to state a claim.
Plaintiff pleads the ascertainable loss element as follows:
(CAC ¶ 115). If we were construing this paragraph in a vacuum, we would agree with Defendants that Plaintiff appears to rely on the "loss-in-value" theory and thus insufficiently pleads an ascertainable loss under Rule 9(b)'s fraud pleading requirement. However, we construe the CAC's allegations in the light most favorable to the Plaintiff. See Lockyer, 568 F.3d at 1067. Taken as a whole, Plaintiff's CAC alleges that Defendants' homeopathic products are nothing more than "expensive sweetened, flavored water or sugar tablets," (id. ¶ 68), which are "ineffective and do not provide relief for any of the[] symptoms" for which they are advertised, (id. ¶ 92). Indeed, Plaintiff alleges that Defendants' products are "no more effective than placebos." (Id. ¶ 66). Plaintiff also clearly states that he and the putative class members "seek a refund and/or rescission of the transaction." (Id. ¶ 3). Plaintiff's NJFCA claim explicitly incorporates all of these paragraphs. (Id. ¶ 112). Therefore, although the specific assertions made under the heading of the NJFCA claim could be clearer on the ascertainable loss theory upon which Plaintiff relies, the CAC taken as a whole and in the light most favorable to the Plaintiff sufficiently pleads an ascertainable loss under the out-of-pocket
In light of the foregoing, we hereby
Defendants' Motion is
