JOSEPH F. BIANCO, District Judge:
Plaintiffs Patrick Hughes ("Hughes") and Nafise Nina Hodjat ("Hodjat") (collectively, "plaintiffs") bring this class action in diversity on behalf of themselves and others similarly situated against Ester-C Company (a subsidiary of NBTY, Inc.), NBTY, Inc., and NatureSmart LLC (collectively, "defendants" or "Ester-C Co."). Specifically, plaintiffs allege that defendants have deceptively marketed their products ("Ester-C products" or "products") from January 5, 2006 through to the present, and that such marketing has, inter alia: created a reasonable expectation in Ester-C consumers that the products are a form of immune system defense; deceptively represented Ester-C as a superior source of Vitamin C than other sources; and made misleading representations as to Ester-C's health benefits that are not supported by credible science. (See First Am. Class Action Compl. ("FAC") ¶¶ 1, 2, 9, 10.) In particular, plaintiffs allege violations of Missouri's Merchandising Practices Act, Mo.Rev.Stat. § 407.010 (on behalf of Missouri class members); violations of California's Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq. ("CLRA"), California's False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq. ("FAL"), and California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. ("UCL") (on behalf of California class members); and violations under New York common law, including unjust enrichment, intentional misrepresentation, and negligent misrepresentation as to all class members. (Id. ¶¶ 40-97.)
For the reasons stated herein, defendants' motion is denied in its entirety.
The following facts are taken from the FAC, including documents that plaintiffs have incorporated by reference. These facts are not findings of fact by the Court. Rather, the Court assumes these facts to be true for purposes of deciding the pending motion to dismiss. The Court construes the facts in the light most favorable to plaintiffs, the nonmoving party.
Ester-C Co. produces products that contain large dosages of vitamins. According to its packaging, Ester-C Co.'s products contain 500 mg of Vitamin C (more than eight times the daily dosage of Vitamin C as recommended by the Food and Drug Administration (the "FDA")) or 1000 mg of Vitamin C (approximately seventeen times the daily dosage of Vitamin C as recommended by the FDA). (FAC ¶ 16.) Ester-C Co.'s products also state that they contain Calcium, "C-Sorb Citrus Vioflavonoids Complex," and "Naturally Occurring Vitamin C Metabolites." (Id. ¶¶ 16; see also Decl. of James Arden in Supp. of Mot. to Dismiss, Ex. A ("Product Labels, Ex. A").)
Ester-C Co. offers consumers three principal forms of products, including Ester-C Tablets, Ester-C Gummies, and Ester-C To Go, a type of beverage mix. (FAC ¶ 16.) Consumers may purchase the products at several major drugstores, including CVS, Walgreens, K-Mart, Wal-Mart, Amazon.com, Drugstore.com, Rite Aid, Target, A & P, and Duane Read. (Id.)
Plaintiff Hughes, a citizen of Illinois, purchased an Ester-C product at a Walgreen's in St. Louis, Missouri, in March 2010. (Id. ¶ 9.) Plaintiff Hodjat, a citizen of California, purchased Ester-C products at Ralph's and Whole Foods grocery stores in Los Angeles, California on several occasions in 2011. (Id. ¶ 10.) Plaintiffs subsequently brought suit against defendants on behalf of nation-wide consumers of Ester-C.
This dispute centers on the specific packaging, labeling, and marketing of Ester-C Co.'s products. Plaintiffs point to several statements — present either on the products' packaging or Ester-C Co.'s website — which they assert are deceptive, false, and/or misleading to consumers. (See id. ¶¶ 16-21.) These statements include the following:
According to the FAC, Ester-C Co.'s representations as to the purpose and performance of its Products are not limited to the aforementioned packaging. (FAC ¶¶ 19-21.) Rather, Ester-C Co.'s website includes similar representations, including a section entitled "Ask An Expert," in which an identified "expert" claims he maintains a healthy and active lifestyle in part through the consumption of Ester-C. (Id. ¶¶ 19-20.) The website also discusses Ester-C's ability to increase absorption of vitamin C molecules, "making it easier for the body to transport [the vitamins] from cell to cell for numerous health benefits." (Id. ¶ 21.)
According to the FAC, retailers' marketing as to the products is similar. For instance, Amazon.com advertises product "Ester-C 24 Hour Immune Support 500mg" as "24 hour immune protection. [E]ster-C gives you powerful immune system support. [E]ster-C provides your body with the antioxidant protection it needs to help keep you healthy and strong ...." (Id. ¶ 24 (alterations in original).) Wal-mart markets Ester-C with such statements as, "[s]tay healthy with the Ester-C The Better Vitamin C Supplement Tablets," and "[t]he Ester-C vitamin C 1000mg tablets also offer 24 hour immunity from day to day ailments like flu and fever." (Id. ¶ 22.)Sears.com states, "Ester-C to go 24 hour immune support powder packets ... naturally pleasant tasting health and energy booster." (Id. ¶ 23.)
Plaintiffs also reference various Federal Trade Commission ("FTC") investigations into several of Ester-C's competitors, including Airborne Health, Inc., Rite-Aid Corp.'s "Germ Defense" products, CVS Pharmacy, Inc.'s "AirShield" products, and Walgreens' "Wal-Born" products. (Id. ¶ 26.) Plaintiffs note that the FTC settled all of these investigations, which were based on manufacturers' and retailers' representations regarding the ability of their products to boost one's immune system and protect against illness. (Id.) Plaintiffs contend that, given the similarities between Ester-C Co.'s products and those of the aforementioned FTC-targeted companies, "[d]efendants have not been truthful regarding what their Ester-C Products `can and cannot do'" (id. ¶ 28), and therefore, their representations "are misleading and false" (id. ¶ 4).
Defendants move to dismiss plaintiffs' complaint on three principal grounds. First, defendants contend that plaintiffs' misrepresentation claims (raised under several states' laws) are not adequately pled under Federal Rules of Civil Procedure 8 and 12(b)(6) because plaintiffs cannot point to any false statements allegedly made by defendants. (Defs.' Mem. of Law in Supp. of Mot. to Dismiss ("Defs.' Mot. to Dismiss") at 1-2, 5-11.) As part of this argument, defendants contend that plaintiffs' falsity-by-virtue-of-lack-of-credibleevidence claim is actually a lack of substantiation claim, which plaintiffs do not adequately support in their pleadings. Defendants further argue that plaintiffs' references to recent FTC consent decrees in support of their misrepresentation claim are unavailing because such decrees concern settlements between the FTC and other manufacturers, and involve different products and different claims. (Id. at 9-10.) Lastly, defendants argue that plaintiffs do not have standing to pursue their claims because plaintiffs never stated which products they allegedly purchased, nor did they plead whether they ever read the various marketing statements referenced in their complaint before purchase. (Id. at 6.)
Second, defendants argue that plaintiffs have failed to plead their claims, which sound in fraud, with particularity in accordance with Rule 9(b) of the Federal Rules of Civil Procedure. (Id. at 12-13.) This lack of particularity, according to defendants, is evidenced by plaintiffs' failure to identify which Ester-C products they purchased; what specific alleged misrepresentations they relied on in deciding to purchase
Third, defendants claim that plaintiffs have not properly alleged the elements of the torts of intentional misrepresentation, negligent misrepresentation, or unjust enrichment. (Id. at 14-17.)
Plaintiffs' arguments in opposition, most briefly summarized, are as follows. First, plaintiffs assert that they both have standing to bring, and have properly alleged, their claims. (Pls. Opp'n to Defs.' Mot. to Dismiss at 5-13.) Second, plaintiffs contend they have pled their fraud claims with the requisite particularity. (Id. at 13-18.) Third, plaintiffs argue that they have adequately pled their state misrepresentation claims (both intentional and negligent), as well as their unjust enrichment claim. (Id. at 18-25.)
On careful consideration of the parties' arguments, and for the reasons set forth herein, the Court concludes that dismissal of plaintiffs' claims is not warranted. Accordingly, the Court denies defendants' motion to dismiss in its entirety.
The original complaint in this action was filed on January 4, 2012; plaintiffs' amended complaint followed on May 15, 2012. Defendants filed their motion to dismiss on June 13, 2012. Plaintiffs' opposition thereto was filed on July 13, 2012, and defendants' reply was filed on July 27, 2012. Oral argument was held on October 23, 2012. The Court has fully considered the arguments and submissions of the parties.
Plaintiffs' pleadings focus on three states' laws concerning false product representations, namely, California, Missouri, and New York. All three states (whether under their common or statutory law) broadly prohibit false advertising or merchandising, unfair and deceptive business practices, and fraudulent misrepresentations. These state regulations will be discussed in greater detail infra.
Motions to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure probe the legal, not the factual, sufficiency of a complaint. See, e.g., Sims v. Artuz, 230 F.3d 14, 20 (2d Cir.2000). Stated differently, when assessing the viability of a complaint's pleadings at the Rule 12(b)(6) stage, "the issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims." Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir.1998) (internal alternation omitted). Thus, when
To survive a motion to dismiss, a complaint must set forth "a plausible set of facts sufficient `to raise a right to relief above the speculative level.'" Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 91 (2d Cir.2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Generally, this standard for survival does not require "heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955.
However, where a case concerns allegations of fraud or mistake under Rule 9(b) of the Federal Rules of Civil Procedure, claims must be pled with particularity. See Fed.R.Civ.P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."); see also Nasso, 892 F.Supp.2d at 446 ("Claims concerning fraud are subject to heightened pleading standards.").
Generally, to comply with Rule 9(b)'s specificity requirements, "the complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir.2006) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993)) (internal quotation mark omitted). Conclusory allegations of fraud will not survive Rule 9(b)'s heightened pleading standard, and therefore, will be subject to dismissal at the motion to dismiss stage. See Nasso, 892 F.Supp.2d at 445-46 (citing Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 444 (2d Cir.1971)).
Where a motion to dismiss presents itself before the court, a court may examine the following: "(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents `integral' to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence." Nasso, 892 F.Supp.2d at 446 (quoting In re Merrill Lynch & Co., 273 F.Supp.2d at 356-57) (internal citations omitted).
The Court first addresses defendants' argument that plaintiffs fail to state a claim under Rules 8 and 12(b)(6) of the Federal Rules of Civil Procedure. Defendants' argument is twofold: (1) plaintiffs lack standing to challenge Ester-C's Products, and (2) plaintiffs' assertion that Ester-C Co.'s representations are "misleading
When turning to the courts, a plaintiff must show that he has a justiciable case or controversy, including that he has standing before the court. Thus, standing "`focuses on the party seeking to get his complaint before a federal court, and not on the issues he wishes to have adjudicated.'" Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 38, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976) (quoting Flast v. Cohen, 392 U.S. 83, 99, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968)). Generally, to establish standing, a plaintiff must satisfy three requirements: (1) "there must be alleged (and ultimately proved) an injury in fact — a harm suffered by the plaintiff that is concrete and actual or imminent," Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990)) (internal quotation marks omitted); (2) there must be "a fairly traceable connection between the plaintiff's injury and the complained-of conduct of the defendant," id.; and (3) there must be "a likelihood that the requested relief will redress the alleged injury," id. Where a plaintiff satisfies this trifecta of injury, causation, and redressability, he also will have met the "case or controversy" requirement of Article III, Jaghory v. N.Y. State Dept. of Educ., 131 F.3d 326, 329-30 (2d Cir.1997), thereby giving a federal court jurisdiction over the matter, see Steel Co., 523 U.S. at 103-04, 118 S.Ct. 1003.
Notably, for purposes of this action, where a case involves a class of plaintiffs, a court must "look[] to the status of the named plaintiff, not the standing of unidentified class members." Salsitz v. Peltz, 210 F.R.D. 95, 99 (S.D.N.Y.2002); see also Simon, 426 U.S. at 40 n. 20, 96 S.Ct. 1917 ("That a suit may be a class action ... adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent." (citations and internal quotation marks omitted)).
The Court first addresses whether the named plaintiffs, Hodjat and Hughes, have standing to bring their claims before this Court.
Economic injury suffices as a form of injury-in-fact that meets the first element of standing. See Watt v. Energy Action Educ. Found., 454 U.S. 151, 161, 102 S.Ct. 205, 70 L.Ed.2d 309 (1981) (recognizing economic injury as an injuryin-fact); see also Danvers Motor Co., Inc. v. Ford Motor Co., 432 F.3d 286, 291 (3d Cir.2005) ("While it is difficult to reduce injury-in-fact to a simple formula, economic injury is one of its paradigmatic forms."); San Diego Cnty. Gun Rights Comm. v. Reno, 98 F.3d 1121, 1130 (9th Cir.1996) ("Economic injury is clearly a sufficient basis for standing.").
Here, plaintiffs state that they purchased Ester-C based on its representations as to immune support, and that "[h]ad [they] known the truth that the statements [they] relied on were false, misleading, deceptive, and unfair, [they] would not have purchased Ester-C or paid the premium price (of approximately 300%) for the Ester-C [they] bought." (FAC ¶¶ 9, 10; see also id. ¶ 49 ("As a
Plaintiffs likewise satisfy the causation and redressability elements of standing. As to causation, plaintiffs state that their economic injuries (here, the out-of-pocket cost of purchasing Ester-C as opposed to another brand) are fairly traceable to the alleged misrepresentations on Ester-C's packaging, as plaintiffs state that they would not have purchased Ester-C's products "had [they] known the truth that the statements [they] relied on were false, misleading, deceptive, and unfair...." (FAC ¶¶ 9, 10.) As to redressability, plaintiffs seek "to put an end to [d]efendants' deceptive marketing of Ester-C and to provide consumers with monetary relief for [d]efendants' deceptive conduct." (Id. ¶ 6.) This is sufficient for purposes of Article III standing.
Although defendants argue that plaintiffs cannot demonstrate that they have standing because plaintiffs do not clarify which products they purchased or which product representations, if any, they read or actually relied upon, this contention is countered by the express language of the complaint. Plaintiffs state that they purchased Ester-C (id. ¶¶ 9 & 10), they note the different types of Ester-C products available for consumer purchase (id. ¶ 16), and they list several examples of the types of Ester-C product representations that plaintiffs assert they relied upon in making their purchases (id. ¶¶ 9-10, 17-25). Defendants' call for greater specificity here better falls to their challenges on Rule 9(b) grounds, not to their arguments as to standing. See Kwikset, 120 Cal.Rptr.3d 741, 246 P.3d at 890 (stating "a consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement... by alleging ... that he or she would not have bought the product but for the misrepresentation").
Rule 8 of the Federal Rules of Civil Procedure sets out the general pleading standard with which all pleadings must comply: "A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R.Civ.P. 8(a)(2). The Supreme Court has fleshed out this statement further, noting that Rule 8 requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft, 556 U.S. at 678, 129 S.Ct. 1937; id. (rejecting under Rule 8 "labels and conclusions," "formulaic recitation[s] of the elements of a cause of action," and "naked assertions devoid of further factual enhancement" (citations and internal quotation marks omitted)). That is, a complaint must contain "facial plausibility," present "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.; see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (stating "[f]actual allegations must be enough to raise a right to relief above the speculative level").
Whereas Rule 8 governs pleadings at the outset of a case, Rule 12(b)(6) serves as a type of gatekeeper, preventing claims that fail to satisfy Rule 8's requisites from proceeding onward through the labyrinthine terrain of a case's progression to resolution. For this reason, a "[f]ailure to comply with Rule 8(a) may result in dismissal of a complaint...." Praseuth v. Werbe, 99 F.3d 402, 402 (2d Cir.1995). As noted earlier, for a complaint to survive the motion to dismiss stage, it "must contain sufficient factual matter, accepted as true," which effectively "`state[s] a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).
The key issue embedded in defendants' argument in support of dismissal is whether plaintiffs, in pleading their claims of misrepresentation under California, Missouri, and New York consumer protection laws, in fact plead a lack of substantiation claim. In crafting their claims as to the alleged fraudulent nature of defendants' representations, plaintiffs' principal pleadings are that "[e]vidence ... indicates that Ester-C is not any better than other Vitamin C supplements at providing Vitamin C to the body," and that "[d]efendants have no credible evidence that taking Ester-C will provide immune support or keep one from getting sick." (FAC ¶ 25.) In other words, plaintiffs argue that defendants' representations are misleading or false because defendants have no scientific evidence backing up their statements. As discussed below, lack-of-substantiation arguments have been found by many courts, including California courts, to be insufficient, on their own, to support a false or misleading advertising claim. In the instant case, however, the FAC goes beyond asserting a simple lack of substantiation claim, and also alleges that defendants made representations that are affirmatively false.
Several courts have addressed the issue of a lack of substantiation claim raised in the context of a false advertising or misrepresentation argument. In particular, California courts have addressed claims of false advertising similar to those at issue
The Court finds these courts' analyses to be persuasive here. Because these holdings are relevant to the Court's line of reasoning, it addresses this precedent in detail.
In the District Court for the Eastern District of California's Fraker decision, the court held that dismissal of plaintiff's claims under the FAL, UCL, and CLRA was warranted because plaintiff's allegations of false or misleading advertising were "essentially [an] attempt to shoehorn an allegation of violation of the Federal Trade Commission Act, 15 U.S.C. § 45 et seq. ("FTCA"), into a private cause of action." Fraker, 2009 WL 5865687, at *7. The FTCA prohibits "unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a)(1). An FTCA claim lies "[w]here a company advertises that a product has certain attributes without making any specific claim as to the existence of any substantiation"; in such an instance, "the FTCA provides that the [Federal Trade Commission] may require that the manufacturer provide a reasonable basis for the advertising or cease and desist in making the unsubstantiated advertising claims." Fraker, 2009 WL 5865687, at *8. However, the express language of the statute vests remedial power in the Federal Trade Commission ("FTC"). See 15 U.S.C. § 45(a)(2).
Case law is clear that "private parties do not have standing to sue under the FTCA." Manning Int'l Inc. v. Home Shopping Network, Inc., 152 F.Supp.2d 432, 437 (S.D.N.Y.2001); see also Dreisbach v. Murphy, 658 F.2d 720, 730 (9th Cir.1981) (stating that "private litigants may not invoke the jurisdiction of the federal district courts by alleging that defendants engaged in business practices proscribed by § [45(a)(1)]"); Carlson v. Coca-Cola Co., 483 F.2d 279, 280 (9th Cir. 1973) ("The protection against unfair trade practices afforded by the Act vests initial remedial power solely in the Federal Trade Commission."). Thus, because there is no private remedy for "unsubstantiated advertising," private litigants are
In Fraker, the court determined that the plaintiff had failed to plead such facts where she only offered the government's prior complaint to the FTC, and the FTC's subsequent Order and Consent Decree (both issued against the defendant company in that case). Id. The court found this to be insufficient for purposes of showing "that the absence of substantiation of an advertising claim is, itself, falsity or somehow misleading.... If [p]laintiff is going to maintain an action against [d]efendant for false or misleading advertising, then [p]laintiff will be required to adduce evidence sufficient to present to a jury to show that [d]efendant's advertising claims with respect to Product are actually false; not simply that they are not backed up by scientific evidence." Id. (emphasis added). Accordingly, the district court dismissed plaintiffs claims for false or misleading advertising under California's FAL, UCL, and CLRA, granting leave to replead. Id. at *8-9, *10.
The District Court for the Central District of California held similarly in Chavez, 2011 WL 2150128. The court noted that, although plaintiffs had specified falsity and reliance in their pleadings, they had not provided an adequate factual basis from which the court might infer falsity. Id. at *4. The court concluded that plaintiffs' allegations were, in essence, a lack of substantiation claim, and citing Fraker, that their allegations lacked the requisite factual support for purposes of surviving a motion to dismiss. See id. at *6 ("[L]ike the plaintiff in Fraker, Plaintiffs have offered no support for the contention that a lack of substantiation could render Defendant's claims misleading."); id. ("[I]t is not unreasonable to expect Plaintiffs to plead facts that show they would have some remote chance of prevailing at trial.").
Thus, the holdings of Fraker and Chavez are that, where a private litigant seeks to assert a false advertising claim under the UCL, FLA, or CLRA, he must set forth more than simply an allegation that a product's statements are not supported by credible science; rather, he must provide a sufficient factual basis in support of such a contention.
The District Court for the Southern District of California shed additional light on this issue of a plaintiff's pleading burden in the context of UCL, FLA, or CLRA allegations in its decision of Eckler v. Wal-Mart Stores, Inc., No. 12-CV-727-LAMDD, 2012 WL 5382218 at *2-3 (S.D.Cal. Nov. 1, 2012). The court addressed whether plaintiff's false advertising claims under California's UCL and CLRA "are really just `lack of substantiation' claims." Id. at *1. The Eckler court stated that the majority of plaintiff's claims in that case alleged that the purported benefits of the contested product in that case (specifically, glucosamine, an alleged form of joint relief) were either unsubstantiated by Wal-Mart or had been disproved by the scientific community. Id. at *3. Notably, for purposes of this dispute, the court drew a critical distinction between these differing forms of allegations. Specifically, it stated:
Id.
The Eckler court determined that because plaintiff "points to studies that allegedly debunk the purported benefits of glucosamine hydrochloride, she isn't just saying those benefits are unsubstantiated. She is saying they are positively false." Id. This, concluded the Eckler court, placed plaintiff's claims outside of the "lack of substantiation" category; therefore, if dismissal were going to be the fate of her claims, it would have to be on grounds of "deficien[cy] under Rules 8, 9(b), or 12(b)(6) of the Federal Rules of Civil Procedure." Id.
The Eckler court proceeded to examine plaintiff's pleadings and determined that because her UCL claim sounded in fraud, it was subject to Rule 9(b)'s heightened pleading standards. Id. at *5. On reviewing those studies which the plaintiff contended supported the false nature of the contested product's statements, the court concluded that such studies did not clear the heightened particularity bar. The problems with the studies that the court highlighted were twofold: (1) none of the studies referenced by plaintiff involved the disputed product, and (2) the studies to which plaintiff cited were all osteoarthritis studies, a condition that the disputed product did not represent itself as helping to alleviate or improve. Id. at *6. The court also found as relevant the fact that the product contained a disclaimer expressly stating that it was not intended to "diagnose, treat, cure, or prevent any disease," and that the labeling described the product as one intended for "everyday wear and tear." Id. at *7 (internal quotation marks omitted). This language made clear that the product was intended for overall joint health, a proposition which plaintiff's studies did not call into question. Id. For these reasons, the court dismissed plaintiff's complaint.
Thus, Eckler, by virtue of plaintiff's pleadings in that case, went one step further than the Fraker or Chavez courts. Because the plaintiff in Eckler proffered studies supporting her contention that defendant's statements were not only unsupported by scientific evidence, but in fact, contrary to it, plaintiff's claims fell outside the "lack of substantiation" category, and a different legal analysis came into play, namely, sufficiency of the pleadings under Rules 8, 9(b), or 12(b)(6) of the Federal Rules of Civil Procedure.
California courts are not alone in their holding as to a plaintiff's misrepresentation claim — when grounded in a lack of substantiation argument — requiring something more than the simple assertion that there is no scientific evidence supporting a product's representations. For instance, in Gredell v. Wyeth Labs, Inc., the Appellate Court of Illinois addressed a consumer class action against a drug company under the Illinois Consumer Fraud Act. 367 Ill.App.3d 287, 305 Ill.Dec. 160, 854 N.E.2d 752 (2006). Plaintiffs alleged that defendant had fraudulently marketed and sold cough and cold medication as an expectorant and anesthetic in the absence of any supporting scientific evidence. Id. Tellingly, plaintiffs' only challenge (dismissed by the trial court) was limited to the fact that no scientific evidence supported defendants' representations. See id., 305 Ill.Dec. 160, 854 N.E.2d at 756 ("Plaintiff did not claim that the drugs were ineffective.... Rather, his claim was that defendants violated the Act because they could not support their claim of the drugs' effectiveness with `scientific' tests proving that effectiveness."). The court rejected plaintiffs' fraud-due-to-lack-of-substantiation argument, noting that "[m]erely because a fact is unsupported by clinical tests does
Similarly, the Seventh Circuit, in a class action case against manufacturers and marketers of over-the-counter and prescription strength forms of stomach acid relief, briefly touched upon the issue of lack of substantiation. Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 939 (7th Cir.2001). In that case, plaintiffs alleged that defendants had issued false and misleading information to consumers about the substitutability of two drugs in violation of Illinois's Consumer Fraud and Deceptive Business Practice Act. Id. at 936. The court noted that in order for a lack of substantiation claim to be deemed deceptive, the "comparative claim at issue [must] impl[y] that there is substantiation for the claim made." Id. at 939 n. 2. The court concluded that any claim of deception on grounds of lacking scientific evidence failed because the contested product statements at issue did not imply substantiation for their claims as to two drugs' effectiveness. Id. Moreover, there was significant information available to consumers — via the products' packaging information, web page, and even the contested product statements — providing accurate information as to the two drugs' effectiveness, thereby dispelling "any tendency to deceive that the statements at issue might otherwise have had." Id. at 939. Thus, the Seventh Circuit, similar to the prior reviewed precedents, called upon plaintiffs to bring forth more than a claim of deception based solely on a lack of scientific evidence.
Lastly, the Third Circuit, in Franulovic v. Coca-Cola Co., 390 Fed.Appx. 125 (3d Cir.2010), similarly held that plaintiffs had failed to sufficiently show fraud on the part of defendants where plaintiffs grounded their claims in a lack of substantiation theory. In Franulovic, plaintiffs brought suit alleging that Coca-Cola had engaged in deceptive marketing. Id. at 126. The Third Circuit found that summary judgment was properly granted to defendant because defendant "advertised Enviga as a calorie-burning drink based on the results of a short-term scientific study," id., and plaintiffs did not offer information or studies disputing or otherwise controverting such representations, id. at 127.
As these cases correctly explain, where a party asserts fraudulent misrepresentation based on a lack of substantiation, that party must allege sufficient facts from which a court may infer deception. In other words, the simple allegation that a given statement is unsubstantiated or unsupported by scientific evidence, standing alone, will not be enough for purposes of showing a deceptive or fraudulent representation.
With this framework in mind, the Court returns to the pleadings of this case, remaining mindful that the common issue with respect to plaintiffs' claims is whether there is a plausible claim that a reasonable consumer could have been misled by defendants' labeling, packaging, and marketing.
Defendants are correct that plaintiffs, at first blush, seem to be bringing a lack of substantiation claim, as they allege that defendants' marketing of Ester-C is unsupported by credible evidence. (See FAC ¶¶ 4, 25.) However, plaintiffs do not rest on this claim alone; rather, they go several steps further, thereby removing their claims from the lack of substantiation sphere and into the affirmative misrepresentation realm.
Moreover, the study's cited conclusion, i.e., that Ester-C is no better at increasing the bioavailability of vitamin C in humans than other commercially available tablets, disputes several marketing statements present on Ester-C's website, which plaintiffs cite to and incorporate by reference in their complaint. Regarding the issue of vitamin C absorption, the website explicitly states:
(Id. ¶ 21 (quoting http://www.ester-c.com/Benefits.htm).) Plaintiffs' study, on the other hand, contends that Ester-C's allegedly unique metabolites, which supposedly "increase the bioavailability of vitamin C," do not actually do so any better than other market brands. (Id. ¶ 25 & n. 1.) Thus, plaintiffs are not simply stating that defendants have no credible science backing up their claims. Instead, they are affirmatively claiming that defendants' representations are positively false. See Eckler, 2012 WL 5382218, at *3 (drawing distinction between a lack of substantiation claim and an affirmative misrepresentation claim).
There are more allegations, though, that make clear that plaintiffs' asserted claims are not simply based upon a lack of substantiation. In particular, plaintiffs' allegation that defendants have no credible scientific evidence backing up their representations is relevant in this case because Ester-C's website expressly states that there is clinical research supporting its products. For instance, in Ester-C's "Ask an Expert" section of its website, the website's "expert" states he "take[s] an Ester-C tablet daily, all year long, because it is gentler on the stomach and because of all the clinical research that supports the use of this product." (FAC ¶ 20 (quoting http://www.ester-c.com/FAQ.htm).)
This case is distinguishable from Eckler, in which plaintiffs proffered studies did not involve the disputed product, and moreover, targeted the narrower proposition that the contested product's main ingredient did not help with osteoarthritis (contrary to the product's representation that it helped target overall joint health), contributing to dismissal of plaintiffs' claims. See Eckler, 2012 WL 5382218, at *5-6. In contrast, here, plaintiffs' study involves Ester-C and specifically concerns Ester-C's vitamin C bioavailability qualities. Moreover, plaintiffs assert that Ester-C's marketing suggests (both explicitly and implicitly) that Ester-C is superior to other brands on the market, with statements such as:
(Product Labels, Ex. A.)
As to the study relied upon by plaintiffs, defendants counter that this study is not problematic because "the absorption study dates from 1994, does not involve a formulation of Ester-C on the market at any time during the proposed class period, and does not relate to any claim upon which Plaintiffs allegedly relied." (Defs.' Mot. to Dismiss at 4 n. 5.) As a threshold matter, the fact that the study is older does not mean its findings are, by virtue of their age, necessarily incorrect, inconclusive, or irrelevant. Certainly, this type of determination cannot be made at the motion to dismiss stage. Second, although it is not clear what formulation of Ester-C the cited 1994 study addresses, there is nothing in the FAC to suggest that Ester-C's ingredients, components, or qualities have significantly changed over the years such that this study may be deemed completely inapposite. In fact, a simple examination of Ester-C's labels reveals that Ester-C is mainly composed of calcium ascorbate and vitamin C metabolites, two of the same ingredients addressed in plaintiffs' referenced study. (Product Labels, Ex. A.) In short, issues concerning the weight that should be given
Additionally, based upon the allegations in the FAC, the Court fails to see how plaintiffs' study does not "relate to any claim upon which Plaintiffs allegedly relied." (Defs. Mot. to Dismiss at 4 n. 5.) Plaintiffs assert that they relied on Ester-C's various product representations, made via its packaging, labeling, and marketing, all of which state, to some degree, that Ester-C is better at providing vitamin C to the body than other products. Plaintiffs' study disputes this representation, asserting that there is no difference between Ester-C and other commercial products "with respect to the absorption and urinary excretion of vitamin C." (FAC ¶ 25 n. 1.) To the Court's reading, this certainly "relates to" plaintiffs' claims here. Defendants' contention that this is not sufficient for purposes of establishing relation — at the motion to dismiss stage — because the study solely pertains to absorption and urinary excretion, as opposed to efficacy, is unpersuasive. (Defs.' Reply Mem. at 5-6.) Ester-C's label specifically includes such language as, "Enhanced Absorption," "Ester-C is a patented ingredient that is absorbed in your body and provides advanced, active immune system support," and "Ester-C, along with naturally occurring metabolites, works synergistically to enhance the absorption and retention of vitamins in your body." (Product Labels, Ex. A.) Thus, the 1994 study's findings regarding absorption indeed "relate to" plaintiffs' claims and to Ester-C's explicit labeling.
Next, defendants direct the Court's attention to another asserted flaw in plaintiffs' pleading, namely, plaintiffs' references to FTC settlements in cases involving similar (although not identical) products. Defendants argue that such settlements are not relevant because "FTC consent decrees do not constitute legal determinations of falsity," and because the cited decrees involve "different products making different claims." (Defs.' Mot. to Dismiss at 9.)
The FTC decrees to which plaintiffs cite involve such products as Airborne Health Inc. ("Airborne"), Rite-Aid's "Germ Defense," CVS's "AirShield," and Walgreens' "Wal-Born." (FAC ¶¶ 26.) The FTC's decrees for the respective products required retailers to cease making misleading claims that their dietary supplements could prevent colds, fight germs, and boost immune systems. See, e.g., Federal Trade Commission, "Walgreens Will Pay Nearly $6 Million to Settle FTC Deceptive Advertising Charges," http://www.ftc.gov/opa/2010/03/walgreens.shtm (hereinafter "Walborn FTC Decree"); Federal Trade Commission, "CVS to Pay Nearly $2.8 Million in Consumer Refunds to Settle FTC Charges of Unsubstantiated Advertising of AirShield `Immune Boosting' Supplement," http://www.ftc.gov/opa/2009/09/cvs.shtm (hereinafter "Airshield FTC Decree"); Airborne FTC Decree, http://www.ftc.gov/opa/2008/08/airborne.shtm; Federal Trade Commission, "Rite Aid to Pay $500,000 in Consumer Refunds to Settle FTC Charges of False and Deceptive Advertising," http://www.ftc.gov/opa/2009/07/riteaide.shtm (hereinafter "Rite-Aid FTC Decree"). In reviewing these decrees, it seems clear that the FTC targeted these particular products because of their representations that, through their immune-boosting properties, they served as a cold and/or flu prevention and treatment remedy.
Defendants try to isolate Ester-C from these other products, claiming that these FTC decrees concerned products making "disease prevention claims," in contrast to Ester-C, the packaging of which "does not contain any reference to colds, cough, or flu." (Defs.' Mot. to
Finally, defendants argue that no reasonable consumer could mistake Ester-C for a disease prevention product because "the only reference to disease on the packaging is contained in the disclaimer, which clearly states: `This product is not intended to diagnose, cure, treat or prevent any disease.'" (Defs.' Mot. to Dismiss at 10 (quoting Product Labels, Ex. A).) First, it is true that there is a disclaimer on the package containing the above-referenced language. It is also true that the disclaimer is preceded by an asterisk, and this asterisk appears after several of the statements on Ester-C's packaging, including after such statements as "immune system support," "antioxidant support," "B Vitamins to Boost Energy Metabolism," to name only a few. (Product Labels, Ex. A.)
However, in determining whether a product's label or packaging is misleading, one must examine a disclaimer or accurate information on the product in the context of the allegedly misleading statements. For example, a similar issue was addressed in Ackerman v. Coca-Cola, No. CV-09-0395(JG)(RML), 2010 WL 2925955 (E.D.N.Y. July 21, 2010), in the context of vitaminwater's labeling. In that case, a class of plaintiffs asserted violations under California, New Jersey, and New York consumer protection laws, alleging, among other issues, that vitaminwater's labeling and marketing was misleading because it "bombard[ed]" consumers with the product's supposed benefits while drawing consumers' attention away from the product's significant sugar content. Id. at *6. Upon careful consideration of the different product statements alleged to be misleading by the plaintiffs in that action, the court concluded that a reasonable consumer could have been misled by the product's labeling: "[t]he fact that the actual sugar content of vitaminwater was accurately stated in an FDA-mandated label on the product does not eliminate the possibility that reasonable consumers may be misled." Id. at * 16.
The court noted as relevant a Ninth Circuit decision, in which that court addressed
Id.; see also Potler v. MCP Facilities Corp., 471 F.Supp. 1344, 1351 (E.D.N.Y. 1979) (deeming a disclaimer inoperative where a product's express warranties could not reasonably be construed consistently with the disclaimer's language).
At this early stage of the litigation, it cannot be determined whether a disclaimer on the back of Ester-C's products, stating that it is "not intended to diagnose, treat, or prevent any disease," eliminates the possibility of a reasonable consumer being misled into thinking that Ester-C's claims of being the "Better Vitamin C" that "provides advanced, active immune system support" and "antioxidant support" to "help keep you healthy and strong during times of seasonal change" signified a cold or flu prevention product. Indeed, plaintiffs buttress their position on this issue by pointing in the FAC to various prominent retailers' marketing of Ester-C:
In sum, the Court concludes that plaintiffs are not bringing a stand-alone lack of substantiation claim. Instead, in the FAC, plaintiffs reference scientific evidence
The Court now proceeds to plaintiffs' specific allegations of misrepresentation under several states' laws, and considers whether plaintiffs' claims pass muster under Rule 9(b)'s heightened pleading requirements.
The parties do not dispute that Rule 9(b)'s heightened pleading standard is applicable to plaintiffs' California claims, nor could they, for that matter, as plaintiffs' claims of false advertising and unfair, unlawful, or deceptive business practices sound in fraud. (See FAC ¶¶ 1-4, 9-10, 55, 56, 58, 62, 70, 71, 73, 74); see Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir.2009) ("Rule 9(b)'s particularity requirement applies to [California's consumer protection statutes'] state-law causes of action."). As set forth in greater detail infra as to each consumer fraud claim, plaintiffs here have sufficiently pled their false and misleading claims under California law with the requisite particularity. See Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.1985) (stating allegations of fraud must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute fraud charged so that they can defend against the charge and not just deny that they have done anything wrong"). That is, plaintiffs adequately provide the "`who, what, when, where, and how'" of the alleged fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.1997)).
In brief (and echoed in the Court's analysis of each California claim), plaintiffs clearly identify themselves, defendants, and the contested products at issue (FAC ¶¶ 1, 9-10, 11-14, 16); they identify the specific representations made via the product's packaging, labeling, and marketing that are allegedly misleading (id. ¶¶ 2-3, 16-21); they identify where the allegedly fraudulent statements were made, namely, at particular retail stores (including a Walgreens in St. Louis, Missouri and a Ralphs and a Whole Foods stores in Los Angeles, California for the respective class representatives) and on certain sections of the website (id. ¶¶ 2-3, 9-10, 16-21); they clarify the time period at issue, including the specific times when Hodjat and Hughes purchased Ester-C (id. ¶¶ 1, 9-10); they assert how defendants' representations are deceptive, alleging they "convey to the consumer that, by taking Ester-C, his or her immune system will be aided in protecting the consumer from illness" (id. ¶ 25); and, lastly, plaintiffs allege why defendants' statements are fraudulent, namely, because their representations are "wholly unsupported by scientific evidence"
California's CLRA prohibits specified "unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer." See Cal. Civ. Code, § 1770(a). Practices expressly prohibited by the CLRA include, inter alia, "[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have," id. § 1770(a)(5), "[r]epresenting that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another," id. § 1770(a)(7), and "[a]dvertising goods or services with intent not to sell them as advertised," id. § 1770(a)(9). Section 1760 makes clear that the CLRA "shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." Id. § 1760.
The Court concludes that plaintiffs have adequately pled a violation of the CLRA here. The FAC provides a detailed list of the representations that plaintiffs challenge. (FAC ¶¶ 16-21.) Additionally, the FAC sets forth the specific sections of the CLRA that plaintiffs contend defendants violated (id. ¶¶ 52, 57), along with a statement of how defendants violated such sections (id. ¶¶ 2-4, 25, 55-57). Plaintiffs also allege that they are "consumers" under Section 1761(d), as they purchased Ester-C for personal, family, or household purposes. (Id. ¶ 53); see also Cal. Civ. Code § 1761(d) (defining "consumer" as "an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes"). Similarly, plaintiffs state that they engaged in "transactions" under the statute. (FAC ¶ 54); see also Cal. Civ. Code § 1761(e) (defining "transaction" as "an agreement between a consumer and another person, whether or not the agreement is a contract enforceable by action, and includes the making of, and the performance pursuant to, that agreement"). These allegations are more than sufficient to survive dismissal at this stage.
Section 17500 of California's False Advertising Law ("FAL") of the California Business and Professions Code prohibits the dissemination in any advertising medium of any "statement" concerning "real or personal property" offered for sale, "which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading." Cal. Bus. & Prof. Code § 17500. An FAL-based claim may concern "not only advertising which is false, but also advertising which[,] although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public." Ackerman, 2010 WL 2925955, at *18 (quoting Kasky v. Nike, Inc., 27 Cal.4th 939, 119 Cal.Rptr.2d 296, 45 P.3d 243, 250 (2002)) (internal quotation marks omitted).
In pleading a false advertising claim, a plaintiff's claims are governed by the "reasonable consumer" test, i.e., plaintiff must show that "members of the public are likely to be deceived." Parino v. BidRack, Inc., 838 F.Supp.2d 900, 905 (N.D.Cal.2011) (citation and internal quotation marks omitted); see also Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995) (noting applicability of "reasonable consumer" test when addressing false advertising
Plaintiffs allege that defendants made several false and misleading statements via their product labeling, website, and overall marketing, creating the reasonable expectation in consumers that Ester-C provides better vitamin absorption than other brands, and that Ester-C is a form of immune system support capable of protecting consumers from illness. Plaintiffs additionally allege that such false and deceptive representations enticed consumers into purchasing Ester-C's products. Plaintiffs state that defendants knew their statements were false at the time they made them, and that plaintiffs relied on these statements when purchasing the different forms of the products. Thus, plaintiffs have satisfied their pleading burden as to their FAL claim.
Notably, a "violation of the False Advertising Law necessarily violates California's Unfair Competition Law." Parino, 838 F.Supp.2d at 905 (citing Gerber Prods., 552 F.3d at 938). Section 17200 defines "unfair competition" as including "unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code." Cal. Bus. Prof. Code § 17200. Because plaintiffs have pled sufficient facts to state a claim under California's FAL, they likewise have done so under California's UCL. See, e.g., Parino, 838 F.Supp.2d at 905-06 (holding that because plaintiff sufficiently pled her FAL claim, she also pled enough to establish a UCL claim); Ackerman, 2010 WL 2925955, at *18 ("[V]iolations of California's False Advertising Law constitute `unlawful' conduct for the purposes of the UCL."); Kasky, 119 Cal.Rptr.2d 296, 45 P.3d at 249 (recognizing that Section 17200, Cal. Bus. & Prof. Code, defines unfair competition to include any act prohibited by California's FAL).
In an abundance of caution, the Court addresses each prong pursuant to which plaintiff attempts to state a cause of action under the UCL, namely, (1) unlawful conduct, (2) fraudulent conduct, and (3) unfair conduct. (FAC ¶¶ 65-77.) The Court bears in mind that the issue of "[w]hether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires `consideration and weighing of evidence from both sides' and which usually cannot be made on demurrer." In re Ferrero Litig., 794 F.Supp.2d 1107, 1116 (S.D.Cal.2011).
An "unlawful" practice is one "forbidden by law, be [it] civil or criminal, federal, state, or municipal, statutory, regulation, or court-made." VP Racing Fuels, Inc. v. Gen. Petroleum Corp., 2010 WL 1611398, at *4 (E.D.Cal. Apr. 20, 2010) (quoting Saunders v. Superior Court, 27 Cal.App.4th 832, 838-39, 33 Cal.Rptr.2d 438 (1994)). A plaintiff stating a cause of action based on an "unlawful" business act or practice under the UCL "must allege facts sufficient to show a violation of some underlying law." Id. Plaintiffs here plead sufficient facts to show violations of the CLRA, Cal. Civ. Code § 1770(a)(5), (a)(7), and (a)(9), and violations of the FAL, Cal. Bus. & Prof. Code § 17500 et seq., as set forth supra.
The term "fraudulent," as used in the UCL, "does not refer to the common law tort of fraud." See Capitol Records, Inc. v. MP3tunes, LLC, 611 F.Supp.2d 342, 348 (S.D.N.Y.2009) ("Fraudulent as used in § 17200 [of the UCL] does not refer to the common law tort of fraud but only requires a showing [that] members of the public are likely to be deceived." (quoting Express, LLC v. Fetish Grp., Inc., 464 F.Supp.2d 965, 980 (C.D.Cal.2006))). Thus, for a business act or practice to be deemed "fraudulent" under the UCL, a plaintiff must allege that "consumers are likely to be deceived by the defendant's conduct." VP Racing Fuels, 673 F.Supp.2d at 1087; see also Ackerman, 2010 WL 2925955, at *21 ("To prevail, a plaintiff must produce evidence showing a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care." (quoting Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1025-26 (9th Cir.2008)) (internal quotation marks omitted)).
Plaintiffs state that defendants' "misleading marketing, advertising, packaging, and labeling of Ester-C is likely to deceive reasonable customers." (FAC ¶ 71.) Plaintiffs identify defendants, as well as their respective principal places of business. (Id. ¶¶ 11-14.) Plaintiffs also allege where and when they purchased the Ester-C products (id. ¶¶ 9-10); expressly identify the different forms of Ester-C products available for purchase (id. ¶ 16); and explicitly identify a number of the statements on Ester-C's labeling, packaging, and marketing that plaintiffs allege create a misleading representation (id. ¶¶ 2-3, 17-21). Plaintiffs assert that they relied on such representations, and make clear that they would not have purchased such products had it not been for the identified statements' health benefit representations. (Id. ¶¶ 9-10, 71.) Plaintiffs allege that a reasonable consumer will understand Ester-C's marketing and packaging to mean that "his or her immune system will be aided in protecting the consumer from illness" (id. ¶ 25), and that "[d]efendants have not been truthful regarding
Thus, plaintiffs sufficiently state a cause of action under the "fraudulent" prong of the UCL.
A business act or practice is "unfair" where it "`threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to a violation of the law, or that otherwise significantly threatens or harms competition.'" VP Racing Fuels, 673 F.Supp.2d at 1086-87 (quoting Cel-Tech Commcn's., Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 187, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999)). For purposes of a claim under the UCL, a business practice is "unfair" "when it `offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.'" Ackerman, 2010 WL 2925955, at *20 (quoting Wilner v. Sunset Life Ins. Co., 78 Cal.App.4th 952, 965, 93 Cal.Rptr.2d 413 (Ct.App.2000)). For a plaintiff to successfully plead an "unfair" business act or practice, he must "allege facts showing the `unfair' nature of the conduct and that the harm caused by the conduct outweighs any benefits that the conduct may have." VP Racing Fuels, 673 F.Supp.2d at 1087; see also In re Ferrero Litig., 794 F.Supp.2d at 1117 ("California courts define an unfair business practice as either a practice that undermines a legislatively declared policy or threatens competition, or a practice that has an impact on its alleged victim that outweighs the reasons, justifications, and motives of the alleged wrongdoer."). Generally, to prevail, a plaintiff must show that "the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided." Daugherty v. Am. Honda Motor Co., Inc., 144 Cal.App.4th 824, 839, 51 Cal.Rptr.3d 118 (2006).
Here, plaintiffs allege that defendants "have profited enormously from their false advertising of Ester-C," charging consumers "a premium price of more than three times the cost of a comparable Vitamin C supplement." (FAC ¶ 29.) Plaintiffs further state that they "suffered a substantial injury by virtue of buying a product they would not have purchased absent [d]efendants' unlawful, fraudulent, and unfair marketing, advertising, packaging, and labeling or by paying an excessive premium price for the unlawfully, fraudulently, and unfairly marketed, advertised, packaged, and labeled Ester-C." (Id. ¶ 73.) Plaintiffs also allege that "[t]here is no benefit to consumers or competition from deceptively marketing and labeling dietary supplements[,] [i]ndeed, the harm to consumers and competition is substantial." (Id. ¶ 74.) Lastly, plaintiffs state that they "had no way of reasonably knowing that the Ester-C they purchased was not as marketed, advertised, packaged, and labeled," and that defendants'"conduct is immoral, unethical, unscrupulous, offends established public policy, or is substantially injurious to" consumers. (Id. ¶¶ 75-76.) The Court finds these allegations of harm sufficient for purposes of stating a cause of action under the "unfair" prong of the UCL.
For these reasons, the Court finds that plaintiffs have sufficiently pled their claims of violations under the three asserted UCL prongs of unlawful, fraudulent, and unfair conduct.
Plaintiffs assert a violation under Missouri's Merchandising Practices Act ("MMPA"). The MMPA prohibits the
To state a claim for violation under the MMPA, "plaintiffs must allege that they (1) purchased a product sold or advertised by defendants; (2) for personal, family, or household purposes; and (3) suffered an ascertainable loss of money or property; (4) as a result of an act declared unlawful by § 407.020." Metcalf v. Lowe's Home Ctrs., Inc., 09-CV-14 (CAS), 2010 WL 1221855, at *2 (E.D.Mo. Mar. 30, 2010). Plaintiffs adequately do so.
Plaintiffs' pleadings establish that they purchased defendants' products for personal, family, or household purposes. (See FAC ¶¶ 9, 10, 53.)
Plaintiffs' allegations satisfy Rule 9(b)'s particularity requisites. Plaintiffs state the following facts regarding the "who, what, where, when, and how" of the asserted fraud under Missouri law.
Accordingly, dismissal of plaintiffs' claims under the MMPA is not warranted.
Rule 9(b)'s particularity requirements also apply to plaintiffs' claims under New York common law, namely, unjust enrichment, Sgaliordich v. Lloyd's Asset Mgmt., 10-CV-03669(ERK), 2012 WL 4327283, at *5 (E.D.N.Y. Sept. 20, 2012) (noting that a claim of unjust enrichment "must be pled with specificity when the underlying acts are allegedly fraudulent" (quoting Silverman Partners, L.P. v. First Bank, 687 F.Supp.2d 269, 288 (E.D.N.Y. 2010))); Welch v. TD Ameritrade Holding Corp., No. 07-CV-6904(RJS), 2009 WL 2356131, at *21 (S.D.N.Y. July 27, 2009) (holding that Rule 9(b) applied to unjust enrichment claim premised on alleged fraudulent acts), intentional misrepresentation, Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44-45 (2d Cir.1991) (noting Rule 9(b)'s applicability to an intentional misrepresentation claim); Apex Maritime Co. v. OHM Enters., Inc., No. 10-Civ-8119(SAS), 2011 WL 1226377, at *2 (S.D.N.Y. Mar. 31, 2011) (same), and negligent misrepresentation, Watson v. Riptide Worldwide, Inc., No. 11 Civ. 0874(PAC), 2013 WL 417372, at *4 (S.D.N.Y. Feb. 4, 2013) ("Negligent misrepresentation is a type of fraud and, as such, is subject to Rule 9(b)'s heightened pleading standard." (citations and internal quotation marks omitted)).
To prevail on a claim for unjust enrichment in New York, a plaintiff must establish: "(1) defendant was enriched; (2) the enrichment was at plaintiff's expense; and (3) the circumstances were such that equity and good conscience require defendant[] to make restitution." Intellectual Capital Partner v. Institutional Credit Partners LLC, No. 08 Civ 10580(DC), 2009 WL 1974392, at *8 (S.D.N.Y. July 8, 2009). Under New York law, unjust enrichment does not require a direct relationship between the parties. See In re Canon Cameras Litig., No. 05 Civ. 7233(JSR), 2006 WL 1751245, at *2 (S.D.N.Y. June 23, 2006); see also Cox v. Microsoft Corp., 8 A.D.3d 39, 778 N.Y.S.2d 147, 149 (2004) (finding plaintiffs' allegations that defendant's deceptive practices "caused them to pay artificially inflated prices for its products [sufficient for purposes of] stat[ing] a cause of action for unjust enrichment").
Here, plaintiffs clearly allege that defendants were unjustly enriched. (FAC ¶ 80 ("Defendants have been unjustly enriched by their sale of Ester-C Products through the use of false advertising and other fraudulent and deceptive conduct designed to persuade consumers that Ester-C Products actually provide immune support."); id. ¶ 81 ("As a proximate result of
Plaintiffs also have done so with the requisite Rule 9(b) particularity through the same allegations that satisfied their fraud claims under California and Missouri law. See supra.
To state an intentional misrepresentation (or fraud) claim under New York law, a "plaintiff must establish that: `(1) the defendant made a material false representation; (2) the defendant intended to defraud the plaintiff thereby; (3) the plaintiff reasonably relied upon the representation; and (4) the plaintiff suffered damage as a result of such reliance.'" Liberty Mut. Ins. Co. v. Palace Car. Servs. Corp., No. 06-cv4881(FB)(CLP), 2007 WL 2287902, at *2 (E.D.N.Y. Aug. 8, 2007) (quoting Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 940 (2d Cir.1998)).
Plaintiffs have adequately pled their intentional misrepresentation claim. Plaintiffs clearly allege that defendants made a material false representation, i.e., that defendants promoted products as having qualities they did not in fact possess, namely, the ability to protect consumers from illness. (See FAC ¶ 25 ("Defendants have no credible evidence that taking Ester-C will provide immune support or keep one from getting sick."); id. ¶ 48 ("Defendant [sic] have thereby — in their manufacturing, advertising, marketing, selling, and distribution of the Products — engaged in practices that constitute deception, fraud, false pretense, false promise ..."); id. ¶ 62 ("Defendants ... have falsely advertised Ester-C Products by falsely claiming that the Products offer protection against germs, provide immune support, and help prevent a user from getting or remaining sick."); id. ¶ 93 ("Defendants made the false representations herein alleged ...").) Plaintiffs identify those packaging and marketing statements that they contend are false. (See FAC ¶¶ 16-21.) Plaintiffs also set forth their grounds for asserting that such statements are false, including reference to a study that counters Ester-C's representations of being the "Better Vitamin C" that offers "Enhanced Absorption" and that is superior to other brands on the market (implicitly suggested by its statement of being the "#1 Pharmacist Recommended Brand") (see FAC ¶ 25 & n. 1), as well as reference to FTC settlements in cases involving similar product representations (see id. ¶¶ 26-28).
Third, plaintiffs assert that they reasonably relied on defendants' representations and that they would not have purchased such products "[h]ad [they] known the truth that the statements [they] relied on were false, misleading, deceptive, and unfair." (Id. ¶¶ 9 & 10; see also id. ¶ 87 ("Plaintiffs and other Class members believed and relied on Defendants' promoting, marketing, advertising, packaging, and labeling of the Ester-C Products, and, in justifiable reliance thereon, purchased them.").) The parties dispute whether this Court, on a motion to dismiss, may consider the issue of whether a plaintiff's reliance was justified. Compare MBIA Ins. Co. v. GMAC Mortg. LLC, 30 Misc.3d 856, 914 N.Y.S.2d 604, 608 (N.Y.Sup.2010) (in action involving motion to dismiss fraud claim on grounds that plaintiff could not have justifiably relied on such misrepresentation, court denied motion because "[r]easonable reliance is a fact intensive inquiry, which should be reserved for a trier of fact"), with Allison v. Round Table Inv. Mgmt. Co., 447 Fed.Appx. 274, 276 (2d Cir.2012) (upholding district court's dismissal of fraud claim on grounds that plaintiff could not show reliance was justifiable). Based on the allegations before it in this particular case, the Court cannot conclude as a matter of law that the cited statements here could not have been reasonably relied on by consumers; it, therefore, declines to dismiss plaintiffs' intentional misrepresentation claim on this ground. See Ackerman, 2010 WL 2925955, at *17 ("[W]hether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires consideration and weighing of evidence from both sides and therefore usually cannot be resolved through a motion to dismiss" (quoting Gerber Prods., 552 F.3d at 938-39) (internal quotation marks omitted)).
Fourth, plaintiffs allege that they suffered damages on account of their purchasing a product at a premium price that did not offer the qualities it presented itself as having. (See id. ¶¶ 29, 88 ("Plaintiffs
The Court also finds that plaintiffs have cleared Rule 9(b)'s particularity bar for those reasons set forth supra, as plaintiffs have specified those statements asserted to be fraudulent, identified the "speaker" of the statements, stated where and when the statements were made, and explained why plaintiffs considered the statements to be fraudulent.
A negligent misrepresentation will be actionable "where the defendant has been careless `in imparting words upon which others were expected to rely and upon which they did or failed to act to their damage,' and where the author of the statement has `some relationship or duty... to act with care' vis-a-vis the party at whom the statement is directed." Aetna Cas. & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 583 (2d Cir.2005). The New York Court of Appeals most recently described the particular elements of such a claim as follows:
Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc., 910 F.Supp.2d 543, 546 (S.D.N.Y.2012) (quoting Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 180, 919 N.Y.S.2d 465, 944 N.E.2d 1104 (2011)) (internal quotation marks omitted); see also Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 788 (2d Cir.2003) (stating that "the elements of negligent representation are: ... carelessness in imparting words; ... upon which others were expected to rely; ... and upon which they did act or failed to act; ... to their damage ... to one to whom the declarant is bound by some relation or duty of care").
Turning to plaintiffs' negligent misrepresentation claims, as previously set forth, plaintiffs have adequately pled the elements of false statements and damages. (See, e.g., FAC ¶¶ 16-21, 25, 48, 62, 86, 93.) Because the factor of reliance ties into the special relationship element, the Court addresses both prongs simultaneously.
Generally, "[t]o state a claim for negligent misrepresentation in connection with a commercial transaction, a plaintiff must plead justifiable reliance." Landesbank Baden-Wurttemberg v. Goldman, Sachs & Co., 821 F.Supp.2d 616, 623-24 (S.D.N.Y.2011). A court assessing reliance under New York law must consider three
Plaintiffs have pled sufficient facts from which the Court may infer a special relationship between the parties to this action. Plaintiffs point out that defendants, in their marketing, allegedly held themselves out as holding a type of special expertise regarding the purported health benefits of Ester-C. For instance, Ester-C's website contains a section entitled, "Ask an Expert," which states that the "expert" "take[s] an Ester-C tablet daily, all year long, because it is gentler on the stomach and because of all the clinical research that supports the use of this product." (FAC ¶ 20 (quoting http://www.ester-c.com/FAQ.htm).) That same page also states that Ester-C "has good clinical research and is the easiest form of vitamin C to take in my opinion because it is non-acidic. The company is also completely committed to clinical studies." http://www.ester-c.com/FAQ.htm. Plaintiffs also assert that the product's labeling also contains language that, at the very least, suggests some level of medical or scientific backing for its claims. (See Product Labels, Ex. A ("#1 Pharmacist Recommended Brand"; "Ester-C gives you the added benefits of C-Sorb[, and] Ester-C, together with C-Sorb and naturally occurring metabolites, works synergistically to quickly absorb into your system and stay there, providing immune system support"; "As a unique, delicious form of Vitamin C, Ester-C is well retained, providing immune system support[, p]lus Ester-C [] can be taken all year long to support heart health, antioxidant health, healthy bones and joints, and healthy skin, hair and nails").)
In short, plaintiffs have stated a plausible claim that defendants understood that the content of their labeling, packaging, and website — indeed, all forms of their marketing and branding — would be used by consumers for the purpose of evaluating Ester-C in comparison to the numerous other brands of vitamin supplements on the market. See Kwikset, 120 Cal.Rptr.3d 741, 246 P.3d at 889 ("The marketing industry is based on the premise that labels matter, that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities that may come to associate with a particular source." (citing F.T.C. v. Procter & Gamble Co., 386 U.S. 568, 572, 87 S.Ct. 1224, 18 L.Ed.2d 303 (1967))). Moreover, plaintiffs have plausibly alleged that defendants knew that they were targeting individuals who generally lacked the scientific or medical background necessary to carefully assess and truly evaluate Ester-C's assertions before purchase, and who would have to trust the representations as stated in Ester-C's marketing. Cf. Dallas Aerospace, 352 F.3d at 788-89 (finding as a relevant factor for dismissal of negligent misrepresentation claim the fact that plaintiff held the relevant expertise with which to assess the representations at issue).
For these reasons, plaintiffs have pled sufficient facts from which a special relationship under New York law might be inferred. And for reasons previously set forth, based on the allegations before it, the Court cannot conclude as a matter of law that the contested statements could not have been reasonably relied on by consumers. Thus, the Court will allow plaintiffs' negligent misrepresentation claim to proceed. See Suez Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87,
Lastly, plaintiffs have adequately pled their negligent misrepresentation claims, via the same allegations that satisfy their fraud claims under California and Missouri law, such that they satisfy both Rule 8 and Rule 9(b)'s standards.
For the reasons set forth, defendants' motion to dismiss plaintiffs' complaint is denied.
SO ORDERED.
