Archi's Acres, Inc. v. Whole Foods Mkt. Serv., Inc.

• Decision Date: 08 February 2021
• Docket Number: Case No.: 19-CV-2478 JLS (MSB)
• Parties: ARCHI'S ACRES, INC., a California corporation; and ARCHIPLEY'S FAMILY FARM, INC., a California corporation, Plaintiffs, v. WHOLE FOODS MARKET SERVICE, INC., a Delaware corporation; WHOLE FOODS MARKET CALIFORNIA, INC., a California corporation; and DOES 1-50, inclusive, Defendants.
• Court: U.S. District Court — Southern District of California

ARCHI'S ACRES, INC., a California corporation;and ARCHIPLEY'S FAMILY FARM, INC., a California corporation, Plaintiffs, v. WHOLE FOODS MARKET SERVICE, INC., a Delaware corporation;WHOLE FOODS MARKET CALIFORNIA, INC., a California corporation;and DOES 1-50, inclusive, Defendants.

Case No.: 19-CV-2478 JLS (MSB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

February 8, 2021

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT

(ECF No. 15)

Presently before the Court is Defendants Whole Foods Market California, Inc. and Whole Foods Market Service, Inc.'s Motion to Dismiss for Failure to State a Claim ("Mot.," ECF No. 15). Also before the Court is Plaintiffs Archi's Acres, Inc. and Archipley's Family Farm, Inc.'s Opposition to ("Opp'n," ECF No. 16) and Defendants' Reply in Support of ("Reply," ECF No. 17) the Motion. The Court took the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF No. 18. Having carefully reviewed Plaintiffs' First Amended Complaint ("FAC," ECF No. 11), the Parties' arguments, and the law, the Court GRANTS the Motion.

BACKGROUND

Plaintiffs Archi's Acres, Inc. and Archipley's Family Farm, Inc. are farmers and growers of high-quality living organic basil. FAC ¶ 1. In 2007, Defendants began purchasing small quantities of basil from Plaintiffs and selling the product in Whole Foods Market stores in the San Diego area. Id. ¶ 14. Defendants allegedly approached Plaintiffs in 2012 with an offer for Plaintiffs to supply basil products for Defendants' stores in the entire southwest region. Id. ¶ 15. On or around June 6, 2012, Plaintiffs allege Defendants signed a contract committing to purchase $573,000 in basil from Plaintiffs per year. Id. ¶ 16. Plaintiffs claim the contract contained "all material terms required of an agreement," including "the price per unit, number of weekly units, units per year, number of units per case, and quality requirements." Id. ¶ 16. Plaintiffs allege that as part of this contract, Defendants "recruit[ed] Plaintiffs for a partnership and joint venture." Id. ¶ 15.

Plaintiffs planned to increase basil production by building a greenhouse to meet the needs of the contract. Id. ¶ 17. Plaintiffs estimated the greenhouse project would cost a total of $870,000. Id. ¶ 18. Defendants gave Plaintiffs a "local producer loan" application, and Plaintiffs subsequently applied for and secured the loan through Defendants to help fund the "purchase of a hydroponic greenhouse to provide organic living basil to the southwest region of Whole Foods Market." Id. Defendants issued Plaintiffs the "local producer loan" on January 25, 2013 for $100,065. Id. ¶ 19.

On February 25, 2013, Defendants presented Plaintiffs with an oversized check for $100,000 at the opening of Defendants' store location in Del Mar, California. Id. ¶ 20. Plaintiffs allege that Defendants used and continue to use a photograph of this event in Defendants' advertising materials "to show Defendants' purported commitment to local farms and giving back to the local community." Id. Plaintiffs obtained additional financing from other sources and completed the greenhouse project in late 2017 at a cost of $1,260,000, plus interest. Id. ¶¶ 18, 21-22.

Plaintiffs allege that after completing the greenhouse project, "Defendants abandoned Plaintiffs, purchased from other suppliers and reduced their orders fromPlaintiffs." Id. ¶ 23. Defendants purchased $76,000 in basil from Plaintiffs in 2018, and subsequently "purchased even less in 2019 and have now ceased ordering from Plaintiffs." Id. ¶ 25. Plaintiffs allege damages in excess of $2 million. Id. ¶ 26. Plaintiffs assert causes of action for breach of contract, promissory estoppel, fraud, negligent misrepresentation, breach of fiduciary duty, and violation of the Lanham Act. Id. ¶¶ 30-92.

Plaintiffs filed their Complaint on December 24, 2019. See generally ECF No. 1. Defendants filed a Motion to Dismiss for failure to state a claim and lack of subject matter jurisdiction on February 5, 2020. ECF No. 5. Instead of opposing the motion, Plaintiffs filed the operative First Amended Complaint on February 26, 2020. ECF No. 11. The Court denied Defendants' first Motion to Dismiss as moot. ECF No. 12. Defendants then filed the instant Motion. See ECF No. 15.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it [does] demand more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A complaint will not suffice "if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 557).

To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quotingTwombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. Facts "'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. This review requires context-specific analysis involving the Court's "judicial experience and common sense." Id. at 678 (citation omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id.

Where a complaint does not survive 12(b)(6) analysis, the Court will grant leave to amend unless it determines that no modified contention "consistent with the challenged pleading . . . [will] cure the deficiency." DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

ANALYSIS

I. Lanham Act Claim

Defendants argue that Plaintiffs' sixth cause of action fails to state a claim under the Lanham Act. Section 43(a) of the Lanham Act provides for civil liability against

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities[.]

15 U.S.C. § 1225(a). Section 43(a) contains two distinct prongs: a "trademark" or "false association" prong under subsection (1)(A) and a "false advertising" prong under subsection (1)(B). See, e.g., Summit Tech., Inc. v. High-Line Medical Instruments, Co., 933 F. Supp. 918, 928 (C.D. Cal. 1996) (identifying "trademark infringement/false designation of origin" prong and false advertising prong); see also Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 38 (2003) (distinguishing subsection (1)(A)'s "confusion . . . as to the origin" provision from subsection (1)(B)'s "misrepresents the nature, characteristics [or] qualities" provision); Enigma Software Grp. USA, LLC v. Malwarebytes, Inc., 946 F.3d 1040, 1053 (9th Cir. 2019) (stating section 1225(a) creates two bases of liability, false association and false advertising). The Court will address the sufficiency of Plaintiffs' pleading regarding the two prongs of Section 43(a) below.

A. Trademark Infringement/False Association

As to the first prong of Section 43(a), Defendants argue that Plaintiffs fail to adequately allege trademark infringement because Plaintiffs "only allege that [they] own[] certain marks and that '[d]efendants infringed upon [their] marks' without ever alleging how [Defendants] used [Plaintiffs'] marks, much less in a manner likely to cause consumer confusion." Mot. at 6 (quoting FAC ¶¶ 83, 87-88).¹

/// "A false association claim is often considered as a trademark infringement claim." United Tactical Sys., LLC, 2014 WL 6788310, at *9; see also Bell v. Harley Davidson Motor Co., 539 F. Supp. 2d 1249, 1254 (S.D. Cal. 2008) ("Section 43(a)(1) provides similar protection to trademarks regardless of registration." (footnote and citations omitted)). To state a claim for trademark infringement under the Lanham Act, a plaintiff "must prove: (1) that it has a protectible ownership...