Stanwood v. Mary Kay, Inc.

• Decision Date: 13 November 2012
• Docket Number: Case No. SACV 12–00312–CJC(ANx).
• Citation: 941 F.Supp.2d 1212
• Court: U.S. District Court — Central District of California
• Parties: Ashley STANWOOD, Plaintiff, v. MARY KAY, INC., Defendant.

941 F.Supp.2d 1212

Ashley STANWOOD, Plaintiff,

v.MARY KAY, INC., Defendant.

Case No. SACV 12–00312–CJC(ANx).

United States District Court,

C.D. California,

Southern Division.

Sept. 20, 2012.

Order Denying Reconsideration Nov. 13, 2012.

Damon Rogers, Filippo Marchino, The X–Law Group PC, Los Angeles, CA, Michael J. Avenatti, Scott Howard Sims, Eagan Avenatti LLP, Newport Beach, CA, for Plaintiff.

Bradley Joseph Hamburger, James L. Zelenay, Jr., Gibson Dunn & Crutcher LLP, Los Angeles, CA, Michael Sean Royall, Gibson Dunn and Crutcher LLP, Dallas, TX, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS IN PART AND DENYING DEFENDANT'S MOTION TO STRIKE

CORMAC J. CARNEY, District Judge.

I. INTRODUCTION AND BACKGROUND

On February 28, 2012, Plaintiff Ashley Stanwood, along with other individuals (collectively, “Plaintiffs”), brought a nationwide putative class action against three cosmetic companies, Mary Kay, Inc. (“Mary Kay”), The Estee Lauder Companies, Inc. and Estee Lauder, Inc. (together, “Estee Lauder”), and Avon Products, Inc. (“Avon”) (collectively, “Defendants”). Plaintiffs allege that Defendants defrauded American consumers by marketing and advertising that they did not test any of their products on animals. In reality, Defendants were testing products sold in foreign markets on animals, often as required by law in those countries. Plaintiffs allege that they purchased Defendants' products based on the representations that Defendants did not test any of their products on animals, regardless of where those products were sold. Had they known the truth about Defendants' operations, Plaintiffs allege that they would not have purchased the products.

On March 22, 2012, Plaintiffs voluntarily dismissed Avon without prejudice. (Dkt. No. 15.) On April 16, 2012, Plaintiffs filed their First Amended Complaint (“FAC”) against Mary Kay and Estee Lauder. (Dkt. No. 32.) On May 14, 2012, Mary Kay moved to dismiss the FAC or, in the alternative, to dismiss or strike the class allegations. (Dkt. No. 35.) On the same date, Estee Lauder moved to dismiss the FAC or, in the alternative to strike Plaintiffs' requests for restitution and punitive damages. (Dkt. No. 36.) On June 28, 2012, the Court granted both motions to dismiss, and severed the claims against Mary Kay and Estee Lauder. (Dkt. No. 44.) On July 18, 2012, Ms. Stanwood filed her operative Second Amended Complaint (“SAC”) against Mary Kay. (Dkt. No. 45.) Before the Court is Mary Kay's motion to dismiss the SAC or strike Ms. Stanwood's class claims.

In her SAC, Ms. Stanwood alleges that Mary Kay engaged in a long-term marketing and advertising campaign touting itself as a company that did not test its products on animals. (SAC ¶ 1.) While it was making such representations to American consumers, Mary Kay decided to enter the Chinese market, where it was required by Chinese law to test certain products on animals. ( Id. ¶ 14.) Specifically, she alleges that Mary Kay represented to the People for the Ethical Treatment of Animals (“PETA”) and the Coalition for Consumer Information of Cosmetics (the “Coalition”) that it did not and would not test any of its products on animals. ( Id. ¶ 8.) As a result, Mary Kay was placed on PETA's “Do Not Test” list and the Coalition's “Leaping Bunny” list of companies that do not conduct animal testing. ( Id.) In addition to making such representations to PETA and the Coalition, Ms. Stanwood alleges that Mary Kay placed a statement on its website that “Mary Kay does not conduct animal testing for its products and is a PETA pledge member.” ( Id.) Mary Kay also allegedly represented to its sales force that Mary Kay did not test any of its products on animals, with full knowledge that the sales force would repeat these representations to consumers. ( Id.) Finally, Ms. Stanwood alleges that in September 2011, a Mary Kay representative named Jacqueline represented to her, as part of a sale, that Mary Kay did not test any of its products on animals. ( Id. ¶ 5.) Ms. Stanwood alleges that Mary Kay profited millions of dollars from U.S. consumers who would not have purchased any products from a company that tested its products on animals. ( Id. ¶ 13.) Ms. Stanwood, individually and on behalf of others similarly situated, asserts four claims against Mary Kay for: (1) fraud/fraudulent concealment, (2) violation of California's Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq., (3) violation of California's False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq., and (4) violation of the California Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1750, et seq. Ms. Stanwood requests injunctive relief, compensatory damages, punitive damages, and restitution. For the following reasons, the Court GRANTS IN PART Mary Kay's motion to dismiss. Because the Court cannot say with certainty at this time whether any further amendment would be futile, those claims which are dismissed are done so WITH LEAVE TO AMEND. Mary Kay's motion to strike class allegations is DENIED WITHOUT PREJUDICE.¹

II. ANALYSISA. Standing

Mary Kay argues that Ms. Stanwood lacks standing under Article III, the UCL, FAL, and CLRA because she has not suffered an actual injury. Under Article III, federal courts may only hear a “case or controversy.” U.S. Const. art. III, § 2, cl. 1. To satisfy this standard, the plaintiff must show an injury in fact that is fairly traceable to the defendant's unlawful conduct. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir.2004). The injury must be “an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.” Stickrath v. Globalstar, Inc., 527 F.Supp.2d 992, 995 (N.D.Cal.2007) (quoting Lujan, 504 U.S. at 560, 112 S.Ct. 2130) (quotes omitted).

The UCL, FAL, and CLRA have independent requirements for standing. After the passage of Proposition 64 in 2004, a plaintiff asserting a UCL or FAL claim must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011) (alterations in original). In addition, the CLRA requires that a person have suffered “damages as the result of” a violation of the statute. Cal. Civ. Code § 1780(a).

Ms. Stanwood has pleaded a sufficient injury under Article III, the UCL, the FAL, and the CLRA. Mary Kay incorrectly frames the standing issue as whether “American purchasers of Mary Kay products have standing to pursue claims premised on Mary Kay's alleged conduct related to products they did not purchase and that were sold only in foreign countries.” (Dkt. No. 52, at 1.) Because Mary Kay mischaracterizes the issue, the cases Mary Kay relies on in support of its argument against standing are irrelevant here. Those cases would only be relevant if Ms. Stanwood was seeking redress for an injury related to some defect in the products. She is not. Ms. Stanwood does not allege that she was, in any way, injured by using animal-tested products. Rather, she was injured because Mary Kay made false representations and omissions about its operations, which induced her to buy a non-defective product she otherwise would not have purchased. The real question before the Court is whether purchasing a non-defective product based on fraudulent misrepresentations can constitute a sufficient injury for standing purposes.

The California Supreme Court recently answered this question in the affirmative. See Kwikset, 51 Cal.4th at 330, 120 Cal.Rptr.3d 741, 246 P.3d 877. In Kwikset, a consumer brought claims against a company for falsely marketing and selling locksets labeled “Made in the U.S.A.” that actually contained foreign-made parts or involved foreign manufacture. The plaintiff argued that he suffered an injury because, but for the false representations on the label, he would not have bought the product. Id. at 327–28, 120 Cal.Rptr.3d 741, 246 P.3d 877. He did not allege that the lockset was defective in any way, or that it was somehow inferior because it was partially manufactured overseas. Id. at 331, 120 Cal.Rptr.3d 741, 246 P.3d 877. The California Supreme Court held that the plaintiff had standing to pursue his claims. Id. at 328, 120 Cal.Rptr.3d 741, 246 P.3d 877. The California Supreme Court noted that “to some consumers, the ‘Made in U.S.A.’ label matters. A range of motivations may fuel this preference, from the desire to support domestic jobs, to beliefs about quality, to concerns about overseas environmental or labor conditions, to simple patriotism.” Id. at 329, 120 Cal.Rptr.3d 741, 246 P.3d 877. The California Supreme Court held that consumers that relied on the label and were deceived by the misrepresentation into making a purchase suffered an injury in fact: “[T]he consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately.” Id. (emphasis in original). The harm was not that the product was somehow inferiorly made, but simply that the consumer would not have purchased it at the price he paid, but for the misrepresentations.

Like the Kwikset plaintiff, Ms. Stanwood does not allege that the Mary Kay products she purchased were in any way defective or inferior based on the fact that Mary Kay tests some foreign products on animals. She argues that had she known the truth about Mary Kay's operations, she would not have purchased its products. From this, we know that Ms. Stanwood paid more for the products than she actually valued them. “That increment, the extra money paid, is economic...