Vp Racing Fuels, Inc. v. General Petroleum Corp., 2:09-cv-02067-MCE-GGH.

• Citation: 673 F.Supp.2d 1073
• Decision Date: 25 November 2009
• Docket Number: No. 2:09-cv-02067-MCE-GGH.,2:09-cv-02067-MCE-GGH.
• Parties: VP RACING FUELS, INC., a Texas corporation, Plaintiff, v. GENERAL PETROLEUM CORPORATION, a California corporation, and Does 1 through 100, inclusive, Defendants.
• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California

673 F.Supp.2d 1073

VP RACING FUELS, INC., a Texas corporation, Plaintiff, v. GENERAL PETROLEUM CORPORATION, a California corporation, and Does 1 through 100, inclusive, Defendants.

No. 2:09-cv-02067-MCE-GGH.

United States District Court, E.D. California.

November 25, 2009.

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Glenn W. Peterson, Millstone Peterson & Watts, LLP, Roseville, CA, for Plaintiff.

Stephen S. Walters, Michael Ray Adele, Allen Matkins Leck Gamble Mallory & Natsis LLP, San Diego, CA, for Defendants.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, JR., District Judge.

Plaintiff VP Racing Fuels ("Plaintiff") seeks injunctive and monetary relief from Defendant General Petroleum Corporation ("Defendant") for False Advertising in violation of both the Lanham Act, 15 U.S.C. § 1125(a) and California Business and Professions Code §§ 17500 et seq., and for Unfair Competition in violation of California Business and Professions Code §§ 17200 et seq. Plaintiff's claims against Defendant stem from alleged misrepresentations of the octane rating of racing fuel distributed throughout California by Defendant.

Presently before the Court is Defendant's Motion to Dismiss for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6), on the grounds that Plaintiff's Claims are preempted by the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-2841, or, in the alternative, for failure to plead fraud with particularity under Fed.R.Civ.P. 9(b). For the reasons set forth below, Defendant's Motion to Dismiss is granted in part and denied in part.¹

BACKGROUND

Plaintiff, a Texas corporation authorized to do business in California, sells racing fuels in California, including street legal 100 Octane fuel. Defendant, a California corporation with its principal place of business in California, distributes racing fuel in California under the Sunoco brand, including Sunoco's 100 Octane product, known as 260 GT™. Plaintiff contends that Defendant "sold or caused to be sold 97 Octane fuel that has been represented and marketed to consumers to be 100 Octane." (Compl. ¶ 13.)

Plaintiff alleges that in June 2009, it collected samples of allegedly 100 Octane fuel from ten fueling stations in California ("Subject Locations"). Plaintiff alleges that Defendant is the distributor responsible for the 100 Octane fuel offered for sale at the Subject Locations. Plaintiff avers that laboratory testing and analysis showed that "[n]one of the evidentiary samples tested from the Subject Locations were validated as 100 Octane. The evidentiary samples taken at the Subject Locations, despite being portrayed and sold as '100 Octane' tested at 97 Octane or below." (Compl. ¶ 12.)

Plaintiff alleges that Defendant, willfully and intentionally, misrepresented the nature, characteristics and qualities of Defendant's product in its labeling, marketing and product displays. Plaintiff further claims that Defendant "caused these literally false statements to enter interstate commerce and such statements have actually and materially deceived a substantial number of consumers, and have a continuing tendency to further deceive consumers." (Compl. ¶ 18.) Plaintiff also alleges that as a direct competitor of Defendant, Plaintiff "has been harmed by consumer reliance upon such misrepresentations, which has enabled Defendants to price their 100 Octane produce below the true market value of bona fide, 100 Octane fuel ... [and] has resulted in competitive harm and has unfairly diverted sales to Defendants." (Compl. ¶ 31.)

Plaintiff filed the present action on July 27, 2009, alleging federal and state law claims for false advertising and a state law unfair competition claim. Defendant now moves to dismiss all of Plaintiff's claims for failure to state a claim, on the grounds that such claims are preempted by federal law, or in the alternative, for failure to plead fraud with particularity.

STANDARD

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). A complaint will not be dismissed for failure to state a claim "`unless it appears beyond doubt that plaintiff can prove no set of facts in support of her claim that would entitle her to relief.'" Yamaguchi v. Dep't of the Air Force, 109 F.3d 1475, 1480 (9th Cir.1997) (quoting Lewis v. Tel. Employees Credit Union, 87 F.3d 1537, 1545 (9th Cir.1996)).

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). One exception to this general policy of liberality in pleading is fraud or mistake, which instead requires a heightened standard. In alleging fraud or mistake, "a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b) (emphasis added); Desaigoudar v. Meyercord, 223 F.3d 1020, 1022-23 (9th Cir.2000) (Fraud must be pled "with a high degree of meticulousness.").

If the court grants a motion to dismiss a complaint, it must then decide whether to grant leave to amend. The court should "freely give" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant ... undue prejudice to the opposing party by virtue of ... the amendment, [or] futility of the amendment...." Fed.R.Civ.P. 15(a); Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Generally, leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.1992).

ANALYSIS

A. Preemption

Defendant contends that Title II of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2821-2824, preempts both the state and federal law claims presented by Plaintiff. Defendant further argues that in the absence of express preemption, conflict and/or obstacle preemption bars those claims. Defendant claims that because the PMPA does not contain a private right of action but rather allegedly gives the Federal Trade Commission exclusive authority to enforce its provisions, Plaintiff cannot rely on the general statutes proscribing unfair business practices to state a private claim not permitted by the PMPA.

The Court will first set forth the principles of preemption before applying such principles to the facts of this case.

1. General Preemption Principles

Under the Supremacy Clause in the Constitution, state laws that conflict with federal law are without effect. Altria Group, Inc. v. Good, ___ U.S. ___, 129 S.Ct. 538, 543, 172 L.Ed.2d 398 (2008) ("Article VI, cl. 2, of the Constitution provides that the laws of the United States `shall be the supreme Law of the Land; ... any Thing in the Constitution of Laws of any state to the Contrary notwithstanding.'"). The Federal Government, acting within the authority it possesses under the Constitution, is empowered to preempt state laws to the extent it is believed that such an action is necessary to achieve its purposes. See New York v. FCC, 486 U.S. 57, 63-64, 108 S.Ct. 1637, 100 L.Ed.2d 48 (1988).

Congress may indicate preemptive intent through a statute's express language or through its structure and purpose. Altria, 129 S.Ct. at 543. However, the presence of an express preemption clause does not immediately end the inquiry; "the question of the substance and scope of Congress' displacement of state law remains." Id. Preemption may also be inferred if the scope of the statute indicates that Congress intended federal law to occupy the legislative field, or if there is an actual conflict between state and federal law. Id. (citation omitted). Irrespective of the variety of preemption at issue, the Court is guided by the rule that "`[t]he purpose of Congress is the ultimate touchstone' in every pre-emption case." Id. (citations omitted); City of Auburn v. United States, 154 F.3d 1025, 1031 (9th Cir.1998) ("[T]he pivotal question is not the nature of the state regulation, but the language and congressional intent of the specific federal statute." (citations omitted)).

Because the States are independent sovereigns in our federal system, the federal courts have long presumed that Congress does not cavalierly preempt state-law causes of action. Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005) (citations and quotations omitted); Altria, 129 S.Ct. at 543 ("When addressing questions of express or implied pre-emption, we begin our analysis `with the assumption that the historic police powers of the States [are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" (citation omitted)). This assumption applies with particular force when Congress has legislated in a field traditionally occupied by the States. Altria, 129 S.Ct. at 543. Therefore, when the text of a preemption clause is susceptible to more than one plausible reading, courts ordinarily "accept the reading that disfavors pre-emption." Bates, 544 U.S. at 449, 125 S.Ct. 1788.

The Court begins by first noting that the States have traditionally occupied the area of regulating petroleum products. In California, the laws relating to petroleum products were first enacted in 1931 and are found in the California Business and Professions Code, Division 5, Chapters 14 and 15. Regulations that further define and implement the laws are found in the California Code of Regulations, Title 4, Division 9, Chapters 6, 7, and 8. Therefore, there is a strong presumption that state law claims are not to be superseded unless that was the clear and manifest purpose of Cong...