Yumul v. Smart Balance, Inc.

• Decision Date: 24 May 2010
• Docket Number: Case No. CV 10-00927 MMM (AJWx)
• Citation: 733 F.Supp.2d 1117
• Court: U.S. District Court — Central District of California
• Parties: Rebecca YUMUL, individually, and on behalf of all others similarly situated, Plaintiff, v. SMART BALANCE, INC., Defendant.

733 F.Supp.2d 1117

Rebecca YUMUL, individually, and on behalf of all others similarly situated, Plaintiff,

v.SMART BALANCE, INC., Defendant.

Case No. CV 10-00927 MMM (AJWx).

United States District Court,

C.D. California.

May 24, 2010.

Gregory S. Weston, John Joseph Fitzgerald, IV, The Weston Firm, San Diego, CA, Jared H. Beck, Elizabeth Lee Beck, Beck & Lee Business Trial Lawyers, Miami, FL, for Plaintiff.

Rick L. Shackelford of Greenberg Traurig, for Defendant.

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

MARGARET M. MORROW, District Judge.

I. BACKGROUND

Rebecca Yumul filed this putative class action against defendant Smart Balance, Inc. ("Smart Balance") on February 8, 2010.¹ Yumul's complaint alleges that she purchased Nucoa margarine, a product manufactured by Smart Balance, repeatedly during the class period, from January 1, 2000 until the present.²

Yumul alleges that Nucoa contains artificial trans fat, which raises the risk of coronary heart disease by raising the level of "bad" LDL blood cholesterol and lowering the level of "good" HDL blood cholesterol. ³ Yumul also alleges that trans fat causes cancer and type 2 diabetes.⁴ Despite the ill effects of trans fat, Smart Balance markets Nucoa as "cholesterol free." Yumul alleges that while possibly true, this statement is misleading, since consumption of Nucoa in fact raises the level of LDL blood cholesterol.⁵ Yumul contends that use on the product packaging of the word "healthy," (in Spanish, "saludable") is also misleading because of the negative health effects of trans fat.⁶

Yumul asserts that any statute of limitations that might otherwise bar the action must be tolled because Smart Balance "affirmatively conceal[ed] and publically misrepresent[ed] its violations of law" on the product packaging. Yumul alleges that "[a] reasonable consumer would have relied on the deceptive and false claims on the packaging of Nucoa margarine, and through the exercise of reasonable diligence would not have discovered the violations alleged ... because SBI actively and purposefully concealed the truth." ⁷

Yumul pleads three causes of action: (1) violation of California's unfair competition law ("UCL"), California Business & Professions Code §§ 17200 et seq.; (2) violation of California's false advertising law ("FAL"), California Business & Professions Code §§ 17500 et seq.; and (3) violation of California's Consumer Legal Remedies Act ("CLRA"), California Civil Code § 1750 et seq.

Yumul seeks (1) an injunction requiring Smart Balance to cease its misleading advertising practices; (2) a mandatory injunction requiring Smart Balance to conduct a corrective advertising campaign; (3) restitution of the amount by which Smart Balance has been unjustly enriched by its false advertising; and (4) a mandatory injunction requiring that Smart Balance destroy all misleading and deceptive materials and products.

II. DISCUSSION

A. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir.1988). In deciding a Rule 12(b)(6) motion, the court generally looks only to the face of the complaint and documents attached thereto. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir.2002); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990).

The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Insurance Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995). It need not, however, accept as true unreasonable inferences or legal conclusions cast in the form of factual allegations. See Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) ("[B]are assertions ... amount[ing] to nothing more than a 'formulaic recitation of the elements' of a constitutional discrimination claim" are not entitled to an assumption of truth, quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see also Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir.2009) ("Such allegations are not to be discounted because they are 'unrealistic or nonsensical,' but rather because they do nothing more than state a legal conclusion-even if that conclusion is cast in the form of a factual allegation").

To survive a motion to dismiss, plaintiff's complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' ... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. See also id. ("The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.... Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of "entitlement to relief," ' " quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955); Twombly, 550 U.S. at 545, 127 S.Ct. 1955 ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" (citations omitted)). See also, e.g., Moss, 572 F.3d at 969 ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonableinferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief," citing Iqbal and Twombly ).

B. Legal Standard Governing Rule 9(b) Pleading Requirements

Rule 9(b) requires that, "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.Proc. 9(b); see also 5A Charles A. Wright & Arthur W. Miller, Federal Practice and Procedure § 1297 (2006) ("[Rule 9(b) ] is a special pleading requirement [that is] contrary to the general approach of the 'short and plain,' simplified pleading adopted by the federal rules ..."). "To avoid dismissal for inadequacy under Rule 9(b)," a "complaint [must] 'state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.' " Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir.2004) (quoting Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1393 (9th Cir.1989), and Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986)); see also In re GlenFed Securities Litigation, 42 F.3d 1541, 1548 (9th Cir.1994) (en banc). Conclusory allegations are insufficient, and the facts constituting the fraud must be alleged with specificity. See Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir.1989) ("A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient" (citation omitted)); see also Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.1997) (to satisfy Rule 9(b), "the complaint [must] identif[y] the circumstances of the alleged fraud so that defendants can prepare an adequate answer" (internal quotation marks omitted)).

"It is well-settled that the Federal Rules of Civil Procedure apply in federal court, 'irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.' " Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir.2009) (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir.2003)). Consequently, the Ninth Circuit has held that Rule 9(b)'s pleading requirements apply to both the CLRA and the UCL:

"The CLRA prohibits '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 ... of goods or services to any consumer.' Cal. Civ.Code § 1770. The UCL prohibits 'unlawful, unfair or fraudulent business act[s] or practice[s]' and 'unfair, deceptive, untrue or misleading advertising.' Cal. Bus. & Prof.Code § 17200. Rule 9(b)'s particularity requirement applies to these state-law causes of action. Vess, 317 F.3d at 1102-05. In fact, we have specifically ruled that Rule 9(b)'s heightened pleading standards apply to claims for violations of the CLRA and UCL." Kearns, 567 F.3d at 1125 (citing Vess, 317 F.3d at 1102-05).

The Ninth Circuit conceded that "fraud [was] not a necessary element of a claim under the CLRA and UCL," but noted that when a plaintiff alleges "fraudulent conduct and rel[ies] entirely on that course of conduct as the basis of that claim," then "the claim [can be] said to be 'grounded in fraud' or to 'sound in fraud,' and the pleading ... as a whole must satisfy the particularity requirement of Rule 9(b)." Id. District courts in California have consistently held in addition that claims under California's FAL are grounded in fraud. See,e.g., Pom Wonderful LLC v. Ocean Spray...