Brown v. Danone N. Am., LLC

CRYSTAL BROWN, Plaintiff, v. DANONE NORTH AMERICA, LLC, et al., Defendants.

Case No. 17-cv-07325-JST

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

May 1, 2018

ORDER GRANTING MOTION TO DISMISS

Re: ECF No. 20

Before the Court is Defendants Danone North America, LLC ("Danone") and WWF Operating Company's motion to dismiss Plaintiff Crystal Brown's putative class action complaint. ECF No. 20-1. The Court will grant the motion. Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds the matter suitable for disposition without oral argument.

I. FACTUAL AND PROCEDURAL BACKGROUND¹

Brown purchased several varieties of Horizon Organic milk approximately once a week between January 2015 through January 2016. ECF No. 1 ("Compl.") ¶ 8. Prior to purchasing the milk, Brown "read defendants' labels." Id. Brown purchased the milk in reliance on the labels' indication that the milk was organic. Id. The labels clearly state that the milk is "organic" and that the milk contains DHA,² and the labels bear the United States Department of Agriculture ("USDA") organic certification logo. Id. ¶ 17.³ Brown describes the milk in her complaint as"[c]ertified organic." Id. ¶ 18. The USDA database publicly shows that Horizon Organic milk with DHA is currently certified organic by the USDA, and has been so since 2013. ECF No. 21-9 at 2.⁴ Horizon Organic milk is more expensive that non-organic milk. Id. ¶ 16. Brown alleges that the milk is not organic because it contains DHA, a nutritional additive. Id. ¶ 20. According to Brown, only certain nutritional additives, not including DHA, may be added to organic food products. Id. ¶ 21. Therefore, Brown alleges that the Defendants' labeling and advertising of Horizon Organic milk as organic is false and misleading. Id. ¶ 23. Brown "would not have purchased the products or would not have paid the price she paid," had she known the milk was not organic. Id. ¶ 8.

Defendant WWF Operating Company ("WhiteWave"), erroneously sued as WhiteWave Foods Company, produces and sells different varieties of Horizon Organic milk. ECF No. 20-1 at 9; Compl. ¶¶ 9-11. WhiteWave is a subsidiary of Danone. Compl. ¶¶ 9-10. Horizon Organic's market share of the organic milk market exceeds 40 percent. Id. ¶ 10.

Brown's putative class action complaint alleges that Defendants violated California's Unfair Competition Law ("UCL"), Bus. & Prof. Code §§ 17200, et seq. Id. ¶ 36. Specifically, Brown alleges that Defendants committed: (1) unlawful business practices, id.¶ 36, (2) unfair business practices, id.¶ 38, (3) fraudulent business practices, id.¶ 41, all by makingmisrepresentations and material omissions. Brown also alleges that Defendants fraudulently violated the California Consumers Legal Remedies Act ("CLRA"), Civil Code §§ 1750, et seq. by knowingly and falsely representing the milk as organic. Id. ¶¶ 48-54. Defendants now move to dismiss Brown's complaint. ECF No. 20.

II. JUDICIAL NOTICE

Defendants request judicial notice of seven administrative rules and other similar documents issued by the USDA, the USDA's certification listings for Horizon Organic milk, and the USDA's accreditation for Quality Assurance International, the certifying agent for Horizon Organic milk. ECF No. 21. Brown requests judicial notice of USDA memoranda and other similar documents, and an amicus curiae brief filed in the Second Circuit. ECF No. 27. None of the requests is opposed.

Federal Rule of Evidence 201 permits a court to take judicial notice of facts that are "not subject to reasonable dispute" because they are either "generally known within the trial court's territorial jurisdiction," or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). The Court concludes that the documents included by the parties are proper subjects of judicial notice and grants the parties' respective requests. See Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012) (citing Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986) (finding the Court "may take judicial notice of 'records and reports of administrative bodies'").

III. LEGAL STANDARD

While the Court accepts the material facts alleged in the complaint, along with all reasonable inferences to be drawn from those facts, as true, Navarro, 250 F.3d at 732, "the tenet that a court must accept a complaint's allegations as true is inapplicable to . . . [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To be entitled to the presumption of truth, a complaint "must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

"In alleging fraud or mistake, a party must state with particularity the circumstancesconstituting fraud or mistake." Fed. R. Civ. P. 9(b). To satisfy Rule 9(b), a complaint must supply "the circumstances constituting the alleged fraud" with a description "specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (citation omitted).

IV. REGULATORY FRAMEWORK

The Organic Foods Production Act ("OFPA") directs the USDA to "establish an organic certification program for producers and handlers of agricultural products that have been produced using organic methods." 7 U.S.C. § 6503(a). The OFPA's purposes are "(1) to establish national standards governing the marketing of certain agricultural products as organically produced products; (2) to assure consumers that organically produced products meet a consistent standard; and (3) to facilitate interstate commerce in fresh and processed food that is organically produced." Id. § 6501. Certifying agents accredited by the USDA certify that products sold and labeled as organic are "produced and handled in compliance with an organic plan." Id. §§ 6503(d), 6504(3), 6514-6515. Only certified organic products may bear the USDA organic logo. 7 U.S.C. § 6505; 7 C.F.R. § 205.301. Certifying agents examine "all substances or materials used in the production or handling process" to determine whether the final product is organic. Marentette v. Abbott Labs., Inc., 886 F.3d 112, 116 (2d Cir. 2018). Once a product is certified, certifying agents review the certification annually. 7 C.F.R. § 205.403(a)(1).

The USDA limits the remedies available for violations of the OFPA. "[A]nyone may file a complaint, with USDA, . . . or [a] certifying agent, alleging violations of the Act or these regulations." 65 Fed. Reg. 80627. The USDA penalizes violations through civil penalties and criminal prosecutions. 7 U.S.C. § 6519(c). A consumer who believes that a certifying agent wrongly certified a product may administratively appeal that certification to the USDA, and if the USDA denies that appeal, the consumer may seek review in district court. Id. § 6520(a). OFPA expressly preempts independent state certification laws. See id. § 6507.

V. DISCUSSION

A. Whether Plaintiff's Claims Are Preempted

Defendants argue Plaintiff's claims that Defendants misrepresented Horizon Organic milk as organic in violation of state law are impliedly preempted by the federal certification scheme. ECF No. 20-1 at 18. Plaintiff argues that her claims fall within the category of claims courts have recognized are not preempted by this federal scheme. ECF No. 26 at 15.

Where state law claims stand "as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," as laid out in a comprehensive federal regulatory scheme, those claims are impliedly preempted by that federal scheme. Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 373 (2000) (citation omitted). This doctrine, commonly referred to as "obstacle preemption," is a form of implied preemption which derives from the Supremacy Clause. U.S. Const. art. VI, cl. 2; Arizona v. United States, 567 U.S. 387, 399 (2012). There is a general presumption against implied preemption of state law, which is particularly strong in areas traditionally occupied by the states, such as food and consumer regulation. Wyeth v. Levine, 555 U.S. 555, 565 (2009). To determine whether a federal scheme preempts state law, courts look to the purposes of Congress in establishing the federal scheme, to assess whether there is a direct conflict. Id. at 565-567.

The Ninth Circuit has yet to analyze whether the OFPA preempts state law challenges which call into question whether organic products were properly certified as organic. The Eighth, and Second Circuits, however, have concluded that such challenges are preempted. See Marentette, 886 F.3d 112; In re Aurora Dairy Corp. Organic Milk Marketing & Sales Practices Litig., 621 F.3d 781 (8th Cir. 2010). Other courts in this district have followed these cases as persuasive. See Jones v. ConAgra Foods, Inc., 912 F. Supp. 2d 889, 895 (N.D. Cal. 2012); Brown v. Hain Celestial Grp., Inc., No. C 11-03082 LB, 2012 WL 3138013, at *9 (N.D. Cal. Aug. 1, 2012).⁵

In 2010, the Eighth Circuit assessed whether state law challenges to the organic certification of milk, and regarding misleading representations about the treatment of the cows producing that milk, were preempted by OFPA. Aurora, 621 F.3d at 790. The Eighth Circuit reasoned that through OFPA, Congress intended to replace the patchwork of state organic certifications with a single national certification standard and enforcement mechanism. Id. at 795. The court held that "plaintiffs' claims that Aurora and the retailers sold milk as organic when in fact it was not organic are preempted because they conflict with the OFPA." Id. at 796. Some of the plaintiffs' claims survived, however. "[I]n contrast to state...