Cheslow v. Ghirardelli Chocolate Co.

497 F.Supp.3d 540

Linda CHESLOW, et al., Plaintiffs,

v.GHIRARDELLI CHOCOLATE COMPANY, Defendant.

Case No. 19-cv-07467-PJH

United States District Court, N.D. California.

Signed October 29, 2020

Ryan J. Clarkson, Bahar Sodaify, Matthew Thomas Theriault, Shireen M. Clarkson, Zachary T. Chrzan, Clarkson Law Firm, P.C., Los Angeles, CA, for Plaintiffs.

Dale Joseph Giali, Keri Elizabeth Borders, Mayer Brown LLP, Los Angeles, CA, for Defendant.

ORDER DENYING MOTION TO ALTER OR AMEND JUDGMENT

Re: Dkt. No. 54

PHYLLIS J. HAMILTON, United States District Judge

Before the court is plaintiffs’ motion to alter or amend judgment pursuant to Federal Rule of Civil Procedure 59(e). The matter is fully briefed and suitable for decision without oral argument. Having read the parties’ papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby rules as follows.

BACKGROUND

On September 19, 2019, plaintiffs Linda Cheslow and Steven Prescott ("plaintiffs") filed a complaint in Sonoma County Superior Court, which defendant Ghirardelli Chocolate Co. ("Ghirardelli" or "defendant") removed to federal court on November 13, 2019. Dkt. 1. The complaint asserted three causes of action: (1) violation of California Unfair Competition Law Business & Professions Code § 17200 et seq. ; (2) False and Misleading Advertising in violation of Business & Professions Code § 17500 et seq. ; and (3) violation of California Consumer Legal Remedies Act, Civil Code § 1750 et seq. Dkt. 1-1.

On April 8, 2020, this court granted defendant's first motion to dismiss and dismissed the complaint with leave to amend. See Dkt. 34. On April 29, 2020, plaintiffs filed their First Amended Complaint ("FAC") alleging the same three causes of action as the original complaint. Dkt. 36. On July 17, 2020, the court granted defendant's second motion to dismiss the FAC, dismissed the FAC with prejudice, (Dkt. 52), and entered judgment on behalf of defendant, (Dkt. 53). Plaintiffs now seek to alter or amend the court's judgment. Dkt. 54. They have also filed a notice of appeal. Dkt. 55.

The court's April 8th order contains a more thorough discussion of the factual background of this case. Dkt. 34 at 2–4. For purposes of this order, plaintiffs seek to certify a class action of all persons who purchased Ghirardelli's "Premium Baking Chips Classic White Chips" (the "product") in the United States or, alternatively, in California. FAC ¶¶ 1, 62.

DISCUSSION

A. Legal Standard

Rule 59(e) of the Federal Rules of Civil Procedure permits a party to seek an order altering or amending a judgment. Rule 59(e) does not describe the conditions under which a court should reconsider a prior decision, but under Ninth Circuit authority, it is appropriate to alter or amend a judgment under Rule 59(e) if "(1) the district court is presented with newly discovered evidence, (2) the district court committed clear error or made an initial decision that was manifestly unjust, or (3) there is an intervening change in controlling law." United Nat. Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 780 (9th Cir. 2009) (quoting Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001) ).

"Since specific grounds for a motion to amend or alter are not listed in the rule, the district court enjoys considerable discretion in granting or denying the motion. However, reconsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly." McDowell v. Calderon, 197 F.3d 1253, 1255 n.1 (9th Cir. 1999) (per curiam) (quoting 11 Charles Alan Wright et al., Fed. Practice & Proc., § 2810.1 (2d ed. 1995)).

B. Analysis

Plaintiffs argue that the Ninth Circuit's opinion in Moore v. Mars Petcare US, Inc., 966 F.3d 1007 (9th Cir. 2020), requires the court to alter or amend its judgment because Moore represents new controlling authority issued after judgment that demonstrates the court's dismissal was in error. Mtn. at 2. Plaintiffs also contend that, independent of Moore, the court committed clear error by conducting a Daubert hearing concerning plaintiffs’ consumer survey and then discrediting the survey without actual briefing and discovery. Id.

At the outset, the court notes that the primary basis for plaintiffs’ Rule 59(e) motion is that Moore represents a change in controlling law. Indeed, in their reply brief, plaintiffs contend that Moore changes Ninth Circuit law. Reply at 2. That contention is inaccurate. As the Ninth Circuit noted, federal courts sitting in diversity apply state law, here California law. Moore, 966 F.3d at 1016 (citing Hinojos v. Kohl's Corp., 718 F.3d 1098, 1103 (9th Cir. 2013) ). In this case, the controlling laws are California's Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act and none of those laws have changed. While in some cases the Ninth Circuit's interpretation of statutory law may represent a change in controlling law, Moore cites prior federal and California appellate decisions and then applies those well-established precedents to the particular facts of the case. Indeed, Moore explains that "[s]everal themes emerge from cases evaluating the potential to mislead under the reasonable consumer test," id. at 1017, and then proceeds to evaluate the facts "under [those] guidelines," id. at 1018. Thus, Moore represents an application of long-standing precedent rather than a change in controlling law necessary to grant a Rule 59(e) motion.

However, Rule 59(e) also permits a court to alter or amend a judgment based on clear error and it is plausible that Ninth Circuit authority could demonstrate that the court's application of California law to the facts of this case was clear error. Accordingly, the court proceeds to consider the merits of plaintiffs’ motion.

Moore involved false advertising claims against defendant pet food manufacturers that sold prescription pet food in packaging labeled "Prescription Diet," among other similar labels. 966 F.3d at 1013. In September 2012, the U.S. Food & Drug Administration ("FDA") published a draft compliance policy guidance, finalized in 2016, that proposed a set of nine factors it would consider in determining whether to initiate an enforcement action against pet food products labeled as intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease. Id. at 1014. Relying in part on the compliance guidance, the plaintiffs alleged that the defendants misrepresented that the prescription pet food "(1) qualified as some sort of drug or medicine; (2) met a medical requirement for the pet; (3) had been evaluated by the FDA as a drug; (4) had been evaluated by the FDA regarding its intended uses and effects; (5) required a prescription per federal or state law; and (6) warranted a particular premium price." Id. at 1016.

On appeal from the district court's order granting a Rule 12(b)(6) motion to dismiss, the Ninth Circuit reversed, citing three reasons. First, common sense dictated that a product requiring a prescription meant that the product was a medicine that contained a drug or controlled substance, but the plaintiffs alleged there were no drugs or controlled substance in the pet food. Id. at 1018. Second, in relying on an intervening role played by veterinarians who prescribed the food, the district court erred because the defendant manufacturers marketed to consumers, in addition to the veterinarians. Id. The Ninth Circuit reasoned that even though the FDA's 2016 compliance guidance sanctioned the role of veterinarians in supervising the consumption of pet food, the FDA's compliance guidance did not signal the FDA's authorization of the products, nor did it authorize the defendants’ labeling and marketing representations. Id. at 1018–19. Third, the court found persuasive the fact that the defendants violated three of the conditions listed in the FDA's compliance guidance, even though the guidance was non-binding and no enforcement action had been brought by the FDA. Id. at 1019 ; see also id. at 1022 (Rawlinson, J., dissenting) (discussing non-binding nature of FDA's compliance guidance).

With that summary in mind, the court turns to plaintiffs’ arguments.

1. Whether the Product Brand Name is Misleading

Plaintiffs, relying on Moore’s statement that brand names by themselves can be misleading, argue that Ghirardelli's brand name has a particular meaning to consumers, it is synonymous with chocolate. Mtn. at 5. According to plaintiffs, deceptive brand names like Ghirardelli require "little thought" of consumers and may be misleading where they leave consumers susceptible to purchasing in reliance on the brand name and without investigating the back of the box. Id. Plaintiffs would apply that reasoning here because they purchased "Ghirardelli Classic White Chips" and were surprised to learn that there is no white chocolate at all, even though other baking chips sold by Ghirardelli do contain chocolate. Id.

Defendant asserts that Moore does not hold that brand names alone warrant denial of a motion to dismiss. Opp. at 6. Rather, only when a brand name plausibly supports a deception claim, can a plaintiff state a claim based on the brand name alone. Id.

"[B]rand names by themselves can be misleading in the context of the product being marketed." Moore, 966 F.3d at 1018 (quoting Brady v. Bayer Corp., 26 Cal. App. 5th 1156, 237 Cal. Rptr. 3d 683, 694 (2018) ). "Descriptive brand names require of the consumer ‘little thought,’ which can make consumers susceptible to purchasing because ‘they won't have the time or interest to read about [the product] on [the] website or the back of the box.’ " Id. (alterations in original) (emphasis omitted) (quoting Brady, 237 Cal. Rptr. 3d at 694 ). Moore cited an example from the California Court of Appeal's decision in Brady where "a product called ‘One a Day’ gummy vitamins, which required two gummies a day for a full dosage, [was] explicitly misleading." Id. (citing Brady, ...