Johnson-Jack v. Health-Ade LLC

587 F.Supp.3d 957

Brandon JOHNSON-JACK, et al., Plaintiffs,

v.HEALTH-ADE LLC, Defendant.

Case No. 21-cv-07895-LB

United States District Court, N.D. California, San Francisco Division.

Signed February 24, 2022

Caroline Emhardt, Paul K. Joseph, Jack Fitzgerald, Melanie Rae Persinger, Trevor Matthew Flynn, Fitzgerald Joseph LLP, San Diego, CA, for Plaintiffs.

Robert James Herrington, Sandhu K. Gaganjyot, Greenberg Traurig LLP, Los Angeles, CA, Emerson Bonner Luke, Weintraub Tobin, Sacramento, CA, for Defendant.

ORDER DENYING MOTION TO DISMISS

Re: ECF No. 18

LAUREL BEELER, United States Magistrate Judge

INTRODUCTION

In this consumer-products mislabeling class action, the plaintiffs allege that the defendant's use of the term "Health-Ade" to market kombucha-inspired beverages, including Health-Ade Kombucha, Health-Ade Plus, Health-Ade Booch Pop, Health-Ade pop, and Health-Ade Mixers, violates California law. The plaintiffs’ theory is that the term "Health-Ade" is misleading because it implies that the defendant's products are healthy when, according to the plaintiffs, they are not because they contain sugar.¹ Most courts in this district have found that mislabeling claims based on this theory (i.e. , that it is deceptive to market products with added sugar as healthy based on studies linking excess sugar consumption to disease) can survive a motion to dismiss and that the term "healthy" is not puffery. The Ninth Circuit has not yet issued a controlling decision. Thus, the court denies the defendant's motion to dismiss.²

ANALYSIS

The named plaintiffs allege that they regularly purchased Health-Ade Kombucha during the class period.³ According to the complaint, the product's label is misleading because it implies that the drinks are healthy when the "high sugar content" makes the drinks unhealthy.⁴ The plaintiffs assert claims for relief under the (1) California Business and Professions Code §§ 17200, et seq. , (i.e. , Unfair Competition Law or UCL) for unfair business practices, (2) California Business and Professions Code §§ 17500, et seq. , (i.e. , False Advertising Law or FAL) for deceptive advertising, and (3) California Civil Code §§ 1750, et seq. , (i.e. , Consumer Legal Remedies Act or CLRA) for deceptive practices.⁵ They also assert claims for breach of implied and express warranties.⁶

The defendant, Health-Ade LLC, asks the court to dismiss the complaint for several reasons. Its main argument is that the term "Health-Ade" is not misleading because the amount of sugar in the products is accurately disclosed in the nutrition facts box and ingredients list on the label.⁷ The defendant also contends that the term "health" is non-actionable puffery and that federal laws concerning food labeling preempt the plaintiffs’ claims.⁸ Finally, the defendant contends that the plaintiffs do not (1) satisfy the heightened pleading standards under Federal Rule of Civil Procedure 9(b), (2) have grounds to seek injunctive relief because they have an adequate remedy at law, or (3) have standing to assert claims based on products they did not purchase.⁹

The term "Health-Ade" implies to reasonable consumers that the defendant's products are healthy, and the plaintiffs have plausibly alleged that the products are unhealthy by citing scientific studies that allegedly link the consumption of sugar-sweetened beverages to negative health outcomes. Whether the defendant's products are, in fact, healthy or unhealthy cannot be resolved at this stage. While the term "healthy" can be difficult to define, many courts in this district have held that it is not puffery because consumers rely on it when purchasing food products. Federal law does not preempt the plaintiffs’ claims because the challenged term is not a "health" claim or "nutrient content" claim, which are the relevant types of labeling statements governed by federal law.

Furthermore, the plaintiffs have adequately pled "the who, what, when, where, and how" of the alleged fraud for purposes of Rule 9(b) by describing the element of the label that is allegedly misleading, pleading the time of the alleged fraud by reference to the class period, and supporting their claim that sugar-sweetened beverages are unhealthy based on scientific studies. The plaintiffs have standing to seek injunctive relief because the difficult-to-ascertain nature of the alleged misrepresentation suggests that the plaintiffs will not be able to rely on the labeling statements in the future. Thus, the court denies the motion to dismiss.

1. Applicable Legal Standard

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief" to give the defendant "fair notice" of what the claims are and the grounds upon which they rest. Fed. R. Civ. P. 8(a)(2) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (cleaned up). A complaint does not need detailed factual allegations, but "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement 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[.]" Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (cleaned up).

To survive a motion to dismiss, a complaint must contain sufficient factual allegations, which when accepted as true, " ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "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." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "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." Id. (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "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.’ " Id. (cleaned up) (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).

If a court dismisses a complaint, it should give leave to amend unless the "pleading could not possibly be cured by the allegation of other facts." United States v. United Healthcare Ins. Co. , 848 F.3d 1161, 1182 (9th Cir. 2016) (cleaned up).

2. Unfair Competition Statutory Claims – Reasonable Consumer Test

Claims under the CLRA, FAL, and UCL are governed by the "reasonable consumer" test. Williams v. Gerber Prods. Co. , 552 F.3d 934, 938 (9th Cir. 2008). Given that the same standard applies, courts often analyze claims under these statutes together. Hadley v. Kellogg Sales Co. , 273 F. Supp. 3d 1052, 1063 (N.D. Cal. 2017) (" Hadley I "). "Under the reasonable consumer standard, [plaintiffs] must show that ‘members of the public are likely to be deceived.’ " Williams , 552 F.3d at 938 (cleaned up).

Generally, determining "whether a reasonable consumer would be deceived" is a question of fact. Cheslow v. Ghirardelli Chocolate Co. , 445 F. Supp. 3d 8, 16 (N.D. Cal. 2020) ; see also Reid v. Johnson & Johnson , 780 F.3d 952, 958 (9th Cir. 2015). In rare situations, however, "a court may determine, as a matter of law, that the alleged violations of the UCL, FAL, and CLRA are simply not plausible." Cheslow , 445 F. Supp. 3d at 16 (cleaned up); see, e.g., Becerra v. Dr Pepper/Seven Up, Inc. , No. 17-cv-05921-WHO, 2018 WL 1569697, at *7 (N.D. Cal. Mar. 30, 2018) (dismissing claims based on use of term "diet" because studies cited in complaint did not show the product causes weight gain); Becerra v. Coca-Cola Co. , No. C 17-05916 WHA, 2018 WL 1070823, at *4 (N.D. Cal. Feb. 27, 2018) (same). Moreover, whether language constitutes non-actionable puffery may be decided as a matter of law. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc. , 911 F.2d 242, 245 (9th Cir. 1990) ("District courts often resolve whether a statement is puffery when considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and we can think of no sound reason why they should not do so.").

2.1 The Alleged Meaning of "Health-Ade"

The plaintiffs assert the term "Health-Ade" implies that the product is healthy or an aid to health.¹⁰ According to the plaintiffs, the term is deceptive because "consuming sugar-sweetened beverages is unhealthy."¹¹ The defendant, citing the dictionary definitions of "ade" and "kombucha," argues that the term "Health-Ade" "means a ‘sweet drink’ made with tea and ‘sugar’ " and that no reasonable consumer could be deceived as a matter of law.¹²

For purposes of this motion, the court must construe the allegations "in the light most favorable to the plaintiff[s]." Puri v. Costco Wholesale Corp. , No. 5:21-cv-01202-EJD, 2021 WL 6000078, at *2 (N.D. Cal. Dec. 20, 2021) (citing Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1989), abrogated by DaVinci Aircraft, Inc. v. United States , 926 F.3d 1117 (9th Cir. 2019) ); cf. Jou v. Kimberly-Clark Corp. , No. C-13-03075 JSC, 2013 WL 6491158, at *6 (N.D. Cal. Dec. 10, 2013) (finding that a reasonable consumer could plausibly interpret a claim that a product is "natural" to mean that it has all natural ingredients and holding that defendants’ alternate interpretation that "natural" merely means the product has at least one natural ingredient did not warrant dismissal at the pleadings stage).

Here, the prominent use of the word "health" and the homophonic connection between "ade" and "aid" make it plausible that reasonable consumers would construe "Health-Ade" to mean healthy. The plaintiffs also point out the use of a cross on some of the subject products.¹³ The cross (or plus sign), which evokes the Red Cross symbol, also militates in favor of...