Sharpe v. Puritan's Pride, Inc.

466 F.Supp.3d 1066

Darcey L. SHARPE, et al., Plaintiffs,

v.PURITAN'S PRIDE, INC., et al., Defendants.

Case No. 3:16-cv-06717-JD

United States District Court, N.D. California.

Signed June 12, 2020

Curtis Brooks Cutter, John R. Parker, Jr., Cutter Law, P.C., Sacramento, CA, Tina Mehr, Vision Legal, Inc., Long Beach, CA, Adam Tamburelli, Marlin and Saltzman, LLP, Agoura Hills, CA, for Plaintiffs Darcey L. Sharpe, Mary Ludolph-Aliaga, Jay D. Werner, Eva Krueger.

Adam Tamburelli, Stanley Donald Saltzman, Marlin and Saltzman, LLP, Agoura Hills, CA, for Plaintiff Diane Cabrera.

Tina Mehr, Vision Legal, Inc., Long Beach, CA, for Plaintiff Penelope Mueller.

James Frederic Speyer, Eskandar Alex Beroukhim, Ryan W. Light, Arnold & Porter Kaye Scholer LLP, Los Angeles, CA, for Defendants.

ORDER RE PARTIAL SUMMARY JUDGMENT

Re: Dkt. No. 136

JAMES DONATO, United States District Judge

This putative consumer class action challenges defendant Puritan's Pride's use of "buy one/get one free" ("BOGO") promotionals to sell vitamins and health supplements. The discounts were presented as available for a limited time only, but plaintiffs allege that the pricing was permanent and that "there has been no reasonably substantial period of time" when Puritan's Pride sold products at anything other than purportedly exceptional prices. Dkt. No. 88 ¶ 4. Plaintiffs allege that they bought defendants’ products in reliance on the BOGO promotionals. Id. ¶ 16. The operative first amended consolidated complaint ("FACC") states claims for deceptive marketing practices under the California Unfair Competition Law ("UCL"), False Advertising Law ("FAL"), and Consumers Legal Remedies Act ("CLRA"). Dkt. No. 88. The Court dismissed causes of action under the New York General Business Law, and for unjust enrichment. Dkt. No. 112.

Defendants seek partial summary judgment barring plaintiffs’ claims for restitution and damages under the California consumer statutes. Dkt. No. 136. The motion does not challenge the merits of the deceptive practices claims, or contest the availability of injunctive relief should plaintiffs prevail. Defendants argue only that the measure of restitution in this case is limited as a matter of law to the difference between the prices plaintiffs paid under the BOGO promotionals and the value they received. They say plaintiffs’ proposed "expected discount" method is not based on this differential, and so restitution is foreclosed as a remedy. Defendants contend that actual damages under the CLRA are barred for similar reasons.

The Court heard oral argument on the partial summary judgment motion. Dkt. No. 168. Because the parties are familiar with the facts, they will not be repeated here. Substantial background was provided in the Court's orders on defendants’ motion to dismiss, Dkt. No. 112, and plaintiffs’ motion to remand, Dkt. No. 34.

DISCUSSION

I. SUMMARY JUDGMENT STANDARDS

Parties "may move for summary judgment, identifying each claim or defense -- or the part of each claim or defense -- on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court may dispose of less than the entire case and even just portions of a claim or defense. Smith v. Cal. Dep't of Highway Patrol , 75 F. Supp. 3d 1173, 1179 (N.D. Cal. 2014). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material if it could affect the outcome of the suit under the governing law. Id. To determine whether a genuine dispute as to any material fact exists, a court must view the evidence in the light most favorable to the non-moving party, and "all justifiable inferences are to be drawn" in that party's favor. Id. at 255, 106 S.Ct. 2505.

"The Court is sitting in diversity jurisdiction and is guided principally by decisions of the California Supreme Court." McDonald v. Kiloo ApS , 385 F. Supp. 3d 1022, 1031 (N.D. Cal. 2019). If there is no pertinent decision, "a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance." Nelson v. City of Irvine , 143 F.3d 1196, 1206 (9th Cir. 1998) (citation omitted). Where "there is no convincing evidence that the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state's intermediate appellate courts." Perez v. Mortg. Elec. Registration Sys., Inc. , 959 F.3d 334, 338 (9th Cir. 2020) (citations omitted).

II. REMEDIES UNDER THE CALIFORNIA CONSUMER STATUTES

The expansive scope of the California consumer statutes is well established. The California Legislature used "sweeping language" for the purpose of allowing the courts "to deal with the innumerable ‘new schemes which the fertility of man's invention would contrive.’ " Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co. , 20 Cal. 4th 163, 181, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) (citation omitted); see also Kwikset Corp. v. Superior Court , 51 Cal. 4th 310, 320, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011). The statutes are a type of market regulation and are "intended to preserve fair competition and protect consumers from market distortions." Kwikset , 51 Cal. 4th at 331, 120 Cal.Rptr.3d 741, 246 P.3d 877 (citing Kasky v. Nike, Inc. , 27 Cal. 4th 939, 949, 119 Cal.Rptr.2d 296, 45 P.3d 243 (2002) ). Deceptive sales practices harm not only consumers who have been duped into making purchases, but also competing businesses that do not engage in misrepresentations or "dispense with accuracy in favor of deceit." Id.

Actions under the UCL and FAL are actions in equity.

Barquis v. Merchants Collection Ass'n , 7 Cal. 3d 94, 112, 101 Cal.Rptr. 745, 496 P.2d 817 (1972). Damages such as those in contract or tort cases are not available, and the remedies "are generally limited to injunctive relief and restitution." Korea Supply Co. v. Lockheed Martin Corp. , 29 Cal. 4th 1134, 1144, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003) (citation omitted); see also Zhang v. Superior Court , 57 Cal. 4th 364, 371, 159 Cal.Rptr.3d 672, 304 P.3d 163 (2013). The CLRA provides for restitution as a remedy, and also for legal damages in the form of "actual damages." Cal. Civ. Code § 1780(a)(1), (3).

The California Supreme Court has concluded that "[i]njunctions are ‘the primary form of relief available under the UCL to protect consumers from unfair business practices.’ " Kwikset , 51 Cal. 4th at 337, 120 Cal.Rptr.3d 741, 246 P.3d 877 (citation omitted). Even so, a conduct remedy "is only a partial remedy since it does not correct the consequences of past conduct," namely the losses sustained by consumers misled by deceptive conduct before it is enjoined. Fletcher v. Sec. Pac. Nat'l Bank, 23 Cal. 3d 442, 451, 153 Cal.Rptr. 28, 591 P.2d 51 (1979) (citation omitted).

Consequently, although restitution is "ancillary" to an injunction, id. at 454, 153 Cal.Rptr. 28, 591 P.2d 51 (citation omitted), it plays an important role in correcting the harm inflicted by violations. The Court "may make such orders or judgments ... as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." Cal. Bus. & Prof. Code § 17203 (UCL) ; id. § 17535 (FAL); see also Zhang , 57 Cal. 4th at 371, 159 Cal.Rptr.3d 672, 304 P.3d 163. California courts have interpreted restitution in the UCL, FAL, and CLRA as providing the same relief under the same standards. See Colgan v. Leatherman Tool Grp., Inc. , 135 Cal. App. 4th 663, 694, 38 Cal.Rptr.3d 36 (2006). Consequently, the discussion of restitution here applies equally to all of plaintiffs’ claims in the FACC.

The discretion to award restitution is bounded by two principles. On one side, equity counsels that "wrongdoers not retain the benefits of their misconduct." Fletcher , 23 Cal. 3d at 452, 153 Cal.Rptr. 28, 591 P.2d 51. "To permit the [retention of even] a portion of the illicit profits, would impair the full impact of the deterrent force that is essential if adequate enforcement [of the law] is to be achieved." Id. at 451, 153 Cal.Rptr. 28, 591 P.2d 51 (alteration in original) (citation omitted); see also In re Tobacco Cases II , 240 Cal. App. 4th 779, 796, 192 Cal.Rptr.3d 881 (2015). On the other side, a party seeking restitution must generally return any benefit it has received to avoid a windfall that might overcompensate a victim of unfair market practices. In re Tobacco Cases II , 240 Cal. App. 4th at 795-96, 192 Cal.Rptr.3d 881.

Restitution "requires both that money or property have been lost by a plaintiff, on the one hand, and that it have been acquired by a defendant, on the other." Kwikset , 51 Cal. 4th at 336, 120 Cal.Rptr.3d 741, 246 P.3d 877. There is no mandatory, one-size-fits-all formula for determining what portion of an unfair exchange should be restored to an aggrieved party. That decision is entrusted to "the broad discretion of the trial court." Zhang , 57 Cal. 4th at 371, 159 Cal.Rptr.3d 672, 304 P.3d 163.

III. EXPECTED DISCOUNT AND PRICE/VALUE DIFFERENTIAL

The main dispute here is whether plaintiffs can pursue restitution under an expected discount method, or whether they are limited to an approach based on a price/value differential, as defendants contend. Before reaching that issue, two other theories of recovery that plaintiffs mention can be dismissed in short order. They propose to pursue legal damages under California Business and Professions Code § 17537, which is a provision in the FAL that makes it "unlawful for any person to use the term ‘prize’ or ‘gift’ or other similar term in any manner that would be untrue or misleading." See...