B&G Foods North America, Inc. v. Embry ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 1] B&G Foods North America, Inc., No. 2:20-cv-00526-KJM-DB 12 Plaintiff, ORDER 13 v. 14 Kim Embry and Environmental Health 15 Advocates, Inc., 16 Defendants. 17 18 Plaintiff B&G Foods North America, Inc. (B&G) brings this action under 42 U.S.C. 19 | § 1983 against defendants Kim Embry and Environmental Health Advocates, Inc. (EHA). B&G 20 | alleges Embry and EHA violated its First and Fourteenth Amendment rights by bringing private 21 | enforcement actions under California chemical disclosure rules, commonly known as 22 | “Proposition 65.” Embry and EHA contend B&G’s complaint is barred by Noerr-Pennington 23 | immunity. In response, B&G argues the defendants’ Proposition 65 citizen enforcement lawsuits 24 | are asham and entitled to no protections. B&G has not alleged sufficient facts to support that 25 | claim, so Embry and EHA’s motion is granted and the complaint is dismissed with leave to 26 | amend. 1 I. BACKGROUND 2 B&G sold and distributed devil’s cookie cakes and chocolate crème sandwich cookies in 3 California and across the country. First Am. Compl. (FAC) ¶¶ 1–2, ECF No. 45. These cookies 4 contained acrylamide, a naturally occurring byproduct of all baking. Id. ¶ 3. Since 1990, 5 California has included acrylamide on its list of “known” carcinogens under Proposition 65. 6 Id. ¶ 4. Proposition 65 imposes certain warning requirements on foods and drinks that contain 7 chemicals on this list, and it permits private litigants to enforce those warning requirements after 8 sending the alleged violator a “Notice of Violation.” See Cal. Health & Safety Code §§ 25249.6, 9 25249.7(d). Defendants Embry and EHA sent Notices of Violation to B&G about its cookies, 10 intending to require B&G to place a warning label on the cookies. Id. ¶¶ 6, 113, 116. They 11 subsequently filed lawsuits in state court to enforce Proposition 65. Id. ¶¶ 7–9. 12 B&G alleges these Proposition 65 citizen enforcement actions rest on false allegations and 13 were brought without regard to their merit. Id. ¶ 10. As a result, B&G argues these lawsuits aim 14 to “compel” it to make false statements about its cookies, and thus deprive it of its constitutional 15 rights. Id. ¶ 11. B&G seeks injunctive relief against future acrylamide lawsuits by the defendants 16 about the cookies, and a declaration that a Proposition 65 warning as applied to its cookies 17 violates the First Amendment. Id., Prayer for Relief A–B. 18 This court previously dismissed B&G’s complaint without leave to amend as barred by 19 the Noerr-Pennington doctrine. See Order, ECF No. 33. The Ninth Circuit affirmed the 20 dismissal but reversed and remanded to give B&G an opportunity to amend its complaint. See 21 B&G Foods N. Am., Inc. v. Embry, 29 F.4th 527 (9th Cir. 2022), cert. denied, ___ S. Ct. ___, 22 2022 WL 4654543 (2022). B&G then filed an amended complaint. FAC. The defendants move 23 again to dismiss because, among other reasons, they contend the complaint is still barred by the 24 Noerr-Pennington doctrine. Mot., ECF No. 52. B&G opposes the motion, arguing the 25 defendants’ lawsuits fall within the sham exception to Noerr-Pennington immunity. Opp’n at 1 6–11, ECF No. 53.1 The defendants replied. Reply, ECF No. 54. The court submitted the 2 motion without hearing oral argument. Min. Order, ECF No. 55. 3 II. LEGAL STANDARD 4 A party may move to dismiss for “failure to state a claim upon which relief can be 5 granted[.]” Fed. R. Civ. P. 12(b)(6). On a motion to dismiss, the court assumes all factual 6 allegations are true, construing “them in the light most favorable to the nonmoving party.” 7 Steinle v. City & County of San Francisco, 919 F.3d 1154, 1160 (9th Cir. 2019) (mark and 8 citation omitted). The motion may be granted if the complaint’s factual allegations do not 9 support a “cognizable legal theory.” Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 10 1122 (9th Cir. 2013) (citation omitted). To survive a motion to dismiss, a complaint need contain 11 only a “short and plain statement of the claim showing that the pleader is entitled to relief[,]” Fed. 12 R. Civ. P. 8(a)(2), not “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 13 555 (2007). But formulaic recitations of elements are inadequate. Id. “[S]ufficient factual 14 matter” must make the claim plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 15 The defendants claim B&G must satisfy a heightened pleading standard to overcome their 16 assertion of Noerr-Pennington immunity. See Mot. at 13. B&G disagrees. See Opp’n at 7 n.1. 17 Courts in this district and others within the Ninth Circuit have applied a heightened pleading 18 standard to the sham exception to the Noerr-Pennington doctrine in recent years. See, e.g., 19 Wonderful Real Est. Dev. LLC v. Laborers Int’l Union of N. Am. Loc. 220, No. 19-0416, 2020 20 WL 91998, at *7 (E.D. Cal. Jan. 8, 2020) (“[A]llegations that the sham litigation exception 21 applies are subject to a heightened pleading standard.”); Dairy, LLC v. Milk Moovement, Inc., No. 22 21-2233, 2022 WL 4387981, at *3 (E.D. Cal. Sept. 22, 2022) (same); Evanger’s Dog & Cat Food 23 Co., Inc. v. Env’t Democracy Project, No. 21-8489, 2022 WL 180205, at *4 (C.D. Cal. Jan. 20, 24 2022) (same); 3M Co. v. AIME LLC, No. 20-1096, 2021 WL 5824376, at *4 (W.D. Wash. Dec. 8, 25 2021) (same). In so doing, they have relied on Kottle v. Nw. Kidney Ctrs., 146 F.3d 1056, 1063 26 (9th Cir. 1998), and earlier Circuit decisions, not on the Federal Rules of Civil Procedure. After 1 Pages cited in this document are those applied by the CM/ECF system. 1 all, the Federal Rules impose a heightened pleading standard only for allegations of fraud and 2 mistake. Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity 3 the circumstances constituting fraud or mistake.”). 4 In Kottle, the Circuit applied a heightened pleading standard to a sham exception to the 5 Noerr-Pennington doctrine due to concerns about chilling the exercise of First Amendment rights. 6 Kottle, 146 F.3d at 1063. In turn, Kottle relied on an earlier Circuit decision holding that “where 7 a plaintiff seeks damages or injunctive relief, or both, for conduct which is prima facie protected 8 by the First Amendment, the danger that the mere pendency of the action will chill the exercise of 9 First Amendment rights requires more specific allegations than would otherwise be required.” 10 Franchise Realty Interstate Corp. v. S.F. Loc. Joint Exec. Bd. of Culinary Workers, 542 F.2d 11 1076, 1082–83 (9th Cir. 1976); see also Or. Nat. Res. Council v. Mohla, 944 F.2d 531, 536 12 (9th Cir. 1991). 13 Subsequently, the Circuit held that intervening Supreme Court precedent – most recently, 14 Swierkiewicz v. Sorema N. A., 534 U.S. 506 (2002) – “dictates that a heightened pleading 15 standard should only be applied when the Federal Rules of Civil Procedure so require.” Empress 16 LLC v. City & County of San Francisco, 419 F.3d 1052, 1056 (9th Cir. 2005) (holding district 17 court erred by applying heightened pleading standard in Noerr-Pennington case regarding 18 constitutional tort when not required by Federal Rules); see also Miller v. Gammie, 335 F.3d 889, 19 893 (9th Cir. 2003) (holding “where the reasoning or theory of our prior circuit authority is 20 clearly irreconcilable with the reasoning or theory of intervening higher authority, a three-judge 21 panel should consider itself bound by the later and controlling authority”). Because no federal 22 rule imposes a heightened pleading standard on plaintiffs who contest a defendant’s assertion of 23 Noerr-Pennington immunity, Empress would appear to resolve the matter. To be sure, Rule 24 9(b)’s heightened pleading standard applies to Noerr-Pennington immunity contests based on 25 fraud, as explained in subsection A.3 below. But for non-fraud allegations, Empress appears to 26 require this court to apply the Rule 8(a) standard. See 419 F.3d at 1057; Fed. R. Civ. P. 8(a). 27 But subsequent Circuit decisions still have relied on Kottle’s heightened pleading standard 28 due to First Amendment concerns, see Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 646–47 1 (9th Cir. 2009), and have suggested the heightened standard continues to apply in the Noerr- 2 Pennington context, see Miller v. Sawant, 18 F.4th 328, 337 n.9 (9th Cir. 2021). This court could 3 read Kearney’s result as compatible with Empress because Kearney only addressed fraud 4 allegations. 590 F.3d at 646. But Kearney’s reasoning expressly relied on First Amendment 5 concerns, not the Federal Rules. Id. at 647. As a result, this court is faced with conflicting 6 Circuit precedents, interspliced with a series of Supreme Court cases rejecting common law 7 heightened pleading standards in other contexts. See Swierkiewicz, 534 U.S. at 515 (“A 8 requirement of greater specificity for particular claims is a result that must be obtained by the 9 process of amending the Federal Rules, and not by judicial interpretation.”) (employment 10 discrimination claim); Crawford-El v. Britton, 523 U.S. 574, 595–96 (1998) (constitutional 11 claims in which improper motive is necessary element); Leatherman v. Tarrant Cty. Narcotics 12 Intel. & Coordination Unit, 507 U.S. 163, 168 (1993) (municipal liability under § 1983); see also 13 Twombly, 550 U.S. at 569–70 (distinguishing plausibility pleading from heightened pleading 14 standard rejected in Swierkiewicz). 15 This court is not in a position to resolve any dispute about which pleading standard applies 16 to the sham exception of the Noerr-Pennington doctrine. That said, in this court’s considered 17 opinion, Empress correctly read Swierkiewicz to foreclose common law heightened pleading 18 standards such as the one articulated in Franchise Realty. See also Miranda v. Clark County, 19 Nev., 319 F.3d 465, 470 (9th Cir. 2003) (“We have now held that no heightened pleading standard 20 applies unless required by the Federal Rules of Civil Procedure.”); Thomas v. Fry’s Electronics, 21 Inc., 400 F.3d 1206, 1207 (9th Cir. 2005) (same); Kong v. Shirazi-Fard, 814 F. App’x 292, 293 22 (9th Cir. 2020) (Mem.) (unpublished) (“A heightened pleading standard may be imposed only by 23 legislative directive, not by judicial interpretation.”). Moreover, given that Rule 9(b) does apply 24 to Noerr-Pennington doctrine sham exceptions based on fraud, the application of a heightened 25 pleading standard to non-fraud-based allegations runs counter to the Federal Rules. 26 Therefore, because B&G cannot meet the Rule 8(a) pleading standard here, the court 27 applies the Rule 8(a) standard in general to B&G’s complaint. It only imposes a heightened 28 pleading standard to B&G’s fraud allegations. 1 III. ANALYSIS 2 This court previously assumed without deciding that if the defendants – then Embry and 3 Glick, now Embry and EHA – “are ‘state actors’ who can be sued under 42 U.S.C. § 1983, they 4 would be entitled to the protections of the Noerr-Pennington doctrine.” Order at 4. The Ninth 5 Circuit agreed. See 29 F.4th at 536 (“Assuming Defendants are state actors, our precedent 6 compels the conclusion that their activities were protected by the Petition Clause.”). This court 7 also held that B&G could not take advantage of an exception to the Noerr-Pennington doctrine 8 for sham lawsuits. Order at 5. That exception did not apply because B&G had alleged the 9 defendants’ Proposition 65 litigation was, at least partially, successful. Id. Again, the Ninth 10 Circuit agreed. See 29 F.4th at 539 (“B&G has failed to show that any of the sham exceptions 11 could apply based on the allegations in the complaint.”). The Circuit remanded to permit B&G to 12 amend its complaint with allegations supporting its claims of a sham. See id. at 541–42. B&G 13 has now amended its complaint. See generally FAC. 14 As a result, the first and ultimately dispositive question here is whether B&G has alleged 15 sufficient facts to support a plausible inference that the defendants’ underlying litigation is a 16 sham. If the defendants’ Proposition 65 lawsuits are not a sham, then the Noerr-Pennington 17 doctrine bars B&G’s complaint. 18 A. Sham Exception 19 “Under the Noerr–Pennington doctrine, those who petition any department of the 20 government for redress are generally immune from statutory liability for their petitioning 21 conduct.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006). This protection arises from 22 the First Amendment’s Petition Clause, see id., and it includes litigation in a state’s courts, see 23 Kottle, 146 F.3d at 1059. The Petition Clause does not, however, shield a lawsuit if it is “a mere 24 sham[.]” E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144 (1961); 25 see Prof’l Real Est. Invs., Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 51, 56 (1993). A 26 person cannot claim the protections of the Petition Clause when a lawsuit is “not genuinely aimed 27 at procuring favorable government action,” but rather seeks a result “through improper means.” 1 City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 380 (1991) (quoting Allied Tube 2 & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500 n.4, 508 n.10 (1988)) (cleaned up). 3 The Ninth Circuit has “identified three circumstances in which the sham exception might 4 apply in the litigation context[.]” B&G Foods, 29 F.4th at 537. First, a lawsuit is a sham when it 5 is objectively baseless and brought for an unlawful purpose. See Sosa, 437 F.3d at 938. Second, 6 a series of lawsuits can be a sham, even if some cases in the series have merit, when brought 7 “pursuant to a policy of starting legal proceedings without regard to the merits and for an 8 unlawful purpose[.]” B&G Foods, 29 F.4th at 537 (quoting Sosa, 437 F.3d at 938). Third, 9 litigation predicated on “intentional misrepresentations to the court” is a sham if that “knowing 10 fraud . . . deprive[s] the litigation of its legitimacy.” Kottle, 146 F.3d at 1060 (quoting Liberty 11 Lake Invs., Inc. v. Magnuson, 12 F.3d 155, 158 (9th Cir. 1993)). 12 The parties present these circumstances as rigid and independent categories. See FAC 13 ¶¶ 127–28; Mot. at 12; Opp’n at 7. They are not. “[T]he Noerr-Pennington doctrine and its sham 14 exception arose in the antitrust context, and so the sham-exception principles discuss whether 15 petitioning is done for an anticompetitive purpose or to interfere with a competitor’s business 16 relationships.” B&G Foods, 29 F.4th at 536. These principles can be “inapt” outside the antitrust 17 context, so courts “do not treat them as rigid requirements” in cases like this one. Id. In Manistee 18 Town Center. v. City of Glendale, for example, the Circuit focused on whether the alleged harm 19 was a “direct injury from the process, rather than the outcome[.]” 227 F.3d 1090, 1095 (9th Cir. 20 2000). The plaintiff alleged the defendants had “orchestrated a publicity and lobbying campaign 21 to convince the County not to lease space” owned by the plaintiff. Id. Because the harm of 22 failure to lease space was caused by an outcome of the process reflected in a county decision, 23 rather than the process itself consisting of the publicity and lobbying, the court held it was not a 24 sham. Id. 25 It is easy to lose sight of what the three circumstances are: “three ways in which litigation 26 might be a sham[.]” Kottle, 146 F.3d at 1061. They might overlap, and they might not. For 27 example, it is not obvious that one case could be a sham in all three ways, as B&G assumes. See 28 Opp’n at 7. The first and second circumstances are likely to overlap only rarely. They might 1 even be mutually exclusive. In the first, a party receives no First Amendment protections for a 2 single lawsuit if the case is objectively baseless and seeks to advance an improper purpose. 3 Kottle, 146 F.3d at 1060. In the second, the question is not whether any particular case has merit. 4 Id. In that circumstance, there is not just one or a few cases to investigate, but rather a “series of 5 lawsuits,” and the policy driving them. See id. Nor is it clear whether the categories or 6 circumstances are always independent. Consider the third. If a person makes intentional 7 misrepresentations to the court that deprive the litigation of its legitimacy, the case is a sham and 8 receives no protection. See Sosa, 437 F.3d at 938. In many cases, the misrepresentation might 9 both deprive the litigation of legitimacy and render it objectively baseless. Cf. Liberty Lake, 10 12 F.3d at 159 (citing, by way of example, an attempt to enforce a patent obtained by fraud). 11 These cases would fall in both the third category and the first. 12 Because the parties have put forward arguments about each of the three sham litigation 13 circumstances, the court will consider all three in turn. Recognizing the complicated relationship 14 between and among the circumstances, as well as the difficulty of exhaustively cataloging sham 15 litigation, the court will analyze defendants’ Proposition 65 citizen enforcement actions using the 16 more general principles the Circuit employed in Manistee. 17 1. Objectively Baseless Lawsuit 18 In the first type of sham case, a plaintiff must show the lawsuit is objectively baseless and 19 was brought for unlawful reasons. A lawsuit is objectively baseless when “no reasonable litigant 20 could realistically expect success on the merits.” B&G Foods, 29 F.4th at 538 (quoting Prof’l 21 Real Est. Invs., 508 U.S. at 60). In other words, if “the suit is reasonably calculated to elicit a 22 favorable outcome, the suit is immunized under Noerr . . . .” Id. 23 Here, B&G points to four factual allegations that, in its view, show the underlying 24 Proposition 65 litigation is objectively baseless. First, “there is no evidence that acrylamide in 25 food causes cancer.” FAC ¶ 129; see Opp’n at 14. Second, the cookies “are the type of classic 26 snack foods which consumers only enjoy at infrequent snacking intervals[,]” so its cookies fall 27 within a statutory safe harbor for foods that contain only a very small amount of acrylamide. 28 FAC ¶ 130; see Opp’n at 14. Third, acrylamide is only present as “the natural consequence of the 1 cooking process,” and thus falls within another statutory exemption from liability. FAC ¶ 131; 2 see Opp’n at 14. And, lastly, the defendants conducted no reasonable pre-suit investigation to 3 determine if B&G violated Proposition 65. FAC ¶¶ 132–33; see Opp’n at 14. Even in the light 4 most favorable to B&G, these allegations do not plausibly show plaintiffs’ Proposition 65 5 litigation was objectively baseless. 6 B&G’s first three allegations, if proven, would support affirmative defenses to a 7 Proposition 65 citizen enforcement action. But on their own, they do not demonstrate an 8 enforcement action had no realistic chance of success. After all, “[i]t is undisputed that B&G’s 9 [cookies] contain some amount of acrylamide, that acrylamide is on the list of chemicals ‘known 10 to the state to cause cancer,’ and that B&G does not provide a warning.” B&G Foods, 11 29 F.4th at 538. Proposition 65 enforcers do not need to independently determine whether a listed 12 chemical causes cancer, and they could prevail in a lawsuit if the chemical is listed. See generally 13 Cal. Health & Safety Code § 25249.7. These undisputed facts could offer an objective basis for 14 the action. 15 Moreover, B&G admits that “[n]o one who makes or sells baked goods could ever be sure 16 whether the [cooking] exemption applies to their products . . . [because t]he language of the 17 cooking exemption is also vague on its face and subject to a multitude of differing 18 interpretations.” FAC ¶¶ 73–74. If B&G itself could not be sure whether the cooking exemption 19 applied to its cookies, then the exemption’s application cannot be so obvious that lawsuits against 20 B&G are objectively baseless. Similarly, B&G admits that even with “a full range of experts and 21 consumption scientists for every food product . . . , the State and enforcers disagree on how 22 average consumption of acrylamide is calculated . . . [in part] because the determination of the 23 applicable [No Significant Risk Levels] and related safe harbor is very burdensome[.]” FAC 24 ¶¶ 81–83. If the applicable safe harbor limit is so difficult to determine – and all the more so in 25 this case, given that people have widely varying snack habits – then it does not render the 26 lawsuits objectively baseless. The court recognizes that B&G made the concessions reviewed 27 above in explaining how expensive Proposition 65 lawsuits are to defend, not in discussing 28 whether the underlying litigation is a sham. But relying on them now is fair; they demonstrate 1 why the affirmative defenses do not make the defendants’ lawsuits baseless. Cf. Burke v. Soto, 2 No. 16-1311, 2017 WL 4811832, at *4 (E.D. Cal. Oct. 24, 2017) (finding plaintiff’s “own 3 allegations undermine his claim”). 4 In addition, B&G does not offer facts to support its conclusion that the defendants 5 conducted no meaningful pre-suit investigation. B&G points to a list of admissions the 6 defendants made in the underlying litigation. See FAC ¶¶ 134–61. Among these admissions is 7 that EHA had not obtained a written statement, interviewed any person about its claims, or 8 obtained a report about its claims. Id. ¶ 161. These allegations do not make it plausible the 9 defendants did not conduct a meaningful pre-suit investigation. California law requires private 10 enforcers to attest that they conducted a pre-suit investigation. Under the applicable statute, a 11 prospective litigant must certify they “consulted with one or more persons with relevant and 12 appropriate experience or expertise who has reviewed facts, studies, or other data regarding the 13 exposure to the listed chemical that is the subject of the action . . . [and] believes there is a 14 reasonable and meritorious case for the private action.” Cal. Health & Safety Code 15 § 25249.7(d)(1). Nothing in the complaint suggests the defendants did not comply with this 16 requirement. If the defendants filed a certificate of merit as required by law, then B&G’s 17 allegations about additional steps not taken do not plausibly convey that no meaningful pre-suit 18 investigation was conducted. As a result, B&G has not pled sufficient facts to permit a plausible 19 inference that the defendants conducted no meaningful investigation. 20 Lastly, B&G alleges the statutory scheme makes it very easy for private enforcers to bring 21 Proposition 65 claims and to extract extortionary settlements. See FAC ¶¶ 85–89. These 22 allegations attack Proposition 65, not the defendants’ litigation. If anything, B&G’s allegations 23 about low standards and advantageous rules undermine its claim that the defendants’ lawsuits are 24 objectively meritless. 25 2. Series of Lawsuits 26 A series of meritless lawsuits can also be a sham. “In such cases, the question is not 27 whether any one suit has merit—some may turn out to, just as a matter of chance—but whether 28 they are brought pursuant to a policy of starting legal proceedings without regard to the merits 1 and for the purpose of injuring a market rival.” B&G Foods, 29 F.4th at 539 (internal citation and 2 marks omitted). To evaluate whether this circumstance applies, courts ask: “Were the legal 3 filings made, not out of a genuine interest in redressing grievances, but as part of a pattern or 4 practice of successive filings undertaken essentially for purposes of harassment?” USS-POSCO 5 Indus. v. Contra Costa Cty. Bldg. & Constr. Trades Council, AFLO-CIO, 31 F.3d 800, 811 6 (9th Cir. 1994). In USS-POSCO, fifteen out of twenty-nine lawsuits were successful, so there 7 was no sham. Id. Similarly, in this case, the Circuit held that because the defendants had won 8 $1.7 million in penalties and fines from their Proposition 65 litigation, the only reasonable 9 inference is they had been “largely successful” and thus were not pursuing a policy of disregard 10 for the merits. B&G Foods, 29 F.4th at 539. 11 There is more to a sham than quantity and scale. If lawsuits are brought for an unlawful 12 purpose, such as delaying the entry of generic drugs into the market, then those lawsuits are a 13 sham. See In re Xyrem Antitrust Litig., 555 F. Supp. 3d 829, 881 (N.D. Cal. 2021). Even a mere 14 four prior lawsuits could qualify as a sham, so long as they were initiated “for the sole purpose of 15 delaying competing real estate projects.” Relevant Grp., LLC v. Nourmand, No. 19-5019, 16 2020 WL 2523115, at *5 (C.D. Cal. May 18, 2020). In sum, district courts often focus on the 17 purpose of the prior lawsuits – whether lawsuits were filed for unlawful aims – to determine 18 whether the instant case is a sham. 19 Here, B&G argues the defendants “routinely” file many notices of Proposition 65 20 violations and subsequent lawsuits without regard to merit “to extort money from businesses.” 21 Opp’n at 16. B&G alleges the defendants’ unsuccessful track record demonstrates their sole 22 purpose is to “acquire quick nuisance settlements.” FAC ¶ 178. Defendant Embry has filed at 23 least 260 Notices of Violation, pursued a lawsuit in 131, and settled 25 cases.2 FAC ¶¶ 166–68. 2 B&G’s complaint does not say how many of these cases, if any, were filed against B&G. If defendants Embry and EHA have never before filed a Proposition 65 action against B&G—a reasonable interpretation of its ambiguous allegations—then B&G could not prove the defendants are pursuing a series of lawsuits against it. B&G would need to show why lawsuits against others demonstrate the defendants sued B&G for improper reasons. See Evans Hotels, LLC v. Unite Here Loc. 30, 433 F. Supp. 3d 1130, 1148 (S.D. Cal. 2020) (“Where a plaintiff alleges a series of 1 Defendant EHA has filed over 800 Notices of Violation, pursued a lawsuit in 240, and settled 160 2 cases.3 FAC ¶¶ 174–76. It is unclear whether the appropriate comparison is settlements to 3 Notices of Violation or settlements to lawsuits filed. The defendants argue that “litigation does 4 not ensue from every such notice” because sometimes “legitimate reasons,” such as the volume of 5 products sold in California, counsel against filing suit. Mot. at 23; see Reply at 10. If the 6 appropriate comparison is lawsuits filed to cases settled, then defendant Embry is successful 7 19 percent of the time and defendant EHA is successful 67 percent of the time. If the appropriate 8 comparison is between Notices of Violation and successful settlements, then defendant Embry is 9 successful only about 10 percent of the time, and defendant EHA is successfully only 20 percent 10 of the time. 11 Regardless of which metric should serve as the denominator, the key question is whether 12 the success rate is so low that it is plausible to infer a sham operation. In this case, it is not. Even 13 with the low-end success rates of 25 out of 260 and 160 out of 800, such an inference is not 14 plausible. These rates do not plausibly show the litigation is a sham. See P.R. Telephone Co., 15 Inc. v. San Juan Cable Co. LLC, 196 F. Supp. 3d 248, 338 (D.P.R. 2016) (finding not plausible 16 inference of a sham from “a 4 for 13 record” because “[when] more than an insignificant number 17 of filings have objective merit, a defendant likely did not have a policy of filing willy-nilly 18 without regard to success”) (quotation marks and citation omitted). More facts would be needed 19 to tip the scale from possible to plausible. 20 Nor do the defendants’ profits permit the court to infer they are operating a sham. B&G 21 admits the defendants “have extracted millions of dollars” through the lawsuits but argues these that they demonstrate that the defendant was improperly motivated in filing its lawsuit against the plaintiff.’”) (quoting Mohla, 944 F.2d at). 3 B&G alleges private enforcers have filed “nearly 600 60-day notices” for Proposition 65 warnings regarding acrylamide, 500 of which have concerned food products. FAC ¶¶ 105–06. This allegation raises a question that B&G does not answer. If all private enforcers have filed only 500 notices related to acrylamide, and if Embry and EHA have filed more than 800, then this statistic impliedly reports notices, and perhaps lawsuits and settlements, about other substances. In other words, these numbers might not reflect the defendants’ track record for bringing acrylamide lawsuits under Proposition 65. If they do not, then B&G’s allegations might not permit any broader inferences about the merits of the defendants’ acrylamide litigation. 1 numbers indicate a successful “shake-down.” FAC ¶¶ 28, 24; see Opp’n at 10. These numbers 2 could mean either (1) the lawsuits have some merit, or (2) the shakedown is a success. B&G’s 3 complaint contains no factual allegations to show the second is a plausible explanation. The 4 closest B&G comes is its allegation that the defendants “trade away benefits to the public and to 5 the State in exchange for larger settlement payments.” FAC ¶ 179. However, even this allegation 6 is just a conclusion: there are no specific factual allegations about what benefits they traded away, 7 when they traded them away, or how much additional settlement they received in return. In the 8 absence of factual allegations regarding the supposed “shakedown,” B&G’s complaint does not 9 permit a plausible inference that the defendants’ litigation is a shakedown, rather than a series of 10 successful Proposition 65 citizen enforcement actions. 11 Instead of putting forth factual allegations, B&G makes a variety of conclusory 12 statements. For example, it alleges the defendants “are not interested in the merits of their cases” 13 because they file large numbers of cases “with the hope that some accused parties will pay them 14 to go away.” FAC ¶ 164. In the absence of specific allegations about the defendants’ motives or 15 about why these cases lack merit, and given B&G’s allegations about the large number of 16 settlements (156) worth millions of dollars, it is not plausible to infer the defendants’ litigation is 17 a sham. 18 3. Intentional Misrepresentations 19 In the third type of sham litigation recognized in previous Ninth Circuit decisions, the filer 20 makes intentional misrepresentations. “[I]f the allegedly unlawful conduct consists of making 21 intentional misrepresentations to the court, litigation can be deemed a sham if a party’s knowing 22 fraud upon, or its intentional misrepresentations to, the court deprive the litigation of its 23 legitimacy.” B&G Foods, 29 F.4th at 537–38 (quoting Sosa, 437 F.3d at 938). Here, B&G 24 argues the defendants’ claims in its underlying litigation are intentional misrepresentations 25 because (1) acrylamide does not cause cancer, and (2) B&G’s cookies do not require Proposition 26 65 warning labels. See FAC ¶¶ 182–85. There are two interrelated flaws in this argument. 27 First, B&G must allege facts that permit a plausible inference of intentional 28 misrepresentation. In other words, B&G must plead facts that establish the defendants knew the 1 cookies do not require Proposition 65 warning labels. Otherwise, a plaintiff could plead its way 2 around the Noerr-Pennington doctrine just by reiterating disputed facts. As discussed with the 3 first sham exception, the complaint’s allegations do not permit that inference. 4 Second, a heightened pleading standard applies to the third sham exception under 5 Rule 9(b). See Fed. R. Civ. P. 9(b); Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 646–47 6 (9th Cir. 2009) (applying heightened pleading standard4 in the context of allegations of 7 “intentional misrepresentations to the court, and fraud upon the court through the suppression of 8 evidence”). Because the third sham exception requires a showing of fraud, B&G “must state with 9 particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). Here, B&G alleges the 10 defendants “know[] full well that there is no evidence to support” the allegation its cookies cause 11 cancer and it “is not true” the defendants completed an investigation into the facts of their claims. 12 FAC ¶¶ 183–84. Although B&G needs only to allege generally the defendants’ knowledge, see 13 Fed. R. Civ. P. 9(b), it must state with particularity the circumstances constituting fraud: what 14 was the false statement; when was it made; to whom; and so on. See Kearney, 590 F.3d at 647 15 (explaining “the required specifics would include such things as exactly what representations 16 defendant made, or to whom; with whom defendant conspired; and what exactly its improper 17 and/or unlawful methods of advocacy were”) (internal quotation marks and brackets omitted). 18 B&G’s complaint contains no such allegations. 19 4. Noerr-Pennington Principles: Injured by Process 20 In Manistee, the Ninth Circuit held that Noerr-Pennington immunity extends to 21 government officials who petition other government entities because such petitions are “vital to 22 the functioning of a modern representative democracy[.]” 227 F.3d at 1093. The core of this 23 protection ensures government officials can petition even for outcomes that some do not desire. 24 In other words, the Noerr-Pennington doctrine immunizes government officials’ legitimate, if 4 As discussed in the legal standard section, Kearney relies on Kottle and Franchise Realty’s First Amendment rationale for the heightened pleading standard. However, putting that rationale aside, Kearney’s application of the heightened pleading standard is notable because it is only discussed regarding the third sham exception, i.e., allegations of fraud. This application is thus justified under Rule 9(b). 1 unpopular, petitioning. But this protection does not extend to abuses of the process—to shams. 2 As a result, petitioning is not covered by Noerr-Pennington immunity when the alleged harm is a 3 “direct injury from the process, rather than the outcome.” Id. at 1095. 4 These principles fit cases of legal “petitioning” just as well. Litigants should not be 5 punished for pursuing unpopular but legitimate lawsuits. When a lawsuit seeks a valid outcome, 6 its filing is protected by the Noerr-Pennington doctrine. This protection should be withdrawn, 7 however, if the litigant has used the process itself to directly inflict harm. 8 In this case, B&G seeks an injunction against further lawsuits about the acrylamide in its 9 cookies, a declaration that the Proposition 65 warning requirement is unconstitutional as applied 10 to its cookies, damages, and attorneys’ fees. FAC, Prayer for Relief A–D. This requested relief 11 goes to the merits of the defendants’ litigation: whether the cookies are subject to the Proposition 12 65 regulatory scheme. 13 If the cookies are subject to Proposition 65, then future lawsuits would be warranted, and 14 a warning label could be applied. If they are not, then B&G’s requested relief is largely 15 redundant because the resolution of the underlying litigation would establish that Proposition 65 16 does not apply to B&G’s cookies. The requested relief in the instant case therefore mirrors the 17 outcome of the defendants’ litigation. B&G does not target the process. B&G seeks to avoid 18 harm that could occur only if the defendants’ Proposition 65 litigation were successful. Such 19 harm is not a “direct injury from the process” of litigation. Manistee, 227 F.3d at 1095. 20 In sum, considering the defendants’ litigation in light of the Noerr-Pennington principles 21 explained in Manistee, B&G has not alleged facts to support a plausible inference that the 22 defendants’ conduct is a sham. Instead, the defendants’ Proposition 65 litigation appears to be the 23 type of legitimate lawsuit that the Petition Clause protects, even if the litigation is unpopular in 24 certain quarters. 25 B. Leave to Amend 26 If a motion to dismiss is granted, “[the] district court should grant leave to amend even if 27 no request to amend the pleading was made[.]” Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 28 2016) (citation omitted). However, leave to amend should be denied when the plaintiff could not 1 amend the complaint to state a viable claim without contradicting the complaint’s original 2 allegations. See Garmon v. County of Los Angeles, 828 F.3d 837, 845–46 (9th Cir. 2016). The 3 key question in this case is futility. See B&G Foods, 29 F.4th at 541. Here, amendment might 4 not be futile. B&G could amend to add factual allegations that make it plausible the defendants’ 5 Proposition 65 litigation is a sham. For example, it could allege the defendants did not file the 6 certificate of merit required by Proposition 65, or that the certificate filed contains falsehoods. 7 The court cautions, however, that any amendments must comply with Rule 11, including the 8 requirement that factual allegations “have evidentiary support or, if specifically so identified, will 9 likely have evidentiary support after a reasonable opportunity for further investigation or 10 discovery[.]” Fed. R. Civ. P. 11(b)(3). 11 Because B&G has already been given leave to amend, the court now grants leave to 12 amend its complaint only with respect to the sham exception to the Noerr-Pennington doctrine 13 and only to advance factual allegations to support its claim that the underlying lawsuits are a 14 sham. 15 IV. CONCLUSION 16 The court grants the defendants’ motion to dismiss with limited leave to amend, as 17 explained above. Any amended complaint must be filed within twenty-one days of this order. 18 This order resolves ECF No. 52. 19 IT IS SO ORDERED. 20 DATED: November 2, 2022.