Fahey v. Godiva Chocolatier, Inc. ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
A. KEVIN FAHEY, on behalf of hímself
ønd the General Public of the District of
Columbiø,
Plaintiff,
v Civil Action No. l9-2L28 (JDB)
GODIVA CHOCOLATIER, INC.,
Defendant.
MEMORANDUM OPINION
Plaintiff A. Kevin Fahey sued Godiva Chocolatier, Inc. in D.C. Superior Court under the
District of Columbia's Consumer Protection Procedures Act ("CPPA"), D.C. Code $$ 28-3904-
28-3913. Godiva removed the action to this Court, and Fahey now moves to remand the action
back to D.C. Superior Court. For the reasons set forth below, the Court concludes that it lacks
subject matter jurisdiction over this dispute and therefore will grant Fahey's motion and remand
the action to D.C. Superior Court.
B¡.cxcRouNu
On June 19,2019, Fahey purchased a package of five milk chocolate caramel candy bars
through Godiva's website. Am. Compl. & Demand for Jury Trial ("4m. Compl.") [ECF No. 1-1]
,1T
1S & Figs. 1-10. The candy bars were shipped to Fahey in V/ashington, D.C. See id. Figs. 1-
2. Each candy bar in the shipment bore the phrase "Belgium 1926" on its wrapper. See id. Fig.
10.
On May 25, 2019, Fahey sued Godiva in D.C. Superior Court, alleging that Godiva's
inclusion of "Belgium 1926 on its \Àrappers violated the CPPA. Mem. of Law in Supp. of Mot.
1
to Remand to Dist. of Colum. Superior Ct. ("Pl.'s Mem.") IECF No. 9-l] at 2; see also D.C. Code
$ 2S-3905(k) (2001). In essence, Fahey alleges that the use of the phrase "Belgium 1926- on the
labels for the candy bars he purchased, as well as on the labels of various other Godiva products,
constitutes'oa massive fraud on tU.S.] consumers by falsely implying the Products were made in
Belgium." Am. Compl.n37. Because Belgium maintains "an international reputation for superior
chocolate," Fahey contends, the phrase induces American consumers to pay a premium price fog
Godiva chocolate despite its being made, for the most part, in the United States. See id. nn24-37.
As made clear in his subsequent amended complaint, Fahey brought the case on behalf of
himself and "the DC general public who purchased Godiva chocolate products." Id. 11 1. For
relief, Fahey seeks "statutory or actual damages, trebled, on behalf of [himself], except that in no
case does [he] seek an amount in excess of $74,000; attorneys' fees; and an injunction against
Defendant's violations of the CPPA; and any other relief this court deems just and proper." Id. at
25-26.
On July 17,2019, Godiva removed the case to federal court under 28 U.S.C. $ 1441,
arguing that this Court has original jurisdiction based on diversity of citizenship under 28 U.S.C.
$ 1332(a). Notice of Removal IECF No. 1] at 1. According to Godiva, the parties have complete
diversity, and the amount in controversy easily exceeds the statutory requirement of $75,000
exclusive of interest and costs because, in addition to attorney's fees and statutory or actual
damages, Fahey's proposed injunctive relief will cost at least $10 million. Id. T 10.
Godiva subsequently filed a motion to dismiss, transfer, or stay the proceeding, see Def.
Godiva Chocolatier, Inc.'s Mot. to Dismiss, Transfer, or Stay [ECF No. 8] at 1, and Fahey now
moves to remand the case to D.C. Superior Court, see Mot. to Remand to Dist. of Colum. Superior
Ct. ("Remand Mot.") [ECF No. 9) at I. The Court stayed briefing on Godiva's motion to dismiss,
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transfer, or stay until it reached a decision on Fahey's motion to remand, which is now fully briefed
and ready for resolution. Order, Fahey v. Godiva Chocolatier. Inc., Civ. Action No. 18-2128
(D.D.C. Aug.8,2019).
Lncu, SrlNn¡.Ro
Federal courts are courts of limited subject matter jurisdiction. An action originally filed
.
in state court "may be removed by the defendant or the defendants, to the district court of the
United States for the district and division embracing the place where such action is pending," only
if the case falls within the federal court's original jurisdiction. 28 U.S.C. $ 1aa1(a). Federal courts
strictly construe the scope of their removal jurisdiction, and the party seeking to remain in federal
court bears the burden of establishing that federal jurisdiction exists. Pesticides v. Dr Pepper
Snapple Grp.. Inc. ,322F. Supp. 3d ll9, 121 (D.D.C. 2018) (citing Shamrock Oil & Gas Corp. v.
Sheets, 313 U.S. 100, 107-08 (1941)).
"['W]hen a defendant seeks federal-court adjudication, the defendant's amount-in-
controversy allegation should be accepted when not contested by the plaintiff or questioned by the
court." Dart Cherokee Basin Operating Co.. LLC v. Owens, 574 U.S. 81, 87 (2014). But under
28 U.S.C. $ 1aa6(c)(2xB), if the plaintiff does challenge the defendant's allegation, then the
district court is to determine by a preponderance of the evidence whether the amount in controversy
exceeds the statutory requirement. See Owens, 574 U.S. at 88. "When it appears that a district
court lacks subject matter jurisdiction over a case that has been removed from state court, the
district court must remand the case. . . resolv[ing] any ambiguities concerning the propriety of
removal in favor of remand." Zuckman v. Monster Beverage Corp., 958 F. Supp. 2d 2g3,2g7
(D.D.C. 2013) (internal quotation marks and citations omitted).
J
AN¿.r,vsrs
Federal district courts have jurisdiction in diversity cases when the amount in controversy
exceeds $75,000 and the lawsuit is between citizens of different U.S. states or between U.S.
citizens and foreign citizens or states. 28 U.S.C. $ 1332(a). Here, both parties agree that there is
complete diversity of citizenship-Fahey is a resident of Virginia, and Godiva is incorporated in
New Jersey and has its principal place of business in New York. Am. Compl. ll'1T 11-12; see also
Def. Godiva Chocolatier, Inc.'s Opp'n to Pl.'s Mot. to Remand ("Def.'s Opp'n") [ECF No. 2Il at
2. The main dispute is thus whether the amount in controversy exceeds $75,000.
Godiva argues that removal is proper because "the anticipated damages, costs, and fees" in
this case exceed $75,000. Def.'s Opp'n at 3. Godiva bases this contention on several expenses
that it contends will result from a ruling in Fahey's favor: (1) the cost of conforming to Fahey's
requested injunctive relief; (2) the actual or statutory damages; and (3) attorney's fees. Id. at 13-
19. The company submits an affidavit of Jennifer J. Smith, an executive in charge of regulatory
affairs and quality control, explaining its projection for the costs of conforming to Fahey's
proposed injunction. See generally Decl. of Jennifer J. Smith in Supp. of Godiva Chocolatier,
Inc.'s Opp'n to Pl.'s Mot. to Remand ("Smith Decl.") [ECF No. 2l-ll. The Court will consider
each expense in turn.
A. Costs of Proposed Injunctive Relief
Godiva states "that the total costs directly arising from an injunction [as sought by Fahey]
amount[] to $I million." Def.'s Opp'n at 8; see also Smith Decl. fl 17. According to Smith,
the lion's share of this expense would consist of lost sales of approximately $I million during
the six months it would take to comply fully with the injunction. Smith Decl. fl 14-15. Smith
notes that, "[i]f Godiva was compelled to modiS the content or design of its label, such a
4
modifîcation would affect all of its products nationwide." Id. fl 9. Godiva contends that it cannot
use different labels in Washington, D.C. than in the rest of the country because "third party retail
merchants cannot market the same product with two different labels," "using different labels in
different parts of the country would potentially confuse consumers," and different labels would
require different "stock keeping unit" numbers,.leading to duplicative packaging and inventory.
Id. Smith states that "Godiva would spend at least six months creating a new label that complied
with the terms of the injunction": three months for "redesign and remanufacture [of] a compliant
label followed by another three months to fully replace the inventory." Id. T 13.
The remaining costs associated with Fahey's proposed injunctive relief come from disposal
of previously mislabeled stock and the adjustment of Godiva's labeling process. Smith declares
that an injunction would 'orequire Godiva to destroy or throw away all of its unused inventory
bearing the Offending Label," valued at around 527 .3million, and all unused offending packaging,
valued at $3.4 million. Id. 1T 11. Additionally, retooling the label printer and designing new
packaging would cost about $100,000. Id. 1T 12.
Fahey challenges Godiva's total injunction cost of $I million in two ways. First, he
argues that the proper perspective for viewing the costs of an injunction-as well as the other
expenses that factor into the amount in controversy-is not the total cost to the defendant, but the
cost divided by the number of plaintiffs who benefit. See Reply to Def. Chocolatier's Inc.'s Opp'n
to Pl.'s Mot to Remand ("P1.'s Reply") [ECF No. 22] at4-5; Pl.'s Mem. at 4-5. Second, Fahey
insists that there is no need for the company to destroy its product and forgo six months' worth of
o'no
sales, because there is public interest in forcing the defendant to destroy existing inventory."
Pl.'s Reply at 6. He also notes that any requested injunction in this case "would be accompanied
by a proposal that [Godiva] be able to sell its existing inventory," perhaps in combination with a
5
"national announcement . . . to the public that the old inventory was defectively labeled and in fact
made in the United States." Id. at 6-8.
The Court largely agrees with Fahey on both points. "When calculating the amount in
controversy under 28 U.S.C. $ 1332, it is well-established that'the separate and distinct claims of
two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount
requirement."' Breathe DC v. SantaFeNat. Tobacco Co. ,232F.Supp. 3d163,167 (D.D.C .2017)
(quoting Snyder v. Harris, 394 U.S. 332,335 (1969)). This so-called non-aggregation principle
"applies when separate and distinct claims are asserted on behalf of a number of individuals,
regardless of whether an action involves a simple joinder of multiple plaintiffs, or a representative
action." v. AOL 545 F. Supp. 2d96,103 (D.D.C. 2008) (internal quotationmarks
and brackets omitted). Courts in this Circuit have consistently applied this principle when a
plaintiff seeks injunctive relief under the CPPA on behalf of the public. See. e.g., Animal Legal
Defense Fund v. Hormel Foods Corp.,249F. Stpp.3d 53,60 (D.D.C.2017) ("[T]he cost of
compliance that a court should consider when determining the amount in controversy is the total
amount divided among the beneficiaries of the injunction."); Breathe DC,232F. Supp. 3datl70-
72 (calculating the amount in controversy by dividing the total costs "reasonably attributed to the
injunction . . . by the number of beneficiaries"). Following the weight of these cases, the Court
adopts the non-aggregation principle in evaluating whether Godiva has demonstrated an amount
in controversy exceeding $75,000.
The question for the Court thus becomes twofold: V/hat is the total cost of the injunction
to Godiva, and how many consumers will benefit from such an injunction? Despite Godiva's
oodoubts"
representations through Smith, the Court has significant about both the presented costs
of an injunction and the number of beneficiaries of such an injunction and, therefore, "the existence
6
of subject matter jurisdiction." Cf. Pesticides, 322 F. Supp. 3d at I2l.
In terms of costs, the Court finds Godiva's proposed costs speculative and unreasonable.
First, although Smith describes the $J million loss in sales as "tied directly to the costs of
Godiva's compliance with any injunction," Smith Decl. fl 15, Godiva fails to satisfy its burden in
establishing the reasonableness of that figure. Over the past three years, Godiva has made $I
million, $I million, and $f million, respectively, driring the six months from october
to March. Id. Smith posits that, oobased on the sales that Godiva's current business initiatives [are]
expected to generate and fthis] sales information for the past three calendar years," the expected
lost sales ate $I million. Id. But sales of $! million again,let alone $f million, are
not assured, pafticularly if the six months excluded such holidays as Christmas and Valentine's
Day that are captured by Godiva's chosen period. Indeed, anything more than the $I million
is "too speculative to serve as the basis for determining the amount in controversy." Zuckman,
958 F. Supp.2dat302.
Second, it is not clear that Godiva would have to cease all its sales in light of an injunction.
Godiva argues that, if it "\'as compelled to modify the content or design of its label, such a
modification would affect all of its products nationwide." Smith Decl. fl 9 (emphasis added). But,
as Mr. Fahey notes, "the product at issue is not inherently defective, but simply requir[es]
additional disclosure." Pl.'s Reply at 6. Relief in fraudulent advertisement cases does not always
requirerecallorcessationofproduction.See.e.q.,,971F.2d
6, 17 (7th Cir. 1992) (highlighting "corrective advertisements and brochures" as one possible
remedy for a false advertising and trade dress infringement violation); Thomas Nelson. Inc. v.
Cherish Books. Ltd., 595 F. Supp. 989,992 (S.D.N.Y. 1984) (ordering that the losing party in a
trademark lawsuit pay for a corrective advertisement). It also remains to be seen why Godiva
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would have to cease sales nationwide and not just in the District, the area of the proposed
injunction. While Godiva might still have to wait six months to cycle through its inventory and
have uniform, CPPA-compliant products, see Smith Decl. flfl |3-I6,Godiva does not explain why
its sales could not continue across the rest of the country, particularly through its brick-and-mortar
stores and third-party vendors in other states.
Third, it may be that neither a temporary cessation in sales nor the destruction of current
inventory is necessary, because Fahey suggests in his brief that "any injunction would be
accompanied by a proposal that [Godiva] be able to sell its existing inventory.'? Pl.'s Reply at 8.
Such a carve-out in the injunition could avoid a significant percentage of the $I million in
lost sales as well as the losses of $27 .3 million in unused inventory and $3.4 million in unused
packaging. See Smith Decl. flfl 11, 15.
The Court also has considerable doubts about the number of consumers in Washington,
D.C., who would be benefitted by such an injunction. Smith reports that Godiva sold its products
to "approximately I customers with addresses within the District of Columbia." Id. fl 8. That
figure rèpresents "I unique individual customers" who purchased products through Godiva's
website and"28 unique third-party merchants located within the District of Columbia." Id. Under
the CPPA, however, "consumer" is defined as "a person who, other than for purposes of resale,
does or would purchase. . . consumer goods or services . . . or does or would otherwise provide
the economic demand for a trade practice." D.C. Code $ 28-3901(aX2XA). Godiva's I online
customers fit this descliption, but the twenty-eight third-party merchants do not because they buy
chocolate from Godiva "for purposes of resale." Id. These merchants purchased "approximately
10,811 units," Smith Decl. fl8, and although there is potential for repeat brick-and-mortar
customers, as well as overlap between online and in-person customers, it is implausible that all
8
10,81 I units went to just twenty-eight unique consumers.
Taken together, these questions about the cost of Fahey's proposed injunction and the
number of beneficiaries thereof raise serious doubts about whether the amount in controversy
exceeds $75,000. Under Godiva's approach, $I million, when divided among f total
consumers, yields a per-consumer cost of about $ 105,894.07. But if just I of the 10,81 I
units sold through third-party beneficiaries went to unique consumers, then the cost of the
injunction per benefitted consumer drops to under $58,000.1 Likewise, even if Fahey's statement
that Godiva "be able to sell its existing inventory" were limited to just the current three-month
stock, see id. fl 10, and sales still felt by half (i.e., $I million), the cost of the injunction per
benefitted consumer would drop to under $60,000.
Taking into account both the lower costs and the greater number of benefitting consumers
that the Court deems more appropriate than the figures in Smith's declaration, Godiva has failed
to prove the requisite amount in controversy by a preponderance of the evidence. And given that
'oany doubts about the existence of subject matter jurisdiction will be resolved in favor of remand,"
Hood v. F. Hoffman-La Roche. Ltd. , 639 F. Supp. 2d 25, 28 (D.D.C. 2009) (citing Gasch v.
Hartford Accident & Indem. Co. , 491. F.3d 278, 281-82 (5th Cir. 2007)), the Court cannot rely
solely on Godiva's alleged costs of complying with Fahey's proposed injunction to assure itself of
subject matter jurisdiction under 28 U.S.C. $ 1332(a).
B. Actual and Statutory Damages
The next expense that Godiva flags, though does not discuss in significant depth, is the
actual or statutory damages to be awarded in this case. Def.'s Opp'n at 17-18. Under the CPPA,
a consumer may recover "treble damages, or $1,500 per violation, whichever is greater, payable
I That is, $f million divided bV I consumers (I online customers and I bri"k-and-mortar
customers).
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to the consumer." D.C. Code $ 28-3905(k)(1XA). Fahey alleges that he purchased a five-piece
set of candy bars, each of which had the allegedly inaccurate label. Am. Compl. 1T 18 & Figs. 1-
10. Although the cost of those candy bars is not evident from the face of his amended complaint,
it seems likely that the statutory damages of $7,500----one violation for each individually wrapped
candy bar-far exceed his trebled actual damages. Godiva provides no further information about
any other individual consumer who purchased more items than Fahey, cf. Pesticides,322F. Supp.
3d at l2I,thus the Court relies on the facts it does know about Mr. Fahey for this alleged expense.2
C. Attorney's Fees
Lastly, Godiva argues that the attomey's fees provided for under the CPPA, when combined
with the cost of Fahey's proposed injunction and statutory damages, "have the additive effect of
putting this case far in excess of the jurisdictional threshold." Def.'s Opp'n at 18. Godiva posits
that, based on Fahey's counsel's years ofexperience and the adjusted rate for the20t8-2019 year,
the hourly rate under the Laffey Matrix (the fee schedule used by District of Columbia courts when
calculating attorney's fees) would be $613 per hour. Id. Fahey does not appear to challenge this
hourly rate, but insists that, like the cost of injunctive reliet attorney's fees cannot be aggregated
to satisfu the amount-in-controversy requirement. See Pl.'s Reply at 9 (citing Breakman, 545 F.
Supp. 2d at 107 ("[T]he non-aggregation principle logically should extend to claims of attorneys'
fees.")).
The CPPA entitles prevailing consumers to "fr]easonable attorney's fees," D.C. Code $ 28-
3905(kX2)(B), but Godiva does not provide any information about how many hours would be
"reasonable" for Fahey's attorney to bill in this case, see Def.'s Opp'n at 18. Even if Fahey's
2The third-party sellers described in Smith's declaration do not appear to be eligible for statutory damages
under the statute, for they are not "consumers" under the CPPA and are therefore not properly situated to bring an
action. See D.C. Code $$ 28-3901(2),28-3904(kX1)(A); see also Ford v. Chartone, Inc., 908 A.2d 72,83 (D.C.2006)
("[T]he CPPA does not protect merchants in their commercial dealings with suppliers or other merchants.").
10
attorney spends 2,500 hours working on this project-well above the hours associated with other
CPPA cases, see. e.g., In re InPhonic. Inc. ,674F. Supp. 2d273,283 (D.D.C .2009) (awarding fees
for a maximum of l27g.g hours)-the total cost of legal fees that results ($1,532,500) must still
be divided by the number of the members of the public benefited by this case. See Animal Legal
, 249 F. Supp. 3d at 60. Using Godiva's figure of I customers, which likely
undercounts the consumers involved, as discussed above, the per-consumer attorney's fees would
come out to just $I.
* * *
In sum, then, the Court is unpersuaded by Godiva's arguments against remand in this case.
Fahey's statutory damages and attorney's fees together equal less than $10,000 at best, meaning
that the cost of the injunction per benefitted consumer must exceed $65,000 for the Court to have
jurisdiction. Given the considerable uncertainty around both the cost of the injunction and the
number of consumers that would benefit in the District, the Court cannot assure itself that the
injunction will cost that much. Taken together, Godiva's arguments for keeping this lawsuit in
federal court do not show by a preponderance of the evidence that more than $75,000 is implicated
for any potential District consumer. Too many doubts remain, and thus remand is the proper
course. See Hood,639 F. Supp.2dat28.
Finally, Godiva argues that this Court should avoid addressing the question of subject
matter jurisdiction and instead evaluate Godiva's outstanding motion to transfer. Def.'s Opp'n at
9. Godiva notes that there is another action cunently pending in the Southem District of New
York that "share[s] an identical theory of liability and substantially similar allegations, claims, and
demands for relief," id. at 10, and urges the Court to transfer this action there.
The Supreme Court has observed "that a court may, for the sake of effrciency, decline to
determine its subject matter jurisdiction prior to deciding a 'threshold, nonmerits issue' presented
11
by a case." Hulley Enters. Ltd. v. Russian Fed'n,2Il F. Supp. 3d269,279 (D.D.C.2016) (quoting
QinnnLam Tnf'l ñn r¡ l\¡fol ^,'.ì^ T-+:l eL;^-;-- la^* 549 U.S. 422, 433 (2007)). Sinochem
involved a motion for dismissal based on forum non conveniens, 549 U.S. at 429, and courts in
this Circuit have also applied the same principle to motions to transfer under 28 U.S.C. $ 1404(a),
*1-4., Aftab v. Gonzalez,,.597 F. Supp. 2d76,79 (D.D.C. 2009). But the Supreme Court did
not say that a district court must exercise this option; "[a] federal district court has discretion to
dismiss a case" on such a threshold issue. Sinochem, 549 U.S. af 429 (emphasis added). The
Court observes that it seems particularly inappropriate to transfer to a federal district court in New
York a case brought under D.C. law in D.C. local court when significant questions exist as to
federal jurisdiction. The Court chooses not to exercise its discretion to transfer the case under
$ 1a0a(a) and instead considers Fahey's motion to remand now, rather than transferring this case
only to have its jurisdiction evaluated by yet another court.
Concl-usloN
For the foregoing reasons, Fahey's motion to remand is granted, and the case will be
remanded to D.C. Superior Court. A separate order will be issued on this date.
/sl
JOHN D. BATES
United States District Judge
Dated: February 12.2020
t2