Chavez v. Blue Sky Natural Beverage Co.

503 F. Supp. 2d 1370 (2007)

Chris CHAVEZ, an individual, on behalf of himself, the general public and those similarly situated, Plaintiffs,
v.
BLUE SKY NATURAL BEVERAGE CO., a foreign corporation; Hansen Beverage Company, a foreign corporation; Hansen Natural Corp., a foreign corporation; and Does 1 Through 10, Defendants.

No. C-06-6609 SC.

United States District Court, N.D. California.

June 11, 2007.

Seth A. Safier, Adam Gutride, Gutride Safier Reese LLP, San Francisco, CA, Michael R. Reese, Gutride Safier LLP, New York, NY, for Plaintiffs.

William N. Kammer, Alison Lee Pivonka, Norman Leslie Smith, Solomon Ward Seidenwurm & Smith LLP, San Diego, CA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS AND VACATING MOTION TO TRANSFER

CONTI, District Judge.

I. INTRODUCTION

Presently before the Court are a Motion to Dismiss and Motion to Transfer filed by Defendants Blue Sky Natural Beverage Co., Hansen Beverage Company, and Hansen Natural Corp. ("Defendants" or "Blue Sky"). See Mot. to Dismiss, Docket No. 6; Mot. to Transfer, Docket No. 8. Plaintiffs Chris Chavez and those similarly situated ("Plaintiffs") oppose both motions. See Opp'n, Docket Nos. 13, 14.

For the reasons discussed herein, the Court GRANTS Defendants' Motion to Dismiss with prejudice. Defendants' Motion to Transfer is VACATED.

II. BACKGROUND

Defendants develop, market, sell, and distribute beverages including natural or healthy sodas, fruit juices, energy sports drinks, and other beverages under a variety of brand names. Compl., ¶¶ 20-21. In September of 2000, Defendants acquired the Blue Sky natural soda business from the Blue Sky Natural Beverage Co., a company that had been based in and operated from Santa Fe, New Mexico since approximately 1980. Id. at ¶ 22. From that time until at least May of 2006, the Blue Sky containers indicated that their contents were made in and/or originated from Santa Fe, New Mexico. Id. at ¶ 24. Specifically, the cans and bottles prominently stated "SANTA FE, NEW MEXICO" or "SANTA FE, NM." Id. In addition, every can stated "CANNED FOR THE BLUE SKY NATURAL BEVERAGE COMPANY SANTA FE, NM 87501" or "CANNED UNDER THE AUTHORITY OF BLUE SKY NATURAL BEVERAGE CO., SANTA FE, NM USA." Id. According to Plaintiffs, the packaging of Blue Sky beverages also has a "particularly Southwestern look and feel" including "stylized Southwestern Indian tribal bands" across the top and bottom and "pictures of what appear to be the Sangre de Cristo mountains that border Santa Fe, New Mexico on the eastern side of the city." Id. at ¶ 25. Finally, until May of 2006, Defendants' website stated "Santa Fe, New Mexico, U.S.A. (505) 995-9716" (the 505 area code is assigned to Santa Fe). Id. at ¶ 26.

Plaintiffs contend that despite Defendants' representations, Blue Sky beverages are not manufactured or bottled anywhere in New Mexico. Id. at ¶ 30. Plaintiffs assert that Defendants outsource all manufacturing to third parties, all located outside New Mexico. Id. In addition, Plaintiffs assert that the Blue Sky Natural Beverage Co. no longer exists in Santa Fe because one month after Hansen's acquisition, the company was dissolved in New Mexico and re-registered with the California Corporation Commission as a Delaware corporation with its principal place of business in Corona, California. Id. at ¶ 31.

According to the Complaint, the named Plaintiff is a native of New Mexico and has purchased a variety of Blue Sky beverages since he was a child. Id. at ¶ 27. Plaintiff relocated to California in August of 1999 and has continued purchasing Blue Sky beverages "due to the fact that he believed Blue Sky Beverages were made in Santa Fe, New Mexico and/or by a company that was located in Santa Fe, New Mexico" and because Plaintiff "desired to (i) support a New Mexico company and (ii) to associate himself with a product from Santa Fe, New Mexico." Id. at ¶ 28.

Plaintiff asserts that he "would not have purchased Blue Sky Beverages had he known where they were really manufactured and/or where the company that owned or controlled the canning of Blue Sky Beverages was located." Id. at ¶ 36. Plaintiff, on behalf of himself and those similarly situated, filed a class action complaint alleging causes of action for (1) false advertising under California Business and Professions Code § 17500 et seq., (2) unfair trade practices under California Business and Professions Code § 17200 et seq., (3) violation of the Consumers Legal Remedies Act under California Civil Code § 1750 et seq., and (4) common law fraud, deceit and misrepresentation.

III. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss can be granted if the plaintiff fails "to state a claim upon which relief can be granted." Fed. R.Civ.P. 12(b)(6). When evaluating a motion to dismiss, the court accepts the facts as stated by the nonmoving party and draws all inferences in its favor. See Everest & Jennings, Inc. v. Am. Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). Furthermore, courts must assume that all general allegations "embrace whatever specific facts might be necessary to support them." Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir.1994). At the pleading stage, the plaintiff "need only show that the facts alleged, if proved, would confer standing upon him." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1140 (9th Cir.2003). If a complaint is dismissed for failure to state a claim, "leave to amend should be granted unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986).

This case was removed to federal court based on diversity jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). See Not. of Removal, Docket No. 1. A federal court sitting in diversity jurisdiction applies state law on substantive issues. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79-80, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). Thus, the Court will apply California law in evaluating Defendants' motion.

IV. DISCUSSION

A. Plaintiffs' Three Statutory Claims

In the Complaint, Plaintiffs assert causes of action under California false advertising law, Cal. Bus. & Prof.Code § 17500 et seq. ("FAL"), California unfair competition law, Cal. Bus. & Prof.Code § 17200 et seq. ("UCL"), and the Consumers Legal Remedies Act, Cal. Civ.Code § 1750 et seq. ("CLRA"). As a basis for their motion to dismiss, Defendants assert that Plaintiffs have failed to allege any remediable damage as required to state a claim under the FAL, UCL, and CLRA. See Mot. to Dismiss, 10.

In 2004, Proposition 64 amended the express language of the UCL and FAL with respect to damages. As a result, a plaintiff with standing under the UCL is "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Cal. Bus. & Prof.Code § 17204. In addition, a plaintiff with standing under the FAL is "any person who has suffered injury in fact and has lost money or property as a result of a violation of this chapter." Cal. Bus. & Prof.Code § 17535. Similarly, the CLRA limits relief to "[a]ny person who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by [the CLRA]." Cal. Civ.Code § 1780(a).

Plaintiffs do not dispute the damages requirements for the three statutory claims. See Opp'n, 11. Instead, Plaintiffs argue that they have properly alleged injury in fact. See id. The named Plaintiff claims that he would not have purchased Blue Sky beverages had he known the truth about the geographic origin of the products. Compl. at ¶ 52. Thus, Plaintiffs assert that they lost the full value of the price paid for each can or bottle of soda. Id. Specifically, Plaintiffs claim that Defendants' alleged misrepresentations frustrated their desire to "support a New Mexico company" and/or "associate [themselves] with a product from Santa Fe, New Mexico." Id. at ¶ 28.

B. Plaintiffs' Common Law Claim

Plaintiffs fourth cause of action seeks to recover damages for alleged fraud, deceit, and misrepresentation. See id. at ¶¶ 90-100. It has long been established that under California law, "Fraud, without damage, furnishes no ground for action, nor is fraud without damage a defense." S. Tahoe Gas Co. p. Hofmann Land Improvement Co., 25 Cal. App. 3d 750, 102 Cal. Rptr. 286, 296 (1972), quoting Holton v. Noble, 83 Cal. 7, 9, 23 P. 58 (1890); see Charnay v. Cobert, 145 Cal. App. 4th 170, 51 Cal. Rptr. 3d 471, 482 (2006) (listing the elements of fraud, including "resulting damage"). Thus, similar to their statutory claims, Plaintiffs must allege actual damages to pursue their common law claims.

C. Plaintiffs' Allegations of Damages

Under the relevant law, Plaintiffs' damages allegations are insufficient to state a claim under the FAL, UCL, CLRA, or common law fraud. Thus, Plaintiffs do not have standing to pursue any of their claims. On this issue, Plaintiffs assert that their damages equal the, amount paid for the Blue Sky beverages because they would not have purchased the drinks had they known the drinks and company were no longer related to Santa Fe, New Mexico. See Compl. at ¶¶ 36, 52. However, Plaintiffs' alleged injury and' damages are nonexistent because Defendants' alleged promise had no value. In other words, Plaintiffs have not alleged damages resulting from Defendants' supposed misrepresentation of the location of its bottling operations and/or corporate headquarters.

The relevant case law confirms that Plaintiffs must adequately plead. "injury in fact" to survive Defendants' motion to dismiss. In contrast to this case, in Daghlian v. DeVry Univ., Inc., the court found that Plaintiff had stated a claim under the FAL and UCL by properly pleading injury in fact. 461 F. Supp. 2d 1121, 1153-57 (C.D.Cal.2006). The Daghlian plaintiff incurred $40,000 in educational debt based on a recruiter's promise that DeVry's academic credits would be transferable to a wide variety of other schools. See id. at 1156. When the plaintiff discovered that the credits "probably would not transfer to other educational institutions," he sued. See id. at 1124. Daghlian's injury or damage was clear: the difference in value between what he was promised and what he received. He was promised an accredited degree with transferable credits, but actually received a degree worth much less. Similarly, in Laster v. T-Mobile USA, Inc., the plaintiffs thought they were getting a free or substantially discounted phone, but were charged sales tax on the full retail value of the phone. 407 F. Supp. 2d 1181, 1194 (S.D.Cal.2005). The court found the assertions concerning the shifted tax burden sufficient to allege injury in fact. See id. As such, the plaintiffs in Laster suffered injury because they did not get the benefit of their bargain and paid more taxes than promised.

In contrast to Daghlian and Laster, the Plaintiffs in this case suffered no injury or damages as a result of Defendants' conduct. Plaintiff did not pay a premium for Defendants' beverages because the drinks purportedly originated in Santa Fe, New Mexico. Accepting the facts as stated by Plaintiffs and drawing all inferences in their favor, Defendants' promise concerning geographic origin had no value and Plaintiffs have suffered no damages by purchasing beverages they thought were produced in New Mexico by a New Mexico-based company, but actually originated in California. As a result of Plaintiffs' failure to allege any damages under all four causes of action, Plaintiffs have no standing to pursue their claims against Defendants.

D. Dismissal with Prejudice

When evaluating a Rule 12(b)(6) motion to dismiss, the court must accept all material allegations in the complaint as true and construe them in the light most favorable to the non-moving party. Barron v. Reich, 13 F.3d 1370, 1374 (9th Cir.1994). The court is not required, however, to accept conclusory legal allegations "cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir.1994). Rule 12(b)(6) must be read in conjunction with Rule 8(a) which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The notice pleading standard set forth in Rule 8 establishes "a powerful presumption against rejecting pleadings for failure to state a claim." Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (citations omitted). Therefore, a court must not dismiss a complaint for failure to state a claim unless the plaintiff has failed to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007).

Where plaintiffs complaint should be dismissed for failure to state a claim, the plaintiff should generally be given "at least one chance to amend the complaint" under Fed. R. Civ. Proc. 15(a) before dismissing the action with prejudice. Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir.1991). However, a plaintiff should be denied leave to amend a complaint if the court determines that "allegations of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co. Inc., 806 F.2d 1393, 1401 (9th Cir. 1986).

In this case, Plaintiffs' complaint gives Defendants proper notice of Plaintiffs' claims and sets forth its theory with specificity. Even so, the complaint is clearly deficient because no set of facts consistent with the complaint could possibly cure Plaintiffs' inability to plead damages resulting from Defendants' conduct. As the Supreme Court recently stated, "we do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Because the plaintiffs here have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Bell Atlantic, 127 S.Ct. at 1974. The Court finds that there are no other facts Plaintiffs could present to cure their lack of standing. Plaintiffs suffered neither injury nor damages because they bought cans of Defendants' beverages which contained text stating "Santa Fe, New, Mexico." As a result, the Court must dismiss Plaintiffs' complaint with prejudice.

V. CONCLUSION

For the reasons discussed herein, Defendants' Motion to Dismiss is GRANTED with prejudice. All other pending motions in this case, including Defendants' Motion to Transfer are VACATED.

IT IS SO ORDERED.