Beasley v. Lucky Stores, Inc.

Background

Mark Beasley brought a proposed class action concerning Coffee-mate, a line of coffee-creamer products. He alleged that Coffee-mate contained partially hydrogenated oil (PHO), which he described as an unsafe artificial trans fat, and that some labels stated “0g Trans Fat” or “IT’S GOOD TO KNOW: 0g TRANS FAT/SERV. . . .” The defendants included Nestlé USA, which Beasley alleged manufactured, marketed, and sold Coffee-mate, and Lucky Stores, Inc., Save Mart Super Markets, Save Mart Companies, Inc., and The Kroger Company, which allegedly sold Coffee-mate in California.

The First Amended Complaint asserted six causes of action. The first two challenged the use of PHO under California’s Unfair Competition Law and an implied warranty of merchantability. The last four challenged the “0g Trans Fat” statements under the Unfair Competition Law, California’s False Advertising Law, breach of express warranty, and the Consumer Legal Remedies Act. Beasley brought the claims individually and for two proposed California purchaser groups.

Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. They argued that the PHO-use claims were preempted by federal law and failed on their merits. They also argued that the labeling claims were untimely, failed to allege reliance, did not satisfy Federal Rule of Civil Procedure 9(b)’s heightened requirements for fraud allegations, and failed to allege actionable wrongdoing by the retailer defendants.

PHO-use claims

The court concluded that the first and second causes of action were conflict-preempted. Conflict preemption applies when state-law requirements conflict with federal law or obstruct federal objectives. The court relied on federal food laws and the Food and Drug Administration’s determination concerning PHOs, together with Congress’s decision not to treat PHOs as unsafe or PHO-containing food as adulterated before the applicable June 18, 2018 compliance date. The court reasoned that Beasley’s claims, which challenged the sale of PHO-containing Coffee-mate beginning January 1, 2010, would effectively negate that federal compliance period. It therefore held that the use claims were subject to dismissal.

Labeling claims

The court held that the third through sixth causes of action were subject to dismissal because the complaint did not satisfy Rule 9(b). Beasley alleged purchases approximately once per month during a class period beginning January 1, 2010, but did not identify sufficiently when the purchases occurred, when Coffee-mate contained PHO, when the challenged statements appeared, when he relied on them, or which retailer sold the relevant products. The court also found it unclear whether the presence of PHO or the labeling statements varied among different Coffee-mate forms or flavors.

The court did not find, based on the First Amended Complaint, that the labeling claims were definitively time-barred. It explained that the applicable limitations periods were three or four years, but the complaint lacked enough information to determine when Beasley purchased the relevant products. The court also declined to consider a Nestlé employee’s declaration and attached product-label exhibits when deciding the dismissal motion because they were outside the pleadings and did not qualify for consideration under the incorporation-by-reference doctrine.

The court further held that Beasley had not adequately pleaded delayed discovery. Although he alleged that he learned of the alleged misconduct in January 2017, he did not explain how he made that discovery, and his allegation that he was not a nutrition expert did not, by itself, show that he could not have discovered the facts earlier.

For the Unfair Competition Law and False Advertising Law claims, the court also found the reliance allegations insufficient. Beasley alleged that the “0g Trans Fat” statement was a substantial factor in some purchases and that he would not have purchased Coffee-mate without the statement on at least one occasion. But he did not state whether those purchases occurred before or after January 2017, when he allegedly learned that trans fat was harmful, or otherwise connect the statements to his purchasing decisions.

The court rejected the defendants’ separate argument that the retailer defendants could not be liable because they did not control Nestlé’s labels. Beasley alleged that the retailers unlawfully sold Coffee-mate, and the statutes on which he relied applied by their terms to sellers as well as manufacturers. The court nevertheless dismissed the claims against the retailers on the other grounds discussed above.

Leave to Amend

The court denied Beasley’s request to amend the first and second causes of action because amendment of the preempted use claims would be futile. It granted his request to amend the third through sixth causes of action because it was not clear that those claims could not be saved by amendment. The court allowed a Second Amended Complaint by October 7, 2019, limited to curing the labeling-claim deficiencies; Beasley could not add new claims or defendants without the court’s permission.

Motion to Strike

Nestlé separately moved under Rule 12(f) to strike paragraphs 82–126 of the First Amended Complaint. Those paragraphs alleged that Nestlé had engaged in a pattern of misconduct involving matters such as price fixing, infant formula, Gerber baby-food labels, and advertising for other products.

The court granted Nestlé’s motion to strike. It found that the allegations did not concern Coffee-mate, PHO, or the “0g Trans Fat” statements; did not show conduct similar to the conduct at issue for purposes of punitive damages or the Unfair Competition Law; and served to prejudice Nestlé by portraying it as a bad actor.

Disposition

The court granted defendants’ motion to dismiss, allowed Beasley to amend the labeling claims, and granted Nestlé’s motion to strike. It also continued the case-management conference from September 27, 2019, to January 31, 2020.