Freedline v. O Organics LLC

Background

Gary Freedline brought a putative class action against O Organics LLC and Lucerne Foods, Inc., identified as O Organics’ parent company. He alleged that the labels on O Organics kombucha beverages falsely represented that the drinks contained less than 0.5 percent alcohol. The complaint asserted claims under the California Consumers Legal Remedies Act, Unfair Competition Law, and False Advertising Law; claims for breach of express and implied warranties; negligent misrepresentation; common-law fraud; and unjust enrichment.

The court had previously dismissed the unjust-enrichment claim with prejudice and dismissed the sugar-content claims with leave to amend. Freedline did not amend, so the sugar-content claims were no longer part of the case. The court had also previously declined to decide whether the case could proceed as a national class action because the parties’ arguments on that issue were underdeveloped.

National-Class Issue

Freedline sought to represent all people in the United States who purchased O Organics kombucha beverages, while alleging that he purchased the drinks only from stores in California. The court stated that he could bring California-law claims on behalf of other California consumers, but that a national class required a choice-of-law analysis.

Because the case was before the court under the Class Action Fairness Act, the court could apply California law to nationwide class claims only if doing so was consistent with California choice-of-law principles. Those principles required the court to consider: (1) material differences between California law and other states’ laws; (2) the other states’ interests in applying their own laws; and (3) which state’s interests would be more impaired if its law were not applied.

The court concluded that the first factor favored applying other states’ laws because O Organics identified significant differences in reliance and knowledge requirements, as well as available remedies, between California’s consumer-protection laws and the laws of other states. The court also stated that common-law claims vary materially from state to state.

The second factor also favored applying other states’ laws. Each state has a strong interest in applying its consumer-protection laws to transactions within its borders that affect its residents. The court rejected Freedline’s argument that California’s interests were stronger because O Organics allegedly brewed and bottled the drinks in California, was headquartered there, and conducted substantial advertising, labeling, manufacturing, and testing there. The court explained that the relevant place of the wrong was where consumers saw the allegedly fraudulent advertisements and relied on them when purchasing the drinks—not where the advertisements were created or where the company was headquartered.

Disposition

The court dismissed the nationwide class claims without prejudice. It stated that Freedline could amend by adding new named plaintiffs, creating different subclasses for materially different bodies of state law, or otherwise amending the complaint consistently with the order. Any amended complaint had to be filed by November 23, 2020.

Judge James Donato issued the order on October 27, 2020.