Brown v. Madison Reed, Inc.

Background

Plaintiffs Keppie Moore and Molly Brown brought a proposed class action against Madison Reed, Inc., alleging violations of California’s Consumers Legal Remedies Act, False Advertising Law, and Unfair Competition Law. They alleged that Madison Reed made misleading statements about its hair-color products, including statements that the products were free of ammonia, resorcinol, PPD, or other harsh ingredients. Plaintiffs alleged that the products contained other ingredients similar to those substances and that they relied on Madison Reed’s representations when purchasing the products.

The complaint sought monetary and injunctive relief for a nationwide class of consumers who purchased Madison Reed products containing ethanolamine, 2-methylresorcinol, and toluene-2,5-diamine sulfate.

Motion to Compel Arbitration

Madison Reed asked the court to compel Brown to arbitrate her claims. The court found that Brown assented to the company’s Terms of Service through a clickwrap agreement during the online ordering process. The court concluded that the notice near the Place Order button was sufficiently conspicuous and that Brown’s assent covered the arbitration provision. The court did not find the website’s terms link at the bottom of the website, standing alone, sufficient to establish notice through a browsewrap agreement.

The court then considered whether the arbitration agreement was enforceable under McGill v. Citibank, N.A. Under McGill, an agreement cannot prevent a consumer from seeking a public injunction—an injunction primarily benefiting the general public—under California consumer-protection laws. The court found that Brown’s request to require Madison Reed to remove allegedly false or misleading ingredient statements from its packaging, marketing, and advertising sought public injunctive relief.

The court held that the arbitration agreement’s provision allowing injunctive relief only for the claimant and only as necessary for the claimant’s individual claim improperly prevented Brown from seeking a public injunction. That provision was unenforceable under McGill. The court also held that the unlawful provision could be severed from the remainder of the arbitration agreement because the agreement was not otherwise permeated with illegality.

Accordingly, Madison Reed’s motion to compel Brown to arbitration was denied with respect to her public injunctive relief claim and granted for her remaining individual claims.

Motion to Dismiss

Madison Reed also moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. The court held that the California consumer-protection claims were subject to Federal Rule of Civil Procedure 9(b), which requires fraud-based allegations to identify the particular circumstances of the alleged misrepresentations.

The court found that plaintiffs listed many statements from product packaging, websites, advertisements, commercials, and promotional messages but did not specify which statements Moore and Brown actually saw and relied on before purchasing the products. Plaintiffs also did not provide even an approximate time when they viewed the statements. The court declined to decide whether the listed statements were puffery, verifiably accurate, or otherwise actionable because the complaint did not clarify which statements formed the basis of the claims.

The court rejected plaintiffs’ reliance on the exception for long-term advertising campaigns because the complaint did not allege facts bringing the case within that narrow exception. The court also found that plaintiffs had not adequately pleaded entitlement to equitable relief because they had not alleged that their legal remedies were inadequate. Plaintiffs withdrew their unjust-enrichment claim in their opposition.

Finally, the court found that plaintiffs had not adequately alleged standing to seek injunctive relief. The complaint did not clearly allege whether plaintiffs wanted or intended to purchase Madison Reed products in the future or whether they could not rely on Madison Reed’s representations when deciding whether to do so.

Disposition

The court granted Madison Reed’s motion to dismiss the Complaint with thirty days leave to amend. The opinion therefore allowed plaintiffs an opportunity to correct the pleading deficiencies. The arbitration ruling required Brown’s remaining individual claims to proceed in arbitration but left her public injunctive relief claim outside arbitration.