Murphy v. Olly Public Benefit Corporation

Background

Hope Murphy, Carol Lesh, and Emily Jiang brought a proposed class action against Olly Public Benefit Corporation concerning Olly melatonin supplements. They alleged that testing showed the products contained between 165% and 274% of the melatonin stated on their labels, including in products that had expired or were close to expiration. They asserted claims under consumer-protection laws of several states, California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act, New York consumer-protection statutes, breach of express warranty, and unjust enrichment or quasi-contract.

Olly moved to dismiss the amended complaint under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim. Olly argued that federal food-and-drug law preempted the claims, that the court should defer to the Food and Drug Administration, and that the plaintiffs had not adequately alleged deception, reliance, materiality, injury, standing, warranty, or unjust enrichment.

Court’s analysis

The court rejected Olly’s express-preemption argument. It concluded that the plaintiffs were not trying to impose a requirement different from federal law. Instead, they alleged that Olly used more melatonin than reasonably necessary to ensure that the products would contain the labeled amount throughout their shelf life. The court also rejected Olly’s argument that the plaintiffs’ testing was insufficient because it did not use the FDA’s required 12-sample testing method. At the pleading stage, the plaintiffs’ independent testing could plausibly support their allegation of unreasonable overages, although they would eventually have to prove that Olly violated the applicable requirements.

The court also rejected implied preemption. It explained that the plaintiffs were suing under state law for allegedly false or misleading labeling, not asserting a claim solely because Olly allegedly violated the federal Food, Drug, and Cosmetic Act. The court declined to apply the primary-jurisdiction doctrine, which can allow an agency to address an issue first, because the FDA had already provided relevant guidance and referral to the FDA would not be efficient.

The court held that the plaintiffs adequately alleged violations of California consumer-protection laws. Their allegations that they read and relied on the dosage labels, did not want higher doses, and would not have purchased the products if they knew the labels were inaccurate were sufficient at this stage. The court also held that they adequately alleged economic injury by claiming that they paid a price premium for products with misleading labels or received products that were worthless to them.

The court allowed the plaintiffs to seek equitable relief, such as restitution, in the alternative to damages. It concluded that their allegations that legal remedies were less certain than equitable remedies were sufficient at the pleading stage. The court further held that the fraud-related allegations satisfied the heightened pleading requirement under Rule 9(b), even assuming that requirement applied.

The court distinguished between products the plaintiffs bought and other products included in the proposed class claims. The plaintiffs purchased only Olly Sleep Extra Strength gummies and Olly Sleep gummies, but asserted claims involving at least five other melatonin products with different ingredients, flavors, forms, melatonin amounts, and degradation rates. The court found that the plaintiffs had not plausibly alleged that the unpurchased and untested products were overdosed or sufficiently similar to the products they purchased. It therefore dismissed the claims based on unpurchased products, with leave to amend.

The court allowed the plaintiffs to seek injunctive relief because they alleged they would buy Olly products again if Olly corrected its dosing and labeling, but could not rely on the labels while the alleged problem continued. The court also declined to dismiss claims under the laws of states other than California and New York, finding that Olly had provided too little detail about differences among the states’ laws. Olly could raise that issue later, likely in connection with whether the plaintiffs could represent a multistate class under Rule 23.

Finally, the court allowed the express-warranty, unjust-enrichment, and New York consumer-protection claims to proceed. It found that the plaintiffs plausibly alleged that Olly warranted a particular amount of melatonin, that they relied on that representation, and that the products did not conform to it. The court also rejected Olly’s argument that Jiang had not alleged injury, explaining that Jiang alleged wanting no more than 6 milligrams in two servings but receiving approximately 9.88 milligrams based on the alleged test results.

Disposition

Judge Charles R. Breyer granted the motion to dismiss only as to claims based on unpurchased products and denied it in all other respects. The plaintiffs were allowed 30 days to amend the claims concerning unpurchased products.