Davis v. Rebel Creamery LLC

Background

Rebel Creamery LLC markets and sells Rebel ice cream products. Angela Davis and Bonnie Bennett alleged that they bought the products after relying on representations that the products were “healthy,” “low carb,” contained “healthy fats,” and assisted with weight loss, increased energy, suppressed appetite, and mental clarity. They alleged that the products instead contained dangerously high levels of saturated and trans fats.

The plaintiffs brought proposed California and nationwide class claims for violations of California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act, as well as breach of express warranty, breach of the implied warranty of merchantability, and unjust enrichment.

Rebel Creamery moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legally sufficient claim.

Incorporation of Product Packaging

The court considered Rebel Creamery’s packaging exhibit under the incorporation-by-reference doctrine because the complaint necessarily relied on the product packaging and the plaintiffs did not contest the exhibit’s authenticity or relevance. The court found the exhibit of limited usefulness because it showed only the front label, while the complaint’s principal labeling problem concerned the back label, and the timing of the packaging was unclear.

Statutory Standing

Rebel Creamery argued that the plaintiffs lacked statutory standing to challenge online marketing because they did not allege that they relied on those online statements. The court denied dismissal on this ground. The complaint alleged that both plaintiffs saw and relied on Rebel Creamery’s “marketing and labeling,” which the court found sufficient at this stage to allege reliance on online advertising and marketing.

Specificity of Fraud Allegations

Rule 9(b) requires fraud-based allegations to describe the circumstances of the alleged fraud with particularity, including the relevant details of who made the statement, what was said, when and where it was said, and how it was misleading.

The court found that the labeling allegations satisfied Rule 9(b). The complaint identified statements on the product label concerning healthy fats, low carbohydrates or sugar, and the potential benefits of a low-carbohydrate, high-fat diet. It also explained why the plaintiffs considered those statements misleading, including the alleged levels of saturated and trans fats and the alleged failure to include required disclosures.

The court found that the online-marketing allegations did not satisfy Rule 9(b). The complaint generally referred to “marketing” but did not identify the specific online advertisements or statements that the plaintiffs saw and relied upon. The court therefore denied the motion to dismiss under Rule 9(b) to the extent the claims were based on product labeling and granted the motion to dismiss under Rule 9(b) as to online marketing and advertising.

The court declined to address an argument about the Sherman Law that Rebel Creamery raised for the first time in its reply brief.

False Advertising, Consumer Remedies, and Common-Law Claims

Rebel Creamery argued that consumers following the Keto diet would not reasonably be misled by the product statements and that the products did not claim to contain healthy fats. The court applied California’s reasonable-consumer standard and found it plausible that a reasonable consumer could be misled into believing that the products were healthy and contained healthy fats when, according to the complaint, they contained dangerously high levels of saturated and trans fats.

The court rejected the argument that the nutrition facts panel necessarily corrected any misleading front-label statement. It also rejected the arguments that the statements referred only to the Keto diet rather than the products themselves and that “healthy fats” could not be a nutrient-content claim as a matter of law.

The court denied Rebel Creamery’s motion to dismiss the plaintiffs’ False Advertising Law and Consumer Legal Remedies Act claims. It also denied dismissal of the common-law claims because Rebel Creamery treated those claims as derivative of the False Advertising Law and Consumer Legal Remedies Act claims.

Unfair Competition Law Claims

The plaintiffs alleged claims under the unlawful, unfair, and fraudulent prongs of California’s Unfair Competition Law. The court found that the “healthy fats” statement could plausibly mislead a reasonable consumer and therefore found the UCL claims adequately pleaded. The court did not decide whether the reasonable-consumer standard applies to the plaintiffs’ unlawful-prong claims because it resolved the motion on other grounds and Rebel Creamery had not otherwise raised arguments concerning those claims.

Disposition

Judge Thomas S. Hixson granted in part and denied in part Rebel Creamery’s motion to dismiss. The court granted dismissal of the causes of action to the extent they were based on online advertising and marketing, denied dismissal otherwise, and granted the plaintiffs leave to amend. The court allowed the plaintiffs to file a First Amended Complaint by April 24, 2023.