Costa v. Reliance Vitamin Co., Inc.

Background

Taylor Costa filed a proposed class action on behalf of herself and a class of California consumers. She alleged that Reliance Vitamin Co., Inc. misleadingly packaged and sold protein powder in containers that were unnecessarily large and contained unlawful “slack fill”—empty space that allegedly made the amount of product appear greater than it was.

Costa’s amended complaint asserted seven California-law claims, including claims under California’s Unfair Competition Law, False and Misleading Advertising Laws, and Consumers Legal Remedies Act; breach of express and implied warranty; fraudulent inducement; and intentional and negligent misrepresentation. Reliance moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which asks whether the complaint states a legally sufficient claim.

Reasonable-Consumer Standard

The court held that Costa’s amended allegations met the reasonable-consumer standard for her claims under the Unfair Competition Law, False and Misleading Advertising Laws, and Consumers Legal Remedies Act. That standard requires allegations showing that a significant portion of reasonable consumers could be misled.

Costa alleged that the package displayed information in different places and units: the rear label stated that one serving was one scoop or 30 grams and that the container held 15 scoops, while the side label instructed consumers to mix one scoop with 10 to 12 ounces of water. She alleged that consumers should not be expected to turn the container, combine this information, and calculate how many beverages the product would make. She also identified alternative packaging methods, including fill lines, clear containers, and less slack fill.

The court concluded that the package did not clearly state how many beverages of what size could be made from the powder. Because the number and size of beverages could be the units most relevant to protein-powder consumers, the court found it plausible that a reasonable consumer could be deceived by the container’s size and slack fill. The court therefore denied Reliance’s motion as to this argument.

Intentional and Negligent Misrepresentation

The court denied the motion as to Costa’s intentional-misrepresentation claim. Costa adequately alleged a misrepresentation, knowledge of falsity, intent to induce reliance, actual and justifiable reliance, and resulting damage. The court found that her allegations about Reliance’s knowledge of alternative packaging and its decision not to use those alternatives sufficiently alleged an intent to deceive.

The court also ruled that the economic-loss doctrine barred Costa’s negligent-misrepresentation claim. That doctrine generally prevents recovery in tort for purely monetary losses arising from a contract unless the plaintiff shows an independent duty or other qualifying harm. The court held that Costa’s negligent-misrepresentation claim arose from the purchase of the allegedly deceptive product. It dismissed that claim with prejudice because, in this context, Costa could not plead a negligent-misrepresentation claim that would survive the economic-loss rule.

Express Warranty

The court denied the motion as to Costa’s breach-of-express-warranty claim. It found persuasive the reasoning that a product’s package size can constitute a description of the goods and can form part of the basis for a consumer’s decision to purchase the product. Given Costa’s allegations that the label information did not dispel the alleged deception created by the container’s size, the court found that she sufficiently pleaded this claim.

Consumers Legal Remedies Act

Reliance moved to dismiss Costa’s Consumers Legal Remedies Act claim because she had not initially filed the required affidavit. Costa later filed that affidavit. The court denied the motion to the extent Reliance continued to pursue dismissal of that claim.

Disposition

Judge William H. Orrick ordered that Reliance’s motion to dismiss the amended complaint was GRANTED in part and DENIED in part. The opinion expressly dismissed Costa’s negligent-misrepresentation claim with prejudice and denied the motion as to the other arguments and claims discussed above.