Ahmed Ashour v. Arizona Beverages USA LLC

Background

Ahmed Ashour brought a proposed class action against Arizona Beverages USA LLC, Hornell Brewing Co., Inc., Beverage Marketing USA, Inc., Arizona Beverages Holdings LLC, and Arizona Beverages Holdings 2 LLC. He alleged that the defendants marketed beverages as containing “No Preservatives” even though they contained citric acid, which he alleged is a preservative. He asserted claims under California’s Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law, as well as claims for breach of express warranty and unjust enrichment. He sought damages and injunctive relief.

The defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(6), for failure to state a claim, and 9(b), which requires fraud allegations to be pleaded with particularity.

Federal Preemption

The defendants argued that the Federal Food, Drug, and Cosmetic Act, as amended by the Nutrition Labeling and Education Act, preempted Ashour’s state-law labeling claims. The court rejected that argument. Federal law requires a product containing a preservative to identify the ingredient and separately describe its function, but the court concluded that it does not regulate what a company may not place on a label for commercial marketing purposes. Ashour’s claims challenged the allegedly deceptive “No Preservatives” statement rather than seeking requirements that conflicted with the federal disclosure rules.

The court also rejected the defendants’ argument that the claims were barred by implied preemption. It noted that the Nutrition Labeling and Education Act says it does not preempt state law unless the law is expressly preempted under the relevant provision of the federal statute. The motion to dismiss based on federal preemption was therefore denied.

Injunctive Relief and Standing

Ashour sought an order barring the defendants from labeling their beverages as preservative-free and requiring corrective advertising. The court held that he lacked standing to seek this relief under Article III of the Constitution because he did not allege that he would purchase the defendants’ beverages in the future. His statement that he would buy the products if he could rely on truthful labeling was conditional and did not establish a real or immediate threat of future injury.

The defendants’ motion to dismiss the claims for injunctive relief was granted. The conclusion specifies that this ruling applied to the requests for injunctive relief under Counts I, II, and III: the Unfair Competition Law, the Consumer Legal Remedies Act, and the False Advertising Law.

Fraudulent Advertising Claims

The court held that Ashour adequately pleaded his fraudulent advertising claims under Rule 9(b). The complaint identified the allegedly fraudulent statement—“No Preservatives”—and included images of the product labels. It identified the defendants as the speakers, alleged where and when Ashour saw the statements, identified where he purchased the beverages, and explained why the statements were allegedly fraudulent: the products contained citric acid, which Ashour alleged was a known and common preservative.

The defendants’ motion to dismiss the fraudulent advertising claims was denied.

Consumer Legal Remedies Act Damages

The defendants argued that Ashour’s damages claim under California’s Consumer Legal Remedies Act was barred because he did not provide the required notice at least 30 days before bringing an action for damages. Ashour responded that his original complaint sought only injunctive relief and that he added his damages request in an amended complaint more than 30 days after sending the notice letter.

The court agreed with Ashour. He sent the notice one day after filing the original complaint, which sought only injunctive relief under the Act. He later amended the complaint, more than 30 days after sending the notice, to add a damages request. The court also concluded that the restitution request in the original complaint did not itself constitute a damages claim under the Act. The motion to dismiss the Consumer Legal Remedies Act damages claim was denied.

Unjust-Enrichment Class Claims

The defendants asked the court to dismiss or strike Ashour’s nationwide class claims for unjust enrichment because unjust-enrichment law differs among the states. Ashour argued that striking the allegations before a class-certification motion would be premature.

The court agreed with Ashour and denied the motion to dismiss or strike the unjust-enrichment class claims. It noted that courts in the district generally hesitate to strike class allegations before a class-certification motion is filed and that rejecting nationwide unjust-enrichment classes is not a universal rule.

Disposition

Judge Analisa Torres granted the defendants’ motion to dismiss only to the extent that Ashour sought injunctive relief under Counts I, II, and III. The motion to dismiss the complaint was otherwise denied. The order did not dismiss Ashour’s other claims or strike the nationwide unjust-enrichment class allegations.