Ahmed Ashour v. Arizona Beverages USA LLC

Background

Ahmed Ashour, Joy Brown, and Crystal Townes 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. They alleged that defendants marketed beverages with “No Preservatives” labels even though the products contained citric acid, which the complaint described as a preservative when used to prevent bacterial growth. The plaintiffs alleged that they relied on the labels, believed they were buying preservative-free beverages, and would not have bought the products—or would not have paid as much—if they had known about the citric acid.

The second amended complaint asserted California claims for unfair competition, deceptive business practices, false advertising, breach of express warranty, and unjust enrichment. It also asserted New York claims for deceptive acts and practices, false advertising, breach of express warranty, and unjust enrichment. The plaintiffs sought to represent state-specific subclasses and, for unjust enrichment, a nationwide class.

Defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), 8(a), and 9(b). A Rule 12(b)(6) motion challenges whether the complaint states a legally sufficient claim, while Rule 9(b) requires fraud allegations to be pleaded with particularity. The court had previously granted dismissal of the injunctive-relief claims and later ruled that the New York express-warranty and Rule 23(b)(2) injunctive-relief claims would be dismissed, with the remaining issues addressed in this opinion.

Court’s analysis

Deceptive-labeling claims. The court held that the plaintiffs adequately alleged that a reasonable consumer could understand “No Preservatives” to mean that the product contained no ingredient that functioned as a preservative, including citric acid in sufficient quantities. The complaint also adequately alleged that the products contained enough citric acid to have preservative qualities. Whether the citric acid actually functioned as a preservative was an issue for expert discovery, not resolution at the pleading stage. The motion to dismiss the deceptive-labeling claims was denied.

Warranty claims. The New York express-warranty claim was inadequately pleaded because Townes bought the products from retail stores rather than directly from defendants, and the plaintiffs alleged only economic injury. The court therefore found that the required direct relationship between buyer and seller had not been alleged and did not reach the notice issue for that claim. The motion to dismiss the New York express-warranty claim was granted.

For the California express-warranty claim, the court found that California law did not require a direct buyer-seller relationship. It also found that Ashour’s May 15, 2019 letter, sent under California’s Consumer Legal Remedies Act, adequately notified defendants that the plaintiffs believed the “No Preservatives” representation was false and breached the warranty. The motion to dismiss the California express-warranty claim was denied.

Brown’s fraud-based advertising claim. The court rejected defendants’ argument that Brown’s allegations did not meet the particularity requirement for fraud claims. Brown alleged that she bought the products on numerous occasions during the class period, relied on the “No Preservatives” labels, and attached the labels to the complaint. The motion to dismiss her fraud claims was denied.

False Advertising Law claims. The court found that Ashour and Brown identified the alleged advertisements by stating that they saw the “No Preservatives” representation on the products on numerous occasions. The motion to dismiss the false-advertising claims was denied.

Unjust-enrichment claims. The court held that Townes could plead New York unjust enrichment in the alternative to her tort and contract claims because she also alleged fraud and unjust enrichment. The motion to dismiss that claim was denied. The court likewise denied the motion to dismiss the California unjust-enrichment claims, explaining that California law was unsettled on the claim’s legal basis but that Ashour and Brown had adequately alleged that defendants profited improperly from a misrepresentation.

The court also noted that defendants had withdrawn their challenge to the nationwide unjust-enrichment claim based on subject-matter jurisdiction. The court had previously found that striking that claim was premature, so the motion to dismiss it was denied.

Product definition and injunctive relief. The court found that the proposed product definition—including other AriZona products labeled “No Preservatives” despite containing citric acid—was specific enough to give defendants fair notice. The plaintiffs consented to dismissal of the Rule 23(b)(2) injunctive-relief claim because it had been included inadvertently. The motion to dismiss that claim was granted.

Disposition

Judge Analisa Torres concluded that defendants’ motion was granted in part as to the New York-law breach-of-express-warranty claim and the Rule 23(b)(2) injunctive-relief claim, and otherwise denied. Those two claims were dismissed. The court also denied defendants’ request for oral argument.