Schleyer v. Starbucks Corporation

Background

Eric Schleyer and Emilyn Mishkan brought a proposed class action against Starbucks Corporation. Schleyer alleged that he purchased Starbucks “sprouted grain” bagels in New York, and Mishkan alleged that she purchased them in California. They claimed that the label led consumers to believe that sprouted grain was the bagels’ sole or primary grain source, although the bagels allegedly were made primarily with traditional, unsprouted grain.

The complaint asserted New York General Business Law Sections 349 and 350 claims; California Consumers Legal Remedies Act, False Advertising Law, and Unfair Competition Law claims; breach-of-implied-warranty claims under New York and California law; and unjust-enrichment claims. Starbucks moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). In the alternative, Starbucks moved to strike the proposed nationwide class allegations.

New York consumer-protection claims

The court held that Schleyer plausibly alleged that the “sprouted grain” label was materially misleading. At the motion-to-dismiss stage, the court accepted the complaint’s allegations as true and concluded that a reasonable consumer could understand the label to mean that the bagel’s grain content was primarily sprouted grain. The court rejected Starbucks’s arguments that the presence of some sprouted-grain ingredients, an ingredient list, the absence of words expressly stating the proportion of sprouted grain, or the lack of consumer surveys required dismissal.

The court also held that Schleyer plausibly alleged injury through a price-premium theory: he alleged that he would have paid significantly less or would not have bought the bagel if he had known its primary grain source was unsprouted grain. The motion to dismiss the New York General Business Law Sections 349 and 350 claims was denied. The conclusion also states that dismissal of claims under Sections 349, 350, and 350-a(1) was denied.

California statutory claims

Applying the reasonable-consumer standard, the court concluded that Mishkan plausibly alleged that the label could deceive a significant portion of the consuming public into believing that the bagel was made primarily or solely with sprouted grain. The court held that the ingredient list did not cure the alleged deception and distinguished a case involving a product described as “flavored,” rather than one labeled with an ingredient name.

The motion to dismiss the California Consumers Legal Remedies Act, False Advertising Law, and Unfair Competition Law claims was denied.

Implied-warranty claims

The New York implied-warranty claim survived because the plaintiffs plausibly alleged that Starbucks’s representations could mislead a reasonable consumer, and Starbucks made no further argument supporting dismissal of that claim.

The California implied-warranty claim also survived. The court explained that California law permits an implied-warranty claim when a product does not conform to promises or affirmations on its container or label, even if the product remains fit for ordinary use. Mishkan adequately alleged that the bagels did not conform to the label’s alleged promise that the primary ingredient was sprouted grain.

Unjust-enrichment claims

The court dismissed the plaintiffs’ New York unjust-enrichment claims as duplicative. Those claims relied on the same factual allegations and theory of liability as the New York consumer-protection claims.

The California unjust-enrichment claim survived. Although California does not recognize unjust enrichment as a standalone cause of action, the court explained that it may construe such a claim as a quasi-contract claim seeking restitution. The court also held that Mishkan could plead unjust enrichment in the alternative to her other California claims.

Proposed nationwide class

Starbucks’s alternative request to strike the proposed nationwide class allegations argued that differences among state laws made the proposed class impracticable. The court held that this issue concerned whether common issues would predominate and was premature. The court reserved that issue for the class-certification stage.

Disposition

Judge J. Paul Oetken’s opinion and order granted Starbucks’s motion to dismiss in part and denied it in part. The New York unjust-enrichment claims were dismissed, while the New York consumer-protection claims, the California statutory claims, the implied-warranty claims, and the California unjust-enrichment claim were allowed to proceed as described in the opinion. Starbucks was ordered to file an answer within 21 days, and the clerk was directed to close the motion at Docket Number 22.