Kominis v. Starbucks Corporation

Background

Joan Kominis and Jason McAllister brought a proposed class action against Starbucks Corporation. They alleged that Starbucks sold six fruit-based beverages whose names included fruits that the beverages allegedly did not contain: mango, açaí, or passion fruit. The products were the Mango Dragonfruit Lemonade Starbucks Refreshers, Mango Dragonfruit Starbucks Refreshers, Strawberry Açaí Lemonade Starbucks Refreshers, Strawberry Açaí Starbucks Refreshers, Pineapple Passionfruit Lemonade Starbucks Refreshers, and Pineapple Passionfruit Starbucks Refreshers.

The amended complaint asserted eleven causes of action: claims under sections 349 and 350 of the New York General Business Law; claims under California’s Consumers Legal Remedies Act, False Advertising Law, and Unfair Competition Law; New York and California express-warranty claims; New York and California implied-warranty claims; unjust enrichment; and common-law fraud. Plaintiffs alleged that they purchased the products and paid a premium because they believed the names indicated that the beverages contained all the named fruits.

Starbucks moved to dismiss all eleven causes of action under the federal pleading rules. On a motion to dismiss, the court generally assumes the complaint’s factual allegations are true and asks whether they plausibly state a legal claim.

Reasonable-consumer claims

The first five causes of action alleged that Starbucks’s beverage names and advertising were materially misleading to reasonable consumers. The court held that, considering the names, images, surrounding menu items, and lack of a disclosure that the drinks were missing some named fruits, a significant portion of the general consuming public could reasonably believe that the products contained those fruits.

The court rejected Starbucks’s argument that the names referred only to flavors. The names did not clearly use terms such as “mango-flavored,” “açaí-flavored,” or “passionfruit-flavored.” The court also found that images of actual fruit and the names of other Starbucks products that did contain their named ingredients could support the plaintiffs’ interpretation. The court further rejected Starbucks’s argument that consumers could ask Starbucks employees about the ingredients, reasoning that this assumed facts not alleged in the complaint and that reasonable consumers should not be expected to seek additional information to correct potentially misleading product names.

The court therefore denied Starbucks’s motion to dismiss the first five causes of action under the New York and California consumer-protection statutes.

Warranty claims

The sixth and seventh causes of action alleged breaches of express warranty under New York and California law. Because the consumer-protection claims survived, the court denied the motion to dismiss these express-warranty claims as well.

The eighth and ninth causes of action alleged breaches of implied warranty under provisions requiring goods to conform to promises or affirmations of fact made on a container or label. Starbucks argued that the drinks were fit for human consumption. The court held that Starbucks had not adequately addressed the specific statutory provisions invoked by the plaintiffs. The court also declined to consider an argument first raised in Starbucks’s reply brief and took no position on whether product names and descriptions on menu boards constituted statutory “labels.” The court denied the motion to dismiss both implied-warranty claims.

Unjust enrichment

The court dismissed the tenth cause of action for unjust enrichment with prejudice. Under New York law, the claim duplicated the plaintiffs’ other claims because it relied on the same alleged misrepresentations and alleged benefits to Starbucks. Under California law, the court explained that unjust enrichment is not a standalone cause of action and that the plaintiffs could not pursue the restitution theory alongside their California express-warranty claim. The court denied leave to amend this claim because amendment would be futile.

Common-law fraud

The court dismissed the eleventh cause of action for common-law fraud because the plaintiffs did not adequately plead fraudulent intent, or “scienter.” Fraud claims must provide particular details and facts creating a strong inference that the defendant intended to deceive. The plaintiffs alleged that Starbucks knew the beverages lacked some named fruits and intended consumers to rely on the names, but the court found those allegations conclusory. A general desire to increase sales or prices was not enough to establish fraudulent intent.

The court granted the plaintiffs leave to amend the fraud claim if they could plead additional facts addressing the deficiency. The opinion did not state that the fraud claim was dismissed with prejudice.

Disposition

The court granted Starbucks’s motion to dismiss in part and denied it in part. It granted the motion as to the tenth and eleventh causes of action and denied it as to the first nine causes of action. The tenth cause of action was dismissed with prejudice; leave to amend was granted for the eleventh cause of action. Any amended complaint had to be filed within thirty days. Judge Cronan also directed counsel to appear for an initial pretrial conference and directed the clerk to close the pending motion.