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Denise ANGIANO, et al. v. ANHEUSER-BUSCH INBEV WORLDWIDE, INC., et al.
Proceedings: IN CHAMBERS—COURT ORDER
Before the Court is a Motion to Dismiss filed by defendants Anheuser-Busch InBev Worldwide Inc. (“Anheuser Inc.”) and Anheuser-Busch LLC (“Anheuser LLC”) (collectively “Defendants”). (Dkt. No. 7.) Plaintiffs Denise Angiano (“Angiano”) and Charley Karpinski (“Karpinski”) (collectively “Plaintiffs”) filed an Opposition (Dkt. No. 14) and Defendants filed a Reply (Dkt. No. 15.) Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court finds this matter appropriate for decision without oral argument.
Plaintiffs, on behalf of themselves and a putative class they seek to represent, allege they are “consumers who purchased Beck's beer reasonably believing that such beverages do not contain alcohol.” (Dkt. No. 1 Ex. 2, First Amended Complaint (“FAC”) ¶ 3). According to Plaintiffs, they “did not observe the phrase ‘contains less than 0.5 percent (or .5%) alcohol by volume’ on any of the bottles or packs of Beck's beer they purchased and consumed at any time.” (Id. ¶ 5.) Plaintiffs further argue that “[w]hile some Beck's beer bottles contain the required warning that the beverage contains some alcohol, many of those Beck's beer bottles do not contain this warning in readily legible printing or on a completely contrasting background.” (Id. ¶ 10.) Moreover, Plaintiffs allege that “no pack of Beck's beer contains the required warning.” (Id.)
Plaintiff Angiano was allegedly “pregnant and breast feeding her child when she purchased and consumed Beck's beer.” (Id. ¶ 27.) Plaintiff Karpinski “was in recovery for alcoholism when he purchased and consumed Beck's beer.” (Id. ¶ 30.) Plaintiffs allege that “[a]s a result of Defendants’ deceptive and misleading practice of labeling Beck's beer as ‘non-alcoholic,’ without including the required warning that the beverage contains ‘less than 0.5 percent (or .5%) alcohol by volume’ in direct conjunction with the use of the phrase ‘non-alcoholic’ in readily legible printing and on a completely contrasting background, Plaintiffs and [the putative class members] were induced to purchase Beck's beer, which is not devoid of alcohol as advertised.” (Id. ¶ 4.)
Plaintiffs seek to represent a class defined as “[a]ll consumers residing in California who purchased Beck's non-alcoholic beer packs from November 24, 2016 through final entry of judgment.” (Id. ¶ 36.) Plaintiffs bring claims for: (1) intentional misrepresentation, (2) negligent misrepresentation, (3) violation of California's False Advertising Law under Cal. Bus. & Prof. Code § 17500 (“FAL”), (4) violation of the Consumer Legal Remedies Act (“CLRA”) Cal. Civ. Code § 1750, (5) Breach of the Implied Warranty of Merchantability under Cal. Com. Code § 2314, (6) violation of the Magnusson-Moss Warranty Act (“MMWA”) 15 U.S.C. § 230, (7) violation of the Unfair Competition Law (“UCL”) under Cal. Bus. & Prof. Code § 17200, and (8) negligence. (Id. ¶¶ 44-110.)
II. Legal Standard
Defendants argue in part that Plaintiffs’ claims should be dismissed for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For purposes of a Motion to Dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6), plaintiffs in federal court are generally required to give only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). While the Federal Rules allow a court to dismiss a cause of action for “failure to state a claim upon which relief can be granted,” they also require all pleadings to be “construed so as to do justice.” Fed. R. Civ. P. 12(b)(6), 8(e). The purpose of Rule 8(a)(2) is to “ ‘give the defendant fair notice of what the ․ claim is and the grounds upon which it rests.’ ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Ninth Circuit is particularly hostile to motions to dismiss under Rule 12(b)(6). See, e.g., Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248–49 (9th Cir. 1997) (“The Rule 8 standard contains a powerful presumption against rejecting pleadings for failure to state a claim.”) (internal quotation omitted).
However, in Twombly, the Supreme Court rejected the notion that “a wholly conclusory statement of a claim would survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some set of undisclosed facts to support recovery.” Twombly, 550 U.S. at 561, 127 S.Ct. 1955 (internal quotation omitted). Instead, the Court adopted a “plausibility standard,” in which the complaint must “raise a reasonable expectation that discovery will reveal evidence of [the alleged infraction].” Id. at 556, 127 S.Ct. 1955. For a complaint to meet this standard, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555, 127 S.Ct. 1955 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235–36 (3d ed. 2004) (“[T]he pleading must contain something more ․ than ․ a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”) (alteration in original)); Daniel v. County of Santa Barbara, 288 F.3d 375, 380 (9th Cir. 2002) (“ ‘All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party.’ ”) (quoting Burgert v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000)). “[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal quotations omitted). In construing the Twombly standard, the Supreme Court has advised that “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
III. Judicial Notice
Defendants ask the Court to take judicial notice of the following documents: (A) the label that appears on the front of bottles of Beck's NA malt beverage, (B) the label that appears on the back of bottles of Beck's NA malt beverage, (C) the Certificate of Label Approval issued by the U.S. Treasury Department's Alcohol and Tobacco Tax and Trade Bureau (“TTB”), (D) the packaging for the six-pack of Beck's NA malt beverage, and (E) the packaging for the four six-pack box of Beck's NA malt beverage. (Dkt. No. 7-1, Request for Judicial Notice.)
The Court may consider documents that are incorporated by reference but not physically attached to the complaint if they are relevant to Plaintiffs’ claims and no party questions their authenticity. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). In addition, pursuant to Federal Rule of Evidence 201, courts may take judicial notice of facts that are not subject to reasonable dispute because they are generally known or are capable of accurate and ready determination. Under this rule, a court may take judicial notice of “the records and reports of administrative bodies.” United States v. Ritchie, 342 F.3d 903, 909 (9th Cir. 2003) (quotation marks omitted).
The Court finds that these documents are appropriate for judicial notice. Here, Plaintiffs refer to the labels and packaging on Defendants’ products several times in the FAC, and attach pictures of some of Defendants’ labels and packaging. (See FAC ¶ 7.) See Pelayo v. Nestle USA, Inc., 989 F. Supp. 2d 973, 977 n. 3 (2013) (taking judicial notice of labeling on the defendant's pasta packaging where the plaintiff referred to the labels in the complaint). In addition, the Certificate of Label Approval is a public record and Plaintiffs do not question its authenticity. See Hofmann v. Fifth Generation, Inc., 14-cv-02569, 2015 WL 5440330 (S.D. Cal. Mar. 18, 2015) (taking judicial notice of TTB certificates and label approvals as “records and reports of administrative bodies”).
A. The Safe Harbor Doctrine Precludes Liability for Plaintiffs’ UCL, FAL, and CLRA Claims (Third, Fourth, and Seventh Causes of Action)
In California, unfair competition claims are subject to the safe harbor doctrine, which precludes plaintiffs from bringing claims based on “action the Legislature permits.” Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 182, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999); Davis v. HSBC Bank Nevada N.A., 691 F.3d 1152, 1164 (9th Cir. 2012) (“When specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair competition law to assault that harbor.”); Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (the safe harbor doctrine applies to CLRA, UCL, and FAL claims). Here, Defendants argue that their compliance with 27 C.F.R. § 7.71(e) and their Certificate of Label Approval from the TTB shields them from any potential liability under the CLRA, UCL, and FAL. This Court agrees.
The “TTB has exclusive jurisdiction in regulating the labels on alcoholic beverages because Congress expressly granted exclusive authority to the Treasury Department who in turn delegated its duties to the TTB.” Cruz v. Anheuser-Busch, LLC, 14-cv-09670, 2015 WL 3561536, at *4 (C.D. Cal. June 3, 2015). The TTB has enacted regulations specifically addressing the labeling of alcoholic beverage products. “In order to implement the foregoing, the TTB requires industry members to obtain a Certificate of Label Approval from the TTB prior to the public release of alcoholic beverages.” 27 C.F.R. § 7.41(a). With respect to the labeling of alcoholic beverages as “non-alcoholic,” the TTB regulation states that “the term ‘non-alcoholic’ may be used ․, provided the statement ‘contains less than 0.5 percent (or .5%) by alcohol volume’ appears in direct conjunction with it, in readily legible printing and on a completely contrasting background.” 27 C.F.R. § 7.71(e).
Here, Defendants’ judicially noticeable documents demonstrate that Anheuser-Busch LLC submitted its label for Beck's beer to the TTB for the agency's review and approval, and that the TTB approved the label and issued a Certificate of Label Approval. In receiving a Certificate of Label Approval for the front and back label of Defendants’ non-alcoholic beer product, the Court finds that the labels on Defendants’ products are permitted under federal law. “And because Plaintiffs’ causes of action [under the FAL, UCL, and CLRA] conflict with TTB's approval of the [Beck's non-alcoholic beer] label, the safe harbor doctrine insulates [Defendant] from liability.” Cruz, 2015 WL 3561536, at *6.
In their Opposition, Plaintiffs argue Defendants are in violation of 27 C.F.R. § 7.71(e) in two ways: (1) the packaging for Defendants’ products does not include the content statement next to the term “non-alcoholic” and (2) some of the labels have the federal alcohol content statement in a white font against a silver background that makes it difficult to see. Finally, Plaintiffs argue Defendants’ TTB approved labeling was blocked by the packaging and a reasonable purchaser would not look at the bottle labels before buying the product.
As to Plaintiffs’ first argument, Section 771(e) regulates labels, not packaging. See, e.g. 27 C.F.R § 25 (distinguishing between labeling, packaging, and cartons). Thus, contrary to Plaintiffs’ assertion, packaging cannot violate CFR § 7.71(e). Second, the judicially noticed documents show that the only Beck's non-alcoholic beer label in use from 2012, four years before the proposed class period began, to the present has the required statement in black font on a silver background, and in white type on a royal blue background immediately below the use of the phrase “non-alcoholic.” See Ex. C. Both of these labels were approved by the TTB, and according to the judicially noticed documents, there is no Beck's non-alcoholic beer label that was in use during the class period that was in white font against a silver background. Plaintiffs did not contest Defendants’ Request for Judicial Notice or dispute the accuracy of these documents.
Finally, while the TTB approved label may have been blocked by Defendants’ packaging, and not all consumers would pull the bottles out of the packaging to observe the TTB label, Plaintiffs’ FAC specifically alleges that these two named Plaintiffs did exactly that. (See FAC ¶ 26) (“When Plaintiffs made their purchases, they saw the labeling and packaging of the beverage, including the large prominent ‘non-alcoholic’ term on every side of the pack, on bottle caps, and on the bottle labels.”) Thus, here at least, these two Plaintiffs allege they did see the bottle with the TTB approved label.1
For these reasons, the Court finds that the safe harbor provision applies to Plaintiffs’ claims, and prevents Plaintiffs from bringing claims under the FAL, UCL, or CLRA. Thus, the Court finds Plaintiffs’ causes of action under the UCL, FAL, and CLRA fail as a matter of law.
B. Plaintiffs do not Adequately State Claims for Intentional or Negligent Misrepresentation (First and Second Causes of Action)
In order to state claims for intentional or negligent misrepresentation, Plaintiffs must allege: (1) a misrepresentation of fact; (2) knowledge that the representation was false (intentional misrepresentation); or without reasonable grounds for believing it to be true (negligent misrepresentation); (3) with the intent to induce another's reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damages. Palomares v. Bear Stearns Residential Mortg., 07-cv-01899, 2008 WL 686683, at *4 (S.D. Cal. Mar. 13, 2008). Plaintiffs’ claims for negligent and intentional misrepresentation fail for substantially the same reasons as those stated above.
As to the first element, there was no misrepresentation of fact, as the labels referred to in the FAC do contain the alcohol content statement required by the TTB. (See Request for Judicial Notice Exs. A-E.) Further, as to the fourth element, Plaintiffs do not plead any facts suggesting that any reliance was justified. Plaintiffs admit in the FAC that they saw the labels that contain the TTB approved label.
Plaintiffs argue Defendants are wrong that a reasonable consumer would “notice the white font of the disclaimer against a shiny, metallic silver background.” (Opp. at 11.) However, as noted above, the labels approved by the TTB and in use since 2012 are in a font and background that was approved by the TTB. In addition, whether or not a reasonable consumer would have removed the bottles from the package and observed the labels, here the Plaintiffs allege they did remove the bottles from the package and observe the labels. Thus, the Court finds Plaintiffs have failed to allege there was a misrepresentation of fact, or that any reliance was justifiable. Therefore, Plaintiffs fail to state a claim for either negligent or intentional misrepresentation.
C. Plaintiffs do not Adequately State a Claim for Negligence (Eighth Cause of Action)
To state a cognizable claim for negligence under California law, a plaintiff “must establish four required elements: (1) duty; (2) breach; (3) causation; and (4) damages.” Wells Fargo Bank, N.A. v. Renz, 795 F. Supp. 2d 898 924-25 (N.D. Cal. 2011) (citing Ileto v. Glock, Inc., 349 F.3d 1191, 1203 (9th Cir. 2003)). Plaintiffs allege Defendants breached their duty of care to Plaintiffs by “creating false and misleading advertisements that their product is ‘non-alcoholic,’ and affixing this term to Beck's beer bottles and packs, without warning consumers that the product contains some alcohol, thereby preventing consumers from discovering that Beck's beer contains some alcohol.” (Opp. at 23) (citing FAC ¶ 109.)
While Plaintiffs allege Defendants failed to disclose to consumers that the Beck's beer product contains some alcohol, Plaintiffs also allege they looked at Defendants’ label. Defendants’ label does in fact disclose that the beer might contain some alcohol. The Beck's beer label that Plaintiffs looked at includes the statement “contains less than 0.5 percent (or .5%) alcohol by volume” immediately underneath the “non-alcohol” statement. Thus, the label discloses that Beck's beer can contain some alcohol - up to .5 percent. There cannot be a breach of the duty to disclose that a product may contain some alcohol where the label on the product explicitly discloses that the product might contain some alcohol. Plaintiffs cannot show that Defendants breached any duty, and therefore Plaintiffs fail to state a claim for negligence.
D. Plaintiffs Do Not Adequately State a Claim for Breach of Implied Warranty of Merchantability (Fifth Cause of Action)
The California Commercial Code “implies a warranty of merchantability that goods ‘[a]re fit for ordinary purposes for which such goods are used.’ ” Allen v. Hyland's Inc., 300 F.R.D. 643, 669 (C.D. Cal. 2014) (citing Birdsong v. Apple, Inc., 590 F.3d 955, 958 (9th Cir. 2009)). “The implied warranty ‘provides for a minimum level of quality.’ ” Id. (quoting Am. Suzuki Motor Corp. v. Superior Court, 37 Cal. App. 4th 1291, 1296, 44 Cal.Rptr.2d 526 (1995)). “A breach of merchantability occurs if the product lacks ‘even the most basic degree of fitness for ordinary use.’ ” Id. (quoting Mocek v. Alfa Leisure, Inc., 114 Cal. App. 4th 402, 406, 7 Cal.Rptr.3d 546 (2003)). “Under California law, an action for a breach of an implied warranty also requires that the plaintiff be in vertical privity with the defendant.” Id. (citing Burr v. Sherwin Williams, 42 Cal. 2d 682, 696 (1954)).
Defendants argue Plaintiffs’ breach of implied warranty claim must be dismissed because Plaintiffs do not, and cannot plead privity. (Mot. at 17-18.) Plaintiffs “do not plead that they bought their products from Defendants,” and Defendants do “not sell to consumers.” (Id. at 18; see also FAC ¶ 27 (Plaintiff Angiano ․ purchased ․ Beck's beer from ․ a BevMo! Store.”); ¶ 30 (“Plaintiff Karpinski ․ purchased ․ Beck's beer from ․ a Gelson's store.”)). Plaintiffs concede that privity between the parties does not exist, but argue that the Ninth Circuit has recognized that an exception to the privity requirement arises ‘when the plaintiff relies on written labels or advertisements of a manufacturer.’ ” (Opp. at 18.)
However, while the exception to vertical privity based on written labels or advertisements of a manufacturer can apply to breach of express warranty claims, this same exception does not apply to breach of implied warranty claims. See Allen, 300 F.R.D. at 669 (citing Burr, 42 Cal. 2d at 696) (“[T]he California Supreme Court [has] explicitly held that the exception for representations made on labels or advertisements ‘is’ applicable only to express warranties.’ ”) (emphasis in original); In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 986 (C.D. Cal. 2015) (“Contrary to plaintiffs’ assertions, California law requires that a plaintiff asserting a breach of implied warranty claim be in vertical privity with the defendant; the exception to privity available for breach of express warranty claims is not available for breach of implied warranty claims.”).2
Plaintiffs do not plead a breach of express warranty claim. The Court finds that privity is required for Plaintiffs’ breach of implied warranty claim, and Plaintiffs concede that they do not have privity. Thus, Plaintiffs have not adequately pled a claim for breach of implied warranty.3
E. This Court Does not Have Jurisdiction Over Plaintiffs’ MMWA Claim (Sixth Cause of Action)
Defendants move to dismiss Plaintiffs’ Magnusson-Moss Warranty Act (“MMWA”) Claim, arguing that Plaintiffs do not satisfy the MMWA's express jurisdictional requirements. (Mot. at 16-17.) Section 2310(d)(3)(C) of the MMWA states that no claim shall be cognizable in a federal district court “if the action is brought as a class action and the number of named plaintiffs is less than one hundred.” 15 U.S.C. § 2310(d)(3)(C). In addition the MMWA precludes federal jurisdiction if “the amount in controversy of any individual claim is less than the sum or value of $25.” 15 U.S.C. § 2310(d)(3)(B). Thus, the MMWA provides “necessary condition[s] that class plaintiffs must meet before they can make a MMWA claim, which is a distinct federal cause of action for certain warranty violations.” Goldstein v. General Motors LLC, 445 F. Supp. 3d 1000, 1013 (S.D. Cal. 2020).
Here, those conditions are not met. There are only two named Plaintiffs. In addition, the FAC pleads that BevMo! sold six-packs of Beck's beer for $6.99. (FAC ¶ 33.) Thus, any potential class Plaintiff that bought fewer than four six-packs of Beck's beer would not meet the $25 jurisdictional requirement.
Plaintiffs, ignoring recent Ninth Circuit precedent, cite two out of circuit state court cases to suggest that the Court can exercise supplemental jurisdiction over Plaintiff's MMWA. This Court has jurisdiction over this case pursuant to the Class Action Fairness Act (“CAFA”). The Ninth Circuit has explicitly held that “CAFA may not be used to evade or override the MMWA's specific numerosity requirement.” Floyd v. American Honda Motor Co., Inc., 966 F.3d 1027, 1035 (9th Cir. 2020) (affirming district court's decision that CAFA does not provide an alternative basis on which district courts may exercise federal jurisdiction over MMWA class actions); see also Goldstein, 445 F. Supp. 3d at 1013 (“the 100-plaintiff requirement [of the MMWA] cannot be supplanted by the prerequisites for exercising diversity jurisdiction under CAFA”). Accordingly the Court dismisses Plaintiffs’ MMWA claim for lack of jurisdiction.
For all of the foregoing reasons, the Court grants Defendants’ Motion to Dismiss. The Court dismisses Plaintiffs’ MMWA claim without prejudice to Plaintiff bringing this claim in the appropriate venue. As to the remainder of Plaintiffs’ claims, the Court finds that leave to amend would be futile, and dismisses these claims with prejudice. Del Toro v. Centene Corporation, 19-cv-05163, 2020 WL 6081738, at *5 (N.D. Cal. Oct. 14, 2020) (“Dismissing with prejudice is warranted when allowing leave to amend would be futile.”) The Court will issue a judgment consistent with this Order.
IT IS SO ORDERED.
1. While the Court is not deciding class certification here, the Court notes a potential issue with certifying a class with individualized questions such as the lighting in different stores where the purchase was made. See Opp. at 4 (“Depending on the angle from which the viewer looks at the product, the disclaimer can be obscured by overhead lighting because it is printed in a white font against a shiny, metallic silver background.”) (Opp. at 4.)
2. In addition, there cannot be an implied warranty claim that is contrary to what the label actually says. Here, the label says that the product contains less than .5% alcohol as required by the TTB. If the label says one thing, Defendants cannot impliedly warrant another.
3. Defendants also raise and rebut a possible “foodstuffs exception to privity” in their Motion. (Mot. at 19.) Plaintiffs do not address this possible exception in their Opposition, and therefore concede that it does not apply.
PERCY ANDERSON, UNITED STATES DISTRICT JUDGE
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Docket No: CV 21-01879 PA (PVCx)
Decided: April 05, 2021
Court: United States District Court, C.D. California.
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