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Silva v. Unique Beverage Co. LLC

United States District Court, D. Oregon

October 30, 2017

VICKY SILVA, an Oregon consumer, individually and on behalf of all others similarly situated, Plaintiffs,
UNIQUE BEVERAGE COMPANY, LLC, a foreign corporation, Defendant.

          Michael Fuller OLSEN DAINES PC Mark Geragos Benjamin J. Meiselas GERAGOS & GERAGOS Attorneys for Plaintiff

          Joe Hochman HOCHMAN LEGAL GROUP, PLLC Attorney for Defendant

          OPINION & ORDER

          Marco A. Hernandez United States District Judge

         In this putative class action brought by Plaintiff Vicky Silva on behalf of herself and all others similarly situated against Defendant Unique Beverage Company, LLC, Plaintiff contends that the labeling on one of Defendant's products is misleading and in violation of Oregon's Unlawful Trade Practices Act, Oregon Revised Statutes §§ (O.R.S.) 646.605-646.656 (UTPA). In a June 15, 2017 Opinion & Order, I granted Defendant's motion to dismiss the Amended Complaint but gave Plaintiff leave to amend. Silva v. Unique Beverage Co., No. 3:17-cv-00391-HZ, 2017 WL 2642286 (D. Or. June 15, 2017) (hereinafter "the June 15, 2017 Opinion"). On June 28, 2017, Plaintiff filed a Second Amended Complaint, ECF 28. Defendant now moves to dismiss the amended pleading for failure to state a claim. I grant the motion as to the allegations in Paragraph 18, deny the motion as moot as to any claim for injunctive relief, and otherwise deny the motion.


         In the Second Amended Complaint, Plaintiff alleges that in February 2017, she purchased a "Cascade Ice" beverage product manufactured by Defendant. Sec. Am. Compl. ¶¶ 4, 5. The front label depicted large colorful coconuts along with the word "Coconut." Id.[1] Below the word "Coconut, " the label stated that the product is a "NATURALLY FLAVORED SPARKLING WATER" beverage. Id. The front label looks like this:

         (Image Omitted)

         Fuller Decl., ¶ 2, ECF 40.

         Plaintiff asserts that the product contains no coconut, coconut water, coconut juice, coconut pulp, coconut jelly, or coconut natural flavor. Id. at ¶ 4. Additionally, she contends it does not taste like coconut and has no coconut health qualities. Id. Plaintiff alleges that the label violates O.R.S. 646.608(1)(b) because it causes the likelihood of confusion and misunderstanding as to the source of the flavoring, ingredients, and properties in Defendant's product. Id. ¶ 15. Further, she contends that the label violates O.R.S. 646.608(1)(e) because it falsely represents that Defendant's coconut product had ingredients, characteristics, benefits, quantities, or qualities it did not have. Id. She also alleges that the label violates O.R.S. 646.609(1)(g), because it falsely represented that Defendant's coconut product was of a standard, quality, or grade it did not have. Id.

         Plaintiff seeks damages under three different theories: a diminished value theory, a purchase price refund theory, and an objective market value loss theory. Id. ¶¶ 16, 17, 18. These damages allegations are discussed in more detail below. Plaintiff seeks actual damages or $200 statutory damages. Id. ¶ 19. Finally, based on her allegation that Defendant's violation of the UTPA was reckless and in pursuit of profit, she seeks punitive damages. Id.[2]/ / /


         A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept all material facts alleged in the complaint as true and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012).

         A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the "grounds" of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Id. (citations and footnote omitted).

         To survive a motion to dismiss, a complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[, ]" meaning "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). Additionally, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. A complaint must contain "well-pleaded facts" which "permit the court to infer more than the mere possibility of misconduct[.]" Id. at 679.


         Defendant argues that dismissal of the Second Amended Complaint is warranted because no reasonable juror could be confused by the product labels and thus, as a matter of law the product is not deceptive. Defendant also argues that Plaintiff fails to sufficiently allege damages.

         I. Labeling

         Generally, whether a product's labels are deceptive under a consumer protection statute is a question of fact for the jury. See Williams v. Gerber Prods. Co., 552 F.3d 934, 938-39 (9th Cir. 2008) (in case challenging product's labeling as deceptive under California law, court noted that California courts "recognized that whether a business practice is deceptive will usually be a question of fact"). However, as with many fact questions, if the court determines that no reasonable juror could conclude that the product's label was not deceptive or misleading, dismissal on a Rule 12(b)(6) motion is appropriate. E.g., Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1162 (9th Cir. 2012) (in false advertising claim under California statute, court quoted Williams for the proposition that the issue of deception is usually a question of fact, but court nonetheless affirmed the district court's dismissal of the claim at the pleading stage because as a matter of law, the advertising at issue was not likely to deceive a reasonable consumer); Pelayo v. Nestle USA, Inc., 989 F.Supp.2d 973, 978 (C.D. Cal. 2013) (citing Williams for the proposition that the "question of whether a business practice is deceptive in most cases presents a question of fact not amenable to resolution on a motion to dismiss[, ]" but concluding that "where a Court can conclude as a matter of law that members of the public are not likely to be deceived by the product packaging, dismissal is appropriate"); Hairston v. S. Beach Beverage Co., No. CV 12-1429-JFW DTBX, 2012 WL 1893818, at *4 (C.D. Cal. May 18, 2012) (citing Williams but noting that "in certain instances, the Court can properly make [the deception] determination and resolve such claims based on its review of the product packaging" and finding dismissal on a Rule 12(b)(6) appropriate "where a Court can conclude as a matter of law that members of the public are not likely to be deceived by the product packaging[.]").

         In Pearson v. Philip Morris, Inc., the Oregon Supreme Court indicated that whether a product's label was a misrepresentation under the UTPA "is determined based on an objective standard of what a reasonable consumer would understand the representation to be[.]" 358 Or. 88, 135 n.26, 361 P.3d 3, 32 n.26 (2015); see also Andriesian v. Cosmetic Dermatology, Inc., No. 3:14-cv-01600-ST, 2015 WL 1638729, at *3 (D. Or. Mar. 3, 2015) (to state a false labeling claim under the UTPA, "plaintiff must affirmatively plead and prove that the statements at issue are either objectively false or at least likely to mislead a reasonable consumer."), adopted, 2015 WL 1925944 (D. Or. Apr. 28, 2015).

         Defendant argues that when the labeling of the entire bottle of its Cascade Ice beverage is considered, no reasonable consumer could be misled into believing that the product contained any coconut. Cases suggest that it is appropriate to consider the entirety of a label in ascertaining whether a reasonable consumer would find a product deceptive or misleading. In Freeman v. Time, Inc., 68 F.3d 285, 289-90 (9th Cir. 1995), the Ninth Circuit relied on qualifying language in smaller font to conclude that no reasonable consumer would be deceived by the larger font statements suggesting that the mailer's recipient had won a sweepstakes. The court also rejected the plaintiff's argument that a certain statement was ambiguous because the contention was "unreasonable in the context of the entire document." Id. at 290; see also Lam v. Gen. Mills, Inc., 859 F.Supp.2d 1097, 1104 (N.D. Cal. 2012) (court looked at side panel as well as front, back, top, and bottom panels of package in making reasonable consumer determination).

         In Williams, the Ninth Circuit concluded that misleading label information on the front of a product cannot be corrected by an ingredient list. 552 F.3d at 939. There, the court determined that a number of features on the packaging "could likely deceive a reasonable consumer." Id. at 939. In light of such deceptive packaging, the court rejected the use of the ingredient list as a "shield for liability for the deception[, ]" explaining that a reasonable consumer is not "expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box." Id.

         Williams does not hold, however, that an ingredient list, along with other information on the label, is irrelevant in determining whether the package as a whole is misleading or deceptive. Rather, as a 2016 Ninth Circuit case put it, "[s]tated straightforwardly, Williams stands for the proposition that if the defendant commits an act of deception, the presence of fine print revealing the truth is insufficient to dispel that deception." Ebner v. Fresh, Inc., 838 F.3d 958, 966 (9th Cir. 2016). Thus, an ingredient list alone cannot remedy an otherwise misleading or deceptive package but it still plays a part in assessing whether the package as a whole is misleading.

         Defendant points to six features of the label that it argues dispel any notion that the product contains coconut. First, the front of the label states, as indicated above, that it is "NATURALLY FLAVORED SPARKING WATER." Def. Req. for Jud. Notice, Ex. C.[3] Second, the front label also states that the beverage has "Zero Calories." Id. Third, the back or side of the label, near the top and above the Nutrition Facts section, states that it "Contains No Coconut." Id., Ex. A. Fourth, immediately below the "Contains No Coconut" language, and immediately above the Nutrition Facts section, the label states that it contains "1% Fruit Juice." Id. Fifth, the Nutrition Facts section shows that the beverage has zero calories, zero fat, zero sugars, and no potassium. Id. Finally, the ingredient list confirms there is no coconut of any kind in the product. Id. The entire label, in relevant part, looks like this:

         (Image Omitted)

         Def. Req. for Jud. Notice, Ex. C.

         Defendant argues that taken as a whole, no reasonable consumer would conclude that the beverage contains coconut or has coconut health qualities. Defendant contends that although the label depicts coconuts, the statement "Zero Calories" on the front, as well as the Nutrition Facts section on the back or side which recites zero calories, zero fat, zero sugars, and no potassium, are all inconsistent with a product that actually contains coconut. Notably, the back or side label states, separately from the Nutrition Facts section or the ingredient list, that the product "Contains No Coconut." Because the product label itself establishes that it is not misleading or deceptive, Defendant argues that dismissal is appropriate.

         As can be seen from the images of the product's label reproduced in this Opinion, the front of the bottle is adorned with fairly large images of several coconuts. The word "Coconut" is prominently displayed on a white background. Although the words "NATURALLY FLAVORED SPARKLING WATER" appear on the front, they are in smaller font than the word "Coconut." Moreover, these words are separate from the word "Coconut" such that a reasonable consumer would not necessarily understand the label to represent a naturally coconut-flavored drink. A reasonable consumer could understand a phrase like "naturally coconut-flavored sparkling water" to mean a drink that was flavored to taste like coconut but not necessarily containing coconut.[4] But when the word "Coconut" is not part of the "naturally flavored" phrase, that understanding is not necessarily the only reasonable one to be drawn. Instead, a reasonable consumer could understand that he or she was purchasing a drink containing coconut and which also was naturally flavored. The large coconut depictions, the prominence of the word "Coconut, " and the words "NATURALLY FLAVORED SPARKLING WATER, " plus the location of those words separate from the word "Coconut" could cause a reasonable consumer to believe that he or she was buying a sparkling water beverage containing coconut.

         This understanding is not diminished by the "Zero Calories" statement on the front of the bottle or by the Nutrition Facts showing that the product has zero calories, zero fat, and zero sugars. Reasonable consumers do not necessarily possess information about the calories of any given fruit, vegetable, or other featured characteristic and so may not know that if the product contained actual coconut it would likely have some calories or fat. Many consumers could rationally assume that the product had zero calories, fat, or sugar yet still contain some natural coconut flavor. After all, the beverage contains pear juice concentrate yet obviously not in sufficient quantity to provide calories, fat, or sugars. Moreover, contrary to Defendant's suggestion, the Nutrition Facts section does not expressly state that it has no potassium. It lists, as is relevant here, the total fat, sodium, total carbohydrate, and protein as all zero, and then states in fairly small print that the product is "[n]ot a significant source of other nutrients." Thus, unless the purchaser knows that coconuts are a good source of potassium, and there is no reason to conclude that a reasonable consumer would actually possess that knowledge, the fact that the Nutrition Facts section lacks any information about the potassium content of the product is meaningless. Moreover, the ingredient list includes "Potassium Benzoate (Preservative), " and a reasonable consumer could mistakenly assume this was potassium, the element. The ingredient list also shows that the product contains potassium citrate, further reinforcing the suggestion, for those who know about the amount of potassium in coconut, that coconut is in the product.

         As to the "1% Fruit Juice" language on the back or side of the label, Defendant argues that a reasonable consumer would understand the product contains no coconut because a coconut "is a nut, not a fruit." Def.'s Mot. 15, ECF 29. Defendant states that "the FDA confirms that coconut is a nut, not a fruit." Id. Defendant provides no authority or citation for this assertion. A coconut is defined as "the fruit of the coconut palm that is a drupe consisting of an outer fibrous husk that yields coir and a large nut containing the thick edible meat, and in the fresh fruit, a clear fluid called coconut milk." Webster's Third New Int'l Dictionary 437 (unabridged ed. 2002).[5] Regardless of what the FDA considers a coconut to be, given that a dictionary defines it as the ...

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