Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Cal.: Claims alleging misrepresentation of mulch bag contents proceed, (May 5, 2016)

By Michael Menzhuber, J.D., LL.M.

Claims that a manufacturer misrepresented the bag contents of its mulch product, in violation of California consumer protection statutes, survived a motion to dismiss. The federal district court in Sacramento rejected a claim for injunctive relief but granted leave to amend (McMillan v. Lowe’s Home Centers, LLC, May 4, 2016, Mueller, K.).

Glenn McMillan purchased bags of Premium Mulch, a private-label product retailed exclusively at Lowe’s Home Centers, and manufactured and packaged by Gro-Well Brands, Inc. He selected Premium Mulch for purchase because the label on the bag represented that the net contents of each bag was two cubic feet.

After determining that the bags of Premium Mulch contained less than two cubic feet of mulch, he filed a putative class action complaint against Lowes and Gro-Well, asserting: (1) violation of California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL) and False Advertising Law; (2) violation of the consumer fraud and deceptive trade practices acts of each of the 50 states and the District of Columbia; (3) fraudulent misrepresentation; and (4) unjust enrichment.

Gro-Well moved to dismiss, contending that the plaintiff’s complaint failed to: (1) state a plausible claim because it did not expressly reference the California Fair Packaging and Labeling Act (CFPLA) or allege that he measured the mulch using standards and procedures consistent with the CFPLA; (2) plead facts supporting the elements of justifiable reliance and intent to deceive; (3) state a cognizable claim for unjust enrichment; and (4) establish standing for the requested injunctive relief. Alternatively, Gro-Well requested the court to abstain from adjudicating the plaintiff’s claims because the provisions of the CFPLA are better enforced by state administrative agencies than by the court.

The court dismissed the plaintiff’s claim for injunctive relief because the complaint did not allege that he continued to be misled by the representations on the Premium Mulch bag label or would likely be misled again. However, the court granted leave to amend after determining that the plaintiff’s declaration suggested that he might be able to plead facts to establish standing.

Equitable abstention. The court determined that Gro-Well did not show that equitable abstention was appropriate at this stage of the proceeding. After noting the circumstances under which equitable abstention might be proper, the court determined that: (1) there was not a complex economic arrangement or legislated enforcement scheme that could be thrown out of balance by a parallel private enforcement of the statutory regulations; (2) it was not required to apply vague, judgment-laden standards or to make an economic or policy judgment in order to adjudicate the plaintiff’s claims; and (3) the injunctive relief requested by the plaintiff was limited to the two defendants in this case and, therefore, would not be unnecessarily burdensome to monitor.

Safe harbor doctrine. The court further determined that Gro-Well did not show that the plaintiff’s claim should be dismissed under the safe harbor doctrine, which precludes liability under California consumer protection statutes when the defendant’s conduct complies with California’s weights and measures rules and regulations. It determined that: (1) the plaintiff was not required to expressly plead in his complaint that the safe harbor doctrine did not apply because the safe harbor doctrine is an affirmative defense; and (2) it was not clear, based on the face of the complaint, that Gro-Well would prevail on its safe harbor defense.

Fraud claims. The court rejected Gro-Well’s argument that the plaintiff’s fraud claims should be dismissed. It determined that the plaintiff’s allegation that he purchased the Premium Mulch in reliance on those representations was a fact question not appropriate for the current stage of the proceedings. The court also found that Gro-Well’s economic theory, suggesting that it would be contrary to its self-interest to falsely represent the content on the bag label, did not undermine the plain allegations of the complaint—that Gro-Well intended to deceive consumers.

The court also rejected Gro-Well’s argument that the plaintiff’s unjust enrichment claim was not an independent claim and was duplicative of other causes of action because the court found that the plaintiff’s allegations were sufficient to state a quasi-contract claim for restitution.

The case is No. 1:15-cv-00695 DAD SMS.

Attorneys: Matthew C. De Re (Zimmerman Law Offices, PC) for Glenn McMillan. Neil K. Gilman (Hunton & Williams LLP) for Lowe’s Home Centers, LLC. Eric M. Roberts (DLA Piper LLP) for GRO-WELL Brands, Inc.

Companies: Lowe’s Home Centers, LLC; GRO-WELL Brands, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews