Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: CLRA claim moves forward in supplement natural flavoring case, (Aug 25, 2023)

By Seth Abrams, J.D., M.A.

Actual reliance on label was sufficiently pleaded by the buyer.

The federal district court in San Diego granted in part and denied in part a motion to dismiss filed by defendant, Performance Enhancing Supplements, LLC (“PES”) against a plaintiff, Jacob Scheibe, who filed a false advertising class action over the company’s dietary supplements. It trimmed the operative complaint by (1) granting the voluntary request to dismiss without prejudice the claims under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL); and (2) dismissing the equitable portions of the claim under California’s Consumer Legal Remedies Act (CLRA) and the equitable claim for unjust enrichment. The court, however, did allow the claim for legal relief brought under the CLRA to proceed. It also did not reach the claim for breach of express warranty (Scheibe v. Performance Enhancing Supplements, LLC, August 23, 2023, Huff, M.).

PES is a supplement company. It formulates, manufactures, and sells supplements, including a dietary supplement called “Versalyte.” In October 2022, the buyer purchased two different flavors of Versalyte—wild berry and citrus splash—from Amazon. The front label of the products stated that they are “naturally flavored.” However, the back label indicated that the products contain malic acid, which can be either naturally occurring or synthetic. Counsel for the buyer sent the products to an independent laboratory that confirmed that the malic acid in the products was synthetic. The buyer contended that he reviewed the labels and the statement that they contain natural flavors prior to purchasing the product. He also asserted that he relied on the labels’ statements and would not have purchased the products or been only willing to pay a reduced price had he been aware that the products used artificially derived malic acid.

In this putative class action, the buyer, who is a resident and citizen of California, is seeking to represent a California class of purchasers of the two Versalyte flavors with artificially derived malic acid within the last four years. Buyer’s first three claims were for violations of three prongs of the UCL—unfair, fraudulent, and unlawful. The fourth was for a violation of the FAL. The fifth was for violation of the CLRA and the sixth was for unjust enrichment. The seventh claim, which was not included in PES’s motion to dismiss, was for express warranty.

In June 2023, the buyer’s claims were originally dismissed without prejudice upon motion by PES. The buyer filed a first amended complaint which PES now sought to dismiss.

CLRA claim. PES contended that the buyer’s CLRA claim should fail because he failed to plead actual reliance with particularity as required by Rule 9(b). The court disagreed. The court looked to California law to define reliance as “reliance on a statement for its truth and accuracy, such that the plaintiff was motivated to act or refrain from action based on the truth or falsity of defendant’s statement, not merely on the fact that it was made.” The court found that the buyer was motivated to act based on the label of “Naturally Flavored.” He alleged that he would not have purchased the products if they indicated otherwise. To the court, the buyer’s “allegations make clear that he relied on the . . . statements for their truth and accuracy.” As a result, the court found that the CLRA claim was sufficiently pleaded to survive the motion to dismiss.

Equitable relief. The entire CLRA claim, however, did not move forward. In the original motion to dismiss, the court ruled that the buyer’s claims that seek equitable relief were dismissed because of the failure to adequately plead the lack of an adequate remedy at law. This included the claim under the CLRA. Under the current motion, PES argued that the buyer had again failed to plead under this requirement that it lacked a remedy at law. The court first noted that “equitable relief is not appropriate where an adequate remedy exists at law.” It then looked to plaintiff’s operative complaint and found that it “does not contain an allegation, let alone adequately pleads, that his legal remedies are inadequate.” As a result, the court granted the motion to dismiss with prejudice on the buyer’s CLRA claim to the extent that it sought equitable relief. The court reached the same conclusion on the buyer’s claim for unjust enrichment, finding again that the buyer did not allege that his legal remedies are inadequate.

Voluntary dismissal. The buyer sought the voluntary dismissal of the claims under the UCL and the FAL. The court granted this request without prejudice. This left the portions of the CLRA claim seeking legal remedies and the claim for breach of express warranty to move forward in the case.

The Case is No. 3:23-cv-00219-H-DDL.

Attorneys: Charles C. Weller (Charles C. Weller, APC) for Jacob Scheibe. Matthew Orr (Amin Talati Wasserman, LLP) for Performance Enhancing Supplements, LLC d/b/a PEScience.

Companies: Performance Enhancing Supplements, LLC d/b/a PEScience

Cases: Advertising StateUnfairTradePractices CaliforniaNews