Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: California deceptive labeling action transferred to New York district court under first-to-file rule, (Jul 11, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Oakland, California has ordered the transfer of a putative class action under California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) to the Eastern District of New York based on the first-to-file rule (Hill v. Robert’s American Gourmet Food, LLC, July 10, 2013, Rogers, Y.). The action alleged that Pirate Brands snack foods were misleadingly labeled as “all natural” when they contained genetically modified and heavily processed ingredients

On February 15, 2013, Michael Hill filed a putative class action lawsuit in the Northern District of California on behalf of a class of Californians who purchased Pirates Brands snack foods products manufactured by Robert’s American Gourmet Food, LLC during the period from February 15, 2009 until the date notice would be disseminated to the class. Hill alleged that the products were deceptively labeled as “all natural” because they were made using genetically modified organisms and because they were so heavily processed that they no longer chemically resembled the corps from which they were derived. He asserted claims for violations of the UCL, CLRA, and FAL, and for breach of express warranty. Hill later added VMG Partners II, LLC as a defendant.

Prior to that lawsuit, Milana Valasquez and Christiana Tran filed a putative class action lawsuit in the Eastern District of New York on behalf of a nationwide class of consumers who purchased Pirates Brands snack foods products during the period from December 21, 2008 until the conclusion of the action. Tran also sought to represent a subclass of Californians who purchased the products. Valasquez and Tran asserted a variety of claims including claims under the UCL, FAL, and CLRA.

Robert’s filed a motion to transfer Hill’s action to the Eastern District of New York. Hill filed an opposition.

First-to-file Rule

The court explained that a federal district court has discretion to transfer an action to another district court under the first-to-file rule. In determining whether to apply the first-to-file rule, courts consider three factors: “(1) chronology of actions; (2) similarity of the parties; and (3) similarity of the issues.”

Chronology of actions. Since Valasquez and Tran filed their action on December 21, 2012, eight weeks before Hill filed his action on February 15, 2013, the “chronology of actions” factor was satisfied, according to the court.

Similarity of the parties. With respect to the “similarity of the parties” factor, the court explained that “the first-to-file rule does not require strict identity of the parties, but rather substantial similarity.” Although Hill’s action included VMG Partners as a defendant as well as Robert’s, “[m]erely naming additional defendants in the second-filed action did not render the parties too dissimilar to apply the first-to-file rule.” Although Valasquez and Tran sought to represent both a nationwide subclass and a California subclass, and Hill merely sought to represent a California class, both sets of plaintiffs “intend[ed] to represent at least a California class of consumers.” Thus, the court found the “similarity of the parties” factor to be met.

Similarity of the issues. In addressing the “Similarity of the issues” factor, the court explained that, as with the previous factor, “the issues in the two actions must be substantially similar, rather than identical.” Hill alleged violations of the unlawful, unfair, and fraudulent prongs of the UCL, the untrue and misleading prongs of the FAL, and Sections 1770(a)(2), (a)(5), (a)(7), (a)(9), and (a)(16) of the CLRA, while Valasquez and Tran alleged violations of the unlawful and fraudulent prongs of the UCL, the misleading prong of the FAL, and Sections 1770(a)(5), (a)(7) , and (a)(9). Both sets of plaintiffs asserted claims for breach of warranty, although they based their claims on different state laws.

The court found that, although Hill alleged violations of more prongs or subsections of the California laws, “both actions implicate the same factual issues.” Moreover, the fact that Valasquez and Tran only asserted that the Pirate Brands products were mislabeled because they contained GMO ingredients, while Hill also claimed they were mislabeled because they contained “heavily processed” ingredients, did not “prevent application of the first-to-file rule.”

“[T]he central question in both cases is the same: whether the use of the ‘all natural’ label on Pirate Brands products is deceptive and misleading because the products are, in fact, unnatural,” the court explained. “Furthermore, the claims relating to the California consumers that are represented in both cases are substantially similar as they involve the same California statutes.”

Therefore, the requirements of the first-to-file rule were met, according to the court. In addition, the court found the purposes of the first-to-file rule—“promoting judicial efficiency and avoiding the possibility of conflicting judgments”—would be served by transferring the case. The actions involved the same products, although Hill identified more of them; the class periods overlapped significantly; discovery would be duplicative; and both actions were nearing the motion to dismiss stage. The court found the “slight variations” in Hill’s allegations to be “inconsequential.”

Thus, the court granted Robert’s motion to transfer the action to the Eastern District of New York.

The case is No. 13-cv-00696-YGR.

Attorneys: Robert Ahdoot (Ahdoot & Wolfson, P.C.) for Michael Hill. Jonas Noah Hagey (Braun Hagey & Borden LLP) for Robert’s American Gourmet Food, LLC.

Companies: Robert’s American Gourmet Food, LLC; VMG Partners II, LLC.

Cases: StateUnfairTradePractices CaliforniaNews