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holding that a statement that a building product is "exceptionally durable" is non-actionable puffery under California law
Summary of this case from In re Hardieplank Fiber Cement Siding Litig.Opinion
Case No. 14-cv-05373-TEH
11-30-2015
DANA GOLD, Plaintiff, v. LUMBER LIQUIDATORS, INC., Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS; DENYING DEFENDANT'S MOTION TO STRIKE; DENYING DEFENDANT'S REQUEST FOR JUDICIAL NOTICE
This matter came before the Court on October 26, 2015 for a hearing on Defendant Lumber Liquidators' motions to dismiss Plaintiffs' First Amended Complaint (Docket No. 31) and strike Plaintiffs' Nationwide Class and West Virginia Sub-Class from the First Amended Complaint (Docket No. 33). Defendant also filed a request for judicial notice in support of its motion to dismiss. (Docket No. 32.) Plaintiffs opposed all three filings (Docket Nos. 39, 42, and 40, respectively), and Defendant timely replied (Docket Nos. 43, 45, and 44, respectively). After carefully considering the parties' written and oral arguments, the Court hereby GRANTS IN PART and DENIES IN PART Defendant's motion to dismiss, DENIES Defendant's motion to strike, and DENIES Defendant's request for judicial notice, for the reasons set forth below.
BACKGROUND
The following factual allegations are taken from Plaintiffs' First Amended Complaint ("FAC"), unless otherwise stated, and are therefore accepted as true for the purposes of this motion. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).
Plaintiffs Dana Gold, Tammy Emery, Edwin Mendez, and Christopher Massaro are residents of California, West Virginia, Illinois, and New York, respectively. FAC ¶¶ 9-12 (Docket No. 17). All four Plaintiffs purchased and installed Lumber Liquidators' Morning Star bamboo flooring ("the Product") in their homes, and shortly thereafter began experiencing Product defects. Id. ¶¶ 16-38. Plaintiff Gold has experienced "warping, splitting, buckling and shrinking" (id. ¶ 17); Plaintiff Emery has experienced "delaminating, warping, splitting, shrinking and scratching and generally deteriorating in various places" (id. ¶ 21), requiring several repairs (id. ¶ 22); Plaintiff Mendez has experienced "buckling and shrinking in several areas" (id. ¶ 30); and Plaintiff Massaro has experienced "cracking, delaminating, gapping, and scratching in various places" (id. ¶ 35).
Plaintiffs allege that Lumber Liquidators employed "deceptive practices [that] were specifically designed to induce Plaintiffs and Members of the Class to purchase the [defective] Product," (id. ¶ 67); namely, Lumber Liquidators (1) "failed to disclose to Plaintiffs and the Class the defective nature of the Product" (id. ¶ 40), and (2) "misrepresented to Class Members [that] the Product possess qualities and characteristics it does not have" (id. ¶ 74).
As to the omissions: Plaintiffs allege Lumber Liquidators failed to disclose that the Product was "defectively formulated, was susceptible to warping, splitting, shrinking and splintering, would otherwise not perform as represented, and would fail before its thirty year warranted life." Id. ¶ 44.
As to the misrepresentations: Plaintiffs allege Plaintiff Emery purchased the Product on July 10, 2014 "after . . . being told by a Lumber Liquidator Manager (Mr. William S. Dyess) that it was durable, the best product available, and sold with 30 year warranty" (id. ¶ 20); and Plaintiff Massaro purchased the Product on October 17, 2013 "after . . . being told by a Lumber Liquidators' salesperson that the floor was 'harder than hardwood' and long lasting" (id. ¶ 34). More generally, Plaintiffs allege Lumber Liquidators distributed a "repeated theme regarding the Product" through "representations [that] were published on Internet sites such as YouTube, on the Lumber Liquidators website, at trade, building and home shows typically open to the general public." Id. ¶ 42. This theme included representations such as: the Product is "free of defects," "exceptionally durable," and "two- to two-and-a-half times harder than red oak." Id. The Lumber Liquidators website likewise states that the Product meets accepted industry standards: "'QUALITY GUARANTEE: This Flooring is constructed and tested to meet or exceed industry standards for emissions' - including ASTM 4066 (wear resistance), ASTM 3359 (Finish Adhesion) and ASTM 4442 (Moisture Content)." Id.
Plaintiffs brought this putative class action pursuant to Rules 23(b)(2) and (b)(3) of the Federal Rules of Civil Procedure, challenging Lumber Liquidators' business practices with respect to the sale and marketing of the Product. Id. ¶ 49. Plaintiffs advance the class action on behalf of a Nationwide Class as well as four state Sub-Classes (id. ¶ 50), and bring five causes of action: first cause of action for violation of California Consumers Legal Remedies Act ("CLRA") (id. ¶¶ 64-69); second cause of action for violation of California Unfair Competition Law ("UCL") through unlawful business practices (id. ¶¶ 70-76); third cause of action for violation of UCL through unfair business practices (id. ¶¶ 77-81); fourth cause of action for violation of New York General Business Law ("GBL") § 349 (id. ¶¶ 82-96); and fifth cause of action for violation of Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA") (id. ¶¶ 97-106).
LEGAL STANDARDS
I. Motion to Dismiss: Rules 12(b)(1), 12(b)(6), and 9(b)
Dismissal is appropriate under Federal Rule of Civil Procedure ("Rule") 12(b)(1) when a court lacks subject matter jurisdiction because a plaintiff lacks Article III standing. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). The burden of proof on such motion lies with the party asserting jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). In reviewing such a motion, courts must take the allegations in the plaintiff's complaint as true and draw "all reasonable inferences in [plaintiff's] favor." Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004).
Dismissal is also appropriate under Rule 12(b)(6) when a plaintiff's allegations fail "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Specifically, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
In ruling on a motion to dismiss, a court must "accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party." Vasquez v. L.A. Cty., 487 F.3d 1246, 1249 (9th Cir. 2007). Courts are not "bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (citation omitted). Dismissal of claims that fail to meet this standard should be with leave to amend, unless it is clear that amendment could not possibly cure the complaint's deficiencies. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296, 1298 (9th Cir. 1998).
In addition, fraud claims are subject to a heightened pleading standard. "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). The allegations must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). To that end, allegations sounding in fraud must contain "an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.2007).
II. Motion to Strike: Rule 12(f)
Rule 12(f) provides that "the court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "Immaterial matter is that which has no essential or important relationship to the claim for relief or the defenses being plead" and "[i]mpertinent matter consists of statements that do not pertain, and are not necessary, to the issues in question." Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 974 (9th Cir. 2010) (citations omitted). "Redundant matter is defined as allegations that constitute a needless repetition of other averments or are foreign to the issue" and "[s]candalous[] includes allegations that cast a cruelly derogatory light on a party or other person." Swanson v. Yuba City Unified Sch. Dist., No. 2:14-cv-01431-KJM-DAD, 2015 WL 2358629, at *4 (E.D. Cal. May 15, 2015). Moreover, "[w]here the complaint demonstrates that a class action cannot be maintained on the facts alleged, a defendant may move to strike class allegations prior to discovery." Sanders v. Apple Inc., 672 F. Supp. 2d 978, 990 (N.D. Cal. 2009).
When ruling on a motion to strike, the court must view the pleading in the light most favorable to the pleader. Jacobson v. Persolve, LLC, No. 14-CV-00735-LHK, 2014 WL 4090809, at *2 (N.D. Cal. Aug. 19, 2014).
DISCUSSION
I. MOTION TO DISMISS
Defendant Lumber Liquidators argues that Plaintiffs' claims fail for five reasons; each of these arguments is addressed in turn below.
1. Defendant's First Argument: Plaintiffs Lack Article III Standing to Sue
First, Lumber Liquidators argues that the FAC should be dismissed under Rule 12(b)(1) because Plaintiffs lack Article III standing: "[while the FAC] is littered with supposedly deceptive statements, [] no Plaintiff is alleged to have both seen or heard and relied on any one of them." Mot. to Dismiss at 1, 6-9 (Docket No. 31).
To establish Article III standing, a plaintiff must satisfy three elements: (1) "injury in fact - an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical"; (2) causation - "a causal connection between the injury and the conduct complained of"; and (3) redressability - "it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotation marks, citations, and footnote omitted). "In a class action, standing is satisfied if at least one named plaintiff meets the requirements." Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (en banc).
As to the injury requirement, Plaintiffs allege that they were deceived into paying more for the Product than it is actually worth (given its defective nature and the repairs that resulted), and/or that they bought it when they otherwise would not have (because Lumber Liquidators made deceptive claims and failed to disclose the Product's true quality). See FAC ¶ 75 ("Plaintiffs and the Class have suffered actual damages in that they own homes and other structures on which defective Product is or was installed. . . . [Such defects have caused] Plaintiffs and the Class to incur costs to prematurely repair and/or replace their floorings."); ¶ 95 ("Plaintiffs and the other Members of the Class suffered an ascertainable loss in the form of monies paid to Defendant for Product that, contrary to Defendant's representations, prematurely failed."). There is little doubt that such economic harm constitutes an Article III injury-in-fact:
No doubt a plaintiff's injury must be "concrete and particularized." The injury here meets both of those requirements. Each alleged class member was relieved of money in the transactions. . . . [This] is plainly a case where [Plaintiffs'] claim is that they came, saw, were conquered by stealth, and were relieved of their money.Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011). As to the redressability requirement, Lumber Liquidators does not even argue that the requirement is not met where, as here, a plaintiff seeks injunction and restitution for such harm under state consumer protection statutes.
The gravamen of Lumber Liquidators' Article III argument therefore appropriately lies with the causation requirement; namely, Lumber Liquidators argues that Plaintiffs' failure to plead reliance on specific misrepresentations violates the causation requirement. Mot. to Dismiss at 6-9. This issue turns on whether a class is required to plead reliance on specific misrepresentations to establish Article III standing. And the answer is complicated.
The Ninth Circuit has considered this question in the context of California's UCL. The California Supreme Court recently clarified in In re Tobacco II Cases that the UCL provides for restitution and injunctive relief to absent class members, without requiring individualized proof of deception, reliance, or injury. 46 Cal. 4th 298, 320 (2009). And in the wake of Tobacco II, the Ninth Circuit has held that this conclusion does not rob absent class members of Article III standing:
Although it is not a simple or a clear cut matter, we conclude, in the light of our prior precedent, that [Defendant's] objection "that state law gives a right to 'monetary relief to a citizen suing under it' without a more particularized proof of injury and causation . . . is not enough to preclude class standing here.Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 595 (9th Cir. 2012) (quoting Stearns, 655 F.3d at 1021).
There is, however, one important qualification to this analysis. The Ninth Circuit has also held that named class representatives in UCL cases must still show "additional factors as to [themselves]" to meet the Article III standing requirements. Stearns, 655 F.3d at 1020 (citing Tobacco II, 46 Cal. 4th at 313-14). And in the context of a UCL and CLRA-based class action, at least one court in this district has held that a named plaintiff must "allege specifically which statements she found material to her decision to purchase" in order to meet the causation requirements of Article III. Pirozzi v. Apple Inc., 913 F. Supp. 2d 840, 847 (N.D. Cal. 2012).
To that end, Plaintiffs conceded at the October 26, 2015 hearing that they failed to allege any misrepresentations were made to Plaintiffs Gold and Mendez, let alone which statements they found material to their decisions to purchase the Product. Defendant's motion to dismiss is therefore GRANTED WITHOUT PREJUDICE as to Plaintiffs Gold and Mendez, as they have not pleaded facts sufficient to find Article III standing.
As to Plaintiffs Emery and Massaro, the FAC does allege that Defendant or its agent made specific misrepresentations. Plaintiff Emery stated she purchased the Product on July 10, 2014 "after . . . being told by a Lumber Liquidator Manager (Mr. William S. Dyess) that it was durable, the best product available, and sold with 30 year warranty." FAC ¶ 20. Plaintiff Massaro stated that he purchased the Product on October 17, 2013 "after . . . being told by a Lumber Liquidators' salesperson that the floor was 'harder than hardwood' and long lasting." Id. ¶ 34. The causal connection between those statements and Plaintiffs' alleged losses is clear: Lumber Liquidators claimed that the Product was high quality, and, according to the FAC, in actuality it is not. Those allegations are therefore sufficient to plead causation and confer Article III standing. Accordingly, Lumber Liquidators' motion to dismiss the FAC for lack of Article III standing is DENIED as to Plaintiffs Gold and Massaro.
Importantly, this does not mean the alleged misrepresentations are also both actionable and sufficient to survive the heightened pleading standard under Rule 9(b). See infra Sections I(3)(iii) (discussing Lumber Liquidators' puffery arguments) and I(3)(vi) (discussing the heightened pleading standard applicable to misrepresentations).
It is worth noting, however, that this analysis applies only to the extent that Plaintiffs' claims are based on misrepresentations. Though all five of Plaintiffs' causes of action reference misrepresentations, Plaintiffs seem to concede that this is really an omissions case. See Opp'n to Mot. to Dismiss at 18 ("Finally, and most importantly, this is an omissions case."). If that is true, then Plaintiffs cannot be said to lack Article III standing for want of specificity regarding Lumber Liquidators' misrepresentations. Should Plaintiffs choose to amend the complaint, they should confirm or deny whether they intend to pursue only omission-based theories of liability.
2. Defendant's Second Argument: Consumer Statutes Do Not Apply Extraterritorially
Second, Lumber Liquidators argues that Plaintiffs are limited to bringing claims under the law of the state in which they purchased the flooring and also reside, and that Plaintiff Emery (West Virginia) should therefore be dismissed because the FAC brings no claims under West Virginia law. Mot. at 1, 9-10.
Plaintiffs bring this action on behalf of a Nationwide Class of all persons that purchased the Product in the United States (FAC ¶ 50) and four state Sub-Classes: California, New York, Illinois, and West Virginia. Id. Each of these Sub-Classes would be represented by a lead plaintiff from the state and would encompass all persons who purchased the Product in that state. Id.
It is actually unclear from the face of the FAC which consumer statues Plaintiffs even intend to apply extraterritorially, as it is unclear whether the Sub-Classes are sought in addition to or in the alternative of the Nationwide Class. Consequently, questions abound: Do the fourth and fifth causes of action (under New York and Illinois law) apply only to the New York and Illinois Sub-Classes, respectively? Or are Class Members in California, for example, availing themselves of both the California consumer protections statutes (first, second, and third causes of action) as well the New York and Illinois statutes? And why is there no cause of action under West Virginia law?
The FAC does provide one clue as to Plaintiffs' intentions, however, by placing California law front and center. See, e.g., id. ¶ 52 (including analysis of only the California consumer statutes as questions common to the class). Moreover, Plaintiffs' Opposition briefing addresses only the propriety of applying California law extraterritorially. Opp'n to Mot. to Dismiss at 6-7 (Docket No. 39). The Court therefore assumes Plaintiffs intend to apply only California law extraterritorially, and thus that they intend to apply New York and Illinois law only to the New York and Illinois Sub-Classes. If this is the case, then it follows that the state Sub-Classes are pleaded in the alternative of a Nationwide Class; in other words, that Plaintiffs seeks to apply California law to a Nationwide Class if one is certified, but would otherwise limit each Sub-Class to the law of that state. Accordingly, the Court considers only the propriety of applying California law to a Nationwide Class.
If this understanding is incorrect, then Plaintiffs should clarify their intentions if and when they choose to file an amended complaint.
As to the Nationwide Class, it may be true that California choice-of-law principles will eventually preclude extraterritorial application of the California consumer statues at issue. But "[a]t this stage of the instant litigation, a detailed choice-of-law analysis would be inappropriate." In re Clorox Consumer Litig., 894 F. Supp. 2d 1224, 1237 (N.D. Cal. 2012). Accordingly, Lumber Liquidators' motion to dismiss the Nationwide Class and the California, New York, and Illinois Sub-Classes, on the basis that state consumer laws may not be applied extraterritorially, is hereby DENIED. But because the FAC fails to bring any causes of action under West Virginia law, there would be no substantive law to apply to this Sub-Class in the absence of a Nationwide Class. Accordingly, Lumber Liquidators' motion to dismiss the West Virginia Sub-Class is hereby GRANTED WITHOUT PREJUDICE.
The Court's reasoning on this point is discussed more fully below under the analysis of Lumber Liquidators' Motion to Strike. See infra Section II.
Again, this holding turns on the Court's current understanding that the only law Plaintiffs seek to apply extraterritorially is California law (and only in the case of a Nationwide Class), an understanding which Plaintiffs should feel free to correct upon amendment.
3. Defendant's Third Argument: CLRA and UCL Claims Fail
Third, Lumber Liquidators argues that Plaintiffs cannot state claims under California's consumer protection statutes because: "(1) they fail to allege any representation that would mislead a reasonable consumer, (2) do not allege that Lumber Liquidators had knowledge of any fact it was obligated to disclose, (3) fail to allege reliance, and (4) do not meet the Rule 9(b) pleading standard." Mot. to Dismiss at x. Lumber Liquidators further argues that Plaintiffs' "unlawful" UCL claim fails for the additional reason that Plaintiffs fail to allege a predicate "unlawful" act. Id. at 19-20.
i. The CLRA Claim (First Cause of Action)
California's CLRA makes unlawful "unfair methods of competition and unfair or deceptive acts or practices." Cal. Civ. Code § 1770(a). Of relevance in this action, the CLRA prohibits a person from "[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have," and from "[r]epresenting that goods or services are of a particular standard, quality, or grade . . . if they are of another." Id. §§ 1770(a)(5), (a)(7).
Plaintiffs allege that Lumber Liquidators violated CLRA §§ 1770(a)(5) and (a)(7) when it "represented, through its advertising and other express representations, that the Product had benefits or characteristics that it did not actually have." FAC ¶ 66.
ii. The UCL Claims (Second and Third Causes of Action)
The UCL bans "unlawful, unfair or fraudulent business act[s] or practice[s] and unfair, deceptive, untrue or misleading advertising." Cal. Bus. & Prof. Code § 17200. The three "prongs" of the UCL are independent of each other and may be asserted as separate claims. The "unlawful" prong of the UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law. Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000).
First, Plaintiffs allege that Lumber Liquidators engaged in unlawful business practices when "it falsely represented the Product was of a particular standard or quality, including representations that the Product was 'free of defects,' 'exceptionally durable,' and 'two to two and a half times harder than red oak.' " FAC ¶ 72. Second, Plaintiffs allege that Lumber Liquidators engaged in an unfair business practices "by failing to disclose material facts concerning the Product, and representing, through advertising, warranties and other representations that the Product had particular qualities . . . that were inconsistent with Defendant's knowledge of Product performance." Id. ¶ 78.
iii. Some of the Alleged Misrepresentations Are Actionable Under CRLA and UCL, While Others Are Not
The CLRA and UCL utilize a "reasonable consumer standard." Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir.1995). Thus, statements are only actionable under these statutes if they are likely to deceive a reasonable consumer. Stickrath v. Globalstar, Inc., 527 F. Supp. 2d 992, 998 (N.D. Cal. 2007). "Advertisements that amount to mere puffery are not actionable because no reasonable consumer relies on puffery. Factual representations, however, are actionable." Id. (citation omitted). While vague "product superiority claims" typically amount to nonactionable puffery, "misdescriptions of specific or absolute characteristics of a product are actionable," as are any "specific and measurable advertisement claim of product superiority based on product testing." Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997) (citation omitted).
Thus, for example, statements that a satellite television service provides "crystal clear" or "CD quality" reception are not actionable because they "are not factual representations that a given standard is met," but statements that a service would provide "50 channels" and "7 day service" are actionable factual representations. Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351, 1361-62 (2003). Similarly, terms such as "high quality," "reliable," "high performance," and "latest technology" are nonactionable puffery, whereas "brand-name components" and "most stringent quality control tests" are actionable factual representations that can be proved or disproved during discovery. Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133, 1140-41 (C.D. Cal. 2005).
To that end, Plaintiffs allege that some representations were specifically made to Plaintiffs Emery and Massaro, including that the Product was "durable" and "the best product available" (FAC ¶ 20), and that the Product was " 'harder than hardwood' and long lasting" (id. ¶ 34). Plaintiffs also allege that Lumber Liquidators published a "repeated theme regarding the Product," including representations that the Product is "free of defects," "exceptionally durable," "two- to two-and-a-half times harder than red oak," and "meets accepted industry standards." Id. ¶ 42.
Lumber Liquidators is correct to argue that "[n]o reasonable consumer would believe that statements such as 'exceptionally durable' and 'the best product available,' were intended to guarantee against the very things that the Product's warranty excluded." Mot. to Dismiss at 1. These statements, as well as statements that the Product is "long lasting," "harder than hardwood," and "free of defects," amount to nonactionable puffery. Certain other statements, however, have precisely the "measureable" quality that nudges a statement over the line from mere puffery to actionable misrepresentation: namely, that the Product is "two- to two-and-a-half times harder than red oak," and "meets accepted industry standards." Accordingly, Lumber Liquidators' motion to dismiss the FAC for failure to plead actionable misrepresentations is DENIED with respect to the statements identified above as actionable misrepresentations.
According to Lumber Liquidators, the Product's warranty covers manufacturing defects but excludes conditions unrelated to the manufacture of the flooring, such as scratches or buckling due to moisture at the site. Mot. to Dismiss at 1.
Again, the Court's holding that certain statements constitute actionable misrepresentations does not mean the same statements meet Rule 9(b)'s heightened pleading requirements. See infra Section I(3)(vi).
iv. Plaintiffs Pleaded Actionable Omissions Under CRLA and UCL
"Omissions are actionable under the CLRA only when the omission is contrary to a representation actually made by the defendant or where a duty to disclose exists." Williamson v. Apple, Inc., No. 5:11-cv-00377 EJD, 2012 WL 3835104, at *6 (N.D. Cal. Sept. 4, 2012). A duty to disclose may arise in four circumstances: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact. LiMandri v. Judkins, 52 Cal. App. 4th 326, 337 (1997). Conclusory allegations are insufficient to establish a defendant's knowledge for purposes of creating a duty to disclose. See, e.g., Williamson, 2012 WL 3835104, at *7 ("Plaintiff has not sufficiently plead facts supporting a duty to disclose on the part of Apple because Plaintiff does not allege what was actually known to Apple in anything less than a conclusory fashion.").
Though Lumber Liquidators argues that "Plaintiffs admit they cannot identify an omission contrary to any particular representation actually made by Lumber Liquidators" (Reply ISO Mot. to Dismiss at 7 (Docket No. 43)), the Court is not convinced this is the case. Plaintiffs do allege that Lumber Liquidators knew of and failed to disclose the falsity of certain actionable misrepresentations. For example, Plaintiffs allege that "Defendant states that its flooring meets accepted industry standards," including for wear resistance and finish adhesion (FAC ¶ 42), that Defendant knew said representations were false (id. ¶ 43) because in reality the Product is "defectively designed, tested, and manufactured, and will warp, buckle, splinter and unreasonably scratch and dent when used in its intended manner" (id. ¶ 43). Taken as true, these allegations are sufficient to state a claim that there was an omission - that the Product prematurely buckled, scratched, etc. - contrary to a representation - that the Product met industry standards for wear resistance and finish adhesion. Twombly, 550 U.S. at 555-56. Accordingly, Lumber Liquidators' motion to dismiss the FAC for failure to plead actionable omissions is DENIED.
Again, the Court's holding that Plaintiffs have alleged actionable omissions does not mean these omissions meet the relevant pleading requirements. See infra Section II(3)(vi).
It is worth noting, however, that absent this "contrary to a representation" omission, Plaintiffs have failed to plead Lumber Liquidators had adequate knowledge to trigger a duty to disclose, and would therefore have failed to plead an actionable omission. Though Plaintiffs make numerous allegations that Lumber Liquidators "knew" that the Product did not conform to representations made at the time of sale (FAC ¶¶ 59, 88), such conclusory allegations are insufficient to establish a defendant's knowledge for purposes of creating a duty to disclose. Williamson, 2012 WL 3835104, at *7. The complaints named Plaintiffs made to Lumber Liquidators after they purchased the Product (FAC ¶¶ 16, 37) are also insufficient to create such a duty, as "[a]wareness of a few customer complaints . . . does not establish knowledge of an alleged defect." Baba v. Hewlett-Packard Co., No. C 09-05946 RS, 2011 WL 317650, at *3 (N.D. Cal. Jan. 28, 2011). Finally, the four sample internet complaints cited by Plaintiffs (FAC at 11-12) are insufficient for the same reason. Though Plaintiffs allege "thousands" of customers made such complaints, they list only four. Id. Simply put, then, Plaintiffs have not "plausibly" pleaded that Lumber Liquidators was on notice of any defect at the time Plaintiffs purchased their flooring. Iqbal, 556 U.S. at 678. Plaintiffs seem to have recognized that this may be true, offering to "amend to include more detail" on the complaints. Opp'n to Mot. to Dismiss at 15. Should they choose to amend, "more detail" will indeed be needed to adequately allege that Lumber Liquidators had the knowledge required to trigger a duty to disclose. // // //
v. Plaintiffs Adequately Pleaded Reliance Under CRLA and UCL
1. UCL Claims
The UCL requires that a plaintiff's economic injury come "as a result of" the allegedly unfair competition. Cal. Bus. & Prof. Code § 17204. The California Supreme Court concluded in Tobacco II "that this language imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL's fraud prong." Tobacco II, 46 Cal. 4th at 327-28. Courts in California have concluded that this reasoning from Tobacco II applies equally to the UCL's other prongs, where the predicate conduct is misrepresentation or nondisclosure. Hale v. Sharp Healthcare, 183 Cal. App. 4th 1373, 1385 (2010).
Actual reliance, however, may be presumed where a misrepresentation was "material":
While a plaintiff must show that the misrepresentation was an immediate cause of the injury-producing conduct, the plaintiff need not demonstrate it was the only cause. . . . Moreover, a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material. A misrepresentation is judged to be "material" if "a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question."Tobacco II, 46 Cal. 4th at 326-27 (citations omitted). Moreover, a plaintiff need not "demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement." Id. at 327.
The Ninth Circuit has recognized the practical effect of these holdings from Tobacco II: "One might even say that, in effect, California has created what amounts to a conclusive presumption that when a defendant puts out tainted bait and a person sees it and bites, the defendant has caused an injury; restitution is the remedy." Stearns, 655 F.3d at 1021 n.13. This materiality/reliance rule "applies to cases regarding omissions or 'failures to disclose' as well." Stearns, 655 F.3d at 1022; see also McAdams v. Monier, Inc., 182 Cal. App. 4th 174, 184 (2010) (holding that because of defendant's failure to disclose information "which would have been material to any reasonable person who purchased" the product, a presumption of reliance was justified).
It seems difficult to argue that a reasonable consumer would not find the alleged misrepresentations and omissions to be important to the purchasing decision at issue. Taken as true, a reasonable consumer would certainly want to know that Lumber Liquidators knew the Product was defective and "misrepresented to Class Members the Product possess qualities and characteristics it does not have," (id. ¶ 74), such as through suggestions that the Product met industry standards for wear resistance and finish adhesion (id. ¶ 42) that it did not, in actuality, meet (id. ¶ 43). Reliance may therefore be inferred from materiality in this case. Accordingly, Lumber Liquidators' motion to dismiss the FAC for failure to plead reliance is DENIED as to the UCL claims.
It bears repeating that the Court's holding that Plaintiffs have pleaded reliance does not mean they have met the relevant pleading requirements. See infra Section I(3)(vi).
2. CLRA Claim
"A CLRA claim warrants an analysis different from a UCL claim because the CLRA requires each class member to have an actual injury caused by the unlawful practice." Stearns, 655 F.3d at 1022. Nevertheless, "[c]ausation, on a classwide basis, may [likewise] be established by materiality. If the trial court finds that material misrepresentations have been made to the entire class, an inference of reliance arises as to the class." In re Vioxx Class Cases, 180 Cal. App. 4th 116, 129 (2009).
For the reasons discussed above, reliance may be inferred from materiality in this case. Accordingly, Lumber Liquidators' motion to dismiss the FAC for failure to plead reliance is DENIED as to the CLRA claim.
vi. Plaintiffs Pleaded Omissions, but Not Misrepresentations, with the Required Particularity
1. Misrepresentations
Claims under the CLRA and UCL that sound in fraud must satisfy Rule 9(b)'s heightened pleading requirement. Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009). Courts in the Ninth Circuit have dismissed CRLA and UCL claims for failure to comply with Rule 9(b). See, e.g., Chavez v. Nestle USA, Inc., No. CV 09-9192-GW (CWx), 2011 WL 10565797, at *8 (C.D. Cal. Jan. 10, 2011) (dismissing UCL claims where complaint did not identify "what specific misrepresentations [plaintiffs] allegedly saw, when they viewed them, or how they relied upon them"); Pirozzi, 913 F. Supp. 2d at 850 ("While Plaintiff identifies a number of representations []—on [defendant's] website, in its privacy policy, and in the [] Review Guidelines—she fails to provide the particulars of her own experience reviewing or relying upon any of those statements. Nowhere in the CAC does Plaintiff specify when she was exposed to the statements or which ones she found material to her decisions to purchase . . . .").
Plaintiffs correctly point out they are "not required to plead with an unrealistic degree of specificity that the plaintiff relied upon particular advertisements or statements." Opp'n to Mot. to Dismiss at 18 (citing Tobacco II, 46 Cal. 4th at 328). What Plaintiffs have identified, however, is the standard for statutory standing under California law, not the heightened standard for pleading fraud in federal courts. As Chavez, Pirozzi, and other cases make clear, Plaintiffs must plead "the who, what, when, where, and how" of their misrepresentation-based UCL and CLRA claims to maintain a case in federal court.
See supra Section I(1).
And they do not. Though Plaintiffs allege the challenged representations were made on websites, at trade shows, and at product retail stores (FAC ¶ 41), the FAC never identifies which advertising or sales materials each named Plaintiff was allegedly exposed to, the time frame during which these comments appeared, when the exposure occurred, or which statements each found material. And although Plaintiffs do allege "the who, what, when, where, and how" of misrepresentations made to Plaintiffs Emery and Massaro, these specific statements were nonactionable mere puffery, as discussed above. Plaintiffs' claims based on affirmative misrepresentations therefore clearly fail to meet the pleading standards under Rule 9(b). Accordingly, Lumber Liquidators' motion to dismiss the FAC for failure to plead with particularity is GRANTED WITHOUT PREJUDICE as to the misrepresentation-based CRLA and UCL claims.
See supra Section I(3)(iii).
2. Omissions
Plaintiffs argued in their Opposition briefing that claims based on omission "can succeed without the same level of specificity required by a normal fraud claim." Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). "Clearly, a plaintiff in a fraud by omission suit will not be able to specify the time, place, and specific content of an omission as precisely as would a plaintiff in a false representation claim." Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1098-99 (N.D. Cal. 2007).
In Reply, Lumber Liquidators asserted only that "Rule 9(b) still applies to omissions claims," without any supporting authority. Reply ISO Mot. to Dismiss at 10. Without any authority to suggest otherwise, the Court must follow the cases cited by Plaintiffs, and therefore holds that omissions-based claims need not be pleaded with the same specificity as misrepresentations-based claims. Accordingly, the FAC cannot be dismissed for failure to plead "the who, what, when, where, and how" of the alleged omissions, and Lumber Liquidators' motion to dismiss the FAC for failure to plead with particularity is DENIED as to the omissions-based CRLA and UCL claims.
vii. Plaintiffs Pleaded a UCL Predicate "Unlawful" Act
"Generally, violation of almost any law may serve as a basis for a UCL claim." Jordan v. Paul Fin., LLC, 745 F. Supp. 2d 1084, 1098 (N.D. Cal. 2010) (internal quotations marks and citation omitted). This includes the CLRA. Keegan v. Am. Honda Motor Co., Inc., 284 F.R.D. 504, 533 (C.D. Cal. 2012). Accordingly, to the extent Plaintiffs' CLRA claim survives, Plaintiffs' "unlawful" UCL claim does, too.
4. Defendant's Fourth Argument: GBL and ICFA Claims Fail
Fourth, Lumber Liquidators argue that Plaintiffs' claims under New York's and Illinois' consumer protection statutes (GBL and ICFA, respectively) fail because "(1) they fail to allege any actionable misrepresentation or omission, (2) do not allege that Lumber Liquidators had knowledge of any fact it was obligated to disclose, (3) do not meet the Rule 9(b) pleading standard, (4) fail to allege injury under New York's law, and (5) fail to allege intent under Illinois' law." Mot. to Dismiss at x.
i. GBL and ICFA Claims
To state a claim under GBL § 349, a plaintiff must allege: "(1) the act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result." Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009). To state a claim under ICFA, a plaintiff must allege: (1) a deceptive act or unfair practice by the defendant; (2) the defendant intended that the plaintiff rely on that conduct, or intended to deceive plaintiff; (3) the conduct occurred during the course of trade or commerce; and (4) the conduct proximately caused the plaintiff's injury." Garrett v. RentGrow, Inc., No. 04 C 8309, 2005 WL 1563162, at *2 (N.D. Ill. July 1, 2005). An act or practice is "unfair" under ICFA if: (1) the practice offends public policy; (2) it is immoral, unethical, oppressive, or unscrupulous; or (3) it causes substantial injury to consumers. Id. at *3.
ii. Some of the Alleged Misrepresentations Are Actionable Under GBL and ICFA, While Others Are Not
As with the UCL and CLRA, a representation is deceptive under GBL where it is "likely to mislead a reasonable consumer acting reasonably" (Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 647 N.E.2d 741, 744 (N.Y. 1995)), and deceptive under ICFA "if it creates a likelihood of deception or has the capacity to deceive" (Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938 (7th Cir. 2001)).
Despite the slight differences between these laws and the CLRA and UCL, they command the same conclusion: some of the alleged misrepresentations are "likely to mislead a reasonable consumer" (GBL) and/or have "the capacity to deceive" (ICFA), while others do not. Accordingly, Lumber Liquidators' motion to dismiss the GBL and ICFA claims for failure to plead actionable misrepresentations is DENIED with respect to the statements identified above as actionable misrepresentations.
See supra Section I(3)(iii) (listing out which statements are actionable and which statements are not).
iii. Plaintiffs Failed to Plead GBL- and ICFA-Actionable Omissions
As with the UCL and CLRA, an omission is also actionable under the GBL and ICFA. Under the GBL, a duty to disclose arises when "a defendant exclusively possesses information that a reasonable consumer would want to know and could not discover without difficulty . . . ." Woods v. Maytag Co., No. 10-CV-0559 ADS WDW, 2010 WL 4314313, at *16 (E.D.N.Y. Nov. 2, 2010). Under ICFA, an omission is actionable where the defendant has knowledge of a material fact at the time of concealment. Rockford Mem'l Hosp. v. Havrilesko, 858 N.E.2d 56, 62 (Ill. App. Ct. 2006).
Plaintiffs concede that "both the GBL and ICFA require awareness of the relevant information before omission-based liability can be imposed." Opp'n to Mot. to Dismiss at 20. Plaintiffs also concede that "[f]or the sake of brevity, the FAC includes just a few [consumer] complaints," and argue that "the product purchase dates mentioned [in those complaints] all predate Plaintiffs' purchase of their respective flooring." Id. at 21. But for the same reasons as discussed above under the CRLA and UCL analysis, the FAC does not adequately allege that Lumber Liquidators had adequate knowledge of any defect to trigger a duty to disclose or actionable omission under the GBL and ICFA. Accordingly, Lumber Liquidators' motion to dismiss the GBL and ICFA claims for failure to plead actionable omissions is GRANTED WITHOUT PREJUDICE.
See supra Section I(3)(iv).
iv. Plaintiffs Pleaded GBL and ICFA Omissions, but Not Misrepresentations, with the Required Particularity
Plaintiffs' GBL and ICFA claims are based upon the same alleged fraudulent misrepresentations and omissions as their California-law claims. As such, if the heightened pleading requirements of Rule 9(b) apply to the GBL and ICFA claims, then the 9(b) analysis will be identical to the analysis done for the CLRA and UCL claims.
Regardless of whether federal courts in New York and Illinois apply Rule 9(b) to their state consumer protection statutes, federal courts in California are bound to apply Ninth Circuit precedent, which applies rule 9(b) to CLRA and UCL claims. Keegan v. Am. Honda Motor Co., Inc., 838 F. Supp. 2d 929, 957 (C.D. Cal. 2012) (citing Kearns, 567 F.3d at 1125). The district court in Keegan therefore applied Rule 9(b) to each of the various state consumer protection claims at issue, including NewYork's, despite the Second Circuit's contrary practice:
While the court acknowledges this authority, it is bound to apply Ninth Circuit precedent as set forth in Kearns. Although Kearns addressed only Rule 9(b)'s applicability to CLRA and UCL claims that sound in fraud, its reasoning is broad and applies to any claim that is " 'grounded in fraud' or 'sound[s] in fraud.' "Keegan, 838 F. Supp. 2d at 957. Given Plaintiffs argument that Defendants' "conduct constitutes consumer fraud within the meaning of the various consumer protection statutes" (FAC ¶ 103), this Court is likewise bound by the holding in Kearns. As such, the Rule 9(b) analysis conducted above for the CRLA and UCL claims applies here with equal force. Accordingly, Lumber Liquidators' motion to dismiss for failure to plead with particularity is GRANTED WITHOUT PREJUDICE as to the misrepresentations-based GBL and ICFA claims and DENIED as to the omissions-based claims.
See supra Section I(3)(vi).
v. Plaintiffs Adequately Pleaded an Injury Under the GBL
Unlike the economic harm recognized as cognizable under the CRLA and UCL, courts in New York reject the notion that "a defendant's deception alone - in other words, allegations of pecuniary loss arising solely from the purchase of the defendant's product - may suffice to plead 'actual injury' for a Section 349 [GBL] claim." Preira v. Bancorp Bank, 885 F. Supp. 2d 672, 676 (S.D.N.Y. 2012). New York courts do, however, accept a "price premium" theory of actual harm, i.e., that "the price of the product was inflated as a result of defendant's deception . . . ." Baron v. Pfizer, Inc., 840 N.Y.S.2d 445, 448 (N.Y. App. Div. 2007).
See supra Section I(1).
Despite Lumber Liquidators' arguments to the contrary, Plaintiffs do advance a "price premium" theory. See FAC ¶¶ 95 ("Plaintiffs . . . suffered an ascertainable loss in the form of monies paid to Defendant for Product that, contrary to Defendant's representations, prematurely failed."); 52(q) (listing as a common question "[w]hether Defendant should be declared financially responsible for . . . providing restitution of monies paid and inadequate value given"). Accordingly, Lumber Liquidators' motion to dismiss the GBL claim for failure to plead actual injury is DENIED.
vi. Plaintiffs Have Not Adequately Pleaded Intent Under ICFA
To satisfy ICFA's intent requirement, "a plaintiff must allege either intent by the defendant that the plaintiff rely on that act or practice, or intent by the defendant to deceive, defraud, or be unfair to the plaintiff." Garrett, 2005 WL 1563162, at *4.
Plaintiffs admit that their ICFA "intent" argument rests on the same allegations that were dismissed above as inadequate to allege Lumber Liquidators was on notice of any defect at the time Plaintiffs purchased their flooring. See Opp'n to Mot. to Dismiss at 25 ("Sufficient evidence, including a substantial volume of consumer complaints predating Plaintiffs' purchases, supports these claims and suggests [t]hat Lumber Liquidators knew of the defects at all relevant times."). Accordingly, Lumber Liquidators' motion to dismiss the ICFA claim for failure to plead intent is GRANTED WITHOUT PREJUDICE.
See supra Section I(3)(iv).
5. Defendant's Fifth Argument: Standing for Injunctive Relief
Fifth, and finally, Lumber Liquidators argues that Plaintiffs cannot plausibly allege that they will be misled by any misrepresentations or omissions in the future, and therefore lack Article III standing to pursue injunctive relief. Mot. to Dismiss at 25. Plaintiffs seek injunctive relief preventing Lumber Liquidators from distributing advertising "that omits material facts about product performance . . . ." FAC ¶ 69.
Historically,"[t]o have standing to obtain injunctive relief, a plaintiff must allege that a 'real or immediate threat' exists that he will be wronged again." Rahman v. Mott's LLP, No. CV 13-3482-SI, 2014 WL 325241, at *10 (N.D. Cal. Jan. 29, 2014) (quoting City of L.A. v. Lyons, 461 U.S. 95, 111 (1983)). And it is true that in the context of consumer cases, some courts in this district have held that a plaintiff's knowledge of allegedly unlawful or misleading conduct precludes Article III standing for injunctive relief. See Garrison v. Whole Foods Mkt. Grp., Inc., No. 13-CV-05222-VC, 2014 WL 2451290, at *5 (N.D. Cal. June 2, 2014) ("The named plaintiffs in this case allege that had they known the Whole Foods products they purchased contained SAPP, they would not have purchased them. Now they know. There is therefore no danger that they will be misled in the future."); Morgan v. Wallaby Yogurt Co., No. 13-CV-00296-WHO, 2014 WL 1017879, at *6 (N.D. Cal. Mar. 13, 2014) (same). With such cases as support, Lumber Liquidators argues that "[r]egardless of the merits of their claims, Plaintiffs now know the information they contend Lumber Liquidators should have disclosed," "cannot plausibly allege that they would be misled by this omission again in the future," and therefore lack standing to pursue injunctive relief. Mot. to Dismiss at 25.
Recently, however, courts in this district have resisted such a narrow construction of California consumer protection statutes, and ruled that injunctive relief is available even to a consumer who is aware of a misrepresentation:
If the Court were to construe Article III standing for [] UCL claims as narrowly as the Defendant advocates, federal courts would be precluded from enjoining false advertising under California consumer protection laws because a plaintiff who had been injured would always be deemed to avoid the cause of the injury thereafter ("once bitten, twice shy") and would never have Article III standing.Henderson v. Gruma Corp., No. CV 10-04173 AHM (AJWx), 2011 WL 1362188, at *7 (C.D. Cal. Apr. 11, 2011). In Lilly v. Jamba Juice Co., No. 13-cv-02998-JST, 2015 WL 1248027 (N.D. Cal. Mar. 18, 2015), for example, the district court held that "a plaintiff can [] have standing to seek an injunction against a product she knows to be mislabeled." 2015 WL 1248027, at *3. The court was particularly concerned that "to deny injunctive relief 'would eviscerate the intent of the California Legislature in creating consumer protection statutes because it would effectively bar any consumer who avoids the offending product from seeking injunctive relief.'" Id. (citation omitted).
The Court finds the reasoning in Henderson and Jamba Juice to be compelling. Though those were mislabeling cases, rather than omissions cases, their rationale applies with equal force to the case at hand. Lumber Liquidators should not be able to escape injunctive relief, and continue with the alleged unlawful practices, merely by making them known to the subset of consumers who happen to presently be suing.
Accordingly, Lumber Liquidators' motion to dismiss for lack of Article III standing to pursue injunctive relief is DENIED.
II. MOTION TO STRIKE
Defendant Lumber Liquidators also moves to strike Plaintiffs' Nationwide Class and West Virginia Sub-Class from the FAC. Mot. to Strike (Docket No. 33). Lumber Liquidators makes two arguments: first, consumer protection statutes cannot be applied extraterritorially; and second, choice-of-law principles preclude nationwide application of the consumer protection statutes. Id. at 2-7.
As discussed above, the FAC and Plaintiffs' Opposition briefing suggest that Plaintiffs intend to apply only California law extraterritorially, and only in the event a Nationwide Class is certified. Lumber Liquidators' first argument regarding extraterritorial application of consumer statues is therefore irrelevant, and the real issue is whether California law may be applied to a Nationwide Class.
See supra Section I(2).
In a CAFA diversity action, federal courts in California apply California's choice-of-law rules. See Forcellati v. Hyland's, Inc., No. CV 12-1983-GHK (MRWx), 2014 WL 1410264, at *1 (C.D. Cal. Apr. 9, 2014). California applies the three-step "governmental interest analysis" to determine whether California law should apply abroad: (1) whether the laws of the potentially affected jurisdictions differ; (2) if so, whether there is a "true conflict" given each jurisdiction's interest in the application of its own law under the facts of the case; and (3) if so, which jurisdiction's interests would be most impaired if its laws were not applied. Mazza, 666 F.3d at 590. Applying this test in Mazza, the Ninth Circuit reversed certification of a nationwide class under the UCL and CLRA, holding that "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." Id. at 594.
Lumber Liquidators argues that in the case now before the Court, all three prongs of the "governmental interest analysis" counsel against maintenance of a Nationwide Class. Mot. to Strike at 4-7. In response, rather than arguing that these prongs should be analyzed differently, Plaintiffs argue that courts within the Ninth Circuit should not even be addressing this question at such an early stage in the litigation. Opp'n to Mot. to Strike at 3-6 (Docket No. 42).
And Plaintiffs are correct. In Forcellati v. Hyland's, Inc., 876 F. Supp. 2d 1155 (C.D. Cal. 2012), the district court denied defendant's motion to strike plaintiff's nationwide class claims, recognizing that "[c]ourts rarely undertake choice-of-law analysis to strike class claims at this early stage in litigation." 876 F. Supp. 2d at 1159. As the court explained:
Mazza (and nearly every other case cited by Defendants) undertook a class-wide choice-of-law analysis at the class certification stage, rather than the pleading stage at which we find ourselves. Until the Parties have explored the facts in this case, it would be premature to speculate about whether the differences in various states' consumer protection laws are material in this case.Id. As Plaintiff argues, "[t]his approach ensures that parties can argue - and the court decide - the issue on a complete record with the benefit of discovery." Opp'n to Mot. to Strike at 3.
Though Lumber Liquidators' cites some case law counseling otherwise, the Court finds Plaintiffs' cases and arguments on this point to be more compelling. Though it is true that the Court will eventually have to address California's three-step "governmental interest analysis," it would be premature to conduct this analysis now. Accordingly, Lumber Liquidators' motion to strike the Nationwide Class is DENIED. And the Court had already GRANTED WITHOUT PREJUDICE Lumber Liquidators' motion to dismiss the West Virginia Sub-Class because the FAC fails to bring any causes of action under West Virginia law. Accordingly, Lumber Liquidators' motion to strike the West Virginia Sub-Class is also DENIED.
See, e.g., In re Graphics Processing Units Antitrust Litig., 527 F. Supp. 2d 1011, 1028 (N.D. Cal. 2007) (granting defendants' motion to strike nationwide UCL claims prior to discovery, and noting that the court "[saw] merit in disposing of [such claims] at an early stage of the litigation, particularly where the issue of whether the different state's laws conflict will not change significantly as this action progresses").
See supra Section I(2).
III. REQUEST FOR JUDICIAL NOTICE
Defendant Lumber Liquidators requests judicial notice of eight documents: the warranties in use for the Product in September and October 2013 (Ex. A, Docket No. 32-2) and between July and September 2014 (Ex. B, Docket No. 32-3); the purchase invoices for Plaintiffs Gold (Ex. C, Docket No. 32-4), Emery (Ex. G, Docket No. 32-8), and Mendez (Ex. H, Docket No. 32-9); the inspection report for Plaintiff Gold (Ex. D, Docket No. 32-5); and the delivery receipt (Ex. E, Docket No. 32-6) and general disclosure statement (Ex. F, Docket No. 32-7) for Plaintiff Massaro.
Though styled as a request for judicial notice, Lumber Liquidators attempts to draw the Court's attention to these documents through the "incorporation by reference" doctrine, rather than through Rule 201. Under the incorporation by reference doctrine, courts may "deviate from the general rule that [], when ruling on a motion to dismiss, [they] must disregard facts that are not alleged on the face of the complaint or contained in documents attached to the complaint." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). The doctrine provides that courts may "consider documents in situations where the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance." Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010).
Rule 201 governs judicial notice of adjudicative facts "not subject to reasonable dispute." Fed. R. Civ. P. 201(b). --------
Resolution of this request is simple, as Plaintiffs challenge the authenticity of all eight documents:
Mr. Pullin [through whose declaration the documents were introduced] does not purport to be the records custodian for each of these stores. . . does not even indicate whether he is located in one of the states in which the purchase took place . . . does not testify about the document retention practices in any of these stores . . . [does not] indicate how he obtained access to the documents . . . [and] does not describe how he was able to identify the sales specific to each Plaintiff or the records he claims are associated with the purchase, delivery, and investigation of their claims.Opp'n to Req. for Judicial Notice at 3-4 (Docket No. 40). Regardless of whether Mr. Pullin can properly authenticate these documents, their authenticity is undoubtedly "in question." Accordingly, Lumber Liquidators' request for judicial notice is DENIED.
CONCLUSION
For the foregoing reasons, Lumber Liquidators' motion to dismiss the FAC is GRANTED IN PART and DENIED IN PART. All dismissal is WITHOUT PREJUDICE. Should Plaintiffs elect to file an amended complaint curing the deficiencies identified herein, they shall do so by Wednesday, December 16, 2015. Failure to file a timely amended complaint shall result in dismissal of all claims with prejudice.
Lumber Liquidators' motion to strike is DENIED.
Lumber Liquidators' request for judicial notice is DENIED.
IT IS SO ORDERED.
Dated: 11/30/15
/s/_________
THELTON E. HENDERSON
United States District Judge