Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-md-02087/USCOURTS-casd-3_09-md-02087-7/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1331 Fed. Question

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1 09MD2087

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

IN RE HYDROXYCUT MARKETING

AND SALES PRACTICES LITIGATION

________________________________

JUAN A. NOYOLA, 

 Plaintiff,

 vs.

IOVATE HEALTH SCIENCES GROUP,

INC., IOVATE HEALTH SCIENCES

U.S.A., INC., MUSCLETECH

RESEARCH AND DEVELOPMENT,

LTD., AND HEALTH SCIENCES

GROUP, INC.,

 Defendants.

CASE NO. 09MD2087-BTM (AJB)

 

 (S.D. Cal. No. 09CV2509)

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT’S

MOTION TO DISMISS COUNTS IV

AND V OF THE FIRST AMENDED

COMPLAINT

Defendant Iovate Health Sciences, U.S.A., Inc. (“Defendant”) has filed a motion to

dismiss Counts IV and V of Plaintiff Juan A. Noyola’s First Amended Complaint (“Motion”). For

the reasons set forth below, Defendant’s Motion is GRANTED in part and DENIED in part.

The Court denies the Motion as to Count IV. Count V is dismissed with leave to amend.

Plaintiff shall have 21 days leave to amend as to Count V. The time for leave shall run from the

date of entry of this order. 

Case 3:09-md-02087-BTM-KSC Document 183 Filed 04/26/10 Page 1 of 8
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2 09MD2087

I. BACKGROUND

On July 29, 2009, Plaintiff filed a complaint in the District Court for the Southern District

of New York (S.D.N.Y. Civil Action No. 09cv6740). On November 9, 2009, the case was

transferred by the Panel on Multidistrict Litigation (“MDL”) to the Southern District of California.

On December 16, 2009, in the above-entitled MDL action (09MD2087), Plaintiff filed a First

Amended Complaint (“FAC”). On January 22, 2010, Defendant filed a Motion to Dismiss Count

IV (breach of express and implied warranties) and Count V (violation of N.Y. General Business

Law § 349) of the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6).

II. STANDARD

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the formal sufficiency of the

plaintiff’s statement of the claim for relief. The Court's inquiry is whether the allegations state

a sufficient claim under Fed. R. Civ. P. 8, which sets forth the requirements for pleading. Under

Fed. R. Civ. P. 8(a)(2), a pleading must contain a “short and plain statement of the claim

showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).

In the adjudication of a motion to dismiss under 12(b)(6), plaintiff’s allegations must be

accepted as true, drawing all inferences from the pleaded facts in plaintiff’s favor. Pension

Comm. of Univ. of Montreal Pension Plan v. Banc of America Sec. LLC, 568 F.3d 374, 377 (2nd

Cir. 2009). To survive a motion to dismiss, the complaint must allege facts that, if true, would

create a judicially cognizable cause of action. South Road Assoc. v. Int’l Bus. Machines Corp.,

216 F.3d 251, 253 (2nd Cir. 2000). Only factual allegations must be accepted as true—not

legal conclusions. Iqbal, 129 S.Ct. at 1949. “Threadbare recitals of the elements of a cause

of action, supported by mere conclusory statements, do not suffice.” Id. Although detailed

factual allegations are not required, the factual allegations ”must be enough to raise a right to

relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

 

III. DISCUSSION

Plaintiff, Juan A. Noyola, alleges that he suffered personal injuries, namely, acute

rhabdomyalsis and liver failure, after ingesting a dietary supplement manufactured and sold by

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3 09MD2087

defendants, namely, Hydroxycut Hardcore Liquid Caplets. FAC ¶¶ 40, 21. Plaintiff’s complaint

contains five claims for relief: negligence, products liability (defective design and failure to

warn), breach of warranties, and violation of New York General Business Law. 

“Count IV” of the FAC, alleges breach of express and implied warranties and is based

on the New York Uniform Commercial Code. FAC ¶¶ 88-92. Specifically, Plaintiff alleges that

defendants expressly warranted that Hydroxycut products were safe and impliedly warranted

that the products were reasonably fit for their intended purpose to increase energy, burn

calories, and control appetite. FAC ¶ 89. According to Plaintiff, Hyrdroxycut products were

unfit and unsafe for those purposes. Id. “Count V” of the FAC alleges a violation of the New

York General Business Law § 349. FAC ¶¶ 93-97. Specifically, Plaintiff alleges defendants

engaged in unfair and deceptive acts by failing to disclose the known risks of Hyrdroxycut

products. FAC ¶ 95. Defendant Iovate Health Sciences U.S.A., Inc. moves to dismiss Counts

IV and V. 

A. Breach of Warranty Claims - Count IV

Defendant contends that Plaintiff’s breach of warranty claims fail because he has not

pled “notice” as required by New York warranty law. Specifically, Defendant argues that in

order to properly plead a warranty claim under the New York Uniform Commercial Code (“N.Y.-

U.C.C.”), a buyer must plead factual allegations that he gave the seller prior notice of such

claim. See N.Y.-U.C.C. § 2-607(3)(a). Section 2-607(3) of the New York Uniform Commercial

Code provides:

Where a tender has been accepted (a) the buyer must within a

reasonable time after he discovers or should have discovered any breach

notify the seller of breach or be barred from any remedy.

Plaintiff contends that the notice requirement in N.Y.-U.C.C. § 2-607 is inapplicable to

a product, such as Hyrdroxycut Hardcore Liquid Caplets, which is intended for human

ingestion. In support of his contention, Plaintiff cites Fischer v. Mead Johnson Labs., 41

A.D.2d 737 (N.Y. App. Div. 1973). The Fischer case involved breach of warranty claims

against the manufacturer of an oral contraceptive. In Fischer, the court noted that the notice

provision contained in N.Y-U.C.C. § 2-607(3)(a) is to be applied, if at all, differently in

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4 09MD2087

commercial and retail sales situations and held the notice requirement to be inapplicable in

cases involving goods sold for human consumption. Id. The court in Fischer looked to

Kennedy v. Woolworth Co., 205 A.D. 648 (N.Y. App. Div. 1923), a case involving injuries

caused by a child’s consumption of candy sold by the defendant. In Kennedy, the plaintiff

brought breach of warranty claims and, based on a similar provision of the statutory

predecessor to section 2-607, the court recognized:

The reason for the rule has no relevant application to the

circumstances of such a case. That section apparently has to do with

the sales of goods whose inspection or use discloses a defect of

quality, lack of conformance to sample, failure to comply with

description, or other cognate circumstances, which causes money

damage to the vendee. To require a complaint which, whatever its

nomenclature of form, is really grounded on tortious elements, to

indicate a notice of rejection or claim of damage within a reasonable

time on account of defect of edible goods in a retail transaction, would

strain the rule beyond a breaking point of sense or proportion to its

intended object.

 Id. at 649.

Contrary to Defendant’s suggestion, Fischer remains good law in New York. Neri v. R.J.

Reynolds Tobacco Co., 2000 WL 33911224 (N.D.N.Y. 2000). No contrary New York authority

appears to exist. Indeed, the latest version of New York Pattern Jury Instructions, presumably

applicable when this case goes to trial, recognizes the exception to the N.Y.-U.C.C. notice

provision that is carved out in Fischer. See e.g., N.Y. P.J.I. 2:140, Comments, (fourth

paragraph from end.)

While Defendant cites to Reyes v. McDonald’s Corp. 2006 WL 3253579 (N.D. Ill. 2006),

an unreported case from the Northern District of Illinois involving McDonald’s French fries, for

the proposition that some courts require notice even in the context of goods for human

consumption, it appears that another court, in a reported opinion the following year from that

same district, has reached the opposite result where the case involves, as here, personal

injuries. See, In re McDonald’s French Fries Litigation, 503 F.Supp. 2d 953, 956-57 (N.D. Ill.

2007) (a case also involving breach of warranty claims relating to McDonald’s French fries).

 Defendant also relies on Hubbard v. General Motors Corp., 1996WL274081 (S.D.N.Y.

1996), to support its position that Plaintiff must plead that notice was given as a prerequisite

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5 09MD2087

to his breach of warranty claims. In Hubbard, a class brought claims again General Motors

based, in part, on warranty theories for defects in the braking system in the Chevrolet

Suburban. That case is distinguishable because the court’s entire analysis of § 2-607 involved

a distinctly different question than that presented here. In Hubbard, the issue was whether

§ 2-607(3)(a) requires a buyer to give notice only to his or her immediate seller, not a remote

manufacturer. Moreover, the Hubbard case is distinguishable because of the particular

product involved, which, as in the other cases cited by Defendant, did not involve goods

intended for human consumption. 

Accordingly, the Court holds Plaintiff has, at least at the pleading stage, sufficiently

alleged his breach of warranty claims.

Because the Court has held that notice is not required in this case under the applicable

New York law, it need not reach the question of whether adequate notice was pled based on

Plaintiff’s allegations that the FDA informed defendants of the dangers of its Hydroxycut

products or whether the filing of Plaintiff’s complaint constituted sufficient notice in this case.

B. New York General Business Law § 349 Claim - Count V

Next, Defendant contends that Plaintiff’s claim for violation of New York General

Business Law § 349 should be dismissed because the “allegations fail to establish the most

basic element of a cause of action pursuant to § 349: causation.” Motion, p. 4. Defendant

argues that Plaintiff’s complaint fails because he never alleges that he actually saw any

particular representations regarding the product prior to purchasing it. Defendant cites Gale

v. Int’l Bus. Machines Corp., 781 N.Y.S. 2d 45, (N.Y. App. Div. 2004), a case in which the court

dismissed a § 349 claim because the plaintiff never alleged he saw any of the allegedly

deceptive statements before he purchased his computer hard drive. Contrary to the plaintiff

in Gale, the Plaintiff here has alleged that he purchased Hydroxycut Hardcore Liquid Caplets

“[a]fter carefully reading and considering the claims” of defendants. FAC ¶ 39. The FAC

further specifically identifies many of the claims made by defendants and the sources from

which those claims came. FAC ¶¶ 32, 34, 35. Thus, upon review of the FAC, the Court

disagrees with Defendant. Count V is not subject to dismissal for failure to plead causation.

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For the same reasons, the Court rejects the arguments set forth in footnote 3 of

Defendant’s Memorandum in support of its Motion to Dismiss. See Motion, p. 5.

Nevertheless, the Court does agree with Defendant that Plaintiff’s New York General

Business Law § 349 claim fails because he has not alleged the transaction in which he was

allegedly deceived took place in the state of New York. The purpose and intent of § 349 is to

protect consumers in their transactions that take place in the sate of New York. The authority

relied on by Plaintiff acknowledges such. Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y. 2d 314,

324 (N.Y. 2002) (“As both the text of the statute and history suggest, the intent is to protect

consumers in their transactions that take place in New York State.”). In Goshen, New York’s

highest court was called upon to determine the territorial reach of § 349 and flatly concluded

that “the transaction in which the consumer is deceived must occur in New York.” Id. at 324.

The court in Goshen specifically rejected the argument that Plaintiff makes here.

Specifically, Plaintiff argues that the statute is not only designed to protect consumers in New

York, “but also to prohibit [New York] corporations from engaging in deceptive practices.“ But

the court in Goshen held that § 349 “was not intended to police the out-of-state transactions

of New York companies . . .”). Id. at 325 (emphasis added). 

Plaintiff’s broad reading of the terms “consumer” and “transaction” are unwarranted.

As reflected in the legislative history, this piece of consumer legislation was intended to protect

consumers in transactions occurring in New York:

Attorney General Robert Abrams' 1980 memorandum to Governor

Hugh Carey described the law as adding “significant new protection

to consumers in this state” (Bill Jacket, L 1980, ch 346; see also Mem

of Attorney General, 1963 NY Legis Ann, at 106 [noting that General

Business Law § 350 “borrows the substantive standards of the

Federal Trade Commission Act and applies them to intrastate

transactions in New York”]). To apply the statute to out-of-state

transactions in the case before us would lead to an unwarranted

expansive reading of the statute, contrary to legislative intent, and

potentially leading to the nationwide, if not global application of

General Business Law § 349 (see Oswego, 85 NY2d at 26 [striking a

balance between protecting consumers and avoiding a “potential ...

tidal wave of litigation against businesses ... not intended by the

Legislature”]). Furthermore, the interpretation out-of-state plaintiffs

would have us adopt would tread on the ability of other states to

regulate their own markets and enforce their own consumer protection

laws.

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Goshen, 98 N.Y. 2d at 325. Thus, Plaintiff’s allegations that defendants “have promoted,

advertised, marketed and sold Hydroxycut products and specifically Hydroxycut Hardcore

Liquid Caplets, in New York . . ., Michigan and all 50 states” is unavailing where Plaintiff

himself alleges that he both purchased the Hydroxycut product and read the representations

about which he claims to have been deceived solely in the state of Michigan. FAC ¶¶ 27, 39.

 The fact that defendants may have developed the products or hatched the marketing

plans in New York is not determinative. The phrase “deceptive acts or practices” under the

statute “is not the mere invention of a scheme or marketing strategy” but the actual

misrepresentation or omission to the consumer. Goshen, 98 N.Y. 2d at 325. Thus, where the

plaintiff in Goshen conceded that he received the deceptive information in Florida, purchased

his policy and paid his premiums in Florida through a Florida insurance agent, the court held:

“Plainly, for purposes of section 349, any deception took place in Florida, not New York.” The

same is true here. Plaintiff here alleges he “purchased Hydroxycut Hardcore Liquid Caplets

for use as fat burners in or around March 2007 from the Wal-Mart retail store in Lansing,

Michigan” and further alleges that the deceptive information he read was on the product’s

packaging. FAC ¶ 35, 39. 

Contrary to Plaintiff’s suggestion here, the assertion that the same acts or practices may

have also deceived some unnamed, theoretical consumers in New York is not enough.

Goshen, 98 N.Y. 2d at 326 (dismissing the claims of parties who alleged to have been

deceived by purchasing the offending material in other states, while denying dismissal as to

the New York plaintiffs–even where the defendant was alleged to have conceived and

orchestrated the allegedly deceptive plan in New York prior to dissemination to potential

consumers).

Accordingly, since Plaintiff has not alleged that the transaction in which he claims he

was deceived occurred in New York, Count V in his complaint for violation of New York

General Business Law § 349 must be dismissed. While the Court will grant Plaintiff leave to

amend as to Count V if he is able to do so, the Court notes that Plaintiff has already alleged

he purchased the Hydroxycut Hardcore Liquid Caplets, the product about which he claims to

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have been deceived by statements on the product’s packaging, in Lansing, Michigan. FAC ¶

39. Therefore, the Court cautions Plaintiff about amending Count V if there is no basis to do

so following the Court’s holding herein.

III. CONCLUSION

Defendant’s Motion to Dismiss is GRANTED in part and DENIED in part as stated

above. As to Count IV, the Court holds Plaintiff has alleged facts sufficient to state a claim for

breach of warranty under New York law and the Motion to Dismiss is DENIED. As to Count

V, the Court holds Plaintiff has failed to state a claim under New York General Business Law

§ 349 and the Motion to Dismiss Count V is GRANTED without prejudice. The Plaintiff shall

have 21 days from the entry of this order to file any amended complaint correcting the

deficiency in Count V. 

The Court believes that motions for summary judgment are more appropriate than any

additional motions to dismiss any subsequent amended complaint filed pursuant to this order.

IT IS SO ORDERED.

DATED: April 26, 2010

Honorable Barry Ted Moskowitz

United States District Judge

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