Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-06609/USCOURTS-cand-3_06-cv-06609-2/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CHRIS CHAVEZ, an individual, on

behalf of himself, the general

public and those similarly

situated,

Plaintiffs,

 v.

BLUE SKY NATURAL BEVERAGE CO., a

foreign corporation; HANSEN

BEVERAGE COMPANY, a foreign

corporation; HANSEN NATURAL CORP.,

a foreign corporation; and DOES 1

THROUGH 10.

Defendants. 

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No. C-06-6609 SC

ORDER GRANTING

DEFENDANTS' MOTION TO

DISMISS AND VACATING

MOTION TO TRANSFER

I. INTRODUCTION

Presently before the Court are a Motion to Dismiss and Motion

to Transfer filed by Defendants Blue Sky Natural Beverage Co.,

Hansen Beverage Company, and Hansen Natural Corp. ("Defendants" or

"Blue Sky"). See Mot. to Dismiss, Docket No. 6; Mot. to Transfer,

Docket No. 8. Plaintiffs Chris Chavez and those similarly

situated ("Plaintiffs") oppose both motions. See Opp'n, Docket

Nos. 13, 14.

For the reasons discussed herein, the Court GRANTS

Defendants' Motion to Dismiss with prejudice. Defendants' Motion

to Transfer is VACATED.

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United States District Court

For the Northern District of California

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II. BACKGROUND

Defendants develop, market, sell, and distribute beverages

including natural or healthy sodas, fruit juices, energy sports

drinks, and other beverages under a variety of brand names. 

Compl., ¶¶ 20-21. In September of 2000, Defendants acquired the

Blue Sky natural soda business from the Blue Sky Natural Beverage

Co., a company that had been based in and operated from Santa Fe,

New Mexico since approximately 1980. Id. at ¶ 22. From that time

until at least May of 2006, the Blue Sky containers indicated that

their contents were made in and/or originated from Santa Fe, New

Mexico. Id. at ¶ 24. Specifically, the cans and bottles

prominently stated "SANTA FE, NEW MEXICO" or "SANTA FE, NM." Id.

In addition, every can stated "CANNED FOR THE BLUE SKY NATURAL

BEVERAGE COMPANY SANTA FE, NM 87501" or "CANNED UNDER THE

AUTHORITY OF BLUE SKY NATURAL BEVERAGE CO., SANTA FE, NM USA." 

Id. According to Plaintiffs, the packaging of Blue Sky beverages

also has a "particularly Southwestern look and feel" including

"stylized Southwestern Indian tribal bands" across the top and

bottom and "pictures of what appear to be the Sangre de Cristo

mountains that border Santa Fe, New Mexico on the eastern side of

the city." Id. at ¶ 25. Finally, until May of 2006, Defendants'

website stated "Santa Fe, New Mexico, U.S.A. (505) 995-9716" (the

505 area code is assigned to Santa Fe). Id. at ¶ 26.

Plaintiffs contend that despite Defendants' representations,

Blue Sky beverages are not manufactured or bottled anywhere in New

Mexico. Id. at ¶ 30. Plaintiffs assert that Defendants outsource

all manufacturing to third parties, all located outside New

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Mexico. Id. In addition, Plaintiffs assert that the Blue Sky

Natural Beverage Co. no longer exists in Santa Fe because one

month after Hansen's acquisition, the company was dissolved in New

Mexico and re-registered with the California Corporation

Commission as a Delaware corporation with its principal place of

business in Corona, California. Id. at ¶ 31.

According to the Complaint, the named Plaintiff is a native

of New Mexico and has purchased a variety of Blue Sky beverages

since he was a child. Id. at ¶ 27. Plaintiff relocated to

California in August of 1999 and has continued purchasing Blue Sky

beverages "due to the fact that he believed Blue Sky Beverages

were made in Santa Fe, New Mexico and/or by a company that was

located in Santa Fe, New Mexico" and because Plaintiff "desired to

(i) support a New Mexico company and (ii) to associate himself

with a product from Santa Fe, New Mexico." Id. at ¶ 28.

Plaintiff asserts that he "would not have purchased Blue Sky

Beverages had he known where they were really manufactured and/or

where the company that owned or controlled the canning of Blue Sky

Beverages was located." Id. at ¶ 36. Plaintiff, on behalf of

himself and those similarly situated, filed a class action

complaint alleging causes of action for (1) false advertising

under California Business and Professions Code § 17500 et seq.,

(2) unfair trade practices under California Business and

Professions Code § 17200 et seq., (3) violation of the Consumers

Legal Remedies Act under California Civil Code § 1750 et seq., and

(4) common law fraud, deceit and misrepresentation.

//

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United States District Court

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III. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a motion to

dismiss can be granted if the plaintiff fails "to state a claim

upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). 

When evaluating a motion to dismiss, the court accepts the facts

as stated by the nonmoving party and draws all inferences in its

favor. See Everest & Jennings, Inc. v. Am. Motorists Ins. Co., 23

F.3d 226, 228 (9th Cir. 1994). Furthermore, courts must assume

that all general allegations "embrace whatever specific facts

might be necessary to support them." Peloza v. Capistrano Unified

Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). At the pleading

stage, the plaintiff "need only show that the facts alleged, if

proved, would confer standing upon him." Warren v. Fox Family

Worldwide, Inc., 328 F.3d 1136, 1140 (9th Cir. 2003). If a

complaint is dismissed for failure to state a claim, "leave to

amend should be granted unless the court determines that the

allegation of other facts consistent with the challenged pleading

could not possibly cure the deficiency." Schreiber Distrib. Co.

v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

This case was removed to federal court based on diversity

jurisdiction under the Class Action Fairness Act, 28 U.S.C. §

1332(d). See Not. of Removal, Docket No. 1. A federal court

sitting in diversity jurisdiction applies state law on substantive

issues. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79-80 (1938). 

Thus, the Court will apply California law in evaluating

Defendants' motion.

//

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United States District Court

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IV. DISCUSSION

A. Plaintiffs' Three Statutory Claims

In the Complaint, Plaintiffs assert causes of action under

California false advertising law, Cal. Bus. & Prof. Code § 17500

et seq. ("FAL"), California unfair competition law, Cal. Bus. &

Prof. Code § 17200 et seq. ("UCL"), and the Consumers Legal

Remedies Act, Cal. Civ. Code § 1750 et seq. ("CLRA"). As a basis

for their motion to dismiss, Defendants assert that Plaintiffs

have failed to allege any remediable damage as required to state a

claim under the FAL, UCL, and CLRA. See Mot. to Dismiss, 10.

In 2004, Proposition 64 amended the express language of the

UCL and FAL with respect to damages. As a result, a plaintiff

with standing under the UCL is "any person who has suffered injury

in fact and has lost money or property as a result of such unfair

competition." Cal. Bus. & Prof. Code § 17204. In addition, a

plaintiff with standing under the FAL is "any person who has

suffered injury in fact and has lost money or property as a result

of a violation of this chapter." Cal. Bus. & Prof. Code § 17535. 

Similarly, the CLRA limits relief to "[a]ny person who suffers any

damage as a result of the use or employment by any person of a

method, act, or practice declared to be unlawful by [the CLRA]." 

Cal. Civ. Code § 1780(a).

Plaintiffs do not dispute the damages requirements for the

three statutory claims. See Opp'n, 11. Instead, Plaintiffs argue

that they have properly alleged injury in fact. See id. The

named Plaintiff claims that he would not have purchased Blue Sky

beverages had he known the truth about the geographic origin of

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the products. Compl. at ¶ 52. Thus, Plaintiffs assert that they

lost the full value of the price paid for each can or bottle of

soda. Id. Specifically, Plaintiffs claim that Defendants'

alleged misrepresentations frustrated their desire to "support a

New Mexico company" and/or "associate [themselves] with a product

from Santa Fe, New Mexico." Id. at ¶ 28.

B. Plaintiffs' Common Law Claim

Plaintiffs fourth cause of action seeks to recover damages

for alleged fraud, deceit, and misrepresentation. See id. at ¶¶

90-100. It has long been established that under California law,

"Fraud, without damage, furnishes no ground for action, nor is

fraud without damage a defense." S. Tahoe Gas Co. v. Hofmann Land

Improvement Co., 102 Cal. Rptr. 286, 296 (Cal. Ct. App. 1972),

quoting Holton v. Noble, 83 Cal. 7, 9 (1890); see Charnay v.

Cobert, 51 Cal. Rptr. 3d 471, 482 (Cal. Ct. App. 2006) (listing

the elements of fraud, including "resulting damage"). Thus,

similar to their statutory claims, Plaintiffs must allege actual

damages to pursue their common law claims.

C. Plaintiffs' Allegations of Damages 

Under the relevant law, Plaintiffs' damages allegations are

insufficient to state a claim under the FAL, UCL, CLRA, or common

law fraud. Thus, Plaintiffs do not have standing to pursue any of

their claims. On this issue, Plaintiffs assert that their damages

equal the amount paid for the Blue Sky beverages because they

would not have purchased the drinks had they known the drinks and

company were no longer related to Santa Fe, New Mexico . See

Compl. at ¶¶ 36, 52. However, Plaintiffs' alleged injury and

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damages are nonexistent because Defendants' alleged promise had no

value. In other words, Plaintiffs have not alleged damages

resulting from Defendants' supposed misrepresentation of the

location of its bottling operations and/or corporate headquarters. 

The relevant case law confirms that Plaintiffs must

adequately plead "injury in fact" to survive Defendants' motion to

dismiss. In contrast to this case, in Daghlian v. DeVry Univ.,

Inc., the court found that Plaintiff had stated a claim under the

FAL and UCL by properly pleading injury in fact. 461 F. Supp. 2d

1121, 1153-57 (C.D. Cal. 2006). The Daghlian plaintiff incurred

$40,000 in educational debt based on a recruiter's promise that

DeVry's academic credits would be transferable to a wide variety

of other schools. See id. at 1156. When the plaintiff discovered

that the credits "probably would not transfer to other educational

institutions," he sued. See id. at 1124. Daghlian's injury or

damage was clear: the difference in value between what he was

promised and what he received. He was promised an accredited

degree with transferable credits, but actually received a degree

worth much less. Similarly, in Laster v. T-Mobile USA, Inc., the

plaintiffs thought they were getting a free or substantially

discounted phone, but were charged sales tax on the full retail

value of the phone. 407 F. Supp. 2d 1181, 1194 (S.D. Cal. 2005). 

The court found the assertions concerning the shifted tax burden

sufficient to allege injury in fact. See id. As such, the

plaintiffs in Laster suffered injury because they did not get the

benefit of their bargain and paid more taxes than promised.

In contrast to Daghlian and Laster, the Plaintiffs in this

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case suffered no injury or damages as a result of Defendants'

conduct. Plaintiff did not pay a premium for Defendants'

beverages because the drinks purportedly originated in Santa Fe,

New Mexico. Accepting the facts as stated by Plaintiffs and

drawing all inferences in their favor, Defendants' promise

concerning geographic origin had no value and Plaintiffs have

suffered no damages by purchasing beverages they thought were

produced in New Mexico by a New Mexico-based company, but actually

originated in California. As a result of Plaintiffs' failure to

allege any damages under all four causes of action, Plaintiffs

have no standing to pursue their claims against Defendants.

D. Dismissal with Prejudice

When evaluating a Rule 12(b)(6) motion to dismiss, the court

must accept all material allegations in the complaint as true and

construe them in the light most favorable to the non-moving party. 

Barron v. Reich, 13 F.3d 1370, 1374 (9th Cir. 1994). The court is

not required, however, to accept conclusory legal allegations

"cast in the form of factual allegations if those conclusions

cannot reasonably be drawn from the facts alleged." Clegg v. Cult

Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). Rule

12(b)(6) must be read in conjunction with Rule 8(a) which requires

"a short and plain statement of the claim showing that the pleader

is entitled to relief." Fed. R. Civ. P. 8(a)(2). The notice

pleading standard set forth in Rule 8 establishes "a powerful

presumption against rejecting pleadings for failure to state a

claim." Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249

(citations omitted). Therefore, a court must not dismiss a

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complaint for failure to state a claim unless the plaintiff has

failed to plead "enough facts to state a claim to relief that is

plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S.Ct.

1955, 1974 (2007).

Where plaintiff's complaint should be dismissed for failure

to state a claim, the plaintiff should generally be given "at

least one chance to amend the complaint" under Fed. R. Civ. Proc.

15(a) before dismissing the action with prejudice. Bank v. Pitt,

928 F.2d 1108, 1112 (11th Cir. 1991). However, a plaintiff should

be denied leave to amend a complaint if the court determines that

"allegations of other facts consistent with the challenged

pleading could not possibly cure the deficiency." Schreiber

Distrib. Co. v. Serv-Well Furniture Co. Inc., 806 F.2d 1393, 1401

(9th Cir. 1986).

In this case, Plaintiffs' complaint gives Defendants proper

notice of Plaintiffs' claims and sets forth its theory with

specificity. Even so, the complaint is clearly deficient because

no set of facts consistent with the complaint could possibly cure

Plaintiffs' inability to plead damages resulting from Defendants'

conduct. As the Supreme Court recently stated, "we do not require

heightened fact pleading of specifics, but only enough facts to

state a claim to relief that is plausible on its face. Because

the plaintiffs here have not nudged their claims across the line

from conceivable to plausible, their complaint must be dismissed." 

Bell Atlantic, 127 S.Ct. at 1974. The Court finds that there are

no other facts Plaintiffs could present to cure their lack of

standing. Plaintiffs suffered neither injury nor damages because

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they bought cans of Defendants' beverages which contained text

stating "Santa Fe, New Mexico." As a result, the Court must

dismiss Plaintiffs' complaint with prejudice.

V. CONCLUSION

For the reasons discussed herein, Defendants' Motion to

Dismiss is GRANTED with prejudice. All other pending motions in

this case, including Defendants' Motion to Transfer are VACATED.

IT IS SO ORDERED.

Dated: June 11, 2007

 

UNITED STATES DISTRICT JUDGE

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