Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-00837/USCOURTS-casd-3_19-cv-00837-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332dtp Diversity - Deceptive Trade Practices

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

LIT’L PEPPER GOURMET, INC.,

Plaintiff,

vs.

AIRGAS USA, LLC,

Defendant.

CASE NO. 19cv837-LAB (AGS)

ORDER GRANTING DEFENDANT’S 

MOTION TO DISMISS [Dkt. 16]

Currently before the Court is Defendant Airgas USA’s Motion to Dismiss. Dkt. 16. 

For the reasons below, that motion is GRANTED. 

BACKGROUND

Defendant Airgas USA, LLC (“Airgas”) is a Delaware corporation, headquartered 

in Pennsylvania, that manufactures and distributes commercial gas cannisters 

nationwide. First Am. Compl. (“FAC”) at ¶¶ 8-9. For at least the past four years, Airgas

has charged its customers, including Plaintiff Lit’l Pepper Gourmet, Inc. (“Lit’l Pepper”), a 

“Fuel Surcharge,” which it lists on every invoice and delivery receipt. Id. at ¶¶ 16, 21. Lit’l 

Pepper filed this complaint on behalf of itself and all other California Airgas customers, 

alleging that Airgas’s decision to impose these fuel surcharges constitutes breach of 

contract and a violation of various California consumer protection laws. Lit’l Pepper

claims that the fuel surcharges bear no relation to Airgas’s actual fuel costs and are not 

used to offset an increase in the cost of fuels. Instead, according to Lit’l Pepper, the fuel 

surcharges are simply a hidden rate increase designed to generate profit. Airgas now 

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moves to dismiss, arguing that the terms of sale found on its website permit it to impose 

these fuel surcharges.

ANALYSIS

A. Legal Standard

A Rule 12(b)(6) motion tests the sufficiency of a complaint. Navarro v. Block, 250 

F.3d 729, 732 (9th Cir. 2001). While a plaintiff need not give “detailed factual allegations,” 

a plaintiff must plead sufficient facts that, if true, “raise a right to relief above the 

speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007). “To survive 

a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,

to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 

678 (2009) (quoting Twombly, 550 U.S. at 547). A claim is facially plausible when the 

factual allegations permit “the court to draw the reasonable inference that the defendant 

is liable for the misconduct alleged.” Id. The Court need not accept legal conclusions 

couched as factual allegations. See Twombly, 550 U.S. at 555.

B. Threshold Issue: Which Set of Terms Controls?

Before analyzing the sufficiency of Plaintiff’s complaint, the Court must first 

determine which set of contractual terms governs the party’s relationship when the terms 

conflict. The key dispute in this case concerns a provision in the website’s terms of sale

that allows Airgas to impose a fuel surcharge not only if the company encounters 

extraordinary or emergency circumstances, but also in the face of “unanticipated 

increases in the cost of manufacturing, supplying or distributing.” The corresponding 

provision on the invoices contains no such carve out, but instead permits the company to 

impose a fuel surcharge only in extraordinary or emergency circumstances. Naturally, 

Plaintiff claims that the terms on the invoices control, while Airgas maintains that the terms 

on its website supersede those on the invoices. As relevant here, the language on the 

invoices provided:

Terms of Sale. Each sale of Goods or services . . . is and shall be governed 

by the terms and conditions on this Disclosure, the Terms of Sale affixed to 

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the Account Application (if one has been completed), and the Terms of Sale 

found at http://www.airgas.com/terms-of-sale (collectively the “Terms of 

Sale”).

Surcharges. Upon notice and receipt of underlying documentation, Buyer 

shall pay to Seller a surcharge in the event of any extraordinary or 

emergency increases in the cost of (a) power and/or raw materials used in 

the production of Products and/or (b) fuel. 

FAC, Ex. A at 9. The language on the delivery orders—which were signed by a Lit’l 

Pepper representative at the time Lit’l Pepper accepted a delivery from Airgas—contained 

no information about surcharges but similarly directed customers to Airgas’s website for 

the full terms governing the transaction:

AIRGAS TERMS AND CONDITIONS OF SALE. Each sale of Products by 

Airgas USA, LLC, or one of its affiliates (“Seller”), shall be governed by the 

terms and condition below and the terms of sale found at

http://www.airgas.com/terms-of-sale (collectively, the “Terms”). If you do 

not have access to the internet, you may request a copy of the terms of sale 

from your Airgas customer service representative.

Id. at 6. Finally, the online terms provide, in relevant part: 

TERMS OF SALE. Except as provided in a separate written agreement, 

such as a Product Sales Agreement, negotiated by the parties and executed 

by authorized representatives of Seller and Buyer, each sale of Products or 

Services shall be governed by these Terms and Conditions of Sale

(“Terms”). . . . Seller’s acceptance of any order is expressly subject to 

Buyer’s assent to each and all of the terms and conditions set forth herein. 

These Terms represent the entire agreement with respect to the sale or 

rental of Products and Services and, except as provided in a separate 

written agreement as set forth above, supersede all prior or 

contemporaneous written/oral communications between the parties and

information in any Seller literature, website or catalog, and override and 

exclude any other terms and conditions stipulated, incorporated or referred 

to by Buyer, including without limitation any Buyer purchase order, and any 

prior course of dealing between the parties.

. . .

ITEMIZED CHARGES. The total amount due from Buyer may include 

various itemized charges, including: charges for the handling of hazardous 

materials and for compliance with laws and regulations concerning 

hazardous materials; charges for handling, delivery, and shipping; and/or 

charges for energy or fuel. None of the charges represents a tax or fee paid 

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to or imposed by any governmental authority and all of the charges are 

retained by Seller. Seller has not specifically quantified the relationship 

between the charges and the actual costs associated with the charges, 

which can vary by product, service, time and place, among other things.

www.airgas.com/terms-of-sale.

. . .

SURCHARGES. Following notice from Seller, Buyer shall pay to Seller a 

surcharge in the event of any extraordinary, emergency or other 

unanticipated increases in the cost of manufacturing, supplying or 

distributing Product hereunder.

www.airgas.com/terms-of-sale (emphasis added in italics).

Given that both the invoices and delivery orders specifically directed customers to 

the terms of sale on its website, Airgas maintains that the website’s terms are 

incorporated by reference and control when the two sets of terms conflict. 

A contract can incorporate another document by reference if it “is clear and 

unequivocal, the reference is called to the attention of the other party and he consents 

thereto, and the terms of the incorporated document are known or easily available to the 

contracting parties.” In re Holl, 925 F.3d 1076, 1084 (9th Cir. 2019) (quoting Shaw v. 

Regents of Univ. of Cal., 58 Cal. App. 4th 44, 54 (1997)). Under this standard, the 

website’s terms of sale are properly incorporated by reference here. The website’s terms 

of sale are clearly and repeatedly referenced on both the invoices and the delivery orders,

and Lit’l Pepper was able to easily access the website’s terms during the parties’ fouryear commercial relationship. See Marin Storage & Trucking, Inc. v. Benco Contracting 

& Eng'g, Inc., 89 Cal. App. 4th 1042, 1050 (2001) (finding terms on the reverse side of a 

contract incorporated where “[o]ver the course of their lengthy history of doing business 

together prior to the accident, the parties had used the form many times, and [the 

contractor] had ample opportunity to examine the back of the form, even though [the 

contractor]'s president apparently failed to do so.”).

Lit’l Pepper argues that the differences in the language between the invoices and

online terms creates an ambiguity that must be “resolved against the drafter.” Victoria v. 

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Superior Court, 40 Cal. 3d 734, 738 (1985). An ambiguous term is “susceptible to more 

than one reasonable interpretation[,]” which suggests that no meeting of the minds 

occurred. Local Motion, Inc. v. Niescher, 105 F.3d 1278, 1280 (9th Cir. 1997). Here, the 

terms are inconsistent, but they are not ambiguous. The website terms, for example, are 

perfectly clear that they “supersede all prior or contemporaneous written/oral 

communications between the parties.” A reasonable party reading those terms would 

understand that the complete terms on the website governed the relationship and that 

any terms included on the invoice were intended only as non-exhaustive summaries.

Slaught v. Bencomo Roofing Company, 25 Cal. App. 4th 744, 750-51 (1994) is 

instructive on this point. In that case, the defendant-contractor entered into a subcontract

that incorporated by reference a broader “Construction Contract.” The arbitration 

provision in that broader Construction Contract conflicted with the arbitration provision in 

the subcontract, and the plaintiff-subcontractors argued that this led to an “obvious 

ambiguity” that should be resolved in their favor. The California Court of Appeals 

disagreed, finding that “due to incorporation of the Construction Contract . . ., the 

arbitration procedures specified in the general [Construction C]ontract controlled.” Id. 

The same is true here. There is no obvious ambiguity in language; there is only an 

inconsistency in terms. Where that’s the case, the more exhaustive, incorporated 

document—in this case, the one found on the website that explicitly superseded all other 

agreements—controls. For purposes of this opinion, the Court will treat the terms on 

Airgas’s website as governing the parties’ relationship.

C. Breach of Contract

The primary allegation underlying Plaintiff’s complaint is that Airgas’s imposition of 

a fuel surcharge constitutes breach of contract. Specifically, Lit’l Pepper alleges that the 

terms found on the parties’ invoices permitted Airgas to impose a fuel surcharge only 

when there were “extraordinary or emergency increases in fuel costs.” In Plaintiff’s view, 

there were no such extraordinary circumstances and Airgas’s decision to impose a fuel 

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surcharge therefore breached both the explicit terms of the agreement and the covenant 

of good faith and fair dealing. 

Lit’l Pepper’s claim is belied by the terms of the parties’ agreement. Under the 

terms of sale set out on Airgas’s website, which the Court has determined control here, 

Airgas was permitted to impose a fuel surcharge “in the event of any extraordinary, 

emergency, or other unanticipated increases in the cost of manufacturing, supplying or 

distributing Product hereunder.” Airgas Terms of Sale, www.airgas.com/terms-of-sale, 

¶ 7 (emphasis added). Although Plaintiff’s complaint alleges that there were no 

extraordinary or emergency circumstances, it doesn’t account for the possibility that any 

surcharge increases were the result of unanticipated cost increases. Indeed, Plaintiff 

concedes in its complaint that the price of fuel in California “increased by approximately 

25 percent” from April 28, 2015 to October 1, 2018, which suggests that there were in fact

unanticipated increases in the costs of providing the product. FAC at ¶ 22. The increase 

in the fuel surcharge—130% over the same period—may have outstripped the increase

in the price of fuel, but there is no requirement in the contract that the fuel surcharge 

precisely track the cost of fuel.1 As pled, Lit’l Pepper has not stated a valid claim for 

breach of contract.

Lit’l Pepper’s related claim for breach of the covenant of good faith and fair dealing 

fails because “the covenant . . . cannot impose substantive duties or limits on the 

contracting parties beyond those incorporated in the specific terms of their agreement.” 

Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 349-50 (Cal. 2000). 

/ / /

 

1

In fact, there’s no reason to think the two percentages are necessarily linked to one 

another at all. If a fuel surcharge starts out close to zero, even a modest increase—say 

from 10¢ to $1—will result in a large percentage increase—in this example, 1000%. But 

that additional revenue might not be sufficient to cover a 50% increase in the cost of fuel 

from, say, $40 per barrel to $60 per barrel. In other words, it’s not apparent there is a 

close relationship between an increased fuel surcharge and increased fuel prices, at least 

in percentage terms.

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D. Unlawful, Unfair, and Fraudulent Business Practices

Lit’l Pepper next argues that Airgas’s imposition of a fuel surcharge constitutes an 

unlawful, unfair, and/or fraudulent business practice in violation of California Business 

and Professions Code Section 17200, et seq., commonly known as “the UCL.”

A. Unlawful

“Under its ‘unlawful’ prong, ‘the UCL borrows violations of other laws . . . and 

makes those unlawful practices actionable under the UCL.’” Berryman v. Merit Prop. 

Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (2007). To properly plead an unlawful claim 

under the UCL, a plaintiff must plausibly allege a violation of some other predicate law. 

See Pellerin v. Honeywell Int'l, Inc., 877 F. Supp. 2d 983, 992 (S.D. Cal. 2012) (“A UCL 

claim must be dismissed if the plaintiff has not stated a claim for the predicate acts upon 

which he bases the claim.”). 

Lit’l Pepper’s complaint sets forth a laundry list of predicate statutes that Airgas 

supposedly violated by imposing a fuel surcharge, including, among others, California 

Civil Code Sections 1572 (actual fraud), 1573 (constructive fraud), 1709 (fraudulent 

deceit), 1711 (deceit upon the public), and 1670.5 (unconscionable contracts). But Lit’l 

Pepper makes no serious effort to plead a violation of any of these predicate statutes. It 

doesn’t plead the specific elements of the statutes, nor does it plead any factual support 

for its allegations other than that Airgas imposed a fuel surcharge. Because Lit’l Pepper 

did not “take care to specifically plead the elements of the predicate, unlawful California 

Civil Code violations,” it has not stated a plausible claim under the UCL’s unlawful prong. 

Eckler v. Wal-Mart Stores, Inc., 2012 WL 5382218, at *5 (S.D. Cal. 2012).

B. Unfair

Lit’l Pepper next alleges that Airgas’s decision to impose a fuel surcharge, even if 

not unlawful, was an “unfair” business practice in violation of the UCL. An unfair business 

practice is one that “offends an established public policy or . . . is immoral, unethical, 

oppressive, unscrupulous or substantially injurious to consumers.” Smith v. State Farm 

Mut. Auto. Ins. Co., 93 Cal. App. 4th 700, 719 (2001), as modified (Nov. 20, 2001). 

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Plaintiff does not explain how specifically Airgas’s actions were unfair, except that the 

decision to impose a fuel surcharge amounted to a “systematic breach” of the parties’ 

agreement. As discussed above, Lit’l Pepper has not plausibly alleged any breach of the 

parties’ agreement, so this argument doesn’t hold water here.

But even putting aside the “systematic breach” argument, federal courts in 

California have regularly rejected claims that surcharges—even those disproportionate to 

the seller’s underlying costs—constitute unfair competition. In Graham v. VCA Antech, 

2016 WL 5958252 (C.D. Cal. 2016), for example, the plaintiff alleged that defendants’ 

“Biohazard Waste Management” fee was unfair because it was an “illegal profit enhancer” 

that bore no rational relationship to the defendants’ actual waste-disposal costs. Id., at 

*3. The court disagreed, finding that the imposition of the fee was not unfair even if the 

“overall revenue that was generated for ‘waste management’ surpassed [defendants’] 

ultimate expenses associated with waste disposal.” Id., at *9. The court found it important 

that the seller “disclosed the [fee] on plaintiff’s invoices” and “plaintiffs willfully paid the full 

amount of the [fee].”2 Id., at *10. The same is true here. Airgas’s invoices and delivery 

orders disclosed the existence and the amount of the fuel surcharge, and Lit’l Pepper 

regularly paid these surcharges for years. The UCL does not provide courts with “a 

general license to assess the fairness of contracts,” Samura v. Kaiser Found. Health Plan, 

Inc., 17 Cal. App. 4th 1284, 1299 n.6 (1993), and Plaintiff has identified no authority that 

requires a for-profit business to identify the specific statute or contract that permits it to 

charge a fee for a service. Instead, the burden is on Lit’l Pepper to show that the fee was 

impermissible. It hasn’t met that burden here.

C. Fraudulent

Lit’l Pepper’s last UCL claim is that Airgas’s decision to impose a fuel surcharge 

constituted a fraudulent business practice. To show that a business practice is fraudulent, 

 

2 Relatedly, Airgas argues that all of Lit’l Pepper’s claims are barred under the so-called 

“voluntary payment doctrine.” Except as relevant here, the Court doesn’t address this 

argument. 

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a plaintiff must demonstrate that “members of the public are likely to be deceived.” Brown 

v. Starbucks Corp., 2019 WL 996399, at *2 (S.D. Cal. 2019). Here, because Lit’l Pepper 

hasn’t plausibly alleged that Airgas exceeded its authority under the contract in imposing 

the fuel surcharge, it also hasn’t plausibly alleged that the public would be deceived by 

Airgas’s actions. See Chaiwong v. Hanlees Fremont, Inc., 2018 WL 4677600, at *5 (N.D. 

Cal. 2018) (dismissing plaintiff’s claim under the fraudulent prong of the UCL failed where 

“the lease agreement explicitly states that [defendant’s] customers may be charged for 

excess wear or mileage at lease end.”). 

E. False and Misleading Statements

Plaintiff’s last claim is that Airgas’s terms and conditions violated California 

Business and Professions Code § 17500, also known as California’s False Advertising 

Law. California’s False Advertising Law “prohibits any ‘unfair, deceptive, untrue, or 

misleading advertising.’” Williams v. Gerber Prod. Co., 552 F.3d 934, 938 (9th Cir. 2008)

(quoting Cal. Bus. & Prof. Code § 17500). To state a claim for violation of this law, a 

plaintiff must allege that there was an advertisement that was directed at the public and 

that it was unfair, deceptive, untrue, or misleading. See id.; see also VP Racing Fuels, 

Inc. v. Gen. Petroleum Corp., 673 F. Supp. 2d 1073, 1088 (E.D. Cal. 2009) (“The 

underlying element of a false advertising claim is some type of advertising statement.”). 

Lit’l Pepper has not plausibly alleged a violation of California’s False Advertising 

Law because it has neither shown that Airgas’s terms and conditions were 

advertisements directed at the public nor that the terms were untrue or deceptive. 

Although the definition of “advertising” in section 17500 is expansive and includes “any [ ] 

manner or means whatsoever, . . . [the statute] as a whole clearly refers to advertising,” 

not to contracts. Otashe Golden, M.D. v. Sound Inpatient Physicians Med. Grp., Inc., 

2015 WL 8539034, at *5 (E.D. Cal. 2015). Lit’l Pepper has identified no authority holding 

that a contract between parties constitutes “advertising,” and the Court declines to adopt 

such a broad reading. See id. (“Finding for Plaintiff on this point would mean that nearly 

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any false statement connected with the sale of a product/service constitutes false 

advertising.”).

Further, even if the Court were to construe Airgas’s terms of service as an 

advertisement, for the reasons discussed above, Lit’l Pepper has not plausibly pled that 

there was anything false, unfair, or deceptive about them. 

F. CLASS ACTION WAIVER

The final piece of this puzzle is the class action waiver in Airgas’s terms. The 

waiver, which is found in the online terms but not the physical invoices,3 provides: 

GOVERNING LAW; CLASS ACTION AND TRIAL BY JURY WAIVER.

These Terms shall be governed by and construed in accordance with the 

substantive law of the State of Delaware, without regard to its conflict of 

laws principles. . . . Any claim must be brought in the respective party’s 

individual capacity, and not as a plaintiff or a class member in any purported 

class, collective, representative, multiple plaintiff, or similar proceeding 

(“Class Action”). The parties expressly waive any ability to maintain any 

Class Action in any forum. Id.

Airgas Terms of Sale, www.airgas.com/terms-of-sale, at ¶ 25. Airgas argues that the 

unambiguous language of this provision means that Lit’l Pepper must pursue this litigation 

individually and not on behalf of other customers. Lit’l Pepper does not dispute the 

language of the provision, but instead maintains that California law controls and that the 

provision is substantively unconscionable—and therefore unenforceable—under the 

California Supreme Court’s decision in Discover Bank v. Superior Court, 113 Cal.4th 148

(Cal. 2005) abrogated on other grounds by AT&T Mobility LLC v. Concepcion, 563 U.S. 

333 (2011). 

Although the parties disagree about whether California or Delaware law governs 

the class action waiver, it’s not necessary to reach that question here because the waiver 

is valid even under the more stringent California standard. In Discover Bank, the 

 

3 For the same reasons discussed earlier, the Court finds that the class action waiver was 

properly incorporated by reference into the parties’ contract.

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California Supreme Court held that a class action waiver is substantively unconscionable

when “the waiver is found in a consumer contract of adhesion in a setting in which 

disputes between the contracting parties predictably involve small amounts of damages, 

and when it is alleged that the party with the superior bargaining power has carried out a 

scheme to deliberately cheat large numbers of consumers out of individually small sums 

of money.” Discover Bank, 113 Cal. 4th at 162-63. Lit’l Pepper has failed to plausibly 

allege that Airgas “carried out a scheme to deliberately cheat large numbers of consumers 

out of the individual small sums of money.” Id. The Terms of the parties’ agreement 

expressly authorized Airgas to levy a fuel surcharge, and Lit’l Pepper cannot plausibly 

allege that Airgas’s decision to impose an authorized surcharge constitutes “a scheme to 

deliberately cheat its customers.” Lit’l Pepper’s request for declaratory relief is dismissed. 

CONCLUSION

Defendant’s motion to dismiss is GRANTED. Dkt. 16. Lit’l Pepper’s First Cause 

of Action for Violation of California’s False Advertising Law, Cal. Bus. & Prof. Code 

§ 17500, is DISMISSED WITH PREJUDICE because Plaintiff has not (and cannot) show 

that the parties’ contract constituted advertising as a matter of law. Lit’l Pepper’s 

remaining claims, including the class allegations, are DISMISSED WITHOUT 

PREJUDICE. Lit’l Pepper may amend, but only if it can show that Airgas’s decision to 

impose a fuel surcharge was done in the face of known or anticipated fuel increases, and 

only if it can make that showing on more than a “speculative level.” Twombly, 550 U.S. 

at 545. As discussed above, the fact that the fuel surcharge increased faster than the 

price of fuel is not alone sufficient to state a plausible claim. If Lit’l Pepper elects to 

amend, it must do so no later than January 13, 2020. 

IT IS SO ORDERED.

Dated: November 21, 2019

HONORABLE LARRY ALAN BURNS

Chief United States District Judge

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