Outlaw Laboratory, LP v. DG in PB, LLC

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 In re Outlaw Laboratory, LLP. Case No.: 3:18-CV-0840-GPC 12 ORDER 13 (1) GRANTING THE STORES’ 14 MOTION TO RECONSIDER THE 15 MAY 29, 2020 ORDER AS TO PLAINTIFF’S CLAIM OF “UNFAIR” 16 BUSINESS PRACTICES, AND 17 (2) DISMISSING THE “UNFAIR” 18 BUSINESS PRACTICES CLAIM 19 WITH PREJUDICE.

20 (ECF NO. 213.) 21 22 On May 29, 2020, the Court largely granted the Stores’ motion for judgement on 23 the pleadings as to Plaintiff Outlaw Laboratory, LLP’s Complaint. (ECF No. 209.) The 24 Court found that Plaintiff failed to state a claim under the Lanham Act, 15 U.S.C. §§ 25 1051 et seq., California’s False Advertising Law (“FAL”), Cal. Bus. & Prof. Code § 26 17500, and the “fraudulent” and “unlawful” prongs of California’s Unfair Competition 27 Law (“UCL”), Cal. Bus. & Prof. Code § 17200. Importantly, however, the Court 28 observed that the Stores did not challenge the adequacy of the Outlaw’s claim for 1 “unfair” business practices under the UCL. (ECF No. 209 at 22) (“Here, Plaintiff alleges 2 that the Stores have violated each prong of the UCL and the Stores move for judgment on 3 the pleadings under the “fraudulent” and “unlawful” prongs, only.”) 4 The Stores now move for reconsideration, arguing that the Court committed clear 5 error by overlooking their challenge to the “unfair” prong. (ECF No. 213.) In light of the 6 applicable law and for the reasons below, the Court finds that it clearly erred by not 7 considering the Stores’ challenge to the “unfair” prong, and that Plaintiff fails to allege 8 “unfair” business practices under the UCL. Thus, upon reconsideration, the Court 9 GRANTS the Stores’ motion for judgment on the pleadings in full and now also 10 DISMISSES WITH PREJUDICE Plaintiff’s claim for “unfair” practices. 11 I. Background. 12 The Court adopts the facts as summarized in the May 29, 2020 Order. (See ECF 13 No. 209 1–6.) The Court adds that, on May 29, 2020, the Stores filed a motion for 14 reconsideration of the Court’s order. (ECF No. 213.) Third-Party Defendant Tauler Smith 15 filed a response on June 19, 2020. (ECF No. 237.) On June 26, 2020, the Stores filed a 16 reply. (ECF No. 245.) Plaintiff Outlaw did not respond to this motion. 17 II. Legal Standard 18 A motion for reconsideration is “appropriate if the district court (1) is presented 19 with newly discovered evidence; (2) clear error or the initial decision was manifestly 20 unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, 21 Multnomah County, Or. v. ACandS, Inc., 5 F.3d 1255, 1262 (9th Cir. 1993); see also 22 Ybarra v. McDaniel, 656 F.3d 984, 998 (9th Cir. 2011). “[A] motion for reconsideration 23 should not be granted, absent highly unusual circumstances . . .” Marlyn Nutraceuticals, 24 Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (quotation 25 omitted); McDowell v. Calderon, 197 F.3d 1253, 1255 (9th Cir. 1999). Reconsideration is 26 an “extraordinary remedy, to be used sparingly in the interests of finality and 27 conservation of judicial resources.” Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 28 890 (9th Cir. 2000). 1 Reconsideration “cannot be used to ask the Court to rethink what the Court has 2 already thought through merely because a party disagrees with the Court’s decision.” 3 Beaver v. Tarsadia Hotels, 29 F. Supp. 3d 1294, 1301–02 (S.D. Cal. 2014), aff’d, 816 4 F.3d 1170 (9th Cir. 2016); Collins v. D.R. Horton, Inc., 252 F. Supp. 2d 936, 938 (D. Az. 5 2003). It also “may not be used to raise arguments or present evidence for the first time 6 when they could reasonably have been raised earlier in the litigation.” Marlyn 7 Nutraceuticals, Inc., 571 F.3d at 880 (quoting Kona Enters., Inc., 229 F.3d 890). 8 In addition, Local Civil Rule 7.1(i)(1) provides that a motion for reconsideration 9 must include an affidavit or certified statement of a party or attorney “setting forth the 10 material facts and circumstances surrounding each prior application, including inter alia: 11 (1) when and to what judge the application was made, (2) what ruling or decision or order 12 was made thereon, and (3) what new and different facts and circumstances are claimed to 13 exist which did not exist, or were not shown upon such prior application.” Local Civ. R. 14 7.1(i)(1). Ultimately, “[w]hether or not to grant reconsideration is committed to the sound 15 discretion of the court.” Navajo Nation v. Confederated Tribes & Bands of the Yakama 16 Indian Nation, 331 F.3d 1041, 1046 (9th Cir. 2003). 17 III. Analysis of Clear Error. 18 Based on the Parties’ papers, and in light of the applicable law, the Court finds that 19 it clearly erred in overlooking the Stores’ argument as to the UCL’s “unfair” prong. The 20 Stores argument, moreover, is dispositive and thus Plaintiff fails to state a claim under the 21 UCL’s “unfair” prong. 22 A. The Court Erred by Overlooking the Stores’ Argument. 23 The Stores assert that the Court erred when is construed their motion as 24 challenging only the “fraudulent” and “unlawful” prongs of the UCL cause of action. 25 (ECF No. 213.) Outlaw does not oppose the motion, and Tauler Smith contends that the 26 Stores “failed to make any argument as to” the unfairness prong. (ECF No. 237.) Upon 27 reviewing the papers, the Court finds that the Stores have the stronger argument. 28 1 The Stores’ motion for judgment on the pleadings challenged the “unfair” prong 2 concurrently with the “fraudulent” prong of the UCL. (ECF No. 168-1 at 15.) The Stores 3 quoted Plaintiff’s’ allegations as to both prongs. (Id. (quoting ECF No. 1 (“Compl.”) at ¶ 4 134.)) The Stores further referenced the unfairness prong by adding that “Outlaw’s 5 ‘unfair’ claim is also premised on Stores’ supposedly false and misleading statements 6 about the Rhino Products.” (Id.) Then, the Stores argued that “as a matter of law [they] 7 cannot be liable for false advertising under the UCL by simply placing the Rhino 8 Products on Stores’ motion their retail shelves for sale.” (Id.) 9 The Court addressed this very argument in considering the “fraudulent” prong of 10 the UCL cause of action. (See ECF No. 209 at 22.). The Court should have also 11 considered its application to the “unfair” prong, but instead denied the motion on the 12 erroneous basis that the Stores made no argument at all. (Id.) Thus, the Court committed 13 clear error. See Polanco v. Lynch, No. 2:15-CV-1234-JCM, 2016 WL 3965188, at *5 (D. 14 Nev. July 21, 2016) (finding that an agency committed clear error “when it did not 15 address, consider, or give sufficient reason to not consider” a party’s argument). The 16 error is clear, moreover, because any ambiguity as to whether the Stores put forward an 17 argument is resolved by (1) their request for judgment “as to each claim” in the 18 Complaint, and (2) that the Stores cited “three precedents . . . which summarily dismissed 19 the plaintiff’s UCL claims in their entirety.” (ECF No. 168 at 1; ECF No. 168-1 at 11.) 20 Tauler Smith’s response1 does not compel a different conclusion. Tauler Smith 21 argues, for example, that the Stores cannot use the motion for reconsideration “to raise a 22 new argument” that could have been raised before. (ECF No. 237 at 3.) While that is a 23 correct statement of law, see Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 24 (9th Cir. 2000), it does not address the Stores’ argument. Even though the Stores now cite 25 26 1 In reply, the Stores assert that Tauler Smith lacks the standing to oppose the Stores’ motion for 27 judgment on the pleadings and, thus, the instant motion for reconsideration. (ECF No. 245 at 2–4.) The Court assumes without deciding that Tauler Smith’s filing can be considered and addresses the 28 1 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 2 187 (1999), to explain how they may have replied had Outlaw “made any arguments as to 3 why the ‘unfair’ prong should survive independently of the ‘false advertising’ premise,” 4 (ECF 213-1 at 3), the Court must still determine whether it failed to consider the Stores’ 5 argument as to the “unfair” prong of the UCL in the first place. 6 Tauler Smith’s other precedents, moreover, are inapposite. One case addresses a 7 situation where the movant failed to make any argument in support of a specific issue. 8 See Sherman v. Fountain Valley Police Dep’t, No. SA-CV-17-2217-JVS, 2019 WL 9 4238873, at *9 (C.D. Cal. Apr. 2, 2019) (denying summary judgment, in part, because the 10 movant failed to address a material issue even with “a single argument”). That is not the 11 case here for the reasons noted above. Another precedent involved a situation where the 12 movant made an argument, but the Court found that the argument was insufficient to 13 meet the movant’s burden. See Rogal v. Astrue, No. C12-5158-RSL-BAT, 2012 WL 14 7141260, at *3 (W.D. Wash. Dec. 7, 2012), report and recommendation adopted, No. 15 C12-5158-RSL, 2013 WL 557172 (W.D. Wash. Feb. 12, 2013), aff’d sub nom. Rogal v. 16 Colvin, 590 F. App’x 667 (9th Cir. 2014) (considering and denying plaintiff’s argument 17 as “conclusory”). That case thus goes to the adequacy of the movant’s argument – not 18 whether failing to consider the argument is clear error. Neither of these cases, moreover, 19 are binding upon the Court. 20 Accordingly, Court concludes that it erred in failing to consider the Stores’ 21 challenge to Plaintiff’s claim for “unfair” business practices. 22 B. Plaintiff Fails to State a Claim Under the UCL’s “Unfair” Prong. 23 Having found error, the Court now considers the Stores’ argument. Plaintiff alleges 24 that “Defendants have engaged in unfair conduct because the use of pharmaceuticals in 25 male Rhino Products provides them with a competitive advantage in the marketplace 26 among consumers seeking effective products, since pharmaceuticals are necessarily more 27 potent than nutritional supplements.” (Compl. at ¶ 134.) The Stores argue that Plaintiff’s 28 allegations are “premised on the Stores’ supposedly false and misleading statements,” 1 and thus must fail as a matter of law because “the Stores cannot be liable for false 2 advertising under the UCL by simply placing the Rhino Products on their retail shelves 3 for sale.” (ECF No. 168-1 at 15–16.) The Court finds that Plaintiff’s claim fails for two 4 reasons: (1) that Outlaw did not oppose this argument and (2) that Plaintiff’s allegations 5 do not state a claim under Cel-Tech. 6 First, Plaintiff Outlaw did not contest the Stores’ challenge to the “unfair” prong in 7 their opposition to the motion for judgment on the pleadings. Outlaw only responded to 8 the “unlawful prong” argument, stating “that The Stores cannot sell pharmaceutical drugs 9 without a prescription,” and to the argument that it did not plead an adequate remedy in 10 the Complaint. (ECF No. 175 at 14–16.) Plaintiff Outlaw has also filed no opposition to 11 the motion for reconsideration now before the Court. Consequently, the Court “may 12 consider Plaintiff to have conceded the issue,” both during the motion for judgment on 13 the pleadings and now upon reconsideration. See Pub. Watchdogs v. S. California Edison 14 Co., No. 19-CV-1635-JLS, 2019 WL 6497886, at *6 (S.D. Cal. Dec. 3, 2019); see also 15 Ramirez v. Ghilotti Bros. Inc., 941 F. Supp. 2d 1197, 1210–11 (N.D. Cal. 2013). 16 Second, Plaintiff’s barebones allegation does not state a claim under the UCL. In 17 1999, the Supreme Court of California articulated the legal standard for “unfair” UCL 18 claims in “an action by a competitor alleging anticompetitive practices.” Cel-Tech 19 Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 187 n.12 (1999). The 20 Court defined “unfair” conduct as conduct that “threatens an incipient violation of an 21 antitrust law, or violates the policy or spirit of one of those laws because its effects are 22 comparable to or the same as a violation of the law, or otherwise significantly threatens 23 or harms competition.” Id. at 187. In doing so, the Court rejected prior definitions offered 24 for the term unfair as “too amorphous” because they “provide[d] too little guidance to 25 courts and businesses,” and sought to provide “adequate guidelines” for future lawsuits 26 under the UCL. Id. at 185. 27 Here, Plaintiff has failed to state a claim under Cel-Tech by merely alleging that 28 the Stores gained an actionable, “unfair” advantage by selling the Rhino Products. (ECF 1 No. at ¶ 134.) Simply put, neither Outlaw’s papers nor the Complaint point to any 2 antitrust law or policy to support the unfair practices claim, much less one that shares a 3 “close nexus” with the Stores’ sales. See Hodsdon v. Mars, Inc., 891 F.3d 857, 866 (9th 4 Cir. 2018); see also id. at 867 (noting that the United Nations’ Universal Declaration of 5 Human Rights and the ILO’s Convention 182’s prohibitions on child slavery lacked “a 6 close enough nexus . . . [to] the challenged action—here not placing disclosures on 7 consumer labels.”); Gregory v. Albertson’s, Inc., 104 Cal. App. 4th 845, 854–55 (2002) 8 (rejecting a UCL claim because defendant’s decision to close a store but keep paying the 9 lease was not sufficiently tethered to a public policy against community blight under 10 California’s health and safety code). 11 To the contrary, in affirming the plausibility of Plaintiff’s suit, the Court would 12 have to find that retailers could be held liable for the false statements or fraudulent 13 conduct of an unnamed manufacturer, since Plaintiff neither alleges that the Stores 14 created the Rhino Products or their packaging. But see In re Hydroxycut Mktg. & Sales 15 Practices Litig., 801 F. Supp. 2d 993, 1012 (S.D. Cal. 2011) (finding that retailer 16 defendants could not be held liable under the UCL for placing “falsely advertised 17 Products on the shelf and failing to disclaim the Manufacturer Defendants’ 18 representations”). More generally, the Court would also have to endorse a theory of 19 vicarious liability. But see In re Jamster Mktg. Litig., No. 05-CV-0819-JM, 2009 WL 20 1456632, at *8 (S.D. Cal. May 22, 2009) (“It is well established that the concept of 21 vicarious liability has no application to actions brought under the unfair business 22 practices act.”) (quotation omitted); Emery v. Visa Internat. Serv. Ass’n, 95 Cal. App. 4th 23 952, 964 (2002) (holding that VISA did not commit an “unfair practice” in failing to stop 24 lottery merchants from improperly using its mark because VISA had “no duty to 25 investigate the truth of statements made by others”). Because neither is permitted under 26 the UCL, Plaintiff fails to state a claim for which relief can be granted. 27 Consequently, the Court finds that Plaintiff Outlaw conceded its claim under the 28 UCL’s “unfair” prong and, in the alternative, failed to allege a claim for which relief 1 could be granted. Plaintiff correctly argued that “the Stores cannot be liable for false 2 || advertising under the UCL by simply placing the Rhino Products on their retail shelves 3 ||for sale.” (ECF No. 168-1 at 15-16.) 4 Conclusion. 5 For the foregoing reasons, the Court GRANTS the Stores’ motion and 6 || DISMISSES Outlaw’s claim for “unfair” practices under the UCL with prejudice. The 7 Court clearly erred in not considering the Stores’ challenge to the UCL cause of action 8 under the “unfair” prong, and now finds that the Stores’ argument was dispositive as 9 || Plaintiff’s allegations did not make out a claim for which relief can be granted.” The 10 || Court’s reasoning is supported by Outlaw’s decisions not to respond to Stores’ argument 11 the initial briefing or on the motion for reconsideration now before the Court. 12 IT IS SO ORDERED. = 13 Dated: July 7, 2020 Hon. Gonzalo P. Curiel 14 United States District Judge 15 16 17 The Stores also contend that a party “cannot move for judgment on the pleadings with respect to less than a full cause of action.” (ECF No. 213-1 at 2) (quoting Living on the Edge, LLC v. Lee, No. CV-14- 18 ||5982-MWF-JEMX, 2015 WL 12661917, at *4 (C.D. Cal. Aug. 25, 2015)). While true, that rule does not support a finding that the Court erred here. California law permits consumers to allege “three varieties” 19 of UCL violations: “practices which are unlawful, unfair or fraudulent.” In re Tobacco II Cases, 46 Cal. 0 4th 298, 311 (2009) (quotation omitted). Each violation is governed by a different standard and thus supports a distinct claim. See Holt v. Noble House Hotels & Resort, Ltd, 370 F. Supp. 3d 1158, 1163 21 || (S.D. Cal. 2019) (differentiating each prong of the UCL). Consequently, because Plaintiff alleged violations of each prong of the UCL, (Compl. at § 134), the Court did not err in treating the UCL cause 22 || of action as alleging three distinct claims. Courts of the Ninth Circuit, moreover, regularly permit judgment on the pleading in such circumstances. See Pantastico v. Dep’t of Educ., 406 F. Supp. 3d 865, 23 ggo (D. Haw. 2019) (granting motion for judgment on the pleadings with respect to plaintiff's § 1983 claim as to a Due Process theory, but granting the motion under an Equal Protection theory); Am. Traffic Sols., Inc. v. Redflex Traffic Sys., Inc., No. CV-08-205 1-PHX, 2009 WL 2714017, at *2 (D. Ariz. Aug. 25 2009) (finding judgment on the pleadings appropriate as to a Lanham Act claim because the allegations “contain[ed] what could be construed as several claims for false advertising based on 26 || separate statements by defendants”); Holloway v. Best Buy Co., No. C-05-5056-PJH, 2009 WL 1533668, at *4 (N.D. Cal. May 28, 2009) (“In light of the purpose of Rule 12(c) motions, as stated 27 above, and given that each cause of action in the TAC alleges what could be construed as several 8 separate claims, the court finds no reason not to consider Best Buy’s motion for judgment on the pleadings as to less than entire causes of action.”).