Following a federal court’s refusal to approve the settlement of putative class claims alleging consumer fraud relating to the sale of 14 Hydroxycut-branded weight-loss dietary supplements, the parties elected to proceed on pending motions to dismiss the second amended complaint; the court has denied the motions, but ordered the plaintiffs to file a more definite statement as to the retailer defendants, finding the fraud-related allegations in the second amended complaint insufficient. In re Hydroxycut Mktg. & Sales Practices Litig., Nos. 09-2087, -1088 (U.S. Dist. Ct., S.D. Cal., order entered January 27, 2014).
The manufacturing defendants argued that certain claims should be dismissed because the consumer-fraud statutes of certain states do not allow class actions. They relied on Justice John Paul Stevens’ concurring opinion in Shady Grove Orthopedic Association v. Allstate Insurance Co., 559 U.S. 393 (2010), to argue that “the state provisions prohibiting class actions are found within the state consumer protection acts and are therefore so intertwined with the state rights or remedies that application of Rule 23 would violate the Rules Enabling Act.”The court disagreed, concluding that Justice Stevens’ concurrence did not represent a common denominator in the Court’s fractured reasoning. Relying on related Ninth Circuit decisions, the court concluded that state statutory provisions prohibiting class actions are procedural in nature and thus application of Rule 23 to the plaintiffs’ claims “does not run afoul of the Rules Enabling Act.”The court denied the motion without prejudice; if the Ninth Circuit squarely addresses Shady Grove, the manufacturing defendants may file a new motion.
The court agreed with the retailer defendants that the plaintiffs failed to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), and found the standard applicable to all of the consumer- protection claims because the plaintiffs alleged a “unified course of fraudulent conduct.”The plaintiffs have alleged that the retailer defendants “participated in the advertising and marketing process with Iovate, adopted Iovate’s product representations as their own, and also made their own false and deceptive statements about the products’ safety and efficacy.” According to the court, the allegations in this regard fail to specify those defendants that made specific representations to which they were exposed.
The court disavowed a reading of Dorfman v. Nutramax Laboratories, Inc., 2013 WL 535040 (S.D. Cal. Sept. 2013), that would hold a retailer defendant who disseminates or repeats deceptive statements liable under California’s Unfair Competition Law or Consumers Legal Remedies Act “for statements on product packaging that the retailer did not control.” Retailers may be held liable only for displaying additional promotional materials. The court further rejected the theory that the retailers should be held liable as aiders and abettors of the manufacturer because the plaintiffs failed to allege that the retailers knew that the safety and efficacy claims made by the manufacturers were false or deceptive.
Still, to move the case along, the court decided not to dismiss the claims against the retailer defendants, but rather to order the plaintiffs to file a more definite statement. They have 20 days to do so.