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O'Hara v. Diageo-Guinness, USA, Inc.

United States District Court, D. Massachusetts

March 29, 2018

KIERAN O'HARA, Plaintiff.
v.
DIAGEO-GUINNESS, USA, INC. and DIAGEO NORTH AMERICA, INC., Defendants.

          MEMORANDUM AND ORDER

          WOLF, D.J.

         I. INTRODUCTION

         Defendants Diageo-Guinness, USA, Inc. and Diageo North America, Inc. make and market Guinness Extra Stout ("Extra Stout"), a form of beer, for distribution in the United States. Plaintiff Kieran O'Hara filed a putative class complaint alleging that he bought Extra Stout in part because defendants deceptively advertised that it was brewed at St. James's Gate brewery, Dublin, Ireland. Plaintiff alleges that Extra Stout was actually brewed in New Brunswick, Canada. Plaintiff alleges that he paid more for the beer than he would have if defendants had disclosed its origin. Plaintiff subsequently filed an amended complaint with seven claims, including unjust enrichment, misrepresentation, and unfair and deceptive practices in violation of Mass. Gen. Laws Chapter 93A. Defendants have moved to dismiss.

         The court is denying the motion with respect to Count I, alleging misrepresentation. It is also denying the motion with respect to Counts III and IV to the extent that they allege that statements on defendants' website violated Mass. Gen. Laws Chapter 93A. The Amended Complaint states plausible claims that these statements reasonably deceived plaintiff into buying and paying a price premium for Extra Stout.

         However, the court is dismissing the Chapter 93A claims to the extent that they are based on the labels affixed to Extra Stout's bottles and packaging. The labels were approved by the Alcohol Tobacco Tax and Trade Bureau (the "TTB") and, therefore, are entitled to safe harbor protection under Chapter 93A, §3. It is also dismissing Count II, alleging unjust enrichment, because plaintiff has adequate remedies at law. In addition, plaintiff has not alleged any threatened injury to himself that could be prevented by prospective relief, and his claim for a declaratory judgment duplicates his claims for damages. Accordingly, the claims for injunctive and declaratory relief are also being dismissed.

         II. APPLICABLE LEGAL STANDARDS

         A. Motion to Dismiss

         Federal Rule of Civil Procedure 8(a)(2) requires that a complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." This pleading standard does not require "detailed factual allegations, " but does require "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In addition, "some allegations, while not stating ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross ' the line between the conclusory and the factual'" and must be disregarded. Penalbert-Rosa v. Fortuno-Burset, 631 F.3d 592, 595 (1st Cir. 2011) (quoting Twombly, 556 U.S. at 557 n.5).

         To survive a motion to dismiss under Rule 12(b)(6), the 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 570). In considering a motion to dismiss under Rule 12(b)(6), the court must "take all factual allegations as true and...draw all reasonable inferences in favor of the plaintiff." Rodriguez-Ortiz v. Marao Caribe, Inc., 490 F.3d 92, 96 (1st Cir. 2007); Maldonado v. Fontanes, 568 F.3d 263, 266 (1st Cir. 2009). An entitlement to relief is "plausible" if the facts "raise a reasonable expectation that discovery will reveal evidence" of the alleged misconduct, "even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very-remote and unlikely." Twombly, 550 U.S. at 556; see also Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 17 (1st Cir. 2011) . Nevertheless, "where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 556 U.S. at 678. "[G]uaging a pleaded situation's plausibility is a 'context-specific' job that compels [the court] 'to draw on' [its] 'judicial experience and common sense.'" Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012)(quoting Iqbal, 556 U.S. at 677).

         In addition, Rule 9(b) requires that "in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." This standard means that a complaint must specify the "time, place, and content of an alleged false representation, " including misrepresentations forming the basis of a Chapter 93A claim. Mulder v. Kohl's Pep't Stores, Inc., 865 F.3d 17');">865 F.3d 17, 22 (1st Cir. 2017).

         Under Rule 12(b)(6), the district court must consider the complaint, attached exhibits, "documents incorporated by reference into the complaint, matters of public record, and facts susceptible to judicial notice." Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011); In re Colonial Mortgage Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003). "The court may judicially notice a fact that is not subject to reasonable dispute because it is generally known within [the court's] jurisdiction or can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." F.R.E. 201(b). This includes "documents the authenticity of which [is] not disputed by the parties, " Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993), and "official public records, " Freeman v. Town of Hudson, 714 F.3d 29, 36-37 (1st Cir. 2013). When such a document contradicts an allegation in the complaint, the document trumps the allegation. See Clorox Co. P.R. v. Proctor & Gamble Consumer Co., 228 F.3d 24, 32 (1st Cir. 2000) (citing Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 454 (7th Cir. 1998)). These rules derive from "the axiom that a writing is the best evidence of its contents. . . [and the] tenant that a court may look to matters of public record in deciding a Rule 12(b)(6) motion." Colonial Mortgage Bankers, 324 F.3d at 15-16.

         When a defendant seeks dismissal based upon an affirmative defense, "the facts establishing the defense must be clear on the face of the plaintiff»s pleadings." Blackstone Realty LLC v. FDIC, 244 F.3d 193, 197 (1st Cir. 2001). "Furthermore, review of the complaint, together with any other documents appropriately considered under Federal Rule of Civil Procedure P. 12(b)(6), must leave no doubt' that the plaintiff's action is barred by the asserted defense." Id.

         B. Standing

         The same standards apply to defendants' challenges to plaintiff's standing. The plaintiff must support each element of standing "in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). Therefore, where, as here, the factual allegations in the pleadings concerning jurisdiction are unchallenged, the court "must credit the plaintiff's well-pleaded factual allegations (usually taken from the complaint, but sometimes augmented by an explanatory affidavit or other repository of uncontested facts), draw all reasonable inferences from them in her favor, and dispose of the challenge accordingly." Valentin v. Hospital Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001).

         To have standing to sue under Article III of the Constitution, plaintiff must have "a personal stake in the outcome of the controversy." Warth v. Seldin, 422 U.S. 490, 498 (1975)(citing Baker v. Carr, 369 U.S. 186, 204 (1962)). He "must allege and show that [he] personally ha[s] been injured" or will be injured without judicial relief, and "not that injury has been suffered" or will be suffered "by other, unidentified members of the class to which [he] belong[s] and which [he] purport[s] to represent." Id. at 502. "Unless [the plaintiff] can thus demonstrate the requisite case or controversy between [himself] personally and [defendants], [he] may [not] seek relief on behalf of [himself] or any other member of the class." Id.

         In addition, the "plaintiff must demonstrate standing for each claim he seeks to press and for each form of relief that is sought." Town of Chester, N.Y. v. Laroe Estates, Inc., 137 S.Ct. 1645, 1650 (2017) . Therefore, a plaintiff who has standing to seek damages must also demonstrate standing to pursue injunctive relief." Id. "Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief...if unaccompanied by any continuing, present adverse effects." O'Shea v. Littleton, 414 U.S. 488, 495 (1974).

         The "irreducible constitutional minimum of standing consists of three elements." Lujan, 504 U.S. at 560. First, there must be an "actual or imminent" "'injury in fact'--an invasion of a legally protected interest which is concrete and particularized." Id.; see also Katz v. Pershing, LLC, 672 F.3d 64, 71-72 (1st Cir. 2012). A threatened injury confers standing to seek injunctive relief if it "is 'certainly impending, ' or there is a 'substantial risk' that the harm will occur." Clapper v. Amnesty Int'l, 133 S.Ct. 1138, 1147, 1150, n. 5 (2013). "Second, there must be a causal connection between the injury and the conduct complained of--the injury has to be fairly traceable to the challenged action of the defendant, and not...the result of the independent action of some third party not before the court." Lujan, 504 U.S. at 560. "Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Id. at 561.

         C. Misrepresentation

         To state a claim for intentional misrepresentation, the complaint must allege that the defendant " [1] made a false representation of a material fact [2] with knowledge of its falsity [3] for the purpose of inducing the plaintiff to act thereon, and [4] that the plaintiff reasonably relied upon the representation as true and acted upon it [5] to [her] damage." Eureka Broadband Corp. v. Wentworth Leasing Corp., 400 F.3d 62, 68 (1st Cir. 2005). The element of "damage" requires pecuniary loss. See Shaulis v. Nordstrom, Inc., 865 F.3d 1, 15 (1st Cir. 2017); Restatement (Second) of Torts §525 (1977) . "A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent misrepresentation." Id. at §529.

         A plaintiff may justifiably rely on a representation even if he would have discovered the truth through an investigation "without considerable trouble or expense." Restatement (Second) of Torts at §540; accord Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass. 459, 467 (2003) . Nevertheless, "if a mere cursory glance would have disclosed the falsity of the representation, its falsity is regarded as obvious, " and reliance on it would not be justified. Id. Therefore, "although the recipient of a fraudulent misrepresentation is not barred from recovery because he could have discovered its falsity if he had shown his distrust of the maker's honesty by investigating its truth, he is nonetheless required to use his senses, and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation." Restatement (Second) of Torts at §541.

         D. Mass. Gen. Laws Chapter 93A

         Mass. Gen. Laws Chapter 93A, §2 prohibits "unfair or deceptive acts or practices" in business and consumer transactions. Edlow v. RBW, LLC, 688 F.3d 26, 39 (1st Cir. 2012)(quoting Green v. Blue Cross & Blue Shield of Mass., Inc., 47 Mass.App.Ct. 443 (1999)). A representation about a product is "deceptive" under Chapter 93A "when it has the capacity to mislead consumers, acting reasonably under the circumstances, to act differently from the way they otherwise would have acted (i.e., to entice a reasonable consumer to purchase [a] product) ." Edlow, 688 F.3d at 39 (quoting Aspinall v. Philip Morris Companies, Inc., 442 Mass. 381, 394 (2004)). The court decides the "boundaries of what may qualify for consideration as a [Chapter] 93A violation, " but within those bounds, "whether a particular set of acts...is unfair or deceptive is a question of fact." Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 563 (2008).

         940 Code Mass. Regs. §3.16(3) states that "an act or practice is a violation of [Chapter 93A] if...it fails to comply with existing [Massachusetts] statutes, rules, regulations or laws, meant for the protection of the public's health, safety, or welfare...intended to provide [Massachusetts] consumers protection." In Klairmont v. Gainsboro Rest., Inc., however, the Supreme Judicial Court held that a violation of such a statute or regulation constitutes a violation of Chapter 93A "only if the conduct leading to the violation is...unfair [or] deceptive and occurs in trade or commerce." 465 Mass. 165, 174 (2013); see also McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 775 F.3d 109, 116-120 (1st Cir. 2014) . In Klairmont, for example, the court stated that "not all building code violations--indeed, very few-will give rise to violations of Chapter 93A, either because they would lack the unfairness or deceptiveness present in this case or because they do not arise in trade or commerce." 465 Mass. at 174. However, because the defendants had "violated the building code for decades to avoid the expense and complications of required improvements, and the violations created a hazardous environment for patrons of the defendants' business, a danger of which the defendants were well aware, " the defendants were liable under Chapter 93A. Id. at 177.

         "The state has authority to seek heavy sanctions on those who engage in deceptive advertising even without injury" to any individual consumer. Rule v. Fort Dodge Animal Health, Inc., 607 F.3d 250, 255 (1st Cir. 2010). However, Chapter 93A, §9 gives the individual consumer a right to sue only when he suffers an "objective, identifiable harm that goes beyond the deception [or unfairness] itself." Shaulis, 865 F.3d at 10. Allegations that the deceptive conduct inflated the product's price, causing the plaintiff to overpay, suffice. Id. at 10.[1] However, "claims of injury premised on 'overpayment' for a product, or a loss of the benefit of the bargain, require an objective measure against which the plaintiff's allegations may be evaluated" and may not rest on the plaintiff's "subjective belief" that he received a less valuable product than he paid for. Id. "The complaint must identify a legally required standard that the [product was] at least implicitly represented as meeting, but allegedly did not." Iannacchino v. Ford Motor Co., 451 Mass. 623, 633 (2008) . In addition, overpayment may not be inferred solely from the fact that a product was deceptively advertised, since the deception itself cannot be the requisite injury. Id. at 11. [2]

         Chapter 93A exempts a defendant's conduct from liability if the conduct is authorized under another statute. Specifically, Chapter 93A, §3 provides that "nothing in this chapter shall apply to transactions or action otherwise permitted under laws as administered by a regulatory board or officer acting under statutory authority of the commonwealth or of the United States." The defendant has the burden of proving that its conduct fell under this "safe harbor" exemption. See Aspinall, 453 Mass. at 434-35 (2009) . To sustain that burden, it "must show more than the mere existence of a related or even overlapping regulatory scheme that covers the transaction. Rather, [the] defendant must show that such scheme affirmatively permits the practice which is alleged to be unfair or deceptive." Bierig v. Everett Sq. Plaza Assocs., 34 Mass.App.Ct. 354, 367 n. 14 (1993); Greany, Chapter 93A Right and Remedies §6-4 (1992). In Bierig, for example, a group of high-income tenants renting units in a subsidized housing project alleged that their rent illegally exceeded the maximum "below market rate" that the landlord could charge under the applicable regulations. 34 Mass.App.Ct. 354, 367 (1993). The court, however, held that the challenged rents were entitled to safe harbor because the "statutory scheme...expressly permitted rents for [high income] tenants to be above the 'below market rates' and implicitly required it, "[3] and the Massachusetts Housing Finance Agency had approved the rates. Id. at 367-68.

         Courts applying Bierig, including this court, have held that Chapter 93A claims are precluded when a regulator authorized to review the defendant's actions has determined that those actions, in particular, were not unfair or deceptive. Compare Cablevision of Boston, Inc. v. Public Imp. Com'n of City of Boston, 38 F.Supp.2d 46, 60-61 (D. Mass. 1999)(holding that defendants were likely to prove that municipal agency's approval of defendant's allegedly unfair and deceptive act, the conversion of telecommunications conduits to new uses, precluded Chapter 93A claim), aff'd 184 F.3d 88 (1st Cir. 1999); Rogers v. Comcast Corp, 55 F.Supp.3d 711, 721 (E.D. Pa. 2014)(holding that allegedly anti-competitive transaction could not premise Chapter 93A liability because it was approved by the FTC) with Aspinall, 453 Mass. at 434-35 (holding that FTC's failure to prosecute defendant for describing cigarettes as "light" was not "affirmative permission" to use the descriptor, even though an FTC consent decree authorized another cigarette manufacturer to use a similar term). Courts applying comparable state statutes have reached the same conclusion. See Kuenzig v. Hormel Foods Corp., 505 Fed.App'x 937, 939 (11th Cir. 2013)(applying Florida law); Cruz v. Anheuser-Busch, LLC, 2015 WL 3561536, at *3-4 (CD. Cal. 2015)(applying California law). So interpreted, §3 enables a defendant to rely on regulators' authoritative and particularized determination that its product or conduct is not unfair or deceptive.

         E. The TTB Regulatory Framework

         The Federal Alcohol Administration Act (the "FAAA"), 27 U.S.C. §§201-219, regulates the sale of alcohol beverages, including beer, in interstate commerce. The FAAA "was designed as a comprehensive statute to deal with practices within the alcohol beverage industry that Congress had judged to be unfair and deceptive, resulting in harm to both competitors and consumers." Adolph Coors Co. v. Brady, 944 F.2d 1543, 1547 (10th Cir. 1991). Specifically, the statute requires alcoholic beverages to be "bottled, packaged, and labeled in conformity with...regulations, to be prescribed by the Secretary of the Treasury." 27 U.S.C. §205(e). Those regulations must "prohibit deception of the consumer with respect to such products" and "provide the consumer with adequate information as to the identity and quality of the product." Id.

         The Secretary's duties to enforce the FAAA have been delegated to the TTB, which has enacted regulations specifically addressing the labeling of malt beverages, including beer.[4] Before releasing a beer product, bottlers and distributors must first apply for and obtain a Certificate of Label Approval (a "COLA") from the TTB. See 27 C.F.R. §§7.41, 25.142(e). The TTB may not issue a COLA unless the product's labelling "complies with applicable laws and regulations." 27 C.F.R. §13.21(a); see also §7.20 ("No person engaged in business as a brewer, wholesaler, or importer of malt beverages...shall sell, ship, or deliver for sale or shipment...in interstate or foreign commerce commerce...any malt beverages in containers unless the malt beverages are packaged, and the packages are marked, branded, and labelled in conformity with this subpart.").

         The applicable regulations require, among other things, that:

Each bottle of beer...show by label or otherwise the name or trade name of the brewer, the net contents of the bottle, the nature of the product such as beer, ale, porter, stout, etc., and the place of production (city and, when necessary for identification, State).

27 C.F.R. §25.142(a)(emphasis added). They also prohibit placing on any label "any statement that is false or untrue in any particular, or that, irrespective of falsity, directly or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter, tends to create a misleading impression." 27 C.F.R. §§7.29(a)(1). More specifically, §7.23(b) provides that:

No label shall contain any brand name, [5] which, standing alone, or in association with other printed or graphic matter, creates any impression or inference as to the age, origin, or other characteristics of the product unless the appropriate TTB officer finds that such brand name... conveys no erroneous impressions as to the age, origin, or other characteristics of the product.

Id. (emphasis added). These regulations apply to labels on bottles as well as "any carton, case, or other covering of the container." Id. at §7.21.

         Accordingly, the TTB may not issue a COLA if the label creates a misleading impression as to the characteristics ...


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