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Segedie v. Hain Celestial Group, Inc.

United States District Court, S.D. New York

May 7, 2015

LEAH SEGEDIE and DMITRIY SHNEYDER, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
THE HAIN CELESTIAL GROUP, INC. and JOHN: DOES #1-99, Defendants.

OPINION & ORDER

NELSON S. ROMAN, District Judge.

Leah Segedie and Dmitriy Shneyder ("Plaintiffs"), on behalf of themselves and all others similarly situated, bring this putative class action against the Hain Celestial Group, Inc. ("Hain Celestial" or "Defendant") and unnamed co-defendants. Hain Celestial moves to dismiss pursuant to Rules 8, 9, and 12(b)(6) of the Federal Rules of Civil Procedure, on the basis that the claims concerning organic products are preempted by the Organic Foods Production Act of 1990, 7 U.S.C. §§ 6501-6523 ("OFPA"); that the Court should defer to the primary jurisdiction of the United States Department of Agriculture ("USDA") or Food and Drug Administration ("FDA") with respect to claims concerning organic and natural products, respectively; that all claims lack merit; that all claims fail to meet the applicable pleading standards; and that Plaitniffs lack standing to bring claims concerning products they never purchased. For the following reasons, the motion is GRANTED in patt and DENIED in patt.

STANDARD ON A MOTION TO DISMISS

To survive a motion to dismiss, a complaint must supply "factual allegations sufficient to raise a right to relief above the speculative level.'" ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, the complaint must allege "enough facts to state a claim to relief that is plausible on its face." Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In applying this standard, a court should accept as true all well-pleaded factual allegations, but should not credit "mere conclusory statements" or "[t]hreadbare recitals of the elements of a cause of action." Id.

FACTUAL BACKGROUND

Plaintiffs are alleged purchasers of certain "Earth's Best" brand food, body care, and home care products produced and sold by Hain Celestial. (Compl. ¶¶ 20-30, ECF No. 1.) Plaintiffs claim that these products were all misleadingly labeled as "organic, " "natural, " or "all natural, " in violation of various state statutes and common law doctrines.

Plaintiffs identify 62 food products[1] and 12 body care products labeled "organic" (the "Organic Products") that contain ingredients that applicable law allegedly prohibits in organic products, rendering the label false and misleading (the "Organic Claims"). (Id. ¶¶ 51-52.) Plaintiffs specifically challenge 47 ingredients, and by reference to product labels attached to the Complaint, tie each Organic Product to its challenged ingredient(s). ( See id. ¶ 52, Ex. 1.)

Plaintiffs also identify seven food products and eight body care and home care products labeled "natural" or "all natural" (the "Natural Products"). (Id. ¶ 63.) Plaintiffs claim that each Natural Product contains one or more of some 72 artificial or synthetic ingredients, allegedly rendering the "natural" or "all natural" representation false and misleading (the "Natural Claims"). (Id. ¶¶ 61-62, 64.) Again by reference to product labels attached to the Complaint, Plaintiffs tie each Natural Product to its challenged ingredient(s). ( See id. Ex. 1.)

Plaintiffs allege that they and the putative class members saw the "organic, " "natural, " or "all natural" representations and made purchases in reliance on those representations. (Id. ¶¶ 23, 27, 90-94, 97-104.) Plaintiffs allege that if the products were not misleadingly labeled, they would not have purchased the products, would not have purchased as much of the products, or would not have paid the price premium that natural and organic products command. (Id. ¶¶ 29-30, 105-07.) Specifically, Segedie allegedly purchased six of the Organic Products and two of the Natural Products from retailers including Whole Foods in Westlake Village, CA and Von's in Simi Valley, CA, on numerous occasions from February 2009 until 2013. (Id. ¶¶ 20-21, 26.) Shneyder allegedly purchased three of the Organic Products in or around April to September 2011 from Babies "R" Us in Wappingers Falls, NY. (Id. ¶ 22.) Although Segedie and Shneyder allege that they personally purchased only eleven products, they purport to sue on behalf of all persons in the United States who purchased any alleged falsely labeled Earth's Best product "includ[ing] but... not limited to" the 89 products specifically listed in the Complaint. (Id. ¶¶ 51, 63, 109.)

Plaintiffs assert that Defendants are liable under N.Y. Gen. Bus. Law § 349, the California Organic Products Act, Cal. Health & Safety Code §§ 110810-110959, the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq., the California False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq., the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., Cal. Civ. Code §§ 1709, 1573 et seq., and the common law of New York and California for breach of express warranty, breach of implied warranty, fraud, negligence, negligent misrepresentation, and unjust enrichment. (Id. ¶¶ 124-217.)

DISCUSSION

I. Preemption

Defendant asserts that the OFPA preempts the Organic Claims. Because federal law is "the supreme Law of the Land, " U.S. Const. art. VI, cl. 2, "Congress has the power to preempt state law, " Arizona v. United States, 132 S.Ct. 2492, 2500 (2012). In interpreting the presence and scope of preemption, a court starts with the "assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Wyeth v. Levine, 555 U.S. 555, 565 (2009). But in every preemption case, "the purpose of Congress is the ultimate touchstone." Id. (internal quotation marks omitted).

"The Supreme Court has recognized three typical settings in which courts will find that Congress intended to preempt state law." In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig., 725 F.3d 65, 96-97 (2d Cir. 2013), cert. denied sub nom. Exxon Mobil Corp. v. City of New York, N.Y., 134 S.Ct. 1877 (2014). First, when Congress expressly provides that a federal statute overrides state law, courts will find state law preempted if, applying standard tools of statutory construction, the challenged state law falls within the scope of congressional intent to preempt. See, e.g., Medtronic, Inc. v. Lohr, 518 U.S. 470, 484 (1996). Second, when Congress legislates so comprehensively in one area as to "occupy the field, " courts may infer from the federal legislation that Congress intended to preempt state law in that entire subject area. Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 372 (2000). "Third, when neither of the first two categories applies but state law directly conflicts with the structure and purpose of a federal statute, [courts] may conclude that Congress intended to preempt the state law." MTBE, 725 F.3d at 96-97. Courts may find a conflict with preemptive effect only in two circumstances: first, when "compliance with both federal and state regulations is a physical impossibility" ("impossibility preemption"), and second, when the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" ("obstacle preemption"). Arizona, 132 S.Ct. at 2501 (internal quotation marks omitted); see also MTBE, 725 F.3d at 97.

A brief overview of the OFPA and its regulatory history is warranted.

A. The OFPA and its Regulatory History

The purpose of the OFPA is: "(1) to establish national standards governing the marketing of certain agricultural products as organically produced products; (2) to assure consumers that organically produced products meet a consistent standard; and (3) to facilitate interstate commerce in fresh and processed food that is organically produced." 7 U.S.C. § 6501. Legislative history is in accord. See S. Rep. No. 101 357 (1990), reprinted in 1990 U.S.C.C.A.N. 4656, 4943-45. To accomplish these objectives, the OFPA directed the USDA to establish national standards governing products marketed as "organic." Id. § 6503. The USDA published its final rule implementing the OFPA in 2000, creating the National Organic Program ("NOP"). See National Organic Program, 65 Fed. Reg. 80, 548 (Dec. 21, 2000) (codified at 7 C.F.R. pt. 205). The NOP regulations govern the use of the term "organic" in the labeling and marketing of agricultural and processed products. See, e.g., 7 C.F.R. § 205.300-.301. As one court has pointed out, "The NOP provisions governing the production, marketing, and labeling of organic' products are complex, detailed, and specific." All One God Faith, Inc. v. Hain Celestial Grp., Inc., No. C 09-03517, 2011 WL 4433817, at *2 (N.D. Cal. Sept. 22, 2011).

The OFPA and NOP regulations prohibit the sale or labeling of any product as "organic" unless the product has been certified as such by an accredited certifying agent. 7 U.S.C. §§ 6504-6505, 6514(a), 6515, 6519; see also, e.g., 7 C.F.R. § 205.302(c). Certifying agents are private actors who are accredited by the Administrator ("Administrator") of the USDA Agricultural Marketing Service ("AMS"). See 7 U.S.C. §§ 6502(3), 6513; 7 C.F.R. §§ 205.400, .510.

NOP regulations also establish an enforcement scheme. Both the NOP's Program Manager ("Program Manager") and accredited certifying agents are empowered to investigate certified operations suspected of noncompliance and to suspend or revoke a certification. 7 C.F.R. §§ 205.660(a), (b)(1), 205.661(a); see also 7 U.S.C. § 6519(b). Operations found to have sold or labeled products in violation of the OFPA or NOP face civil penalties of up to $10, 000 per violation and the possibility of a 5-year prohibition from re certification. 7 U.S.C. § 6519(c)(1), (3); 7 C.F.R. §§ 3.91(b)(1)(xxxvii), 205.662(f)(2), (g)(1). Any adverse action by a certifying agent or the Program Manager-e.g., a denial of an application for certification, a proposed suspension or revocation, or an actual suspension or revocation-is appealable to the Administrator. 7 C.F.R. § 205.680(a), (c); see also 7 U.S.C. § 6520(a). Final decisions are then appealable to U.S. district courts. 7 U.S.C. § 6520(b). However, if the Administrator reverses a denial of certification, the certifying agent that denied the application has no right to appeal that decision. 7 C.F.R. § 205.681(a)(1).

Finally, the NOP's website invites the public to report noncompliance to the NOP Compliance and Enforcement Division of the AMS. Compliance and Enforcement, Nat'l Organic Prog. (last modified June 5, 2013), http://tinyurl.com/krdy9bt; see also Nat'l Organic Prog., NOP 4001, Complaint Handling Procedure, (2011), available at http://tinyurl.com/12m5uvv. A certifying agent or the Compliance and Enforcement Division may then investigate the complaint and take appropriate action-e.g., issuing a notice of noncompliance. NOP 4001, supra, at 3-4, 6. Apart from this provision, the OFPA and NOP are silent ...


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