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Vigne v. Costco Wholesale Corp.

United States District Court, S.D. New York

January 10, 2018

MARY LA VIGNE, KRISTEN HESSLER, and KATHLEEN HOGAN on behalf of themselves and all others similarly situated, Plaintiffs,
v.
COSTCO WHOLESALE CORPORATION, Defendant.

          OPINION & ORDER

          NELSON S. ROMAN, UNITED STATES DISTRICT JUDGE.

         Plaintiffs Mary La Vigne ("Plaintiff La Vigne"), Kristen Hessler ("Plaintiff Hessler"), and Kathleen Hogan ("Plaintiff Hogan") (collectively, "Plaintiffs") filed this proposed class action against the Costco Wholesale Corporation ("Defendant") alleging violations of New York, Pennsylvania, and Massachusetts statutes that prohibit deceptive marketing practices in the sale of consumer goods. Plaintiffs contend that Defendant has engaged in deceptive acts in connection with the marketing and sale of its Kirkland Signature Premium Chunk Chicken Breast ("Kirkland Canned Chicken"). Defendant now moves to dismiss Plaintiffs amended class action complaint ("Amended Complaint") pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. Defendant argues that the Amended Complaint must be dismissed because (1) Plaintiffs' claims are preempted by federal law; (2) Plaintiffs cannot utilize a state law claim as a vehicle to privately enforce a federal statute that lacks a private right of action; and (3) no reasonable consumer would be misled by the plain language of the packaging and label of Kirkland Canned Chicken. For the reasons stated below, Defendant's motion is GRANTED.

         BACKGROUND

         In considering a Rule 12(b)(6) motion, a court is limited to the facts alleged in the complaint and is required to accept those facts as true. See LaFaro v. N.Y.Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009). A court may, however, consider documents attached to the complaint; statements or documents incorporated into the complaint by reference; matters of which judicial notice may be taken, such as public records; and documents that the plaintiff either possessed or knew about, and relied upon, in bringing the suit. See, e.g., Kleinman v. Elan Corp., PLC, 706 F.3d 145, 152 (2d Cir. 2013); Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (applying that rule to district courts); accord Wechsler v. HSBC Bank USA, N.A, No. 15-CV-5907 (JMF), 2016 WL 1688012, at *1 (S.D.N.Y. Apr. 26, 2016), affd 674 Fed.Appx. 73 (2d Cir. 2017). Accordingly, the following facts are taken from the Amended Complaint and exhibits attached thereto or incorporated by reference therein.

         Defendant is a Washington corporation that, together with its subsidiaries, operates membership warehouses throughout the country offering a range of branded and private-label products, including its house brand, Kirkland Signature. Defendant sells Kirkland Canned Chicken in its membership warehouse stores. (Am. Compl. (ECF No. 1) ¶¶ 9, 12.) The cans are grouped for sale in packages of six 12.5 ounce cans, each slightly more than two inches tall and four inches in diameter. (Id. ¶¶ 12, 14.) Each package is covered by an opaque plastic wrapper. (Id. ¶ 12.) The front of the bulk packaging reads, in large font, "Premium Chunk CHICKEN BREAST." (Id.) Below, in smaller font, are the phrases "Packed in Water" and "Extra Lean." (Id.) At the very bottom of this side of the packaging the net weight of the cans is listed as "NET WT 6-12.5 OZ (354g) CANS TOTAL 4.6 LB (2.1kg)." (Id.) On the reverse side, the bulk packaging includes a Nutrition Facts panel and suggested recipes for the canned chicken. (Id. ¶ 13.) The Nutrition Facts panel includes, in bolded font, the phrase "Nutrition Facts" and immediately below, in smaller, non-bolded font the phrases "Serving Size 2 oz drained (56g)" and "Servings Per Container About 21." (Id.) The individual labels on each can are not visible in the bulk package prior to purchase, but each can is covered with a front label containing the product name in large font, and immediately to left of the name in smaller font the terms "Packed in Water" and "Extra Lean." (Id. ¶ 14.) At the bottom of each front label the net weight of the individual can is listed as "NET WT 12.5 OZ (354g)." (Id.) Each can also has a back label listing Nutrition Facts. (Id.) Immediately beneath the bolded phrase "Nutrition Facts, " in smaller, non-bolded font are the phrases "Serving Size 2 oz drained (56g)" and "Servings Per Container About 3.5." (Id.)

         Defendant provides members of its warehouse stores with a calculation of the unit price for its Kirkland Canned Chicken, which allegedly "allows customers to compare the price of its product with a competitor's chicken on a per pound basis...[T]he unit price provided by [Defendant] is calculated using the gross weight of the contents, which includes chicken and water." (Id. ¶21.)

         An opened can of Kirkland Canned Chicken reveals chicken covered by a layer of water. (Id. ¶ 15.) If the consumer drains the 2/3 of a cup of water that the can contains, she is left with between seven and eight ounces of meat, meaning that as much as 44% of the weight of the can's contents is water. (Id. ¶¶ 16-17.) According to the Amended Complaint, the consumer receives little benefit from the water in the can and Defendant does not intend for consumers to use the water, as evidenced by the recipes Defendant includes with each bulk package, which direct consumers to drain the chicken before using it in a dish. (Id. ¶ 20.)

         Plaintiff La Vigne, Plaintiff Hessler, and Plaintiff Hogan purchased Kirkland Canned Chicken from Defendant at warehouse locations in New York, Pennsylvania, and Massachusetts, respectively, for between $10.99 and $11.99 per bulk package. (Id. ¶¶ 22, 23, 25.) They allege that they "reasonably believed that they were purchasing a package that contained an adequate amount of chicken in each can because of the misrepresentations on the label, the packaging, the price label on the shelf, the unit pricing, the other materials included with the package, and the size of the can." (Id. ¶27.) However, upon using the chicken to prepare meals, each Plaintiff allegedly came to learn that she had received a product with "substantially less chicken than should have been in the can." (Id.) Plaintiffs admit that they received the amount of chicken indicated under the Nutrition Facts label on the back of the bulk packaging and on the back label of each can, i.e., 42 ounces divided among six cans. (Id. ¶ 1.)

         Plaintiffs support their claim that Kirkland Canned Chicken, as labeled, contains too much water and not enough chicken largely through their invocation of federal standards for the marketing of chicken products. Specifically, the Poultry Products Inspection Act ("PPIA"), 21 U.S.C. §§ 451-72, authorizes regulations relating to the disclosure of the amount of water in canned chicken products. See 9 C.F.R. § 381.157. According to Plaintiffs, these regulations state that "if the poultry meat is only between 50% and 80% with 20% to 50% water or broth, then the product name must disclose the percentage of water or broth." (Am. Compl. ¶ 18.) They further claim that Kirkland Canned Chicken does not comply with this requirement since each can, when opened subsequent to purchase, contains less than 80% chicken, even though the product name does not disclose the percentage of water in the can. (Id.)

         Put simply, Plaintiffs allege, on behalf of themselves and all others similarly situated, that Defendant's conduct violates the PPIA and misleads consumers into believing that they are being charged "a reasonable price to pay for chicken" when they buy cans of Kirkland Canned Chicken, even though almost half of the contents of each can is water, and that such conduct constitutes "an unconscionable and deceptive commercial practice" in violation of consumer protection laws in New York, Pennsylvania, and Massachusetts.[1] (Id. ¶¶ 1-5; see also ¶¶ 41-62.) Defendant moves to dismiss the Amended Complaint in its entirety.

         STANDARD OF REVIEW

         On a motion to dismiss for "failure to state a claim upon which relief can be granted, " Fed.R.Civ.P. 12(b)(6), dismissal is proper unless the complaint "contain[s] 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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); accord Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010). "Although for the purposes of a motion to dismiss [a court] must take all of the factual allegations in the complaint as true, [it is] 'not bound to accept as true a legal conclusion couched as a factual allegation.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 679.

         When there are well-pleaded factual allegations in the complaint, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. A claim is facially plausible when the factual content pleaded allows a court "to draw a reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678. Ultimately, determining whether a complaint states a facially plausible claim upon which relief may be granted must be "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

         JUDICIAL NOTICE

         As a preliminary matter, the Court must assess whether the document Defendant attached to its pleadings purporting to show that the United States Department of Agriculture's ("USDA's") Food Safety Inspection Service ("FSIS") approved the label at issue in this case ("Defendant's FSIS Form 7234-1") is appropriate to consider for purposes of the instant motion. On a motion to dismiss, courts may "judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b) (c). Matters suitable for judicial notice include matters of public record. Giraldo v. Kessler, 694 F.3d 161, 164 (2d Cir. 2012).

         Defendant contends that the Court may consider Defendant's FSIS Form 7234-1 because "it is a public record and because Plaintiffs' entire case theory depends on Kirkland Canned Chicken's label." (Reply Supp. Def.'s Mot. To Dismiss (ECF No. 21) ("Def.'s Reply") 13.) Plaintiffs assert that the Court's consideration of this document is inappropriate on a motion to dismiss because the Amended Complaint "does not argue that [Defendant] submitted the label for approval" and because this document does not bear "the necessary indicia" that it is "the original or complete submission to the FSIS." (Pls.' Mem. P. & A. Opp'n Def.'s Mot. To Dismiss (ECF No. 20) ("Pls.' Opp'n") 13.) An FSIS Form 7234-1 would ordinarily be considered a matter of public record, and Plaintiffs rely on the images displayed in Defendant's FSIS Form 7234-1 in their Amended Complaint. See Nelson v. MillerCoors, LLC, 246 F.Supp.3d 666, 673 (E.D.N.Y. 2017) (taking judicial notice of certain Certificates of Label Approval ("COLA") applications reviewed and approved by the United States Alcohol and Tobacco Tax and Trade Bureau where plaintiff relied on images displayed in the COL As in his complaint and there was no dispute as to the COLAs' authenticity); see also Dumas v. Diageo PLC, 2016 WL 1367511, at *3 n, 2 (S.D. Cal. April 6, 2016) (taking judicial notice of COLA applications); Cruz v. Anheuser-Busch, LLC, 2015 WL 3561536, at *4 n.10 (CD. Cal. June 3, 2015) (taking judicial notice of COLAs). However, because Plaintiffs raise concerns with regard to the authenticity of Defendant's FSIS Form 7234-1, see Pls.' Opp'n 13, the Court will not consider Defendant's FSIS Form 7234-1 at this time.

         Nevertheless, the Court may presume that the Kirkland Canned Chicken label at issue was approved by the FSIS. The PPIA regulation discussed herein is clear that the Kirkland Canned Chicken label required FSIS pre-approval, as no exemption was applicable due to Defendant's inclusion of American Heart Association claims and a graphic representation of a heart. See discussion infra note 2. The label was actually used on the products offered for sale. (Am. Compl. ¶¶ 11-13.) See Kuenzig v. Kraft Foods, Inc., 2011 WL 4031141, at *7 n.8 (M.D. Fla. Sept. 12, 2011), aff'd, 505 Fed.Appx. 937 (11th Cir. 2013) ("The regulations relating to the.. .PPIA are clear that Defendants' labels were required to be submitted to the FSIS for approval prior to their use, and given that the labels were, in fact used, the Court will presume that the labels received the FSIS's approval."). Furthermore, while Plaintiffs challenge the authenticity of Defendant's FSIS Form 7234-1 due to concerns about page numbering, they make no allegation that Defendant did not actually receive FSIS approval.[2] Therefore, the Court will assume that there is no dispute as to the fact of FSIS approval of the Kirkland Canned Chicken label.

         DISCUSSION

         Defendant moves to dismiss on several grounds. First, it argues that Plaintiffs' state law claims are preempted by the PPIA. (Mem. Law Supp. Costco Wholesale Corporation's Mot. To Dismiss (ECF No. 19) ("Def.'s Mem.") 6-10.) Second, it argues that Plaintiffs' claims are precluded to the extent they are predicated on violations of the PPIA, which lacks a private right of action (Def.'s Mem. 10-14.) Finally, Defendant argues that Plaintiffs' claims fail as a matter of law because no reasonable consumer would be misled by Kirkland Canned Chicken's packaging and label. (Id. 15-24.) The Court will address each argument in turn.

         A. Preemption

         Defendant reasons that because Plaintiffs' challenges to the representations on the Kirkland Canned Chicken label fall within the express preemption clause of the PPIA and the FSIS has preapproved the challenged label, Plaintiffs' state law claims are expressly preempted. (Def.'s Mem. 10.) The Court, noting that Plaintiffs also fail to allege a violation of applicable federal law, agrees that Plaintiffs' labeling-related claims are preempted under the facts alleged. In addressing this argument, the Court will begin by describing the relevant statutory and regulatory framework controlling the labeling of poultry products.

         1. Regulatory Scheme

         Under the PPIA, Congress granted the USDA the authority to regulate the distribution and sale of poultry products shipped in interstate commerce by ensuring, among other things, that poultry products are "properly marked, labeled, and packaged." See 21 U.S.C. § 451. The PPIA forbids the sale of poultry products that have a false or misleading marking, labeling or container. 21 U.S.C. § 457(c). Pursuant to this prohibition, the FSIS, a public health agency of the USDA, is tasked with inspecting and approving product labels under the purview of the PPIA before products bearing that label may be sold in interstate commerce. 9 C.F.R. § 412.1(a).[3]

         Additionally, canned poultry products are subject to a number of specific labeling requirements. The relevant requirement in this case states: "Canned boned poultry, except poultry within paragraph (c) of this section, [4] shall meet the requirements set forth in Table II. The percentages in Table II shall be calculated on the basis of the total ingredients used in the preparation of the product." 9 C.F.R. § 381.157(b). Table II, in turn, contains a list of percentages specifying the minimum amount of meat and maximum amount of liquid a canned chicken product may contain for each of four categories and, alongside each category's percentages, the naming requirements for products falling into each specified range. See 9 C.F.R. § 381.157(e). Table II appears as follows:

Product name

Table II Minimum percent cooked, deboned poultry meat of kind indicated, with skin, fat, and seasoning

Maximum percent liquid that may be added1

1. Boned (Kind)-solid pack

95

5

2. Boned (Kind)

90

10

3. Boned (Kind) with broth2

80

20

4. Boned (Kind) (-) percent broth2 3

50

50

1 Liquid may be in the form of, but is not limited to, broth or extractives.
2 Alternatively, product may be prepared from raw boned poultry in combination with cooked boned poultry so long as the product complies with the specified standard.
3 Total amount of liquid added shall be included in the name of the product: e.g., "Boned Chicken with 25 ...

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