Opinion
Civil No. 05CV1380 J (BLM).
September 30, 2005
Currently before the Court is a Motion to Dismiss ("Motion") under Federal Rules of Civil Procedure 12(b)(1) ("Rule 12(b)(1)"), 12(b)(6) ("Rule 12(b)(6)"), 9(b) ("Rule 9(b)") and a Motion to Strike under 12(f) ("Rule 12(f)") and supporting Memorandum of Points and Authorities in Support thereof filed by Defendant Manor Care, Inc. ("Defendant") [Doc. No. 6.] Plaintiffs Richard Scholl and Kathleen Levin ("Plaintiffs") have filed an Opposition to the Motion. [Doc. No. 10.] Defendant has also filed a Reply. [Doc. No. 14.] For the reasons set forth below, the Court DENIES Defendant's Motion to Dismiss under Rule 12(b)(1), DENIES Defendant's Motion to Dismiss under Rule 12(b)(6); GRANTS Defendant's Motion to Strike injunctive relief, and STRIKES paragraphs 90 and 96(b) of the Complaint.
Background Facts
Plaintiffs Richard Scholl and Kathleen Levin are individuals residing in San Diego and appearing respectively on behalf of the estates of their mothers, Mildred Scholl and Kathleen Van Arum, as well as on behalf of all others similarly situated. (Complaint, Prayer for Relief.) Defendant Manor Care Health Services, Inc., is a corporation organized and existing under the laws of Delaware with its principal place of business located in Ohio. (Complaint ¶ 6). Defendant Manor Care Health Services, Inc., and affiliated companies Defendants Manor Care, Inc., Manor Care of America, Inc., and Manor Properties, Inc. (collectively, "Manor Care"), own and operate ten facilities in the State of California that treat the elderly. (Complaint ¶ 4).
Plaintiffs allege that their mothers were subjected to substandard care during their time as residents at Defendant's facility located in Encinitas, California. ( Id. ¶ 6). In addition to their personal claims, Plaintiffs also seek to represent a purported class consisting of all persons who resided as patients at the Manor Care skilled nursing facility in Encinitas at any time in the four (4) years preceding the filing of the complaint. ( Id. ¶ 77). Specifically, Plaintiffs allege that on a class-wide basis Manor Care has failed to maintain adequate staffing at their Encinitas facility and that as a result, residents have suffered from: (1) pressure sores resulting from staff failure to turn over bedfast residents; (2) incontinence and urinary tract infections resulting from inadequate toileting assistance; (3) falls resulting from the failure to respond to call lights; (4) malnutrition resulting from inadequate feeding assistance and lack of monitoring; and (5) dehydration. ( Id. ¶ 4-5). According to Plaintiffs, Defendant misrepresented the level of care, services, and staffing levels to the public in their written marketing materials and admission agreement. ( Id. ¶ 10).
Plaintiffs filed a Complaint in the Superior Court of the State of California that was subsequently removed to this Court on diversity of citizenship grounds under the Class Action Fairness Act. Plaintiffs have alleged the following causes of action against Defendant: (1) unlawful, unfair, and fraudulent business acts and practices in violation of California Business Professions Code §§ 17200 and 17500 (together, the unfair competition law, "UCL"); (2) false advertising; (3) violation of the Consumer Legal Remedies Act (Cal. Civ. Code § 1750 et seq.); and (4) unjust enrichment. (Complaint ¶¶ 86-106). Defendant now seeks to dismiss the action for: (1) lack of subject matter jurisdiction; (2) failure to state a claim on which relief can be granted; and (3) failure to plead fraud with the requisite particularity. Additionally, Defendant moves to strike Plaintiffs' request for injunctive relief.
I. Legal Standards
A. Motion to Dismiss Pursuant to Rule 12(b)(1)
Under Federal Rule of Civil Procedure Rule 12(b)(1), a defendant may seek to dismiss a complaint for "lack of jurisdiction over the subject matter." Fed.R.Civ.P. 12(b)(1).
Federal subject matter jurisdiction must have a statutory basis. The primary sources of federal subject matter jurisdiction are federal question jurisdiction under 28 U.S.C. § 1331, diversity jurisdiction under 28 U.S.C § 1332, and supplemental jurisdiction under 28 U.S.C. § 1367.
When considering a Rule 12(b)(1) motion, the district court "is free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). "In such circumstances, `[n]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.'" Id. (quoting Thornhill Publishing Co. v. General Telephone Electronic Corp., 594 F.2d 730, 733 (9th Cir. 1979)). Plaintiffs, as the party seeking to invoke jurisdiction, have the burden of establishing that jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 114 S. Ct. 1673, 1675 (1994).
B. Motion to Dismiss Pursuant to Rule 12(b)(6)
Federal Rules of Civil Procedure Rule 12(b)(6) provides that a complaint may be dismissed for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. See Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Dismissal of a claim under this rule is appropriate only where it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Edwards v. Marin Park, Inc., 356 F.3d 1058, 1061 (9th Cir. 2004), (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).
In reviewing the motion, the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). However, the court is not bound to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 (1986); see also Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Instead, the court must determine "whether conclusory allegations follow from the description of facts as alleged by the plaintiff." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992).
When ruling on a motion to dismiss, the court may consider the facts alleged in the complaint, documents attached to the complaint, and documents relied upon but not attached to the complaint when authenticity is not contested. Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998); Fed.R.Civ.P. 12(b)(6).
C. Motion to Strike Pursuant to Rule 12(f)
Federal Rules of Civil Procedure Rule 12(f) provides that the court may strike from any pleading "any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). Immaterial matter is material "which has no essential or important relationship to the claim for relief." Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds by 510 U.S. 517 (1994). Impertinent material "consists of statements that do not pertain, and are not necessary, to the issues in question." Id.
For purposes of the motion to strike, the court "must view the pleading under attack in the light more favorable to the pleader." Lazar v. Trans Union LLC, 195 F.R.D. 665, 669 (C.D. Cal. 2000); see also California v. United States, 512 F. Supp. 36, 39 (N.D. Cal. 1981). Because striking a portion of a pleading is a drastic remedy, Rule 12(f) motions are disfavored and infrequently granted. Lazar, 195 F.R.D. at 669. For a motion to strike to succeed, the movant must show that the allegations objected to are "so unworthy of any consideration . . . that their presence in the pleading throughout the proceedings will be prejudicial to the moving party." 5A Wright Miller, Federal Practice and Procedure § 1380 (2d ed. 1990). Motions to strike based on impertinent or immaterial matters are usually denied unless "the allegations have no possible relation to the controversy." Id. § 1382.
Discussion
I. 12(b)(1) Motion to Dismiss
Under Rule 12(b)(1), Defendant moves to dismiss Plaintiff's Complaint on the grounds of (1) the primary jurisdiction doctrine and (2) lack of standing. For the reasons set forth below, this Court DENIES Defendant's Motion on both grounds.
A. Primary Jurisdiction
Defendant argues that the doctrine of primary jurisdiction requires this Court to decline jurisdiction over any alleged incidents or complaints that have not first been reviewed by the California's Department of Health Services ("CDHS") and the federal government's Center for Medicare and Medicaid ("CMS"). (Def.'s Mem. of P. and A. at 2-3.) Plaintiffs contend that invoking the doctrine is improper. For the reasons stated below, this Court FINDS that it has jurisdiction over each of Plaintiffs' causes of action.
1. Background on Primary Jurisdiction Doctrine
The Supreme Court has spoken on the issue of primary jurisdiction:
"The doctrine of primary jurisdiction . . . is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. "Primary jurisdiction," . . . applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views . . . No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." United States v. Western Pac. R. Co., 352 U.S. 59, 63-64 (1956). The Court also suggested that two reasons for invoking the doctrine are (1) to promote uniform application of regulatory laws by having agencies initially resolve certain administrative questions and (2) to utilize the expert and specialized knowledge of the agencies involved in matters not within the conventional experience of judges. Id. at 64.
The Ninth Circuit has also addressed this doctrine. In Brown v. MCI Worldcom Servs., Inc., 277 F.3d 1166, 1169 (9th Cir. 2002), the plaintiff filed a class action complaint alleging overcharging by a telephone service provider. The district court held that under the doctrine, the claim had to be resolved in the first instance by the Federal Communications Commission ("FCC"). Id. The Ninth Circuit reversed and remanded the case to the district court to determine whether the claims involved issues requiring resolution by the FCC. Id. at 1173.
The court stated that the doctrine does not require that all claims within an agency's purview be decided by the agency. Id. at 1172 (citing U.S. Gen. Dynamics Corp., 828 F.2d 1356, 1362 (9th Cir. 1987)). The court added that the primary jurisdiction doctrine is not intended to "secure expert advice for the courts from regulatory agencies every time a court is presented with an issue conceivably within the agency's ambit." Id. Finally, the court concluded it was not clear from the record whether the claims presented the "sort of complex and far-reaching issues that are properly within the FCC's primary jurisdiction." Id. at 1173.
2. Primary Jurisdiction Doctrine In Relation to Nursing Homes
Substantial compliance with federal regulations governing nursing homes is a condition of participation in both the Medicare and Medicaid programs. 42 C.F.R. § 488.406. The CDHS regulates the quality of care administered to nursing home residents. (Complaint ¶ 71); Cal. Health Safety Code §§ 1417-1439.8. The CDHS also provides an administrative complaint procedure to investigate complaints regarding the care and treatment provided by long-term health care providers. (Def.'s Mem. of P. and A. 7-8.); Cal. Health Safety Code § 1420. Most importantly, the chapter of the California Health Safety Code that governs the quality of Long-Term Health Care facilities and explains the administrative complaint procedure states: "the remedies provided by this chapter are cumulative and shall not be construed as restricting any remedy . . . provided by law . . . and no judgment under this chapter shall preclude any party from obtaining additional relief based on the same facts." See Cal. Health Safety Code § 1433 (emphasis added).
California courts have been willing to address unfair business claims against nursing homes. In People v. Casa Blanca Convalescent Homes, Inc., 159 Cal.App.3d 509, 515 (1984), the state brought an action against defendant convalescent home seeking civil penalties and injunctive relief under section 17200. Id. The State claimed that Casa Blanca failed to provide adequate nursing care so as to prevent bedsores and failed to serve adequate diets. Id. The appellate court found that plaintiffs properly admitted inspection reports from the Department of Health Services into evidence and ultimately found that the practice of providing insufficient personnel was not only an illegal practice, but also an "unfair practice" under section 17200. Id. at 530-33. The court emphasized that the "sweeping language of Health Safety Code Sections 1430 and 1433 show a legislative intent to authorize the district attorney to bring a cause of action and seek remedies in whatever form such remedies might exist." Id. at 532.
Federal courts have also permitted plaintiffs to bring tort claims under similar circumstances. In Brogdon v. National Healthcare Corp., 103 F. Supp. 2d 1322, 1333-34 (D. Ga. 2000), residents of a long-term health care facility filed federal and state law claims, alleging that defendants failed to provide basic and minimally required levels of care. The court ruled that federal law did not preempt Plaintiff's claims and that invoking the primary jurisdiction doctrine was improper. Id. at 1340-44. Defendants asserted that the standard of care applied under a state negligence claim is in "direct conflict" with the participation requirement that nursing homes provide sufficient care "to attain or maintain the highest practicable physical, mental, and psychosocial well-being" of their residents. Id. at 1341 (citing 42 C.F.R. § 483). The court responded:
"While perhaps different, these standards do not pose mutually exclusive choices for nursing homes that receive money under the Medicare and Medicaid programs . . . Indeed, Defendants fail to explain why a nursing home and its employees cannot comply with the ordinary standard of due care while striving to adequately provide for the mental, physical, and social needs of the residents." Id. The court added that evidence of government "certification" for the facility could provide some evidence that Defendants have not breached Plaintiffs' contracts or violated the applicable standard of care. Id. Finally, the Brogdon court also noted that while Georgia provided an administrative complaint procedure to investigate complaints regarding care and treatment, plaintiffs' claims required the "measurement of Defendants' conduct against the duties imposed by tort law . . . In other words, Plaintiffs' claims do not arise from any state administrative proceeding or regulatory ruling." Id. at 1343.
3. Application of Primary Jurisdiction Doctrine to Present Action
Under the same reasoning as Brogdon and Casa Blanca, this Court is unconvinced that the primary jurisdiction doctrine demands that this Court suspend these proceedings or dismiss Plaintiffs' claims. First, section 1433 of the Health Safety Code states that "no judgment under this chapter shall preclude any party from obtaining additional relief based on the same facts." Similar to the Casa Blanca court, this Court finds that this "sweeping language" allows for plaintiffs to bring claims under the UCL. Casa Blanca, 159 Cal.App.3d at 532.
Second, the Court does not believe that adjudication of Plaintiffs' claims in federal court will intrude upon California's administrative scheme for reviewing complaints regarding nursing home care or will create any inconsistency. As stated in Brogdon, this Court will be measuring Defendant's conduct against the duties imposed by business tort law. See Brogdon, 103 F. Supp. 2d at 1343. Moreover, abiding by the regulations and meeting the duty of care are not "mutually exclusive choices." Id. at 1341. Thus, the CDHS can serve penalties on the Defendant if it does not adhere to their standards and this Court can award restitution if Plaintiffs were misled when purchasing Defendant's services. See Prata v. Superior Court, 91 Cal.App.4th 1128, 1137 (2001) (discussing purposes of section 17200).
Third, the Court believes that adjudication of Plaintiffs' tort claims does not disregard the respective agencies' expertise, but rather embraces it. In Casa Blanca the court agreed that plaintiffs could properly admit the agency's inspection reports to support their claims. Casa Blanca Convalescent Homes, Inc., 159 Cal.App.3d at 533. In Brogdon the court found government "certification" for the facility could provide some evidence that there was no breach of contract. Brogdon, 103 F.Supp. 2d at 1341. Similarly, in this instance, Plaintiffs will likely be using CDHS reports to support their claims. Thus, the Court will not be side-stepping the agencies, but instead will be utilizing their specialization and expertise. (Complaint ¶¶ 72-76); (Tyler Weaver Decl., Exhibit 1).
Finally, none of Defendant's cited cases to the contrary are particularly on point. Johnson v. Nyack Hosp., 964 F.2d 116, 122 (2d Cir. 1992) (utilizing the primary jurisdiction doctrine to defer case involving revocation of doctor's surgical privileges to agency designed to determine whether there is a medical justification for such a revocation); In Re Shelby County Healthcare Servs. Inc. v. U.S., 80 B.R. 555, 562 (N.D. Ga. 1987) (stating that the primary jurisdiction doctrine places debtor's claim for Medicare reimbursement properly before the Department of Health and Human Services); In re Mid-Delta Health Sys., Inc., 251 B.R. 811 (N.D. Miss. 1999) (suspending and postponing exercise of jurisdiction pending a determination by agency regarding Medicare provider reimbursement issues); St. Mary Hosp. v. U.S., 125 B.R. 422, 432 (E.D. Pa. 1991) (noting court should intervene in Medicaid appeal process only if necessary).
In sum, the primary jurisdiction doctrine is a discretionary tool that is not appropriate in the present case. This Court can allow Plaintiffs to bring tort claims against Defendant without intruding on the agencies' jurisdiction or usurping their expertise. Accordingly, the Court DENIES Defendant's Motion to Dismiss on grounds of the primary jurisdiction doctrine.
B. Standing and Proposition 64 in Relation to Plaintiffs' Individual Claims
Defendant further argues that this Court lacks jurisdiction because Plaintiffs do not have standing to bring a claim attacking Manor Care's advertising. Specifically, Defendant contends that a recent state enactment created a "reliance" requirement and Plaintiffs failed to allege such reliance. Plaintiffs contend both that no "reliance" requirement exists, and that their allegations would satisfy such a requirement. Although this Court need not rule on whether the enactment added a "reliance requirement," the Court FINDS that even under such a requirement, Plaintiffs have adequately alleged reliance and maintain standing.
Lack of standing is a threshold issue and constitutes cause for dismissal at the pleading stage, before any class determination has been made. O'Shea v. Littleton, 414 U.S. 488, 494 n. 3 (1974). Article III, § 2 of the United States Constitution restricts federal courts to deciding "cases" and "controversies." Federal courts must determine at the outset of every case whether "a party has a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy." Sierra Club v. Morton, 405 U.S. 727, 731 (1972). "[A]t an irreducible minimum, Art. III requires the party who invokes the court's authority to `show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant.'" Valley Forge Christian Coll. v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982) (quoting Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99 (1979); see also Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103 (1998).
Prior to Proposition 64, any person could sue under the UCL in a "representative" action on behalf of the general public, even if the plaintiff never had any relationship to the defendant. See generally, Kraus v. Trinity Mgmt. Servs., Inc., 23 Cal.4th 116 (2000) (discussing remedies available). Moreover, claimants could find relief under section 17200 if they proved that members of the public were likely to be deceived. Committee on Children's Television v. General Foods, 35 Cal. 3d 197, 211 (1983).
On November 2, 2004, California voters passed Proposition 64, entitled "Limits on Private Enforcement of Unfair Business Competition Laws." The enactment amended the UCL to delete language that gave any person the right to bring an action for the benefit of the general public. Cal. Bus. Prof. Code §§ 17203, 17204, 17535. The enactment also added language stating that an action under those sections can be brought by a private plaintiff (i.e., a non-governmental prosecutor) only if that plaintiff "has suffered injury in fact and has lost money or property as a result of [the] unfair competition" or misleading advertising. Id. Defendant now argues that the new "actual injury" language requires Plaintiffs to prove that they saw and relied on the subject advertising to their detriment.
Defendants note that no reported post-Proposition 64 case has considered the issue of a reliance requirement directly, but they do cite to In Re Firearms, 126 Cal.App.4th 959, 982 (2005) (stating that a false advertising UCL violation cannot be "established without a link between a defendant's business practice and the alleged harm," and that plaintiff must show that "[t]he offensive unfair business practices are injurious in some causative way to consumers.").
In Vasquez v. Superior Court, 4 Cal. 3d 800, 814 (1971), the California Supreme Court stated:
"The rule in California and elsewhere is that it is not necessary to show reliance upon false representations by direct evidence. The fact of reliance upon alleged false representations may be inferred from the circumstances attending the transaction which often times afford much stronger and more satisfactory evidence of the inducement which prompted the party defrauded to enter into the contract than his direct testimony to the same effect."
In a later case, the California Supreme Court noted that "an inference of reliance arises if a material false representation was made to persons whose acts thereafter were consistent with reliance upon the representation." Occidental Land, Inc. v. Superior Court, 18 Cal. 3d 355, 363 (1976) (citing Vasquez). In Occidental, homeowners in a planned development subdivision sued as a class against defendant developer for fraudulently misrepresenting the cost and extent of maintenance of the development. Id. at 358. Specifically, plaintiffs alleged the misrepresentations were found in a public subdivision report produced by the defendant. Id. at 358-59. The court found that "because the purchases made by plaintiffs were acts consistent with their reliance on the subdivision report . . . the trial court did not err in inferring that justifiable reliance may be established on a common basis." Id. at 363.
Similarly, in the present case, Plaintiffs paid Manor Care for its services, an act consistent with their reliance on the various promotional materials cited in the Complaint. (Complaint ¶ 30-34). In fact, Plaintiffs explicitly state that misrepresentations made in violation of section 17500 "intended to, and did, induce the purchase of nursing home services here at issue." (Complaint ¶ 95-96). Therefore, at a minimum, Plaintiffs allege an inference of reliance sufficient to maintain standing.
C. Standing and Proposition 64 in Relation to Plaintiffs' Representative Claims
Defendant also contends that Plaintiffs lack standing in their representative claims. (Def.'s Mem. of P. and A. at 20-23.) After Proposition 64, the UCL now states that private plaintiffs meeting the "actual injury" standard who also seek to assert representative claims on behalf of others must comply with the class action procedural requirements in California Code of Civil Procedure Section § 382. Cal. Bus. Prof. Code §§ 17203, 17535. Section 382 states: ". . . when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue for the benefit of all."
California Code of Civil Procedure § 382. In paragraph 78 plaintiffs allege "The members of the class are so numerous that joinder of all their members would be impractical . . . The class has at least several hundred members." Therefore, Plaintiffs adequately allege their representative claims. In sum, this Court FINDS that Plaintiffs allege an inference of reliance sufficient to maintain standing and DENIES Defendant's Motion to Dismiss on the basis of lack of standing.
II. Motion to Dismiss Pursuant to Rule 12(b)(6)
Under Rule 12(b)(6), Defendant moves to dismiss Plaintiffs' Complaint arguing (1) Plaintiffs failed to prove a violation of "another law" as required under the UCL and CLRA and (2) Defendant's alleged misleading statements amount to mere puffery. For the reasons set forth below, this Court DENIES Defendant's Motion on both grounds.
A. Requirement to Prove Violations of "Another Law" Under a UCL or CLRA Claim
Defendant claims that to state a claim under the UCL or the CLRA, Plaintiffs must establish that there has been an underlying violation of law. (Def.'s Motion at p. 12). Plaintiffs argue Defendant has misstated the law and this Court agrees for the reasons stated below. (Plaintiffs' Opposition at 6.)
Section 17200 of the Cal. Bus Prof. Code states: "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500)[.]"
The California Supreme Court has stated:
The statutory language referring to "any unlawful, unfair or fraudulent" practice makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. "Because . . . section 17200 is written in the disjunctive, it establishes three varieties of unfair competition — acts or practices which are unlawful, or unfair, or fraudulent. `In other words, a practice is prohibited as "unfair" or "deceptive" even if not "unlawful" and vice versa.'"Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 180 (1999) (emphasis added); see also State Farm Fire Casualty Co. v. Superior Court, 45 Cal. App. 1093, 1103 (1996) (stating that the "unfair" prong of the UCL is intentionally broad to allow courts the discretion to prohibit ever-changing schemes).
Two alternative tests are used to determine whether a particular claim is unfair under the UCL. First, the court can weigh "the utility of the defendants" conduct against the gravity of the harm to the alleged victim. Motors v. Times-Mirror Co., (1980) 102 Cal.App.3d 735, 740. Second, a practice is considered "unfair" under the UCL if it "offends an established public policy" or is "substantially injurious to consumers." Casa Blanca, 159 Cal.App.3d at 530.
The California Supreme Court criticized Casa Blanca's test as "too amorphous" in Cel Tech Comms, 20 Cal.4th at 185. However, Cel Tech involved a standard claim of unfair competition between direct business competitors. The Court explicitly stated that the standard for an "unfair" act or practice was limited to the competitor context and did not relate to "actions by consumers." Id. at 187 fn. 12.
With respect to the present case, a policy of the Nursing Home Reform Act is "to ensure that nursing home facilities in California provide safe and secure environments for residents and their families and that they have the highest quality of care possible." See 42 C.F.R. § 483.75. Therefore, similar to Casa Blanca, Plaintiffs can plead that Manor Care acted "unfairly" under section 17200 by violating such a policy. (Complaint ¶ 88).
Contrary to Defendant's assertions, Plaintiffs do not have to establish that there was an underlying violation of law under for their CLRA or UCL claims. Accordingly this Court DENIES Defendant's Motion to Dismiss on the grounds that Plaintiffs must claim a violation of "another law" under the UCL or CLRA.
B. Puffery as Grounds for Dismissal of Plaintiffs' False Advertising Claims
Defendant argues that Plaintiffs fail to state a claim because the statements made in their promotional materials amount to nonactionable statements of opinion or "puffery." (Def.'s Mem. of P. and A. at 16-18.) Plaintiffs disagree and argue that the statements are factual representations. (Plaintiffs' Opposition at 15-18.) For the reasons stated below, this Court DENIES the Motion to Dismiss the false advertising claims on the grounds Defendant's statements amount to "puffery."
"Puffery" is described as "generalized or exaggerated statements such that a reasonable consumer would not interpret the statement as a factual claim upon which he or she could rely." In re All Terrain Vehicle Litig., 771 F.Supp. 1057, 1061 (C.D. Cal. 1991), aff'd, 979 F.2d 755 (9th Cir. 1992). The distinguishing characteristics of puffery are vague, subjective assertions about the superiority of a product rather than detailed, factual claims about the characteristics of the product. Cook, Perkiss, Liehe, Inc., 911 F.2d at 246. Puffery is recognized as an insufficient ground for imposing liability for allegedly false statements. See e.g., Hauter v. Zogarts, 14 Cal. 3d 104, 112 (1975) ("If defendants' assertion . . . is merely a statement of opinion-mere-`puffing'-they cannot be held liable for its falsity.").
The question of whether a statement is simple puffery rather than a factual misrepresentation is appropriate for judicial determination at the pleading stage and is a proper ground for dismissal as a matter of law. See Cook, Perkiss, Liehe, Inc. v. Northern Cal. Collection Serv., 911 F.2d 242, 246 (9th Cir. 1990); Haskell, 857 F.Supp. at 1399.
The Ninth Circuit has set boundaries for which statements amount to mere puffery and has stated that "misdescriptions of specific or absolute characteristics of a product are actionable." Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997) (citing Castrol v. Penzoil Prods. Co., 987 F.2d 939, 946 (3d Cir. 1993)). In Sod Farms, the court analyzed false advertisement claims brought under the UCL and the Lanham Act against makers of turfgrass seed and sod. Id. at 1138. The court found that Defendant's "less is more" claim was nonactionable puffery, but that claims of "reduced costs," "slower growth," and "less mowing" were actionable. Id. at 1144-45.
In Consumer Advocates v. Echostar Satellite Corp., 113 Cal.App.4th 1351, 1353-54 (2003), plaintiffs brought claims under the CLRA, the False Advertising Act, and the UCL against defendants for making false representations about their satellite service. The court found representations that the system was "crystal clear" and "CD quality" were akin to "mere puffing" because no "reasonable consumer would take [the claim] as anything more weighty than an advertising slogan." Id. at 1361. In contrast, the court ruled "50 channels" and "7 day schedule" were considered "factual representations" that created a "triable issue of fact . . . whether these representations are likely to deceive a reasonable consumer." Id. at 1362. In so holding, the court added that plaintiffs did not have to produce a consumer survey to prevail and that "the falsity of . . . advertising claims may be established by testing, scientific literature, or anecdotal evidence." Id. (citing National Council Against Health Fraud, Inc. v. King Bio Pharmaceuticals, Inc., 107 Cal.App.4th 1336, 1348). Last, the court concluded, "A perfectly true statement couched in such a manner that is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable." Id. (citing Day v. ATT Corp., 63 Cal.App.4th 325, 332-333 (1998)).
In the present case, Manor Care's promotional materials contain at least the following factual representations: (1) "Professional staff provide physician proscribed comprehensive health care around the clock for residents who require skilled services" (Complaint ¶ 32); (2) "Accommodations include . . . [t]hree delicious homemade meals supervised by a registered dietician" (¶ 30); (3) "Our services include . . . individualized care plans to meet each resident's needs" (¶ 30); (4) "The diverse extent activities offered range from themed events for holidays and exciting scheduled entertainment such as singers, musicians, and comedians to physical diversions including walks, armchair aerobics, and active games. Sensory and creative programs feature strolls down memory lane, current events review, spiritual services, and community outings" (¶ 30); (5) "Every HCR Manor Care health center employee receives 11 hours of intensive training in guest relations skills that emphasizes quality care with a personal sense of responsibility." (¶ 31.)
Similar to Consumer Advocates, Plaintiffs cite specific representations that can be proven true or false, based upon evidence to be presented at trial. Accordingly, this Court DENIES Defendant's Motion to Dismiss on the grounds that Defendant's statements amount to mere puffery.
III. Motion to Strike Injunctive Relief Pursuant to Rule 12(f)
Under Rule 12(f), Defendant argues this Court should strike Plaintiffs' requests for injunctive relief due to lack of standing. Plaintiffs contend this type of relief is available. For the reasons stated below, this Court STRIKES Plaintiffs' requests for injunctive relief.
In City of Los Angeles v. Lyons, 461 U.S. 95, 104-105 (1983), respondent suffered injuries from a police choke-hold and sought damages for his injuries and injunctive relief to bar the choke-hold policy. The Court ruled that respondent could pursue damages for the injuries sustained, but that it was without jurisdiction to entertain respondent's claim for injunctive relief because he could not show that he was likely to suffer future injury. Id. at 105. The Court ruled that to invoke jurisdiction, respondent was required to show that he was in immediate danger of irreparable injury and that neither the existence of past injury nor conjecture over the prospect of some future injury met the case or controversy requirement. Id. at 102; see also Clark v. City of Lakewood, 259 F.3d 996, 1007 (9th Cir. 2001) ("In the context of injunctive relief, the plaintiff must demonstrate a real or immediate threat of an irreparable injury.").
Regarding class actions, the Supreme Court has ruled that the named plaintiff can only seek relief for conduct that is directly applicable to him. Blum v. Yarestsky, 457 U.S. 991 (1982) (trial court lacked jurisdiction to grant class relief for aspect of defendant's conduct because those activities could not reasonably affect the class representatives). Finally, under the UCL, a plaintiff whose cause of action under section 17200 is "perfectly viable in state court under state law may nonetheless be foreclosed from litigating the same cause of action in federal court, if he cannot demonstrate the requisite injury." Lee v. Am. Nat'l Ins. Co., 260 F.3d 997, 1001-02 (9th Cir. 2001).
Plaintiffs request widespread injunctive relief that would govern aspects of Manor Care's operations in the future. (Complaint, Prayer for Relief §§ A-C.) The only named plaintiffs, however, are the estates of two deceased residents. Thus, Plaintiffs themselves are not capable, actually or hypothetically, of benefitting from the injunctive relief sought, and their estates do not have a sufficiently direct interest in obtaining injunctive relief to satisfy applicable standing requirements. See also Mixon v. Gray Drug Stores, Inc. 81 F.R.D. 413, 414 (N.D. Ohio 1978) (estate of deceased named plaintiff cannot maintain class action seeking injunctive relief because "the estate has no direct interest in obtaining injunctive relief."). Thus, this Court STRIKES Plaintiffs' requests for injunctive relief.
IV. Motion to Dismiss Pursuant to Rule 9(b)
Defendant argues that Plaintiffs' false advertising claims should be dismissed because they fail to satisfy the applicable pleading requirements of Federal Rule of Civil Procedure 9(b). Plaintiffs state that Rule 9(b) does not apply to their false advertising claims and that even if applicable, the Complaint satisfies the particularity requirements. For the reasons stated below, the Court DENIES Defendant's Motion to Dismiss on the grounds of Rule 9(b), but STRIKES paragraphs 90 and 96(b) alleging fraud.
A. Relevance of Plaintiffs' Failure to Satisfy Rule 9(b)
Rule 9(b) states that in "all averments of fraud . . ., the circumstances constituting fraud . . . shall be stated with particularity." Fed.R.Civ.P. 9(b). However, the Ninth Circuit has explained that fraud is not an essential element of a claim under sections 17200 and 17500 and that:
"Where averments of fraud are made in a claim in which fraud is not an element, an inadequate averment of fraud does not mean that no claim has been stated. The proper route is to disregard averments of fraud not meeting Rule 9(b)'s standard and then ask whether a claim has been stated."Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1105 (9th Cir. 2003) (quoting Lone Star Ladies Inv. Club v. Schlotzsky's Inc., 238 F.3d 363, 368 (5th Cir. 2001). The Vess court also cited similar language from the Eighth Circuit:
"The only consequence of a holding that Rule 9(b) is violated with respect to a § 11 claim would be that any allegations of fraud would be stripped from the claim. The allegations of innocent or negligent misrepresentation, which are at the heart of a § 11 claim, would survive."Id. (quoting Carlon v. Thaman ( In re NationsMart Corp. Sec. Litig.), 130 F.3d 309, 315 (8th Cir. 1997)).
In the present case, Defendant cites to paragraphs 90 and 96(b) of the Complaint in arguing that Plaintiffs' false advertising claims fail to satisfy the requirements of Rule 9(b).
Paragraph 90 states that Manor Care has engaged in a "fraudulent business act or practice" in violation of section 17200. The Cel-Tech court ruled that a Plaintiff need only claim an unfair, unlawful, or fraudulent practice to make a claim under § 17200. See Cel Tech Communications Inc., 20 Cal.4th at 180; see also supra. Section (II)(A). Plaintiffs have alleged unfair practices. Therefore, under Cel-Tech, removing the allegations of fraud in paragraph 90 will not result in a dismissal of any of Plaintiffs' claims. Id.; Vess, 317 F.3d at 1105.
Paragraph 96(b) falls under the second cause of action for "False Advertising" and alleges that in violation of section 17500, Defendant circulated advertisements "as a part of a plan or scheme with the intent, design or purpose not to conform the facility as advertised." (Complaint ¶ 96(b).) However, in paragraph 96(a), which also falls under the "False Advertising" cause of action, Plaintiffs allege that in violation of section 17500, Defendants circulated "statements which were untrue, deceptive, misleading, or omitted material facts and which were known, or which by the exercise of reasonable care should have been known, by Defendants to be untrue, deceptive or misleading[.]" (Complaint ¶ 96(a)) (emphasis added).
The "reasonable care" language in 9(b) is equivalent to alleging negligent misrepresentation and thus constitutes "non-fraudulent" conduct governed only by the ordinary notice standards of Rule 8(a). See Vess, 317 F.3d at 1105-06. Therefore, even if paragraph 96(b) is disregarded, paragraph 96(a) and the false advertising claims still survive.
B. Plaintiffs' Compliance with Rule 9(b)
While removing allegations of fraud found in paragraphs 90 and 96(b) will not dismiss any of plaintiffs claims, Federal Rule of Procedure Rule 12(f) provides that the court may strike from any pleading "any . . . redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f); see also Fantasy, Inc., 984 F.2d at 1527 (stating impertinent material "consists of statements that do not pertain, and are not necessary, to the issues in question").
The Ninth Circuit has stated that Rule 9(b) requires simply that fraud allegations "be specific enough to give defendants notice of the particular misconduct," provide "the who, what, when, where, and how of the misconduct," and allege "what is false or misleading about a statement and why it is false." Vess, 317 F.3d at 1104-05.
In paragraph 96(b) of the Complaint, Plaintiffs allege that Defendants produced their advertisements "as part of a plan or scheme with the intent . . . not to conform the facility as advertised." However, the Complaint does not provide the particulars of when, where, or how the alleged "scheme" occurred and nothing in the Complaint clearly points to a "scheme" or intentional conduct that would otherwise be necessary for alleging fraud. See Vess, 317 F.3d 1097, 1106-07 (holding that plaintiff failed to satisfy 9(b) when allegations of a fraudulent conspiracy did not provide when, where, or how the alleged conspiracy occurred). Therefore, paragraphs 90 and 96(b) are impertinent under Rule 12(f), but removing these allegations will not result in a dismissal of any of Plaintiffs' claims.
In sum, this Court STRIKES paragraphs 90 and 96(b) of the Complaint under Rule 12(f), but DENIES Defendant's Motion to Dismiss on the grounds of Rule 9(b).
Conclusion and Order
For the reasons stated above, the Court: (1) DENIES Defendant's Motion to Dismiss under Rule 12(b)(1); (2) DENIES Defendant's Motion to Dismiss under Rule 12(b)(6); (3) DENIES Defendant's Motion to Dismiss under Rule 9(b); (4) GRANTS Defendant's Motion to Strike injunctive relief and STRIKES paragraphs 90 and 96(b) of the Complaint under Rule 12(f).
IT IS SO ORDERED.