Lee Walters v. Vitamin Shoppe Industries, Inc , 701 F. App'x 667 ( 2017 )

FILED
NOT FOR PUBLICATION
AUG 01 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
LEE WALTERS, MD, an Oregon resident, No. 15-35592
Plaintiff - Appellant, D.C. No. 3:14-cv-01173-PK
v.
MEMORANDUM*
VITAMIN SHOPPE INDUSTRIES, INC.,
a Delaware corporation,
Defendant - Appellee.
Appeal from the United States District Court
for the District of Oregon
Anna J. Brown, District Judge, Presiding
Argued and Submitted July 14, 2017
Portland, Oregon
Before: WATFORD and OWENS, Circuit Judges, and NAVARRO,** Chief
District Judge.
1. The district court properly dismissed Dr. Lee Walters’ (Walters) breach
of contract claim. We have found no authority under Oregon law holding that the
mere purchase of a consumer good, without more, suffices to establish a valid and
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Gloria M. Navarro, Chief United States District Judge
for the District of Nevada, sitting by designation.
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enforceable contract. To accept Walters’ theory of contract formation, we would
have to conclude that the display of a price term and quantity information on or
immediately surrounding a product’s packaging constitutes an offer to sell. But the
traditional rule is that advertisements of goods by sign or display “are not
ordinarily intended or understood as offers to sell.” Restatement (Second) of
Contracts § 26 cmt. b (1981).
What little precedent we have found from Oregon’s courts suggests that
they, too, adhere to the rule that an advertisement is not ordinarily considered an
offer to sell, absent unusually definite and explicit language. See Sherry v. Bd. of
Accountancy, 157 P.3d 1226, 1232 (Or. Ct. App. 2007). No such language is
present here.
Because we conclude that no contract was formed, we do not reach Walters’
unconscionability argument. That obviates the need to address the parties’ dispute
over whether Vitamin Shoppe Industries’ (VSI) labeling practices comply with the
Food and Drug Administration’s regulations (and if so, whether these regulations
preempt Walters’ state law claims).
2. The district court properly dismissed Walters’ breach of warranty claim
because Walters cannot state such a claim under state or federal law. Oregon
warranty protections specifically exclude “[c]onsumable” goods, defined as “any
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product which is intended for consumption by individuals.” Or. Rev. Stat.
§ 72.8010(7). That definition encompasses the dietary supplements at issue in this
case.
Nor can Walters plead breach of warranty under the federal Magnuson-Moss
Warranty Act (MMWA), which provides a cause of action for breach of written or
implied warranties. 15 U.S.C. § 2310(d). Walters cannot allege a breach of
implied warranty because the MMWA incorporates state law in its definition of
implied warranties. 15 U.S.C. § 2301(7); see Birdsong v. Apple, Inc., 590 F.3d
955, 958 n.2 (9th Cir. 2009). Since there are no implied warranty protections for
consumables under Oregon law, there can be no implied warranty protections
under federal law.
Walters’ argument that the statements on VSI’s products amount to a written
warranty under the MMWA fails as well. The MMWA defines a written warranty
as a promise that (1) the product is “defect free”; (2) the product will “meet a
specified level of performance over a specified period of time”; or (3) the supplier
will “take . . . remedial action” if the product “fails to meet the specifications.” 15
U.S.C. § 2301(6). VSI’s product label contains no such promises. The quantity
statements on the label describe the product’s contents, but do not affirm that the
product is free from imperfections.
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3. We reverse the dismissal of Walters’ unjust enrichment claim. Under
Oregon law, once a court determines that a valid contract exists, an unjust
enrichment claim must fail. See Mount Hood Cmty. Coll. ex rel. K & H Drywall,
Inc. v. Fed. Ins. Co., 111 P.3d 752, 759 (Or. Ct. App. 2005); Prestige Homes Real
Estate Co. v. Hanson, 951 P.2d 193, 195 (Or. Ct. App. 1997). The district court
dismissed Walters’ unjust enrichment claim on this basis, after concluding that a
contract had been formed. Because the parties’ transaction did not form a contract,
the unjust enrichment claim is not precluded.
4. We reverse the dismissal of Walters’ fraudulent misrepresentation claim.
To allege a viable fraud claim under Oregon law, Walters must plead that he
justifiably relied on VSI’s alleged misrepresentations. See In re Brown, 956 P.2d
188, 196 (Or. 1998). This element requires that a plaintiff “tak[e] reasonable
precautions” to safeguard his interests. Gregory v. Novak, 855 P.2d 1142, 1144
(Or. Ct. App. 1993). Contrary to VSI’s contention, the operative question is not
whether Walters unreasonably failed to read the terms of a contract—as explained
above, no contract exists in this case. Instead, the question is whether Walters was
required, as a matter of law, to cross-reference statements on a product’s label
against information found in small print elsewhere on the product. This court has
answered that question in the negative. Consumers review the small print on a
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product’s label to learn additional details about a product, not to correct potentially
misleading representations found on the front. Williams v. Gerber Prods. Co., 552
F.3d 934, 939–40 (9th Cir. 2008). Applying the logic of Williams to this case,
Walters did not have a duty to validate claims on the front of a product’s label by
cross-checking them against information contained in small print on the back. His
failure to read the clarifying serving-size information does not constitute a failure
to reasonably safeguard his interests.
5. The district court improperly dismissed Walters’ UTPA claim. To
prevail under the UTPA, a private plaintiff must suffer “an ascertainable loss of
money or property . . . as a result of another person’s willful use or employment of
a method, act or practice declared unlawful” under the UTPA. Or. Rev. Stat.
§ 646.638(1). “Ascertainable” loss is construed to mean any loss “capable of being
discovered, observed, or established.” Scott v. W. Int’l Surplus Sales, Inc., 517
P.2d 661, 663 (Or. 1973). The loss need be only “objectively verifiable.” Pearson
v. Philip Morris, Inc., 361 P.3d 3, 22 (Or. 2015).
Walters adequately pleaded his UTPA claim. He alleges that VSI made
representations that violate Or. Rev. Stat. § 646.608, and that he would not have
purchased the product but for the alleged misrepresentations. The ascertainable
loss, therefore, is the monetary value of a product that Walters would not otherwise
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have bought. Because Walters alleges that he relied on VSI’s representations, he
sufficiently pleaded that VSI’s conduct caused his loss. See Pearson, 361 P.3d at
27.
To conclude, we affirm the district court’s dismissal of Walters’ breach of
contract and breach of warranty claims. We reverse the district court’s dismissal of
Walters’ unjust enrichment, fraud, and UTPA claims.
Walters’ motion for judicial notice (Docket Entry 25) is DENIED as moot.
VSI’s motion for leave to submit supplemental briefing (Docket Entry 30) is
GRANTED. VSI’s alternative request to strike portions of Walters’ reply brief
(Docket Entry 30) is DENIED.
AFFIRMED in part, REVERSED in part, and REMANDED.
The parties shall bear their own costs.