Kathleen Sonner v. Premier Nutrition Corp. ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KATHLEEN SONNER, on behalf of No. 18-15890
herself and all others similarly
situated, D.C. No.
Plaintiff-Appellant, 3:13-cv-01271-
RS
v.
PREMIER NUTRITION CORPORATION, ORDER AND
FKA Joint Juice, Inc., AMENDED
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, District Judge, Presiding
Argued and Submitted December 3, 2019
San Francisco, California
Filed June 17, 2020
Amended August 20, 2020
Before: Carlos F. Lucero, * Consuelo M. Callahan,
and Bridget S. Bade, Circuit Judges.
Order;
Opinion by Judge Bade
*
The Honorable Carlos F. Lucero, United States Circuit Judge for
the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
2 SONNER V. PREMIER NUTRITION CORP.
SUMMARY **
Restitution
The panel issued (a) an order amending its opinion filed
on June 17, 2020, denying the petition for rehearing, and
denying on behalf of the court the petition for rehearing en
banc; and (b) an amended opinion affirming on different
grounds the district court’s dismissal of plaintiff’s claims for
restitution where plaintiff failed to demonstrate that she
lacked an adequate legal remedy.
Plaintiff brought a diversity action and sought $32
million on behalf of a class of consumers, but as equitable
restitution rather than as damages. The district court applied
its interpretation of California law and dismissed plaintiff’s
claims for restitution because there was an adequate remedy
at law, i.e., damages, available.
The panel held, as a threshold jurisdictional issue, that
pursuant to Erie Railroad Co. v. Tompkins, 304 U.S. 64(1938), and Guaranty Trust Co. of New York v. York, 326
U.S. 99 (1945), federal courts must apply equitable
principles derived from federal common law to claims for
equitable restitution under California’s Unfair Competition
Law and Consumers Legal Remedies Act (“CLRA”). The
panel held that state law cannot circumscribe a federal
court’s equitable powers even when state law affords the rule
of decision.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
SONNER V. PREMIER NUTRITION CORP. 3
The panel held that the district court did not abuse its
discretion in denying plaintiff leave to amend her complaint
for a third time to reallege the CLRA damages claim.
COUNSEL
Leslie E. Hurst (argued), Timothy G. Blood, Thomas J.
O’Reardon II, and Paula R. Brown, Blood Hurst &
O’Reardon LLP, San Diego, California; Todd D. Carpenter,
Carlson Lynch LLP, San Diego, California; Craig M. Peters,
Altair Law, San Francisco, California; for Plaintiff-
Appellant.
Jessica Grant (argued), Angel A. Garganta, and Brian A.
Featherstun, Venable LLP, San Francisco, California, for
Defendant-Appellee.
David M. Arbogast, Arbogast Law, La Jolla, California;
Steven M. Bronson, The Bronson Firm APC, la Jolla,
California; for Amicus Curiae Consumer Attorneys of
California.
Xavier Becerra, Attorney General; Nicklas A. Akers, Senior
Assistant Attorney General; Michele Van Gelderen,
Supervising Deputy Attorney General; Samuel Harbourt,
Deputy Solicitor General; Michael Reynolds, Deputy
Attorney General; Office of the Attorney General, Los
Angeles, California; for Amicus Curiae State of California.
Jordan Elias and Trevor T. Tan, Girard Sharp LLP, San
Francisco, California, for Amicus Curiae Public Justice.
4 SONNER V. PREMIER NUTRITION CORP.
ORDER
The opinion filed on June 17, 2020, and published at
962 F.3d 1072, is amended by the opinion filed concurrently
with this order.
With these amendments, Judges Lucero, Callahan, and
Bade vote to deny the petition for rehearing. Judges
Callahan and Bade vote to deny the petition for rehearing en
banc. The full court has been advised of the petition for
rehearing en banc and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
Accordingly, Appellant’s petition for rehearing or rehearing
en banc is DENIED. No further petitions for panel
rehearing or rehearing en banc may be filed.
OPINION
BADE, Circuit Judge:
On the brink of trial after more than four years of
litigation, Plaintiff-Appellant Kathleen Sonner voluntarily
dismissed her sole state law damages claim and chose to
proceed with only state law equitable claims for restitution
and injunctive relief. A singular and strategic purpose drove
this maneuver: to try the class action as a bench trial rather
than to a jury. Indeed, Sonner continued to seek $32,000,000
on behalf of the consumers she represented, but as equitable
restitution rather than as damages. But, to Sonner’s dismay,
the plan backfired when, relying on its interpretation of
California law, the district court dismissed her claims for
restitution because an adequate remedy at law, i.e., damages,
was available.
SONNER V. PREMIER NUTRITION CORP. 5
Pursuant to Erie Railroad Co. v. Tompkins, 304 U.S. 64(1938), and Guaranty Trust Co. of New York v. York,
326 U.S. 99 (1945), we hold that federal courts must apply
equitable principles derived from federal common law to
claims for equitable restitution under California’s Unfair
Competition Law (“UCL”) and Consumers Legal Remedies
Act (“CLRA”).
I
In March 2013, Vincent Mullins filed a putative class
action regarding “Joint Juice,” a nutritional product
manufactured, marketed, and sold by Defendant-Appellee
Premier Nutrition Corporation (“Premier”). After
substituting as the proposed class representative and named
plaintiff, Sonner amended the complaint in September 2014.
In April 2016, the district court certified a class of all
California consumers who had purchased Joint Juice since
March 1, 2009.
The basis for the lawsuit is false advertising. In its
marketing materials, Premier touts Joint Juice as a dietary
supplement beverage that supports and nourishes cartilage,
lubricates joints, and improves joint comfort. 1 But,
according to Sonner, Joint Juice fails to provide its
advertised health benefits.
As originally pleaded, the complaint demanded
injunctive relief under the UCL and CLRA, restitution under
the UCL and CLRA, and damages under an Illinois
consumer protection statute. In the first amended complaint,
Sonner dropped her claim under Illinois law and amended
1
We treat all factual allegations in the operative complaint as true.
See Dougherty v. City of Covina, 654 F.3d 892, 897 (9th Cir. 2011).
6 SONNER V. PREMIER NUTRITION CORP.
the CLRA claim to seek damages because Premier failed to
correct the alleged CLRA violations pursuant to California
Civil Code § 1782. Both complaints demanded a jury trial.
For years, the litigation proceeded in the typical fashion.
Both sides took discovery, engaged in motion practice, and
prepared for the looming jury trial. But less than two months
before trial was scheduled to begin, and after defeating
Premier’s summary judgment efforts, Sonner sought leave
to file a second amended complaint to drop the CLRA
damages claim. This strategy raises an obvious question:
why would Sonner voluntarily abandon an ostensibly viable
claim on the eve of trial after more than four years of
litigation? The answer is also obvious: to request that the
district court judge award the class $32,000,000 as
restitution, rather than having to persuade a jury to award
this amount as damages.
Premier opposed the motion for leave. Citing futility,
Premier urged that Sonner’s proposed second amended
complaint would require dismissal of the restitution claims
pursuant to California’s inadequate-remedy-at-law doctrine.
Without the CLRA damages claim, Premier argued, the
proposed complaint failed to state viable claims for
restitution because an adequate legal remedy—damages—
was available for that injury.
During oral argument on the motion, the district court
warned Sonner that if it granted the motion and she dropped
the damages claim, “we are never going to hear again
anything about a damage claim under the CLRA” and not to
“put a lot of money” on a future motion to amend to re-allege
the claim. The district court also explained that it would be
“open season” on a motion to dismiss and that Sonner was
taking a “chance” by dropping the damages claim.
SONNER V. PREMIER NUTRITION CORP. 7
The district court ultimately granted Sonner leave to
amend and vacated the jury trial. Undeterred by Premier’s
arguments and the district court’s warning, Sonner filed her
second amended complaint in August 2017, dropping the
CLRA damages claim. And, true to its word, Premier moved
to dismiss the restitution claims pursuant to Federal Rule of
Civil Procedure 12(b)(6), arguing that Sonner needed to—
but could not—establish that she lacked an adequate legal
remedy as required by both federal equitable principles and
California law.
After full briefing and oral argument, the district court
granted Premier’s motion to dismiss. Applying its
interpretation of California law, the district court held that
Sonner could not proceed on her equitable claims for
restitution in lieu of a claim for damages. Specifically, the
district court concluded that claims brought under the UCL
and CLRA remained subject to California’s inadequate-
remedy-at-law doctrine, and that Sonner failed to establish
that she lacked an adequate legal remedy for the same past
harm for which she sought equitable restitution. The district
court also denied Sonner’s request to amend her complaint
to reallege the CLRA damages claim. During oral argument
on the motion, the district court explained that allowing
Sonner to reassert the intentionally dropped claim under the
circumstances would reflect “total prejudice to the court
system,” would be “unfair” and “prejudicial” to Premier, and
would constitute an “abuse of the court system.” After the
district court entered judgment, Sonner timely appealed the
order dismissing her claims for equitable restitution to this
court.
We review the district court’s decision to grant a motion
to dismiss under Rule 12(b)(6) de novo, Fayer v. Vaughn,
649 F.3d 1061, 1063–64 (9th Cir. 2011) (per curiam), and to
8 SONNER V. PREMIER NUTRITION CORP.
deny a request for leave to amend for abuse of discretion,
DCD Progs., Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir.
1987). We may affirm the district court’s dismissal of the
complaint on any basis supported by the record. See
Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116,
1121 (9th Cir. 2008).
II
Although not the basis for the district court’s decision,
we must first resolve a threshold jurisdictional question: do
federal equitable principles independently apply to Sonner’s
equitable claims for restitution or must we, as a federal court,
follow only the state law authorizing that equitable remedy?
Sonner argues that because her UCL and CLRA claims
arise under California law and our jurisdiction rests in
diversity, state law alone decides whether she must show a
lack of an adequate legal remedy before obtaining restitution
under those statutes. And, according to Sonner, the
California legislature abrogated the state’s inadequate-
remedy-at-law doctrine for claims seeking equitable
restitution under the UCL and CLRA. 2
In contrast, Premier argues that federal courts in
diversity are bound by traditional federal equitable
2
Sonner does not dispute that the restitution she seeks under the
UCL and CLRA is restitution in equity, not restitution at law. See Great–
W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 214 (2002)
(drawing a “fine distinction between restitution at law and restitution in
equity”). And California courts have held that “the UCL provides only
for equitable remedies.” See Hodge v. Superior Court, 51 Cal. Rptr. 3d
519, 523 (Ct. App. 2006); see also Nationwide Biweekly Admin., Inc. v.
Superior Court, No. S250047, 2020 WL 2107914, at *1 (Cal. 2020)
(concluding that the “causes of action established by the UCL” are
“equitable in nature”).
SONNER V. PREMIER NUTRITION CORP. 9
principles, including the requirement that the party pursuing
equitable relief establish that it lacks an adequate legal
remedy. Premier also contends that equitable claims for
restitution under the UCL and CLRA remain subject to
California’s inadequate-remedy-at-law doctrine.
A
It has long been the province of federal courts sitting in
equity to apply a body of federal common law irrespective
of state law. See Russell v. Southard, 53 U.S. (12 How.) 139,
147 (1851). Under the doctrine first prescribed in Erie,
however, federal courts exercising diversity jurisdiction
must follow state substantive law and federal procedural law
when adjudicating state law claims. See Hanna v. Plumer,
380 U.S. 460, 465 (1965). To carry out the thorny task of
identifying whether a law is substantive or procedural, we
generally use an “outcome-determination test,” which asks
whether applying federal law instead of state law would
“significantly affect” the litigation’s outcome. See
Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427
(1996) (quoting York, 326 U.S. at 109). Thus, the outcome
of a case in federal court should generally be “substantially
the same, so far as legal rules determine the outcome of a
litigation, as it would be if tried in a State court.” York,
326 U.S. at 109.
But when deciding between state and federal law, we do
not rely on a rote litmus test. See Hanna, 380 U.S. at 467.
Rather, we must be cognizant of Erie’s dual aims:
“discouragement of forum-shopping and avoidance of
inequitable administration of the laws.” Gasperini, 518 U.S.
at 428 (quoting Hanna, 380 U.S. at 468); see also Semtek
Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508–09
(2001). And we should also consider the policies
underpinning the applicable state and federal laws. See Byrd
10 SONNER V. PREMIER NUTRITION CORP.
v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525, 537–38
(1958).
B
As a result of Erie, the scope and application of federal
common law narrowed considerably. See Tex. Indus., Inc.
v. Radcliff Materials, Inc., 451 U.S. 630, 641 (1981) (noting
that “absent some congressional authorization . . . federal
common law exists only in . . . narrow areas”).
Nevertheless, since Erie, the Supreme Court has instructed
that a federal court’s equitable authority remains cabined to
the traditional powers exercised by English courts of equity,
even for claims arising under state law. See York, 326 U.S.
at 104–07.
In York, the Court addressed whether a state’s statute of
limitations could be asserted as a defense to an equitable
claim arising under state law. See id. at 100–01, 107. When
summarizing the applicability of Erie, the Court made clear
that Congress provided that the forms and modes of
proceeding in suits of equity should conform to the historic
uses of courts of equity. See id. at 104–05. Writing for the
Court, Justice Frankfurter explained:
In giving federal courts cognizance of
equity suits in cases of diversity jurisdiction,
Congress never gave, nor did the federal
courts ever claim, the power to deny
substantive rights created by State law or to
create substantive rights denied by State law.
This does not mean that whatever
equitable remedy is available in a State court
must be available in a diversity suit in a
federal court, or conversely, that a federal
SONNER V. PREMIER NUTRITION CORP. 11
court may not afford an equitable remedy not
available in a State court. Equitable relief in
a federal court is of course subject to
restrictions: the suit must be within the
traditional scope of equity as historically
evolved in the English Court of Chancery; a
plain, adequate and complete remedy at law
must be wanting; explicit Congressional
curtailment of equity powers must be
respected; [and] the constitutional right to
trial by jury cannot be evaded. That a State
may authorize its courts to give equitable
relief unhampered by any or all such
restrictions cannot remove these fetters from
the federal courts.
Id. at 105–06 (internal quotation marks and citations
omitted) (emphases added). The Court further instructed
that “State law cannot define the remedies which a federal
court must give simply because a federal court in diversity
jurisdiction is available as an alternative tribunal to the
State’s courts.” Id. at 106; see also Pusey & Jones Co. v.
Hanssen, 261 U.S. 491, 497–98 (1923) (“That a remedial
right to proceed in a federal court sitting in equity cannot be
enlarged by a state statute is likewise clear. . . . The federal
court may therefore be obliged to deny an equitable remedy
which the plaintiff might have secured in state court.”).
The Court also explained that “[t]he source of
substantive rights enforced by a federal court under diversity
jurisdiction . . . is the law of the States.” York, 326 U.S.
at 112. Federal courts must therefore enforce “State-created
substantive rights if the mode of proceeding and remedy
[are] consonant with the traditional body of equitable
remedies, practice and procedure.” Id. at 106.
12 SONNER V. PREMIER NUTRITION CORP.
C
In accordance with York, we hold that a federal court
must apply traditional equitable principles before awarding
restitution under the UCL and CLRA. It has been a
fundamental principle for well over a century that state law
cannot expand or limit a federal court’s equitable authority.
See Payne v. Hook, 74 U.S. (7 Wall.) 425, 430 (1868) (“The
equity jurisdiction conferred on the Federal courts is the
same that the High Court of Chancery in England possesses;
is subject to neither limitation or restraint by State
legislation, and is uniform throughout the different States of
the Union.”). Erie intervened in 1938, of course, and the
merger of law and equity followed soon after. But in
seventy-five years, the Supreme Court has never repudiated
its statements in York—offered seven years after Erie—that
state law can neither broaden nor restrain a federal court’s
power to issue equitable relief. 3
3
We recognize that the statute York cited to support the principle
that a “plain, adequate and complete remedy at law must be wanting,”
326 U.S. at 105, was repealed in 1948 after the merger of law and equity,
see 28 U.S.C. § 384 (repealed 1948). That merger does not, however,
affect the validity of the principle. See, e.g., Grupo Mexicano de
Desarrollo S.A. v. All. Bond Fund, Inc., 527 U.S. 308, 322 (1999)
(“Notwithstanding the fusion of law and equity by the Rules of Civil
Procedure, the substantive principles of Courts of Chancery remain
unaffected.” (quoting Stainback v. Mo Hock Ke Lok Po, 336 U.S. 368,
382 n.26 (1949))); Oneida Indian Nation of N.Y. State v. Cty. of Oneida,
464 F.2d 916, 922 (2d Cir. 1972) (“While [York] relied on § 16 of the
Judiciary Act of 1789 (later Rev. Stat. § 723 and 28 U.S.C. § 384 (1940
ed.)), which limited suits in equity to cases in which there was no ‘plain,
adequate and complete remedy’ at law, and that statute was repealed in
1948 as obsolete in view of the merger of law and equity under the
Federal Rules of Civil Procedure, 62 Stat. 992, the principle remains
intact.”), rev’d on other grounds, 414 U.S. 661 (1974).
SONNER V. PREMIER NUTRITION CORP. 13
To be sure, York suggests that the “outcome” of a lawsuit
should be “substantially the same” regardless of whether it
is filed in state or federal court, 326 U.S. at 109, and applying
federal equitable principles may lead to a different result if,
as Sonner contends, California abrogated its inadequate-
remedy-at-law requirement for claims brought under the
UCL and CLRA. But the Supreme Court clearly foresaw the
possibility of this sort of inconsistency in York and
concluded that federal courts must nonetheless apply
principles of federal common law. See id. at 105–06.
According to the Court, even if a state authorizes its courts
to provide equitable relief when an adequate legal remedy
exists, such relief may be unavailable in federal court
because equitable remedies are subject to traditional
equitable principles unaffected by state law. See id. at 105–
06 & n.3. 4 Since York, the Court has never held or suggested
that state law can expand a federal court’s equitable powers,
even if allowing such expansion would ensure a similar
outcome between state and federal tribunals.
Additionally, the “outcome” of this litigation is not our
“only consideration” as we must also balance the policies
4
Sonner characterizes the Court’s statements in York regarding
equitable remedies as dicta, and some courts have endorsed that view.
See New Mexico ex rel. Balderas v. Real Estate Law Ctr., P.C., 401 F.
Supp. 3d 1229, 1349 n.93 (D.N.M. 2019); Bangor Baptist Church v.
State of Me., Dep’t of Educ. & Cultural Servs., 576 F. Supp. 1299, 1314
& n.21 (D. Me. 1983). Even if we construe these statements as dicta, we
must “afford [them] a weight that is greater than ordinary judicial dicta
as prophecy of what the [C]ourt might hold.” Nettles v. Grounds,
830 F.3d 922, 930-31 (9th Cir. 2016) (en banc) (quoting Managed
Pharmacy Care v. Sebelius, 716 F.3d 1235, 1246 (9th Cir. 2013)). And
“[a]s a lower federal court, we are advised to follow the Supreme Court’s
considered dicta.” Lemoge v. United States, 587 F.3d 1188, 1193 (9th
Cir. 2009) (quoting Fernandez-Ruiz v. Gonzales, 466 F.3d 1121, 1129
(9th Cir. 2006) (en banc)).
14 SONNER V. PREMIER NUTRITION CORP.
underlying the state and federal laws. See Byrd, 356 U.S. at537–38. Here, as in Byrd, the principle precluding courts
from awarding equitable relief when an adequate legal
remedy exists implicates the well-established federal policy
of safeguarding the constitutional right to a trial by jury in
federal court. See id. at 537–39 (state rules should not
abridge a constitutional right to a jury trial in federal court);
see also Scott v. Neely, 140 U.S. 106, 110 (1891)
(“[W]henever, respecting any right violated, a court of law
is competent to render a judgment affording a plain,
adequate, and complete remedy, the party aggrieved must
seek his remedy in such court . . . because the defendant has
a constitutional right to a trial by jury . . . .”). Even assuming
California decided as a matter of policy to streamline UCL
and CLRA claims by abrogating the state’s inadequate-
remedy-at-law doctrine, the strong federal policy protecting
the constitutional right to a trial by jury outweighs that
procedural interest.
Sonner cites our decision in Sims Snowboards, Inc. v.
Kelly, 863 F.2d 643 (9th Cir. 1988), to argue that a federal
court sitting in diversity applies state law to determine the
availability of equitable relief. But Sims does not control
here. In that diversity action, the district court awarded the
plaintiff a preliminary injunction under Federal Rule of Civil
Procedure 65 despite a California statute expressly
prohibiting the issuance of an injunction under the
circumstances. Id. at 646. We reversed and held that
because “the outcome [of the case] is in large part
determined at the preliminary injunction stage,” state law
controls whether a federal court should grant preliminary
injunctive relief. Id. at 647. And in accord with York, we
noted that “[t]he general equitable powers of federal courts
should not enable a party suing in diversity to obtain an
injunction if state law clearly rejects the availability of that
SONNER V. PREMIER NUTRITION CORP. 15
remedy.” Id.; see York, 326 U.S. at 110 (“Plainly enough, a
statute that would completely bar recovery in a suit if
brought in a State court bears on a State created right vitally
and not merely formally or negligibly. As to consequences
that so intimately affect recovery or non-recovery a federal
court in a diversity case should follow State law.”).
In contrast to Sims, we must now decide whether a
federal court sitting in diversity can award equitable
restitution under state law if an adequate legal remedy exists.
Injunctive relief is not at issue, nor is Sonner exploiting the
federal judiciary to access a remedy that California “clearly
rejects.” See Sims, 863 F.2d at 647. Our inquiry instead
aligns directly with the rigid restrictions on a federal court’s
equitable powers explicitly enumerated in York. Indeed,
since Sims, we have confirmed that a state “statute does not
change the nature of the federal courts’ equitable powers.”
See Can. Life Assurance Co. v. LaPeter, 563 F.3d 837, 843
(9th Cir. 2009) (holding that federal equitable principles
govern the appointment of a receiver independent of state
law); see also Barranco v. 3D Sys. Corp., 952 F.3d 1122,
1129 (9th Cir. 2020) (recognizing, in a diversity action
where state law allowed equitable relief, that “‘[t]he
necessary prerequisite’ for a court to award equitable
remedies is ‘the absence of an adequate remedy at law’”
(quoting Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478
(1962))). 5
5
Sonner’s reliance on McKesson HBOC, Inc. v. New York State
Common Retirement Fund, Inc., 339 F.3d 1087 (9th Cir. 2003), likewise
does not support her desired outcome. McKesson addressed neither Erie
nor York, and the court simply assumed that state law governed the
availability of equitable remedies. See 339 F.3d at 1093-94. We thus
are not bound by that decision. See, e.g., Galam v. Carmel (In re Larry’s
Apartment, L.L.C.), 249 F.3d 832, 839 (9th Cir. 2001) (“[Q]uestions
16 SONNER V. PREMIER NUTRITION CORP.
Finally, our decision mirrors those of several other
circuits, which have concluded, consistent with York, that
state law cannot circumscribe a federal court’s equitable
powers even when state law affords the rule of decision. See
Davilla v. Enable Midstream Partners L.P., 913 F.3d 959,
972–73 (10th Cir. 2019) (“The Supreme Court has
concluded that ‘State law cannot define the remedies which
a federal court must give’ . . . . Thus, the practice of
borrowing state rules of decision does not apply with equal
force to determining appropriate remedies, especially
equitable remedies, as it does to defining actionable rights.”
(quoting York, 326 U.S. at 105)); 6 SSMC, Inc., N.V. v.
Steffen, 102 F.3d 704, 708 (4th Cir. 1996) (rejecting the
argument that district court erred in issuing a remedy beyond
what state law permitted because “[s]tate law cannot define
the remedies which a federal court must give simply because
a federal court in diversity jurisdiction is available as an
alternative tribunal to the State’s courts” (alteration in
original) (quoting York, 326 U.S. at 106)); Perfect Fit Indus.,
Inc. v. Acme Quilting Co., 646 F.2d 800, 806 (2d Cir. 1981)
which merely lurk in the record, neither brought to the attention of the
court nor ruled upon, are not to be considered as having so decided as to
constitute precedents.” (quoting Webster v. Fall, 266 U.S. 507, 511
(1925))); Lum v. City & Cty. of Honolulu, 963 F.2d 1167, 1170 n.1 (9th
Cir. 1992) (noting that cases which “stumble into decisions on questions
neither raised nor discussed by the parties or by the trial court are not
treated as authoritative on those unstated assumptions and nonlitigated
points”).
6
Prior to Davilla, then-Judge Gorsuch observed that “[w]hen
addressing cases arising under the diversity statute, we’ve seen the
Supreme Court has likewise suggested that diversity authority doesn’t
necessarily endow federal district courts the power or authority to issue
every form of equitable relief a state court might possess in the same
situation.” Niemi v. Lasshofer, 728 F.3d 1252, 1259 (10th Cir. 2013)
(citing York, 326 U.S. at 105).
SONNER V. PREMIER NUTRITION CORP. 17
(“State law does not govern the scope of the equity powers
of the federal court; and this is so even when state law
supplies the rule of decision.”); Oneida Indian Nation of N.Y.
State, 464 F.2d at 922 (holding that “[i]t is settled that federal
courts may not apply state statutes expanding equity
jurisdiction beyond that prevailing when the Constitution
was adopted,” including “cases in which there was no ‘plain,
adequate and complete remedy at law’”); Clark Equip. Co.
v. Armstrong Equip. Co., 431 F.2d 54, 57 (5th Cir. 1970)
(“Federal courts in diversity cases [have] the power to
enforce State-created substantive rights by well-recognized
equitable remedies even though such remedy might not be
available in the courts of the State.”); Hertz v. Record Publ’g
Co. of Erie, 219 F.2d 397, 398 n.2 (3d Cir. 1955) (“Federal
remedies are not limited or affected by state law.”); see also
Nat’l P’ship Inv. Corp. v. Nat’l Hous. Dev. Corp., 153 F.3d
1289, 1291–92 (11th Cir. 1998) (citing Pusey & Jones and
York to hold that federal law governs the appointment of a
receiver in a diversity case because the equitable remedy of
receivership is not a substantive right); Aviation Supply
Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir.
1993) (holding that federal law and federal equitable
principles govern the appointment of a receiver in a diversity
case).
At bottom, “[t]hat a State may authorize its courts to give
equitable relief unhampered by” the “restriction[]” that an
adequate remedy at law be unavailable “cannot remove
th[at] fetter[] from the federal courts.” York, 326 U.S.
at 105–06. Guided by that instruction, we hold that the
traditional principles governing equitable remedies in
federal courts, including the requisite inadequacy of legal
18 SONNER V. PREMIER NUTRITION CORP.
remedies, apply when a party requests restitution under the
UCL and CLRA in a diversity action. 7
D
Under these principles, Sonner must establish that she
lacks an adequate remedy at law before securing equitable
restitution for past harm under the UCL and CLRA. See
Mort v. United States, 86 F.3d 890, 892 (9th Cir. 1996) (“It
is a basic doctrine of equity jurisprudence that courts of
equity should not act . . . when the moving party has an
adequate remedy at law.” (ellipsis in original) (quoting
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 381
(1992))); see also, e.g., Franklin v. Gwinnett Cty. Pub. Sch.,
503 U.S. 60, 75–76 (1992) (holding that when “remedies are
equitable in nature . . . it is axiomatic that a court should
determine the adequacy of a remedy in law before resorting
to equitable relief”); Schroeder v. United States, 569 F.3d
956, 963 (9th Cir. 2009) (“[E]quitable relief is not
appropriate where an adequate remedy exists at law.”).
Sonner fails to make such a showing. Initially, the
operative complaint does not allege that Sonner lacks an
adequate legal remedy. See O’Shea v. Littleton, 414 U.S.
488, 502 (1974) (holding that a complaint seeking equitable
7
We need not linger long on Sonner’s argument that “under federal
law” we look to the legislature’s intent with respect to “whether a statute
provides for equitable remedies irrespective of an adequate-remedy-at-
law.” The cases Sonner cites apply when equitable relief is sought under
a federal statute, not a state statute. See United States v. Oakland
Cannabis Buyers’ Coop., 532 U.S. 483, 497 (2001) (addressing
injunctions under the Controlled Substances Act); Weinberger v.
Romero-Barcelo, 456 U.S. 305, 316 (1982) (addressing injunctions
under the Federal Water Pollution Control Act). Federal equitable
principles are not subject to qualification by the intent of California’s
legislature.
SONNER V. PREMIER NUTRITION CORP. 19
relief failed because it did not plead “the basic requisites of
the issuance of equitable relief” including “the inadequacy
of remedies at law”). More importantly, Sonner concedes
that she seeks the same sum in equitable restitution as “a full
refund of the purchase price”—$32,000,000—as she
requested in damages to compensate her for the same past
harm. Sonner fails to explain how the same amount of
money for the exact same harm is inadequate or incomplete,
and nothing in the record supports that conclusion. 8
Accordingly, because Sonner fails to establish that she
lacks an adequate remedy at law, we hold, albeit on
alternative grounds, that the district court did not err in
dismissing Sonner’s claims for equitable restitution under
the UCL and CLRA.
III
Turning to the final issue before us, we conclude that the
district court did not abuse its discretion in denying Sonner
leave to amend her complaint for a third time to reallege the
CLRA damages claim. Sonner strategically chose to amend
her complaint on the eve of trial to drop her damages claim.
Premier opposed Sonner’s request to amend, arguing that
Sonner needed to establish a lack of legal remedy before
8
Sonner’s citation to American Life Insurance Co. v. Stewart,
300 U.S. 203, 214 (1937), is unavailing. There, the Court held that “[a]
remedy at law does not exclude one in equity unless it is equally prompt
and certain and in other ways efficient.” Id. But Sonner fails to explain
how damages are any less prompt, certain, or efficient than restitution,
particularly when a jury trial for damages was just two months away
when she amended her complaint. Likewise, that California enacted the
UCL to create new “remedies” not “available at common law,” see
Nationwide Biweekly Admin., Inc., 2020 WL 2107914 at *21, is not
dispositive because it does not account for subsequently enacted statutes,
such as the CLRA.
20 SONNER V. PREMIER NUTRITION CORP.
seeking equitable restitution and warning that it would file a
motion to dismiss on that basis. The district court then
cautioned Sonner prior to the amendment about the risk she
was taking in dropping the damages claim on the eve of trial.
Under these circumstances, the district court did not abuse
its “particularly broad” discretion in denying leave to amend.
See Chodos v. W. Publ’g Co., 292 F.3d 992, 1003 (9th Cir.
2002) (citation omitted); see also AmerisourceBergen Corp.
v. Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006) (“[A]
district court need not grant leave to amend where the
amendment: (1) prejudices the opposing party; (2) is sought
in bad faith; (3) produces an undue delay in litigation; or (4)
is futile.”).
IV
Regardless of whether California authorizes its courts to
award equitable restitution under the UCL and CLRA when
a plain, adequate, and complete remedy exists at law, we
hold that federal courts rely on federal equitable principles
before allowing equitable restitution in such circumstances.
And because Sonner fails to demonstrate that she lacks an
adequate legal remedy in this case, we affirm the district
court’s order dismissing her claims for restitution. 9
AFFIRMED.
9
We deny Sonner’s request for judicial notice, and motion to certify
a question to the California Supreme Court, because neither is relevant
to the resolution of this appeal. See Santa Monica Food Not Bombs v.
City of Santa Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006).