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Rice v. National Beverage Corp.

United States District Court, N.D. Illinois, Eastern Division

July 11, 2019

LENORA RICE, on behalf of herself and other persons similarly situated, Plaintiffs,



         Defendant National Beverage Corp., doing business as LaCroix Sparkling Waters (“defendant”), asks the court to sanction plaintiff Lenora Rice (“Rice”) and her counsel under Federal Rule of Civil Procedure (“Rule”) 11 for plaintiff's “frivolous lawsuit, ” ECF No. 33 at 1, claiming that LaCroix Sparkling Water contains synthetic rather than natural ingredients. Defendant also accuses plaintiff of a “public smear campaign” that defendant claims is “malicious” and equivalent to “financial terrorism.” Id. at 2, 3.

         Defendant makes a sympathetic case. It views itself as having revolutionized the soft drink industry to make it better and healthier for consumers by manufacturing a sparkling water that is “great-tasting [and] healthy” with all its ingredients derived from natural sources. Mot. Sanctions 1-2. It has been the victim, it claims, of an entirely frivolous lawsuit, accompanied by a press release filled with “incendiary language, ” causing damage which has robbed shareholders “of market value [of] over a billion dollars. . . .” Id. at 3. It looks to the court, via the vehicle of Rule 11, to step in and halt the disintegration of values the plaintiff's complaint and conduct represent. Id.

         Defendant relies, however, on argument and not evidence, and while it may well be successful in proving what it argues on the basis of evidence, its outraged, repetitive brief, characterized by ipse dixit assertions, provides the court with little basis for ruling in its favor. As a result, the motion for sanctions is denied.

         I. Background

         This case began in the Circuit Court of Cook County, Illinois, where plaintiff filed his complaint seeking class action status on October 1, 2018, ECF No. 1-1, Ex. A. Plaintiff brought state law claims for breach of warranty, unjust enrichment, and violating the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. § 515/1 et seq. The complaint summarized the case as a challenge to defendant's “practice of mislabeling their signature product, LaCroix Water, as ‘all-natural.' LaCroix Water is manufactured using non-natural flavorings and synthetic compounds, and Defendant continues to mislead consumers into believing that their product is natural when it is not.” Compl. 1. Under the heading “Factual Allegations, ” plaintiff alleged that:

18. In fact, LaCroix [sparkling water] contains, among other things: ethyl butanoate, limonene, linalool and linalool propionate.
19. The above chemical compounds are synthetically created and added to consumable goods to make those goods taste or smell a certain way. For instance, limonene causes kidney toxicity and tumors; linalool is used as a cockroach insecticide; and linalool propionate is used to treat cancer.
20. The Food and Drug Administration has declared these synthetic compounds to be “synthetic.” 21. Defendant is well-aware that LaCroix water contains these non-natural ingredients.

Compl. 4.

         Defendant tells the court that plaintiff issued a “companion” press release (a copy is not in the record) on an unspecified date. Mot. Sanctions 2. The press release's allegations received a great deal of media coverage and, according to defendant, damaged its brand and inflicted “catastrophic harm” including “billions of losses” to defendant's investors. Id. at 3.

         Defendant removed the case to federal court on October 25, 2018, under provisions of the Class Action Fairness Act of 2005. See Notice Removal ¶¶ 6-24, ECF No. 1; 28 U.S.C. § 1332(d), § 1453. Instead of seeking sanctions immediately, defendant answered the complaint on November 14, 2018, ECF No. 18.

         The parties then began formulating a discovery plan. See Fed. R. Civ. P. 26(f). Plaintiff's counsel sent a letter dated November 26, 2018, making plaintiff's initial disclosures and proposing a discovery plan. See ECF No. 33-1, Ex. A. Plaintiff disclosed the results of a pre-suit laboratory test of a single vile of La Croix sparkling water. ECF No. 33-2, Ex. B. The test did not detect “[g]lycerin, propylene glycol, ascorbic acid and erythritol.” Id. at 2. But the report states that “compounds observed . . . included ethyl butanoate, limonene, linalool and linalool propionate.” Id. A disclaimer at the bottom of the report states that “[t]his analysis is provided in good faith with no warranty expressed or implied. [The tester] assumes no obligation or liability with respect to the use of the results.” Id.

         Lawyers for both sides conferred by phone on November 30, 2018, to discuss the discovery plan. Mot. Sanctions 12. The parties reported at an initial status conference in December 2018 that they were at issue, and discovery had begun. ECF No. 21 (Dec. 14, 2018). Defendant filed its motion for sanctions two months later.[1] ECF No. 33 (Feb. 14, 2019). In March 2019, the court referred the case to Judge Rowland for discovery supervision. ECF No. 38 (March 18, 2019). Judge Rowland has ruled on several discovery matters, and the parties are briefing additional issues. See ECF Nos. 42, 48, 50, 58.

         II. Rule 11 Does Not Apply to Pre-Removal Action Taken in State Court

         As already mentioned, defendant seeks Rule 11 sanctions.[2] Initially, the court is concerned that defendant points to no federal conduct to which Rule 11 applies.

         “[T]he central purpose of Rule 11 is to deter baseless filings in [federal] district court and thus . . . streamline the administration and procedure of the federal courts.” Bus. Guides, Inc. v. Chromatic Commc'ns Enters., Inc., 498 U.S. 533, 552 (1991) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 392 (1990)). Under Rule 11(b), a lawyer or party certifies four things by presenting a pleading, like a complaint, to a federal district court-“whether by signing, filing, submitting, or later advocating it. . . .” Fed.R.Civ.P. 11(b). Among other things, the signer certifies that the paper “is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;” that the legal claims “are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law;” and that “the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation.” Fed.R.Civ.P. 11(b)(1)-(3).

         Defendant incorrectly asserts that Rule 11 obligated plaintiff to dismiss the complaint immediately upon the case's removal to federal court. Mot. Sanctions 14. Rule 11 does not authorize a federal court to sanction a party for signing and filing a complaint in state court prior to removal. Burda v. M. Ecker Co., 954 F.2d 434, 440 (7th Cir. 1992) (citing Pavelic & LeFlore v. Marvel Entm't Grp., 493 U.S. 120 (1989)); Schoenberger v. Oselka, 909 F.2d 1086, 1087 (7th Cir. 1990). Rule 11 also does not require a plaintiff to update or amend a state ...

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