The Franchise Memorandum

A federal court in California denied a franchisor’s motion to dismiss a consumer’s claims for a violation of the unfair-practices prong of California’s Unfair Competition Law (UCL) and unjust enrichment. Torres v. Botanic Tonics, LLC, 2023 WL 8852754 (N.D. Cal. Dec. 21, 2023). Torres alleges “Feel Free,” a tonic drink produced by Botanic Tonics, LLC, is addictive and dangerous. He, with another plaintiff, brought a proposed class action on behalf of the drink’s consumers against Botanic Tonics and two retailers of the drink, including 7-Eleven. As it relates to 7-Eleven, the complaint alleged that 7-Eleven controlled decisions about which products could be sold in its stores and knew about Feel Free’s dangers but failed to disclose them to customers. On this basis, Torres alleged that 7-Eleven engaged in an unfair business practice under the UCL and was unjustly enriched by ill-gotten gains. In a motion to dismiss, 7-Eleven argued that Torres’s unfair-practices claim, and with it the unjust enrichment claim, failed because Torres could not establish that that 7-Eleven had a pre-existing duty under some other source of law to disclose allegedly omitted information.

The court denied the motion to dismiss. It reasoned that California’s legislature intended the unfair practices prong to “reach beyond existing law,” including common law. The court further reasoned that a business’s failure to disclose may be considered an unfair practice—independent of the existence or absence of any other legal duty—if it meets one of the three tests used in California to determine unfair practices under the UCL. In ruling on the motion, the court did not address the substance of Torres’s claims, including whether he had adequately pled that 7-Eleven was aware of Feel Free’s alleged dangers. The court rejected the argument that an independent legal duty to disclose was necessary to support an unfair practices claim under the UCL.