In two recent decisions, Reid v. Johnson & Johnson, __ F.3d __, Case No. 12-56726 (9th Cir. March 13, 2015) and Astiana v. The Hain Celestial Group, Inc., __ F.3d __, Case No. 12-17596 (9th Cir. April 10, 2015), the Ninth Circuit either rejected or minimized the use of preemption and primary jurisdiction as defenses to allegations of false labeling of food and cosmetics.
Both of these cases involved allegations of false advertising brought under California’s consumer protection statutes, including the Unfair Competition Law and False Advertising Law. In Reid, the plaintiff alleged that the food product Benecol was falsely advertised because the manufacturer claimed the product (1) had “No Trans Fat” when, in fact, it contained less than 0.5 grams of trans fat per serving, and (2) contained plant stanol esters that could lead to reduced cholesterol. In Astiana, the plaintiff alleged that the cosmetic products she purchased were falsely advertised as “all natural” or “pure natural” even though they contained chemicals that were, allegedly, not natural. Both Reid and Astiana filed putative class actions against the defendants, and, in both cases, the defendants successfully moved to dismiss the claims in the district court. The plaintiffs in both cases appealed, resulting in these opinions.
Reid and Astiana both focus on two separate (though related) arguments often used by defendants in these kinds of cases: federal preemption and the primary jurisdiction doctrine. We address each in turn.
In its essence, federal preemption holds that, when Congress intentionally creates a law setting forth nationwide standards, states cannot (through their own laws) create separate standards that exceed or conflict with the federal law. When it comes to food and cosmetics, the applicable law is the Food, Drug, and Cosmetic Act (“FDCA”), which allows the Food and Drug Administration (the “FDA”) to promulgate regulations governing how manufacturers must label their products. A defendant invoking preemption in response to an allegation of false advertising is essentially arguing that, because the advertising satisfies the federal standards established by the FDA, no liability can be imposed through the litigation brought under state consumer protection laws.
The defendants in Reid and Astiana both tried to invoke federal preemption as a defense to the false advertising claims. The defendant in Reid argued that, because the FDA’s regulations allowed a manufacturer to list (in the nutrient box) “zero grams” of trans fat if the product contains less than 0.5 grams of trans fat per serving, it was also permitted to advertise the product as having “No Trans Fat.” Reid, p. 14. The defendant also argued that, though it was (admittedly) not in compliance with the law regarding labeling of plant stanol esters, the FDA had sent a letter in 2003 to another manufacturer stating it would use its “discretion” in enforcing similar, non-compliant claims. Reid, p. 16. In Astiana, meanwhile, the defendant claimed that the FDCA expressly preempted state law regarding cosmetic labeling, making the plaintiff’s false advertising claims improper. Astiana, p. 5.
The Ninth Circuit rejected both preemption arguments for similar reasons. In Reid, the Court cited several warning letters from the FDA to other manufacturers informing them that claims of “No Trans Fat” or “Trans Fat-Free” were impermissible nutrient claims. Reid, p. 18. Also, since the FDCA prohibits “false or misleading” claims (which is identical to the standard imposed by California’s false advertising law), there was no preemption issue because advertising something as having “No Trans Fat” when it actually has some trans fat per serving could be false and misleading. Reid, p. 19. Additionally, the Court noted that the 2003 letter from the FDA regarding plant stanol esters, which the defendant was relying upon, was insufficient to constitute a ruling from the FDA and, therefore, could not carry the preemptive force of a regulation. Thus, there was no conflict between federal law and state law regarding these advertisements and, therefore, no preemption.
Similarly, in Astiana, the Ninth Circuit summarily rejected the defendant’s argument that “all natural” was a protected phrase under the FDCA. The Court noted that the FDCA expressly prohibits “false or misleading” advertisements, and, therefore, was consistent with California’s false advertising laws. Astiana, p. 8. Thus, if the defendant’s “all natural” advertisement was false (due to the presence of unnatural chemicals in the cosmetics), then the advertisement was not allowed by the FDCA and, therefore, not immune from California’s false advertising statutes. Astiana, p. 6.
The primary jurisdiction doctrine allows district courts, in their discretion, to dismiss or stay cases that involve “technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch.” Astiana, p. 12 (citing Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008)). The underlying premise is that, if an agency has “primary jurisdiction” over a particular subject matter, the district court should delay deciding the case until the agency rules on the issue. Through this doctrine, many defendants have been able to stay or dismiss cases alleging false labeling by arguing that the FDA is the agency that can (and should) decide whether any particular advertisement is false.
The defendants in both Astiana and Reid argued that the primary jurisdiction applied to the plaintiffs’ claims. In Reid, the defendants argued that the FDA’s expertise was required to resolve the question of whether Benecol’s claims regarding trans fat and plant stanol esters were permitted, based on, among other things, the claim that FDA was in the midst of regulatory review of similar issues. Reid, p. 26. In Astiana, the district court actually dismissed the case (without prejudice) in light of the defendant’s argument that deciding what constitutes “all natural” ingredients required a determination by the FDA and that the FDA was likely to issue such a determination. Astiana, pp. 12-14.
In both Astiana and Reid, the Ninth Circuit either rejected (or, at a minimum, reduced the impact of) the primary jurisdiction doctrine. In Reid, the Court decided that the FDA, in 2003, had issued some guidance on the issue of plant stanol esters and was giving no indication that it would revisit the issue now. Reid, p. 27. Thus, this was not an issue of “first impression” better left to the FDA to determine and the district court would be able to decide the issue. Reid, p. 28. Similarly, through the aforementioned warning letters, the FDA had already considered the issue of “No Trans Fat” or “Trans Fat-Free” claims and found them to be improper. Reid, p. 27.
In Astiana, meanwhile, the Ninth Circuit reversed the order dismissing the case, finding that the district court should have merely stayed the case pending further guidance from the FDA. Astiana, p. 12. The Court held that, given the numerous requests made to the FDA to give guidance on the issue of what constitutes “natural” ingredients for food labeling, it was proper for the district court to invoke primary jurisdiction. Astiana, p. 14. However, it was improper to dismiss the case, even without prejudice, given concerns about the running of the statute of limitations. Astiana, p. 15. Accordingly, the Ninth Circuit reversed the dismissal and ordered the trial court to reconsider whether the circumstances (including the FDA’s publication of certain information or the FDA’s response to other courts) “affect the need for further proceedings at the FDA or demonstrate that another referral to the agency would be futile.” Astiana, p. 16.
Taken together, Reid and Astiana limit two of the procedural arguments defendants in food labeling cases often make: preemption and primary jurisdiction. That being said, neither case rejects the arguments outright. Instead, each case demonstrates why, on the particular facts of the case, preemption and the primary jurisdiction doctrine were inappropriate methods to limit the district court’s jurisdiction over the false labeling litigation. Understanding and distinguishing these cases, therefore, will be necessary for any defendants seeking to invoke these arguments in the future.