Thursday, September 27, 2012

Who Needs TwIqbal?: Round II

The following is a guest post by Mollie Benedict and Amanda Villalobos, both of Tucker Ellis, about a recent dismissal they won of one of those all-too-common California "consumer protection" strike suits where nobody's really injured.  They get all the credit for the win, and all the blame for this post.

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In an April 27, 2012 post, “Who Needs TwIqbal?”,  John Sullivan examined a putative class action in New Jersey federal court, Young v. Johnson & Johnson.  Sullivan credited the defendant for putting a standing argument (usually a bench player) into the starting line-up  in the case, and both standing and federal preemption came through in the clutch:  The court dismissed Plaintiff’s claims that he had been misled by representations on the labels of the margarine substitute Benecol Spread, finding both that (1) Plaintiff lacked standing because he had not alleged any injury and (2) his claims were preempted because he sought to impose labeling requirements that were not identical to those imposed by the Federal Food, Drug and Cosmetic Act (FDCA) as amended by the Nutrition Labeling and Education Act (NLEA).

Reid v. Johnson & Johnson, 2012 U.S. Dist. Lexis 133408 (S.D. Cal. Sept, 17, 2012) is a west coast rematch – another putative class action involving Benecol spread, this time in federal court in San Diego.  As in Young, Plaintiff alleged that the defendants made misleading claims regarding Benecol’s trans fat content and the cholesterol-lowering benefits of Benecol’s key ingredient, plant stanol esters.  Plaintiff claimed he purchased the product in reliance on these alleged misrepresentations, asserting causes of action under California’s consumer protection statutes, the Unfair Competition Law, the False Advertising Law,  and the Consumer Legal Remedies Act.
Defendants again brought standing off the bench to lead off, arguing that Plaintiff lacked standing because he suffered no injury in fact and, more significantly, because no reasonable consumer was likely to be deceived by Benecol’s label claims, a standing requirement under all three consumer protection statutes.  Although the court found that Plaintiff had adequately pleaded an injury in fact because he alleged that he “paid more for Benecol, and would have been willing to pay less, or nothing at all, if he had not been misled by the representations and practices”...
[Editorial note:  This proves that California is even more extreme than New Jersey]
...it also found that Plaintiff “has not set forth alleged facts showing that Benecol’s statements may deceive a reasonable consumer.”  Score another win for standing.
But preemption, still waiting on deck, again came to the plate to hog some of the glory.  As mentioned in Sullivan’s Young post, the NLEA contains a broad express preemption provision prohibiting states from establishing labeling requirements that are not identical to federal regulations.
The court concluded that because Benecol’s claims regarding plant stanol esters and their cholesterol-reducing properties were permitted by federal law, Plaintiff’s claims were preempted.  The court based its preemption analysis on an enforcement discretion letter issued by FDA in 2003.  The letter advised that, based on new scientific evidence, the agency would relax the content requirements for products eligible to bear the plant stanol ester health claim codified in 21 C.F.R. §101.83.  While Benecol’s label conformed to the requirements of the 2003 letter, Plaintiff contended the letter did not constitute a final agency action and did not have the force and effect of federal law, so Benecol should be required to, but did not, conform to 21 C.F.R. § 101.83.
The court disagreed, finding that “[t]he [2003] letter reflects the FDA’s position” and that “Plaintiff’s plant [stanol] esters claim essentially … seeks to impose a different, outdated interim rule requirement for  Defendants from that set forth in the 2003 FDA Letter….”  Id. at *21-22.
[Editorial note:  The FDA letter in Reid was not a warning letter, which are different]
The court also found that Plaintiff’s trans fat claims were barred by preemption. According to Plaintiff, Benecol’s “No Trans Fat” and “No Trans Fatty Acids” statements constituted unauthorized nutrient content claims even though the FDA permits the statements “0g trans fat” or “0 grams trans fat” to appear on food labels.  The court, relying on the doctrine of common sense, disagreed with Plaintiff and noted that an attempt to distinguish the statements “No Trans Fat” and “0 grams trans fat” was unreasonable because the two terms are functionally equivalent. 

Defendants also argued that Plaintiff’s claims should be dismissed based on primary jurisdiction and its closely related cousin, judicial abstention.  While the court found application of primary jurisdiction to be inappropriate in this case, it declined to rule on the issue of judicial abstention, leaving open the possibility that it too may have been a basis to bar Plaintiff’s claims.