9th Circuit reverses preemption finding in consumer protection case

Reid v. Johnson & Johnson, 2015 WL 1089583, No. 12–56726, -- F.3d – (9^th Cir. Mar. 13, 2015)

 

Reid sued defendants (here J&J) based on claims about Benecol, a vegetable oil-based spread sold as a healthy substitute for butter or margarine. The label says the product contains “No Trans Fat” and that it contains plant stanol esters that lower cholesterol (e.g., “Proven to Reduce Cholesterol”). But Benecol does contain trans fat, which allegedly is harmful to human health/raises bad cholesterol, counteracting the beneficial effects of the plant stanol esters in Benecol.  J&J said the amount was so insignificant that it was authorized under FDA regulations to make the statement. (The inside of the packaging, where only a purchaser could see it, says: “A small amount of partially hydrogenated oils are used in BENECOL® Spreads to maintain a semi-solid structure and to enhance the melting characteristics of the BENECOL® Regular Spread. As a result, BENECOL® Spreads[ ] contain an extremely low level of trans fat. The FDA allows foods containing less than 0.5 grams of trans fat/serving to be labeled 0 grams trans fat, since this is considered an insignificant amount.”)  Also, Benecol doesn’t comply with the terms of the FDA’s regulation authorizing plant stanol ester-based health claims, but J&J said that a 2003 FDA letter authorized its statements and was entitled to preemptive effect.

 

The district court found that Reid lacked standing and that his claims were preempted; the court of appeals reversed (while agreeing that primary jurisdiction and abstention were not problems). Reid alleged that he bought Benecol based on J&J’s misrepresentations and, since Benecol costs more than similar products, paid a premium for doing so.

 

Along with Reid’s other claims, he argued that Benecol’s name (a combination of “cholesterol” and “benefit”) and the heart and vegetable graphics on the package reinforced the deceptive statements.  He brought the usual California claims.

 

Though Reid alleged that he wouldn’t have been willing to pay as much as he did for Benecol, if anything, if he had not been misled by J&J’s misrepresentations about Benecol’s health effects, the district court found that he lacked standing because he failed to “set forth alleged facts showing that Benecol’s statements may deceive a reasonable consumer.” True, the reaction of reasonable consumers is the standard for violations of the UCL, FAL, and CLRA, but it’s not a standing requirement. Rather, it usually raises fact questions inappropriate for resolution on a motion to dismiss. 

 

If the district court meant Reid failed to state a claim, it also erred, since it relied on disclosures in Benecol’s ingredient list, which included partially hydrogenated vegetable oil.  But the 9^th Circuit has already held that the ingredient list can’t be used to shield manufacturers from liability for other misrepresentations on the label. “Regardless, it is far from clear that typical consumers understand that a product containing partially hydrogenated vegetable oil necessarily has trans fat, so even if an ingredient list has a curative effect in some cases, it might not here.”  Reid’s allegations were sufficiently plausible.

 

Preemption: The key question was whether the challenged statements were authorized by the FDA’s regulations or other pronouncements of similar legal effect. The NLEA expressly preempts non-identical state regulations, but also says there’s no preemption unless the preemption is express.  FDA regulations require a nutrition label, but the claims made in it are not considered “nutrient content claims” for the purposes of FDA regulations. “While a required statement inside a nutrition label escapes regulations reserved for nutrient content claims, the identical statement outside of the nutrition label is still considered a nutrient content claim …. As a result, a requirement to state certain facts in the nutrition label is not a license to make that statement elsewhere on the product.”

 

FDA regulations provide that trans fat should generally be disclosed in the nutrition label “except that label declaration of trans fat content information is not required for products that contain less than 0.5 grams of total fat in a serving if no claims are made about fat, fatty acid or cholesterol content.” In such circumstances, the trans fat content has to be expressed as zero on the nutrition label.  Outside the nutrition label, claimants may make nutrient content claims such as “fat free,” “no fat,” “zero fat,” or “negligible source of fat” on labels where the food contains less than 0.5 grams of fat per serving and certain other conditions are met. There’s a parallel regulation permitting similar claims about “saturated fat,” but not about “trans fat.” The FDA decided not to authorize a “trans fat free” claim in light of “insufficient scientific information.”

 

FDA also authorized certain health claims, as long as they’re “complete, truthful, and not misleading.” Claims for plant stanol esters being associated with reduced risk of heart disease (CHD) are among those authorized. They have to use “may” or “might”; specify the daily intake necessary to reduce the risk; indicate the contribution one serving of the product makes to the specified intake level; and specify that the daily dietary intake of plant sterol or stanol esters should be consumed in two servings eaten at different times of the day with other foods.  The claim may state that the heart disease relationship is through the intermediate link of cholesterol.

 

In a 2003 letter, the FDA indicated that it “will consider exercising enforcement discretion with regard to the use of a claim about reduced risk of CHD in the labeling of phystosterol containing food” that did not meet the requirements in the regulation. Qualifying health claims had to relate to foods containing 400 mg per serving, had to specify “that the daily dietary intake of phytosterols that may reduce the risk of CHD is 800 milligrams (mg) or more per day,” and the food had to satisfy the regulation’s other requirements.

 

The FDA also recognizes a heart symbol as a health claim, and requires a complete claim to appear in immediate proximity.

 

The first question was whether the “No Trans Fat” claim was authorized by FDA regulations.  In a warning letter, the FDA indicated that “No Trans Fat” is “an unauthorized nutrient content claim ... which has not been defined by FDA.”  This interpretation, albeit informal and nonfinal, deserved deference unless clearly erroneous.  The court of appeals agreed that, because Benecol contains some trans fat, its “No Trans Fat” claim was misleading.  The FDA regulations don’t allow a “No Trans Fat” claim similar to allowed “No Fat” and “No Saturated Fat” claims for products that contain less than 0.5 grams of fat or saturated fat per serving; the warning letter made the most sense of the overall labeling regime.  As noted above, the statement on the ingredient list didn’t authorize a “No Trans Fat” nutrient content claim elsewhere on the label. Thus, the trans fat claims weren’t preempted.

 

J&J admitted that its plant stanol esters and cholesterol reduction claims didn’t satisfy the relevant regulation, but claimed that they met the criteria described in the FDA’s 2003 letter about its enforcement intentions. The FDA explicitly found that “[t]he scientific evidence establishes that including plant sterol/stanol esters in the diet helps lower blood total and LDL cholesterol levels.” So, if Benecol contained the minimum amounts necessary to make the health claims at issue, it was consequently also proven to reduce cholesterol as far as the FDA was concerned.  Was this letter a “law” with preemptive effect? “Creation of federal law should demand at least the same formality for purposes of preemption as it does for purposes of Chevron deference.” Thus, the court declined to give preemptive effect “to agency actions that do not carry the force of law under Mead and its progeny.” 

 

Under that rule, the 2003 letter lacked preemptive effect; enforcement guidelines like those in the letter “are beyond the Chevron pale.”  It did not indicate that FDA had a lawmaking purpose, but was “couched in tentative and non-committal terms.” It didn’t promise not to enforce existing regulations, but announced an “inten[t] to consider the exercise of enforcement discretion” in certain circumstances.  A separate statement firmed up the FDA’s intent not to object to the use of the claim specified in the letter, but that wasn’t enough. “The FDA’s equivocal language regarding its intention to foreclose its own ability to enforce noncompliance with existing rules is a good indication that it did not intend to foreclose state law challenges to health claims that do not comply with existing rules.”  The FDA could have acted more formally—it has the power to approve health claims effective immediately, pending consideration of public comment and publication of a final regulation. The fact that it didn’t do so for the claims in the letter indicated that it didn’t intend to create a standard with the force of law, foreclosing state-law protections. “Giving the 2003 letter preemptive effect would effectively open an additional shortcut allowing the FDA to authorize health claims without notice and comment.”  That’s not inherently bad and notice and comment isn’t always required, but Congress showed that it knew how to create a shortcut and didn’t do so here.

 

The court noted an additional prudential consideration: “we are concerned that allowing the FDA effectively to authorize health claims by way of statements of its enforcement policy could place those authorizations beyond judicial review. This is so because agency decisions not to take enforcement action are usually committed to agency discretion by law and thus generally not subject to judicial review.”  Foreclosing challenges to such approvals wouldn’t serve Congress’s goals of improving protection for public health and safety (citing Pom Wonderful).

 

The court of appeals then agreed that the doctrine of primary jurisdiction didn’t bar the claims. There were no issues of first impression, since the FDA had already addressed the substance.  And, though the FDA said it would someday issue a new final plant stanol esters rule, that was over a decade ago; there was no indication that it was thinking about authorizing “No Trans Fat.”  Courts are competent to address the key issue of misleadingness.