Primary jurisdiction didn't warrant dismissal of "natural" claims, 9th Cir. says

Astiana v. Hain Celestial Group, Inc., No. 12-17596 (9th Cir. Apr. 10, 2015)

 

As the court of appeals introduced the case:

 

A product labeled “all natural” or “pure natural” likely evokes images of ground herbs and earth extracts rather than chemicals such as “Polysorbate 20” or “Hydroxycitronellal.” This class action alleges that false or misleading product labels duped consumers seeking natural cosmetics into purchasing products that were chock-full of artificial and synthetic ingredients. Although the underlying question of what constitutes a “natural” cosmetic poses a fascinating question, it is not the one we answer. Instead, this appeal requires us to decide whether federal preemption or the primary jurisdiction doctrine prevents the district court from deciding when a “natural” label on cosmetic products is false or misleading.

 

It does not.  The district court erred in dismissing the case instead of staying it for potential agency action.  On remand, the district court was to consider whether post-ruling events made FDA proceedings unnecessary.

 

Hain labels various cosmetic products “All Natural,” “Pure Natural,” or “Pure, Natural & Organic.”  Plaintiffs filed the usual California and warranty claims. The court of appeals first analyzed Hain’s preemption argument.  The FDCA bars states from imposing new or additional labeling “requirements,” “but is silent with regards to states’ ability to provide remedies for violations of federal law.” Given the similarity between this situation and that in Medtronic, the court of appeals concluded, the FDCA doesn’t preempt state laws that allow consumers to sue cosmetics manufacturers that label or package their products in violation of federal standards. 

 

Astiana wasn’t asking Hain to modify or “enhance” any aspect of the labels required by federal law.  “Rather, she claims deception as a result of advertising statements that contradicted the true ingredients listed on the FDA-mandated label,” a claim consistent with the 9^th Circuit’s ruling in Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008). FDA regulations didn’t require Hain to label its products as “All Natural” or “Pure Natural,” so if Hain were required to remove those allegedly misleading statements, that wouldn’t violate the FDCA’s ban on “requirement[s]” that are “different from,” “in addition to,” or “not identical with” federal rules.

 

Hain noted that the FDA has never regulated “natural” on cosmetic labels. But that is not equivalent to “a conscious decision by the agency to permit any use of this term a manufacturer sees fit.” Under Hain’s logic, a manufacturer could make any claim—“wild, untruthful, or otherwise—about a product whose contents are not addressed by a specific regulation.” But the FDCA bars statements that are “false or misleading in any particular,” not just statements that are “prohibited by specific FDA regulations.” That reinforced the court of appeals’ conclusion that “natural” was not a labeling free-for-all.

 

Turning to primary jurisdiction, Astiana pointed to FDA correspondence during the pendency of the appeal.  After the court dismissed the claims, her counsel sent a letter to the FDA. The letter did not comply with the FDA’s requirements for initiating a citizen petition; it was never assigned a docket number, and the FDA’s response was neither posted to its website nor published in any other capacity.  The FDA responded by outlining the procedures for establishing the meaning of the term “natural,” absent a pre-existing definition. The letter noted that “making the requested determination without adequate public participation would not be in keeping with FDA’s commitment to the principles of openness and transparency.” It also said that “priority cosmetic public health and safety matters are currently fully occupying the resources that FDA has available for proceedings on cosmetics matters” and “proceedings to define ‘natural’ do not fit within [the agency’s] current health and safety priorities.”

 

The court of appeals refused to consider this correspondence on appeal. That was for the district court, which properly invoked primary jurisdiction but erred by dismissing the case rather than staying it.  The definition of “natural” for cosmetics was clearly an area within the FDA’s expertise and also not yet addressed by the agency. However, courts also must consider whether invoking primary jurisdiction would “needlessly delay the resolution of claims,” and efficiency is the key factor. “Common sense tells us that even when agency expertise would be helpful, a court should not invoke primary jurisdiction when the agency is aware of but has expressed no interest in the subject matter of the litigation.”

 

Obtaining advice from the FDA would help resolve the issue presented by Astiana. Though the FDA had been reluctant to define “natural,” the district court here wasn’t alone in thinking new guidance would be forthcoming; other courts had responded similarly to a flood of “natural” litigation.  In response, the FDA declined to address the issue, specifically with respect to labeling genetically engineered ingredients as “natural.”

 

When a court invokes primary jurisdiction to allow parties to pursue administrative remedies, dismissal without prejudice is normally appropriate.  But when further judicial proceedings are contemplated, jurisdiction should be retained by means of a stay, because the 9^th Circuit hasn’t clearly adopted equitable tolling in such cases.  A stay is justified when there’s a possibility that the statute of limitations could run. On remand, the district court could consider whether events during the pendency of this appeal—including “Astiana’s informal letter, the FDA’s website publication of a Small Business Fact Sheet regarding cosmetics labeling, and the FDA’s response to the other courts”—affected the claims here or showed that another referral to the agency would be futile.

 

The court also reinstated Astiana’s quasi-contract claims for restitution.  California doesn’t have a standalone cause of action for “unjust enrichment,” which is synonymous with “restitution.”  But those concepts underpin a claim that a defendant has been unjustly conferred a benefit “through mistake, fraud, coercion, or request.” So, when a plaintiff alleges unjust enrichment, a court may construe the cause of action as a quasi-contract claim seeking restitution.