Monday, August 17, 2020

9th Cir. revives suit against allegedly deceptive "prescription pet food" marketing

Moore v. Mars Petcare US, Inc., No. 18-15026, --- F.3d ----, 2020 WL 4331765 (9th Cir. Jul. 28, 2020)

Over a dissent, the court of appeals reversed the dismissal of plaintiffs’ claims based on allegedly deceptive marketing of “so-called prescription pet food” under California’s consumer protection laws, though it affirmed the dismissal of antitrust claims. “Plaintiffs allege that the prescription requirement and advertising lead reasonable consumers falsely to believe that such food has been subject to government inspection and oversight, and has medicinal and drug properties, causing consumers to pay more or purchase the product when they otherwise would not have.”

As alleged: Defendants are pet food manufacturers, veterinary clinic chains, and a pet goods retailer. Defendant Hill’s sells “Prescription Diet.” Purina sells “Pro Plan Veterinary Diets.” Mars sold prescription pet food under the “Iams” label and then switched to “Royal Canin Veterinary Diet.” I’m skipping details about the market concentration, but the defendant manufacturers have over a 90% share of the U.S. prescription pet food market.

All defendants require a vet prescription as a condition for the purchase of prescription pet food. In 2012, the FDA published a Draft Compliance Policy Guide for comment, noting the increase in pet food products labeled as intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease, as well as a shift in marketing toward pet owners directly. FDA expressed concerns that these products “affect physiological processes to extents that may not be tolerated by all animals and/or may not achieve effective treatment.” It was, however, “less concerned when such dog and cat food products are marketed only through and used under the direction of a licensed veterinarian because the agency presume[d] the veterinarian will provide direction to the pet owner.” The FDA then proposed nine factors it would consider in determining whether to initiate enforcement action against pet food products.

Again as alleged: At that time, defendant manufacturers’ products violated three of those factors: (1) their prescription pet food included indications of disease claims on the labels; (2) the distribution of promotional materials with disease claims were not limited to veterinary professionals; (3) they electronically disseminated promotional materials with disease claims to consumers on the internet. The 2016 Final CPG was substantially the same, but added two more conditions that could lead to enforcement action. Defendant manufacturers didn’t change their behavior, but the FDA hasn’t taken any actions.

Plaintiffs were six California residents who purchased prescription pet food for their sick pets after consulting with their vets. For example, one plaintiff bought prescription urinary care dog food that costs $3.44 per pound while urinary care non-prescription dog foods from other manufacturers cost $2.73 and $2.45 per pound. The non-prescription dog food was also allegedly marketed to “[p]romote[ ] balanced urinary pH” and “a healthier immune system [and] urinary tract,” and had “a number of overlapping ingredients in common” with Hill’s prescription dog food, while the “non-overlapping ingredients are not drugs and are not sufficient to justify one product being sold by prescription for a significantly higher price.”Plaintiffs allegedly assumed from the prescription requirement that this pet food was “(a) a substance medically necessary to health; (b) a drug, medicine, or other controlled ingredient; (c) a substance that has been evaluated by the ... [FDA] as a drug; (d) a substance to which the manufacturers’ representations regarding intended uses and effects have been evaluated by the FDA; and (e) a substance legally required to be sold by prescription.” As a result, they alleged that they paid more for the prescription pet food than they would have in the absence of the prescription requirement, had they purchased it at all. They alleged the usual California claims.

The district court dismissed those claims, reasoning that the sale of the prescription pet food exclusively through vets or with veterinarian approval was not itself a deceptive or otherwise misleading practice; that plaintiffs failed to plead enough facts to show that prescription pet food and other pet food are not materially different; and that they failed adequately to allege that the use of the word “prescription” or “Rx” symbol to have caused any of their claimed loss. The court of appeals reversed on all three grounds.

Some themes: First, “[l]iteral truth can sometimes protect a product manufacturer from a misleading claim, but it is no guarantee,” whereas “there is no protection for literal falseness.” Second, qualifiers in packaging, usually on the back of a label or in ingredient lists, “can ameliorate any tendency of the label to mislead.” If, however, “a back label ingredients list ... conflict[s] with, rather than confirm[s], a front label claim,” the plaintiff’s claim is not defeated. Third, “brand names by themselves can be misleading in the context of the product being marketed.” Descriptive brand names require of the consumer “little thought,” which can make consumers susceptible to purchasing because “they won’t have the time or interest to read about [the product] on [the] website or the back of the box.”

Following these rules, the labeling of “prescription pet food” appeared deceptive and misleading. “Common sense dictates that a product that requires a prescription may be considered a medicine that involves a drug or controlled substance. This conforms to general understandings of prescription drugs for humans and pets.” The brand name of “prescription pet food” “itself could be misleading.” The role of vets in the referral process wasn’t enough to avoid deception. Plaintiffs alleged that the food was marketed to consumers, not just to vets. The 2016 CPG “doesn’t signal [the FDA’s] authorization” and “doesn’t specifically authorize the [defendant]’s prescription requirement, prescription label, and related marketing representations.” Vanzant v. Hill’s Pet Nutrition, Inc., 934 F.3d 730, 739 (7th Cir. 2019).

Indeed, the FDA warned in the CPG that the labeling on such pet food “may lack sufficient information, particularly for pet owners.” And plaintiffs alleged violation of three of the conditions listed in the CPG. Anyway, an advertising practice can be deceptive without directly violating FDA regulations.

Rule 9(b): The consumer protection claims were based in part on a theory of fraud: that prescription pet food is not materially different from non-prescription pet food and therefore does not justify the higher cost. In a footnote, the court commented that “Rule 9(b) requirements may not even be necessary, given that a defendant can violate the UCL, FAL, and CLRA by acting with mere negligence.” But plaintiffs didn’t make this argument in their briefing, so the court didn’t reach it. Regardless, the complaint satisfied Rule 9(b) by alleging “what is false or misleading about a statement, and why it is false.” Specifically, they identified six kinds of prescription pet food and alleged how they overlap with a substantial portion of ingredients in non-prescription pet foods that were marketed to treat similar health issues. “More importantly, Plaintiffs allege that all non-overlapping ingredients are not drugs and are not sufficient to justify one product being sold by prescription for a significantly higher price.” This was enough to put defendants on notice.

Reliance/standing: the district court thought there wasn’t enough detail on how each plaintiff relied on the “prescription” label or requirement to buy the food. But a consumer “who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of [the UCL] by alleging ... that he or she would not have bought the product but for the misrepresentation.” Plaintiffs collectively alleged that “[a]s a result of the false and fraudulent prescription requirement, each Plaintiff paid more for Prescription Pet Food than each Plaintiff would have paid in the absence of the requirement, or would never have purchased Prescription Pet Food.” That was sufficient. “The fact that vets had prescribed each Plaintiff the pet food—rather than each discovering the pet food on their own—does not negate the allegation of actual reliance because the prescription requirement and advertising need not be the sole or even the decisive cause of the purchase.”

Also, at the motion to dismiss stage, “actual reliance ... is inferred from the misrepresentation of a material fact.”

[I]t certainly seems plausible that a reasonable consumer would at least partially rely on the prescription labeling to pay more money for a certain type of pet food over others … particularly for a pet owner who is dealing with possibly a sick or unhealthy pet. … Pets can, after all, be as cherished and cared for as family members, and a reasonable person in Plaintiffs’ shoes would rationally gravitate toward a “prescription” product if that family member’s health is at risk.

Agreed. You’re paying for what you hope is a greater chance of a better outcome. (Disclosure: We buy prescription pet food for our cats, for that very reason.)

The court of appeals also rejected challenges to injunctive relief. “There is sufficient cognizable injury where Plaintiffs allege that they cannot rely on Defendants’ labeling of a product when deciding whether to purchase it in the future.” Also, the argument that plaintiffs couldn’t eek equitable relief under the UCL or FAL, given an adequate legal remedy under the CLRA, was “foreclosed by statute. The UCL, FAL and CLRA explicitly provide that remedies under each act are cumulative to each other.” Finally, defendants argued that plaintiffs lacked standing because they hadn’t bought every single type of prescription pet food available form them.  No: the challenge was “to the common scheme of the prescription requirement and prescription-based advertising,” giving class representatives standing.

Judge Rawlinson, in dissent, agreed with the district court. The FDA hasn’t initiated any enforcement action, so the CPG violations are just theoretical, and the CPG is non-binding anyway. Relying on the alleged “violations” of the recommendations about disease claims & dissemination to consumers wasn’t enough [FWIW, my reading of the majority is that those violations are not that central to the holding except insofar as they reinforce the plausibility that consumers are deceived, which seems like the right call post-Pom Wonderful].

Plaintiffs’ basic argument was that an individual seeing the word “prescription” in connection with pet food “would reasonably assume that the pet food has been vetted and approved by the FDA.” But plaintiffs didn’t explain why that would be reasonable, given that the FDA hadn’t historically done such approvals and that pet foods had been marketed to cure/treat pet diseases for more than fifty years. [If the FDA weren’t involved in any disease claims, I’d see the dissent’s point. Given the role the FDA plays in regulating human disease claims, though, it would be reasonable for most people not to know this distinction and to assume that an arthritis claim for dogs & one for people are treated similarly.]

The dissent also thought that plaintiffs couldn’t show reliance on the labels because they didn’t read the labels prior to purchase, but relied on vets’ advice.

And the dissent would have found the CLRA claims preempted “because the FDA has exclusive enforcement authority over the claims made by Plaintiffs predicated on alleged misrepresentations through use of the term ‘prescription pet food,’ and the healing properties of that food.” [I think that would be a pretty major departure from existing understandings of California law & preemption, especially given the dissent's point that the FDA hasn't made binding regulations here.] Analogizing to a pre-Pom Wonderful case finding that fraud by omission claims against the off-label use of a medical device were preempted, the dissent would have found that this issue as well was within the FDA’s exclusive authority. As in that case, the FDA has been made aware of the allegations that defendants were providing mislabeled products, but hasn’t taken action. 

The dissent also pointed to Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993), which rejected a theory that merely placing prescription drugs on the market impliedly represents FDA approval.  [I suspect that Mylan could survive Pom, but only because of the very specific context of Congress deciding to allow certain grandfathered drugs to stay on the market without modern efficacy testing; that's a much greater conflict than that posited here.]

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