Wednesday, March 23, 2022

SmileDirect may indirectly deceive: "implicit misrepresentation of FDA approval" theory is not precluded

Ciccio v. SmileDirectClub, LLC, 2022 WL 843774, No. 3:19-cv-00845 (M.D. Tenn. Mar. 21, 2022)

The district court doesn’t seem to be having much fun with this case, but issues a thorough and thoughtful opinion that highlights a big conflict in false advertising law—not a split, but a conflict about when courts will consider implicit falsity/misleadingness, the other side of which was represented by last week’s Bimbo Bakeries decision.

Roughly: Orthodontists accused SDC of falsely advertising its plastic aligners as equivalent to traditional orthodontic treatment. Here, SDC sought to narrow the scope of bitterly-fought discovery by getting rid of any claims based, in whole or in part, on allegations that SmileDirect improperly marketed itself as in compliance with federal regulations governing dental devices. The plaintiffs alleged that “[a]t no time has SmileDirect informed consumers that it is in violation of the [Food, Drugs, and Cosmetics Act (‘FDCA’)] and illegally practicing dentistry” and that “[b]oth of these nondisclosures are highly material and highly fraudulent because consumers would be reluctant to use SmileDirect’s aligners in any capacity if they knew that they were being sold in violation of both federal and state law.” Plaintiffs alleged that, “[a]s a manufacturer of its aligners, SmileDirect was legally obligated to seek FDA clearance for such product,” but that it has instead opted to “flout these legal requirements and is selling its product, which should be labeled and sold only by prescription, in an essentially over-the-counter fashion.”

SDC argued that the court should dismiss any such claims because “only the Food and Drug Administration can enforce the FDCA.”  [Procedural discussion, and discussion of an related Tennessee Consumer Protection Act issue, omitted.]

POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014), would seem to support plaintiffs’ arguments that they could enforce the Lanham Act even against FDA-regulated activity. SDC distinguished Pom Wonderful by noting that here, the allegations are about FDA approval. Nonetheless, the allegations were not trying “to police or otherwise interfere with SmileDirect’s dealings with the FDA, nor are they trying to enforce any provision of the FDCA in the FDA’s stead.” Instead, they were arguing that SDC’s marketing misled consumers about its FDA clearance status. (Citing JHP Pharms., LLC v. Hospira, Inc., 52 F. Supp. 3d 992, 1000 (C.D. Cal. 2014) (“[I]f a product has been approved [by the FDA], consumers may take some assurance that it ... meets the agency’s ... standards. This makes an FDA-approved product a more attractive product ....”) The plaintiffs were not alleging that SDC’s disclosures/nondisclosures violated the FDCA, or that there was a general duty to disclose FDA clearance/approval status. Rather, they argued that SDC’s “particular marketing strategy and materials, in the unique context of the orthodontic industry and the particular consumer expectations predominant in that industry, were misleading in a way that could have been, but was not, rectified by such a disclosure.” This was ok, same as in Pom Wonderful: “the Lanham Act applies to this industry just like any other, and ‘[n]othing in the text, history, or structure of the FDCA’ suggests a carve-out for this particular type of unfair competitive practice.”

The defendants even conceded that a false affirmative claim of FDA approval could be subject to the Lanham Act. But they argued that preclusion applied to a theory that the ads falsely implied FDA approval/clearance. The court previously concluded that plaintiffs sufficiently pled “that the defendants misleadingly characterized their products and services as equivalent to traditional orthodontic treatment.” Although plaintiffs didn’t identify specific affirmative claims that SDC’s aligners were FDA-cleared or -approved, they did make a lot of braces-equivalence claims, and the plaintiffs’ theory was that, “in the context of orthodontic care, a reasonable consumer would read SmileDirect’s assertions of equivalence to traditional orthodontic treatment to suggest that such approval or clearance occurred. Whether that is actually true is a factual question ….”

The court rejected SDC’s proposed explicit/implicit division on FDA-related claims as making “little sense.” “The possibility that a consumer can be misled by omission and/or implication is both factually undeniable and well-recognized by the law. Why, then, would that type of well-recognized claim be precluded, if a substantively equivalent claim based on an affirmative statement would not?” The court also noted “substantial practical challenges to applying such a rule,” since “every misrepresentation involves an omission of the true information,” and a plaintiff may, “ ‘[t]hrough word games, ... style his or her complaint as a material misrepresentations [case] or [an] omissions case’ without any change in the substance. Treating one type of claim as wholly precluded and the other as permissible would cause the viability of a plaintiff’s claim to hinge on distinctions too malleable to be safely relied upon, at least in borderline cases.”

So too with allegedly implied claims of dental licensure.

Comment: I am completely aligned (so to speak) with the court here. But it has to be said that Mead Johnson/Bimbo Bakeries analysis is in conflict—not a split, because the same courts that have adopted Mead Johnson say that they accept that implied falsehoods are actionable; they just won’t tell you in advance which ones—because Mead Johnson says that courts are not allowed to recognize some false implications even when shown to exist via empirical evidence. Honestly, preclusion is a better reason than most of those cases have given. Would confining liability only to explicitly false claims avoid some chilling effects? Sure! That’s why it’s a useful test in Rogers v. Grimaldi. But Rogers is a test for protecting noncommercial speech; in commercial speech, we tolerate a lot more potential chill to protect consumers.

As a practical matter, plaintiffs here are better positioned to avoid Mead Johnson than some other plaintiffs because they plead that the implication comes from the entire marketing campaign, not from a single word whose meaning a court could decide consumers were wrong about.


No comments:

Post a Comment