Consumer fraud attorneys on both sides of the bar will be familiar with one of the oft-deployed defenses to claims against federally regulated products: primary jurisdiction. The country cousin of federal preemption, primary jurisdiction is the doctrine that permits a court to dismiss a complaint (without prejudice) or stay proceedings pending the resolution of an issue within the special competence of an administrative agency. In the context of food and beverages, that agency is often the Food and Drug Administration (FDA). Under one widely cited standard, courts consider four factors in deciding whether primary jurisdiction applies: "(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration." Syntek Semiconductor Co. v. Microchip Tech., Inc., 307 F.3d 775, 781 (9th Cir. 2002).
The Test Is Discretionary, and Outcomes Are Difficult to Predict
Primary jurisdiction is a prudential doctrine, and courts have wide discretion whether to apply it in any given case. The four factors courts typically consider seem, on their face, to apply to many, if not most, regulated activities; however, in practice, courts are reluctant to apply the doctrine without some express agency interest in the issue at stake. Generally, "[w]here determination of a plaintiff's claim would require a court to decide an issue committed to the FDA's expertise without a clear indication of how the FDA would view the issue, courts . . . have found that dismissal or stay under the primary jurisdiction is appropriate"; on the other hand, if FDA policy clearly establishes what is an unlawful or misleading label, the doctrine is inapplicable because there is little risk that the courts will undermine the FDA's expertise. Smedt v. Hain Celestial Grp., Inc., No. 5:12-CV-03029-EJD, 2014 U.S. Dist. LEXIS 74291 (N.D. Cal. May 30, 2014) (emphasis added).
Without a rigid standard for determining whether primary jurisdiction applies, consumer fraud defendants whose products are regulated by the FDA frequently pair preemption defenses with an alternative request to dismiss or stay the case by application of the primary jurisdiction doctrine. Most of these efforts fail. However, recent successes in invoking the doctrine in the food and beverage space give practitioners some guidance on the factors cutting in favor of courts finding primary jurisdiction.
Caffeinated Energy Drinks: Despite FDA Interest, Courts Reach Different Outcomes
One recent target of consumer fraud class actions has been the energy drink industry, and particularly the caffeinated energy drink industry. The industry has been quick to fight back, filing motions to dismiss private actions on many grounds, including the doctrine of primary jurisdiction. These efforts have had mixed results. For example, in Fisher v. Monster Beverage Corp., No. EDCV 12-02188-VAP, 2013 U.S. Dist. LEXIS 188973 (C.D. Cal. Nov. 12, 2013), the plaintiffs filed a putative class action bringing consumer fraud and other claims against Monster Beverage, including "off-label" claims related to Monster's advertising strategy, which the plaintiffs alleged targets children despite high caffeine levels posing health risks for that population. Monster argued that these claims were subject to the FDA's primary jurisdiction because the agency has special competence over these matters, and the court agreed. The court explained that the Food, Drug, and Cosmetic Act (FDCA) establishes a uniform federal scheme of food regulation to ensure food labeling is not misleading. However, that a product is governed by the FDCA, standing alone, is insufficient to convey primary jurisdiction.
The court noted two other factors in support of applying the doctrine, and it is in these factors that the Fisher decision is instructive to future litigants. First, it observed that the plaintiffs' claims involved "'technical and policy claims' about the effects of caffeine and whether Monster should be allowed to advertise and label their products in a way that appeals to a younger demographic." Second, the court observed that "the FDA has taken an interest in investigating and resolving whether energy drinks, including Monster, contain unsafe levels of caffeine," in particular for children. Because of the FDA's express interest in investigating and resolving the issue in dispute, the court dismissed the plaintiffs' off-label marketing claims without prejudice, in effect referring them to the FDA for decision, by finding that the doctrine of primary jurisdiction applied. Significant to the defendants looking to build a record in support of primary jurisdiction, the court took judicial notice of a number of exhibits provided by Monster in support of its argument. These exhibits reflected the FDA's investigation of the precise issue of caffeine content in Monster energy drinks.
Contrast the Fisher decision with In re 5-hour ENERGY Marketing & Sales Practices Litigation, No. MDL 13-2438, 2014 U.S. Dist. LEXIS 149732 (C.D. Cal. Sept. 4, 2014), ECF No. 51, in which the plaintiffs brought consumer fraud claims alleging marketing for 5-hour ENERGY shots is false and misleading because the feeling of increased energy is not due to the advertised beneficial ingredients, but rather to a concentrated dose of caffeine. The defendants argued that the doctrine of primary jurisdiction required stay or dismissal on similar grounds to those argued by Monster in the Fisher case, but here the court disagreed. The court noted that "[t]he strongest point in Defendants' favor is Plaintiffs' claim that the FDA is investigating 5-hour ENERGY." See, e.g., "FDA to Investigate Added Caffeine," FDA.gov (May 3, 2013) (interview with FDA Deputy Commissioner for Foods Michael R. Taylor). "However, the mere existence of an agency investigation does not weigh in favor of a referral under the primary jurisdiction doctrine." In re 5-hour ENERGY, No. MDL 13-2438, ECF No. 51, at 20. The court explained that the defendants had not made any showing that litigating this case would conflict with the FDA's investigation, and that in the absence of such a showing there was no reason to conclude the matter would interfere with the FDA's uniform administration of federal labeling laws. Although the court did not note this concern, one must wonder whether the passage of time (since the Monster decision) without FDA action weighed against finding primary jurisdiction.
Evaporated Cane Juice: Is Something More Than Mere "Interest" the Key?
Cases involving food and beverage products containing the ingredient "evaporated cane juice" illustrate how direct and express FDA interest in an issue, along with the implication that it will issue a decision on that issue following the investigation period, can swing the pendulum from rejection to acceptance of the FDA's primary jurisdiction. In 2009, the FDA published a nonbinding draft guidance for the industry indicating that labeling that includes evaporated cane juice is false and misleading because that is not the common name of any type of sweetener, and because the term falsely suggests that the sweeteners are juice. See FDA, Draft Guidance for Industry: Ingredients Declared as Evaporated Cane Juice (Oct. 2009). In subsequent years, the FDA issued several warning letters to companies using the term, and private consumer fraud class actions predictably followed. Early attempts to dismiss these actions on the grounds of the FDA's primary jurisdiction were originally rejected. See, e.g., Leonhart v. Nature's Path Foods, Inc., No. 5:13-CV-0492-EJD, 2014 U.S. Dist. LEXIS 46413 (N.D. Cal. Mar. 31, 2014) (noting the FDA guidance suggests the agency "does not view the issue as unsettled and [therefore] the claim is not precluded by primary jurisdiction").
On March 4, 2014, however, the FDA reopened the comment period on the evaporated cane juice draft guidance. See "FDA Reopens Comment Period on Draft Industry Guidance on Evaporated Cane Juice as a Food-Labeling Term," FDA.gov (Mar. 4, 2014). Specifically, the FDA requested additional comments and supporting data on several questions bearing on whether the phrase "evaporated cane juice" is misleading or a commonly used and understood industry standard term. See Draft Guidance for Industry on Ingredients Declared as Evaporated Cane Juice; Reopening of Comment Period; Request for Comments, Data, and Information, 79 Fed. Reg. 12,507 (Mar. 5, 2014). These questions mirror, in several respects, aspects of the private plaintiff claims against manufacturers in their purported consumer fraud class actions.
As a result of these developments, a long string of courts promptly granted motions to dismiss without prejudice or motions to stay proceedings involving products containing evaporated cane juice, pending the FDA's resolution of the alleged misleading nature of that term. See, e.g., Thomas v. Costco Wholesale Corp., No. 12-cv-02908-BLF, 2014 U.S. Dist. LEXIS 159475 (N.D. Cal. Nov. 12, 2014) (stay); Saubers v. Kashi Co., 39 F. Supp. 3d 1108 (S.D. Cal. 2014) (stay); Gitson v. Trader Joe's Co., No. 13-cv-01333-VC, 2014 U.S. Dist. LEXIS 110024 (N.D. Cal. Aug. 7, 2014) (stay); Swearingen v. Santa Cruz Natural, Inc., No. C 13-04291 SI, 2014 U.S. Dist. LEXIS 90472 (N.D. Cal. July 1, 2014) (stay); Smedt, 2014 U.S. Dist. LEXIS 74291 (dismissal without prejudice); Greenfield v. Yucatan Foods, L.P., 18 F. Supp. 3d 1371 (S.D. Fla. 2014) (stay). Even courts that had previously rejected primary jurisdiction in evaporated cane juice cases reconsidered their position, and granted stays following the FDA's reopening of the comment period. See, e.g., Leonhart v. Nature's Path Foods, Inc., No. 13-cv-00492-BLF, 2014 U.S. Dist. LEXIS 164425 (N.D. Cal. Nov. 21, 2014); Figy v. Amy's Kitchen, Inc., No. C 13-03816-SI, 2014 U.S. Dist. LEXIS 92773 (N.D. Cal. July 7, 2014). The reopening of the comment period, paired with specific FDA questions bearing on the issues as stake in the litigation, strongly suggest the FDA's intent to resolve these issues. The existence of these factors considerably strengthens a primary jurisdiction defense.
POM Wonderful May Have Changed Everything
The much-discussed Supreme Court decision POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014), holding that a statutory private right of action under the Lanham Act is not precluded by the regulatory provisions of the FDCA, has been interpreted by some courts as casting doubt on the primary jurisdiction doctrine. For example, in Ibarrola v. Kind, LLC, No. 13 C 50377 (N.D. Ill. July 14, 2014), the court declared that "in light of the guidance in POM Wonderful," it would "refrain from substantively considering Kind's argument that the doctrine of primary jurisdiction warrants dismissal" in a case involving Vanilla Blueberry Clusters containing evaporated cane juice. It is not yet clear whether this approach will be followed more widely by other courts. On its face, the POM Wonderful decision involves preclusion (resolving conflicts between two federal statutes), not preemption or primary jurisdiction. But courts like Ibarrola may likewise apply the Supreme Court's reasoning beyond the four corners of the matter under review, and use their discretion to refrain from addressing primary jurisdiction out of an abundance of caution.
A recent pronouncement on this subject from the Ninth Circuit may signal the modern, post-POM Wonderful trend. In Astiana v. Hain Celestial Group, Inc., No. 12-17596, 2015 U.S. App. LEXIS 5833, at *19–20 (9th Cir. Apr. 10, 2015), the Ninth Circuit considered the oft-disputed meaning of the term "natural" in product labeling and advertising (in this instance, in the context of cosmetic products). The appellate court concluded that the district court did not err in invoking primary jurisdiction. First, the court observed 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." Nevertheless, the issue of "what chemical compounds may be advertised as natural on cosmetic product labels" is a particularly complicated issue that Congress has entrusted to the FDA. At the time the district court dismissed the case, three other district courts had similarly referred the "natural" issue to the FDA for a determination, citing its primary jurisdiction.
But the Ninth Circuit also concluded that the district court erred in choosing to dismiss the matter rather than stay it pending either a determination by the FDA or a conclusion that no such determination would be forthcoming (at which time the matter would be reinstated). Since the dismissal, the FDA had in fact responded to the three district courts that referred the issue to the FDA, and informed them that due to limited resources it declined to make a determination on the "natural" issue at this time. Moreover, the plaintiffs' counsel had independently sought a determination from the FDA, and the FDA declined to resolve the issue. Accordingly, the Ninth Circuit declared that, on remand, the district court must consider whether continued delay would unduly disadvantage the plaintiffs, and whether these events during the pendency of the appeal "affect the need for further proceedings at the FDA or demonstrate that another referral to the agency would be futile."
The Astiana case gets to the heart of the matter—what does the evidence suggest regarding the likelihood of direct and specific guidance on the issue in question from the agency vested with jurisdiction over that issue? This level of specificity is not a prerequisite to finding primary jurisdiction. Nevertheless, practitioners, clients, and courts attempting to evaluate whether an agency has primary jurisdiction over an issue in litigation would do well to focus on this question as they evaluate the strength of a primary jurisdiction defense in their matter.
Keywords: litigation, products liability, primary jurisdiction, consumer fraud class actions, FDA
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