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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