[Drug and Device Law] Consumer Food Fraud Claim Sinks in Arkansas Safe Harbor


 

On this date in 1896 the Dutch completed the harbor at IJmuiden.  (That capital J is not a mistake.  The I and J go together as a digraph, and they form a ligature that effectively makes up a single letter in the Dutch language.)  The IJmuiden harbor has an interesting history.  It connects Amsterdam to the North Sea via canals.  After the Germans invaded the Netherlands in 1940, the Dutch Royal family left the country from IJmuiden.  The Germans then used the IJmuiden harbor to house their torpedo boats and midget submarines.  After D-Day, the Allies bombed IJmuiden.  The American Air Force employed various weapons to penetrate the German concrete bunkers, including rocket-powered Disney bombs.  The bombs were named after war propaganda efforts by the Disney Studio.  Today IJmuiden harbor welcomes cruise ships.  It is a safe harbor. 

 

(Yes, that is a rather long and pointless windup to get to our safe harbor case, but we are busily planning our Benelux Summer vacation, so you’ll have to excuse the travelogue/history.)

 

In the past we have had several opportunities to discuss state consumer protection laws containing "safe harbor" provisions that bar suits over conduct that was authorized, approved, or permitted by governmental agencies. Applying these safe harbor provisions, courts have dismissed consumer protection claims that attacked FDA-approved actions (usually labeling) after finding that the challenged conduct had the imprimatur of an agency.  One example was the DePriest case in the Arkansas Supreme Court.  The plaintiff in that case claimed that the defendant fraudulently marketed Nexium as better than older drugs that - allegedly - did essentially the same thing. The case was styled as an economic-loss-only class action.  The Arkansas Supreme Court threw the case out and we blogged about it here in 2009.

 

Now we have a federal case that applied the Arkansas safe harbor in a slightly different, but equally effective way.  This time the safe harbor protected a food manufacturer, but the principle is fully applicable to drugs and devices as well. The case is Gabriele v. Conagra Foods, Inc., 2014 U.S. Dist. LEXIS 82585 (W.D. Ark. June 25, 2015).  The plaintiff brought a putative class action on behalf of Arkansas consumers pursuant to the Arkansas Deceptive Trade Practices Act (ADTPA) and other state law causes of action, regarding allegedly deceptive and misleading labels on Hunt’s tomato products.   The plaintiff asserted that the labels improperly describe Hunt’s tomato paste as “100% Natural,” and “free of artificial ingredients and preservatives.” The plaintiff called these statements lies because the presence of citric acid and calcium chloride in the paste means that the tomato products contain “artificial and synthetic ingredients which have undergone substantial processing and which include various artificial chemical preservatives and coloring agents.”  The plaintiff contended that the claims of natural-not-artificial enabled the defendant to charge a premium.  In fact, according to the plaintiff, mislabeled products cannot be legally sold or possessed, and misbranded food have zero economic value.  That is a tasty damages theory indeed. 

 

The defendant moved to dismiss on several grounds, including preemption by the federal Food, Drug, and Cosmetic Act (FDCA).  Normally, we adore talking about FDCA preemption, but that defense did not win the day here.  The defendant argued that FDA regulations specifically define calcium chloride and citric acid as “nonsynthetic” and permit their use in food bearing a label bearing a boast of being “organic” or “natural.” The defendant further argued that the FDA had expressly approved the use of an “all natural” label claim for a food product containing citric acid, as evidenced by a letter sent to a different (but related) company.  That FDA letter suggested that the FDA did not object to the use of the “all natural” label if citric acid was “naturally derived.” Of course, the FDA letter was outside the pleadings and the court treaded carefully about what it would and would not judicially notice. 

 

Predictably, the plaintiff maintained that preemption was inapplicable because he was simply seeking to enforce state law food-labeling requirements that are identical to those of the FDCA.  The Gabriele court was not inclined to resolve the natural vs. artificial debate at this point.  It is not as if the FDA has been terribly helpful in this regard.  The term “natural” is not defined in the FDCA, and the FDA has expressly declined to define “natural” in any regulation or formal policy statement.  The FDA concluded that while “the ambiguity surrounding the use of this term … could be abated” if the term were adequately defined, the FDA was unwilling at that time to consider defining “natural” because of “resource limitations and other agency priorities.”  Faced with this ambiguous stew, the court simply accepted as true the plaintiff’s allegations that the tomato paste contained artificially derived citric acid or calcium chloride in contravention of federal regulations.  If that is the case, according to the court, then the plaintiff’s state law claims effectively paralleled the FDCA and were therefore not expressly preempted.  In any event, according to the Gabriele court, “there are no federal requirements regarding the term ‘natural’ to be given preemptive effect.”  Thanks, FDA.  Here’s hoping that your next plate of penne is sticky and that the sauce is 50% Sriracha – natural or not.   

 

If the Gabriele case limited itself to this vaguely unsatisfactory discussion of preemption, we’d grumble a bit about it, offer a few silly allusions to Razorbacks, Walmart, chickens, and the lyrics of “Tell Me What I Say,” and then we’d be on our way.  But one of the plaintiff’s claims was a consumer fraud claim under the ADTPA.  The ADTPA contains a safe harbor provision that prohibits a plaintiff from bringing a suit regarding: “Actions or transactions permitted under laws administered by the
Insurance Commissioner, the Securities Commissioner, the State Highway Commission, the Bank Commissioner, or other regulatory body or officer acting under statutory authority of this state or the United States, unless a director of these divisions specifically requests the Attorney General to implement the powers of this chapter.”  That, ladies and gentlemen, is nice and broad.  The Gabriele court identified two rules regarding the construction of the ADTPA safe-harbor provision:  (1) the “specific-conduct” rule, which looks to whether state law expressly permits or prohibits the conduct at issue, and (2) the “general-activity” rule, which looks to whether a state agency regulates the conduct, in which case a regulated actor enjoys full exemption from the ADTPA. 

 

Both parties acknowledged that the DePriest case offered controlling law on the safe harbor.  In DePriest, the court applied the specific conduct rule and upheld the trial court’s dismissal of a class action that alleged that Nexium had been fraudulently marketed.  Because the FDA specifically approved the labeling for the drug, the court held that the safe-harbor exemption applied because the defendant’s actions were consistent with the FDA-approved labeling for the drug.  That is the reasoning we applauded way back when, and it is wonderful as far as it goes. 

 

Gabriele goes further.  According to the Gabriele court, the Arkansas Supreme Court in the DePriest case had not considered the general-activity rule.  No gripe about that; the DePriest had no need to consider it.  But the Gabriele court would consider it, and its application will give plaintiff lawyers sleepless nights.  They will toss and turn betwixt their 900-count sheets and mattresses made up of unicorn hair.  The general-activity rule “exempts regulated conduct by regulated actors regardless of whether substantive state law explicitly authorizes or prohibits the precise conduct at issue.”  That is, the ADTPA does not apply to conduct regulated by a state or federal agency, such as the Arkansas Board of Health and/or the FDA.  Applying the general-activity rule to the Gabriele case, the federal court concluded that because the alleged mislabeling of products is conduct that is regulated by the FDA and the Arkansas Board of Health, the safe harbor provision applies, and there is no private right of action.  Consequently, the plaintiff’s ADTPA claim was dismissed with prejudice.

 

That general-activity prong of the safe harbor sounds very like field preemption which is, of course, much more expansive than conflict preemption.  It is a concept that should help manufacturers of foods, cosmetics, drugs, and devices fend off consumer class actions in Arkansas and, we’d like to think, other states that have similar safe harbors.

 

There are other rulings in the Gabriele case, some good and some not so good.  The court punts on unjust enrichment, finding a factual dispute as to whether a benefit was conferred on the defendant due to its alleged misrepresentations. Because the plaintiff had not alleged that the products lacked even the most basic degree of fitness for ordinary use, such as the ability to be consumed, the implied warranty claim was dismissed.  The issue of whether the “100% Natural” and “free of artificial ingredients” statements were false was live enough to carry the express warranty past the motion to dismiss.  Similarly, the negligence claim survived.  Finally, the court punted on whether the particular lead plaintiff could represent putative class members as to similar products that he did not purchase. We’d answer that question No, but nobody asked us.

 

Thus, we’ll content ourselves with splashing about a bit in the safe harbor.  Join us.  The water’s fine. 

  

   


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Posted By Steve McConnell to Drug and Device Law at 7/01/2015 07:30:00 AM

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