Reid v. Johnson & Johnson

• Decision Date: 13 March 2015
• Docket Number: No. 12–56726.,12–56726.
• Citation: 780 F.3d 952
• Parties: Robert REID, on Behalf of Himself and All Others Similarly Situated, Plaintiff–Appellant, v. JOHNSON & JOHNSON and McNeil Nutritionals, LLC, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

780 F.3d 952

Robert REID, on Behalf of Himself and All Others Similarly Situated, Plaintiff–Appellant

v.JOHNSON & JOHNSON and McNeil Nutritionals, LLC, Defendants–Appellees.

No. 12–56726.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 5, 2014.

Filed March 13, 2015.

Jack Fitzgerald (argued), Gregory S. Weston, and Melanie Persinger, The Weston Firm, San Diego, CA; Ronald A. Marron and Beatrice Skye Resendes, The Law Offices of Ronald A. Marron, APLC, San Diego, CA for Plaintiff–Appellant.

Matthew I. Kaplan (argued), Mollie F. Benedict, and Amanda Villalobos, Tucker Ellis LLP, Los Angeles, CA, for Defendants–Appellees.

Appeal from the United States District Court for the Southern District of California, M. James Lorenz, Senior District Judge, Presiding. D.C. No. 3:11–cv–01310–L–BLM.

Before: ALEX KOZINSKI, STEPHEN S. TROTT, and CONSUELO M. CALLAHAN, Circuit Judges.

OPINION

CALLAHAN, Circuit Judge:

Robert Reid appeals the district court's decision dismissing his false advertising lawsuit against Johnson & Johnson and McNeil Nutritionals, LLC (collectively, “McNeil”). Reid challenges a number of McNeil's assertions about its product, Benecol. Benecol is a vegetable oil-based spread that McNeil sells as a healthy substitute for butter or margarine. Among other things, on Benecol's label, McNeil prominently declares that the product contains “No Trans Fat” and contains plant stanol esters that lower cholesterol. Benecol, however, does contain trans fat. McNeil nonetheless contends that the amount of trans fat in the product is so insignificant that it is authorized under the Food and Drug Administration's (FDA) regulations to make the statement. It is also undisputed that Benecol does not comply with the terms of the FDA's regulation authorizing plant stanol ester-based health claims. McNeil contends that Benecol nonetheless satisfies the standards set forth in a 2003 FDA letter that authorizes its plant stanol esters statements and is entitled to preemptive effect.

The district court found that Reid lacked standing to challenge the statements and that Reid's claims for relief were preempted. However, the district court rejected McNeil's arguments that Reid's action was barred by the primary jurisdiction and abstention doctrines. We conclude that Reid has standing, that Reid's claims for relief are not preempted, and that Reid's action is not barred by the primary jurisdiction doctrine. Accordingly, we reverse the district court's standing and preemption decisions, affirm the district court's decision not to invoke the primary jurisdiction doctrine, and remand for further proceedings.

I

A

McNeil manufactures and sells Benecol.¹ Benecol is manufactured with partially hydrogenated vegetable oil, which contains artificial trans fat. According to Reid, “[a]rtificial trans fat does not exist in nature, and the human body has not evolved to digest it.” It is “a toxic food additive that, in the amounts present in Benecol, negatively affects blood cholesterol levels.”

Low density lipoprotein (“LDL ”), or “bad” cholesterol, carries cholesterol to arteries and tissues. High density lipoprotein (“HDL ”), or “good” cholesterol, “takes cholesterol away from tissues to the liver, where it is removed from the body.” High levels of LDL cholesterol and low levels of HDL cholesterol are associated with an increased risk of heart disease. The consumption of artificial trans fat “increases ‘bad’ LDL cholesterol and decreases ‘good’ HDL cholesterol.” Consequently, consuming partially hydrogenated vegetable oil “causes cardiovascular [ ] disease, diabetes and cancer.”

Benecol also contains plant stanol esters. Consuming plant stanols has been shown to reduce LDL cholesterol and thus the risk of heart disease. According to Reid, the partially hydrogenated vegetable oil in Benecol counteracts any positive effect associated with plant stanol esters in the product.

The outside packaging for Benecol includes the following statements:

• “Proven to Reduce Cholesterol”

• “No Trans Fat”

• “No Trans Fatty Acids”

• “Use at least 2 servings of spread per day with your meals and snacks. Each serving contains 0.85 g of Plant Stanol Esters (0.5 g plant stanols). BENECOL® Spreads can help you meet the National Cholesterol Education Program Guidelines recommended amount of 2 g plant stanols/sterols per day.”

• “Plant Stanol Esters, the unique ingredient found only in BENECOL® Spreads, are derived from natural plant components found in vegetable oils such as soy. Plant Stanol Esters [sic] proven ability to lower cholesterol is supported by over 25 studies , including one reported in the New England Journal of Medicine.”

• “Products containing 0.7 g or more of Plant Stanol Esters per serving eaten twice a day with meals for a daily intake of at least 1.4 g may reduce the risk of heart disease as part of a diet low in saturated fat and cholesterol. A serving of BENECOL® spread contains 0.85 g of Plant Stanol Esters.”

The outer packing depicts several heart icons, and the packaging for Benecol Light spread also depicts vegetables. The interior packaging, which a consumer would not see unless he or she opened the package (presumably, after purchasing it), further states:

The name BENECOL® brings together Bene, meaning “good” and col, for “cholesterol”. BENECOL® offers you a great way to reduce your cholesterol with a delightfully good-tasting spread. Did you know that 2 or more servings of BENECOL® Spreads each day:

? Reduces “bad” (LDL) cholesterol

? Reduces total cholesterol

? Works to further reduce cholesterol for those on cholesterol—lowering statin medications

? Blocks cholesterol from being absorbed into your body

It also explains:

How can BENECOL® Spreads have 0 grams trans fat if they contain partially hydrogenated oils?

A small amount of partially hydrogenated oils are used in BENECOL® Spreads to maintain a semi-solid structure and to enhance the melting characteristics of the BENECOL® Regular Spread. As a result, BENECOL® Spreads[ ] contain an extremely low level of trans fat. The FDA allows foods containing less than 0.5 grams of trans fat/serving to be labeled 0 grams trans fat, since this is considered an insignificant amount.

Reid contends that he is a lay consumer with no background in nutrition or food science. He purchased Benecol at three different stores in California over a period of more than three years prior to filing the complaint. He asserts that he did so based on McNeil's representations in its advertisements and on its packaging. Benecol costs more than similar products, and Reid contends that he would not have been willing to pay as much as he did—if anything at all—for Benecol had he not been misled.

B

Reid filed his complaint on June 14, 2011. He alleged that McNeil's plant stanol esters-based health and “No Trans Fat” claims were not authorized under the FDA's regulations and were false. He further asserted that the “Proven to Reduce Cholesterol” and related statements were false and misleading and rendered Benecol an improperly marketed drug. He also contended that McNeil created Benecol's name and used heart graphics and vegetable depictions to reinforce its deceptive statements and to convey misleading information about Benecol's health benefits. He asserted claims for relief on behalf of a putative class of Benecol purchasers under California's Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code §§ 17200 –10; False Advertising Law (“FAL”), Cal. Bus. & Prof.Code §§ 17500 –09; and Consumer Legal Remedies Act (“CLRA”), Cal. Civ.Code §§ 1750 –84.

The district court granted McNeil's motion to dismiss. Initially, the district court decided that Reid had sufficiently alleged an economic injury, but lacked standing because he failed to plead reasonable reliance on any misrepresentations. The district court further concluded that Reid's claims for relief were preempted under federal law. It held that McNeil's plant stanol esters statements complied with a 2003 FDA letter where the agency discussed its intentions about enforcing certain requirements for health claims about plant stanol esters, and it found that McNeil's cholesterol reduction and trans fat statements complied with FDA regulations. The court rejected McNeil's arguments that it should stay or dismiss the case under the primary jurisdiction or abstention doctrines. It also denied Reid's request to take judicial notice of a number of FDA warning letters. Reid appealed and we have jurisdiction pursuant to 28 U.S.C. § 1291.

II

We review de novo a district court's order granting a motion to dismiss on preemption grounds, for lack of standing, or for failure to state a claim upon which relief can be granted. Lilly v. ConAgra Foods, Inc., 743 F.3d 662, 664 (9th Cir.2014) (preemption); Mont. Shooting Sports Ass'n v. Holder, 727 F.3d 975, 979 (9th Cir.2013) (standing), cert. denied, –––U.S. ––––, 134 S.Ct. 955, 187 L.Ed.2d 786 (2014) ; Henry A. v. Willden, 678 F.3d 991, 998 (9th Cir.2012) (failure to state a claim). We review the district court's “ultimate decision” to exercise or “decline to exercise jurisdiction for abuse of discretion, but conduct de novo review of the court's application of the primary jurisdiction doctrine.” N. Cnty. Commc'ns Corp. v. Cal. Catalog & Tech., 594 F.3d 1149, 1154 (9th Cir.2010) (quoting Rhoades v. Avon Prods., Inc., 504 F.3d 1151, 1162 n. 11 (9th Cir.2007) ).

III

The district court appeared to dismiss Reid's claims for relief for lack of standing under California's standing requirements for the UCL, FAL, and CLRA. To establish standing to bring a claim under these statutes, plaintiffs must meet an economic injury-in-fact requirement, which demands no more than the corresponding requirement under Article III of the U.S. Constitution. Hinojos v. Kohl's Corp., 718 F.3d 1098, 1104 (9th Cir.2013). In a false advertising case, plaintiffs meet this requirement if they show that, by relying on a misrepresentation on a product label, they “paid more for a...