Moore v. Mars Petcare United States, Inc.

• Decision Date: 28 July 2020
• Docket Number: No. 18-15026,18-15026
• Citation: 966 F.3d 1007
• Parties: Tamara MOORE; Greta L. Ervin; Raff Arando; Nichols Smith; Renee Edgren; Cynthia Welton, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. MARS PETCARE US, INC.; Nestle Purina Petcare Company; Hill's Pet Nutrition, Inc.; Petsmart, Inc.; Medical Management International, Inc., dba Banfield Pet Hospital; Bluepearl Vet, LLC; Royal Canin USA Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

966 F.3d 1007

Tamara MOORE; Greta L. Ervin; Raff Arando; Nichols Smith; Renee Edgren; Cynthia Welton, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,

v.MARS PETCARE US, INC.; Nestle Purina Petcare Company; Hill's Pet Nutrition, Inc.; Petsmart, Inc.; Medical Management International, Inc., dba Banfield Pet Hospital; Bluepearl Vet, LLC; Royal Canin USA Inc., Defendants-Appellees.

No. 18-15026

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 19, 2019 San Francisco, California

Filed July 28, 2020

OPINION

PAEZ, Circuit Judge:

This appeal arises out of a challenge by Tamara Moore and five other California residents (collectively "Plaintiffs") to the marketing of so-called prescription pet food under California's consumer protection laws and federal antitrust law.¹ Plaintiffs brought a putative class action lawsuit against four pet food manufacturers, two veterinary clinic chains, and one pet goods retailer (collectively "Defendants"). 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. The district court granted Defendants' motions to dismiss Plaintiffs' Second Amended Complaint. We have jurisdiction under 28 U.S.C. § 1291, and we reverse.²

I.

A.

The following facts are taken from Plaintiffs' allegations in the Second Amended Complaint, the operative complaint, "[b]ecause the district court dismissed the complaint on the pleadings." Reid v. Johnson & Johnson , 780 F.3d 952, 956 n.1 (9th Cir. 2015) (citation omitted).

Defendants

Defendants consist of pet food manufacturers, Mars Petcare US, Inc. and Royal Canin U.S.A., Inc. (collectively "Mars"),³ Nestle Purina Petcare Company ("Purina"), and Hill's Pet Nutrition, Inc. ("Hill's"); veterinary clinic chains, Medical Management International, Inc. d/b/a Banfield Pet Hospital ("Banfield") and BluePearl Vet, LLC ("Blue Pearl"); and pet goods retailer, PetSmart, Inc. ("PetSmart"). Hill's manufactures and markets its prescription pet food in packaging labeled "Prescription Diet." Purina manufactures and markets its prescription pet food under the label "Pro Plan Veterinary Diets." Mars manufactured and sold prescription pet food under the "Iams" label prior to January 1, 2017 and switched to "Royal Canin Veterinary Diet" starting in 2017.

The market for prescription pet food had a slow roll-out. Hill's began selling its "Prescription Diet" pet food in the 1960s through vets and, in the late 1980s, began supplying vets with prescription pads as part of its marketing effort. In 2004, when Hill's became a significant player in the prescription pet food market, Mars introduced its own line of prescription pet food. At an unspecified time prior to 2012, Purina entered the prescription pet food market. Mars, Purina and Hill's (collectively "Defendant Manufacturers") have over 90 percent share of the U.S. prescription pet food market.

Three small companies attempt to compete with Defendant Manufacturers: Blue Buffalo Company, Diamond Pet Foods, and Darwin's Natural Pet Products. Mars—which has 100 percent ownership over Banfield and 90 percent over Blue Pearl—has a strategic partnership with PetSmart that involves hosting Banfield hospitals in PetSmart store locations throughout the United States. Banfield and PetSmart sell prescription pet food made by Defendant Manufacturers, but not any other competitors.

PetSmart sells Defendant Manufacturers' prescription pet food online and in its brick-and-mortar stores, requiring proof of a prescription from the pet's vet. At PetSmart stores, a consumer must first obtain an Rx card from Banfield, either by visiting a Banfield veterinarian (hereinafter, "vet") on site or presenting a prescription from another vet to Banfield. Consumers may also purchase Defendant Manufacturers' prescription pet food directly from Banfield or Blue Pearl. PetSmart, Bluefield and Blue Pearl are not the exclusive sources of Defendant Manufacturers' prescription pet food, but there is no dispute that all Defendants require a vet prescription as a condition for the purchase of prescription pet food.

In September 2012, the U.S. Food & Drug Administration ("FDA") published for comment a Draft Compliance Policy Guide ("Draft CPG"). In the Draft CPG, the FDA noted that there has been an increase in the number of 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. The agency expressed concerns that animal health may suffer from consumption of these products because they "affect physiological processes to extents that may not be tolerated by all animals and/or may not achieve effective treatment." The FDA 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 a set of nine factors it would consider in determining whether to initiate enforcement action against pet food products.

At that time, in late-2012, Defendant Manufacturers' products violated three of the factors in the Draft CPG. First, their prescription pet food included indications of disease claims on the labels. Second, the distribution of promotional materials with disease claims were not limited to veterinary professionals. Third, they electronically disseminated promotional materials with disease claims to consumers on the internet. The FDA adopted a final Compliance Policy Guide⁴ ("Final CPG") in April 2016, in substantially the same form as the Draft CPG, although it added two more conditions that could lead to enforcement action. Defendant Manufacturers did not change their behavior despite violating the same three conditions of the Final CPG. The FDA has not, however, taken any enforcement action against Defendant Manufacturers.

Plaintiffs

Plaintiffs are six California residents who purchased prescription pet food for their sick pets after consulting with their vets.

For instance, Plaintiff Moore alleges she purchased "Hill's Prescription Diet u/d dog food" after her dog, Pugalicious, underwent surgery to remove kidney stones

. Pugalicious's vet informed Moore that a prescription was required to purchase the dog food, and he issued her one. Moore initially tried to purchase the product from an animal hospital but was refused because she failed to present a prescription. She subsequently was able to purchase the prescription pet food at a PetSmart using a prescription. The product is marketed to provide for "Urinary Care," and claims that it "[p]romotes desirable urine pH," is "especially formulated to help support your dog's bladder health ... [and] [e]nriched with taurine, L-carnitine & antioxidants," and has "[c]ontrolled levels of high quality, highly digestible protein." The product 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 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."

The other five plaintiffs made similar allegations. Plaintiff Greta Ervin's dog, Teddy, became ill from giardia, after which she received a prescription from Teddy's vet for Royal Canin Veterinary Diet Gastrointestinal Puppy dog food, as well as a prescription from a specialty vet for Royal Canin Veterinary Diet Selected Protein Adult PV dog food. Ervin "understood a prescription requirement to indicate that the foods contained medicine and were subject to the controls associated with prescription drugs." The ingredients of the prescription dog food overlapped significantly with the ingredients of non-prescription dog food that was also marketed for digestive health and sensitive digestion, although the price of the prescription pet food was two to three times that of the non-prescription counterparts; none of the non-overlapping ingredients consisted of drugs.

Plaintiff Nicols Smith had two cats, Mimi and Neichi, who became overweight, and he received a prescription for Hill's "Prescription Diet Glucose/Weight Management m/d cat food" from their vet. When the vet told Smith that a prescription was required, Smith "assumed and understood that there was something medicinal in the food, a medically controlled substance containing a drug." Because the product was substantially more expensive than the non-prescription cat food he had been buying, Smith first attempted to purchase the Hill's prescription cat food at a Petco without a prescription. He was turned away and advised he could not buy the product without presenting a prescription from a vet. Hill's prescription cat food was marketed to help support a cat's glucose and weight management, and its ingredients overlapped over 65 percent of those of Hill's non-prescription diet cat food. Again, the non-overlapping ingredients did not include drugs and did not justify tripling the cost of the prescription cat food.

Plaintiffs 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...