Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: Consumer action over Benecol nutritional and health benefit claims revived, (Mar 13, 2015)

By Linda O’Brien, J.D., LL.M.

A consumer sufficiently alleged facts to pursue false advertising claims against the makers of Benecol, a vegetable-based spread, over statements on the product label that the product contained no trans fat and contained an ingredient that was proven to reduce cholesterol, the U.S. Court of Appeals in San Francisco has decided. Thus, the district court’s dismissal of the consumer’s complaint was reversed (Reid v. Johnson & Johnson, March 13, 2015, Callahan, C.).

McNeil Nutritionals, LLC, a subsidiary of Johnson & Johnson, manufactures Benecol, a vegetable-based spread marketed as a substitute for butter or margarine. Benecol’s label states that the product contains “No Trans Fat” and contains plant stanol esters that lower cholesterol. After purchasing Benecol, consumer Robert Reid filed suit against McNeil and Johnson & Johnson, alleging violations of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA). Specifically, Reid asserted that McNeil’s statements regarding “No Trans Fat” and plant stanol esters were false and not authorized under Food and Drug Administration (FDA) regulations. He also alleged that the statement “Proven to Reduce Cholesterol” was false and misleading and rendered Benecol an improperly marketed drug.

In granting McNeil’s motion to dismiss, the district court found that Reid lacked standing for failure to plead reasonable reliance on any misrepresentations and McNeil’s cholesterol reduction and trans fat statements complied with FDA regulations.

Standing. The district court improperly held that the plaintiff lacked standing to pursue UCL, FAL, and CLRA claims against the defendants. According to the appellate court, to establish standing to bring a claim under these statutes, a plaintiff must meet an injury-in-fact requirement. Reid alleged that he purchased Benecol based on McNeil’s misrepresentations, paid a premium price for Benecol, and would not have been willing to pay as much as he did for Benecol had he not been misled about Benecol’s health benefits. These allegations clearly satisfied the individual reliance requirement.

The district court decided that Reid failed to set forth facts showing that Benecol’s statements may deceive a reasonable consumer. However, the reasonable consumer standard, unlike the individual reliance requirement, was not a standing requirement. Furthermore, disclosure of the presence of partially hydrogenated vegetable oil on the ingredient list did not provide a shield from liability from misrepresentations since a typical consumer may not understand that a product containing partially hydrogenated vegetable oil contained trans fat. Therefore, Reid’s allegations were sufficiently plausible to survive a motion to dismiss.

Preemption. The appellate court determined that Reid’s state law claims were not preempted by the Nutritional Labeling and Education Act (NLEA). The NLEA amended the Food, Drug, and Cosmetic Act (FDCA) to establish uniform food labeling requirements. In this case, the challenged statements could be grouped into two categories — the trans fat nutrient content claims and the plant stanol esters health claims. Under FDA regulations, a nutrient content claim fails if it is false or misleading in any respect. McNeil’s “No Trans Fat” claim was misleading in at least one respect since Benecol contains some trans fat. Moreover, the appellate court declined to afford preemptive effect as an enforcement action to a 2003 FDA letter in which the agency stated its intention not to enforce certain requirements of the plant stanol esters regarding claims about the reduced risk of high cholesterol.

Primary jurisdiction doctrine. However, the district court properly declined to dismiss or stay the proceeding pursuant to the primary jurisdiction doctrine. The doctrine allows court to stay proceedings or dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency. McNeil’s argument that Reid’s case was barred by the doctrine was rejected since the FDA has made several judgments on the legal issues of the case and the application of the doctrine would not promote efficiency, the court concluded.

The case is No. 12-56726.

Attorneys: Jack Fitzgerald, Gregory S. Weston, and Melanie Persinger (The Weston Firm) and Ronald A. Marron and Beatrice Skye Resendes (The Law Offices of Ronald A. Marron) for Robert Reid. Matthew I. Kaplan, Mollie F. Benedict, and Amanda Villalobos (Tucker Ellis LLP) for Johnson & Johnson and McNeil Nutritionals, LLC.

Companies: Johnson & Johnson; McNeil Nutritionals, LLC

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