Health Law Daily Wrap Up, COSMETICS—S.D.N.Y.: Amendment of acne product complaint leaves blemishes for dismissal in unapproved areas, (Oct 7, 2026)

By Justin Marcus Smith, J.D.

The consumer strayed from amendment instructions and failed to allege deception independent of illegality under New York law, where it did not follow that illegal sale of an allegedly misbranded product necessarily conveyed it was lawful and safe.

A New York consumer could not proceed to discovery on a claim that Harvard Drug Group LLC (HDG) violated New York General Business Law Section 349 when it sold over-the-counter acne products that allegedly contained the carcinogen benzene, held the federal district court in New York City. First, the court noted that the consumer went beyond the previously granted leave to amend, but the court elected not to dismiss on that basis. Instead, the court analyzed that the consumer’s implied representation theory failed because the consumer did not allege any deception independent of the product’s alleged illegality under Section 349. The consumer’s omission theory of liability in connection with Section 349 also failed because the consumer did not plausibly allege that HDG knew its acne product contained elevated levels of benzene at sale. The New York economic loss rule barred the consumer’s negligence and strict liability claims. The unjust enrichment equitable cause of action was duplicative of the Section 349 claim because it turned on the same alleged conduct and sought recovery for the same economic injury. The court dismissed the Section 349 and unjust enrichment claims with prejudice. The court dismissed the negligence and strict liability claims without prejudice; however, it explicitly reserved on potential deficiencies on any amendment of those claims. The consumer would have to allege personal injury or property damage on any further amendment of negligence and strict liability claims, but that would place the pleading at odds with the class definition (Kouyate v. The Harvard Drug Group LLC, No. 1:24-cv-06223-GHW-SDA (S.D.N.Y. Sept. 30, 2026)).

Background. A New York consumer brought a putative class action alleging that Harvard Drug Group LLC (HDG) over-the-counter (OTC) benzoyl peroxide acne products sold under the Rugby Laboratories brand name allegedly contained elevated levels of the carcinogen benzene. The court dismissed the consumer’s initial complaint for Federal Food, Drug, and Cosmetic Act (FDC Act) Acne Monograph federal labeling preemption and failure to plead non-preempted affirmative misrepresentation or manufacturing defect claims. Under the Acne Monograph, acne drugs containing benzoyl peroxide (BPO products) in concentrations of 2.5 to 10 percent are generally recognized as safe and effective if not misbranded, subject to applicable monograph conditions and each general condition for OTC drugs. The court granted limited leave to amend.

After amendment, the first amended complaint (FAC) asserted claims under Section 349 of the New York General Business Law (N.Y.G.B.L.), strict liability based on manufacturing defect (contamination), common law negligence, and unjust enrichment. The FAC alleged the Harvard product was “dangerous to health” when used as directed and therefore misbranded under New York Education Law Section 6815(2)(i). New York Education Law Section 6811(9) prohibits the manufacture or sale of misbranded drugs.

The FAC cited a March 11, 2025 FDA notice reporting voluntary recalls of a limited number of BPO products after testing purportedly identified “elevated levels of benzene.” At the same time, the FAC expressly disclaimed any challenge to FDA approval of benzoyl peroxide, any claim implicating BPO product labeling, and any theory that all BPO products are unsafe or systematically degrade into benzene under normal conditions. The consumer instead alleged that the particular Harvard product contained significantly elevated levels of benzene. The consumer prayed only for economic damages. HDG moved for Fed. R. Civ. P. 12(b)(6) dismissal for failure to state a claim. HDG also asserted preemption as an affirmative defense. The court held it did not need to reach preemption because the consumer failed to plead any of his claims adequately.

Amendment. The court noted first that the consumer exceeded the court’s “limited” leave to amend, but the court elected not to dismiss on that basis. The court had granted the consumer leave to amend his N.Y.G.B.L. § 350, fraud, and negligence per se claims “solely” to cure the deficiencies of those claims only. The FAC strayed from the permitted amendment insofar as it asserted claims under N.Y.G.B.L. § 349 and for strict liability based on manufacturing defect, common law negligence, and unjust enrichment. The unjust enrichment claim had no bearing on any deficiency the court authorized the consumer to cure, and his explanation for substituting Section 349 for Section 350 rested on a misreading of the court’s prior opinion. The court cited that Second Circuit courts routinely dismiss claims that exceed the scope of permitted amendment.

The consumer contended the court’s prior dismissal opinion left him “seemingly precluded” under the law of the case from alleging any labeling facts under Section 350 false advertising, but the court said it did not foreclose every Section 350 claim involving the product label. The court distinguished preempted claims seeking additional disclosures from non-preempted claims based on affirmative misrepresentations. The court dismissed the latter because the consumer did not identify an affirmative misrepresentation. The court said the consumer also conflated permission to add new facts with permission to add new claims. If the consumer believed the FDA alert justified additional claims, he could have sought broader leave to amend, but he did not, and the alert did not expand the leave the court had granted. Even so, the court declined to dismiss the new claims, which would have been a procedural dismissal without prejudice.

Section 349. The court held the FAC failed to state a Section 349 claim because it did not plausibly allege that HDG engaged in materially misleading conduct. The test for misleading conduct is objective. A party seeking to dismiss a must exclude the possibility that a reasonable consumer could be misled.

The FAC and the consumer’s opposition to dismissal appeared to advance two theories of misleading conduct: (1) implied representation arising from mere product sale; and (2) alleged omission of material product information. The court found the consumer failed to plead either theory.

The implied representation theory failed because illegality alone is not inherently deceptive under Section 349. The act of selling a misbranded BPO product was supposed to be the deceptive or materially misleading act or practice, but the consumer did not identify any New York authority establishing that proposition. The consumer’s cites to case law were misguided, whereas the court cited how the New York Court of Appeals has rejected Section 349 claims based on similar reasoning.

The consumer did not allege any deception independent of the product’s alleged illegality under Section 349. It did not follow that illegal sale of an allegedly misbranded product necessarily conveyed that it was lawful and safe. The consumer did not allege independently misleading conduct as identified in key cases. The consumer’s implied misrepresentation theory failed.

The consumer’s omission theory of liability also failed because he did not make a plausible allegation that HDG knew its acne product contained elevated levels of benzene at sale. Actionable GBL omission claims are limited to those likely to mislead a reasonable consumer acting reasonably under the circumstances. The consumer conceded he had not asserted an actionable omission. He argued the FAC alleged no facts detailing how or why HDG would have known about the potential for elevated benzene in its acne product and instead alleged the potential danger of benzene contamination in BPO products was both scientifically discoverable and commonly known among scientists at the time of the Acne Monograph approval. But this opposition did not respond to the HDG argument that the FAC failed to plead an actionable omission. The consumer relied on his implied representation theory, and in doing so, he conceded the HDG argument as to the deficiency of his omission theory.

Even setting that aside, the consumer’s omission theory failed because the FAC did not plausibly allege that HDG had knowledge of elevated benzene levels, if any, when it sold the product. Although the FAC might support an inference that HDG knew of such risk, the inference could not extend to actual knowledge. The FAC testing allegations actually undermined an inference of knowledge to the extent they alleged HDG “negligently failed to test” the acne product for benzene. Courts that have found plausible pleading of manufacturer knowledge have relied on facts showing the manufacturer had learned of the particular defect.

Negligence, strict liability. The New York economic loss rule barred the consumer’s negligence and strict liability claims. Product end-purchasers can only claim contract remedies in both instances. They may not seek damages in tort for economic loss. The FAC alleged only economic injury from the consumer’s purchase of the HDG acne product, and the proposed class excluded personal injury. The consumer’s arguments to the contrary conflated the economic loss rule with distinct tort law principles despite the New York Court of Appeals having specifically cautioned against that.

Unjust enrichment. The court dismissed the unjust enrichment claim as duplicative of the Section 349 claim. Courts in the Second Circuit have consistently held that unjust enrichment claims are duplicative of N.Y.G.B.L. claims. The claims here were duplicative because they arose from the same alleged conduct and sought recovery for the same economic injury. The unjust enrichment claim also repackaged the same theory that HDG benefited financially benefited from sale of the acne product. The retention of the benefit was said to be unjust based on the same alleged deceptive conduct underlying the Section 349 claim. Among the consumer’s other infirm arguments here, the idea that Section 349 might not provide a remedy at law was wrong because it provides for recovery of actual damages or fifty dollars, whichever is greater.

Amendment. The court did not grant further leave to amend the Section 349 claim. The court reasoned the consumer had notice of the central defect in his non-preempted Section 350 claim: failure to allege any HDG misrepresentation. The consumer did not cure that deficiency and instead substituted a Section 349 claim. On amendment, the consumer still failed to identify a misrepresentation that the product was safe to use as directed or was not misbranded. He instead relied on the implied representation theory by the act of selling the product, a theory the court rejected. The consumer was not entitled to another opportunity to amend.

The court did not grant further leave to replead an omission theory. Again, the defendant failed to cure after notice that the FAC alleged no facts detailing how or why HDG would have uniquely known about the potential for alleged elevated levels of benzene.

The court also declined to grant leave to amend the unjust enrichment claim because there was no remedy for the defect of basing it on the same allegations as the Section 349 or 350 claim.

However, the court dismissed the consumer’s negligence and strict liability claims without prejudice. The sole purpose of amendment would be to cure the economic loss rule defect already described, that is, the consumer would have to plead he suffered personal bodily injury or property damage. The court explicitly forbade amendment to add new causes of action, theories of liability, or new categories of damages unrelated to those two exceptions to the economic loss rule.

The court noted that the proposed class definition excluded individuals who alleged personal injury. Amendment to allege the plaintiff suffered personal injury would mean the plaintiff would not be in the class. The court warned the class definition would have to be revised for consistency.

The court expressly reserved as to potential dismissal of amended negligence and strict liability claims and whether the FDCA might preempt them. HDG raised both express and implied FDCA preemption.

The case is No. 1:24-cv-06223-GHW-SDA.

Judge: Woods, G.

Attorneys: Bryan F. Aylstock (Aylstock, Witkin, Kreis & Overholtz PLLC) for Moussa Kouyate. Jamie Michele Zeevi (Crowell & Moring LLP) for The Harvard Drug Group LLC d/b/a Rugby Laboratories.

Companies: The Harvard Drug Group LLC d/b/a Rugby Laboratories

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