In two recent consumer protection cases, the attorneys general of Georgia and Mississippi successfully opposed removal and preemption claims based on the federal Food, Drug, and Cosmetic Act (FDCA).
A federal court remanded a consumer protection case removed by defendants in Georgia ex rel. Carr v. Elite Integrated Medical, No. 1:20-cv-4946 (N.D. Ga. Apr. 12. 2021). Georgia filed suit in state court in September 2020, alleging Elite and its founder made false and/or misleading representations to the public concerning the regenerative medicine products Elite offered, in violation of the Georgia Fair Business Practices Act, O.C.G.A. § 10-1-390 et seq. (GFBPA). Regenerative products “replace, engineer, or regenerate human cells, tissues, or organs to establish, restore or enhance normal cell function.” Regenerative products are regulated by the U.S. Food and Drug Administration (FDA), which had not approved any products sold by the defendants. The FDA has issued “consumer alerts” about some stem cell products, notifying consumers that none of these products have been approved to treat any orthopedic condition, neurological disorder, or cardiovascular or pulmonary disease. The FDA has also condemned the practice of advertising and offering of unproven stem cell products.
The defendants were resellers of products that they advertised as safe and effective through a variety of media, and they stated in their marketing that their products were not regulated by the FDA. The Georgia Attorney General alleged, among other claims, that the defendants had violated the GFBPA by making false and misleading representations that their products are not regulated by the FDA and do not require FDA approval. Defendants removed the case in December 2020 on the grounds that it arose under the Constitution, laws, or treaties of the United States, and filed a motion to dismiss for failure to state a claim. The state filed a motion to remand for lack of jurisdiction and the court granted the motion and remanded the case.
The court began with a discussion of removal standards. Defendants may remove a case if either “federal law creates the cause of action or . . . the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law. If federal law completely preempts an area of the law, an ordinary state common-law claim may also be treated as a federal claim.” The Supreme Court has articulated the standard as “Does the state-law claim necessarily raise an actually disputed and substantial federal issue which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities?”
Defendants argued that federal question jurisdiction existed because there is a disputed issue as to whether the FDA regulates regenerative medicine products. If the FDA does regulate them, a state law claim could exist. If not, the state has no claim. In order to prove a violation of the GFBPA, the state must show (1) that a representation was made, (2) that the representation was likely to mislead consumers acting reasonably under the circumstance, and (3) that the representation was material. The state does not need to prove that a person was actually misled. According to the court, the state had proved the first element. The state could prove the second element by showing that “Elite lacked a reasonable basis, or adequate substantiation, for asserting that the message was true.”
The court found that the state had pleaded a “reasonable basis” theory, under which it did not mater whether the FDA regulated regenerative medicine products. Instead, the state could show that the defendants had no reasonable basis to “claim that their products are not regulated by the FDA and/or that the products are not drugs when the FDA issued press releases and consumer alerts stating otherwise, the manufacturers of the products represented otherwise, and the studies and reports represented by defendants to be substantiation for efficacy appear to involve products that are regulated by the FDA as drugs.” There was no need to determine whether the FDA actually regulated the products since the state had shown that the defendant had no reasonable basis to claim that it did not. The state was using the FDA statements and regulations only as evidence supporting the false and misleading nature of the claims.
The court also found that the issue was not “substantial” because the state had pled a number of other claims and because any decision as to whether the defendants’ claims about FDA regulation were true would not affect the FDA’s regulation of regenerative products, but would instead be specific to this case.
Finally, the court held that permitting removal in this case would “disrupt the federal-state balance approved by Congress.” The FDCA does not authorize a private right of action. All actions for violations of the FDCA must be brought by the United States. The court cited a long line of cases holding that to allow removal in this circumstance would essentially authorize a federal private right of action which was not contemplated by Congress. The court concluded, “Evidently, [Congress] determined that widely available state rights of action provided appropriate relief for injured consumers.”
Turning to the defendant’s preemption argument, the court held that although preemption could be raised as a defense in state court, it was not sufficient to allow removal. Only “complete preemption,” where federal law so completely covers the field so that there is “nothing left for the state to regulate without running afoul of the federal scheme” can be grounds for removal, and that is not the case here.
In Johnson & Johnson v. Fitch, No. 2019-IA-00033-SCT. (Miss. Apr. 1, 2021), decided by the Mississippi Supreme Court, Attorney General Fitch sued Johnson & Johnson (J&J), the manufacturer of several products that include talc. Mississippi alleged that J&J violated the Mississippi Consumer Protection Act (MCPA or the Act) by failing to warn of the risk of ovarian cancer in women who used talc. The state relied on “numerous studies over the last several decades” that it alleged “revealed a significant link between the use of talcum powders with an increased risk of ovarian cancer.” Mississippi sought, among other things, an injunction to require J&J to warn of the hazards associated with talc use and a civil penalty of up to $10,000 for each violation of the MCPA.
J&J filed a motion to dismiss, arguing 1) the Act does not apply to the labeling of products regulated by the FDA because the Act is modeled on the Federal Trade Commission (FTC) Act, which excludes such claims; and 2) even if the MCPA did apply, federal law preempts the state’s labeling claim. J&J alleged preemption on the grounds that the FDA declined, after considering two separate citizen petitions, to require a cancer warning on talc products.
The MCPA states, “It is the intent of the Legislature that in construing what constitutes unfair or deceptive trade practices that the courts will be guided by the interpretations given by the Federal Trade Commission and the federal courts to Section 5(a)(1) of the Federal Trade Commission Act…” J&J argued that the FTC Act specifically excludes labeling from its false advertising prohibitions. Mississippi argued first that J&J cited interpretations of a different provision of the FTC Act, not the provision that mirrored the section of the Act that the state alleged J&J had violated. Second, the state argued that “guided by” does not require that the state be “bound by or limited by the federal Act.”
The Mississippi Supreme Court agreed with the state, noting that if it accepted J&J’s interpretation of the MCPA, the state would be left with no means to challenge unfair or deceptive labelling. “Unlike Mississippi, the federal system assigns the regulation of labeling issues to the Food and Drug Administration. There is even an agreement between the Federal Trade Commission and the Administration that delegates the regulation of labels to the Administration. No such dual system exists in Mississippi. Instead, the Act is the legal mechanism available to govern the regulation of labels.”
The court also declined to find that Mississippi’s claims were preempted. The FDCA provides, “[N]o State or political subdivision of a State may establish or continue in effect any requirement for labeling or packaging of a cosmetic that is different from or in addition to, or that is otherwise not identical with, a requirement specifically applicable to a particular cosmetic or class of cosmetics under this chapter. . . “ 21 U.S.C. § 379s(a). The court found that there was no “requirement specifically applicable” to the labeling of J&J products in this case. The FDA had issued a letter stating that they were not going to require the labelling sought by two citizen petitions, but the FDA did not implement a notice and comment period or adopt a rule on this matter. The court concluded, “Through its inaction, the Food and Drug Administration declined to make a requirement regarding cancer warnings for cosmetic products that contain talc.” Because the FDA “chose not to exercise its regulatory authority, [it allowed] the states the freedom to regulate cosmetics instead.”