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11th Circuit Weighs in on Intersection of Lanham Act and FDCA Protein Powder Labeling Requirements
A battle between two dietary supplement manufacturers has revived interested in the intersection between the Lanham Act and federal labeling regulations. The issue: can an advertiser challenge a competitor's product label for false advertising under the Lanham Act if it complies with applicable federal regulations? The Supreme Court of the United States answered the question affirmatively in 2014 with regard to food products, and now the 11th Circuit has weighed in with regard to dietary supplements. In Hi-Tech Pharms, Inc. v HBA Intl's Corp, 2018 WL 6314282, No. 17-13884 (11th Cir. Dec 4, 2018), the Circuit Court ruled that a Lanham Act claim for unfair or deceptive advertising could proceed even if a supplement's label had complied with the requirements of the federal Food, Drug, and Cosmetic Act (FDCA).
|Background
The FDCA does not allow a private litigant to pursue action for misbranding of a dietary supplement. Accordingly, brands frustrated by a competitor's label claims might seek recourse for false advertising through the Lanham Act's Section 43 (a). The Lanham Act has trademark provisions to stave off unfair competition, but it also prohibits false advertising and authorizes private suit against those who use a false or misleading description or representation of the "nature, characteristics, [or] qualities" of their goods. The statute is designed to protect and compensate a private party for the damages that flow from such deceptive statements. The intersection between the FDCA and 43(a) claims has led to litigation. If a label meets all federal compliance requirements, could there still be liability under the Lanham Act?
After a battle in the 9th Circuit, the Supreme Court of the United States (SCOTUS) weighed in on this question with regard to juice beverages in POM Wonderful LLC v Coca-Cola Co., 573 U. S. ____ (2014). In its Lanham Act challenge, POM alleged that Coke's juice product's name, label, marketing, and advertising misled consumers into thinking the product was mostly a pomegranate and blueberry juice when it in fact was mostly apple and grape juice. Coke countered that its product met FDCA requirements for its juice name and label, and that the FDCA's regulations preclude any Lanham Act claim. SCOTUS reversed the 9th Circuit decision and held that POM's Lanham Act claim against Coca Cola was not precluded.
The Supreme Court did not rule on the merits of the case, instead remanding it back to the Ninth Circuit. At the same time, the court's opinion makes it clear that there can be Lanham Act liability for food and beverage labeling practices that "mislead and trick consumers, all to the injury of competitors." (For a more detailed discussion of the Supreme Court's POM Wonderful decision, see this author's previous article in the August 2014 issue of The Intellectual Property Strategist.)
The POM Wonderful case was about juice and involved little science, rather relying on consumer perception. Ultimately, a California jury rejected POM Wonderful's claims that Coca-Cola's label was misleading. (Interestingly, Coca-Cola no longer makes the drink.) Other product labels and their advertising claims are more complex, resulting in even more potential confusion to consumers. Regardless of POM Wonderful's ultimate loss of its challenge to Coca-Cola, the case still stands as a powerful precedent, allowing advertisers to use the Lanham Act as a sword even if a product meets federal labeling requirements.
|Hi-Tech's Challenge
After SCOTUS remanded the POM Wonderful dispute to the Ninth Circuit, commentators predicted a spike in litigation about the intersection of the FDCA and the Lanham Act. The Hi-Tech challenge of its competitor HBS is, indeed, part of POM Wonderful's legacy. Hi-Tech sued concerning HBS's labeling of its protein-powder supplement HexaPro. Hi-Tech alleged that the HexaPro label misleads consumers as to quantity and source of protein in a serving of HexaPro. The complaint presents a detailed analysis of the claims "Ultra-Premium 6-Protein Blend" with "25 G[rams] Protein per Serving" and "6 Ultra-High Quality Proteins" and "5 Amino Acid Blend with [Brand-Chain Amino Acids]." Hi-Tech alleges that the amino acids and other non-protein ingredients are "spiking agents" that boost protein, and that the product does not actually contain the protein amounts indicated on the label. In addition, Hi-Tech complains that the "Ultra-Premium 6-Protein Blend" misleads consumers into believing that the protein derives exclusively from that blend, rather than from the spiking agents.
Hi-Tech challenged the labeling as deceptive under Georgia state law and the Lanham Act. The district court dismissed the state law cause of action as preempted by the FDCA. It further dismissed the Lanham Act claim finding that the label is "not plausibly misleading." Hi-Tech appealed to the 11th Circuit.
|11th Circuit Decision
The Circuit Court first rejected HBS's argument that the appeal could not continue because Hi-Tech waived or forfeited certain dispositive arguments. The panel chastised HBS for "misunderstand[ing] the law." While parties can waive overall positions by not arguing them in a lower court, they cannot waive individual arguments. The 11th Circuit explained: "In the district court, Hi-Tech defended the sufficiency of its complaint and disputed HBS's reading of POM Wonderful." Its failure to respond to every individual argument that HBS made in its motion to dismiss "would not amount to a waiver or forfeiture …."
Having dispensed with the procedural issue, the 11th Circuit moved on to the state law claims. Here, the panel agreed with the district court that the FDCA preempts Georgia's Uniform Deceptive Trade Practices Act. The FDCA expressly preempts the state law claim because it "would impose liability for conduct that does not violate the [FDA]." Hi-Tech's state law claim alleges that HexaPro's label should have reduced the calculation of protein per serving or itemize each source of protein that supports its 25 gram claim. The FDCA and its accompanying regulations, however, do not require such specificity on the label: "To avoid preemption, Hi-Tech's state-law claim must be identical, not merely consistent, with federal requirements."
On the other hand, the 11th Circuit disagreed with the district court's dismissal of Hi-Tech's Lanham Act claim. Citing to other 11th Circuit case law, the panel explained that advertising is culpable under the Lanham Act if it affects interstate commerce and if: it is false or misleading; it misleads or has the capacity to mislead consumers; the deception could materially affect consumers' purchasing decisions; and if the plaintiff has been or is likely to be injured as a result of the misleading statements. Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1261 (11th Cir. 2004). The 11th Circuit also cited to other cases within the circuit that remind courts to analyze advertising messages in their full context. In the instant case, the 11th Circuit "conclude[s] that the allegations in the complaint and the undisputed product label allow the plausible inference that HexaPro's labeling is misleading."
In reaching this conclusion, the 11th Circuit distinguished Gubala v Allmax Nutrition, Inc., No. 14-cv 9299(N.D. Ill. Oct 26, 2015), a case with an almost identical fact pattern. The district court had relied heavily on Gubala's reasoning that the label would not plausibly lead consumers to believe that the ultra-premium protein blend is the only product ingredient. The Circuit Court, however, explained that Hi-Tech does not make this argument. Instead, "Hi-Tech argues that the label would induce a reasonable consumer to believe that the protein in HexaPro derives exclusively from the six-protein blend. And we agree that HI-Tech's theory, stated this way, is at least plausible."
While HexaPro's label meets all relevant federal guidelines, the 11th Circuit still was concerned about consumer deception. "Based on the total impression given by the label, it is plausible that only sophisticated consumers schooled in federal regulations or nutrition science would understand or even suspect that free-form amino acids or other non-protein ingredients form any part of HexaPro's stated 25 grams of protein per serving."
The 11th Circuit next discussed the POM Wonderful case. HBS argued based on dicta in the Supreme Court's decision that "application of the Lanham Act would create 'a genuinely irreconcilable conflict' with the federal regulation governing protein calculations." The circuit court disagreed, citing at least one possible improvement for HexaPro's label to clarify the source of the protein. In addition, the panel rejected HBS' argument that hearing the Lanham Act claim essentially requires the court to interpret FDA regulations." Instead, it would require a court to determine only whether the protein-content representations on the HexaPro label are misleading to consumers …. [R]esolving Hi-Tech's claim under the Lanham Act would not 'step on the FDCA's toes'."
|Analysis
The Hi-Tech case will now go back to the district court for consideration of the Lanham Act claim. Dietary supplement, food, and beverage manufacturers should take this case, when combined with the POM Wonderful Supreme Court decision, as a warning that Lanham Act claims may proceed even where product labels comply with regulatory standards. All labels should be vetted for potentially false advertising claims as well as compliance with FDCA standards.
*****
Kyle-Beth Hilfer, Esq. specializes in advertising, marketing, promotions, intellectual property and new media law. A member of the Board of Editors of this newsletter, she advises clients regularly on their advertising and marketing strategies and campaigns to ensure compliance with the Lanham Act and other related statutes. For more information about her law practice, please visit www.kbhilferlaw.com. © Kyle-Beth Hilfer, P.C. 2018
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