Keeping Tabs on the Ninth Circuit
July 30, 2020 - This Week at the Ninth

This Week at The Ninth: CAFA and Dog Food Deception

This Week at The Ninth: CAFA and Dog Food Deception

This week, the Ninth Circuit decided cases involving Ashley Judd’s lawsuit against Harvey Weinstein, allegedly deceptive prescription pet food, and the interaction between the Class Action Fairness Act and the Magnusson-Moss Warranty Act. Naturally, here at Left Coast Appeals, we focus on the latter two decisions.

The Court holds that the Class Action Fairness Act (CAFA) did not impliedly repeal the Magnusson-Moss Warranty Act’s requirement that there be at least 100 named plaintiffs in any class action.

Panel: Judges Boggs (6th Cir.), Bea, and Hurwitz, with Judge Boggs writing the opinion.

Key Highlight: “[T]he statutory language of the MMWA and of CAFA is not irreconcilable—the MMWA simply prevents claims under that Act from proceeding in federal court absent the satisfaction of certain jurisdictional prerequisites. We can easily give effect to that command and apply CAFA in all other cases.”

Background: Plaintiffs filed a putative class action against Honda, alleging that a transmission defect in certain Honda Civics caused the vehicles to sometimes unintentionally roll away. Plaintiffs advanced claims under state law and the federal Magnusson-Moss Warranty Act (MMWA), which provides a federal cause of action for warranty claims.  The Act expressly limits federal-court jurisdiction over class actions raising such claims to those in which the number of named plaintiffs is 100 or greater. 15 U.S.C. § 2310(d)(1). The district court dismissed plaintiffs’ Magnusson-Moss claim for failure to satisfy this requirement, then declined to exercise supplemental jurisdiction over the remaining state-law claims.

Result: The Ninth Circuit affirmed in part and reversed in part. Plaintiffs contended that Congress had superseded the Magnusson-Moss Act's named-plaintiff requirement in CAFA, which likewise provides for federal-court jurisdiction over certain class actions but does not require that there be 100 named plaintiffs. As the Court observed, some courts—including, in an unpublished opinion, the Sixth Circuit, Judge Boggs’ home court—had accepted this contention, holding that the CAFA “effectively super[s]edes the MMWA’s more stringent jurisdictional requirements.” But the Ninth Circuit rejected this proposition, declaring: “We disagree.” As the Court reasoned, “repeals by implication are disfavored,” and so if two statutes could be read to co-exist, they should be. Here, the Court explained, the two statutes covered different categories of claims: “CAFA allows certain claims to proceed under diversity jurisdiction, while the MMWA provides for a distinct claim to be brought in federal court for certain state-law warranty violations.” Thus, the Court held, the 100-plaintiff requirement continued to apply to any claim brought under the Magnusson-Moss Act. Because plaintiffs had not satisfied that requirement, their claim was correctly dismissed.

That did not mean, however, that the district court had been correct to dismiss plaintiffs’ complaint entirely. As the Ninth Circuit went on to explain, plaintiffs had also advanced state-law claims, and they alleged that they had satisfied CAFA’s jurisdictional requirements with respect to those claims. Because CAFA would vest the district court with original jurisdiction over these state-law claims, the district court had erred in addressing solely whether it should exercise supplemental jurisdiction.

The Court holds that plaintiffs plausibly alleged that the sale of prescription pet food was deceptive under California law because it lead reasonable consumers to think that the food contained medicine or was subject federal oversight.

Panel: Judges Murphy (10th Cir.), Paez, and Rawlinson, with Judge Paez writing the opinion and Judge Rawlinson dissenting.

Key Highlight: “[I]t is reasonable for a consumer to rely on the prescription requirement and labeling in her purchasing decision for an ailing pet. Pets can, after all, be as cherished and cared for as family members, and a reasonable person in Plaintiffs’ shoes would rationally gravitate toward a ‘prescription’ product if that family member’s health is at risk.”

Background: Plaintiffs bought pet food for their sick pets after consulting with their vets. The food was sold only through veterinarians, cost two to three times more than comparable non-prescription products, and its marketing used health-related terms, such as “Urinary Care,” “Veterinary Diet Gastrointestinal,” and “Prescription Diet Glucose/Weight Management.” Those facts allegedly led plaintiffs to believe the prescription food contained medicine and had been evaluated by the FDA. But according to plaintiffs, the food contained substantially similar ingredients to non-prescription pet food. Plaintiffs filed suit, alleging that pet food manufacturers, veterinary clinics, and a pet food retailer had violated California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The district court dismissed plaintiffs’ claims because: (1) selling prescription pet food exclusively through vets was not itself deceptive; (2) plaintiffs failed to show that the prescription pet food was not materially different from other pet food; and (3) plaintiffs failed to show how the word “prescription” (or “Rx” symbol) affected their purchasing decisions.

Result:  The Ninth Circuit reversed. Whether a business practice is deceptive or misleading under California law turns on the “reasonable consumer”’ test, which asks whether a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled. Labeling a product “prescription pet food” was plausibly deceptive, the Court reasoned, because “[c]ommon sense dictates that a product that requires a prescription may be considered a medicine that involves a drug or controlled substance.” The Court found it significant that FDA guidance has warned consumers that prescription pet food labeling “may lack sufficient information.” And even if vets could tell the difference between food and medicine, it was plausible that the general public could not.

The Court also held that plaintiffs satisfied the heightened pleading standard for fraud. Under Fed. R. Civ. P. 9(b), a party alleging fraud must “state with particularity the circumstances constituting fraud.” Plaintiffs did just that, the Court said, by describing the six kinds of prescription pet food they purchased and how their ingredients largely overlap with those in non-prescription pet foods marketed to treat similar health issues. What is more, none of the non-overlapping ingredients were drugs and thus the prescription food’s premium price was unjusitified.

Lastly, the Court held that plaintiffs adequately pleaded that they relied on the “prescription” label in purchasing the food. Under California consumer law, plaintiffs must show that a misrepresentation was an immediate cause of their injury. In labeling cases, plaintiffs can satisfy that standard by alleging that they would not have bought the product but for the misrepresentation. Plaintiffs here pleaded that they would not have paid more for the food (or bought it at all) absent the prescription requirement and labeling. The Court concluded that was enough to proceed past a motion to dismiss.

Judge Rawlinson dissented, pointing out that the FDA guidance was non-binding, the agency has not historically approved pet food marketed to address health issues, and that the Fourth Circuit concluded in a similar case that the word “prescription” does not reasonably imply FDA oversight.

Editors’ note: This week we (sadly) say goodbye to our appellate paralegal Holly Chaisson, who is off to law school. Holly was instrumental in the launch of this blog—key to just about everything from the data analysis to the overall design.  Good luck, Holly!