In January, we posted about FDA warning letters and class action litigation relating to anti-aging cosmetic products. Because the industry is seeing an increase in putative class action filings relating to such products this year, I have updated the post to include important developments and practical suggestions for cosmetics companies:
Recognizing and Mitigating the Risks of Anti-Aging Product Class Actions
Lately, the cosmetics industry – particularly with respect to anti-aging products – has been a popular target for both the FDA and plaintiffs. FDA warning letters and lawsuits can create unwanted press and costs for companies. Accordingly, it is important for inside and outside counsel to work together to recognize potential risks of increased FDA scrutiny and the potential consequent risk of future class actions lawsuits.
FDA Warning Letters To Anti-Aging Product Manufacturers
In the fall of 2012, the FDA was busy admonishing makers of cosmetic skin care products over promotional claims made on their websites and product labels. The FDA’s concern appears to be an increasingly blurred line between “cosmetics” and “drugs,” each of which is subject to specific regulations under the Federal Food, Drug, and Cosmetic Act (the “Act”).
The FDA issued six warning letters in September and October 2012 identifying manufacturers’ statements and claims that could only be properly made in connection with products classified as drugs, not cosmetics. Under the Act, any product that is intended to diagnose, mitigate, treat or prevent disease, or to affect the structure or function of the body is classified as a drug. Any product classified as a drug must either be generally recognized as safe and effective when used as labeled (such as a common over the counter drug) or must go through the FDA’s new drug application and approval process. Cosmetics, on the other hand, do not require any FDA approval prior to going to market. Participation in the FDA’s Voluntary Cosmetic Registration Program is – as the name makes abundantly clear – voluntary. If a product is classified as both a cosmetic and drug (e.g. anti-dandruff shampoo, makeup with SPF), it must comply with the Act’s requirements for both cosmetics and drugs. Thus, because the requisite application and approval process for drugs was bypassed, the marketing of cosmetics with statements indicating that the product is intended to affect the structure or a function of the human body (e.g. skin) – as a drug would – is a violation of the Act.
In its letters, the FDA identified numerous statements made in connection with beauty creams and serums that it contends violate the Act. Some examples of claims made in connection with those products that caught the FDA’s eye include:
- “the at-home answer to wrinkle-filling injections”
- “help tighten the connections between skin’s layers”
- “formulated to fortify damaged tissue with new collagen”
- “helping to repair structural damage to deeper layers of the skin”
- “provides all the muscle-relaxing properties of BOTOX®”
- “improves skin’s immune system”
- “fuel the rebuilding of skin structure and elasticity”
- “repairs sun damaged tissues at the cellular level”
- “inhibits microbiological activity of dangerous, pathogenic skin bacteria, including acne”
- “can extend the results of a Botox injection”
- “repairs existing skin damage, prevents future skin damage”
- “promotes collagen synthesis”
- “boosts the activity of genes and stimulates the production of youth proteins”
In addition to these types of statements, the FDA took issue with testimonials on the cosmetics companies’ websites where customers make statements about the use and efficacy of the cosmetic product. With high consumer demand for cosmetics that provide drug-like benefits and cosmetics companies investing more in anti-aging product lines, the FDA is likely to have more to say in the future.
Anti-Aging Product Class Actions
Not surprisingly, plaintiffs have followed up on some of the FDA warning letters and filed multiple putative class actions against anti-aging product manufacturers. These lawsuits typically include claims such as false advertising, unjust enrichment, breach of warranty, and consumer protection law violations. Plaintiffs have cast a much broader net than the FDA in these suits. Both companies that have and some that have not been issued FDA warning letters have been sued. And, with respect to the companies that were issued FDA warning letters and sued, plaintiffs’ complaints allege injuries relating to a broader range of product lines and statements.
Because of the immense costs and risks associated with litigating a certified class action, the key for defendants facing these kinds of lawsuits will be in defeating class certification. As Judge Posner has commented, defendants face “monstrous judgment[s]” and “threats of ruin” in the class action context which “force[s] most defendants [ ] to settle if a class is certified.” See In re: Sulfuric Acid Antitrust Litig., 703 F.3d 1004, 1007 (7th Cir. 2012). The good news for defendant companies is that recent developments in Supreme Court and district court decisions illustrate a variety of arguments for defeating class certification.
The Supreme Court’s 2011 decision in Wal-Mart Stores v. Dukes strengthened defendants’ arguments at the class certification stage. 131 S. Ct. 2541 (2011). Dukes requires district courts to apply a rigorous analysis of all the prerequisites for class certification prior to certifying a class, even if the rigorous analysis entails some overlap with the merits of the underlying claims. In the Dukes decision, the Supreme Court questioned the Ninth Circuit’s conclusion that a Daubert hearing to determine the admissibility of the testimony was not appropriate at the class certification stage. The Supreme Court, however, did not decide whether Daubert applies at the class certification stage in Dukes. But now the Supreme Court is set to decide that very issue in the Behrend v. Comcast case (see our related post here). Specifically, the Supreme Court certified the following question for review: “whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.” Oral arguments were heard in the fall of 2012 and a decision is expected shortly. Should the Supreme Court rule that Daubert does indeed apply at the class certification stage, defendants will have yet another weapon in their arsenal for defeating class certification.
In the wake of Dukes, there have been several notable examples of defendants defeating class certification. In 2012, for example, a district court denied class certification in Edwards v. Ford Motor Co. because the putative class failed to meet Federal Rule of Civil Procedure 23(b)(3)’s predominance requirement. No. 11-CV-1058 (S.D. Cal. June 12, 2012). In that case, the putative class included California owners of certain car models who claimed to have experienced unintended acceleration and incurred repair costs for the allegedly defective electronic throttle control system. In general, to obtain certification under Rule 23(b)(3), the putative class must show that questions of law or fact common to class members predominate over any questions affecting only individual members. The district court – as the Supreme Court instructed in Dukes – employed a “rigorous analysis” of the Rule 23 requirements and ultimately denied plaintiff’s motion for class certification because individual questions predominated for the putative class (e.g. the external driving conditions affecting the performance of each class member’s car).
In another example, the district court judge presiding over a multidistrict litigation concerning the marketing of two antidepressants denied two motions for class certification. See In re Celexa and Lexapro Marketing and Sales Practices Litig., MDL No. 09-02067 (D. Mass. Feb. 5, 2013). Plaintiffs claim that the manufacturer misled physicians as to the safety and efficacy of the antidepressants for pediatric and adolescent use. The complaints allege fraud and violations of the consumer protection laws. The plaintiffs made two separate motions under Rule 23(b)(3) seeking the certification of nationwide classes of purchasers of the antidepressants for pediatric and adolescent use. One of the motions was denied based on the district court’s finding that plaintiffs had not met the predominance requirement of Rule 23(b)(3). The other motion was denied based on the court’s conclusion that plaintiffs had not met the superiority requirement of Rule 23(b)(3). Aside from requiring a showing that common questions of law or fact predominate over any individual, plaintiffs seeking certification under Rule 23(b)(3) must show that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The district court found that plaintiffs had not met this superiority requirement because the law of each plaintiff’s home state would have to be applied to that plaintiff’s case and the consumer protection laws vary greatly from state to state. The court thus concluded that a single nationwide class would not be manageable and that a class action was not the appropriate method to resolve cases implicating the consumer protection laws of numerous states.
There has even been a recent example of a denial of a motion to certify a class within the cosmetics industry. In January, a California district court judge refused to certify a putative class in a lawsuit against Neutrogena. Chow v. Neutrogena Corp. et al., No. 2:12-CV-04624 (C.D. Cal. Jan. 22, 2013). In the case, the named plaintiff alleges false and deceptive advertising with respect to certain Neutrogena brand anti-aging products. The complaint alleges violations of California’s consumers legal remedies act, unfair competition law, and false advertising law, as well as breach of express warranty. According to the complaint, plaintiff purchased the anti-aging products based on Neutrogena’s representations in advertising and labeling that the products would make users look younger in just one week and that results were “clinically proven.” When the plaintiff sought certification under Rule 23(b)(3), the court expressed “significant doubts” as to the plaintiff’s ability to meet Rule 23(a)’s “threshold requirements of commonality, typicality, and adequacy.” The court went on to hold that the class could not be certified under Rule 23(b)(3) because individual fact questions predominated over common questions. The court found that plaintiff had failed to “demonstrate that each class member was exposed to the advertisements” complained of and each class member found the advertisements to be false and misleading. For example, some consumers may have been repeat customers or customers who purchased based on the Neutrogena brand name, not the representations at issue. And because the court also found that the case would present management difficulties, the district court concluded that “the class device [was] not appropriate” and denied plaintiff’s motion for certification.
These developments and cases illustrate that defendant cosmetic companies have several options available when opposing putative class motions for certification. Under Dukes, district courts are required to employ a rigorous analysis to ensure that all of the Rule 23 requirements are met before certifying a class. Companies can argue that the putative class does not meet one or more of Rule 23(a)’s prerequisites. And if the plaintiffs are seeking certification under Rule 23(b)(3), defendants can argue that plaintiffs cannot meet either the predominance or superiority requirements, both of which must be met for certification. Companies can also attack the reliability of any expert testimony presented by plaintiffs in support of class certification, an approach that will become very powerful if the Supreme Court decides that a Daubert analysis does apply to expert testimony presented at the class certification stage.
Since the cosmetics industry may remain a target for some time, there are steps that companies can take to help avoid FDA warning letters and prepare for the possibility of class action litigation. Suggested steps for anti-aging product makers and their counsel include:
- Monitor on a regular basis all FDA warning letters issued to companies in the cosmetics industry and keep a list of all the statements the FDA identifies as problematic.
- Keep track of all of the promotional statements the company makes with respect to its anti-aging products, including testimonials and other statements on labels, displays, websites, brochures, print and television.
- Compare the company’s promotional statements to the ones the FDA has flagged. If any of the company’s statements are similar to those identified as Act violations, the company must assess the risk created by the statements and develop a plan. Depending on the circumstances, the company may decide to alter its statements or may develop arguments that its statements do not violate the Act.
- Track all of the putative class action lawsuits filed against other companies within the industry, taking note of the plaintiffs’ claims and the marketing statements identified in the complaints.
- Compare the promotional statements that plaintiffs have pinpointed in their lawsuits to the company’s marketing statements, looking for any similarities.
- Pay special attention to successful arguments – like Neutrogena’s in defeating class certification – that Rule 23(b)(3)’s predominance requirement cannot be met because of individual issues.
- Work with outside counsel to understand the false advertising and consumer protection laws of all 50 states, including the types of damages that those laws provide for. The recently filed anti-aging product class actions allege violations of these types of state laws. And because of Rule 23(b)(3)’ superiority requirement, the differences between these laws – as illustrated in the antidepressant litigation – may help companies defeat class certification when the putative class includes members from numerous states.
- Keep up with developments in class action law, even those outside the cosmetics industry. Decisions pending at the Supreme Court like the Behrend v. Comcast case which could impact the certification of class actions in all the federal courts are particularly important.
Companies that take a proactive approach to monitoring their marketing materials as well as relevant legal developments will be better able to mitigate the risks of FDA warning letters and class action lawsuits.