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Friday, February 28, 2020

Appeals court reopens fraud class action vs Petsmart over Hill's prescription cat food

Federal Court

By Scott Holland | Aug 22, 2019

Cat eating

CHICAGO — A federal appeals court has revived a class action lawsuit in which cat owners sued PetSmart and Hill’s Pet Nutrition over allegations a “prescription diet” food was not any better than normal products.

In November 2017, U.S. District Judge Samuel Der-Yeghiayan granted the companies’ motion to dismiss the complaint in which plaintiffs Holly Blaine Vanzant and Dana Land alleged HPN and PetSmart used fraud and deception to increase the profitability of selling prescription cat food.

The plaintiffs appealed to the U.S. Seventh Circuit Court of Appeals, which issued an opinion Aug. 20. Judge Diane Sykes wrote the opinion. Judges Joel Flaum and Daniel Manion concurred.

Ellen Carey | Forde Law Offices LLP

Judge Der-Yeghiayan had determined the complaint lacked the specificity needed to support a fraud claim — therefore undercutting an unjust enrichment claim, as well — and also that it would be barred by the statutory safe harbor for conduct authorized by a regulatory body, the U.S. Food and Drug Administration. However, the panel found, that provision does not apply.

“Pet food intended to treat or prevent disease and marketed as such is considered a drug and requires approval of a new animal drug application,” Sykes wrote. “Without FDA approval, the manufacturer may not sell it in interstate commerce and the product is deemed adulterated and misbranded.”

Although the FDA has issued guidance noting most products in the category don’t have the required approval, “the guidance does not specifically authorize the conduct alleged here, so the safe harbor does not apply,” Sykes wrote.

“Hill’s and PetSmart characterize the Compliance Policy Guide as informal regulatory activity specifically authorizing the prescription requirement and prescription label for Hill’s prescription diet pet food,” Sykes wrote. “They are mistaken … the guide does not establish any legally enforceable responsibilities and it is not binding on either the FDA or the public.”

Although the companies argued that the guide established industry-wide standards, the panel said all it did was help FDA staff allocate its enforcement resources. Sykes wrote the guide has 11 factors that make FDA enforcement actions less likely, but the companies only established one such factor, that the food was available only through licensed veterinarians or under a doctor’s direction.

Turning to the fraud allegations, the court noted that the plaintiffs alleged the marketing practices were both deceptive and unfair because the food can be bought without a prescription and also that it has no material difference from nonprescription food. The companies argued the complaint is deficient because the plaintiffs do not allege they relied on deceptive representations when buying the food, but the panel said that argument misconstrues state law.

“The complaint alleges that the prescription requirement, prescription label and associated marketing materials for Hill’s prescription diet were deceptive,” Sykes wrote.

The customers alleged they paid more for food labeled as “prescription only” and that it ended up being less than what they expected. Both plaintiffs alleged seeing marketing materials before buying the food at PetSmart in 2013.

Since the statutory claim was revived, Sykes wrote, the unjust enrichment claim for restitution also may move forward.

The plaintiffs are represented in the action by attorneys Ellen M. Carey, Kevin M. Forde and Michael K. Forde, with the Forde Law Offices LLP, of Chicago.

PetSmart has been defended by attorney Eileen R. Ridley and others with the firm of Foley & Lardner, of Chicago and San Francisco. HPN has been represented by attorney Hannah Chanoine and others with the firms of O'Melveny & Myers LLP, of New York and Los Angeles, and Saul Ewing Arnstein & Lehr LLP, of Chicago.

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Organizations in this Story

PetSmart IncU.S. Court of Appeals for the Seventh CircuitFoley and LardnerO'Melveny & Myers, LlpForde LawLaw Office of Ewing Arnstein Lehr Saul

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