Hi-Tech Pharmaceuticals, Inc. v. HBS International Corp.
Opinion
*1189
This appeal from the dismissal of a complaint raises questions about the relationship between the labeling requirements of the Food, Drug, and Cosmetic Act,
I. BACKGROUND
Hi-Tech Pharmaceuticals, Inc., is a Georgia-based firm that manufactures, markets, distributes, and sells dietary-supplement products. HBS International Corp. is a Canadian firm that distributes throughout the United States and Canada bodybuilding and sports-nutrition supplements supplied by its wholly owned subsidiary, Allmax Nutrition, Inc. One of the Allmax products HBS distributes, the "Ultra-Premium 6-Protein Blend Hexa[P]ro," is a protein-powder drink mix marketed as a bodybuilding and workout-recovery aid.
Because this appeal arises from the dismissal of a complaint, "we accept as true the facts alleged in the complaint, drawing all reasonable inferences in [the] plaintiff's favor."
Bailey v. Wheeler
,
Hi-Tech filed a complaint against HBS and other defendants not involved in this appeal. As relevant here, the complaint alleges that the following HexaPro marketing label violates the Georgia Uniform Deceptive Trade Practices Act, O.C.G.A. § 10-1-372(a), and the Lanham Act,
*1190 For ease of inspection, we provide close-up images of the three sections of the label. The front of the panel identifies the product as an "Ultra-Premium 6-Protein Blend" with "25 G[rams] Protein Per Serving," and it touts the product's "6 Ultra-High Quality Proteins" and "5 Amino Acid Blend with BCAAs [Branch-Chain Amino Acids]":
The left side of the label again identifies HexaPro as "an Ultra-Premium, Ultra-Satisfying Blend of 6 High-Quality Proteins." It elaborates on that claim by identifying the six whole-protein sources that HexaPro contains: whey protein concentrate, milk protein concentrate, whey protein isolate, micellar casein, egg albumin, and hydrolyzed whey. And it states that the product "is also fortified with 5 Amino Acids to enhance recovery":
*1191 Finally, the right side of the label features the nutrition-facts table, which states that HexaPro contains 25 grams of protein per serving, and the list of ingredients. This side also provides a table labeled "Amino Acid Profile." Although the heading of the table indicates that HexaPro contains 44 grams of amino acids per serving, the table itemizes only 25,000 milligrams, or 25 grams:
*1192
In its complaint, Hi-Tech alleges that HexaPro's label misleads consumers in three distinct but related ways. The first concerns the
quantity
of protein in a serving of HexaPro. Although HexaPro contains whole proteins, it also contains free-form amino acids and other non-protein ingredients. Hi-Tech alleges that that an analysis that excludes these "spiking agents" and counts only "total bonded amino acids"-which alone are molecularly complete proteins-yields an "actual protein content" of "17.914 grams per serving," not 25 grams per serving. But Hi-Tech does not allege that the HexaPro label is inconsistent with the applicable regulation of the Food and Drug Administration, which permits "[p]rotein content [to] be calculated on the basis of the factor 6.25 times the nitrogen content of the food,"
Second, Hi-Tech alleges that the label is misleading about the source of the protein content. In Hi-Tech's view, the label suggests that the product's entire stated protein content derives from the whole-protein sources identified on the left side of the panel. Observing that the front label identifies HexaPro as an "Ultra-Premium 6-Protein Blend," Hi-Tech alleges that this "statement of identity is intended to lead consumers to believe that the Product contains protein derived exclusively from the 'Ultra-Premium 6-Protein Blend.' "
*1193 Third, Hi-Tech alleges that the front of the label is misleading about both the quantity and the source of the product's protein content. Hi-Tech alleges that the proximity of the phrase "Ultra-Premium 6-Protein Blend" to the phrase "25 G Protein Per Serving" on the front of the label misleads consumers into believing that HexaPro "contains 25 grams of the 'Ultra-Premium 6-Protein Blend'-type protein per serving," that is, the six whole-protein sources. This representation is untrue because the product is "spike[d] ... with free form amino acids and non-protein ingredients" and, in fact, "contains only 17.914 grams of the 'Blend'-type protein per serving."
HBS moved to dismiss the complaint for failure to state a claim,
see
Fed. R. Civ. P. 12(b)(6), and the district court granted the motion. The district court ruled that Hi-Tech's claim under the Georgia Uniform Deceptive Trade Practices Act was preempted by the federal Food, Drug, and Cosmetic Act for two reasons: first, Hi-Tech's claim fell within the ambit of the federal Act's express preemption clause, which prohibits state-law "claim[s] seek[ing] to impose food labeling requirements that differ from the applicable federal regulation"; and second, Hi-Tech failed to allege that it had established the true protein content of HexaPro using a test that complies with the protein-testing requirements of the Food and Drug Administration,
see
II. STANDARD OF REVIEW
"We review
de novo
the district court's grant of a Rule 12(b)(6) motion to dismiss for failure to state a claim, accepting the complaint's allegations as true and construing them in the light most favorable to the plaintiff."
Chaparro v. Carnival Corp.
,
III. DISCUSSION
We divide our discussion in three parts. First, we reject HBS's contention that Hi-Tech "waived" or forfeited dispositive arguments by failing to challenge them in the district court when HBS raised them in its motion to dismiss. Second, we explain that federal law preempts Hi-Tech's state-law claim. Third, we explain that federal law does not bar Hi-Tech's theory that the HexaPro label is false or misleading under the Lanham Act, and we conclude that Hi-Tech has stated a plausible claim for relief. We affirm in part and reverse in part.
A. Hi-Tech Has Not "Waived" or Forfeited Dispositive Arguments.
HBS contends that we need not reach the merits of this appeal because Hi-Tech "waived"-HBS's word, although "forfeited" would be more appropriate,
see
United States v. Phillips
,
HBS "misunderstand[s] the law. Parties can most assuredly waive [or forfeit] positions and issues on appeal, but not individual arguments...."
Sec'y, U.S. Dep't of Labor v. Preston
,
HBS compares this appeal to
Sapuppo v. Allstate Floridian Insurance Co.
,
Hi-Tech has satisfied the standards for our appellate review. Its initial brief directly challenges each ground on which the district court dismissed the complaint. We turn to its arguments on the merits.
B. Federal Law Preempts Hi-Tech's Claim Under the Georgia Uniform Deceptive Trade Practices Act.
The district court ruled that federal law preempts Hi-Tech's claim under the Georgia Uniform Deceptive Trade Practices Act for two reasons. First, the district court concluded that the federal Food, Drug, and Cosmetic Act's express-preemption provision bars the claim because the claim would impose liability for conduct that does not violate the Act. Second, the district court determined that the claim is preempted because Hi-Tech did not allege that it had established the true protein content of HexaPro using a test that complies with certain regulatory protein-testing requirements,
see
*1195
The Act expressly preempts state laws that "directly or indirectly establish ... any requirement for nutrition labeling of food that is not identical to the requirement of section 343(q) of this title, except [for sales of food at some restaurants], or ... any requirement respecting any claim of the type described in section 343(r)(1) of this title made in the label or labeling of food that is not identical to the requirement of section 343(r) of this title."
Hi-Tech's state-law claim is preempted because it would impose liability for labeling that does not violate the Food, Drug, and Cosmetic Act or the regulations that carry it into effect. A federal regulation expressly allows "[p]rotein content [to] be calculated on the basis of the factor 6.25 times the nitrogen content of the food,"
Hi-Tech contends that its state-law claim "seeks to enforce the requirement that a food not be labeled in such a way as to lead consumers to believe that it is made solely of one ingredient when it is made of multiple ingredients," but this argument is unpersuasive. True, a regulation provides that "[t]he labeling of a food which contains two or more ingredients may be misleading by reason ... of the designation of such food in such labeling by a name which includes or suggests the name of one or more but not all such ingredients, even though the names of all such ingredients are stated elsewhere in the labeling."
Hi-Tech elsewhere retreats from the argument that its state-law claim would enforce federal law and contends instead that its state-law claim is "consistent" with the federal requirements. But to avoid preemption, Hi-Tech's state-law claim must be
identical
, not merely consistent, with federal requirements. To the extent that the Georgia Uniform Deceptive Trade Practices Act would require changes to HexaPro's labeling, it would "directly or indirectly establish" requirements that are "not identical to" federal requirements,
C. The District Court Erred When It Dismissed Hi-Tech's Claim Under the Lanham Act.
Although we agree with the district court that Hi-Tech's state-law claim is preempted, we agree with Hi-Tech that the district court erred in dismissing its claim under the Lanham Act. Hi-Tech has pleaded facts to support a plausible inference that a reasonable consumer would find HexaPro's label misleading. And HBS is mistaken to argue that the Food, Drug, and Cosmetic Act bars Hi-Tech's claim under the Lanham Act.
"To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.' "
Ashcroft v. Iqbal
,
To establish the "false or misleading statement" element of the claim, the plaintiff must prove that "the statements at issue were either '(1) commercial claims that are literally false as a factual matter,' or '(2) claims that may be literally true or ambiguous but which implicitly convey a false impression, are misleading in context, or are likely to deceive consumers.' "
Hickson Corp. v. N. Crossarm Co.
,
The district court concluded that the complaint does not allow a plausible inference that HexaPro's label is misleading, which is the only ground on which HBS challenged the facial sufficiency of the complaint. We disagree with that ruling and reverse the dismissal of Hi-Tech's claim of false advertising under the Lanham *1197 Act. Because HBS has not argued that the complaint is insufficient based on any other element of the claim, we do not consider whether such arguments might have prevailed if HBS had raised them.
As an initial matter, we reject HBS's contention that we may disregard the supposedly "conclusory" allegation of the true whole-protein content of HexaPro when assessing the sufficiency of the complaint. In
Twombly
and
Iqbal
, the Supreme Court made clear that "legal conclusions" are not entitled to be assumed true, and this tenet extends to "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements."
Iqbal
,
With that in mind, we conclude that the allegations in the complaint and the undisputed product label allow the plausible inference that HexaPro's labeling is misleading. The front of the label identifies HexaPro as an "Ultra-Premium 6-Protein Blend" that contains "25 G Protein Per Serving," and the left side of the label declares that HexaPro "is an Ultra-Premium, Ultra-Satisfying Blend of 6 High-Quality Proteins," which are enumerated. The nutrition-facts panel on the right side of the label represents that each serving of HexaPro contains 25 grams of protein. Despite these representations, HexaPro-taking the facts alleged as true, as we must-"does not contain 25 grams of the 'Ultra-Premium 6-Protein Blend'-type protein per serving," that is, the six whole-protein sources listed on the left side of the panel. "Rather, because [HBS] spike[s] [HexaPro] with free form amino acids and non-protein ingredients, [HexaPro] contains only 17.914 grams of the 'Blend'-type protein per serving." Considering the label as a whole and taking its statements in context, we find it plausible that a reasonable consumer would be misled to believe that a serving of HexaPro contains 25 grams of protein derived from the "6-Protein Blend" comprising the "6 High-Quality Proteins" listed on the label.
In ruling otherwise, the district court adopted the reasoning of
Gubala v. Allmax Nutrition, Inc.
, No. 14-cv-9299,
This reasoning is unpersuasive. The district court-and the Gubala court-apparently assumed that Hi-Tech's theory is that the HexaPro label would mislead consumers into believing that the only ingredient in the product is the "Ultra-Premium 6-Protein Blend." But that is not Hi-Tech's contention. 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.
HexaPro's label provides no suggestion that the claimed 25 grams of protein per serving derives from any source other than the whole-protein ingredients that make up the "Ultra-Premium 6-Protein Blend." Not counting the 25-grams figure, the label never uses the word "protein" to refer to anything other than those six ingredients. The label never explains that the figure of 25 grams includes free-form amino acids or other non-protein ingredients. Indeed, the label appears consistently to treat "amino acids" as separate from and providing distinct nutritional benefits from "protein." For example, the front of the label lists the product's "6 Ultra-High Quality Proteins" and its "5 Amino Acid Blend with BCAAs" in separate bullet points. On the left side of the label, two sentences touting the product's "6 highly-bioavailable proteins" are followed by a third stating that HexaPro "is also fortified with 5 Amino Acids to enhance recovery" (emphasis added). And, although the "Amino Acid Profile" on the right side of the label lists 25 grams of amino acids, the label provides no explanation of how this figure relates either to the product's 25 grams of protein per serving or the 44 grams of amino acids per serving advertised at the top of the "Amino Acid Profile" table.
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. Of course, the Food and Drug Administration permits protein calculations based on free-form amino acids and other nitrogen-containing non-protein ingredients.
See
Despite this general rule, HBS argues that Hi-Tech's claim is barred for two specific reasons, but neither is persuasive. First, drawing on dicta in
POM Wonderful
, HBS argues that application of the Lanham Act would create "a genuinely irreconcilable conflict" with the federal regulation governing protein calculations.
See
Second, HBS argues that a claim under the Lanham Act is barred "if determining the truth or falsity of the [challenged] statement would require a court to interpret FDA regulations, which is generally left to the FDA itself." To support this contention, HBS cites
Hi-Tech Pharmaceuticals, Inc. v. Hodges Consulting, Inc.
,
Again, HBS is mistaken. The rule in
Hodges Consulting
applies only to claims that would "circumvent the FDA's exclusive enforcement authority by seeking to prove that [d]efendants violated the FDCA, when the FDA did not reach that conclusion."
PhotoMedex, Inc. v. Irwin
,
Hi-Tech's claim under the Lanham Act would not require a court to question the regulatory determination that "[p]rotein content may be calculated on the basis of the factor 6.25 times the nitrogen content of the food."
IV. CONCLUSION
We AFFIRM the dismissal of Hi-Tech's claim under the Georgia Uniform Deceptive Trade Practices Act but REVERSE the dismissal of its claim under the Lanham Act and REMAND for further proceedings consistent with this opinion.
Reference
- Full Case Name
- HI-TECH PHARMACEUTICALS, INC., Plaintiff-Appellant, v. HBS INTERNATIONAL CORP., Defendant-Appellee.
- Cited By
- 107 cases
- Status
- Published