Update: 2d Circuit denies split in Church & Dwight and Apotex rulings

Originally published by Andre Hanson (US).

On December 2, 2016, the United States Court of Appeals for the Second Circuit denied rehearing by the Panel and rehearing en banc. On December 5, 2016, the Court withdrew its previous opinion, which was to have been published with the reporter cite 836 F.3d 153, and directed that it will be republished as an amended decision. In the Order Amending Opinion, the Court explained that a new footnote is to be added to the decision, stating:

Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51 (2d Cir. 2016), recently settled the materiality standard in this Circuit, explaining that the standard is whether the deception is “likely to influence purchasing decisions.” Id. at 63; see also id. at 67. Consideration of the Apotex decision has no effect on our determination, as our analysis above assumes that the standard is exactly as Apotex decided.

The Second Circuit’s Church & Dwight Panel thus implicitly acknowledged it had not considered the previous (and controlling) Apotex decision. In our prior post, we suggested that there was an apparent split between the Apotex Panel’s ruling “that representations commensurate with information in an FDA label generally cannot form the basis for Lanham Act liability,” Apotex, Inc. v. Acorda Therapeutics, Inc. 823 F.3d 51, 64 (2d Cir. 2016). (emphasis added), and the Church & Dwight Panel’s statement that: “The fact that the FDA has satisfied itself that a product’s labeling is sufficiently accurate to secure FDA approval gives no assurance that the intervention of a competitor would not reveal problematic misleading messaging that is harmful to the competitor’s interests . . . .” In the Order Amending Opinion, the Panel added a second, longer footnote to explain that this tension is merely one of emphasis:

Defendant contends, in a petition for rehearing, that our decision cannot be reconciled with Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51 (2d Cir. 2016). We disagree. If there is some tension between our decision and Apotex, it is only a tension of emphasis, not content. There are at least three reasons why our decision is not incompatible with Apotex.

First, Apotex’s holding does not purport to exclude all claims of falsity in an FDA-approved message. The decision indeed stated that “representations commensurate with information in an FDA label generally” will not be actionable under the Lanham Act, id. at 64 (emphasis added), but went on to acknowledge (in a footnote following this sentence) that “Lanham Act liability might arise if an advertisement us[ing] information contained in an FDA-approved label. . . [is] literally or implicitly false,” id. at 64 n.10. That is the circumstance we have here.

Second, this case and Apotex involve different questions of law. In Apotex, the propriety of the court’s consideration of the claim was assumed. The issue was whether aspects of the defendant’s advertising incorporating FDA-approved factual assertions about pharmacological effects of its product were nonetheless false. Here, in contrast, the question is whether the court may even entertain a claim of falsity relating to FDA-approved messaging, or whether such a claim is legally precluded, so that a court may not even consider the claim but must dismiss it without consideration of whether the advertising or labeling in fact misleads. As explained above, the question was answered by the Supreme Court in POM Wonderful, which clearly held that a Lanham Act claim is not precluded by FDA approval because the Lanham Act and the FDCA serve distinct purposes. The Apotex decision contained no suggestion that a court is precluded by law from entertaining such a claim of falsity. Indeed, it explicitly acknowledged that “Lanham act liability might arise . . . [in cases where] the advertisement [is] literally or implicitly false.” Id. at 64 n.10.

Finally, the Lanham Act claims in the two cases relate to significantly different aspects of the FDA’s competence. The inquiry here does not relate to the truth or falsity of an FDA-approved factual assertion about the effects of a medical product, but rather to the question of whether the phrasing of advertising messages might be misunderstood by consumers. The contention in Apotex was that a fact about the pharmacological effects of a drug, which the FDA had determined to be true, should nonetheless be found by the court to be false. We ruled against the claim, noting that the FDA, as the agency responsible for approving the truthfulness of the content of the label, had expertise in the matter and had devoted exhaustive process to the inquiry, which justified court deference to its determination of truthfulness. Id. at 64. Here, in contrast, there is no claim that any fact relating to the effects of a medical product found by the FDA to be true should nonetheless be found by the court to be false. What is at issue is whether messages that the FDA has concluded are not misleading are nonetheless susceptible to being misunderstood by the consuming public. We have not second-guessed the FDA on matters as to which its competence vastly exceeds that of courts.

For these reasons, we have concluded that there is no inconsistency between our holding and Apotex, and have denied Defendant’s petition for rehearing.

The Court’s concluding thoughts in the penultimate paragraph bear repeating: a claim falls under Apotex’s “general” prohibition on § 43(a) liability if it asserts “that any fact relating to the effects of a medical product found by the FDA to be true should nonetheless be found by the court to be false.” A claim is potentially actionable under Church & Dwight if “[w]hat is at issue is whether messages that the FDA has concluded are not misleading are nonetheless susceptible to being misunderstood by the consuming public.” Does this mean that § 43(a) false advertising claims concerning FDA-approved labeling cannot be based on “literal falsehood,” but can proceed if they are based on literally true but misleading advertising? If so, how does it make sense to provide greater protection for speech that is literally false?

Time will tell if the Church & Dwight Panel’s attempt to clarify the compatibility of these two decisions will have its intended effect. From this vantage, however, it seems that there remains tension within the Second Circuit’s precedent for false advertising claims concerning FDA-approved labeling, and that parties litigating these claims – and the district courts adjudicating them – will have to maneuver individual cases into these two competing paradigmatic pigeon-holes.

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