Holly Vanzant v. Hill's Pet Nutrition, Incorpo ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-3633
HOLLY B. VANZANT and
DANA LAND, on behalf of themselves
and all others similarly situated,
Plaintiffs-Appellants,
v.
HILL’S PET NUTRITION, INC., and
PETSMART, INC.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 17-cv-2535 — Samuel Der-Yeghiayan, Judge.
____________________
ARGUED SEPTEMBER 27, 2018 — DECIDED AUGUST 20, 2019
____________________
Before FLAUM, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. Holly Vanzant and Dana Land own
cats with health problems. Their veterinarians prescribed cat
food manufactured by Hill’s Pet Nutrition, Inc., and sold
under Hill’s “Prescription Diet” brand. For several years
Vanzant and Land purchased this higher-priced cat food
2 No. 17-3633
from their local PetSmart stores using their veterinarian’s
prescriptions. They eventually learned, however, that the
Prescription Diet cat food is not materially different from
nonprescription cat food. And the prescription requirement
is illusory; no prescription is necessary. Feeling deceived,
Vanzant and Land filed a class-action lawsuit against Hill’s
and PetSmart, Inc., asserting claims under the Illinois Con-
sumer Fraud and Deceptive Business Practices Act, 815 ILL.
COMP. STAT. 505/1 et seq., and for unjust enrichment.
The district judge dismissed the Consumer Fraud Act
claim for two reasons: (1) the complaint lacked the specificity
required for a fraud claim; and (2) the claim is barred by a
statutory safe harbor for conduct specifically authorized by a
regulatory body—here, the U.S. Food and Drug Administra-
tion (“FDA”). The judge dismissed the unjust-enrichment
claim because it was premised on the same conduct as the
statutory claim.
We reverse. First, the safe-harbor provision does not
apply. Under the Food, Drug, and Cosmetic Act, 21 U.S.C.
§§ 301 et seq., 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. Without FDA
approval, the manufacturer may not sell it in interstate
commerce and the product is deemed adulterated and
misbranded. The FDA issued guidance recognizing that
most pet-food products in this category do not have the
required approval; the guidance states that the agency is less
likely to initiate an enforcement action if consumers
purchase the food through or under the direction of a
veterinarian (among other factors guiding the agency’s
enforcement discretion). But the guidance does not
No. 17-3633 3
specifically authorize the conduct alleged here, so the safe
harbor does not apply.
And the plaintiffs pleaded the fraud claim with the par-
ticularity required by Rule 9(b) of the Federal Rules of Civil
Procedure. So the statutory claim may proceed. The unjust-
enrichment claim is more appropriately construed as a
request for relief in the form of restitution based on the
alleged fraud. In Illinois unjust enrichment is not a separate
cause of action but is a condition brought about by fraud or
other unlawful conduct. Toulon v. Cont’l Cas. Co., 877 F.3d
725, 741 (7th Cir. 2017). The request for restitution based on
unjust enrichment therefore rests entirely on the consumer-
fraud claim, and it too may move forward.
I. Background
The case comes to us from a dismissal at the pleadings
stage, so we recount the facts as alleged in the amended
complaint. Hill’s Pet Nutrition manufactures a variety of pet
food, and this case concerns its Prescription Diet brand.
Hill’s sells its Prescription Diet pet food through veterinari-
ans and pet-food retailers, though consumers may purchase
it from a retailer only with a veterinarian’s prescription.
PetSmart sells pet supplies and pet food, including Hill’s
Prescription Diet brand. Consumers need a veterinarian’s
prescription to purchase Hill’s Prescription Diet food at
PetSmart.
In January 2013 Holly Vanzant’s cat Tarik underwent
emergency surgery for bladder stones. At a follow-up
appointment, Tarik’s veterinarian prescribed Hill’s
Prescription Diet c/d Multicare Feline Bladder Health cat
food. That same day Vanzant purchased the food at a
4 No. 17-3633
PetSmart store. Inside she saw marketing materials
indicating that the cat food is “prescription only,” and the
label on the bag read “Hill’s Prescription Diet.” PetSmart
provided her with a pet prescription card listing Tarik’s
name, prescription number, and prescription date. For three
years Vanzant purchased Hill’s Prescription Diet cat food
from PetSmart, paying a higher price than for
nonprescription food. She showed the prescription card to
the cashier each time.
Land had a similar experience. In October 2013 a veteri-
narian diagnosed her cat Chief with diabetes and prescribed
Hill’s Prescription Diet m/d Feline Glucose/Weight Man-
agement cat food. Within a few weeks, Land purchased
Hill’s Prescription Diet cat food at a PetSmart store. She too
saw marketing materials inside the store indicating that the
food is meant to treat or control diabetes. PetSmart provided
Land with a pet prescription card listing Chief’s name,
prescription number, and prescription date. For two years
Land purchased Hill’s Prescription Diet cat food from
PetSmart, paying a higher price than for nonprescription
food. She too showed the prescription card each time.
Vanzant and Land eventually learned they were not re-
ceiving what they expected. They thought prescription pet
food was medically necessary for the health of their pets,
had been approved by the FDA, and could not be sold
legally without a prescription. But the FDA had not ap-
proved it, and nothing required that it be sold with a pre-
scription. They filed a proposed class action in state court
against Hill’s and PetSmart alleging claims for violation of
the Illinois Consumer Fraud Act and unjust enrichment. The
No. 17-3633 5
defendants removed the case to federal court and moved to
dismiss it under Rule 12(b)(6).
The judge granted the motion. He held that the
Consumer Fraud Act claim is foreclosed by the statute’s safe-
harbor provision, which shields actions authorized by laws
administered by a regulatory body. Specifically, the judge
relied on an FDA Compliance Policy Guide, which he
construed as regulatory authorization for “the gate-keeping
role of veterinarians in ensuring that pet owners purchase
only appropriate therapeutic foods.” The judge also
concluded that Vanzant and Land failed to plead the
consumer-fraud claim with the particularity required by
Rule 9(b). With no underlying fraud claim remaining, the
judge likewise dismissed the unjust-enrichment claim.
Vanzant and Land appealed.
II. Discussion
We review the dismissal order de novo. Camasta v. Jos. A.
Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). To
survive a motion to dismiss, the complaint must contain
“factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). At a
minimum it “must give enough details about the subject
matter of the case to present a story that holds together.”
Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010).
The Illinois Consumer Fraud Act “protect[s]
consumers … against fraud, unfair methods of competition,
and other unfair and deceptive business practices.” Robinson
v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002).
Deceptive or unfair practices include any “misrepresentation
6 No. 17-3633
or the concealment, suppression or omission of any material
fact.” 815 ILL. COMP. STAT. 505/2. To recover on a claim under
the Act, a plaintiff must plead and prove that the defendant
committed a deceptive or unfair act with the intent that
others rely on the deception, that the act occurred in the
course of trade or commerce, and that it caused actual
damages. Siegel v. Shell Oil Co., 612 F.3d 932, 934–35 (7th Cir.
2010). We begin, however, with the Act’s safe-harbor
provision.
A. Safe-Harbor Provision
The Illinois Consumer Fraud Act exempts some acts and
practices from liability under a safe-harbor provision. See
815 ILL. COMP. STAT. 505/10b(1). One component of that safe
harbor covers actions “specifically authorized by laws
administered by any regulatory body or officer acting under
statutory authority of this State or the United States.” Id.This provision allows regulated actors to “rely on the direc-
tions received from [regulatory] agencies without risk that
such reliance might expose them to … liability.” Price v.
Philip Morris, Inc., 848 N.E.2d 1, 38 (Ill. 2005).
To trigger the safe harbor, the regulatory body must be
operating within its statutory authority and the challenged
conduct must be “specifically authorized by laws adminis-
tered by” that regulatory body. § 10b(1). Formal rulemaking
is not necessary; “informal regulatory activity” is enough.
Price, 848 N.E.2d at 46. The FDA’s statutory authority in-
cludes regulation of pet food, so the dispute centers on
whether the agency’s guidance qualifies as informal regula-
tory activity and specifically authorizes the relevant conduct.
No. 17-3633 7
The Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C.
§§ 301 et seq., regulates pet food. Because Hill’s Prescription
Diet cat food is intended to treat or prevent disease and is
marketed as such, the products are considered “drugs”
under the FDCA. Id. § 321(g)(1)(B). Without FDA approval, a
new animal drug cannot be sold in interstate commerce, id.
§ 331(a), and the product is deemed misbranded and adul-
terated, id. §§ 352(o), 351(a)(5).
Manufacturers face two additional requirements, regard-
less of whether the animal drug at issue has been approved.
All drug manufacturers must list their drugs and register
their facilities or else the drugs are misbranded. Id. § 352(o).
And animal drug products must be manufactured in com-
pliance with current good-manufacturing practices applica-
ble to drugs, otherwise the drugs are adulterated. Id.
§ 351(a)(2)(B).
Most pet-food products claiming to treat or prevent dis-
ease lack FDA approval and do not comply with the FDCA’s
drug registration and listing requirements. Nor do the
manufacturers of these products follow the appropriate
manufacturing practices for animal drugs. The FDA issued
guidance acknowledging this longstanding noncompliance
and identifying circumstances in which the agency may
exercise its discretion against initiating an enforcement
action.
The 2016 FDA Compliance Policy Guide offers the FDA’s
current thinking on the likelihood of an enforcement action.
The guide lists factors for agency staff to consider—
including, for example, whether the product presents a
known safety risk when used as labeled, whether the prod-
uct label represents that it can be used to treat disease, and
8 No. 17-3633
whether the product is marketed as an alternative to ap-
proved new drugs. U.S. DEP’T OF HEALTH & HUMAN SERVS.
FOOD & DRUG ADMIN., COMPLIANCE POLICY GUIDE SEC.
690.150 LABELING & MARKETING OF DOG & CAT FOOD DIETS
INTENDED TO DIAGNOSE, CURE, MITIGATE, TREAT, OR PREVENT
DISEASES: GUIDANCE FOR FDA STAFF 6 (Apr. 2016),
https://www.fda.gov/media/83998/download. The guide
goes on to list 11 factors that make an enforcement action
“less likely”—but only if all 11 are present. Id. at 7.
Hill’s and PetSmart characterize the Compliance Policy
Guide as informal regulatory activity specifically authoriz-
ing the prescription requirement and prescription label for
Hill’s Prescription Diet pet food. They are mistaken. The
FDA classifies the guide as a “Level 1 guidance document[]”
that “[s]et[s] forth initial interpretations of statutory or
regulatory requirements” and details “changes in interpreta-
tion or policy that are of more than a minor nature.”
21 C.F.R. § 10.115(c)(1)(i)-(ii); Draft Compliance Policy Guide
Sec. 690.150 on Labeling and Marketing of Nutritional
Products Intended for Use in Dogs and Cats, 77 Fed. Reg.
55,480, 55,480 (Sept. 10, 2012). But the guide does not estab-
lish any legally enforceable responsibilities, and it is not
binding on either the FDA or the public.
Contrast the Compliance Policy Guide with the
regulatory action in Price v. Philip Morris, where the Illinois
Supreme Court held that a consent order between the
Federal Trade Commission (“FTC”) and a cigarette
manufacturer triggered the Consumer Fraud Act’s safe
harbor because the consent order could be understood as
“provid[ing] guidance” about cigarette labeling to the entire
industry. 848 N.E.2d at 46. Even though the consent order
No. 17-3633 9
did not bind other industry actors, the safe harbor applied
because the order “announce[d] to an entire industry what
behavior is and is not authorized.” Id. at 43. Hill’s and
PetSmart cite Price for support, but the case cuts against
them. The FDA Compliance Policy Guide does not establish
industry-wide standards for labeling and marketing of pet
food intended to treat or prevent disease. Rather, the
document helps FDA staff allocate enforcement resources. It
does not qualify as informal regulatory activity.
Nor does the guide specifically authorize the prescription
requirement and label. To determine whether conduct has
been specifically authorized by a regulatory body, Illinois
courts look to the “affirmative acts or expressions of authori-
zation” by the relevant agency. Id. at 36. For an authorization
to be “specific,” it must be “related to a particular thing,” but
“it need not be express.” Id. at 42 (emphases added). In Price,
for example, the defendant cigarette company’s use of the
term “lights” in its marketing was held to be specifically
authorized by FTC consent orders with other manufactur-
ers—even though those orders authorized the use of the
terms “low,” “lower,” “reduced,” or “like qualifying terms”
to describe tar and nicotine content but did not expressly
include the term “lights.” Id. at 43.
In contrast, of the 11 factors listed in the Compliance Pol-
icy Guide as making an enforcement action less likely, only
one is relevant here: whether “[t]he product is made availa-
ble to the public only through licensed veterinarians or
through retail or internet sales to individuals purchasing the
product under the direction of a veterinarian.” U.S. FDA
COMPLIANCE POLICY GUIDE 7. The defendants rely on this
factor as evidence that the FDA specifically authorizes the
10 No. 17-3633
prescription requirement. But this argument wrongly
equates regulatory forbearance with regulatory authoriza-
tion.
To be sure, if pet food intended to treat or prevent dis-
ease is purchased from or under the direction of a licensed
veterinarian, the FDA is less likely to initiate an enforcement
action based on the lack of an approved new animal drug
application—provided, however, that the other 10 factors are
also present. And “less likely” does not mean “will not”; it
certainly doesn’t signal authorization. Because the Compli-
ance Policy Guide doesn’t specifically authorize the Hill’s
prescription requirement, prescription label, and related
marketing representations, the safe harbor does not apply.
B. Consumer Fraud Act Allegations
With the safe harbor off the table, our next question is
whether the complaint adequately alleges that Hill’s and
PetSmart committed a deceptive or unfair practice. These are
separate categories; deceptive conduct is distinct from unfair
conduct. A claim under the Consumer Fraud Act may be
premised on either (or both), but the two categories have
different pleading standards. If the claim rests on allegations
of deceptive conduct, then Rule 9(b) applies and the plaintiff
must plead with particularity the circumstances constituting
fraud. Camasta, 761 F.3d at 737. Specifically, the complaint
must identify the “who, what, when, where, and how” of the
alleged fraud. Id. (quotation marks omitted).
On the other hand, “[a] plaintiff may allege that conduct
is unfair … without alleging that the conduct is deceptive.”
Siegel, 612 F.3d at 935. To determine whether a practice is
unfair, Illinois courts consider three factors: whether it
No. 17-3633 11
“offends public policy”; is “immoral, unethical, oppressive,
or unscrupulous”; or “causes substantial injury to consum-
ers.” Batson v. Live Nation Entm’t, Inc., 746 F.3d 827, 830 (7th
Cir. 2014). A plaintiff need not satisfy all three factors; “[a]
practice may be unfair because of the degree to which it
meets one of the criteria or because to a lesser extent it meets
all three.” Robinson, 775 N.E.2d at 961 (quotation marks
omitted). And because fraud is not a required element,
Rule 9(b)’s heightened pleading standard does not apply. See
Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin.
Servs., Inc., 536 F.3d 663, 670 (7th Cir. 2008). Finally, under
either theory of the case, the plaintiff must adequately plead
causation—more specifically, he must allege that but for the
defendant’s deceptive or unfair conduct, he “would not have
been damaged.” Siegel, 612 F.3d at 935 (quotation marks
omitted).
The complaint alleges that the defendants’ marketing
practices are both deceptive and unfair. Taking the first
category first, the complaint alleges that the prescription
requirement, prescription label, and related marketing
materials for Hill’s Prescription Diet pet food are deceptive
because no prescription is necessary and there is no material
difference between the “prescription” food and nonprescrip-
tion food. Hill’s and PetSmart respond that the complaint is
deficient because it does not allege that Vanzant and Land
relied on the deceptive representations when purchasing
Hill’s Prescription Diet food. This argument misconstrues
Illinois law. “[R]eliance is not an element of statutory con-
sumer fraud.” Connick v. Suzuki Motor Co., 675 N.E.2d 584,
593 (Ill. 1996). Rather, it’s the plaintiff’s “damage,” not his
purchase, that must occur “as a result of” the deceptive act
or practice. Oliveira, 776 N.E.2d at 160. Indeed, it was enough
12 No. 17-3633
in Connick that the plaintiffs’ purchases “occurred after the
allegedly fraudulent statements.” 675 N.E.2d at 595.
Here, the complaint alleges that the prescription re-
quirement, prescription label, and associated marketing
materials for Hill’s Prescription Diet were deceptive; that
Vanzant and Land saw the specific “prescription” language
and symbols when they made their purchases; that the
prescription pet food was something less than they expected;
and that they suffered damages because they paid a higher
price. These allegations detail the “who,” “what,” and
“how” of the fraud claim with particularity. Camasta,
761 F.3d at 737.
The complaint also alleges the “when” and “where” of
the fraud. Vanzant saw marketing materials for Prescription
Diet pet food before purchasing the cat food at PetSmart in
February 2013 and thereafter. Land saw similar marketing
materials before purchasing Prescription Diet cat food from
PetSmart in November 2013 and thereafter. Nothing more is
needed.
In short, the complaint pleads a deceptive-practices claim
to the degree of particularity required by Rule 9(b). That’s
enough to reverse the dismissal of the Consumer Fraud Act
claim, so it’s not necessary to address the adequacy of the
allegations under the unfair-practices theory of the case. As
we’ve noted, an unfair-practices claim has no fraud element
and therefore is not subject to a heightened pleading stand-
ard.
C. Unjust Enrichment
The complaint also seeks restitution for unjust
enrichment. “Under Illinois law, unjust enrichment is not a
No. 17-3633 13
separate cause of action.” Pirelli Armstrong Tire Corp. Retiree
Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 447 (7th Cir.
2011). Rather, it’s a condition brought about by fraud or
other unlawful conduct. Toulon, 877 F.3d at 741. Accordingly,
the request for relief based on unjust enrichment is tied to
the fate of the claim under the Consumer Fraud Act. Cleary v.
Philip Morris Inc., 656 F.3d 511, 518 (7th Cir. 2011). The
statutory claim may move forward, and that revives the
request for restitution based on unjust enrichment.
REVERSED