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Debernardis v. IQ Formulations, LLC

United States Court of Appeals, Eleventh Circuit

November 14, 2019

JOSHUA DEBERNARDIS, on behalf of themselves and all others similarly situated, CHRISTINA DAMORE, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants,
v.
IQ FORMULATIONS, LLC, a Florida limited liability company, EUROPA SPORTS PRODUCTS, INC., Defendants - Appellees.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:17-cv-21562-DPG

          Before WILSON, JILL PRYOR, and SUTTON, [*] Circuit Judges.

          JILL PRYOR, CIRCUIT JUDGE:

         Plaintiffs Joshua Debernardis and Christina Damore appeal the district court's dismissal of their claims against defendants IQ Formulations, LLC and Europa Sports Products, Inc. The plaintiffs argue that the district court erred in concluding they suffered no injury in fact and thus lacked standing. Their allegations that they purchased from the defendants dietary supplements that the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 301 et seq, banned from sale are sufficient, they contend, to establish that they suffered an injury in fact. After careful consideration and with the benefit of oral argument, we conclude that the plaintiffs plausibly alleged that they suffered an economic loss when they purchased supplements that were worthless because the FDCA prohibited sale of the supplements. Because the plaintiffs have standing to pursue their claims, we vacate and remand.

         I. FEDERAL REGULATION OF DIETARY SUPPLEMENTS

         The plaintiffs' theory of standing rests on the premise that federal law prohibited the defendants from selling the supplements the plaintiffs purchased. To explain why the supplements could not lawfully be sold, we begin with a brief overview of the law regulating the sale of dietary supplements.

         The FDCA authorizes the Food and Drug Administration ("FDA") to regulate a variety of products-including food, drugs, and cosmetics-to "protect the public health." 21 U.S.C. § 393(b)(2); see POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, 108 (2014) ("The FDCA statutory regime is designed primarily to protect the health and safety of the public at large."); Medtronic, Inc. v. Lohr, 518 U.S. 470, 475 (1996). In 1994, Congress amended the FDCA, through the Dietary Supplement Health and Education Act ("DSHEA"), to set guidelines governing the FDA's regulation of dietary supplements.[1] See Pub. L. No. 103-417, 108 Stat. 4325 (1994). Congress intended the DSHEA to "protect[] the right of access of consumers to safe dietary supplements . . . to promote wellness." Id. § 2(15)(A) (emphasis added). And Congress expressly imposed a duty on the FDA to "take swift action" to keep "unsafe or adulterated" dietary supplements off the market. Id. § 2(13).

         The sale of "adulterated" dietary supplements is expressly banned by the FDCA and the DSHEA. See 21 U.S.C. §§ 331(a) (prohibiting the sale of adulterated foods), 342(f) (setting forth when a dietary supplement is deemed an adulterated food). A supplement is adulterated if: (1) it "presents a significant or unreasonable risk of illness or injury" when taken as directed by its label; (2) it contains a "new dietary ingredient"; (3) the Secretary of Health and Human Services declares it to "pose an imminent hazard to public health or safety"; or (4) it contains a poisonous substance that renders it injurious to health. See id. § 342(f)(1).

         The plaintiffs in this case alleged that the dietary supplements they purchased were adulterated because they contained "new dietary ingredients." A "new dietary ingredient" is one that was not marketed in the United States before October 15, 1994. See id. §§ 342(f)(1)(B); 350b.[2] Congress created a presumption that supplements containing new dietary ingredients generally should not be sold. See id. §§ 342(f)(1)(B); 350b. The presumption reflected Congress's determination that when a dietary ingredient had no history of use in the United States, there was "inadequate information to provide reasonable assurance that [the] ingredient does not present a significant or unreasonable risk of illness or injury." Id. § 342(f)(1)(B).

         The presumption that a supplement containing a new dietary ingredient is unsafe may be overcome with sufficient proof. There are two ways to establish that a supplement containing a new dietary ingredient is safe enough to be sold. Under the first exception, a supplement containing a new dietary ingredient may be sold if it contains "only dietary ingredients which have been present in the food supply as an article used for food in a form in which the food has not been chemically altered." Id. § 350b(a)(1). Under the second exception, such a supplement may be sold if there is "a history of use or other evidence of safety establishing" that when the dietary ingredient is used as recommended or suggested by its labeling it is "reasonably [] expected to be safe" and at least 75 days before beginning to sell the supplement, the manufacturer or distributor provided the FDA with the information that was the basis for the conclusion that the supplement is reasonably expected to be safe. Id. § 350b(a)(2).

         Viewed as a whole, the FDCA, as amended by the DSHEA, demonstrates that Congress intended to bar the sale of dietary supplements that included ingredients posing too great a risk to public health. With this background about Congress's regulation of dietary supplements in mind, we now discuss the plaintiffs' allegations to determine whether standing has been established.

         II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         This case arises out of the plaintiffs' purchase of the dietary supplement Metabolic Nutrition Synedrex ("Synedrex").[3] Since 2013, IQ has manufactured and sold Synedrex and another dietary supplement, Metabolic Nutrition E.S.P. (together, the "supplements"). Marketed to consumers as energy stimulants, both supplements contain the ingredient MethylPentane Citrate, which is more commonly known as "DMBA."

         Consumers could purchase the supplements directly from IQ through its website or from Europa, IQ's exclusive distributor for the supplements. In addition to selling the supplements directly to consumers, Europa sold them to retailers throughout the United States, including Walgreens and NaturalBodyInc.com, which in turn sold the supplements in their retail stores and/or online.

         Each plaintiff purchased and used Synedrex. Debernardis purchased Synedrex from Walgreens.com in September 2015. Damore purchased Synedrex from websites including NaturalBodyInc.com and eBay.com in June 2015, February 2016, and August 2016.

         After purchasing Synedrex, the plaintiffs sued IQ and Europa in federal court, bringing a putative class action. They sought to represent three potential classes: (1) both plaintiffs sought to represent a class of all persons in the United States who purchased the supplements, (2) Debernardis sought to represent a class of all persons in Illinois who purchased the supplements, and (3) Damore sought to represent a class of all persons in New York who purchased the supplements. The plaintiffs brought claims against IQ under the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 et seq.; against both defendants under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1, et seq; against both defendants under New York General Business Law § 349, et seq; and against both defendants for common law fraud and unjust enrichment. As the basis for all the claims, the plaintiffs alleged that the defendants had engaged in unlawful, deceptive, and unjust conduct when they sold the supplements and failed to disclose that sale of the supplements was illegal in the United States.

         According to the complaint, the FDCA prohibited the sale of the supplements because the supplements were "adulterated" and unsafe for human consumption. Specifically, DMBA, one of the ingredients in the supplements, qualified as a "new dietary ingredient." Because the supplements contained a new dietary ingredient, the plaintiffs alleged, they were adulterated for purposes of the FDCA and presumed to be unsafe for human consumption unless there were sufficient indicia that the new dietary ingredient was safe. Here, neither party has alleged or argued that the first exception-that the supplements contained only dietary ingredients that had been present in the food supply-applied. And the plaintiffs alleged that the supplements did not meet the second exception because the defendants failed to provide the FDA with premarket information showing that DMBA had a history of harmless use or other evidence of its safety.

         To further support their allegations that the FDCA banned the sale of the supplements, the plaintiffs alleged facts showing that the FDA had determined that DMBA was a new dietary ingredient and that other dietary supplements containing DMBA were adulterated. In April 2015-before the plaintiffs purchased their supplements-the FDA sent warning letters to 14 companies that sold supplements containing DMBA. The FDA warned each company that its product was adulterated because DMBA qualified as a new dietary ingredient and the company had failed to provide the FDA with the appropriate premarket notice demonstrating DMBA's safety.

         The complaint further alleged that each plaintiff was harmed as a result of purchasing the supplements. Each plaintiff suffered an injury by purchasing supplements that could not be "legally sold or possessed" and had "no economic or legal value." Doc. 1 at ¶ 50. Because the supplements had no economic value, each plaintiff paid an "unwarranted amount" to purchase the supplements. Id.

         Both defendants moved to dismiss the complaint, raising, among other arguments, that the plaintiffs lacked standing because their complaint failed to establish that they suffered an injury in fact. The defendants argued that the plaintiffs suffered no injury because the plaintiffs received the benefit of the bargain they made when purchasing the supplements. In particular, the defendants pointed out the lack of any allegation that the supplements failed to work as intended or that the plaintiffs paid a premium for the supplements. In response, the plaintiffs argued that they adequately alleged an economic injury by alleging that the supplements they purchased were worthless because the FDCA prohibited their sale.

         The district court granted the defendants' motions to dismiss, concluding that the plaintiffs lacked standing because they failed to allege an injury in fact. The court acknowledged that an economic harm would qualify as a concrete injury but determined that the plaintiffs alleged no economic harm. The court explained that even if the supplements could not legally be sold, the plaintiffs received the benefit of their bargain because there was no allegation that the supplements failed to perform as advertised, that the supplements caused any adverse health effects, or that the plaintiffs paid a premium for the supplements. After concluding that the plaintiffs suffered no injury in fact and ...


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