Daugherty v. Padagis Israel Pharmaceuticals Limited

Background

Lindsey Daugherty, Tuan Nguyen, Jarad Linn, and Cole Scroggs brought a proposed class action against Padagis (US) LLC and L Perrigo Company. They alleged that Perrigo-branded benzoyl peroxide acne products contained benzene or degraded to form benzene at allegedly high levels, and that the products did not disclose benzene or provide a related warning. The plaintiffs alleged only economic harm, claiming they would not have bought the products or would have paid less if they had known about the alleged benzene issue.

The plaintiffs asserted seven state-law claims concerning alleged misleading labeling, omitted warnings, product safety, implied warranty, manufacturing practices, and unjust enrichment. The defendants moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim. The plaintiffs also sought limited discovery concerning jurisdiction and the alleged manufacturing violations.

Standing

The court denied the defendants’ challenge under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal for lack of subject-matter jurisdiction. The court held that the plaintiffs adequately alleged an injury in fact because alleged economic losses—paying more for products than they were worth or buying products they otherwise would not have bought—can support standing.

Claims Based on Benzene Warnings

The court held that the Federal Food, Drug, and Cosmetic Act expressly preempts the plaintiffs’ state-law claims to the extent they sought to require benzene warnings or disclosures on the products’ labels. Federal law establishes uniform labeling requirements for over-the-counter drugs and preempts state requirements that differ from, add to, or are not identical to federal requirements.

The court found that the Food and Drug Administration’s acne-drug rules specify the required warnings for products containing benzoyl peroxide but do not require a warning about benzene or its risks. Because the plaintiffs did not show that the products failed to comply with the federal labeling requirements, the court concluded that claims seeking additional benzene warnings were preempted.

Claims Based on Current Good Manufacturing Practices

The plaintiffs also alleged that the defendants violated state requirements incorporating federal current good manufacturing practices and drug-adulteration standards. The court explained that state-law claims enforcing requirements identical to federal requirements are not automatically expressly preempted. It therefore allowed the plaintiffs’ current-good-manufacturing-practice claims to proceed at this stage.

The court cautioned, however, that these claims could be impliedly preempted if deciding them required a court to interpret broad federal manufacturing regulations. Implied preemption is a legal doctrine under which state-law claims may be barred when they interfere with federal objectives. The court identified the federal objectives of maintaining national uniformity for over-the-counter drugs and leaving enforcement and technical judgments about the federal standards to the Food and Drug Administration.

The court said the complaint did not make clear whether the alleged violations could be proved through straightforward, binary facts or would require interpreting broad and flexible terms in the manufacturing regulations. Because that issue could not be determined from the pleading, the court allowed the claims to proceed for the time being, while warning that claims requiring interpretation of the regulations were at substantial risk of implied preemption.

Failure to State a Claim

The court stated that the current-good-manufacturing-practice claims were likely subject to dismissal under Rule 12(b)(6), which addresses whether a complaint adequately states a legal claim. The plaintiffs listed many state statutes and twenty-one federal manufacturing requirements but did not specifically allege that each state law imposed requirements identical to the federal standards. They also generally alleged that benzene-contaminated products showed that the defendants must have violated one or more manufacturing requirements, without identifying the specific violations or explaining how they caused the alleged adulteration.

The court also found that the plaintiffs did not adequately allege how the alleged manufacturing violations deceived them or consumers. Their allegation that proper testing would have revealed benzene was considered too conclusory. The court said additional specificity was also needed to determine whether the alleged violations would require interpretation of the federal standards and therefore be impliedly preempted.

Disposition

The court said it was inclined to grant the defendants’ motion to dismiss, but it did not enter a final dismissal at that point. It stayed the pending motion to dismiss, lifted the existing discovery stay, and permitted 60 days of limited, focused written discovery concerning whether the defendants violated current good manufacturing practices in a way that could be proved without interpretation or scientific or technical judgment.

The plaintiffs may file an amended complaint identifying the specific parallel state laws and facts establishing violations of particular manufacturing requirements, subject to their obligations under Rule 11. The order states that failure to timely file an amended complaint will result in dismissal of the case with prejudice. The opinion also states that the plaintiffs’ administrative motion was denied as moot, although the relevant sentence in the provided text is unclear.

Judge Edward M. Chen issued the order on August 6, 2025.