Liability Immunity Under The PREP Act: A Potent New Defense Against COVID-Related False Advertising Claims
Our national response to the COVID-19 pandemic has been made more difficult by a shortage of personal protective equipment and lifesaving drugs and medical devices. Some evidence suggests that manufacturers’ fear of lawsuits has exacerbated these shortages. Seeking to allay these concerns, in March 2020, the Secretary of the Department of Health and Human Services (HHS) issued a Declaration providing manufacturers, distributors, health professionals, and other “qualified persons” immunity against certain claims relating to COVID-19 “countermeasures.” See 85 Fed. Reg. 15198 (Mar. 17, 2020). In mid-April, HHS followed up with an Advisory Opinion clarifying the scope of liability immunity under the Declaration.
Much has been written about the Declaration’s potential as a shield against product liability suits. But does the Declaration also provide immunity from false advertising suits, including Lanham Act, common-law, and statutory consumer protection claims? There’s not yet any judicial precedent on this question, but the answer appears to be “yes”—at least in many cases.
HHS’ Declaration invokes the agency’s statutory authority under the Public Readiness and Emergency Preparedness Act of 2005 (“PREP Act”) to provide “a covered person [with] immun[ity] from suit and liability under Federal and State law with respect to all claims for loss . . . relating to . . . the administration to or use by an individual of a covered countermeasure.” 42 U.S.C. § 247d-6d(a)(1). By deeming COVID-related products “covered countermeasures,” the Declaration triggers this statutory immunity as to those products.
What products does this immunity grant apply to? In the Declaration’s words, it covers “any antiviral, any other drug, any biologic, any diagnostic, any other device, or any vaccine, used to treat, diagnose, cure, prevent, or mitigate COVID-19, or the transmission of SARS-CoV-2 or a virus mutating therefrom, or any device used in the administration of any such product, and all components and constituent materials of any such product.” 85 Fed. Reg. at 15202. Such products must also be approved, licensed, or cleared by the FDA or the National Institute for Occupational Safety and Health (NIOSH), or subject to a research exemption (IND or IDE) or emergency use authorization (EUA) under the Food, Drug, and Cosmetic Act. See 42 U.S.C. § 247d-6d(i)(1), (7). Significantly, HHS’ recent Advisory Opinion clarifies that the grant of immunity applies “even if the product is not a covered countermeasure” as defined under the Declaration, as long as the defendant “reasonably could have believed” that it was.
Assuming a product is a “covered countermeasure” (or a reasonable person could have believed it was), how broad is the PREP Act’s grant of immunity? Broad indeed. For starters, it applies to claims asserting “any type of loss.” This includes classic product liability-type losses, such as death and personal injury—but it also expressly includes “loss of or damage to property.” 42 U.S.C. § 247d-6d(a)(2)(A); see Parker v. St. Lawrence Cnty. Pub. Health Dep’t, 102 A.D.3d 140, 143 (N.Y. App. Div. 2012) (noting that the statute “broadly defines ‘loss’”). The type of out-of-pocket or benefit-of-bargain losses generally alleged in false advertising suits has been held to constitute a form of injury “to property.” See, e.g., Cnty. of Oakland v. City of Detroit, 866 F.2d 839, 845 (6th Cir. 1989).
So far, so good. But do false advertising claims have the requisite nexus to “the administration or the use” of covered countermeasures? Here, too, the statutory language is “sweeping.” Parker, 102 A.D.3d at 143. Specifically, “[t]he immunity [at issue] applies to any claim” that “has a causal relationship with the administration to or use by an individual of a covered countermeasure.” 42 U.S.C. § 247d-6d(a)(2)(B) (emphasis added). As the statute goes on to explain, this “causal relationship” test “includ[es]” (but is not limited to) claims involving product “labeling, . . . packaging, marketing, promotion, [and] sale. . . .” Id. (emphasis added). Once again, false advertising and consumer protection claims should easily fit the bill.
There are at least two other prerequisites that must be satisfied before a manufacturer of a “covered countermeasure” may assert immunity. First, the countermeasure must have been “administered or used during the effective period” of the HHS Declaration (which, at present, lasts until October 1, 2024). Id. § 247d-6d(a)(3)(A); 85 Fed. Reg. at 15202. And second, the countermeasure must have been “administered or used for the . . . diseases . . . specified in the [D]eclaration”—i.e., COVID-19, SARS-CoV-2, or “a virus mutating therefrom.” 42 U.S.C. § 247d-6d(a)(3)(B); 85 Fed. Reg. at 15200. There “shall be a rebuttable presumption that any administration or use, during the effective period of the [Declaration] . . . of a covered countermeasure shall have been for” a qualifying disease. 42 U.S.C. § 247d-6d(a)(6).
The PREP Act’s clear declaration of immunity, without more, should preclude liability under the Lanham Act and other federal statutes. Cf. Pom Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, 113-14 (2014). As for state-law causes of action, the PREP Act gives teeth to its immunity declaration with a strong express preemption provision. See Parker, 102 A.D.3d at 143 (noting “the breadth of [this] preemption clause”); Advisory Opinion at 2 (same). This clause provides that “no State or political subdivision of a State may establish, enforce, or continue in effect with respect to a covered countermeasure any provision of law or legal requirement that (A) is different from, or is in conflict with, any requirement applicable under this section; and (B) relates to [among other things] the . . . distribution, sale, . . . marketing, promotion, packaging, [or] labeling . . . of the covered countermeasure.” 42 U.S.C. § 247d-6d(b)(8) (emphasis added). It is well-settled that a state-law duty to pay damages constitutes a legal “requirement” subject to preemption by such a clause. See Parker, 102 A.D.3d at 143 (interpreting PREP Act’s preemption clause); Riegel v. Medtronic, Inc., 552 U.S. 312, 324 (2008).
As broad as the PREP Act’s immunity shield is, as HHS’ recent Advisory Opinion points out, it is “not absolute.” Advisory Opinion at 2. For example, the PREP Act “does not provide immunity against federal enforcement actions brought by the federal government—whether civil, criminal, or administrative.” Id. This is because the statute contains a proviso stating that “[n]othing in this section shall be construed to abrogate or limit any right, remedy, or authority that the United States or any agency thereof may possess under any other provision of law.” 42 U.S.C. § 247d-6d(f). Thus, false advertisers may still be subject to enforcement actions by the FDA, FTC, or other federal regulators. However, this proviso does not save claims belonging to state or local regulatory authorities that fall within the PREP Act’s scope.
HHS’ Advisory Opinion also asserts that the PREP Act does not “provide immunity against . . . claims under federal law for equitable relief.” Advisory Opinion at 2. This is confusing, as nothing in the text of the PREP Act or the Declaration purports to distinguish between “legal” and “equitable” relief. We can only assume that this is a mistake, and that HHS meant to say “claims . . . for injunctive relief,” not “equitable relief.” If that’s what HHS meant, then there’s a colorable argument for that interpretation. Recall that the PREP Act’s immunity shield applies to “claims for loss . . . relating to . . . a covered countermeasure.” 42 U.S.C. § 247d-6d(a)(1) (emphasis added). To the extent a plaintiff seeks a prospective injunction, rather than retrospective compensation, that is arguably not a “claim for loss.” At the same time, to the extent a plaintiff seeks monetary compensation for past wrongs, that is a “claim for loss,” whether the relief requested is legal (e.g., damages) or equitable (e.g., restitution). Note also that even if federal claims for injunctive relief are outside the PREP Act’s affirmative immunity grant, state-law claims for injunctive relief may still be barred by the PREP Act’s preemption clause.
Finally, the PREP Act makes an exception to its immunity grant for certain claims “for death or serious physical injury proximately caused by willful misconduct.” Id. § 247d-6d(d). This exception is unlikely to come up in false advertising cases, as opposed to product liability cases. Regardless, its scope is extremely narrow. “Willfulness” is defined strictly. Id. § 247d-6d(c)(1). The plaintiff must prove both willfulness and causation “by clear and convincing evidence.” Id. § 247d-6d(c)(3). Moreover, if the manufacturer’s conduct is regulated by the FDA—as it generally must be for the PREP Act to apply—there can be no finding of “willful misconduct” unless the federal government “has initiated an enforcement action with respect to” that conduct. Id. § 247d-6d(c)(5). Finally, any suit for such “willful misconduct” must be brought before a special three-judge federal court in Washington, D.C. See id. § 247d-6d(e).
In sum, for manufacturers of FDA-approved or cleared products that are or may be useful for the prevention or treatment of COVID-19, the HHS Declaration bestows potentially sweeping immunity from suit and liability. This immunity applies not just to product liability claims, but also to most suits asserting false advertising—including competitor suits seeking monetary relief under the Lanham Act; most consumer and competitor claims under state law; and even enforcement actions by state and local governments and regulators. Manufacturers facing pandemic-related false advertising and consumer protection litigation should raise this potent new defense at their first opportunity.