The Fraud Caveat to Agency Preemption

INTRODUCTION: THE FRAUD CAVEAT Federal agencies are flexing their preemptive muscles. More and more, they are asserting control over the realms of consumer and product safety-realms that have traditionally been the province of state tort law.1 This trend has prompted polarizing responses: critics have taken aim at what they perceive to be an illegitimate, politically unaccountable form of tort reform in disguise,2 whereas supporters have embraced the opportunity to displace the jury-created, chaotic, ad hoc regulation of inherently risky products with uniform, rational, national standards.3 My focus in this Article is upon what may be the only point of agreement: the need for some regulatory mechanism to police fraud on the agency. What I term the "fraud caveat" to federal agency preemption has great intuitive appeal. Even the most ardent supporters of either the statebased regulatory compliance defense to tort claims against product manufacturers or the more powerful wholesale federal preemption of state tort law by administrative regulations concede that fraud changes the equation.4 State legislatures that have adopted regulatory compliance provisions immunizing manufacturers of PDA-approved prescription drugs from liability for damages (either entirely or just for punitive damages) have, without exception, included the fraud caveat.5 Courts that interpret these immunity statutes echo the caveat mantra: "If Plaintiff comes forward with evidence that the FDA was somehow misled, Plaintiff has ... rebutted a presumption that the manufacturer is not liable."6 Indeed, the FDA itself, in the very same breath in which it proclaimed its authority to preempt state-based tort claims "that a drug's sponsor breached an obligation to plaintiff by making statements that FDA appioved for inclusion in the drug's label," added the obligatory caveat: "unless. . . the sponsor withheld material information relating to the statement."1 Not only does the concession for fraud have a universally moderating effect upon ardent proponents of agency preemption, it also lies at the heart of many detractors' vociferous resistance. In a recent decision that could be read as an exegesis on the perils of agency preemption, Judge Jack Weinstein turned the usual fraud caveat on its head, suggesting that pervasiveness of fraud undermines any theoretical soundness of regulatory preemption: "A reasonable national public policy-in the absence of fraud-would give a pharmaceutical manufacturer protection against tort liability for failure to warn when the FDA had approved the accused warnings."8 The fraud caveat is an undertheorized but highly revealing and consequential aspect of overall preemption debates. I am not the first to highlight the centrality of fraud to the agency preemption debate. In a recent piece, Richard Nagareda argues that "[fjraud on the FDA should turn off preemption."9 More specifically, Nagareda claims that "a showing of [fraud on the FDA] should suffice to defeat the preemptive effect that a given FDA assessment of a device or drug otherwise might have on garden-variety actions for product liability."10 So far, so good. But the fraud caveat Nagareda proposes fails to address a core institutional question: who should police fraud on the FDA-the agency itself or private litigants?" Embroiled within this institutional question, moreover, is a separate doctrinal one, namely the proper scope and interpretation of the Supreme Court's decision in Buckman Co. v. Plaintiffs ' Legal Committee, which held that state law fraud-on-the-agency claims are preempted by the federal Food, Drug, and Cosmetics Act (FDCA), given the uniquely federal interest at stake.12 The Court was set to take up this question this Term in Warner-Lambert Co. v. Kent, but in an equally divided (4-4) per curiam decision with no precedential value, the Court left resolution for another day.13 The resulting federalism conundrum (as aptly stated by a federal court judge) is that "[s]tates may not be concerned about protecting federal agencies, but states have a strong interest in protecting their citizens from fraud and personal injuries. …