Health Law Daily Wrap Up, ADULTERATION—D.N.J.: Dispute between palmetto oil manufacturers over adulterated products dismissed, (Sep 12, 2025)

By Wendy Biddle, J.D.

Testing methodology disagreements insufficient to prove coconut oil contamination in saw palmetto oil.

A saw palmetto oil manufacturer was unable to state Lanham Act claims against competing manufacturer MTC Industries, Inc. for failure to show that the product contained coconut oil adulterants, according to the federal district court in Newark, New Jersey. Jiaherb, Inc. and MTC are each in the business of manufacturing and selling natural ingredients used in the dietary supplement industry. After testing MTC’s product, Jiaherb claimed that the product was adulterated with coconut oil. The court dismissed Jiaherb’s Lanham Act claims for failure to show an actual injury (Jiaherb, Inc. v. MTC Industries, Inc., No. 2:18-cv-15532-KSH-CLW (D.N.J. Sept. 5, 2025)).

Background. Jiaherb and MTC both operate in the dietary supplement industry, manufacturing and selling natural ingredients. Between November 2016 and December 2017, Jiaherb purchased approximately 17,266 kilograms of saw palmetto oil from MTC across multiple batches. The contractual specifications required the oil to contain at least 85% fatty acids as measured by gas chromatography (GC) testing, consistent with United States Pharmacopeia (USP) 37 standards.

The dispute arose in October 2017 when Factors Group, one of Jiaherb's customers, cancelled a substantial portion of its order after commissioning nuclear magnetic resonance (NMR) testing through Isura laboratories. The NMR results suggested potential adulteration with coconut oil, marking the first quality complaint Jiaherb had received regarding the MTC product.

Prior to this incident, both companies had followed standard industry testing protocols. MTC employed a four-step quality control process including vendor testing, third-party GC analysis at Eurofins Suzhou laboratory, in-house FTIR and HPTLC identification tests, and DNA testing through National Safety Foundation and Tru-ID laboratories. Jiaherb similarly conducted comprehensive testing including GC fatty acid analysis, potency testing, and various contamination screenings.

Testing methodology. The crux of the litigation centered on competing testing methodologies and their interpretation. GC testing, the industry standard and contractually specified method, measures fatty acid concentrations and can detect basic adulteration. NMR testing, while more sophisticated and expensive, can identify what experts termed "sophisticated adulteration" that might evade GC detection.

Following the customer complaint, Jiaherb commissioned additional testing from both Isura and Eurofins laboratories. Isura's February 2018 report concluded that batch 161112-2 contained "very high concentrations of triacylglycerols, possibly sourced from coconut oil." A subsequent June 2018 Isura report analyzed additional batches and found similarities to saw palmetto oil mixed with coconut oil, though it stopped short of definitive conclusions.

Expert testimony. The case ultimately turned on a battle between competing expert witnesses interpreting the NMR data. Jiaherb's expert, James Kababick, director of Flora Research Laboratories and specialist in dietary supplement adulteration, testified that visual inspection of the spectral data was sufficient to demonstrate coconut oil contamination. Kababick concluded that the samples showed "distinct resonances that are out of proportion and out of the range they should be for the authentic saw palmetto oil, and those resonances are very characteristic of medium chain triglycerides, mainly coconut oil."

MTC's rebuttal expert, Dr. Poguang Wang, a principal research scientist in chemistry and pharmaceutical sciences at Northeastern University, systematically dismantled the Isura report's methodology and conclusions. Dr. Wang identified multiple critical flaws: the absence of digital data files that would provide precise peak measurements, misleading asterisk markings that appeared to align peaks that were actually at different positions, plotting defects including truncated reference peaks, and the failure to conduct principal component analysis (PCA), which he characterized as essential for proper NMR interpretation.

The court found Dr. Wang's testimony more persuasive, noting that he "went point by point through the visual data (that Kababick found so compelling) and identified irregularities that Kababick overlooked or failed to explain." The court was particularly influenced by Dr. Wang's demonstration that the asterisk markings in the Isura figures were positioned to "train the eye to appear as if they are similar" when the peaks were actually at different positions.

The court observed that while Kababick "fully accepted the Isura report as accurate in design and findings," he provided "little if anything in his testimony [that] refutes Dr. Wang's conclusions about Isura's methodology." The judge also noted concerns about confirmation bias, given that Isura prepared the report specifically to investigate Jiaherb's suspicions of coconut oil contamination.

Legal claims analysis. The court systematically rejected all of Jiaherb's claims. On the Lanham Act false advertising claim, the court found that Jiaherb failed to establish the requisite competitive injury, noting that the evidence showed a buyer-seller relationship rather than competition in the marketplace. Additionally, since GC testing remained the industry standard and MTC's product met the contractually specified 85% fatty acid requirement when measured by GC, the court found no false advertising.

The breach of contract claim failed because MTC had delivered exactly what the contract required: saw palmetto oil containing at least 85% fatty acids as measured by GC testing. The court emphasized that the burden remained on Jiaherb to prove adulteration by a preponderance of the evidence, which it failed to do given Dr. Wang's effective rebuttal of the NMR evidence.

The remaining claims for fraudulent inducement, breach of implied covenant of good faith and fair dealing, breach of implied warranties, and unjust enrichment all failed due to Jiaherb's inability to prove the underlying factual predicate of adulteration.

The Case is No. 2:18-cv-15532-KSH-CLW.

Judge: Hayden, K.

Attorneys: Anastasi Pardalis (Pardalis and Nohavicka LLP) for Jiaherb, Inc. Eric I. Abraham (Hill Wallack, LLP) for MTC Industries, Inc.

Companies: Jiaherb, Inc.; MTC Industries, Inc.

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