Antitrust Law Daily Wrap Up, ADVERTISING—3d Cir.: Saw palmetto oil supplier off the hook for purchaser's adulteration claims, (Jul 29, 2026)

By Erick Jorgenson

The contractual quality specifications for the saw palmetto oil limited any adulteration claims to the parties' agreed-upon testing standards.

The U.S. Court of Appeals for the Third Circuit affirmed the district court’s judgment for MTC Industries, a palmetto oil manufacturer and supplier, in a dispute with Jiaherb, a dietary supplement ingredient seller who purchased the oil from MTC. In affirming judgment for the supplier, the court concluded that the saw palmetto oil satisfied the parties’ contractual quality requirements and that the purchaser failed to prove adulteration. The court agreed with the district court that the contract’s reference to “Fatty Acids 85% GC” required compliance with the agreed gas chromatography standard, and the evidence showed that the disputed batches met that standard. The court also upheld the district court’s reliance on expert testimony criticizing the purchaser’s nuclear magnetic resonance evidence and found no error in the determination that the testing offered by the purchaser did not reliably establish adulteration. Because the purchaser could not prove adulteration, its breach of contract, Lanham Act, and implied-covenant claims all failed (Jiaherb, Inc. v. MTC Industries, Inc., No. 25-2911 (3d Cir. Jul. 24, 2026)).

Jiaherb, Inc.—a seller of dietary supplement ingredients—purchased, through a series of purchase orders requiring “Saw Palmetto Oil | Fatty Acids 85% GC,” 17,266 kilograms of saw palmetto oil from MTC Industries (MTC) over the course of one year. Instead of executing a single unified agreement, the orders were placed through purchase orders and accompanied by certificates of analysis (COAs) identifying compliance with applicable United States Pharmacopeia (USP) standards. Before shipment, samples underwent testing by both sides and, if results were satisfactory, Jiaherb confirmed and MTC fulfilled the order. Each of the COAs reported that the accompanying batches were in compliance with “USP 36” or with “USP 37.” To meet USP standards at the time of these events, saw palmetto oil had to have a total fatty acid content of 85 percent, as measured by a technique called gas chromatography (“GC”). Satisfied with the results, Jiaherb began reselling the saw palmetto oil it purchased from MTC to its own customers.

Underlying lawsuit. The controversy developed after a customer of Jiaherb sought to cancel an order approximately ten months after shipment. The customer, having retained a laboratory to perform nuclear magnetic resonance (NMR) testing on the oil, asserted that two batches showed signs of adulteration, including possible adulteration with coconut oil. In response, Jiaherb obtained additional testing, including further nuclear magnetic resonance analysis from the same laboratory and gas chromatography testing performed by another laboratory. The NMR testing reported that both batches showed possible adulteration with coconut oil. Based on those results, Jiaherb sought to return a substantial quantity of inventory to MTC for reimbursement. After performing an internal investigation, MTC rejected the return request and Jiaherb sued. The district court dismissed Jiaherb's complaint.

Jiaherb then appealed three of the dismissed counts: Count 1, alleging false advertising in violation of the Lanham Act; Count 3, alleging breach of contract; and Count 4, alleging breach of the implied covenant of good faith and fair dealing. All three counts are premised on the dispute of whether the oil sold met quality standards under the parties' contract.

Contract ambiguity. It was undisputed that the purchase orders specified the sale of: “Saw Palmetto Oil | Fatty Acids 85% GC.” Although Jiaherb’s quality control manager acknowledged at trial that the purchase orders only called for GC testing, Jiaherb nonetheless argued that the term “saw palmetto oil” necessarily meant that the product must be “pure” and “unadulterated,” independent of the USP standards.

While noting that the contract language was ambiguous as to whether any testing method other than gas chromatography could be used to determine compliance, the third circuit found no clear error in the district court's conclusion that the contract language meant only that the product must contain at least 85 percent fatty acids "as determined by the GC testing method" and that the contract required no additional testing to establish authenticity or purity. The court further noted that reading “Fatty Acids 85% GC” to require other testing methods to confirm purity would render the "GC" in the contract term superfluous.

Expert testimony. Jiaherb argued that the district court abused its discretion by allowing a doctor to testify as an expert under Rule 702, challenging the doctor’s lack of credentials in botanical adulteration and his methodology. The Third Circuit found that the district court carefully considered the doctor’s qualifications as they pertained to the method of testing rather than botanical adulteration specifically, and did not err in accepting the doctor’s testimony as credible and a good fit. As to methodology, the Third Circuit found that Jiaherb’s argument that the doctor’s testimony only included critiques of the analysis of Jiaherb’s expert, and did not include his own analysis, was misplaced. Jiaherb, not MTC, had the burden of proof, therefore it was sufficient for the doctor to explain why the report did not demonstrate adulteration and why the expert's interpretation of the figures in the report was flawed.

Asymmetrical evidentiary treatment. The Third Circuit rejected Jiaherb's contention that there was “asymmetrical evidentiary treatment” of Jiaherb’s third-party report and MTC’s report because MTC’s report was admitted into evidence but Jiaherb's third-party report was not. MTC, unlike Jiaherb, moved to admit its report into evidence as a business record, and the court was under no obligation to sua sponte admit a report not offered into evidence.

Adulteration. The third circuit further determined that the district court did not clearly err in finding that the product was not adulterated. Jiaherb's expert relied heavily on visual comparisons of nuclear magnetic resonance spectra and interpreted the laboratory report as showing the presence of added coconut oil or another triglyceride-rich oil. The expert also relied on separate gas chromatography data that was not itself admitted into evidence and asserted that certain fatty-acid ratios failed to satisfy USP standards. In contrast, the MTC's expert testified that the particular nuclear magnetic resonance testing used by the laboratory was not suitable for evaluating saw palmetto oil unless supplemented by principal component analysis. The expert also identified multiple shortcomings in Jiaherb's interpretation of the testing results, including the absence of complete underlying data, the limitations of visual comparisons, allegedly misleading graphical annotations, and deficiencies in the supporting gas chromatography report. The district court credited MTC's expert's testimony, and the third circuit found ample evidentiary support for that assessment. Because the factual determination that the product was not adulterated was supported by the record, the breach-of-contract claim failed.

Additional claims. Because the remaining claims depended on proving adulteration, they too failed. The false-advertising claim required proof that representations concerning the product were false, and the implied-covenant claim required proof of bad faith or dishonesty tied to the alleged adulteration. With no error in the finding that the batches met the applicable quality standard and were not adulterated, the third circuit upheld dismissal of those remaining claims.

The case is No. 25-2911.

Judges: Chung, C.

Attorneys: Anastasi Pardalis (Pardalis & 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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