Antitrust Law Daily Wrap Up, ADVERTISING—D. Utah: Adverse inference instruction was appropriate sanction for destroying evidence during discovery, (Jul 13, 2016)

By Elizabeth C. Pope, J.D.

The imposition of an adverse inference jury instruction against a dietary supplement company alleged to have engaged in false advertising was an appropriate sanction for the spoliation of evidence during the discovery phase of litigation, according to the federal district court in Salt Lake City, Utah (Vitamins Online Inc. v. Heartwise, Inc., July 11, 2016, Kimball, D.).

Vitamins Online, a dietary supplement company, filed a false advertising claim against its competitor, NatureWise, alleging that NatureWise advertised that its Garcinia Cambogia and green coffee dietary supplements contained certain ingredients and characteristics that they, in fact, did not have.

Discovery dispute. To resolve disputes over discovery, a magistrate judge issued two orders in favor of Vitamins Online. First, the magistrate granted Vitamins Online’s motion for sanctions for spoliation of evidence, concluding that NatureWise caused relevant samples of its products to be destroyed to prevent Vitamins Online from testing those products to determine the veracity of NatureWise’s advertising claims. As a sanction, the magistrate determined that Vitamins Online wais entitled to an adverse inference jury instruction that, with respect to the products for which no samples remained for testing, the labels bore all the allegedly false ingredient claims and the products failed to meet those label claims.

The magistrate’s second order concerned two categories of products for which limited sample amounts were available for testing. Having received from both parties proposals for testing methodologies and facilities, the magistrate issued an order adopting Vitamins Online’s proposed testing facility and methodologies.

Using a "clearly erroneous" standard of review, the district court upheld both of the magistrate’s orders.

Adverse inference instruction. The district court upheld the use of an adverse inference instruction as an appropriate sanction for the spoliation of evidence. Rejecting NatureWise’s assertion that the order was too broad, the court explained that it intended to implement the magistrate’s order as a "permissive" adverse inference, meaning that at trial (1) the factfinder is allowed, but not required, to infer a given fact and (2) the opposing party may offer evidence contrary to the adverse inference. As such, the court concluded the sanction was a proportional response to the offense that achieved both the need to deter NatureWise’s spoliation of evidence and to restore Vitamins Online to the position it would have been in but for the spoliation.

Proposed testing plan. The court also concluded that NatureWise failed to establish that the magistrate’s adoption of Vitamins Online’s choice of testing facility and methodologies was clearly erroneous or contrary to law. The court noted that NatureWise had failed to state its opposition to Vitamins Online’s proposal in the opposition memorandum it filed with the court.

The case is No. 2:13-CV-982-DAK.

Attorneys: Chad E. Nydegger (Workman Nydegger) for Vitamins Online. Alan R. Houston (Strong & Hanni PC) for Heartwise, Inc. d/b/a NatureWise.

Companies: Vitamins Online, Inc.; Heartwise, Inc.

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