Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Dietary supplement false advertising claims dismissed in part, (May 11, 2015)

By Michael Menzhuber, J.D., LL.M.

False advertising claims brought by consumers against the manufacturer of diet supplement products survived in part and were dismissed in part by the federal district court in San Francisco (Gershman v. Bayer Healthcare LLC., May 8, 2015, Gilliam, H.).

Liz Gershman and Sean Porter purchased an Omega-3 DHA dietary supplement manufactured by Bayer Healthcare LLC, called “Flintstones Healthy Brain Support.” The product’s packaging characterized the product as “Healthy Brain Support” and claimed that it “Supported Healthy Brain Function.” The consumers alleged that these advertising claims were false, misleading and deceptive. They further alleged that they purchased the product in reliance on those claims and, had they known that the claims were misrepresentations, they would not have purchased the product.

The consumers filed a class action complaint, alleging that Bayer’s product advertising claims violated California and Illinois consumer protection laws. Their complaint asserted four causes of action: (1) violation of the “fraudulent” prong of the California Unfair Competition Law (UCL), on behalf of putative multi-state class of consumers, or, in the alternative, a California-only class; (2) violation of the “unlawful” prong of the UCL, on behalf of a putative class of California consumers; (3) violation of the California Consumers Legal Remedies Act (CLRA), on behalf of a putative class of California consumers; and (4) violation of the Illinois Consumer Fraud Act (IFCA), on behalf of a putative class of Illinois consumers.

Bayer filed a motion to dismiss the complaint. The court granted the motion, with prejudice, to dismiss the consumer’s claims under the “unlawful” prong of the UCL and claims for injunctive relief. The court also granted Bayer’s motion to dismiss, but with leave to amend, the plaintiff’s claims under the CLRA, the “fraudulent” prong of the UCL based on RCT allegations, and claims under the “fraudulent” prong of the UCL on behalf of the multi-state class. Bayer’s other motions to dismiss were denied.

UCL Unlawful Prong. In support of their claim that Bayer’s product advertising claims violated the Dietary Supplement Health and Education Act of 1994 (DSHEA) and the Sherman Act, the plaintiffs alleged the product’s health claims were not substantiated by any “high quality” randomized controlled clinical trials. The court noted that, while prosecuting authorities can require substantiation, private litigants may not bring UCL claims based on an alleged lack of substantiation. The court determined that the plaintiffs did not state a claim under the “unlawful” prong of the UCL and, as such, it was not necessary to consider Bayer’s preemption claim.

California Unfair Competition Law (UCL) Fraudulent Prong. The plaintiffs alleged two factual basis for their claims under the “fraudulent” prong: (1) the product claims were false and misleading because daily diets already contain sufficient DHA and any additional DHA amounts provided by the product are trivial and have no effect on brain function (brain chemistry allegations); (2) the falsity of the product representations was demonstrated by the four RCTs conclusive showing that DHA supplements, like the product, do not improve cognitive development.

The brain chemistry allegations were determined to be sufficient to state a claim because, if they were sufficiently proved, they would effectively demonstrate that the product claims were false. Bayer argued that there was no factual support for these claims. However, the court determined the issue of factual support was a consideration for the later stages of litigation.

The court decided that, although the brain chemistry allegations were sufficient to state a claim under the “fraudulent” prong, the plaintiffs’ RCT allegations were not because there was a “mismatch” between the studies’ conclusions and the actual product representations. The court noted that the product claims addressed only the general concept of brain support while the RCTs’ studies’ conclusions cited by the plaintiffs were in regard to affirmative improvements to specified cognitive schools.

UCL Fraudulent Prong – Non-California Plaintiffs. Plaintiff Gershman brought her UCL “fraudulent” prong claim on behalf of a putative multi-state class. The court noted that the claims may be brought under California statutes “by out-of-state parties when they are harmed by wrongful conduct occurring in California” Norwest Mortg. Inc. v. Super. Ct., 72 Cal App. 4th 214 (1999), and that “in-state sales alone cannot properly be considered sufficient to establish a nexus with California. Churchill Vill., LLC v. Gen. Elec. Co., 169 F. Supp. 2d 1119 (2000). Since the plaintiffs’ only allegation that an extra-territorial application of the UCL applied was that a portion of the sales of the product took place in California, the court dismissed the claim.

California Consumers Legal Remedies Act (CLRA). The court denied the motion to dismiss the plaintiffs’ claim under the CLRA. It denied the motion because plaintiffs had already successfully stated a claim under the “fraudulent” prong of the UCL and the “fraudulent” prong of the UCL and the CLRA apply the same standard.

Illinois Consumer Fraud Act (IFCA). The court noted that to state a claim under the ICFA, a plaintiff must allege deceptive conduct by the defendant in the course of commerce, with the intent that plaintiff rely on the deception, resulting in actual damage proximately caused by the deception. Bayer argued that Porter failed to state an IFCA claim because he did not allege that he suffered actual damages. The court, however, found that the allegation that he paid more than he otherwise would have, in the absence of the false product advertising, was sufficient to state a claim that he suffered financial injury.

Injunctive Relief. The court noted that, in a majority of district court false advertising cases, where a plaintiff has no intention of purchasing a product in the future, the plaintiff has no standing to seek prospective injunctive relief. It also further noted that some courts have held that a plaintiff who is unaware of allegedly misleading advertising has no standing to seek prospective injunctive relief. Because the plaintiffs did not allege that they intended to purchase the product again the future, the court found that they did not allege “a real and immediate threat” of future injury. The court, therefore, determined that they were not entitled to injunctive relief.

The court was not persuaded to alter its decision by the plaintiffs’ reliance on Henderson v. Gruma Corp., 2011WL 1362188 (2011) because, to the extent that it and other cases purport to create a public-policy exception to the standing requirement, the exception did not square with the standing requirement of Article III of the U.S. Constitution.

The court also determined that the plaintiffs’ argument that “Illinois law expressly provides” for injunctive relief in private damage actions under the IFCA was of no consequence because the inquiry in federal court is whether there is standing.

The case number is No. 14-cv-05332-HSG

Attorneys: Patricia Nicole Syverson (Bonnett, Fairbourn, Friedman & Balint, PC) for Liza Gershman. Ryan M. Sandrock (Sidley Austin, LLP) for Bayer HealthCare LLC.

Companies: Bayer HealthCare LLC

Cases: Advertising StateUnfairTradePractices CaliforniaNews