Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Consumer states claims against supplement manufacturer over product effectiveness representations, (Sep 25, 2013)

By Jody Coultas, J.D.

A health supplement purchaser stated California Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) claims against Nutramax Laboratories, Inc., Wal-Mart Stores, Inc., and Rite-Aid Corporation based on allegedly false and deceptive advertising about Cosamin DS and Cosamin ASU, the federal district court in San Diego has held (Dorfman v. Nutramax Laboratories, Inc., September 23, 2013, Hayes, W.).

Nutramax manufactures, distributes, and sells the joint health supplements Cosamin DS and Cosamin ASU, advertising it as an exclusive formula that reduces joint pain and protects joint cartilage. Retailers Wal-Mart and Rite-Aid entered into marketing and sales agreements with Nutramax. The labels and advertisements contained the following statements: “The ONLY brand proven effective in controlled, published U.S. studies to reduce joint pain. Shown in laboratory tests to protect cartilage cells from breakdown”; “Protect your cartilage with the ONLY BRAND proven to reduce joint pain”; “The Orthopedic Surgeon and Rheumatologist #1 Recommended Brand”; and “Help your joints last longer.”

A Cosamin purchaser alleged that there was no competent scientific evidence that the active ingredients in Cosamin provided the advertised joint health and cartilage benefits. Rather, scientific studies suggested that Nutramax’s claims about the efficacy of Cosamin were false and deceptive in violation of the UCL and CLRA.

The court held that the purchaser alleged sufficient similarities between the ingredients and represented health benefits of Cosamin DS and Cosamin ASU to avoid dismissal of any claims at this stage of the proceedings based on standing. Nutramax argued that the purchaser lacked standing to state claims concerning Cosamin ASU advertising because the purchaser did not buy or use Cosamin ASU. While some courts have held that a plaintiff who does not buy or use a product lacks standing to assert such claims, others have held that the standing inquiry relates to the typicality and adequacy of representation and is best addressed at the class certification stage pursuant to Federal Rule of Civil Procedure 23. Although the purchaser only relied on representations about Cosamin DS, the two products had the same ingredients and representations. Nutramax’s arguments regarding differences in the Cosamin products or advertising are best addressed at the class certification stage rather than the motion to dismiss stage.

However, the purchaser lacked standing to assert claims for injunctive relief, according to the court. To establish standing for prospective injunctive relief, the purchaser was required to demonstrate that he suffered or is threatened with a concrete and particularized injury and a sufficient likelihood that he will again be wronged in a similar way. Because the purchaser did not allege that he was likely to purchase Cosamin DS again, there was no threat of future harm.

Nutramax may be liable under the fraudulent prong of the UCL and the CLRA, according to the court. The standard under both the CLRA and the fraudulent prong is the “reasonable consumer” test, which requires a plaintiff to show that members of the public are likely to be deceived by the business practice or advertising at issue. Nutramax argued that the purchaser failed to allege that the representations at issue were false or misleading, but merely that the claims were not adequately supported by evidence. The factual allegations were sufficient to suggest that scientific evidence refuted the truth of Nutramax’s statements. The allegations were adequate to allege that the statements were likely to deceive the public. A presence of a disclaimer on the Cosamin bottle did not require dismissal of the claims.

The purchaser adequately alleged a claim under the unfair and unlawful prongs of the UCL, according to the court. The UCL prohibits business practices that are unlawful, unfair, or fraudulent. Because the court previously found that the purchaser stated a CLRA claim, the motion to dismiss the unlawful prong claim was denied. The unfair prong claim was based on allegations that the companies violated public policies against false and misleading advertising, unfair competition, and deceptive conduct towards consumers. The allegations plausibly suggested that the companies engaged in immoral, unethical, oppressive, or unscrupulous business practice that caused injury to consumers. The allegedly unfair business practice was tethered to a legislatively declared policy.

The purchaser adequately alleged claims against Wal-Mart and Rite-Aid, according to the court. Wal-Mart and Rite-Aid argued that they did not breach a duty to purchasers by stocking and selling Nutramax’s products, nor does California law require retailers to conduct independent research and analysis to verify manufacturers’ statements. The statements were not created by Wal-Mart or Rite-Aid. The court found that it was plausible that the purchaser would not have made his second Cosamin DS purchase at Wal-Mart had the product not contained the same representations upon which he allegedly relied in making his first Cosamin DS purchase at Rite-Aid. The allegations were also sufficient to show that Wal-Mart and Rite-Aid participated in the unlawful practices.

The case is No. 13cv0873 WQH (RBB).

Attorneys: Timothy Gordon Blood (Blood Hurst & O’Reardon LLP) for Robert Dorfman. Joshua A. Glikin (Bowie & Jensen, LLC) and Layne H. Melzer (Rutan & Tucker, LLP) for Nutramax Laboratories Incorporated.

Companies: Nutramax Laboratories, Inc.; Wal-Mart Stores, Inc.; Rite-Aid Corporation

Cases: Advertising StateUnfairTradePractices CaliforniaNews