Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: CoQ10 class action brought against Wal-Mart proceeds under California law, (Jan 22, 2015)

By Edward L. Puzzo, J.D.

A putative class action brought against Wal-Mart for alleged deceptive advertising of its “Equate” brand CoQ10 nutritional supplement adequately stated claims under the California Legal Remedies Act; however, claims brought under the Arkansas Deceptive Trade Practices Act must be dismissed, the federal district court in San Diego has ruled (Cortina v. Wal-Mart, Inc., January 20, 2015, Bashant, C.).

Thamar Santisteban Cortina brought a putative class action suit against Wal-Mart based on its sale of a CoQ10 nutritional supplement under its “Equate” brand. Wal-Mart moved to dismiss the claims in plaintiff’s First Amended Complaint (FAC). The court dismissed the claim brought under Arkansas law, but ruled against dismissal of the remainder of the allegations.

Standing. Wal-Mart first challenged Cortina’s Article III constitutional standing, alleging that plaintiff could not allege an injury without also alleging that she consumed the product in question. The court rejected this assertion, stating that the sale itself caused injury-in-fact, which provided plaintiff with standing.

CLRA. Cortina brought a claim under the California Legal Remedies Act (CLRA). Wal-Mart alleged that Cortina had not complied with the requirement that lawsuits for damages under the CLRA must provide at least 30-days notice. Cortina had sent a notice letter on August 23, 2013 and filed her initial complaint on September 3, 2013. Her complaint sought damages for the various causes of action in the complaint, but specified that she was seeking injunctive relief under her CLRA action. A claim for injunctive relief only under the CLRA did not involve damages. Accordingly, the court stated, Wal-Mart’s motion to dismiss on the basis of the 30-day notice issue was denied.

Fraud. Wal-Mart argued that Cortina’s claims were grounded in fraud and failed to satisfy the heightened “who, what, when, where and how” pleading requirements of Fed. R. Civ. P. 9(b) for fraud claims. The court found that Cortina’s first amended complaint gave a reasonably specific recitation of the facts of the purchase and included facts supporting fraud allegations.

USP standards. Wal-Mart stated that Cortina’s claim relied on U.S. Pharmacopeial Convention’s (USP) standards to assert its implied and express warranty claims, but argued that USP standards alone did not create implied or express warranties. The court agreed that the “Equate” CoQ10 product was not required to meet the USP standards. However, USP testing did provide an objective standard for comparing two or more products. One of the allegations was that Equate was produced in inconsistent batches. Another allegation concerned Qunol, a competing product. Plaintiff alleged that the Wal-Mart product failed to fulfill expectations created by the “Compare to Qunol” statement on its product packaging. USP standards would allow comparisons between batches of the product, and between the product and competitor Qunol, and thus were relevant at trial, the court stated.

Magnuson-Moss. Cortina alleged that the Magnuson-Moss Warranty Act (MMWA) was violated by specific and verifiably false claims such as “3 times better absorption” and “high absorption.” The allegations were not mere legal conclusions and set verifiable and reasonable benchmarks and thus successfully stated a Magnuson-Moss claim, ruled the court.

Arkansas claim. Cortina also brought a claim under the Arkansas Deceptive Trade Practices Act (ADTPA). Under the choice of law provisions of California, which federal courts in California must apply, an interest test is used to determine which state’s law should apply, focusing on who the conflicting laws were designed to protect and which state’s interests would be more impaired if not applied. The court opined that the state in which the transaction took place had a superior interest in the matter. Since plaintiff’s injuries occurred in California, and Arkansas had disclaimed any superior interest in policing consumer transactions in other states, California law must be applied here. The court therefore dismissed plaintiff’s ADTPA claim without leave to amend.

The case is Civil Action No. 13-cv-2054 BAS (DHB).

Attorneys: Jack Fitzgerald, IV (The Law Office of Jack Fitzgerald, PC) for Thamar Santisteban Cortina. David C. Allen (Barnes & Thornburg LLP) for Wal-Mart, Inc.

Companies: Wal-Mart, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews