Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—D.D.C.: Declaratory judgment action transferred to dietary supplement false advertising enforcement case in Georgia, (Dec 27, 2013)

By Linda O’Brien, J.D., LL.M.

In a declaratory judgment action by a dietary supplement manufacturer that was charged by the FTC with making false advertising claims regarding weight loss supplements, the FTC was allowed to transfer the matter to another jurisdiction where the underlying enforcement complaint was pending, the federal district court in the District of Columbia has decided (Hi Tech Pharmaceuticals, Inc. v. Federal Trade Commission, December 20, 2013, Sullivan, E.).

Hi Tech Pharmaceuticals, Inc. is a manufacturer and distributor of dietary supplements, including weight loss products. The FTC filed a complaint in Georgia against Hi Tech Pharmaceuticals, among other companies, alleging that Hi Tech made false advertising claims that two weight loss supplements were clinically proven to cause substantial weight loss. The Georgia court accepted the FTC’s conclusions regarding the appropriate level of substantiation for weight loss claims—a party must present analyzed results of independent, placebo-controlled clinical trials involving an appropriate sample population in which reliable data are collected. The standards were incorporated into a permanent injunction.

Hi Tech brought an action for declaratory and injunctive relief against the FTC, challenging the new FTC standard for “competent and reliable scientific evidence.” Hi Tech argued that a particular claim about a product could be substantiated if it is supported by evidence that (1) is based on the expertise of professionals in the relevant area; (2) is conducted in an objective manner by a qualified person; (3) uses procedures generally accepted in the profession to yield accurate and reliable results; and (4) has a causal connection to the claim being challenged. Subsequently, the FTC moved to transfer the matter to the federal district court in Georgia, where the underlying enforcement action was pending.

The FTC asserted that Hi Tech previously litigated the substantiation standard in the enforcement and, even if the issue could be relitigated, the proper forum would be in the enforcement action. In opposing the motion to transfer, Hi Tech argued that the District of Columbia was proper since the FTC had its headquarters in the District.

The court found that it was within its discretion under the federal rules of civil procedure to transfer a case based on the circumstances for the convenience of the parties and witnesses, and in the interest of justice. Although the plaintiff’s choice of forum was generally accorded deference, the claims Hi Tech was attempting to bring arose directly out of the enforcement action pending in Georgia. The only tie to the District of Columbia, the location of the FTC headquarters, was insufficient to maintain jurisdiction. Moreover, given the link between the declaratory action and the enforcement action, Georgia would be a more convenient forum for the parties.

Additionally, both Georgia and the District of Columbia had the requisite familiarity with the law and were equally able to resolve the present dispute. The court noted that there was a public interest in having the issues related to the injunction litigated in the original forum and also that the Georgia court was familiar with the lengthy procedural history of the case. Finally, since litigation of related claims in the same forum was strongly favored, the public interest factors weighed in favor of transfer, the court concluded.

The case is No. 13-489.

Attorneys: Jack Wenik (Sills Cummis & Gross, PC) for HI Tech Pharmaceuticals, Inc.

Companies: Hi Tech Pharmaceuticals, Inc.

Cases: ConsumerProtection FederalTradeCommissionNews DistrictofColumbiaNews