Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: Prior substantiation claims could not be brought under the New Jersey Consumer Fraud Act, (May 22, 2014)

By Edward L. Puzzo, J.D.

Claims brought against the maker of a dietary supplement could not be sustained under the New Jersey Consumer Fraud Act because they were based on the prior substantiation theory of liability, the federal district court in Newark, New Jersey has ruled (Hoffman v. DSE Healthcare Solutions, LLC, May 21, 2014, Linares, J.).

Attorney Harold Hoffman, on behalf of a putative class, alleged that DSE Healthcare Solutions' advertising and marketing for its dietary supplement "Lipo-Flavonoid Plus" was deceptive to consumers. Hoffman alleged that the product, advertised as "guaranteed to relieve tinnitus, dizziness, ear aches, ear infection, and related symptoms", did not perform as promised and further alleged that no medically-accepted evidence supported the claims made for the product. He brought claims against DSE under the New Jersey Consumer Fraud Act (CFA), based on alleged unconscionable commercial practice, deception, fraud, misrepresentation, and concealment of material acts in connection with the sale and advertisement of merchandise. He also alleged common law fraud and unjust enrichment. Defendant moved for judgment on the pleadings, under Federal Rule of Civil Procedure 12(c).

Prior substantiation. A prior substantiation theory of liability, the court explained, is a cause of action where the plaintiff claims that the product sold by the defendant cannot produce the advertised effect. Claims brought under the CFA, the court continued, cannot be premised on the prior substantiation theory of liability. Instead, under the CFA, facts must be pleaded which raise the inference that there was unlawful conduct by the defendant, an ascertainable loss by plaintiff, and a causal relationship between the two.

Defendant DSE argued that all of Hoffman's claims brought under the CFA were based on the prior substantiation theory of liability. The court agreed. The court noted that Hoffman never claimed that he suffered from tinnitus or a similar ear condition or that he purchased the product to relieve his symptoms. Instead, his complaint alleged that DSE could not scientifically substantiate that its product could treat ear conditions, that medical experts could testify that no medically accepted evidence supported DSE's claims for the product, and that an audiology study had reached the same conclusion.

Although Hoffman did not use the word "substantiation" in his pleadings, the court stated, the crux of his claims were that the DSE's product could not produce the advertised effect, which is a prior substantiation theory of liability, the court concluded. The state Attorney General may bring such claims, the court stated, but there was no private cause of action available under the CFA to bring such an action. The court therefore dismissed with prejudice all claims brought by Hoffman under the CFA.

Common law fraud and unjust enrichment. The court also dismissed plaintiff's common law fraud claims, without prejudice, finding that he had failed to specify the nature of DSE's alleged misrepresentations, the nature of his reliance, and how the reliance cause any detriment. Finally, the court dismissed plaintiff's unjust enrichment claims, without prejudice, finding that he failed to allege a direct relationship or course of dealings between himself and the defendant.

The case is Civil Action No. 13-7582 (JLL).

Attorneys: Harold M. Hoffman for Harold M. Hoffman. Michael R. McDonald and Jennifer Marino Thibodaux (Gibbons, PC) for DSE Healthcare Solutions, LLC.

Companies: DSE Healthcare Solutions, LLC

Cases: Advertising StateUnfairTradePractices NewJerseyNews