Articles By Natalie Blazer

Energy Drink Update: New Marketing Strategies, Continued Push for Regulation

By Natalie Blazer
Published on April 15, 2013

 As readers of the Monitor know, we have seen an increasing amount of scrutiny in recent months surrounding so-called “energy drinks,” particularly in the wake of reports linking consumption of such beverages to multiple deaths. Just last month, a study was released finding that energy drinks may boost blood pressure and lead to an erratic heartbreak, and doctors have written to Food and Drug Administration (FDA) Commissioner Margaret Hamburg saying energy drinks should have no more caffeine than sodas and companies should be required to list caffeine content on the labels. Meanwhile, energy drink manufacturers have consistently and vigorously defended the safety of their products. As more studies are published and the medical community voices its concern over these products, litigation has proliferated and lawmakers are taking notice.

The congressional charge has been led by senators Dick Durbin (D-Ill.), Richard Blumenthal (D-Conn.), and Rep. Ed Markey (D-Mass.), who initially urged the Food and Drug Administration last year to convene an expert panel to discuss the effects of consumers’ caffeine consumption. More recently they have sent letters to energy drink companies (including Monster Beverage Corp., Red Bull North America, and Rockstar Inc.), asking about their marketing strategies and the safety of their products, ultimately telling them to stop marketing their beverages to children.

In February the three lawmakers wrote the leaders of the National Collegiate Athletic Association (NCAA) and the National Federation of State High School Associations (NFHS), asking for information on how the organizations are educating student-athletes about the possible health risks of energy drinks. The letters also inquired as to any marketing restrictions the organizations placed on energy drink manufacturers during athletic events.

The NCAA responded that it has devised several policies to limit access to “energy products” because they pose a health and safety risk to student-athletes. The NCAA’s letter further stated that NCAA Advertising and Sponsorship Standards prohibit energy product manufacturers from sponsoring NCAA championships and certified postseason bowl games. The NFHS, for its part, informed the lawmakers that it has been warning student-athletes of the risk of energy drinks for more than a decade.

The response of these organizations is notable, given the uncertainty surrounding the risks of energy drinks and the fact that they have traditionally maintained an unregulated status (Daniel Fabricant, director of the FDA’s dietary supplement division, acknowledged in an interview in October that energy drinks are not in fact defined by any regulation). 

Like many other companies, Monster Beverage – the nation’s largest seller of energy drinks – initially sold its products as dietary supplements, apparently as part of a strategy to convince consumers that they were different from beverages. However, as of March 2013, after a decade of being sold as a dietary supplement, Monster has begun marketing its energy drink as a beverage. While this means the company will no longer be required to comply with federal regulations that apply to dietary supplements, they will now be required to comply with the various rules and regulations that apply to beverages. The company will likely face new reporting mandates as beverage producers, and they will be required to maintain scientific data supporting the safety of any ingredients they use that are not already cleared by the government. 

In addition, Monster Beverage’s new cans will disclose caffeine content for the first time. A 16-ounce can of Monster’s most popular energy drinks will contain 140-160 milligrams of caffeine, compared to about 330 milligrams in a 16-ounce Starbucks coffee. This should, at the very least, allow the company to dispute claims that the beverages’ caffeine content is markedly more than in a cup of coffee (indeed, Monster’s most popular drinks appear to contain less than half the caffeine of coffee).

Monster’s marketing move followed a similar regulatory “makeover” by another brand, Rockstar Energy, according to the New York Times. More companies may follow suit, which could lead to more labels on cans and potentially more informed choices by consumers.

At first, most energy drinks were not bound by FDA guidelines because they were sold as dietary supplements rather than as beverages. This meant that while soda can legally have as many as 71 milligrams of caffeine per 12 ounces, caffeine in energy drinks could range from 160-500 milligrams in a serving. This apparent regulatory loophole caused a stir when Monster Beverage, like its competitors, faced the disclosure in October that the FDA had received reports that mentioned energy drinks in connection with deaths and injuries. Of course, the mention of a product in an incident report filed with the FDA does not mean the product played any role in a death or injury, but it can cause serious problems for companies in terms of fending off lawsuits. The new can labels and reporting mandates may help energy drink companies avoid these types of suits in the future.

Despite the new labels and the companies’ obligation to comply with additional reporting requirements, Congress continues to seek increased regulation in this area, whether the drinks are marketed as “supplements” or “beverages.” For his part, Senator Durbin announced in March that he will reintroduce the Dietary Supplement Labeling Act, which he and Blumenthal originally introduced in 2011.

We are sure to see continuous developments in energy drink legislation and litigation in the coming months, and we will be sure to keep you posted. You can read our previous coverage on this issue here and here.

Posted in Consumer Product Safety, Food and Beverage, Legislation |

Attorneys Present Class Action Litigation Concerns to U.S. House for Reform

By Natalie Blazer
Published on March 15, 2013

As loyal readers of the Monitor know, class action litigation has been on our radar in a major way given all the attention it has received in recent years, from Daubert concerns to standing to issues of similarity. Understanding the changes to class action processes and procedures is crucial to vigilantly defending against these type of lawsuits, particularly for large corporations that are most often the targets of such suits.

In addition to the procedural transformations brought about by our judicial system, some interested parties are seeking changes to address the legal abuses that allegedly plague class action lawsuits. This week, attorneys testified before a U.S. House of Representatives subcommittee seeking significant class action reforms. The House Judiciary’s Constitution and Civil Justice subcommittee had asked lawyers affiliated with class actions, small business, and legal reform interests to speak out on the kinds of litigation abuses they believe warrant legislative reform.

One issue that took center stage was that of cy pres settlements, which are unclaimed class action funds earmarked for third-party charities (for background on potential issues relating to cy pres settlements, see my previous commentary). Reform is called for in this area due to the concern that some attorneys may direct the cy pres money to their favorite charities, then take a 25 to 40 percent commission off the amount as part of their attorney’s fees. The possibility of such “double-dipping” may give class action attorneys an incentive to break professional duties to clients by making it difficult for class members to recover (i.e. by creating lengthy and confusing claim forms).

Essentially, reformists claim cy pres settlements are a way for lawyers to justify their expensive fees without having to craft settlements that deliver any direct benefit to the individuals actually injured by the defendant’s alleged misconduct. On the flipside, defenders of cy pres settlements claim that eliminating cy pres settlements is just another tactic used by corporations to weaken the nation’s class action system. In other words, they say, corporations ultimately don’t want to pay class action settlements regardless of their form.

Other groups presented additional areas of potential reform to the subcommittee, such as the discovery abuses they claim goes on in large-scale litigations. The groups said that practices such as misleading responses to discovery requests and hiding tens of thousands of documents under the attorney-client privilege must be addressed now before they become worse.

According to the testimony before the subcommittee, these and other types of class action abuses particularly harm small business owners who find themselves facing lawsuits without in-house counsel to advise them. And, of course, small businesses must then spend an extraordinary amount of resources (relative to their total assets) to defend themselves.

Lastly, some attorneys directed the subcommittee to consider the phenomenon of contingency fee contracts between state attorneys general and private counsel who are brought on to assist with litigation. One view is that such arrangements may create an “unseemly” liaison between public and private entities. Other attorneys, however, claim that such arrangements are necessary to help understaffed AG’s offices protect consumers.

If passed, these reforms could significantly contribute to the ever-changing class action litigation landscape, and could have a major impact on the way these cases are tried. We will continue to keep you posted.

 

Posted in Class Action Law Suits, Legislation |

In a Matter of Weeks, Drugmakers Urge Alabama Court to Reconsider Generics Liability Ruling

By Natalie Blazer
Published on February 21, 2013

Ever since the Supreme Court of Alabama handed down its controversial decision in Wyeth Inc. v. Weeks, No. 1101397 (Ala. Jan. 11, 2013) last month, it seems the pharmaceutical world has not stopped talking about it. As my colleague reported, the Weeks court held that a generic drug user could foreseeably rely on a brand-name drug warning and maintain a failure-to-warn claim against the brand-name manufacturer, even when the plaintiff did not ingest that manufacturer’s drug. The Supreme Court of Alabama joined only a handful of other courts in ruling this way, and was the first state supreme court to do so.

Because of the serious implications this ruling could have for drug manufacturers, particularly if other states follow Alabama’s lead, the defendants (supported by pharmaceutical industry groups) have sprung into action. On Monday, Pfizer Inc. and Schwarz Pharma Inc. urged Alabama’s highest court to throw out the Weeks decision. Several other organizations, including the U.S. Chamber of Commerce, filed amicus curiae briefs in support of the request.

In challenging Weeks, the drugmakers argued that in taking such an “extreme outlier position,” the majority misapprehended Pliva v. Mensing, 131 S.Ct. 2567, a 2011 decision that holds state-law failure-to-warn claims against generics manufacturers are preempted by federal law. The drugmakers’ brief argued that since Mensing, each of 16 courts other than the Alabama Supreme Court to consider so-called innovator liability has rejected the theory, including three federal appeals courts. In putting aside previous decisions in Alabama rejecting innovator liability, the Weeks majority pointed out that those rulings had come before Mensing.

In what turned out to be good timing for the drugmakers, the U.S. Food and Drug Administration confirmed earlier this month that it may effectively overrule Mensing by allowing generics makers to change their labeling. Thus, the drugmakers had the opportunity to argue in their brief that “rather than distorting settled law to saddle manufacturers with indefinite liability for their competitors’ products, the court should defer to the appropriate policymaking bodies.”

Finally, and not surprisingly, the drugmakers argued that the Weeks decision violates manufacturers’ due process rights by ignoring important Alabama tort law principles, such as the requirement that plaintiffs asserting that a defendant owed them a duty must show a relationship between the two entities, and that a defendant cannot be held liable for failure to warn of a product’s risks if the plaintiff cannot prove it manufactured the products.

Indeed, one key consequence if the Weeks decision stands is that plaintiffs will be able to survive a motion to dismiss and seek to hold a brand-name manufacturer liable for failure to warn even when product identification is impossible. This impact will be especially felt by brand-name manufacturers with small market share, who historically have enjoyed an exit strategy based on product identification. The end result, of course, will be more lawsuits filed against brand-name manufacturers, a reality that is fueling the industry backlash.

Ultimately the drugmakers are asking for the court to grant oral arguments if it won’t change its answer to the certified question, noting that “[i]f ever a case demanded oral argument, this one does.” In addition to the Chamber of Commerce and the Pharmaceutical Research and Manufacturers of America, the groups that filed amicus briefs were the Product Liability Advisory Council, the Business Council of Alabama, the Alabama Policy Institute and the Alabama Defense Lawyers Association. You can read Pfizer and Schwarz’s brief here.

Posted in Pharmaceutical Law, Preemption, Product Labeling Liability |

Do Plaintiffs Have Standing To Bring A Consumer Class Action Including Claims For Products They Did Not Purchase?

By Natalie Blazer
Published on January 5, 2013

Here at the Monitor we have kept our eye on an emerging trend in product liability lawsuits: consumers seeking to bring claims based on items they never bought. As my colleague recently reported, courts have often had to decide this issue when faced with putative class actions. In Miller v. Ghirardelli Chocolate Company, N.D. Cal., no. 12-04936, Dec. 7, 2012, the Northern District of California adopted the reasoning of a majority of courts in its jurisdiction that have held that plaintiffs may have standing to assert claims for unnamed class members based on products they did not actually purchase, but only if the products and the alleged misrepresentations are “substantially similar.”

In Ghirardelli, the plaintiff’s central claim was that the packaging of the product he purchased, as well as that of four other products he did not purchase, contained several actionable misrepresentations. After considering the similarities and differences between all five of the products, the court concluded that while the “products have some similarities in packaging, composition, and labeling,” the products are inherently different from one another, have different target customers, and have substantial labeling differences. Thus, the plaintiff did not have standing to bring claims relating to the dissimilar products he did not purchase.

Just three weeks later, the Northern District of California ruled the other way on standing in Colucci v. ZonePerfect Nutrition Co., N.D. Cal., No. 12-2907, Dec. 28, 2012. In that case, plaintiff Kimberly Sethavanish purchased only one flavor of ZonePerfect bars, but had standing to challenge the labeling of the other 19 varieties as well because the court found that the bars are similar enough to one another. Sethavanish and her fiance James Colucci, for whom she bought the bars, sued ZonePerfect, alleging the company deceptively labeled the bars as “All-Natural,” even though all the varieties contained at least one of 10 allegedly non-natural ingredients.

Sethavanish and Colucci sought to represent a nationwide class of all persons who bought any of ZonePerfect’s nutrition bars after Sept. 14, 2007. They asserted claims for restitution and common-law fraud, and alleged that ZonePerfect violated California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. They also raised a claim under the federal Magnuson-Moss Warranty Act. (The court dismissed only the Magnuson-Moss claim as a matter of law, holding that ingredients being synthetic or artificial is not a “defect” actionable under the MMWA.)

ZonePerfect challenged not only Colucci’s constitutional standing to bring any claim because he did not personally buy the bars, but also challenged the scope of Sethavanish’s standing because she did not buy all of the flavors at issue. The court held that Sethavanish certainly has standing to pursue claims concerning the chocolate peanut butter flavored bars she actually bought, and also has standing to challenge the labels of the flavors she did not buy, because the challenged products are similar enough to one another. Unlike in Ghirardelli, the court here found that the products are all of a single kind and share a uniform size and shape. “On casual inspection, the only obvious difference between the bars is their flavor,” the opinion said. But the court agreed with ZonePerfect that Colucci lacked standing, noting in the opinion that standing in product liability cases is predicated on the purchase of at least some product. Here, Sethavanish bought the bars to include in care packages she sent to Colucci while he was on military deployment: because he himself did not purchase any of the products, Colucci was dismissed as a party.

These cases out of the Northern District of California are yet another reminder of the omnipresence of food labeling lawsuits in the United States. Because we are unlikely to see a decline in these types of cases anytime soon, it is worthwhile to monitor the trends in courts’ reasoning and opinions, even (and especially) in the earliest stages of a lawsuit. Taken together, the Ghirardelli and ZonePerfect cases help define the dimensions of at least one court’s standing analysis when it comes to products that plaintiffs have not themselves purchased, and the facts in Ghirardelli and ZonePerfect are distinguishable enough from one another that the court’s reasoning in each of the decisions seems apt.

What will be interesting, however, is how this and other courts handle cases where the facts do not fall clearly under either end of the spectrum. In fact, the Ghirardelli court itself, after ruling the plaintiff did not have standing in that case, also said that had the “substantial similarity” between the product purchased by the plaintiff and those not purchased been a closer question, the court would have bypassed the standing analysis and saved the questions of similarity for the class certification stage. Does this mean that plaintiffs with less-clear questions of “substantial similarity” necessarily get to the class certification stage, or even the merits stage? As there will undoubtedly be clarifying developments in this area as more suits are filed, we will continue to keep you posted.

Posted in Class Action Law Suits, Consumer Fraud - False Advertising, Food and Beverage, Product Labeling Liability |

Update: Courts, Lawmakers to Decide Fate of NECC in Wake of Deadly Meningitis Outbreak

By Natalie Blazer
Published on December 18, 2012

Over the last few months we have been reporting on developments in the litigation against New England Compounding Pharmacy, also known as the New England Compounding Center (NECC).  Numerous lawsuits have resulted from an outbreak of fungal meningitis traced to NECC’s injectable steroid medication methylprednisolone acetate, a steroid typically used by physicians to treat back pain. The outbreak has killed 36 people and sickened at least 510 nationwide, according to the Centers for Disease Control. Since September, NECC has voluntarily ceased operations, surrendered its license to the Massachusetts Board of Registration in Pharmacy, and recalled all of its products. NECC is facing numerous lawsuits in state and federal court, as well as a criminal probe and a congressional investigation.

On the litigation front, a key question is how the multitude of claims will be adjudicated, given that affected plaintiffs hail from at least 19 states. On Jan. 31, 2013, the U.S. Judicial Panel on Multidistrict Litigation will consider just that when it decides whether to consolidate the federal suits against NECC (In re New England Compounding Pharmacy Products Liability Litigation, J.P.M.L., MDL No. 2149). Plaintiffs Brenda and Robert Bansale have sought consolidation of the cases against NECC, urging the MDL panel to send the suits to the U.S. District Court for the District of Minnesota. NECC supports consolidation, but not the plaintiffs’ choice of forum. In response to the plaintiffs’ petition, NECC asked the panel to transfer litigation to the District of Massachusetts.

Since the Judicial Panel was created in 1968, multidistrict litigation under 28 U.S.C. § 1407 has become somewhat routine: as of September 2012, 59,657 civil actions were pending in 293 MDL dockets. In most cases, the MDL panel’s decisions are not especially controversial. 28 U.S.C. § 1407 provides that civil actions may be transferred for coordinated or consolidated pretrial proceedings when they (1) “involv[e] one or more common questions of fact”; (2) the transfers “will be for the convenience of the parties and witnesses”; and (3) the transfers will promote the just and efficient conduct of such actions.” This standard is fairly lenient, and will frequently be satisfied where numerous plaintiffs bring related cases against a single corporate defendant. The more controversial consolidation decisions are made in cases where plaintiffs seek coordinated proceedings against multiple defendants who are alleged to have engaged in the same or similar misconduct. Consolidation in these cases can cause numerous problems for individual defendants, and in those instances the MDL panel will be more likely to deny transfer and consolidation. Given that the lawsuits here are all against NECC and involve the same drug and adverse effects, and that NECC itself supports consolidation, the MDL panel will almost certainly agree to consolidate the cases. 

In the meantime, a Massachusetts federal judge recently rejected NECC’s motion to stay lawsuits against it pending a decision by the MDL panel. In rejecting the stay, U.S. District Judge Dennis Saylor also decided to coordinate the 12 NECC cases currently before him, and is allowing discovery to proceed in federal court in Massachusetts. He agreed with the plaintiffs’ argument that early case proceedings such as document preservation discussions and answers to plaintiffs’ complaints would need to be accomplished regardless of whether the suits are centralized.

Widespread litigation has not been the only reaction to the deadly meningitis outbreak. Congress and the FDA have been investigating the NECC and other compounding pharmacies, and legislative action is underway. This particular outbreak sparked added controversy because compounded medications – such as the steroid manufactured by NECC – tend to exist in a regulatory gray area. Under the current regulatory scheme, if a licensed practitioner is tailoring drugs to fit individual patients’ needs (the practice known as compounding: compounded medications are so named because they are made by altering the ingredients of an existing drug), the federal agency generally leaves oversight to state pharmacy boards. Thus, in response to criticism that the FDA did not act when it was made aware of NECC’s alleged sterility problems as early as 2006, the agency argued that NECC fell through the cracks of a “patchwork” system that does not clearly give it authority over compounding pharmacies.

Lawmakers are currently working to fill the gaps in this regulatory scheme. H.R. 6638, introduced earlier this month by Reps. Rosa DeLaura, D-Conn., and Nita Lowey, D-N.Y., would require that compounding pharmacies register their facilities with the FDA and would establish an FDA database of information on registered compounders. The proposed law would also require specific labeling for compounded drugs and would improve communication between state and federal regulators.

Meanwhile, a host of serious allegations against NECC and other compounding pharmacies is the subject of an ongoing federal investigation. Most recently, a bipartisan group of representatives from the House Energy & Commerce Committee asked the International Academy of Compounding Pharmacists (IACP) to release any documents showing it may have encouraged NECC to impede the FDA from evaluating the efficacy and safety of their products. The IACP responded by attacking the Massachusetts board of pharmacy and the FDA, both of whom have received heavy criticism over their alleged inaction against NECC.

Without a doubt, the NECC saga has been one of the biggest products liability news items in 2012, and we will continue to monitor developments as we enter the new year.

Posted in Legislation, Pharmaceutical Law |