Category: Consumer Fraud – False Advertising

Despite Ninth Circuit’s Pom Wonderful Decision, District Court Denies Motion to Dismiss Deceptive Labeling Claims

By Isabella C. Lacayo
Published on May 15, 2013

We have previously posted about lawsuits seeking injunctive relief and damages arising from food manufacturers’ use of terms like “natural” on labels and in advertising (see, for example, here and here).  These cases are usually putative class actions that allege particular food products have been misbranded by the manufacturers.  Even though such claims would appear to be preempted by the Federal Food, Drug and Cosmetic Act (“FDCA”), which regulates food safety and labeling and prohibits private enforcement, plaintiffs have been able to bring their claims by alleging violations of state laws that parallel the FDCA requirements.

Plaintiffs have had the most success in California where the state Unfair Competition Law permits causes of action for false, or deceptive, labeling and the courts have been fairly receptive to putative classes.  Indeed, the Ninth Circuit previously noted that, as a general matter, deceptive labeling claims should not be decided at the motion to dismiss stage.  See Williams v. Gerber Products, 552 F.3d 934 (9th Cir. 2009).  But the Ninth Circuit’s decision in Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (2012), made California less friendly to would-be plaintiffs.

In Pom Wonderful, plaintiff Pom Wonderful had alleged that its competitor, defendant Coca-Cola Co., had violated California state law as well as the Lanham Act by using the word “pomegranate” and a picture of a pomegranate on the label of a beverage that contained less than 1% pomegranate juice.  The district court granted summary judgment in favor of Coca-Cola Co. and the Ninth Circuit affirmed.  The Ninth Circuit held that Pom Wonderful’s claims were preempted because the FDCA comprehensively regulates food and beverage labeling and the FDA could act if it determined that Coca-Cola Co.’s labeling did not comply with its regulations.  Thus, the Ninth Circuit deferred to the FDA’s decision whether to act or not with respect to the label in question.

Not surprisingly, though, plaintiffs have not given up and are trying to keep their cases alive in California.  And they recently made some headway steering away from Pom Wonderful in Janney v. General Mills, No. C 12-3919 (N.D. Cal. 2013).  The plaintiffs in Janney are a putative consumer class alleging that General Mills’ Nature Valley brand food products’ “natural” labels are deceptive because the products contain high fructose corn syrup and other processed sweeteners.  The plaintiffs’ complaint includes various counts of California law violations as well as unjust enrichment.  According to the plaintiffs, “natural” labels should only be applied to products that contain no artificial or synthetic ingredients and consist of ingredients that are only minimally processed.

The district court recently issued an opinion denying General Mills’ motion to dismiss based on the primary jurisdiction doctrine.   Under this doctrine, courts may determine that certain decisions should be made by the relevant federal agency (as opposed to the courts).  General Mills argued that the FDA should determine the meaning and proper use of the label “natural.”  Although finding that the “question is a close one,” the court disagreed.  The court concluded that the deceptive labeling claims should not be dismissed because “the FDA has signaled a relative lack of interest” with respect to the use of “natural” in food and beverage labels.  According to the opinion, the FDA’s failure to define “natural” in any regulation or formal policy statement is telling.  The FDA has only issued “informal” guidance stating that “natural” means that “nothing artificial or synthetic [ ] has been included in, or has been added to, a food that would not normally be expected to be in the food.”  Although the FDA has issued numerous warning letters to food and beverage manufacturers for uses in contravention of this definition, the court determined that the FDA “has taken little action against companies who have used the term ‘natural’ in labels for food products that contain various preservatives.”

The court’s decision is surprising given that it “agree[d] that the Syntek factors [for the primary jurisdiction doctrine] favor the resolution of this issue by the FDA.”  Moreover, the court’s decision is inconsistent with the Ninth Circuit’s Pom Wonderful decision.  The district court itself acknowledged that the Ninth Circuit in Pom Wonderful had “found that when a plaintiff’s cause of action requires a court to decide an issue committed to the FDA’s expertise, dismissal in deference to that agency is the proper result – even if no formal regulation has been adopted.” (emphasis added).  Nevertheless, the court did not follow the Ninth Circuit’s lead and found “little reason to stay or dismiss the case to allow the FDA the opportunity to take action.”

The issue will likely eventually be before the Ninth Circuit, but in the meantime plaintiffs will surely rely on the district court’s opinion in Janney v. General Mills in an effort to sidestep Pom Wonderful and support their false labeling claims.

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

Third Circuit Holds That “No Trans Fats” Doesn’t Have To Mean No Trans Fats

By Keith Gibson
Published on May 10, 2013

For anyone who checks labels when buying food products, the statement “No Trans Fats” does not always mean no trans fats, and that is not misleading according to the Third Circuit.  On May 9, the Third Circuit affirmed the dismissal of a putative class action against Johnson & Johnson (J&J) alleging that the labeling on the company’s Benecol brand of butter and margarine substitutes was false and misleading due to its claims of cholesterol-lowering capabilities and the absence of any trans fats.  On April 19, 2012, Judge Joel Pisano of the District Court for the District of New Jersey dismissed the putative class action, holding that J&J had been up front about the presence of partially hydrogenated oils (which constitute trans fats) and that the plaintiff’s claims were preempted by the Nutrition Labeling and Education Act (NLEA).  The Third Circuit affirmed Judge Pisano’s ruling, holding that NLEA preempted the plaintiff’s state law claims, which sought to impose standards stricter than those included in the federal regulations.

In his putative class action complaint, the named plaintiff, Thomas Young, argued that J&J falsely advertised its Benecol line of spreads as containing “no trans fats” even though they contained small amounts of partially hydrogenated oils.  The plaintiff also argued that his claims were not preempted because U.S. Food & Drug Administration guidelines prohibit false claims outside the nutritional box on the product.  Judge Pisano held that J&J had been up front about the presence of partially hydrogenated oils in its Benecol spreads because they were listed on the ingredient list and Benecol’s packaging included a disclaimer stating that the product included a small amount of partially hydrogenated oil.  Judge Pisano also held that the plaintiff’s claims were preempted by the NLEA, which allows for products containing fewer than 0.5 grams of trans fat per serving to be labeled as having 0 grams of trans fat.  Judge Pisano ruled that the “[p]laintiff’s complaint amounts to no more than subjective allegations that the presence of any amount of trans fat and partially hydrogenated oils renders defendant’s health claims misleading and Benecol unhealthy.  Such allegations, however, are insufficient to establish injury-in-fact.”

On appeal, the attorney for the plaintiff argued that it was misleading for the defendant to advertise its product as containing “no trans fat” even if it contained 0 grams per serving under NLEA guidelines.  He further argued that J&J’s claim that Benecol was “proven to reduce cholesterol” was untrue given that trans fats are known to actually raise cholesterol.  The Third Circuit disagreed, however, choosing not to accept a distinction between a claim that a product contains zero grams of trans fat per serving and “no trans fats.”  Because anything less than 0.5 grams of trans fat per serving is considered to be insignificant under the NLEA and FDA guidelines, the statement that the product contained “no trans fats” was not misleading.  This was particularly true, the Court noted, where the product packaging included information identifying small amounts of trans fats in the form of partially hydrogenated oils.  With respect to the choloesterol-reducing claim, the Court held that the claims were authorized based on the presence of plant stanol ester in Benecol.  According to FDA regulations, a food product that contains at least 1.7 grams of plant stanol esters – which Benecol did – can make a health claim such as the one included by J&J.  As a result, the Third Circuit held that the plaintiff’s claims were preempted by the NLEA.

The Benecol suit is another example of plaintiffs trying to gain some traction in the space of false or misleading labeling claims.  Thus far companies have largely been able to stave off these claims, both in the courtroom and in the political and regulatory arena.  However, we will continue to monitor the efforts of the plaintiffs’ bar and report on any significant developments.

Posted in Consumer Fraud - False Advertising, Food and Beverage

Pharmaceutical Advertising and Social Media

By Lisa Sokolowski
Published on March 11, 2013

The appeal of social media as a marketing tool is all too apparent—social media, after all, possesses the unique ability to reach across artificial boundary lines and increase brand recognition beyond what was once thought possible.  The proliferation of social media also guarantees a form of marketing wherein large companies can rely on the efforts of individuals to promote their products, leading to marketing’s version of the “citizen journalist.”  A natural byproduct of these facets of social media marketing has been the increased use of social media by large corporations in their advertising efforts.  Indeed, according to one source, the number of businesses that deem Facebook critical to their marketing has increased seventy-five percent in the last three years.  Still, pharmaceutical companies have only cautiously approached social media while waiting for the U.S. Food and Drug Administration (“FDA”) to issue concrete guidance as to how social media advertising fits into the FDA’s regulatory scheme.

Despite holding a public hearing as early as 2009 to address the use of social media by companies that market FDA-regulated products, the FDA has thus far only issued one draft guidance, which it published in December of 2011.  The guidance, titled “Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices,” only addresses what companies should do when responding to unsolicited requests concerning off-label uses of their products.  Though FDA representatives indicated that more comprehensive guidelines were forthcoming, the FDA has yet to issue any definitive statement regarding whether and how pharmaceutical companies should use social media as a marketing tool.

Perhaps the biggest complication for pharmaceutical companies wishing to engage in social media marketing is also the greatest advantage—the ability of individual consumers to themselves advertise the products.  For example, consumers’ “comments” on company Facebook pages has led the Australian Advertising Standards Board to apply its own advertising laws to those user comments.  For further discussion of this issue, see here.  If the FDA decides to follow suit, companies could be held accountable for inaccurate or misleading statements posted by others.  Given the FDA’s silence on the issue, most pharmaceutical companies have erred on the side of caution and avoided the benefits of advertising on a social media forum.  The FDA’s issuance of warning letters to pharmaceutical companies engaging in social media advertising—including one recent letter chastising a company for “liking” a Facebook post—suggests that, at the very least, this caution is wise.

The FDA may provide more detailed guidance in the coming months, thanks to Congress ordering the FDA to issue such a guidance by 2014.  In the meantime, the FDA’s broad definition of what constitutes solicitation by a company through social media in its 2011 draft guidance suggests that the FDA may very well make companies responsible for at least those consumer comments that are posted on the companies’ own pages.

Posted in Consumer Fraud - False Advertising, Pharmaceutical Law, Risk Management Policy

Update to “Time For A Touch Up?”: Recognizing and Mitigating the Risks of Anti-Aging Product Class Actions

By Isabella C. Lacayo
Published on March 5, 2013

In January, we posted about FDA warning letters and class action litigation relating to anti-aging cosmetic products.  Because the industry is seeing an increase in putative class action filings relating to such products this year, I have updated the post to include important developments and practical suggestions for cosmetics companies:

Recognizing and Mitigating the Risks of Anti-Aging Product Class Actions

Lately, the cosmetics industry – particularly with respect to anti-aging products – has been a popular target for both the FDA and plaintiffs.  FDA warning letters and lawsuits can create unwanted press and costs for companies.  Accordingly, it is important for inside and outside counsel to work together to recognize potential risks of increased FDA scrutiny and the potential consequent risk of future class actions lawsuits.

FDA Warning Letters To Anti-Aging Product Manufacturers

In the fall of 2012, the FDA was busy admonishing makers of cosmetic skin care products over promotional claims made on their websites and product labels.  The FDA’s concern appears to be an increasingly blurred line between “cosmetics” and “drugs,” each of which is subject to specific regulations under the Federal Food, Drug, and Cosmetic Act (the “Act”).

The FDA issued six warning letters in September and October 2012 identifying manufacturers’ statements and claims that could only be properly made in connection with products classified as drugs, not cosmetics.  Under the Act, any product that is intended to diagnose, mitigate, treat or prevent disease, or to affect the structure or function of the body is classified as a drug.  Any product classified as a drug must either be generally recognized as safe and effective when used as labeled (such as a common over the counter drug) or must go through the FDA’s new drug application and approval process.  Cosmetics, on the other hand, do not require any FDA approval prior to going to market.  Participation in the FDA’s Voluntary Cosmetic Registration Program is – as the name makes abundantly clear – voluntary.  If a product is classified as both a cosmetic and drug (e.g. anti-dandruff shampoo, makeup with SPF), it must comply with the Act’s requirements for both cosmetics and drugs.  Thus, because the requisite application and approval process for drugs was bypassed, the marketing of cosmetics with statements indicating that the product is intended to affect the structure or a function of the human body (e.g. skin) – as a drug would – is a violation of the Act.

In its letters, the FDA identified numerous statements made in connection with beauty creams and serums that it contends violate the Act.  Some examples of claims made in connection with those products that caught the FDA’s eye include:

  • “the at-home answer to wrinkle-filling injections”
  • “help tighten the connections between skin’s layers”
  • “formulated to fortify damaged tissue with new collagen”
  • “helping to repair structural damage to deeper layers of the skin”
  • “provides all the muscle-relaxing properties of BOTOX®”
  • “improves skin’s immune system”
  • “fuel the rebuilding of skin structure and elasticity”
  • “repairs sun damaged tissues at the cellular level”
  • “inhibits microbiological activity of dangerous, pathogenic skin bacteria, including acne”
  • “can extend the results of a Botox injection”
  • “repairs existing skin damage, prevents future skin damage”
  • “promotes collagen synthesis”
  • “boosts the activity of genes and stimulates the production of youth proteins”

In addition to these types of statements, the FDA took issue with testimonials on the cosmetics companies’ websites where customers make statements about the use and efficacy of the cosmetic product.  With high consumer demand for cosmetics that provide drug-like benefits and cosmetics companies investing more in anti-aging product lines, the FDA is likely to have more to say in the future.

Anti-Aging Product Class Actions

Not surprisingly, plaintiffs have followed up on some of the FDA warning letters and filed multiple putative class actions against anti-aging product manufacturers.  These lawsuits typically include claims such as false advertising, unjust enrichment, breach of warranty, and consumer protection law violations.  Plaintiffs have cast a much broader net than the FDA in these suits.  Both companies that have and some that have not been issued FDA warning letters have been sued.  And, with respect to the companies that were issued FDA warning letters and sued, plaintiffs’ complaints allege injuries relating to a broader range of product lines and statements.

Because of the immense costs and risks associated with litigating a certified class action, the key for defendants facing these kinds of lawsuits will be in defeating class certification.  As Judge Posner has commented, defendants face “monstrous judgment[s]” and “threats of ruin” in the class action context which “force[s] most defendants [ ] to settle if a class is certified.”  See In re: Sulfuric Acid Antitrust Litig., 703 F.3d 1004, 1007 (7th Cir. 2012).  The good news for defendant companies is that recent developments in Supreme Court and district court decisions illustrate a variety of arguments for defeating class certification.

The Supreme Court’s 2011 decision in Wal-Mart Stores v. Dukes strengthened defendants’ arguments at the class certification stage.  131 S. Ct. 2541 (2011).  Dukes requires district courts to apply a rigorous analysis of all the prerequisites for class certification prior to certifying a class, even if the rigorous analysis entails some overlap with the merits of the underlying claims.  In the Dukes decision, the Supreme Court questioned the Ninth Circuit’s conclusion that a Daubert hearing to determine the admissibility of the testimony was not appropriate at the class certification stage. The Supreme Court, however, did not decide whether Daubert applies at the class certification stage in Dukes.  But now the Supreme Court is set to decide that very issue in the Behrend v. Comcast case (see our related post here).  Specifically, the Supreme Court certified the following question for review: “whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”  Oral arguments were heard in the fall of 2012 and a decision is expected shortly.  Should the Supreme Court rule that Daubert does indeed apply at the class certification stage, defendants will have yet another weapon in their arsenal for defeating class certification.

In the wake of Dukes, there have been several notable examples of defendants defeating class certification.  In 2012, for example, a district court denied class certification in Edwards v. Ford Motor Co. because the putative class failed to meet Federal Rule of Civil Procedure 23(b)(3)’s predominance requirement.  No. 11-CV-1058 (S.D. Cal. June 12, 2012).  In that case, the putative class included California owners of certain car models who claimed to have experienced unintended acceleration and incurred repair costs for the allegedly defective electronic throttle control system.  In general, to obtain certification under Rule 23(b)(3), the putative class must show that questions of law or fact common to class members predominate over any questions affecting only individual members.  The district court – as the Supreme Court instructed in Dukes – employed a “rigorous analysis” of the Rule 23 requirements and ultimately denied plaintiff’s motion for class certification because individual questions predominated for the putative class (e.g. the external driving conditions affecting the performance of each class member’s car).

In another example, the district court judge presiding over a multidistrict litigation concerning the marketing of two antidepressants denied two motions for class certification.  See In re Celexa and Lexapro Marketing and Sales Practices Litig., MDL No. 09-02067 (D. Mass. Feb. 5, 2013).  Plaintiffs claim that the manufacturer misled physicians as to the safety and efficacy of the antidepressants for pediatric and adolescent use.  The complaints allege fraud and violations of the consumer protection laws.  The plaintiffs made two separate motions under Rule 23(b)(3) seeking the certification of nationwide classes of purchasers of the antidepressants for pediatric and adolescent use.  One of the motions was denied based on the district court’s finding that plaintiffs had not met the predominance requirement of Rule 23(b)(3).  The other motion was denied based on the court’s conclusion that plaintiffs had not met the superiority requirement of Rule 23(b)(3).  Aside from requiring a showing that common questions of law or fact predominate over any individual, plaintiffs seeking certification under Rule 23(b)(3) must show that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.  The district court found that plaintiffs had not met this superiority requirement because the law of each plaintiff’s home state would have to be applied to that plaintiff’s case and the consumer protection laws vary greatly from state to state.  The court thus concluded that a single nationwide class would not be manageable and that a class action was not the appropriate method to resolve cases implicating the consumer protection laws of numerous states.

There has even been a recent example of a denial of a motion to certify a class within the cosmetics industry.  In January, a California district court judge refused to certify a putative class in a lawsuit against Neutrogena.  Chow v. Neutrogena Corp. et al., No. 2:12-CV-04624 (C.D. Cal. Jan. 22, 2013).  In the case, the named plaintiff alleges false and deceptive advertising with respect to certain Neutrogena brand anti-aging products.  The complaint alleges violations of California’s consumers legal remedies act, unfair competition law, and false advertising law, as well as breach of express warranty.  According to the complaint, plaintiff purchased the anti-aging products based on Neutrogena’s representations in advertising and labeling that the products would make users look younger in just one week and that results were “clinically proven.”  When the plaintiff sought certification under Rule 23(b)(3), the court expressed “significant doubts” as to the plaintiff’s ability to meet Rule 23(a)’s “threshold requirements of commonality, typicality, and adequacy.”  The court went on to hold that the class could not be certified under Rule 23(b)(3) because individual fact questions predominated over common questions.  The court found that plaintiff had failed to “demonstrate that each class member was exposed to the advertisements” complained of and each class member found the advertisements to be false and misleading.  For example, some consumers may have been repeat customers or customers who purchased based on the Neutrogena brand name, not the representations at issue.  And because the court also found that the case would present management difficulties, the district court concluded that “the class device [was] not appropriate” and denied plaintiff’s motion for certification.

These developments and cases illustrate that defendant cosmetic companies have several options available when opposing putative class motions for certification.  Under Dukes, district courts are required to employ a rigorous analysis to ensure that all of the Rule 23 requirements are met before certifying a class.  Companies can argue that the putative class does not meet one or more of Rule 23(a)’s prerequisites.  And if the plaintiffs are seeking certification under Rule 23(b)(3), defendants can argue that plaintiffs cannot meet either the predominance or superiority requirements, both of which must be met for certification.    Companies can also attack the reliability of any expert testimony presented by plaintiffs in support of class certification, an approach that will become very powerful if the Supreme Court decides that a Daubert analysis does apply to expert testimony presented at the class certification stage.

Since the cosmetics industry may remain a target for some time, there are steps that companies can take to help avoid FDA warning letters and prepare for the possibility of class action litigation.  Suggested steps for anti-aging product makers and their counsel include:

  • Monitor on a regular basis all FDA warning letters issued to companies in the cosmetics industry and keep a list of all the statements the FDA identifies as problematic.
  • Keep track of all of the promotional statements the company makes with respect to its anti-aging products, including testimonials and other statements on labels, displays, websites, brochures, print and television.
  • Compare the company’s promotional statements to the ones the FDA has flagged.  If any of the company’s statements are similar to those identified as Act violations, the company must assess the risk created by the statements and develop a plan.  Depending on the circumstances, the company may decide to alter its statements or may develop arguments that its statements do not violate the Act.
  • Track all of the putative class action lawsuits filed against other companies within the industry, taking note of the plaintiffs’ claims and the marketing statements identified in the complaints.
  • Compare the promotional statements that plaintiffs have pinpointed in their lawsuits to the company’s marketing statements, looking for any similarities.
  • Pay special attention to successful arguments – like Neutrogena’s in defeating class certification – that Rule 23(b)(3)’s predominance requirement cannot be met because of individual issues.
  • Work with outside counsel to understand the false advertising and consumer protection laws of all 50 states, including the types of damages that those laws provide for.  The recently filed anti-aging product class actions allege violations of these types of state laws.  And because of Rule 23(b)(3)’ superiority requirement, the differences between these laws – as illustrated in the antidepressant litigation – may help companies defeat class certification when the putative class includes members from numerous states.
  • Keep up with developments in class action law, even those outside the cosmetics industry. Decisions pending at the Supreme Court like the Behrend v. Comcast case which could impact the certification of class actions in all the federal courts are particularly important.

Companies that take a proactive approach to monitoring their marketing materials as well as relevant legal developments will be better able to mitigate the risks of FDA warning letters and class action lawsuits.

Posted in Class Action Law Suits, Consumer Fraud - False Advertising, Expert Issues, Product Labeling Liability, Supreme Court

Another Class Cert Denial Illustrates Difficulties Associated with Consumer Protection & False Advertising Class Actions

By Sylvia E. Simson
Published on February 12, 2013

On February 5, 2013, Judge Nathaniel Gorton of the U.S. District Court for the District of Massachusetts denied two motions for class certification in the multidistrict litigation (“MDL”) concerning Forest Pharmaceuticals, Inc. and Forest Laboratories, Inc. (collectively, “Forest”)’s marketing and sales of two antidepressant drugs, Celexa and Lexapro, In re: Celexa and Lexapro Marketing and Sales Practices Litigation, MDL 2067.    Judge Gorton’s decision is yet another addition to a growing list of class certification denials in the consumer protection and false advertising class action context, and exemplifies the difficulties faced by plaintiffs in these types of suits in establishing Rule 23(b)(3)’s requirements.

The heart of the off-label use allegations in the plaintiffs’ complaints is as follows.  In 1999, Forest submitted protocols to the U.S. Food and Drug Administration (“FDA”) for two double-blind, placebo-controlled studies on the pediatric use of Celexa.  One study, referred to as the Lundbeck study, indicated that Celexa was no more effective than a placebo in treating pediatric depression and caused more suicidal ideation than taking a placebo, whereas another study conducted by Karen Wagner at the University of Texas indicated than Celexa was more effective than a placebo.  In September 2002, FDA denied Forest’s application for a pediatric indication for Celexa, citing the findings of the Lundbeck study; thus, FDA only approved Celexa, as well as Lexapro, for use in adults.  From 2001-2004, Forest did not disclose the Lundbeck study findings to sales representatives, consultants, or its pediatric researchers, including Dr. Wagner.  On June 21, 2004, the New York Times published an article revealing the results of the Lundbeck study, observing that Dr. Wagner’s recent American Journal of Psychiatry article failed to mention the contradictory results articulated by the Lundbeck study.  Forest quickly issued a press release acknowledging the Lundbeck study and another double-blind study for Lexapro that did not show efficacy in comparison to a placebo.  As for the plaintiffs’ complaints, they alleged that Forest (1) misled physicians by promoting the Wagner results (and thus the safety and efficacy of Celexa for pediatric use) while failing to disclose the Lundbeck results, and (2) illegally paid kickbacks to physicians to induce them to prescribe the drugs.

The first motion for class certification involved a Missouri case, Jaeckel, and a New York case, Palumbo, which were consolidated for pretrial proceedings. The plaintiffs in these cases, who brought consumer protection law violation claims and fraud-based claims, among others, sought to certify a nationwide class of Celexa and Lexapro purchasers for pediatric/adolescent use pursuant to Fed. R. Civ. P. 23(b)(3).  Upon conducting a choice-of-law analysis, despite plaintiffs’ assertions that Missouri law should apply to both cases, Judge Gorton found that the law of the plaintiffs’ home states must apply.  As a result, he found that “[b]ecause the claims in [both] cases must ‘be adjudicated under the law of so many jurisdictions, [presumably all 50 states,] a single nationwide class is not manageable” and “a class action is not the superior method [of] adjudicat[ion].”  In holding that the class did not meet Rule 23(b)(3)’s superiority requirement, Judge Gorton cited to the Seventh Circuit’s In re Bridgestone/Firestone, Inc. decision, which stated that “[c]ourts have been particularly unwilling to certify classes under the laws of multiple states in the . . . state consumer-protection law[ context] . . . [because] those laws vary widely state to state and ‘courts must respect these differences rather than apply one state’s law to sales in other states with different rules.’”

The second motion for class certification was brought by Scott Wilcox, who claimed that Forest violated the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200-17209, and False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500-17509, by making “fraudulent, false, unlawful and misleading representations that [Celexa] was safe and effective for minor children.”  Wilcox sought certification for a California class of purchasers of Celexa for pediatric/adolescent use pursuant to Rule 23(b)(3).  Forest argued that while Wilcox, as the representative plaintiff, need not establish that unnamed class members were “actually deceived,” class certification is inappropriate because individual proof would be necessary to determine whether each class member was exposed to the allegedly false or misleading advertising at issue, i.e., that each of the physicians who prescribed Celexa to class members was actually exposed to the allegedly false statements made by Forest employees.  Judge Gorton agreed, noting that “[a]t best[,] plaintiff can show records indicating that 6,000 sales calls were made by Forest sales representatives to doctors in California regarding Celexa,” and that the plaintiff has not shown “how many of those calls actually related to promoting off-label pediatric use.”  Judge Gorton also noted that “individual questions will remain as to whether each doctor relied on those misrepresentations when deciding to prescribe Celexa.”  Thus, “[b]ecause the UCL and FAL claims require individual, plaintiff-specific determinations, those claims are not subject to common proof” and thus the class cannot meet Rule 23(b)(3)’s predominance requirement.

In short, Judge Gorton’s decision is one more decision illustrating the difficulties associated with litigating consumer protection and false advertising class actions.  The denial of Jaeckel/Palumbo class certification illustrates how even though there may be some advantages to litigating a consumer protection claim on a class-wide basis—for example, each individual claim is relatively small, and so without the class device, many claims would go without vindication—the case management difficulties associated with applying a variety of states’ laws outweigh the benefits.  The denial of Wilcox class certification, on the other hand, highlights how difficult it is to sustain a consumer protection class without resorting to individualized inquiries with respect to each class member’s claim.  In the wake of the recent flurry of consumer fraud and false advertising complaints being filed against corporations in the skincare and food industries, among others, companies should take notice of this decision, and others, bringing such suits to a standstill at the class certification stage.

Posted in Class Action Law Suits, Consumer Fraud - False Advertising, Pharmaceutical Law