Iovate Settles Hydroxycut Complaints after Years of Litigation

By Josh Long

CALIFORNIA Iovate Health Sciences Group, Inc., the Canadian manufacturer of the Hydroxycut weight loss supplements, has agreed to settle a consolidated class action lawsuit after months of negotiations and millions of pages of documents were exchanged in discovery during years of litigation.

The settlement includes $20 million that is available for distribution to class members in cash and Hydroxycut products, though certain administration expenses (estimated to be less than $1.5 million) will partially eat into the bucket. Separately, plaintiffs' lawyers are entitled to up to $5 million in attorney's fees and $300,000 in out-of-pocket costs.

For three years, Iovate has defended itself against allegations that it sold weight loss supplements despite knowledge that the products were ineffective in reducing weight and could result in injury and even death. Hydroxycut has been marketed as "America's #1 Selling Weight-Loss Supplement".

The roots of the litigation approximately coincided with a notice from the FDA that urged consumers to discontinue use of the products after the government agency received reports of several health problems including elevated liver enzymes, jaundice and seizures linked to them.

Settlement to Resolve Number of Civil Lawsuits

If approved, the settlement will resolve a number of class action lawsuits that were filed around the United States and consolidated into one proceeding before the U.S. District Court for the Southern District of California.

The litigation involving 14 Hydroxycut products also brought retail giants into the fray, including defendants CVS Caremark Corp., GNC Corp. and Wal-Mart Stores, Inc. among others.

Two million pages of documents from electronic files and hard copies were produced during discovery.

The parties mediated their dispute in 2011 and 2012, the settlement agreement notes, and plaintiffs' lead counsel Timothy Blood told INSIDER the agreement stemmed from months of negotiations.

The settlement covers individuals who purchased Hydroxycut products between May 9, 2006 and May 1, 2009, but excludes individual personal injury claims that are pending in state and federal courts.

Class Members Entitled to Cash or Hydroxycut Products

Under the settlement, class members can elect to receive $25.00 for every product they purchased. In lieu of cash, consumers can elect to receive a Hydroxycut product with a minimum retail value of $50.00. Consumers must provide proof of purchase only if they are electing to receive either cash or product for more than one unit that they purchased.

"The current Iovate products offered do not contain any of the ingredients alleged to be dangerous and ineffective," according to a memorandum filed by plaintiffs' counsel.

Up to $14 million will be available for cash claims to the extent class members collectively elect to take more cash than products. (Each named plaintiff in the various class action lawsuits also will receive $3,000).

Final Resolution Still Months Away

But it likely will be several months before class members actually receive either award.

Federal judge Barry T. Moskowitz has yet to approve the preliminary settlement. If and after the preliminary settlement is granted, class members will receive notice and have an opportunity to weigh in on the fairness of the agreement. Plaintiffs' counsel have little contact information for class members so a notice will be published in several periodicals and online including on Facebook.  

Finally, the judge must find that the settlement is fair, adequate and reasonable before he signs a final order. 

The parties have asked Moskowitz to schedule a final approval hearing four months after he grants preliminary approval of the agreement.

The settlement will resolve litigation against the following defendants: Iovate Health Sciences, Inc.; Iovate Health Sciences U.S.A., Inc.; Kerr Investment Holding Corp.; GNC Corp.; Wal-Mart Stores, Inc.; Walgreens Company; CVS Caremark Corp.; Vitamin Shoppe Industries, Inc.; NBTY, Inc.; BJ's Wholesale Club, Inc.; Kmart Corp.; and Rite-Aid Corp.

William Tarantino, an attorney for the defendants, did not immediately return a phone call Wednesday seeking comment on the settlement agreement. An Iovate employee also didn't return a phone call Wednesday.

Government Crackdown Preceded Litigation

About three years ago, Ontario, Canada-based Iovate fell on hard times.

On May 1, 2009, FDA warned consumers to immediately stop using Hydroxycut products, noting some products are "associated with a number of serious liver injuries." Iovate simultaneously announced it was voluntarily recalling Hydroxycut branded products sold in the United States.

However, the company said at the time it would not provide restitution to consumers, according to the memo from plaintiffs' counsel. Three weeks later, Andrew Dremak filed a class action lawsuit against Iovate for false advertising, and a number of other civil complaints were filed shortly thereafter around the United States.

In 2010, Iovate entered into a settlement agreement with the Federal Trade Commission over allegations that the company falsely advertised it could help consumers lose weight and treat or prevent colds and other illnesses. The FTC noted Iovate agreed to pay $5.5 million to settle the charges under a resolution that also required the company to stop making deceptive health claims about its products.

Personal Injury Claims Still Alive

Blood said he is aware of several personal injury lawsuits that remain pending against Iovate in state and federal courts. Plaintiffs' memo notes that a number of personal injury cases remain pending in California before Moskowitz, the same federal judge asked to approve the class action settlement.

Gayle Blatt, a San Diego-based plaintiff's attorney who has been involved with personal injury litigation against Iovate, couldn't be immediately reached Thursday for comment. In 2009, her law firm teamed up with another firm to sue Iovate and several other defendants on behalf of a marine who allegedly suffered life-threatening liver failure after ingesting Hydroxycut diet supplements while serving in Iraq. The soldier, Jeremiah D. Smith, reportedly suffered signs of liver failure and was hospitalized for several weeks after ingesting Hydroxycut Hardcore Liquid Caplets at the recommended dose.

Josh Long is Legal and Regulatory Editor with VIRGO's Health & Nutrition Network. He can be reached at [email protected] .