Make Them Prove It

September 15, 2003

10 Min Read
Make Them Prove It

Make Them Prove It

by Robert E. Feyder & Matthew G. Ball

Strategies for makers and sellers of dietary supplements facing private attorney general claims brought under Californias Unfair Competition Law

If you are a supplement maker or seller doing business in California, a private attorney general may be looking to you as a target for a false advertising claim brought under Californias unique Unfair Competition Law, Business & Professions Code Section 17200, et seq., and Section 17500, et seq. An unsuccessful defense of such a claim can be devastatingwitness the recent award against Cytodyne Technologies for more than $12 million.

One strategy for dealing with private attorneys general is to hit them in their pocketbooki.e., prevent them from proving their case through inexpensive shortcuts. Recent California and federal case law may allow supplement makers and sellers to force private attorneys general to prove their case through tests of the actual product, testimony of witnesses who have had negative experiences with the product, or surveys to prove that a statistically significant number of consumers were misled by the supplement makers or sellers advertising. A private attorney general who must finance the litigation alone may find these sources of evidence to be prohibitively expensive to develop, or unavailable.

Californias Unique Law

Supplement makers and sellers doing business in the United States are familiar with false advertising laws. Nearly all states have laws prohibiting false and misleading advertising. And, of course, every supplement maker and seller is familiar with false advertising enforcement actions brought by the Federal Trade Commission (FTC). However, Californias version of such laws, found in Business & Professions Code Sections 17200, et seq., and Sections 17500, et seq., and referred to as the Unfair Competition Law, is unique in two important respects.

First, Californias Unfair Competition Law allows lawsuits to be brought by persons who have never even purchased the supplement makers or sellers products. Plaintiffs attorneys sometimes even form their own corporations to serve as captive plaintiffs.1

Second, Californias Unfair Competition Law allows a private attorney general to bring a lawsuit on behalf of all of a supplement makers or sellers customerswithout even consulting or notifying those customers.2 A private attorney general can thus force a supplement maker or seller to refund all sums paid to purchase the supplement for the past several years.3

Also, something to keep in mind is that private attorneys general may be entitled to recovery of their attorneys fees, which not only encourages the bringing of these types of lawsuits, but also increases the potential financial exposure.

Private attorneys general typically assert that the supplement maker or seller has (1) made fraudulent claims regarding its product, and similarly, (2) that the supplement maker or seller is guilty of false advertising.4 Private attorneys general prove both assertions the same way: by demonstrating that the claims or advertising are likely to mislead the target audience.5

Some examples of how private attorneys general have attacked makers and sellers of supplements using Californias UCL and False Advertising laws are:

  • A private attorney general brought a class action against Twin Laboratories Inc. for the claim on the label of its Ripped Fuel product that it was standardized for 6% ephedrine.6

  • A private attorney general brought a class action suit against Cytodyne Technologies Inc. for claims about its ephedra-based product. Recently, Cytodyne was ordered to make more than $12 million in refunds to its customers, as well as to pay attorneys fees.7

  • An attorney-controlled corporation brought a private attorney general claim against Trimedica International Inc. for its claims that its product could naturally increase breast size.8

  • The same attorney-controlled corporation brought a private attorney general claim against Olympian Labs Inc. for Olympians claims regarding its Medi-Phen and Herp- Eeze products. Medi-Phen was advertised as a natural alternative for weight-loss. Herp-Eeze was advertised for the relief of the herpes simplex virus.9

  • The same attorney-controlled corporation also brought a private attorney general claim against Natural Balance Inc. for its claims that its product, Fat Magnet, was effective in aiding weight loss.10

Incredibly, private attorneys general do not have to prove that any of the supplement makers or sellers customers were actually misled. Nor do the private attorneys general have to prove that the claims or advertising caused anyone to purchase the supplement. A private attorney general can obtain a court order forcing a supplement maker or seller to pay refunds to all of its customers, even if it appearsas was the case with a client we representedthat many of its customers were wholly satisfied with the product.

A private attorney general claim brought under Californias UCL can be devastating to a maker or seller of dietary supplements who is found liable for making false advertising or fraudulent claims. In addition to the costs of defending against a private attorney general claim through trialwhich can be highan unsuccessful defense can literally put a supplement maker or seller out of business.

For example, as discussed above, a San Diego court recently ordered Cytodyne to refund all monies paid to purchase its product over a certain period, totaling more than $12 million.11 Few businesses can withstand a judgment amounting to a total refund of product sold over a period of years.

Because the stakes are so high, mounting a successful defense against a private attorney general is critical. We think certain recent California state and federal cases form the basis for a good strategy for supplement makers and sellers to defend against these claims.

Developing a Defense Strategy

Again, the basis of most private attorney general claims against makers and sellers of supplements is that their claims about their product constitute fraudulent business practices or false advertising. Either way, the private attorney general must prove that the target audience is likely to be deceived or likely to be misled by the fraudulent claims or false advertising.

To satisfy either of these standards, a private attorney general in many cases must prove one of two things: (1) that the claim or advertising is actually false; or (2) that the advertising, though technically true, is likely to mislead or likely to deceive consumers of the product.12

Private attorneys general, especially those Plaintiffs counsel who bring suits using their own captive for-profit corporations, are typically looking for the most bang for their buck. In other words, they will attempt to spend as little on proving their case as possible. Through our own experience, and a review of private attorney general cases brought against supplement makers, private attorneys general will sometimes seek to prove their case using nothing more than the testimony of one or more experts. These experts will attempt to prove falsity through one or more of the following:

  • a review of medical research regarding the actual product, or tests of the actual product, if any;13

  • a review of medical research regarding the ingredients of the product, if any;14

  • or simply through an analysis of the product claims filtered through whatever relevant experience the experts have, or through a rebuttal of defense expert testimony and any studies the defense offers in support of the product.15

The Court of Appeal recently limited the ability of private attorneys general to prove their case through generalized expert testimony. In National Council Against Health Fraud Inc. v. King Bio Pharmaceuticals,16 a nonprofit organization brought a private attorney general action on behalf of King Bios customers and the California general public. The National Council charged that King Bios advertising claims for 50 of its homeopathic remedies were false and misleading.

The National Council lost at trial because it failed to provide evidence showing that King Bios claims were false or misleading. Instead of testing King Bios products, or using witness testimony regarding King Bios products, National Council limited its proof to expert testimony concerning the efficacy of homeopathic remedies in general. The Court of Appeal found this to be insufficient:

[T]here is nothing in the nature of a false advertising action that makes it difficult for a plaintiff to prove the allegations of the complaint. The homeopathic remedies are marketed and readily available for testing by a plaintiff. The falsity of advertising claims may be established by testing, scientific literature or anecdotal evidence. That [National Council] does not wish to bear the expense of proving its case does not mean that the burden and expense should be shifted to King Bio.17

More recently, in National Council Against Health Fraud v. Botanical Laboratories Inc.,18 the California Court of Appeal cut short a similar case brought against another maker of homeopathic remedies for the same reason lack of evidence. Instead of presenting evidence regarding the makers specific products, the National Council again relied solely on expert testimony regarding homeopathic remedies in general.

The National Council cases can assist a supplement manufacturer in defending a false advertising case brought by a private attorney general for three reasons. First, it may be prohibitively expensive for a private attorney general to test a supplement makers products, especially if many different products are at issue in the lawsuit. Second, there may not be scientific literature that addresses the efficacy of a particular supplement product. Finally, anecdotal evidence may be unavailable, particularly if a supplement makers customers are by and large satisfied with the product.

To prove that advertising is misleading, a private attorney general must prove that the advertisement is likely to mislead or deceive a reasonable person.19 Private attorneys general may try to prove that advertising is likely to mislead a reasonable person simply by asking the court to reach that conclusion after reviewing the advertising,20 providing anecdotal evidence of witnesses who claim that the advertising misled them,21 or by using experts who will testify that a reasonable person is likely to be misled.22

However, in two recent federal cases, defendants in private attorney general cases have been able to successfully argue that a private attorney general is required to put on survey or similar evidence that a statistically significant portion of the public is likely to be deceived by plaintiffs advertising.23 This result can be advantageous to the defense of supplement makers because hiring an expert to perform an adequate survey can cost many thousands of dollars and the resulting survey and expert testimony can often be challenged.

The argument that a survey is required to prove that advertising is likely to mislead has been less successful in state courts. California Courts of Appeal have said that federal decisional authority is neither binding nor controlling in matters involving state law, and have rejected defendants attempts to assert that survey evidence is required to prove that advertising is likely to mislead.24 In fact, in the recent case involving Cytodyne, the trial court specifically ruled that consumer survey evidence was not required to find that a supplement makers advertisements are likely to mislead.25 Therefore, this argument will likely find success only in federal court.

The success of these strategies, of course, depends on the nature of each particular case. These strategies will be less successful if testing of the product is easy and inexpensive, if the private attorney general is able to put on the testimony of dissatisfied customers, if there is scientific literature attacking the supplement makers claims about the product, or with respect to survey evidence, if it is not possible to defend the private attorney general action in federal court. It is probably best to think of these strategies as potential arrows in the quill, to be drawn if and when appropriate. Moreover, these are hardly the only strategies that may be employed in defending a private attorney general action; the unique features of Californias Unfair Competition Law also suggest other unique defenses. If a supplement maker becomes a target of a private attorney general action, the supplement maker would do well to consider retaining counsel with experience defending these types of lawsuits on behalf of supplement makers and others.

Robert E. Feyder is a partner in Kirkpatrick & Lockhart LLPs Los Angeles office and Matthew G. Ball is a resident in the San Francisco office. They both have extensive litigation experience in both federal and state courts, including the representation of manufacturers of dietary supplements on a variety of issues, such as litigation under Californias Unfair Competition Law.

For a list of case references to this story, click here.

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