Food for Thought: Food Industry Decisions with Bite

Food for Thought: Under California Law, Individual Class Members Need Not Show Reliance on Allegedly Misleading Statements at Time of Purchase

Class Actions   |   Litigation and Trials   |   Mass Tort and Product Liability   |   May 18, 2018
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Bradach v. Pharmavite, LLC, 735 F. App’x 251 (9th Cir. 2018)

In its latest opinion addressing class action claims related to allegedly misleading labels, the Ninth Circuit Court of Appeals held that individual class members need not show they relied on allegedly misleading statements for a proposed class action against supplement manufacturer Pharmavite LLC to proceed. The lawsuit alleged that the heart health claims on the defendant’s vitamin E supplements were misleading and violated California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA). The plaintiff, Noah Bradach, brought the suit against the defendant on behalf of himself and other Californians. Specifically, the plaintiff alleged he and other consumers purchased the defendant’s Nature Made Vitamin E dietary supplements in reliance on the statement "Helps Maintain a Healthy Heart," which appears on the product’s label.

The lower court held that the plaintiff lacked standing to assert his claims because it concluded that his deposition testimony and interrogatory response indicated he believed the defendant’s heart health statement was a disease claim, preempting his state-law claims. As a result, the district court held the plaintiff could not serve as the class representative, declined to certify the class, dismissed the case, and awarded the defendant its costs for the consumer survey it commissioned to defend the lawsuit. The Ninth Circuit reversed and remanded.

Under federal law, which primarily governs labeling of dietary supplements, manufacturers’ statements on product labels are either "structure/function" claims (allowing manufacturers to display truthful, non-misleading statements about the benefits the dietary supplement provides) or "disease claims" (which are statements that a product can diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases). Structure/function claims do not require preapproval from the Food and Drug Administration (FDA) so long as the manufacturer has substantiated that the statements are truthful and not misleading, and so long as the manufacturer provides a disclaimer that the FDA has not approved the statement. Similarly, the manufacturer must notify the FDA of any structure/function claims it makes no later than 30 days after its first use. Disease claims, on the other hand, require preapproval from the FDA.

Here, the parties did not dispute that the defendant’s heart health statement was a structure/function claim. While federal law can preempt state laws that impose different requirements from those dictated by federal statutes and regulations, federal law does not preempt state requirements that statements on dietary supplement labels that are structure/function claims and speak of maintaining heart health be accurate and not misleading. Federal law does preempt state laws that regulate statements on dietary supplements that are disease claims and speak of preventing heart disease if those state regulations impose requirements that are different from those imposed by the federal government.

The district court denied class certification on the grounds that the plaintiff’s claims were preempted, he was not a member of the proposed class and, as a result, failed the typicality requirement of Federal Rule of Civil Procedure 23. The Ninth Circuit held that the plaintiff’s claims were not preempted. Specifically, the court indicated that the plaintiff’s testimony reflected that he had a mixed understanding of what the defendant’s product would do; he understood that the product could both maintain his heart health and prevent heart disease. Thus, the court held that the plaintiff’s claims were not solely premised on preempted disease claims, and because the court has recognized that a plaintiff may have claims based on mixed motives, the plaintiff was allowed to proceed with claims arising partly from non-preempted motives.

In addition, the district court held that the proposed class filed the ascertainability, commonality, predominance, and superiority elements of Rule 23 because it would be difficult to determine whether the putative class members viewed the heart health statement as a disease claim a structure/function claim. The Ninth Circuit held that class members in actions based on CLRA and UCL violations are not required to prove individual reliance on the allegedly misleading statements. As a result, the Ninth Circuit reversed the district court’s ruling for reconsideration of the class allegations.

Finally, the district court granted the defendant’s motion seeking recovery of more than $84,000 in expenses incurred to conduct a consumer survey for its expert report. The Ninth Circuit held that although Rule 54(d) grants the district courts discretion to refuse to tax costs in favor of a prevailing party, a district court may not rely on its equity power to tax costs beyond those authorized by 28 U.S.C. § 1920. The court explained that the text of section 1920(4) is narrow and permits fees only for the physical preparation and duplication of documents, not for the intellectual effort involved in the production. The Ninth Circuit held that the district court also erred in granting the defendant’s motion seeking to recover the costs of the survey.

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