Tuesday, November 02, 2010

Multivitamins raise multiple claims

McKinney v. Bayer Corp., 2010 WL 3834327 (N.D. Ohio)

Bayer sells One-A-Day vitamins, including One-A-Day Men's Health Formula and One-A-Day Men's 50k Advantage. McKinney alleged that Bayer falsely advertised that these vitamins "promote prostate health" and "may reduce the risk of prostate cancer," putting these claims on the label as well as in ads. In fact, McKinney alleged, the key ingredient which Bayer claims provides these health benefits--selenium--"actually poses serious health risks when taken in the amounts recommended by Bayer." (Bayer has settled claims with three states arising from the same underlying facts.)

The front of Men’s Health Formula, for example, says “Supports Prostate Health,” while the back says that "emerging research suggests Selenium may reduce the risk of prostate cancer,” while including the disclaimers that “FDA has determined that this evidence is limited and not conclusive” and “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” Since 2008, Bayer has run at least 11 TV ads and at least 9 radio ads making prostate cancer/health claims.

McKinney alleged that he bought the vitamins in reliance on the prostate claims in the TV and radio ads, though he didn’t specify which ads he saw, when he bought the products, what the price was, or whether he actually consumed the vitamins. He didn’t allege physical harm. He sued on behalf of a putative class for violation of Ohio consumer protection law and breach of express and implied warranties.

The Ohio Consumer Sales Practice Act bars unfair or deceptive consumer sales practices that mislead consumers about the nature of the product they are receiving, as well as unconscionable acts or practices that manipulate a consumer's understanding of the nature of the transaction at issue. A consumer may bring a class action only when a defendant acted in the face of prior notice that its conduct was deceptive or unconscionable, and notice requires either a rule adopted by the Ohio AG or a judicial decision involving substantially similar conduct.

Along with arguing that he could maintain a class action under a different section of the law, McKinney argued that the prohibition against class actions conflicted with Rule 23 of the FRCP and was preempted. The court disagreed, finding itself bound by Justice Stevens’ concurrence in Shady Grove, the relevant case, because his concurrence rested on the narrowest legal ground: it allowed Rule 23 to preempt only some state rules barring class actions, when the rules weren’t substantive. Ohio has created a statutory scheme allowing individual actions even without prior notice to the supplier of the product or service at issue, but class actions only where the supplier has such notice. Thus, the Ohio rule is substantive and not preempted. The OCSPA class claim was dismissed, though an individual claim survived.

Ohio Deceptive Trade Practices Act: Similar to the Lanham Act, the ODTPA regulates trademarks, unfair competition, and false advertising. There’s a split in the federal district courts on who can file suit under the ODTPA. Some judges hold that consumers can’t sue because the law only governs conduct between commercial entities. Others look at the broad language of the statute, which allows a “person who is injured by a person who commits a deceptive trade practice” to sue. In general, Ohio courts look to the Lanham Act when interpreting the ODTPA, and the Lanham Act doesn’t allow consumer standing despite having similar language about who can sue. The purpose of the Lanham Act, to protect those engaged in commerce against unfair competition, shows an intent to limit standing. Bayer argued that the same was true of the ODTPA, and that if it applied to consumers it would render the OCSPA superfluous. McKinney responded that Lanham Act standing requires a plaintiff who’s a competitor and who alleges competitive injury, whereas Ohio law provides that a complainant need not prove competition between the parties. (This is only true for the Lanham Act’s false advertising provisions; trademark plaintiffs need not prove competition either.) Bayer responded that the ODTPA just allows commercial entities who are noncompetitors to sue.

Because of particular difficulty discerning what the Ohio Supreme Court would do, the court decided to certify the question to that court.

Breach of express warranty: Bayer argued that (1) its statements didn’t provide an express warranty because they were not affirmations of fact; and (2) the damages McKinney sought were legally unavailable. McKinney responded that Bayer promised that the vitamins were safe and that they promoted prostate health, but they aren’t and they don’t, and that he adequately alleged at least benefit-of-the-bargain damages. In Ohio, an ad can create an express warranty, but merely affirming the value of the goods or expressing a favorable opinion doesn’t create a warranty; nor does puffing. Whether a seller made a promise amounting to a warranty is generally reserved for the trier of fact, though courts have also looked at whether the seller conveys a fact the buyer couldn’t know on his own and could reasonably believe. The warranty must be the basis of the bargain—the purchaser must rely on it at least in part.

McKinney alleged that he relied on the prostate claims, and that the vitamins didn’t conform to the promises made because studies show that selenium does not promote prostate health. Bayer argued that, read as a whole, the prostate claims are just conditional statements that the products might or might not have certain health benefits. Bayer might be right, but that’s not for the court to decide on a motion to dismiss.

As for damages, the measure is generally the difference between the value of the goods and the value the goods would have had if they’d been as warranted, and special circumstances can lead to recovery of the full purchase price. McKinney sufficiently alleged economic injury (at least the price difference between ordinary multivitamins and these).

McKinney’s breach of implied warranty of merchantability claim, however, failed for want of privity.

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