Friday, April 22, 2016

Flagging supplement case revived

ThermoLife Intern., LLC v. Gaspari Nutrition Inc., --- Fed.Appx. ----, 2016 WL 1460171, No. 14–15180 (9th Cir.  Apr. 14, 2016)
ThermoLife sued Gaspari (GNI) false advertising under the Lanham Act and unfair competition under Arizona common law, based on GNI’s allegedly false advertising of its testosterone boosters as “safe,” “natural,” “legal” and compliant with the FDCA.  The court of appeals vacated the long-suffering district court’s grant of summary judgment and remanded, given that its preemption analysis was based on now-overturned 9th Circuit precedent. 
The court of appeals first reversed the exclusion of two experts’ opinions, and upheld the exclusion of two others.  The first wrongly excluded expert opined that the dietary supplement industry would not have deemed GNI’s products “safe,” which was relevant even if it didn’t offer a definitive opinion on safety, and also provided a usable standard for determining “safety”—the industry standard.  The expert’s “presumption that GNI’s ingredients were not safe was sufficiently valid in light of the industry’s strict reliance on establishing safety through certain procedures GNI had not used.” 
Another expert’s survey, which asked consumers of testosterone boosters whether they would have continued using GNI’s products (or switched to another testosterone booster) after learning GNI’s advertisements were false, was relevant to materiality.  “Although the district court faulted the survey’s biased questions and unrepresentative sample, neither defect was so serious as to preclude the survey’s admissibility.”  The sample at least included consumers both of GNI’s products and of other testosterone boosters. “Nor was the survey unreliable simply because it was not validated. Berger reasonably explained why the survey could not be validated and concluded it was nevertheless a ‘good survey’ based on respondents’ ‘consistent, across-the-board answers.’”
With that out of the way: “Pom Wonderful established that the FDCA generally does not preclude Lanham Act claims for false labeling of food.”  And its rationale applied to ThermoLife’s claim as well: neither the FDCA nor the Lanham Act expressly barred ThermoLife’s claims, and the FDCA’s public health-protective aim was not inconsistent with the Lanham Act’s protection of commercial interests “by relying on the market expertise of competitors.”
GNI argued that Pom Wonderful could be distinguished because ThermoLife’s claims “require litigation of the alleged underlying FDCA violation ... where the FDA has not itself concluded that there was such a violation.” But ThermoLife’s claims that GNI falsely advertised its products as “safe” and “natural” required no interpretation of the FDCA, nor did ThermoLife need to demonstrate a FDCA violation to prevail on its claims that GNI falsely advertised its products as “legal” or “DSHEA-compliant.”  
Usually, claims about legality are generally inactionable opinion because they “purport to interpret the meaning of a statute or regulation.” But there is a “well-established exception” that an opinion “by a speaker who lacks a good faith belief in the truth of the statement” is actionable. Because every opinion “explicitly affirms ... that the speaker actually holds the stated belief,” a CEO’s statement about legal compliance “would falsely describe her own state of mind if she thought her company was breaking the law.” ThermoLife pointed to numerous emails indicating GNI was aware its products were not DSHEA-compliant, creating a triable issue of falsity about legality.
Safety statements were also factual claims.  GNI argued that its products were presumed safe until the FDA proved otherwise. But the statutory provision on which GNI relied didn’t mention a presumption of safety.  It defined when a supplement is safe enough that it wouldn’t be an “adulterated food.” A reasonable jury could find GNI’s products were not safe, based on the evidence about recalls and the expert’s report. There was also a triable issue of falsity on GNI’s claim that a product was “natural” and that its ingredients were “naturally occurring and are found in natural foodstuffs,” which were factual claims.
The district court also erred in its analysis of materiality.  Survey results and internet message board posts “indicated that the safety, legality and natural ingredients of GNI’s products were—to varying degrees—important factors in consumer purchasing decisions.”  
And there was also a triable issue on injury.  There is a presumption of commercial injury when the parties directly compete and the defendant’s ad tends to mislead: when competitors vie for the same customers, “a misleading ad can upset their relative competitive positions” and thereby cause injury. There needs to be evidence of causality, but evidence of direct competition provides a causal link between likely deception and injury.   
There was also no preemption of the state unfair competition law claim.  Although the FDCA expressly preempts state-law requirements that conflict with certain FDCA provisions, that didn’t include § 343(a), which governs the misbranding of food through false or misleading labeling. Moreover, there was a general “presumption against pre-emption,” and there was no preemption given that “the state-law duty ‘parallels’ the federal-law duty.”

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