Monday, November 01, 2010

Formula lost: consumer claim against Enfamil fails

Martin v. Mead Johnson Nutrition Co., 2010 WL 3928710 (D. Mass.)

Hello, follow-on class action litigation against Enfamil LIPIL! Martin’s putative class action on behalf of Massachusetts consumers alleged that Mead Johnson falsely advertised that Enfamil LIPIL was the only infant formula containing two nutrients, DHA and ARA, which promote brain and vision development in infants. This allegedly caused the class to pay more for Enfamil LIPIL than for competing products providing the same benefits. The label said "Only Brand CLINICALLY PROVEN To Improve VISUAL & MENTAL DEVELOPMENT" with a small print "vs. prior version without LIPIL,” printed perpendicular to the label, which Martin alleged made it less likely to be noticed and was vague and unclear anyway. Allegedly misleading ad statements included "En-Fact: Enfamil LIPIL's unique formulation is not available in any store brand" and "It may be tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development.” Martin pointed out that PBM had won $13.5 million in damages and injunctive relief relating to the same ads, and that the NAD had also concluded that Mead Johnson had repeatedly disseminated ads violating NAD standards.

Martin sued for unjust enrichment, untrue and misleading advertising in violation of Mass. Gen. Laws ch. 266, § 91, and unfair and deceptive acts and practices in violation of Mass. Gen. Laws ch. 93A, § 2.

The magistrate judge recommended that Mead Johnson’s motion to dismiss for failure to state a claim should be allowed. First, the claims had to be pled with particularity under Rule 9(b), but they’d fail under the regular standard too.

On the ch. 93A claim, the judge found that Martin couldn’t show an actionable injury. Economic harm alone—paying too much for Enfamil--was insufficient. She didn’t allege that the product didn’t perform as represented or contain the ingredients advertised. The judge relied on a case finding that a plaintiff didn’t suffer injury from buying a medicine for her dog that allegedly posed safety concerns. Though her dog was fine, she alleged that she was entitled to the difference between the price she paid and the price she would have paid had the risk been fully disclosed. The First Circuit concluded that ch. 93A injury means “economic injury in the traditional sense,” so when the plaintiff had used up the product, and not been harmed thereby, the fact that the plaintiff may have overpaid for the product was insufficient to state a recognizable injury. The judge expressed no opinion on whether someone who still had the product, but had only alleged overpayment, would be able to assert injury. (The economic harm here seems a lot more concrete—there were house brands on the market that offered the same benefits. The underlying problem with the “risk” case is that it’s hard to figure out what the loss was. This seems different.)

Mass. Gen. Laws ch. 266, § 91 prohibits untrue and misleading advertising, but doesn’t provide a private right of action for damages. Since Mead Johnson is already enjoined because of the PBM litigation, it didn’t appear that Martin could establish irreparable harm. In addition, the complaint was too general. It didn’t identify the dates of the challenged ads or which ads contained untrue, as opposed to misleading, statements. Most importantly, she didn’t provide any facts in support of the conclusory allegation that defendants knew or should have known that their ads were misleading. She thus failed to plead facts in support of the critical element of scienter. The complaint supports an interpretation that defendants “may have known” in 2008 that the accuracy of the ads was being challenged, but that excludes a large portion of the class period (since 2005).

Unjust enrichment: in Massachusetts, it’s a theory of equitable recovery, not a separate tort. Because Martin failed to allege a cognizable injury, this claim should also be dismissed. She also failed to plead that Mead Johnson was improperly enriched or that the amount she paid was unjustified, as required: she alleged no facts to suggest that the product she received was worth less than what she paid or that Mead Johnson artificially inflated the price. She bought Enfamil with full knowledge of its price and contents. That there were cheaper products on the market isn’t sufficient to establish that the product she bought wasn’t worth what she paid. (What would be, if pleading that identical but cheaper house brands were available?)

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