This
dispute has been around
for a while. The court’s introduction gives you a sense of the case: “The
briefs and statements of facts alone come to 735 pages. With attachments, the
paper reaches 35 inches and 84 pounds. But at the bottom of the 735 pages, 35
inches, and 84 pounds, there is no lawsuit.”
TLI (and president Kramer) and GNI (and president Gaspari)
compete to sell bodybuilding-related supplements. TLI sued GNI mostly for false advertising,
alleging that GNI falsely marketed its Novedex XT, Halodrol Liquigels, Halodrol
MT, and SuperPump 250 as “safe,” “natural,” “DSHEA-compliant,” and “legal.” (DSHEA is the federal law that (barely)
regulates supplements.) GNI
counterclaimed with similar causes of action, alleging among other things that
TLI disparaged GNI’s products.
The court first kicked out a number of expert reports. For example, TLI’s consumer survey went
because it essentially asked past GNI purchasers whether they’d have changed
their minds if they’d known that GNI falsely advertised its products as
‘Natural,’ ‘Legal,’ ‘DSHEA-compliant’ and ‘Safe.’ The respondents weren’t shown
to be representative, and the questions were “worded to obtain a response
favorable to TLI,” such as asking respondents “how important is it that the
supplement contains ingredients that are legal?” and then offering them the
answers “Very important; I would never purchase a supplement I knew contained
an illegal drug”; “Somewhat important; I would prefer to purchase a supplement
that did not contain an illegal drug;” and “Not important; in purchasing a
supplement, I do not consider whether the product might contain an illegal drug.”
The survey didn’t ask about the effects of “natural” etc. claims on supplement
purchase intentions; it didn’t control for how respondents’ satisfaction levels
with their purchases influenced their responses regardless of the ads. So even if the sample had been
representative, it wouldn’t have been relevant to the materiality of the
challenged claims.
An expert report on whether GNI’s supplements were
DSHEA-compliant and safe also went, because the expert opined on whether the
results of studies were sufficient to substantiate a safety claim rather than
on the key issue of the falsity of the safety claim itself; DSHEA doesn’t
require the kind of substantiation he said should be required. (If properly characterized as an
establishment claim, a safety claim could be disproven by showing that the
evidence didn’t support the claim.) The court concluded the testimony about
insufficient evidence wouldn’t aid the jury, which “likely would be confused
and easily misled without a standard for determining what is ‘safe.””
Similar fates awaited TLI’s market share and damages experts,
GNI’s counterclaim damages expert, and GNI’s legal expert (offered to give
legal testimony on the legal meanings of the relevant terms), the last because
experts aren’t allowed to testify about law.
Turning to the merits: Novedex XT and the Halodrol products
were sold as supplements to increase testosterone levels, while SuperPump 250
was “a preworkout dietary supplement to assist in the development of lean body
mass.” Neither Halodrol MT nor SuperPump 250 has been the subject of a recall. However, TLI questioned GNI’s ability to
obtain turkesterone, an ingredient of SuperPump 250, claiming to have an
exclusive agreement for its sale in the US.
It also challenged GNI’s claim that an ingredient in Halodrol MT was 95%
pure.
In early 2010, the FDA announced that a third-party retailer
was conducting a voluntary nationwide recall of 17 supplements, including
Novedex XT and Halodrol Liquigels, sold during several months in 2009. The FDA was concerned that the products might
contain ingredients appropriately classified as steroids. The retailer stated
that it couldn’t independently confirm the FDA’s concerns, but it was
undertaking a voluntary recall out of an abundance of caution. As the FDA’s press release said, steroids can
cause harmful effects, including acute liver injury, shrinkage of the testes,
male infertility, adverse effects on blood lipid levels, and increased risk of
heart attack, stroke, and death. The FDA
later announced that GNI was conducting a voluntary recall of Novedex XT, after
being informed by the FDA that an ingredient didn’t meet the definition of a
dietary ingredient and thus violated the FDCA.
The press release also described unpleasant potential adverse side
effects from the ingredient.
Many of the allegedly false ads came from posts on the
bulletin board of bodybuilding.com, e.g., Kramer called Gaspari “a joke in this
industry peddling protein from his garage.” (Gaspari said in an interview that
he began selling product out of his car and used his mother’s garage and
basement as his warehouse and office.) Kramer
also posted that “Gaspari was a joke in this industry,” “knows nothing about
supplements,” and “would be a personal trainer at 24 Hour Fitness” without another
party. TLI, posting under the name “Truth Speaker,” posted lab test results from
GNI’s Vasotropin. The post title was “GASPARI selling SAW DUST? ? ?” and the
post stated that “independent lab test results” indicated that each tablet of
Vasotropin contained an ineffective amount of ingredient: “A dose that will do
NOTHING for anyone expecting a pump but may make Gayspari [sic ] and the
scammers that work for him rich and you a sucker!” GNI alleged that the post
falsely suggests that this ingredient was the key ingredient in Vasotropin.
Out of this hot mess, the court first analyzed TLI’s claims
that GNI falsely represented its products as legal, DSHEA-compliant, naturally
occurring, safe/“the safest,” and containing particular ingredients. First, the DSHEA bars private enforcement, so
the court refused to determine whether the products were “legal,”
“DSHEA-compliant,” “naturally occurring,” and/or “safe” when the FDA hadn’t
made such a determination. (This
analysis is a pretty unusual extension of Pom
Wonderful and any appeal is likely to be influenced by the outcome of that
case in the Supreme Court; the long-suffering judge may not be done.) Under the DSHEA, the burden is on the FDA to
prove a supplement adulterated, so a supplement can’t be “unsafe, not DSHEA
compliant, and/or illegal” unless the FDA proves it adulterated. Judicial determination of these claims would
usurp the FDA’s authority. Plus, a
layperson’s statements purporting to interpret a statute or regulation are opinion,
not factual claims. Thus, GNI’s
statements about safety (!), DSHEA compliance, and legality were not false when
made. (I think the court’s annoyance
with the litigants has led it to reason too broadly—safety can be assessed
without the FDA’s ruling, and given the DSHEA’s allowed-by-default rule, a
ruling that the product was unsafe would not conflict with the FDA’s
authorization of the product, since none has occurred, as it might in the case of prescription drugs.)
The court also kicked out challenges to GNI’s ads that Novedex
XT “is the safest way to naturally cause positive anabolic effect,” is a
“natural vehicle,” contains “naturally occurring anti-aromatase inhibiting
compounds,” and “has been shown to increase natural production.” The parties
disputed whether the ingredient could be considered “natural” or “naturally
occurring” because the ingredient can be synthesized from naturally occurring
material. (If it could only be
synthesized, and doesn’t occur in nature, I’m not sure how it could be
considered natural by any definition, but ok.)
But the court held that it didn’t have a standard for determining what
was “natural” or “naturally occurring,” and with no FDA determination, the
statements were just opinions. (I would
think that consumer perception would provide the appropriate standard, though
there doesn’t seem to be any expert evidence left here.) TLI didn’t meet its burden of showing the
falsity of the other challenged claims.
And because of the expert exclusions, it didn’t show materiality
either. Nor did it show damage—it didn’t
show that, but for the false advertising, consumers would have chosen TLI’s
products, as opposed to those of numerous competitors.
Along the way the court rejected arguments that the statute
of limitations and laches barred TLI’s claims, since the evidence showed that TLI
might have had suspicions about various ingredients, but not enough knowledge
to bar its claims as a matter of law.
GNI counterclaimed based on TLI’s disparagement of GNI
products on internet message boards, similar to the false advertising arguments
it made in this case: GNI products lacked claimed ingredients; they were
ineffective; Gaspari was a “joke” who knew nothing about supplements and a
“counterfeiter”; GNI used expired ingredients; the recalled GNI products were
“spiked” with illegal steroids; this case would put GNI out of business;
etc. “[E]ven when read in context, the
statements allegedly made by or on behalf of TLI are … opinions, predictions,
or not false.” Plus, GNI’s own arguments
that comments on message boards weren’t commercial advertising or promotion
applied to the statements it was challenging too. Without damages evidence, its claims had to
fail.
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