Wednesday, December 20, 2017

Another consumer protection case survives despite invocation of In re GNC

Racies v. Quincy Bioscience, LLC, No. 15-cv-00292, 2017 WL 6418910  (N.D. Cal. Dec. 15, 2017)

The court granted Racies’ motion for certification of a California class against the makers of Prevagen, a supposed brain health supplement, covering the usual California claims. Racies alleged that, “contrary to the product’s labeling, Prevagen does not improve memory or brain function because its only active ingredient is digested and transformed into amino acids before it can measurably affect the brain.” Although individuals can’t bring lack of substantiation claims, and allegations that Quincy misrepresented Prevagen as “clinically tested” were impermissibly based on a lack of substantiation theory, the body chemistry allegations were sufficient to proceed.

Quincy tried to turn the original allegations into a reason that Racies’ claims weren’t typical, because he relied on non-actionable representations that Prevagen was “clinically tested” rather than on representations about Prevagen’s potential brain health benefits, and also because he didn’t take the product as directed. The court disagreed.  The evidence suggested that Racies bought Prevagen, at least in part, because of what its ingredients were advertised to deliver.  (Clinical testing could only ever be support for that basic claim.)  It was enough for a misrepresentation to play a substantial part, and so be a substantial factor, in influencing his decision.  “Because Prevagen is not marketed for uses other than improving brain health and memory, it follows that representations about these purported benefits were a ‘substantial factor’ in Plaintiff’s — and all consumers’ — purchasing decision.”  Also, the manner in which Racies took the product wasn’t at issue, because the relevant inquiry and related injury under the CLRA/UCL occurs at the time the consumer purchased the product based on the product label.

Racies also showed predominance by showing that a key question was the objective one of whether the advertising was either false or misleading.  Quincy argued that hat some putative class members may have purchased Prevagen because the product was clinically tested and not simply for its purported brain health benefits. Even if that was something other than a completely “artificial” distinction, “California’s consumer protection laws evaluate materiality under a reasonable person standard, not on an individualized basis.”  Reliance was also no barrier to certification because a plaintiff is entitled to a presumption of reliance if material representations were made to class members.

Quincy then argued that proving falsity would entail individual questions rather than common evidence about the scientific literature. Although “[t]he falsity of the advertising claims may be established by testing, scientific literature, or anecdotal evidence,” Quincy argued that the scientific literature about Prevagen was “equivocal,” and therefore incapable of establishing falsity under In re GNC. Thus, Racies would supposedly have to rely on anecdotal evidence about class members’ individual experiences.

The court was unpersuaded by In re GNC and a subsequent California federal district court case applying it, and didn’t believe that the California Supreme Court would agree either.  Unfortunately, the court still used In re GNC’s redefinition of literal falsity as a situation where “all reasonable scientists agree” that the explicit claims are false, whereas misleadingness comes when “the vast weight of competent evidence establishes that those health claims are false.”  A jury could determine whether either was the case.  [Pause to reiterate: if you were using the Lanham Act, that wouldn’t actually be the test, despite what In re GNC said.  Literal falsity/misleadingness is a distinction made about how a message is conveyed.  Literal falsity is … literal.  “This car gets 40 miles to the gallon,” when it doesn’t.  Implied falsity is where an ambiguous statement deceives a significant number of reasonable consumers, e.g., “No product is better at preserving memory,” when nobody else can do the job either.  The truth or falsity of what message is conveyed to consumers is then established in the ordinary course of proof, traditionally by the usual preponderance standard.  There is zero basis in federal or California law for the new standard invented by In re GNC, so the court should have stayed even further away.]

Regardless, while “a plaintiff may fail to carry his burden to prove falsity if the scientific evidence is ultimately inconclusive, the mere existence of an expert or experts who support the defendant’s representations should not insulate a defendant from false advertising claims or foreclose class certification.” The court couldn’t substitute itself as factfinder on a motion for class certification simply because both parties have proffered scientific evidence.  

Superiority: Quincy argued that identifying class members would be difficult because “Prevagen is primarily sold by third-party retailers,” some individuals could be satisfied with the product, and any who are dissatisfied could seek a refund. None of that mattered; “the Ninth Circuit recently rejected a similar argument that plaintiffs must identify an administratively feasible way to determine who is in the class in order to satisfy the requirements of Rule 23.” That some individuals might like the product was irrelevant; under Racies’ theory, the products were worthless and any benefit was attributable to the placebo effect.  Refunds were also not superior alternatives to adjudicating class members’ claims. 

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