Monday, August 20, 2018

Another court is allergic to In re GNC's flawed reasoning on falsity


Hobbs v. Gerber Prods. Co., 2018 WL 3861571, No. 17 CV 3534 (N.D. Ill. Aug. 14, 2018)

Say what you will about Seventh Circuit substance (and I have), I like the crisp Seventh Circuit style, which seems to influence the district court judges too. This case whips neatly through procedural aspects of a fraud case, declining to dismiss Hobbs’ complaint that Gerber falsely marketed its Good Start Gentle infant formula as reducing the risk that infants would develop allergies to cow’s milk and decrease incidences of the most common manifestation of such allergies, atopic dermatitis (eczema) and as having FDA endorsement of these claims.

Among other things, Hobbs pointed to a “tamper-evident seal” placed on the lid of a plastic container of GSG formula, which stated: “1 & ONLY Routine Formula TO REDUCE RISK OF DEVELOPING ALLERGIES See Label Inside. ” A TV ad allegedly included the statement: “But if you introduce formula, choose the Gerber Good Start Comfort Proteins Advantage. It’s what makes Good Start formula easy to digest and may also provide protective benefits for your baby.”  Similarly, a magazine ad allegedly stated: “If you have allergies in your family, breastfeeding your baby can help reduce their risk. And, if you decide to introduce formula, research shows the formula you first provide your baby may make a difference. In the case of Gerber® Good Start® Gentle Formula, it’s the Comfort Proteins® Advantage that is easy to digest and may also deliver protective benefits.”




Gerber has a history with the FDA on this.  After a lot of back and forth, the FDA concluded in 2011 that “the current scientific evidence is appropriate for considering the exercise of enforcement discretion with respect to a qualified health claim concerning the relationship between 100% whey-protein partially hydrolyzed infant formula and a reduced risk of atopic dermatitis for a specific infant population who [sic] is fed such formula during a specific period of time.” However, use of the term “emerging clinical research” was misleading based on the limited research (4 studies) and the fact that the reduced risk of atopic dermatitis was observed only when infants had the formula during their first four months.

The FDA proposed several versions of a qualified health claim, all of which are not positive when read with careful attention.  One set of approved statements used a “statement-then-negation” formula that, though approved by the courts, is particularly likely to be misunderstood or misremembered: “For healthy infants who are not exclusively breastfed and who have a family history of allergy, feeding a 100% Whey-Protein Partially Hydrolyzed infant formula from birth up to 4 months of age instead of a formula containing intact cow’s milk proteins may reduce the risk of developing atopic dermatitis throughout the 1st year of life. FDA has concluded that the relationship between 100% Whey-Protein Partially Hydrolyzed infant formulas and the reduced risk of atopic dermatitis is uncertain, because there is little scientific evidence for the relationship.” The FDA letter said that FDA would consider exercising its enforcement discretion when all the relevant information from the approved statements was present.

In 2014, the FDA issued a warning letter identifying numerous ways in which the FDA deemed Gerber’s GSG to be misbranded and to include misleading health claims that did not comply with the claims the FDA had approved in 2011 and which restated claims about allergy reduction that the FDA had rejected in 2006. Gerber responded to, discontinued some of its GSG marketing (specifically, the “tamper-evident” sticker label) and the FDA closed the matter in 2015.

Hobbs, however, alleged that “several compelling scientific studies have concluded that partially hydrolyzed whey formula does not lower the risk of developing allergies or allergic manifestations, including eczema, during infancy...when compared with conventional formula.” She identified only one such study.  Hobbs alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), breach of express warranty, and common law fraudulent misrepresentation. 

Rule 9(b) applied, but the precise level of particularity required depends on the case. The key is “to show, in detail, the nature of the charge, so that vague and unsubstantiated accusations of fraud do not lead to costly discovery and public obloquy.” [Y’know, under present conditions I feel we ought to revisit this utilitarian justification for 9(b) and ask whether accusations of fraud really are worse for reputation than other accusations.  Thinking about various political fraudsters and various political gropers/abusers, I don’t find the empirical claim plausible. The mention of discovery is clearly more accurate, but I do also wonder whether there are so many claims in which only the fraud claim is what entitles the plaintiff to discovery.]

Hobbs alleged that she saw at least three specific ads, as well as others, and that she relied on their shared misrepresentations. The complaint didn’t specifically allege “where and when” Hobbs saw the ads or that she saw them before she purchased Gerber products. But that was silly: the complaint expressly alleged reliance, which was an allegation that she saw them before she bought. Specific dates or the particular magazine she read for the print ad weren’t required, at least here.  The alleged marketing was broadly based and “essentially ubiquitous”; this wasn’t a claim where the date was necessary to identify a single putatively offending ad.

Gerber also invoked In re GNC Corp., 789 F.3d 505 (4th Cir. 2015) [boo!], to argue that Hobbs failed to state a claim, because she didn’t allege that no reasonable scientist would agree with the health benefit ad, and correctly found GNC’s analysis unpersuasive. Anyway, the claims in GNC were different. In GNC, the plaintiff alleged that the evidence was equivocal; Hobbs didn’t equivocate, alleging that “[s]cientific evidence concludes that ingesting infant formula made with partially hydrolyzed whey protein does not reduce the risk of infants developing allergies.”  “Hobbs frames her claim not in terms of the relative weight of the scientific evidence but on a factual assertion about whether Gerber’s claims about GSG are true. ‘[T]he falsehood alleged by Plaintiff is not that all experts agree that Defendant’s product lacks a health benefit, but rather that the product in fact lacks that benefit.’”

Expert disagreement might create a disputed issue of fact, but such disputes must be resolved in the nonmovant’s favor at the pleading stage.  [So exactly right about the core GNC flaw.] Further on how wrong GNC is:

That two experts disagree at trial about the truth or falsity of a statement does not, of course, preclude the fact-finder from resolving the disputed fact question; no more should the plaintiff’s acknowledgment of some competing expert opinion preclude her from attempting to prove the fact at issue by conducting discovery and developing the most persuasive argument possible to support her position as to the truth or falsity of the disputed fact. Gerber cannot insulate its statements from claims of falsity by locating a single expert who will endorse them; absolute certainty is not the evidentiary benchmark in civil (or even criminal) litigation. To prove that a statement by Gerber is false, Hobbs’s burden is only to establish falsity by a preponderance of the evidence.

Even under 9(b), Hobbs’s burden was plausibility, not probability. “In pleading her claim, the plaintiff’s burden is to allege facts from which it is plausible to infer that the statement at issue is false, not to allege that every expert in the world agrees that it is false or to otherwise prove the statement’s actual falsity.”  Put another way: “That an expert believes that GSG reduces allergies may, of course, be highly relevant evidence in GSG’s favor, but it is not dispositive of that fact question, particularly where competing opinions have also been introduced. Hobbs has met her burden to plausibly allege that Gerber’s statements are false by also alleging facts that make the inference of falsity plausible,” including the FDA’s conclusions.  Hobbs alleged enough factual detail to push her allegations across “the line between possibility and plausibility.”

And furthermore (though it’s just gilding the lily), Hobbs was arguing both falsity and misleadingness, and GNC didn’t bear on her misleadingness claim.

The court also reminded Gerber that 9(b)’s particularity requirement applies to allegations of fraud, not allegations of damages. “Hobbs’ task in pleading damages is simply to plead facts that support a plausible inference that she experienced an actual pecuniary loss as a result of Gerber’s allegedly false statements.” Her claim that she wouldn’t have bought the product/wouldn’t have paid as much for it absent the misrepresentation met that standard.

ICFA exempts from liability conduct that is “specifically authorized” by federal law, and Gerber argued that its marketing materials complied with the claims the FDA agreed to tolerate in 2011.  Not only was this an affirmative defense that didn’t need to be pled around. The complaint plainly and plausibly alleged that Gerber did not comply with the limits given by the FDA “and, given the specificity of the limited [qualified health claims] that the FDA approved, it is difficult to fathom an argument to the contrary.” [Ouch, but seems justified.] Even considering outside material, Gerber didn’t even try to explain how the statements Hobbs identified complied with the FDA’s standards or were otherwise authorized.

 

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