Thursday, April 04, 2019

Gerber Good Start off to a bad start in false advertising/allergy case

Hasemann v. Gerber Products Co., 2019 WL 1434263, Nos. 15-CV-2995 (MKB) (RER), 16-CV-1153 (MKB) (RER), 17-CV-93 (MKB) (RER) (E.D.N.Y. Mar. 31, 2019)

Hasemenn  alleged that Gerber misrepresented that its “Good Start Gentle” infant formula was the first and only formula that reduces the risk that infants will develop allergies, and that GSG was the first and only infant formula that the FDA endorsed to reduce the risk of infants developing allergies.  Here, the court certified Florida and New York subclasses and denied certification of the North Carolina and multistate subclasses.

Brief background: in 2005, Gerber petitioned the FDA for approval of a qualified health claim for GSG. The FDA rejected this in 2006 concluding that there was “no credible evidence to support the qualified health claim relating consumption of 100 percent partially hydrolyzed whey protein in infant formula to a reduced risk of food allergy.” Gerber tried again in 2009 with “emerging clinical research shows that, in healthy infants with family history of allergy, feeding a 100% Whey-Protein Partially Hydrolyzed infant formula instead of a formula containing intact cow’s milk proteins may reduce the risk of developing the most common allergic disease of infancy — atopic dermatitis — throughout the [first] year of life and up to [three] years of age.”  The FDA “determined that this claim mischaracterized the scientific evidence and was therefore misleading.” It proposed four alternative qualified health claims (of varying wishy-washiness and dubious intelligibility to consumers), over which it would consider exercising its enforcement discretion not to challenge the qualified health claim as long as Gerber also included a statement about the risks of partially hydrolyzed formulas to infants who are allergic to milk who have milk allergy symptoms.

Regardless, GSG went ahead with claims that, e.g., GSG is the “1st & Only Routine Formula to REDUCE THE RISK OF DEVELOPING ALLERGIES.” (Used on larger containers 2013-2016.)
1st and Only Routine Formula to Reduce Risk of Developing Allergies sticker

A manufacturer’s coupon bore a gold badge that reads: “MEETS FDA QUALIFIED HEALTH CLAIM” around the outer perimeter of the badge and read in large font “1st AND ONLY” in the center of the gold badge. A statement on the coupon attachment stated that Good Start “is the first and only formula brand made from 100% whey protein hydrolyzed, and that meets the criteria for a FDA Qualified Health Claim for atopic dermatitis.” [I don't admire the chutzpah here, but it does remind me of xkcd's "contains a clinically studied ingredient."] Gerber used the label “on exterior product packaging” for some larger containers and the gold badge “on supermarket displays advertising [GSG].” (Hasemann Compl. ¶ 47.) Specifically, the coupon was attached to certain “containers of Good Start that contained 22 ounces or more of powder formula.”
GSG coupon
Gerber ran a 2012/2013 TV ad stating, “You want your Gerber baby to have your imagination ... your smile ... your eyes ... not your allergies .... [I]f you introduce formula, choose the Gerber Good Start Comfort Proteins Advantage.” A magazine ad likewise claimed, “If you have allergies in your family, … 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.” An ad that ran in People and Parents magazines in 2013 used a badge on the advertisement, “1st FORMULA WITH FDA QUALIFIED HEALTH CLAIM,” and listed its website as
magazine ad
An ad in Drugstore News, a trade journal, also claimed that GSG “is the first and only infant formula that meets the criteria for a FDA Qualified Health Claim,” and in smaller font: “Breastfeeding helps reduce the risk of developing atopic dermatitis – the most common allergy of infancy. Now there is a formula that can help too, especially for those babies with a family history of allergy. The 100% whey protein partially hydrolyzed used in our Gerber Good Start formulas is easy to digest and may provide protective benefits. This is out Comfort Proteins® Advantage and only Good Start has it.”

Another exhibit showed an in-store display sign from 2011 that contains a picture of a GSG container and the image of the gold badge described above.
in store display

Plaintiffs argued that the ads made two deceptive claims: (1) that GSG reduces the risk that infants will develop allergies (a claim rejected by the FDA and also allegedly shown to be false by several studies), and (2) that GSG meets the criteria for an FDA qualified health claim for atopic dermatitis (not approved by the FDA, and Gerber didn’t use the FDA-required qualifying statement).  In 2014, the FDA sent a warning letter to Gerber over this conduct, stating that the health claims were unauthorized and that the labeling was misleading.  The FTC also filed a still-pending lawsuit over the labeling, and other consumer claims were filed/are pending.  Hobbs v. Gerber Prod. Co., No. 17-CV-3534, 2018 WL 3861571 (N.D. Ill. Aug. 14, 2018) (denying Defendant’s motion to dismiss); Zakaria v. Gerber Prod. Co., No. 15-CV-00200, 2017 WL 9512587 (C.D. Cal. Aug. 9, 2017) (decertifying after having initially certified a class), aff’d, No. 17-CV-56509, 2018 WL 5977897 (9th Cir. Nov. 14, 2018); Slocum v. Gerber Prod. Co., No. 16-CV-04120, 2016 WL 3983873 (W.D. Mo. July 25, 2016) (remanding to state court); Nat’l Consumers League v. Gerber Prods. Co., No. 14-CA-8202 (D.C. Super. Ct. Aug. 8, 2015) (denying Defendant’s motion to dismiss).

Gerber’s basic argument against the consumer protection claims here was that “that the challenged claims did not consistently appear on GSG’s labels and the advertising was extremely limited,” and that “advertisements are often disseminated for short periods of time, and their substance changes frequently.” Its marketing materials, it argued, emphasized multiple benefits of GSG, and the majority had “nothing to do” with allergies or the qualifying statement.  With respect to each contested element of the certification standard, Gerber argued that the variation in what consumers probably saw precluded a finding that plaintiffs satisfied that element (e.g., typicality, predominance).

Although the case citations differ a bit (there are a lot of them; future cases could easily look to this comprehensive opinion for a review), the court’s ultimate conclusion for the Florida and NY subclasses was the same for each element: Where, as with those states, the consumer protection statute uses an objective standard for likely deception and doesn’t require reliance, and where the plaintiff offers a price premium theory of damages, the fact of some potential variation in exposure doesn’t preclude certification. The challenged claims here (1) were widely advertised, including in store displays even when they weren’t on the product packages and (2) had the same core falsity problem even if they varied in terminology.  That was enough to go forward.  This result is consistent with the liberal aims of the FDUTPA and NY GBL.  (Even in California, which requires a more rigorous exposure/reliance showing, courts should find exposure “[w]here the alleged misrepresentation appears on the label or packaging of each item being sold,” but “[e]ven where each product is not sold in a container on which the alleged misrepresentation appears, class-wide exposure may be inferred where there is a sufficiently extensive advertising campaign that includes the alleged misrepresentation.”) 

Causation and reliance, though related, should not be conflated—a deceptive practice can cause actionable harm even without reliance, for example through a price premium. Ultimately,

[t]he fact that the same label did not appear on every single product of GSG that a consumer may have purchased, does not mean that the deceptive act would not still have likely deceived a consumer, given that the labels were both abundant, accompanied by advertising campaigns, and appeared prominently on shelves where consumers shopped. To find otherwise could encourage a defendant to avoid liability under the FDUTPA, a broad statute, by for example, creating multiple labels for a product line.

At a mimimum, the court agreed with the magistrate judge that, because “diminished risk of allergy was a consistent and prominent theme among Gerber’s various marketing campaigns for GSG,” it was therefore a “ ‘near certainty’ that every consumer was exposed to the alleged misrepresentations.”

Thus, plaintiffs could prove typicality despite the variations in labels on the market. Without a reliance requirement, the court declined to read any subjective inquiry into a plaintiff’s response into the standard. “Plaintiffs are arguing that the same course of events — the unlawful conduct of false labeling and marketing — resulted in price premiums for an entire product line. … Plaintiffs will have the incentive to prove the elements of the claims under the FDUTPA and GBL to the same degree that any individual class member would.”

Ascertainability: Although some courts in the Second Circuit have declined to permit the use of self-identifying affidavits as a way to satisfy the issue of ascertainability, many recent false advertising cases have allowed such affidavits, in part to protect the class action device as a key mechanism for consumer protection law. The Second Circuit has specifically declined to read an administrative feasibility requirement into the factor of ascertainability, rejecting “heightened ascertainability test” found in other circuits and confirming that ascertainability presents only a “modest threshold” that “does not concern itself with the plaintiffs’ ability to offer proof of membership under a given class definition.”

Further, consumers are more likely to remember their purchases of baby formula—“a primary source of nutrition” and an “important” purchase—and the time period during which they purchased than they are to remember a random consumer product.  The age/developmental stage of purchasers’ children will provide them with clear referents.

Predominance:  “While predominance may be difficult to demonstrate in mass tort cases, such as Amchem, in which the ‘individual stakes are high and disparities among class members great,’ it is a ‘test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws.’ ” “The objective standards — including whether the representations would likely have misled a reasonable customer — underlying the elements of the statutes render them particularly well-suited to generating common questions.”

Finally, damages were subject to classwide proof under damages models that could satisfy Comcast.  The plaintiffs’ burden at this stage isn’t to prove injury but to show that it’s “capable of proof at trial through evidence that is common to the class rather than individual to its members.” Plaintiffs offered a number of class-wide methods to quantify the alleged price premium: (1) using a generic as a benchmark and subtracting the price of the generic from the price charged by Gerber; (2) calculating the value that Gerber ascribed to its allergy claims; (3) looking at price increases and hikes made during the class period; (4) running a “hedonic regression” analysis, which “statistically analyze(s) fluctuations in price within a given group of products, over a given time”; and (5) running “conjoint analyses,” which utilize surveys in determining “the individual value consumers place on various product attributes,” in order to “determine the hypothetical fair value of a product absent any misrepresentations.” It offered two expert declarations saying this could be done.  Gerber’s expert said it couldn’t.

Comcast held that a damages model must establish “that damages are capable of measurement on a classwide basis,” and that “any model supporting a ‘plaintiff’s damages case must be consistent with its liability case.’ ”  But in that case, the damages model assumed the validity of four different theories of antitrust liability, only one of which was legally valid by the time certification came around, so the model wasn’t tied to the legal violation alleged.

Gerber argued that it was impossible to isolate the effect of the challenged allergy claims because they were always promoted along with multiple other product attributes and “there is no pricing variation between those containers of GSG that displayed the challenged representation on the label and those containers that do not.”

The court disagreed: several of the proffered damages models were consistent with the theory of liability and injury in this case, and many of Gerber’s specific arguments were premature.  The legal theory is that the misrepresentations misled consumers into paying a price premium and all of that theory is still in the case, unlike in Comcast. And while conjoint analysis or other mechanisms for assessing the price premium might ultimately fail, a conjoint analysis can lead to a proper damages calculation if it takes relevant factors into account, such as the price of other comparable products.

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