Monday, May 20, 2019

Placebo effect is ok by CLRA: Homeopathic remedy wins jury trial on false advertising, still needs to defend against "unfairness"

Allen v. Hylands, Inc., --- Fed.Appx. ----, 2019 WL 2142843, No. 17-56184 (9th Cir. May 15, 2019)

Allen, on behalf of a class, appealled following a jury’s verdict in favor of Hyland’s. “The gravamen of [Allen’s] claims is that Hyland’s [homeopathic] products are ineffective at providing the promised symptom relief.” The district court framed the argument as: “Defendants made material misrepresentations about products which do not work and cannot possibly work as a matter of scientific principle, given the level of dilution of their active ingredients.”

“The parties submitted conflicting jury instructions: Allen’s proposed instructions stated that Allen needed to prove that Hyland’s products ‘did not’ work, while the instructions proposed by Hyland’s stated that Allen had to show that the products did not and ‘cannot relieve symptoms as represented.’”  The court went with “cannot,” and declined to give Allen’s proposed instruction that the jury “may not take into consideration the placebo effect in determining whether [Hyland’s] products provided relief.”

The jury returned a verdict for Hyland’s on the Magnuson-Moss Warranty Act claim, express warranty claim, and CLRA claim. Relying on the jury’s express and implicit findings of fact, the district court found for Hyland’s on the equitable FAL and UCL claims and denied Allen’s motion for a new trial.

If “cannot” was error, it was probably harmless, because the parties used “do not” and “cannot” interchangeably throughout. As for the placebo effect instruction, Allen relied on FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994), rejecting the placebo effect as a way a product could “work.” But CLRA, Magnuson-Moss Act, or express warranty cases haven’t adopted this holding [nor have they rejected it, for the record], so the proposed instruction wasn’t supported by law.

Admitting Hyland’s expert was also not an abuse of discretion.  He was a board certified expert in toxicology who’d published extensively; several of his works concerned the principles of hormesis (Wikipedia: “any process in a cell or organism that exhibits a biphasic response to exposure to increasing amounts of a substance or condition,” in particular, a response at low doses that would be reversed or not observed at high doses), about which he was called to testify; and his testimony on the relationship between hormesis and homeopathy was derived from a literature review citing to several peer-reviewed sources in his field.

There was a reasonable basis for the jury’s verdict, and no abuse of discretion in denying Allen’s Rule 59 motion.

As to the equitable claims, the district court should follow the jury where it found facts, but if “determining the equitable claims requires proof of a fact that the jury did not implicitly or expressly find, the district court must make its own determination.”  The FAL claims required proof of the same facts as the legal claims, so that was ok. But the UCL claim had both deceptive advertising and unfairness theories, and the latter was broader than the CLRA, Magnuson-Moss Warranty Act, or express warranty claims. The UCL’s unfair prong can apply to business practices that are against public policy, that are “immoral, unethical, oppressive, unscrupulous or substantially injurious,” or that cause unforeseeable injuries to consumers that are not outweighed by countervailing benefits. The jury’s “narrow” findings on deceptive advertising didn’t resolve the broader unfair practices theory. Thus, the district court erred in granting judgement to Hyland’s without further analysis and that part of the case was reversed.

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