Friday, September 03, 2021

Homeopathy claims weren't unfair in the absence of proven falsity

Allen v. Hyland’s, Inc., 2021 WL 718295, No. CV 12-1150-DMG (MANx) (C.D. Cal. Feb. 23, 2021)

This class action, about whether certain homeopathic products didn’t perform as indicated on the packaging, went to a jury trial that ended in Hyland’s favor on breach of warranty, Magnuson-Moss Warranty Act, and CLRA claims. The court then ruled for Hyland’s on the equitable UCL/FAL claims, guided by the jury verdict. However, the court of appeals reversed in part because “[t]he UCL’s prohibition of unfair business practices sweeps more broadly than the CLRA, Magnuson-Moss Warranty Act, or express warranty.” The UCL claim in fact “encompassed both a deceptive advertising theory and an unfair business practices theory.” Because UCL unfairness applies to 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, “[t]he jury’s narrow findings as to deceptive advertising do not resolve [Plaintiffs’] broader unfair practices theory” in their equitable UCL claim.

The court deferred to the jury’s implicit factual determination that plaintiffs failed to prove by a preponderance of the evidence that the products cannot relieve the symptoms represented on Defendants’ products’ packaging. Plaintiffs failed to submit “evidence of definitive scientific research to meet their burden of proof as to the products at issue.” Though several did testify that they wouldn’t have bought the products if they knew the products had only a placebo effect, they didn’t meet their burden to prove by a preponderance of the evidence that the only medical benefit was via the placebo effect. Defendants’ products followed FDA labeling regulations (or lack thereof), indicating numeric dilution levels, ingredient names, and the word “homeopathic,” which by definition means the administration of remedies in minute doses. Defendants didn’t disclose the absence of controlled clinical trials or other medical testing, but they weren’t required to do so, despite the FTC’s determination that many consumers mistakenly believe manufacturers of homeopathic products test their products on people to show their effectiveness.

“While aspects of homeopathy are inconsistent with modern understandings of physics and chemistry, Defendants presented evidence that some clinical trials have shown favorable results from homeopathic treatment, as compared to a placebo or conventional treatment.” And there was evidence that “homeopathically prepared materials have an effect on animals and on human cells,” and that consumers are generally satisfied with the products.

Starting with an unfairness test borrowed from the FTCA, the factors that define unfairness are: “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Because the jury found either that defendants’ products may perform as promised for some people or that plaintiffs failed to show otherwise, the court couldn’t find on this record that “the only conceivable benefit the products provide is as a placebo.” Thus, plaintiffs didn’t show substantial injury, especially with the evidence showing high levels of consumer satisfaction.

An alternative balancing test asks whether the alleged business practice “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” This too hadn’t been shown. The ingredients are safe and the FDA doesn’t require randomized controlled trials for homeopathic products. There was scientific controversy over whether they worked.

Under a final test, “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.” And plaintiffs couldn’t do this either. The FTC’s recent Enforcement Policy was issued after the trial.

No comments: