Dueling surveys don't defeat class certification in supplement suit

Corbett v. PharmaCare U.S., Inc., 2024 WL 1356220, No. 21cv137-JES (AHG) (S.D. Cal. Mar. 29, 2024)

The court partially grants class certification and rejects motions to exclude experts. Plaintiffs allege consumer protection and breach of warranty claims based on PharmaCare’s Sambucol product, a dietary supplement that is advertised to “support immunity” and contain a proprietary extract of black elderberry. Sambucol comes in various forms, including syrup, tablets, capsules, and gummies. The challenged labels include some combination of the following statements: “Supports Immunity”; “Scientifically Tested” (xkcd is, as always, excellent on this); “Supports the immune system”; “Virologist Developed”; “provides strong immune system support to help you and your family stay healthy throughout the year. … conveniently arms you with some of the best protection nature has to offer”; “only Sambucol® can guarantee consistent, immune supporting properties in every serving”; “Developed by a world renowned virologist, Sambucol®’s unique manufacturing process preserves and maximizes the naturally occurring health benefits of the Black Elderberry”; “used in published scientific studies. No other elderberry brand can make the same claim”; “Developed by a world renowned virologist, Sambucol® has been trusted by millions worldwide. Sambucol can be taken every day for continuous immune support.”

Plaintiffs had two theories: first, the products contain a new unreported dietary ingredient and therefore, were illegal to sell as dietary supplements. Second, the products were labeled and marketed in a way that claims that they mitigate or prevent disease.

The court allowed the parties’ experts and their dueling consumer perception surveys, plaintiffs’ materiality survey, and dueling conjoint analysis/damages opinions.

One of the plaintiffs was a fine representative; he testified that he wouldn’t have bought the products if he’d known of the illegality, which didn’t make him atypical. The other testified that he only bought products that didn’t make the alleged misrepresentations at the core of the disease claim, so wasn’t a typical representative for the disease claims. On the other hand, it didn’t matter that he didn’t recall seeing the “dietary supplement” label because the crux of the argument was that plaintiffs wouldn’t have bought the products if they’d known they were illegal, which didn’t depend on reading the phrase “dietary supplement.”

Because of state-law differences, a nationwide class couldn’t be certified, but a California one could be. The court declined to find the drug theory preempted at this time, noting that California’s Sherman Law adopts the FDCA’s provisions; this isn’t obviously an attempt to directly enforce the FDCA.

Predominance for the drug claims was satisfied based on the theory that an illegal unapproved ingredient would render the products illegal for sale, and that a jury could find that illegality would be material to a reasonable consumer. “Plaintiffs’ unfair or deceptive business practice NDI claim may rest upon a theory that even putting the products for sale on the marketplace is an implicit representation that they are being legally sold and comply with the FDA.” Further, this finding could be supported at the certification stage “based on evidence such as the perception of the named representatives and does not require survey evidence.”

Predominance for the disease claims: PharmaCare argued that the labels varied between products, and while the majority of packaging contains the statements “support immunity” and “scientifically tested” on the front of the package, the statement “virologist developed” varies in its location, including on other sides of the package and in varying font sizes. Courts don’t require uniformity, only “sufficiently similar representations.” The question was whether differences were “materially different.”

There was no dispute that the phrases “scientifically tested” and “supports immunity” appeared on the front of the packaging of all products and in largely the same format and prominence. As for “virologist developed,” it appeared variously on the back, side, and top panels, which the court didn’t find materially different from one another (as front placement might have been).  The text also differed, in that mostly “virologist developed” appeared as part of a bulleted list, but for several of the products, it appeared in a paragraph on the package. Still, the text wasn’t in a smaller or finer print; “this difference in how this one phrase appears on packaging is not ‘materially’ different to preclude class certification, particularly in light of the other statements that do appear consistently amongst all the packaging for the products.”

variants of "virologist developed"

PharmaCare argued that disclaimers on the packaging precluded a disease claim: “[t]his product is not intended to diagnose, treat, cure or prevent any disease” on the back or the side, but not on the front. Whether disclaimers avoid deception is typically a question of fact.

Plaintiffs’ consumer perception survey showed people products with and without the challenged representations, modified to be “brand neutral”—that is, removing mentions of Pharmacare and Sambucol, botanical imagery, and modified the background color so that participants could not use that to determine the brand.

The results showed that test group respondents shown the challenged representations were 2.2 times more likely to perceive the surveyed health benefits (51.9% versus 24.2%, or 27.7% net deception).  Defendants’ expert criticized the survey universe as overbroad—nearly half hadn’t purchased any of the products at issue in the past. He also argued that the survey didn’t test the theory of liability, and that the survey should have tested individual representations individually; used open-ended rather than closed-ended questions; and used actual packaging instead of modified packaging.

Defendants’ expert’s survey used respondents that shopped at supermarkets and drugstores who’d made a recent purchase in the product category of nutritional supplements/vitamins.

After being shown one of defendants’ products, respondents were asked open-ended questions, including 1) “please list all the reasons that you would or would not purchase this product;” and 2) “if you were to purchase [the product], would you have any expectations about specific benefits it would provide” and if answered yes, asked to explain their beliefs. Respondents were also asked a close-ended question on how likely it was that the product would deliver these specific benefits, being able to choose between “very likely,” “somewhat likely,” “neither likely nor unlikely,” “somewhat unlikely,” “very unlikely,” and “don’t know/no opinion.”

Then respondents were shown actual labels and asked to select any of 24 options of statements on the packaging that appealed to them, which included the challenged representations. If they did, they got a follow-up: 

In this survey, only 39.8% of respondents identified health-related reasons for why they would purchase the product, and only 21.2% identified immunity support. Only 71.2% of respondents answered that they would expect the product to provide benefits; 49.2% reported some health-related benefit, with 33.9% identifying immune support/boost immune system. Id. Dr. Keegan’s survey further tested attributes that consumers found appealing, including the following:

Further questions found that consumers varied in their certainty:

Defendants’ surveyor concluded that consumers provide a wide range of reasons for purchasing the products, without a unified or predominant reason driving their decision, that they had wide expectations of the benefits the product would provide, that there was wide variation in what consumers found appealing based on the statements on the packaging, and that consumers did not uniformly understand the statements to mean what plaintiffs assert they mean.

Plaintiffs’ expert had his own criticisms, mostly about use of open-ended questions for most of the survey, and a close-ended question with a ton of options. He contended that using such questions in a self-administered online survey tends to underestimate phenomena, and that survey experts believe that close-ended questions are “more appropriate for scientifically rigorous, quantitative survey research.” In his view, the survey encouraged respondents to answer “I don’t know” to his open ended questions, while providing 24 options for the close-ended question encouraged “under selection” of options.

Moreover, to plaintiffs’ expert, the responses actually supported the claim: “5 of the 7 most “appealing” claims were related to the Plaintiffs’ challenged claims: ‘Supports your immune system’ (62.7 % of respondents); ‘Supports immunity’ (59.0%); ‘Strong immune system support to help you and your family stay healthy throughout the year’ (48.9%); ‘Immune supporting properties’ (48.9%); and ‘Scientifically tested’ (41.0%).”

The dispute didn’t defeat predominance, because it could be resolved classwide.

So too with the dispute over plaintiffs’ materiality survey (and defendants’ expert’s modified version thereof). The materiality survey was a referendum: it tested consumers’ preference for buying the products with or without the challenged representations. Consumers were 11 times more likely to choose the product with the representations (8.1% versus 91.9%).

Defendants’ expert argued that this was dumb, because the format drew attention to the only difference between the products, and the product packaging in the control left open space that, in the real world, would be filled with other product benefit claims. He conducted a survey showing only Sambucol with the claims to one group and Sambucol without to the other, and found “no statistically significant difference between respondents’ likelihood of purchasing products with and without the Considered Representations.” 

Again, this “amounts to a disagreement on survey methodology, rather than suggestions that a survey could not be designed to test materiality in the first place.”

Damages: Plaintiffs first argued that a full refund model could be used to measure damages where a plaintiff’s theory of liability is that the product is valueless (which an illegal or useless product would be). The court disagreed on uselessness, because plaintiffs didn’t show that the products had no other benefits at all. Plaintiffs also argued that a product might actually be worthless if it was illegal to be sold as it was, but the cited cases involved a greater degree of illegality (illegal nicotine sales to youth, or poison sold as food, or a Schedule III controlled substance).

But a price premium model could work, and it was enough at this stage to propose, in detail, how that would be done.