Natural Products Insider

SEP-OCT 2018

INSIDER is the leading information source for marketers, manufacturers and formulators of dietary supplements, healthy foods and cosmeceuticals. Since 1997, INSIDER has been serving the needs of the global nutrition industry.

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32 INSIDER September/October 2018 The growing trend of class-action lawsuits in the food and beverage industry in the last three years is well-known. In 2008, 19 consumer class actions were brought against food and beverage companies in federal courts, according to a 2017 report from U.S. Chamber Institute for Legal Reform. Four years later, that number reached 102. In 2017 alone, more than 140 new food class actions were fi led in state and federal courts, as reported in the 2018 Perkin Coie Food Litigation Index. Similarly, in recent years, class actions brought against dietary supplements gained steam in the jurisdictions where most food and beverage cases have been brought: California, Florida, New York and Illinois. While the products challenged in dietary supplement class actions are as diverse as the marketplace itself, the class-action bar appears to be pursuing a few key case theories. Class Theories Against Dietary Supplements First, as with food class-action claims, false labeling claims constitute the lion's share of dietary supplement class allegations. Generally, though not exclusively, federal district courts have ruled the Federal Food, Drug & Cosmetic Act (FD&C) pre-empts allegations in a class action that a dietary supplement makes an impermissible "disease" claim, but allegations that a "structure/function" claim is false and misleading and contrary to scientifi c studies are allowable in federal court (Gallagher v. Bayer AG). However, due to a recent decision in the U.S. Ninth Circuit Court of Appeals in May 2018, dietary supplement makers should expect an increase in class-action litigation arising from structure/function or "disease" label claims. In Bradach v. Pharmavite LLC, the proposed class plaintiff alleged he and other consumers purchased vitamin E dietary supplements in reliance on the statement "Helps Maintain a Healthy Heart"—an undisputed structure/function claim. The district court ruled Bradach believed this statement constituted a disease claim, thus pre-empting his state law allegations. The Ninth Circuit reversed, holding Bradach's claims were not solely premised on pre-empted disease claims, and the "mixed motive" claims could move forward. The Ninth Circuit's perceived tolerance of "mixed understanding" claims may cause class-action attorneys to pursue more dietary supplement labeling cases that prior case law may have discouraged. A typical "Made in USA" class action brought against a supplement maker alleges that, contrary to state laws interpreting FTC guidance, the defendant's product ingredients are not "all or virtually all" made in the United States, and that some or many of the product's ingredients are sourced from outside the United States (McDonnell v. Nature's Way Prods. LLC). Typical Sequence of Events In many states, a class-action plaintiff must send a notice letter to the defendant before fi ling suit under certain consumer protection statutes. Under the California Legal Remedies Act, Cal. Civil Code § 1782(a), a consumer who seeks to recover damages must send a written demand letter and wait 30 days before fi ling an action, and the letter must provide notice of the alleged wrongdoing and demand the company correct, repair, replace or otherwise rectify the alleged violation. During this period, the prospective class plaintiff and defendant often negotiate an early settlement on an individual basis. Upon the fi ling of a suit, a defendant's next task is to weigh with his or her counsel the effectiveness of a possible motion to dismiss all or part of the claims. Common legal bases for seeking to dismiss a class complaint include pre-emption of the claims by the Dietary Supplement Health and Education Act of 1994 (DSHEA) or the FD&C, the plaintiff's lack of standing for not having purchased some or all of the challenged products, or other failures to properly plead class allegations. If a complaint is not completely dismissed, after the initial motions stage comes the most expensive and time- consuming aspect of any class action: precertifi cation discovery. The defendant company often responds to substantial document production requests, takes and defends numerous depositions, and may deal with discovery motions along the way. Experts may be hired, and the battle culminates in a motion for class certifi cation. If a class is certifi ed—meaning the proposed class plaintiff has won the motion for certifi cation at least in part by satisfying the requirements of Rule 23 of the Federal Rules of Civil Procedure—a settlement may soon follow, or the defendant company may seek to win at trial. A Defensive Plan Dietary supplement and natural products companies should develop a plan for minimizing (to the extent possible) the probability of a class-action lawsuit. Companies should seek the guidance of legal counsel with regulatory expertise to ensure their products' claims are substantiated and their label statements are not misleading. Companies should understand the sourcing of their product ingredients and confer with counsel about any "Made in USA" representations. Also, company-wide policies regarding data, email and artwork retention should be instituted. Following these steps will contribute toward heading off class litigation and protecting a business—not to mention the industry as a whole. Sanjay S. Karnik is senior counsel, business litigation and class action s, Amin Talati Upadhye LLP (amintalati.com) in Chicago. Legal: Class-Action Lawsuits Dietary Supplement Class Actions: Common Theories by Sanjay S. Karnik

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