Class Action Lawsuits Are Out of Control


The Dietary Supplement Industry is Under Attack!

By now I assume that the entire industry is well aware of the New York Attorney General's ("NY AG") cease-and-desist letters sent to GNC, Target, Walgreens and Walmart alleging that store brand supplements were found to contain contaminants not identified on ingredient labels and that just 21% of the tested supplements contained DNA from plant species listed on the labels.

The trade associations and other reputable industry representatives have soundly discredited the DNA Bar Code testing methodology used by the NY AG as being wholly unsuitable for the testing of finished products that are extracts. During the extraction process the DNA of the herbs is removed or destroyed.  DNA from processing ingredients can be found because there do not go through an extraction process; and this is what the NY AG appears to have found. Hopefully, the retailers involved will be able to establish the inappropriate nature of the NY AG's test method and the products and the industry will be vindicated.  But that is not what this column is about.

This is about the class actions that seeming sprout out of the woodwork the moment any opportunity arises. The NY AG issued a press release announcing his “findings” on February 3, 2015.  By February 5—a mere two days later—the first of a growing pile of class actions had already been filed (at least the first complaint that I located). This complaint was directed at GNC.

The allegations in that complaint are a rehash of exactly what the NY AG claimed in the press release, even citing it directly, and nothing more. I can only wonder as to how the plaintiff’s lawyer could connect with the client, investigate the veracity of the claims and have the documents drafted to be filed in court in such an incredibly time. 

The next complaint I saw was filed a day later, February 6. It was also a rehash of the NY AG press release with some copying of each cease-and-desist letter against the four retailers. This complaint was against all four retailers and had over 280 paragraphs in its 61 pages. 

There are reports of at least eight other class actions (and probably many more) having been filed in the short time since NY AG issued the press release. Many, if not all, appear to be based on nothing more than the allegations of the NY AG press release. The NY AG continues to refuse (at the point in time that I write this) to reveal any but the vaguest details of the testing methodology or actual results for industry scrutiny. Yet, with no real information at all, class action plaintiff lawyers are racing to courthouses all over the country to get their "piece of the action."

What will happen, assuming that the NY AG testing is ultimately revealed to the public and totally discredited?  Will all of these class actions be dropped?  Or will the targeted companies be forced to expend enormous sums of money in lawyer's fees defending the cases?  How can so many class actions be filed against companies based on nothing more than a press release?

Are these the only class actions that we have seen against the natural products/dietary supplement industry based on next to nothing? No, they are just the most recent examples.

In October 2009, FDA issued a DRAFT Guidance for Industry concerning "Ingredients Declared as Evaporated Cane Juice" (ECJ). The guidance was only a draft for comment and was intended to "advise" industry of FDA’s view that ECJ is not the common name of any type of sweetener. FDA further noted that such a guidance does "not establish legally enforceable responsibilities" and "should be viewed only as recommendations".

Yet, on the basis of that DRAFT Guidance and perhaps a Warning Letter or two, there have been at least 50 class actions filed (as of January 1, 2014) generally alleging that people are deceived because it sounds healthier than sugar, when it is sugar.

Some of the cases have been settled, some dismissed and some on hold pending final agency action on issuing a "final" guidance (the agency re-opened the comment period in early 2014). Surprisingly, the term can still be found on some product labels.

FDA has refused to update a definition of "natural" issued over 20 years ago, so almost any company that includes a natural claim risks the prospect of a class action. Class actions have also been filed over varying interpretations of nutrient content claims, substantiation for structure/function claims and are becoming a more common follow-up after a Warning Letter or FTC action.

Some have theorized that as the tobacco cases have wound down, food and supplements have become the new target for plaintiff’s lawyers looking for a big/quick hit. The number of case filings certainly supports that theory. 

What can be done? Certainly, if you can obtain insurance coverage, avail yourself of that. Either way, obtain competent counsel who understands and has experience litigating class actions. They are a very unique type of litigation requiring experienced counsel. There are many procedural issues that can serve to doom such an action.

Generally, the first fight is getting an actual class certified. The alleged loss to a single consumer may be minimal, but if a class is certified the plaintiff's counsel, assuming victory, is frequently assured of very significant legal fees, while individual class members may get nothing more than a token payment. Class actions have been denied class certification because it has not been demonstrated that the plaintiff relied on the claim or claims at issue or is otherwise not a proper representative of the class. It may also be impossible to determine who are the proper members of a class if the item at issue is inexpensive and consumers were unlikely to keep receipts. Additionally, it seems that some judges are starting to see at least some of these for exactly what they are and it at least appears are becoming more willing to deny class certification for those brought on shaky grounds.

If the class is not certified, with little to gain, the suit, now for a single plaintiff or just a few is not as "financially viable" and may be discontinued. I think that it is important that, whenever possible, with the advice of competent counsel, industry fight against proposed class actions and not necessarily be so quick to settle.  It seems that the dietary supplement industry is viewed as a ripe target and we need to let prospective class action plaintiffs know that is not the case and that the industry will fight cases that are brought for less than valid reasons. WF


Steven Shapiro is a partner in New York based Ullman, Shapiro & Ullman   His practice focuses on the dietary supplement/natural products industry with a particular emphasis on FDA and FTC compliance issues including labels, labeling and advertising claims.


Published on WholeFoods Magazine Online, 3/2/15