Wednesday, October 20, 2010

Class Action Preferable to Thousands of Suits on Dietary Supplement Claims

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

A purchaser of the dietary supplement Relacore established that a class action, rather than the prosecution of thousands individual small claims, was the superior method for proceeding on allegations that Carter-Reed Company violated the New Jersey Consumer Fraud Act by falsely representing that the product would shrink belly fat and improve mood, among other benefits, the New Jersey Supreme Court has ruled.

The core issues were (1) whether common issues of law and fact predominated, (2) whether the class action was superior to a myriad of individually litigated cases, and (3) whether a class action—given the number of individual claims involved—was manageable.

Carter-Reed did not dispute that the claims met the class action requirements of numerosity, commonality, typicality, and adequacy of representation.

Predominance of Common Issues

Carter-Reed argued that the purchaser had challenged only the marketing of Relacore as a weight-reducing dietary supplement and that class certification inevitably would spawn a host of individual questions concerning why a particular consumer bought Relacore and whether the advertised benefits were realized.

However, the purchaser's detailed allegations asserted that Relacore provided none of the advertised benefits, that no sound scientific evidence supported Carter Reed’s representations about Relacore, and that Carter Reed’s entire marketing scheme was nothing more than a web of lies, according to the court.

A corporate defendant engaged in a marketing scheme founded on a multiplicity of deceptions should not be in a better position in fending off a motion for class certification than a defendant engaged in a sole marketing deception, the court reasoned.

The alleged out-of-pocket ascertainable loss was the purchase price of a bottle of Relacore. While individual questions remained as to the number of bottles purchased by each class member without refunds, these questions did not present an insuperable obstacle, the court found.

Superiority, Manageability

The class action was a superior means for resolving the dispute despite a 30-day refund policy that Carter-Reed offered in some of its advertising but that did not appear on Relacore packaging and labeling, the court determined.

Denying class certification on manageability grounds was disfavored in general and not in any way justified in this case, the court held. If discovery indicates that some of Carter's Reed's claims for Relacore were scientifically sound, then the trial court would have options including subdividing, or in a worst-case scenario, decertifying the class.

The burden would be on the plaintiff to provide the necessary evidence to support the allegations that justified the grant of class certification, the court observed.

The September 29 opinion in Lee v. Carter-Reed Co., LLC, will be reported at CCH Advertising Law Guide ¶64,004 and CCH State Unfair Trade Practices Law ¶32,144.

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