Tuesday, November 15, 2011

Consumer Class Claims on Health Care Discount Ads Rejected

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

Consumers could not pursue deceptive advertising claims against providers of a health care discount program as a class action because the claims were governed by the varying consumer protection laws of different states and factual variations abounded, included varying advertisements in different states, the U.S. Court of Appeals In Cincinnati has ruled.

In 2007, Universal Health Card and Coverdell & Company created a program designed to provide health care discounts to consumers. Membership in the program was touted as giving consumers access to a network of health care providers that had agreed to lower their prices for members.

Universal placed ads in newspapers around the country encouraging customers to visit its website or call its toll-free hotline to learn more about the program and to sign up for a membership. Coverdell was responsible for maintaining the network of health care providers and for reviewing Universal’s advertising materials.

Consumers discovered that health care providers listed in the discount network had never heard of the program, and complained that the newspaper advertisements, designed to look like news stories and dubbed “advertorials,” were deceptive. Two disenchanted consumers sued Universal and Coverdell seeking to represent a nationwide class of all people who had joined the program.

State Consumer Protection Laws

Ohio’s choice of law rules made it clear that the consumer protection laws of the state where each injury took place would govern these claims, the court determined. In view of this and the consumers’ appropriate concession that the consumer protection laws of the affected states varied in material ways, the court found that no common legal issues favored a class-action approach to resolving this dispute.

Varied Ads, Need for Particularized Proof

Advertisements for the program varied to account for the different requirements of each state’s consumer protection laws—a point the consumers acknowledges but could not overcome, according to the court.

In addition, a key part of the consumers’ claim was that the program was worthless because the listed healthcare providers near the consumers did not offer the promised discounts or because there were no listed providers near them in the first place. But to establish the point, the consumers would need to make particularized showings in different parts of the country, the court said.

Even if callers heard identical sales pitches, Internet visitors saw the same website, and purchasers received the same fulfillment kit, these similarities established only that there was some factual overlap, not a predominant factual overlap among the claims and surely not one sufficient to overcome the key defect that the claims had to be resolved under different legal standards.

The court affirmed a decision striking the class allegations and dismissing this lawsuit without prejudice against both Universal and Coverdell.

The November 10 opinion in Pilgrim v. Universal Health Card, LLC will be reported at CCH Advertising Law Guide ¶64,467.

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