On April 21, 2017, the Ninth Circuit affirmed the dismissal of two putative class actions against manufacturers of human growth hormone (HGH) supplements. The actions centered on allegations that the defendant falsely advertised the benefits of the supplements. Specifically, the plaintiffs alleged defendants falsely represented that their product, SeroVital, increased HGH levels, was clinically tested, and that 'peak growth hormone levels' are associated with various health benefits. Plaintiff also alleged that these claims were not supported by scientific studies, and that the study included on defendant's website was "riddled with flaws" and "would not be accepted by any credible, peer-reviewed scientific journal."
The Ninth Circuit agreed with the trial court that the plaintiffs failed to specifically allege facts to support a finding that the defendants advertising claims were actually false. Instead, the Court determined that plaintiffs were alleging defendants' advertising claims (e.g., "clinically tested") were unsubstantiated. California law, however, does not provide for a private cause of action to enforce the substantiation requirements of California's unfair competition and consumer protection laws.
Procedural History
In July 2014, plaintiff filed a class action against defendants, SanMedica International, LLC (SanMedica) and Sierra Research Group, LLC, alleging violations of California's Unfair Competition Law (UCL) and California's Consumers Legal Remedies Act (CLRA). After granting SanMedica's motion to dismiss with leave to amend the first amended complaint, the district court instructed that if plaintiff sought to amend her complaint again, "she must allege facts from which the [c]ourt can conclude that Defendant's advertising representations were false." Restated, plaintiff must allege facts affirmatively disproving defendant's HGH claims—not merely attack the methodology of defendant's study.
After plaintiff filed a second amended complaint, SanMedica filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. The second amended complaint alleged that plaintiff purchased SeroVital, but it did not allege that she, or any of the purported class members, ever actually used the product. The second amended complaint also failed to specifically allege facts to support a finding that SanMedica's claims regarding SeroVital were actually false. Finding that plaintiff was "again merely alleging lack of substantiation," the district court dismissed the matter with prejudice.
Ninth Circuit's Analysis
Citing statutory text and case law, the Ninth Circuit held that neither the UCL nor the CLRA provided plaintiff with a private cause of action to enforce the substantiation provisions of California's unfair competition or consumer protection laws. For instance, the UCL permits both private persons and prosecuting authorities (e.g., the California attorney general) to sue to enjoin false advertising and obtain restitution. Yet, only prosecuting authorities—not private plaintiffs—are permitted to request advertisers to substantiate marketing claims before bringing false advertising actions.
Citing Ashcroft v. Iqbal, the Ninth Circuit found that the second amended complaint contained conclusory allegations that did not satisfy the lenient standards under Fed. R. Civ. P. 12(b)(6). In rejecting plaintiff's claim that the marketing and packaging falsely implied that the SeroVital claims were based on credible scientific proof, the Ninth Circuit ruled that plaintiff was improperly attempting to take the place of a state prosecuting authority by alleging that defendant's marketing claims lacked scientific or clinical substantiation.
Takeaway
The UCL and CLRA, as well as California's False Advertising Law, are powerful consumer protection statutes, and have been at the center of many high-profile class actions regarding allegedly misleading advertising. As demonstrated by Kwan, these statutes have limits. Those defending false advertising claims should scrutinize the allegations to ensure that the allegations are factual, and either support or prove the alleged falsehoods of the claims, and determine whether the plaintiff is alleging an actual falsehood as opposed to a claim that advertising lacks substantiation.
The Ninth Circuit's full opinion in Kwan v. SanMedica Int'l, No. 15-15496 (9th Cir. Apr. 21, 2017) is available here.
The Ninth Circuit concurrently filed a matching opinion dismissing a proposed class action in Julian Engel v. Novex Biotech, LLC, No. 15-15492 (9th Cir. Apr. 21, 2017), available here.
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