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Appellate Court Says False Ads Must Be "Literally False"

By Pamela Sakowicz Menaker, Litigation News Associate Editor – December 11, 2015

 

Deceptive advertising claims alleging misleading representations will be dismissed if the marketing statements by qualified experts “are not literally false.” In In re GNC Corp., the appellate court held that consumers who allege false advertising must show that no reasonable expert would agree with the manufacturer’s statements in order to survive a motion to dismiss. Section leaders see this heightened standard as imposing substantial pleading burdens on plaintiffs asserting a false advertising claim.


Court Decision
The plaintiffs alleged that GNC and Rite Aid violated consumer protection laws by falsely advertising that their supplements promoted joint health. The plaintiffs claimed that GNC’s supplements all contain glucosamine and chondroitin, which purportedly are no more effective than a placebo in treating joint ailments such as osteoarthritis.


In support of their position, the plaintiffs alleged that the “vast weight” of scientific evidence does not support the claims that supplements containing glucosamine and chondroitin promote joint health. In response, GNC and Rite Aid moved to dismiss the complaint for failure to state a claim, arguing that the complaint failed to sufficiently plead the actual falsity of their marketing representations. The district court granted the defendants’ motion to dismiss in full, noting that the marketing statements at issue were not literally false since they accurately describe the findings of qualified and reasonable scientific experts.


The U.S. Court of Appeals for the Fourth Circuit affirmed the decision, finding that the “plaintiffs must allege that all reasonable experts in the field agree that the representations are false.” If the plaintiffs cannot because of equivocal or disputed scientific evidence, the claim fails. The appellate court noted that the plaintiffs did not assert claims for misleading statements or deceptive trade practices, stating that its holding “should not be interpreted as insulating manufacturers of nutritional supplements from liability for consumer fraud.”


Distinguishing Between False Advertising and Deceptive Trade Practices
Deceptive advertising claims are those likely to mislead reasonable consumers, causing them to change their conduct through a misrepresentative statement or an omission, as the FTC wrote in a 1983 Policy Statement. False advertising occurs when the statement is untruthful, as the FTC noted.


“I agree with the court’s decision,” says Benjamin M. Johnston, Glenwood Springs, CO, cochair of the ABA Section of Litigation’s Sales Practices Subcommittee of the Consumer Litigation Committee. “The loophole is that if the plaintiff wants to focus its scope and limit its claim to consumer false advertising, then the defendant can engage an expert who says this is reasonable. It’s a tall mountain for a plaintiff to climb.”


How Plaintiffs May Get Around New Pleading Requirements
Plaintiffs will have a difficult time finding all experts agree on the scientific evidence regarding the falsity of the statement or claim. “There must be no equivocation,” says Anthony E. DiResta, Washington, D.C., former cochair of the Section of Litigation’s Government Litigation Committee and former Litigation News Associate Editor.


Johnston says that if plaintiffs claim the representation made by defendant manufacturer is false under any reasonable representation, the defendants will always be able to find some scientist that says the statement is true. “The biggest hurdle is still to come. If the plaintiffs just allege that no reasonable expert would agree, now they have to prove that,” states Johnston.


In a motion for summary judgment that is certain to follow, which “would be nearly impossible to survive,” Johnston suggests “to avoid that battle and burden, just say a deceptive trade practice and/or misleading statement was made. Courts always interpret deceptive trade practices more broadly,” Johnston adds.


Practical Effect of Court’s Ruling May be Limited
DiResta says that good faith discovery of the facts was necessary here to see how the pleadings play out. “This ruling discourages that,” he says. “There is a whole body of law of the [Federal Trade Commission] on deceptive advertising, but the court read the pleadings quite literally.” DiResta says the courts also look at Fed. R. Civ. P. 12(b)(6) and “bend over backwards” to look at the plaintiffs’ position in the best light.


In affirming the lower court’s dismissal, DiResta says, “I would be very surprised if other courts outside of the Fourth Circuit would find it persuasive, but I can see this case being used very aggressively by defense counsel who will be raising this time and time again in all advertising cases. I think they will even extrapolate from this opinion and ask for the heightened standard in misleading and deceptive cases. Plaintiffs must plead with particularity in advertising cases and make sure the allegations say there is absolute confusion for the consumer.”


Keywords: consumer protection, false advertising


 
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