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From Antitrust Law Daily, April 24, 2017

California consumers could not challenge advertising as false based solely on lack of substantiation

By E. Darius Sturmer, J.D.

A federal district court did not err in dismissing a consumer’s lawsuit alleging that a drug manufacturer violated California’s false advertising and consumer protection laws by making unsubstantiated claims in marketing its over-the-counter human growth hormone (HGH) supplement, the U.S. Court of Appeals in San Francisco has ruled. Neither the state’s Unfair Competition Law (UCL) nor its Consumer Legal Remedies Act (CLRA) provided the consumer with a private cause of action to enforce the substantiation provisions of those laws, and the consumer alleged no facts that would support a finding that the company’s claims were actually false. Dismissal of the suit was therefore affirmed (Kwan v. SanMedica International, April 21, 2017, Erickson, R.).

Marketing statements. The consumer alleged that the manufacturer, SanMedica International, based its marketing and sale of the supplement, SeroVital, on the claim that the product could boost human growth hormone (HGH). In its marketing materials and product packaging, SanMedica represented that it was "clear" that HGH has been associated with wrinkle reduction, decreased body fat, increased lean muscle mass, stronger bones, improved mood, heightened sex drive, and making users look and feel decades younger. The marketing materials also said that "peak" HGH levels were associated with youthful skin integrity, lean musculature, elevated energy production, and adipose tissue distribution. Finally, SanMedica boasted that SeroVital was "clinically tested" to boost HGH levels by a mean of 682%. The complaining consumer contended that all these representations were false, misleading, or deceptive.

In dismissing the claims, the lower court reasoned that the complaint was based entirely on allegations related to whether the claims were properly substantiated, a cause of action reserved under Cal. Bus. & Prof. Code §17508 to the state’s Director of Consumer Affairs, the California Attorney General, and any city or district attorney. In order to state a cause of action, the court had explained, the plaintiff had to allege facts from which the court could conclude that the defendant’s advertising representations were false—"facts affirmatively disproving Defendant’s claims." Instead, her second amended complaint again merely alleged lack of substantiation.

Private cause of action. The UCL and CLRA did not provide private causes of action for private citizens alleging that marketing claims lacked proper scientific substantiation, the appellate court reiterated. While the state’s judiciary recognized that both laws were intended to promote fair competition and consumer protection, and both contained broad, sweeping language to describe their substantive provisions, the statutes did not "give the courts the authority to simply impose their own notions of fairness, the court remarked.

A California appellate decision addressing the issue—National Council Against Health Fraud, Inc. v. King Bio Pharmaceuticals, Inc., 107 Cal.App..4th 1336—has for the last 14 years required that private citizens bringing suit under either law properly alleged proof that plaintiffs sustained injury from relying on marketing statements that were actually false, the appellate court observed. Moreover, the state’s legislature had not amended the statutory language on which the holding relied. Under the circumstances, it was readily apparent that King Bio’s holding was firmly established law in California, the appellate court stated.

Allegations of actual falsity. The district court also concluded properly that the consumer’s complaint failed to specifically allege facts to support of finding that the SanMedica’s claims regarding SeroVital were actually false, in the appellate court’s view. Her assertion that the "clinically tested" representation falsely implied that the health benefits were clinically proven by credible scientific proof was conclusory, as was her additional contention that the claims associating HGH levels with certain health benefits falsely implied scientific proof. These averments did nothing to support or prove the falsehood of the claims. Rather, they are simply charges that SanMedica’s marketing claims lacked scientific substantiation.

The failure to allege specific facts pointing to actual falsehood constituted a fatal flaw, the appellate court held. The court rejected the plaintiff’s argument that Lanham Act distinctions between establishment and non-establishment claims applied to shift the burden of proof for the claims to the defending company. Doing so would clearly violate recognized California law on the burden of proof placed on the plaintiff, the court said.

The case is No. 15-15496.

Attorneys: Elaine A. Ryan (Bonnett, Fairbourn, Friedman & Balint, P.C.) for Serena Kwan. Steven William Garff (Price Parkinson & Kerr PLLC) for SanMedica International, LLC.

Companies: SanMedica International, LLC

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