As seen in the decision in Scheuerman v. Nestlé Healthcare Nutrition, Inc. 2012 U.S. Dist. LEXIS 99397 (D.N.J. July 17, 2012), courts are increasingly rejecting attempts to use the more lenient “prior substantiation doctrine” to support statutory consumer fraud claims. Class action plaintiffs’ counsel must present affirmative evidence of the falsity of challenged advertising claims.
The last several years have seen a significant expansion in enforcement activity by the Federal Trade Commission (“FTC”), especially for health advertising claims on consumer products. Increasingly and often almost immediately after the announcement of a FTC settlement, class action plaintiffs’ counsel attempt to piggyback on the enforcement activity, bring lawsuits asserting claims that are virtually identical to (or rely heavily upon) the FTC settlement. Such lawsuits often attempt to rely upon the “prior substantiation doctrine” used by the FTC, arguing that the defendant-advertiser does not possess adequate substantiation to support the challenged advertising claims. These lawsuits miss an important point — the proof required to support a consumer fraud claim (affirmative proof of the falsity of the advertising claim) is far different then the lack of the prior substantiation standard used by the FTC.
On July 14, 2010, the FTC settled a matter related to advertising for the BOOST Kid Essentials product. In the Matter of Nestlé HealthCare Nutrition, Inc., FTC File No. 092 3087. Challenging the research supporting the advertising claims, the FTC alleged that Nestlé promoted the BOOST product falsely as having certain “clinically shown” health benefits because Nestlé failed to adequately prove (or substantiate) its advertising claims. Less than eight days after the announced settlement, class action plaintiffs’ counsel filed lawsuits bringing claims, among other things, under various States’ consumer fraud laws. The core of plaintiffs’ complaints centered on the allegation that Nestlé promoted BOOST in a deceptive and misleading way because Nestlé made the claims “without any reasonable basis” and “without substantiat[ion].” Amended Consolidated Class Action Complaint, ¶¶ 2-3. Stated another way, plaintiffs alleged that Nestlé “misrepresent[ed] expressly and impliedly to its customers that [BOOST] was clinically shown to and would have the health benefits,” when Nestlé “did not possess or rely upon any reasonable basis that substantiated these purported health benefits. Id. ¶ 8.
Based in large part on the argument that the “prior substantiation doctrine” did not apply and that such claims were not actionable under the above consumer fraud statutes, Nestlé moved for summary judgment and argued that plaintiffs were required, but failed to present sufficient evidence that the claims were false and misleading. 2012 U.S. Dist. LEXIS 99397, *16. On July 22, 2012, the U.S. District Court for the District of New Jersey agreed, holding that plaintiffs must affirmatively prove that Nestlé’s claims were false and misleading. Plaintiffs could not simply rely upon the argument that the advertising claims were merely unsubstantiated (or that the substantiation was inadequate), and the Court awarded Nestlé summary judgment. Id. at *23 and 31 (“[p]laintiffs do not present evidence that Nestlé actually lacks scientific support for its ‘clinically shown’ claims or that such support does not exist; they argue that this support should have been stronger. This is insufficient to satisfy [p]laintiffs’ burden to demonstrate that Nestlé’s ‘clinically shown’ advertising claims are actually false and misleading.”) (internal quotation marks and citations omitted).
This important decision further shows that with respect to “clinically proven” or “clinically shown” advertising claims, plaintiffs cannot simply rely upon the “prior substantiation doctrine” to support their claims, nor can they piggyback on FTC enforcement activity. Plaintiffs need to come forward with affirmative evidence of the falsity of challenged advertising claims.