In a decision of note, the District of New Jersey recently granted defendant Bayer Healthcare LLC's motion to dismiss a putative class action complaint alleging, inter alia, a violation of the New Jersey Consumer Fraud Act (the "NJCFA"). The court held that a report issued by the National Advertising Division of the Better Business Bureau (the "NAD") was insufficient to support plaintiffs' claims that Bayer's advertising was false. Given the recent trend of plaintiff consumer class actions following on the heels of NAD reports, this decision may have important implications.
In Gaul v. Bayer Healthcare LLC, No. 12-5110 (SRC), 2013 U.S. Dist. LEXIS 22637 (D.N.J. Feb. 11, 2013), plaintiffs alleged that Bayer falsely advertised that one dose of its calcium supplement product, Citrical SR, was equivalent to competing supplements that require two doses. Plaintiffs' basis for the allegation of falsity was an NAD report concluding that the sole study cited by Bayer to support its labeling claims was unreliable. The court held that the report could support an inference of inadequate substantiation (which is not cognizable under the NJCFA), but not of false advertising. The court explained that "[t]he allegations about the NAD Report support the inference that Bayer's study should not be relied on. But that does not mean it is wrong or false. What Plaintiffs have tried to do is to shift the burden of proof onto Bayer. The law, however, requires that Plaintiffs prove, inter alia, that the labeling claims are false."[*] The court thus dismissed plaintiffs' claims without prejudice.
The Gaul opinion follows a similar decision from the Central District of California, which also dissected an NAD report to find that it failed to provide factual support for plaintiff's false advertising claims brought under the consumer fraud statutes of California and Ohio. In Otto v. Abbott Labs., Inc., 5:12-cv- 01411-SVW-DTB, Docket No. 35 (C.D. Cal. Jan. 10, 2013), the court dismissed without prejudice a putative class action alleging that labels on Ensure beverage products, which stated that the drinks will "help rebuild muscle and strength naturally lost over time," are misleading because they failed to disclose that Ensure only delivers those benefits to normal, healthy adults who exercise.
The Otto court held that an NAD opinion cited to demonstrate the products' limited efficacy could not allow the court to reasonably adopt the inference that the products deliver health benefits only to exercising adults. The NAD opinion stated that "it is unclear from the body of research whether or not exercise is required to achieve the claimed result" and concluded that it was appropriate to promote Ensure with exercise. The court noted that no study cited in the NAD opinion concluded that Ensure only benefits exercising adults, and thus the "Court perceives no basis to infer that the Products are only effective for exercising adults."
These decisions are in accord with a recent amendment to the Policies and Procedures for the NAD, which states that the self-regulatory function of the NAD seeks to hold advertisers to high standards set by the industry, and does not determine whether the law has been violated. See The Advertising Industry's Process of Voluntary Self-Regulation: Policies and Procedures by the Advertising Self- Regulatory Council, Rule 2.1 (A) (as amended Sept. 24, 2012).
Neither NAD's Rule 2.1(A) nor these recent decisions foreclose a court from finding that an NAD report supports an inference in a consumer fraud class action context that an advertising claim is false. However, it increasingly is clear that courts should carefully examine an NAD report on a motion to dismiss, and need not find that it supports an allegation of falsity merely because the NAD's conclusion was unfavorable to the advertiser.