Who’s responsible for allegedly false, concealed endorsement deals?

Woodard v. Labrada, 2017 WL 1018307, — F. Supp. 3d —, No.
16-00189 (C.D. Cal. Mar. 10, 2017)
I
discussed this case before
.  Woodard
alleged misrepresentations about the effectiveness of weight loss supplements,
specifically the Labrada Garcinia Cambogia Dual Action Fat Buster and Labrada
Green Coffee Bean Extract Fat Loss Optimizer. 
Naturex makes Svetol, the active ingredient in the Fat Loss
Optimizer.  Naturex allegedly dvertised
Svetol as the “most studied and proven green bean extract,” and attributed its
effectiveness to “100% premium Robusta beans” processed to yield a “high
concentration of key chlorogenic acids.” InterHealth makes SuperCitrimax, the
active ingredient in the Dual Action Fat Buster, and allegedly claimed “maximum
stability, solubility, bioavailability, and efficacy” as well as “60% all
natural HCA derived from the Garcinia Cambogia fruit.”
Labrada allegedly advertised the products as “clinically
proven” “FAT BUSTERS” with “ZERO BINDERS, ZERO FILLERS, AND ZERO ARTIFICIAL
INGREDIENTS.” Plaintiffs alleged that these claims were deceptive because the
supplements contained artificial ingredients. For example, SuperCitrimax was allegedly
a synthetic form of hydroxycitric acid. 
Plaintiffs further alleged that defendants misrepresented the quantity
of active ingredients in the products, the origin of the ingredients (“Made in
the USA”), and the overall quality of the products. Labrada allegedly cited
“peer reviewed, published” scientific studies on the labels to claim that the products
“support significant weight loss.” But one such study was later “retracted by
the authors after data was found to be falsified.” [So, essentially, the food
is lousy and the portions are too small.]
Dr. Oz allegedly fraudulently promoted the Labrada products
on his show by misrepresenting his affiliations with the brands he allegedly
endorses. (E.g., he said: “I’ve warned everybody that I’m not going to mention
specific brands, but I do want to go through exactly what I would look for.
You’re going to look on that list of ingredients. There should be ZERO FILLERS.
There should be ZERO BINDER, ZERO ARTIFICIAL INGREDIENTS…”)  He allegedly had undisclosed paid
spokespersons for InterHealth and Naturex on his show to promote the products;
he told his viewers that his guests were doctors or scientists, but they lacked
such credentials. Dr. Oz allegedly referred to the retracted study when touting
the magic of the Green Coffee Extract as a weight-loss aid to his viewers. He
also described it as a “good quality” study during the Senate Hearing on
“Protecting Consumers from False and Deceptive Advertising of Weight-Loss
Supplement Products.”  Various media
defendants allegedly aided Dr. Oz by concealing his endorsement arrangements,
in violation of anti-payola rules, helping him to exploit the trust consumers
place in “America’s Doctor.”
The court found various claims adequately alleged against
some of the defendants, but not Sony. 
EMV, a company responsible for “facilitating strategic partnerships
between Dr. Oz, like endorsements, collaborations, speaking engagements, and
equity deals, etc.” was sufficiently targeted by the pleadings.  Its website stated: “Our goal is for Dr. Oz
to forge a direct and authentic connection between you and your demographic,”
to create an “alliance” that “will ensure brand integrity, large scale
awareness, and continued financial growth.” This allowed a plausible inference that
EMV played a direct role in causing Dr. Oz’s affirmative misrepresentations to
be disseminated to the consuming public, and that EMV aided and abetted Dr. Oz
in concealing the endorsement deals. “It is plausible that any prudent business
partner or representative of Dr. Oz that solicits endorsement deals on his
behalf would be charged with the knowledge that Dr. Oz’s repeated disavowals of
such endorsement deals constitute a breach of duty to those harmed by such
representations.” Thus, the complaint plausibly alleged that EMV participated
in fraud, either intentionally and directly or negligently and contributorily.  Indeed, the existence of a special duty to
consumers, as required for a negligent misrepresentation claim, could plausibly
be inferred from EMV’s profiting from Dr. Oz’s endorsement deals.  “[W]ithout individuals justifiably relying on
Dr. Oz’s recommendations or representations, EMV would have nothing of value to
offer to potential clients.”
Allegations of Sony’s direct participation were lacking, but
not allegations as to media defendants ZoCo and Harpo, which “either provided
substantial assistance to, aided and abetted, employed, entered a joint venture
and/or were involved in a civil conspiracy with Dr. Oz, and either one of the
Labrada Defendants or the Supplier Defendants.”  ZoCo produces the Dr. Oz Show and manages its
website.  An archived page of the website
allegedly displayed the Svetol trademark along with statements made by a
spokesperson for Naturex; this was sufficient to allege that ZoCo “promotes and
markets the Labrada products (and/or their proprietary active ingredients)
across the United States.” An agency relationship could also plausibly be
inferred from Dr. Oz’s @ ZoCo business email address at the pleading stage. There
was a plausible inference that ZoCo “directly participated in the tortious
conduct, had actual knowledge that Dr. Oz was breaching a duty to consumers,
and provided substantial assistance to Dr. Oz and his co-defendants in this
endeavor.”
The complaint did not, however, sufficiently allege Harpo’s
direct liability. Harpo is ZoCo’s parent company; the allegations did make it
plausible that Harpo could be vicariously liable for ZoCo and Dr. Oz’s tortious
conduct as a principal. Harpo was plausibly in a position to directly control
the acts of its agent, Dr. Oz, since Harpo holds and produces copyright,
“creates and develops original TV programming,” and “control[s] any broader
joint venture/web project with Dr. Oz.”  “As the alleged holder of the intellectual
property rights to The Dr. Oz Show, one can reasonably infer that Harpo stands
to gain the most from using the show as a subliminal advertising platform for
deceptively marketed weight-loss supplements.”

Sony and Harpo agreed “to collaborate on a website and
digital extensions” where Sony was to “provide marketing, legal/business
affairs, finance, and other back office services.” That wasn’t sufficient to
allege Sony’s direct involvement in the web marketing. There was also a
distribution agreement stating: “Harpo will control any broader joint
venture/web project with Dr. Oz but Harpo acknowledges Sony’s strong interest
in partnering on a Dr. Oz branded new media venture and will discuss with Sony
in good faith meaningful opportunities to participate.” The complaint didn’t
sufficiently allege that Dr. Oz’s fraudulent promotion of the Products fell
within the partnership’s business activities, or that Sony and Harpo “had equal
rights to direct and govern the conduct of each other” with respect to the
promotion or content of The Dr. Oz Show. Likewise, aiding and
abetting/conspiracy allegations as to Sony were insufficient, even assuming
Sony provided financial or marketing assistance to The Dr. Oz Show.  “[S]ubstantial assistance is insufficient for
fraud without actual knowledge.” 

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