false advertising dispute based on study in medical journal should proceed, judge recommends

Theodosakis v. Clegg, 2017 WL 1294529, No. CV-14-02445 (D.
Ariz. Jan. 30, 2017) (magistrate judge)
Theodosakis and Supplement Testing Institute sued defendants
for defamation, commercial disparagement, tortious interference with business
expectancy, false advertising and unfair competition under the Lanham Act, and
violation of Arizona’s Consumer Fraud Act, based on their alleged participation
in a study and the subsequent report that was published in New England Journal
of Medicine, that plaintiffs claimed contained false and misleading statements.
STI sells glucosamine and chondroitin dietary supplements,
including Avosoy Complete. Theodosakis wrote “The Arthritis Cure” (1997), which
allegedly first reported that osteoarthritis could be successfully treated
through a nine-step treatment program that included two supplements,
glucosamine and chondroitin. This was a best-seller and Theodosakis wrote a
follow-up. Sales of the supplements allegedly “skyrocketed,” including STI’s.  In 1998, NIAMS, the arthritis division of the
National Institute of Health, commissioned a grant to perform human clinical
research specifically on the supplements, the GAIT Glucosamine/Chondroitin
Intervention Trial.  GAIT included the
use of an active comparator, celecoxib (Celebrex).
The NEJM published the study results, with defendants as the
lead authors. “The Report stated that Celebrex® passed the two primary
outcomes, and that glucosamine and chondroitin, alone and in combination, were
not significantly better than a placebo in reducing knee pain from osteoarthritis
and do not effectively reduce knee pain from osteoarthritis.” This allegedly
soured millions on the supplements, and “[a]s a direct result of publication of
the Study and Report, Plaintiff Dr. Theodosakis’ consulting contracts with
Rexall and Pharmavite were not renewed.” 
The complaint alleged that “[i]f the active comparator [in a
study] underperforms as compared to the bulk of its prior studies, there is a
high probability that the effects of treatment groups will be understated and
could lead to a false-negative result.” 
It further alleged that they’d been told that the raw data showed that
celecoxib actually failed the two primary outcomes, though they didn’t have
access to the raw data.  When the report
was published, Dr. Clegg and Dr. Sawitzke were allegedly financially involved
with commercial entities that were in direct market competition with the supplements,
including plaintiffs’ products.
Dr. Clegg and Dr. Sawitzke argued that they had Eleventh
Amendment immunity as members of the faculty of the University of Utah School
of Medicine and employees of the University of Utah.  Plaintiffs filed a motion to amend the complaint
to clarify that they were suing Dr. Clegg and Dr. Sawitzke in their individual
capacities only, and defendants didn’t show that the relief sought would come
from the state coffers, interfere with the public administration, or compel the
State of Utah to act or restrain from acting. 
Thus, defendants failed to meet their burden to show that the complaint
should be dismissed on this ground.
Defamation: Defendants argued that “[a]side from
acknowledging [Dr. Theodosakis] as a participating investigator and member of
the GAIT study steering committee, the report does not mention Dr.
Theodosakis.” Also, the “reported findings concern[ed] glucosamine and
chondroitin, generic compounds naturally made in humans.”  A corporation, like STI, “has no personal
reputation and may be libeled only by imputation about its financial soundness
or business ethics.” The statements at issue didn’t implicate STI, so it didn’t
state a claim. 
Defamatory statements “must be published in such a manner
that they reasonably relate to specific individuals.” Dr. Theodosakis had the
burden of showing that the publication was “of and concerning” him.  Statements in the report included: “The
dietary supplements of glucosamine and chondroitin sulfate have been advocated,
especially in the lay media, as safe and effective options for the management
of symptoms of osteoarthritis.”   The
report also said, “Studies have demonstrated substantial variation between the
content listed on the labels of these products and the actual content. Because
our study was conducted under pharmaceutical rather than dietary-supplement
regulations, agents identical to the ones we used may not be commercially
available.”
Given that “[t]he popular press … published numerous
articles …” not only about Dr. Theodosakis’ book, but also about the
supplements as well, “any alleged defamation occurred with regard to a group.”
“When a group of persons are defamed, the statements must reasonably relate to
a certain individual member or members…. If the group is so large, or the
statements so indefinite, that the objects of the defamatory statements cannot
readily be ascertained, the statements are not actionable.”  However, the complaint plausibly alleged that
Theodosakis was uniquely identified with the supplements because he “publicly
and on a nationwide scale staked his reputation on his position that
glucosamine and chondroitin play a major role in treating osteoarthritis.”
Commercial disparagement:  The report was clear that the glucosamine and
chondroitin utilized for the Study was conducted under pharmaceutical
regulations, so they wouldn’t be identical to readily available supplements. Even
though it questioned the effectiveness of the supplements specifically used in
the study, the allegations weren’t enough to reasonably conclude that the
statements concerned plaintiffs’ products in particular.
Defendants claimed qualified privilege under the First
Amendment as to the remaining defamation claims. The judge agreed that a report
in NEJM, published for educational purposes, qualified for the common interest
privilege given that “ ‘scholarly activity generally fits within the common
interest privilege.’ ”  Thus, plaintiffs
had to allege abuse of privilege by showing either excessive publication or
actual malice.  Plaintiffs alleged that
the raw data didn’t support the published findings, and that the doctors were
financially involved with Celebrex’s maker. 
These reasonably supported the inference of abuse of the privilege with
actual malice.  Also, plaintiffs were
prepared to allege extensive republication of the claims “in interviews,
journals and magazines,” including in a prepared statement from Dr. Clegg concerning
the GAIT Study.
Tortious interference:  There was no factual basis alleged to plausibly
support the claim that defendants were aware of plaintiffs’ alleged business
relationships.
False advertising: A scientific article published in the
NEJM isn’t commercial speech and thus can’t be commercial advertising or
promotion.  The article didn’t advocate
the purchase of one particular product over another.  Drs. Clegg and Sawitzke’s alleged financial
interest in Celebrex’s manufacturer as well as an interest in other competitors
of glucosamine and chondroitin didn’t change anything; they were only two of
more than twenty authors. The publication’s purpose was to assess the efficacy
of glucosamine and chondroitin for the treatment of osteoarthritis of the knee,
“not as a means to sell Celebrex.”
However, plaintiffs argue that defendants’ republication of
the statements allowed Lanham Act liability, since courts have distinguished
between the defendant’s initial publication of the article and its continued
distribution of reprints or republication. But plaintiffs didn’t specifically
allege any particular secondary publication or other means; that wasn’t enough.  They wanted to amend the complaint to add
allegations about “interviews, journals and magazines,” Dr. Clegg’s prepared
statement, and Dr. Sawitzke’s article published in Arthritis & Rheumatism
2008.” I would have said that none of those were commercial advertising or
promotion, for the exact same reasons—Gordon
& Breach
and similar cases allowing republication claims to continue
involved a change in form, when the republication was used as part of a sales pitch.  But the court found that, once defendants
were no longer two of twenty authors and each allegedly had a financial
interest in Celebrex, making statements “arguably aimed at the medical field,
who makes treatment decisions, and the general public touting the Study’s
results in favor of Celebrex” were enough to state a claim under the Lanham
Act, justifying leave to amend.

The Arizona Consumer Fraud Act claim was dismissed because
only consumers can sue under it. 

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