Another court is allergic to In re GNC’s flawed reasoning on falsity

Hobbs v. Gerber Prods. Co., 2018 WL 3861571, No. 17 CV 3534
(N.D. Ill. Aug. 14, 2018)
Say what you will about Seventh Circuit substance (and I
have), I like the crisp Seventh Circuit style, which seems to influence the
district court judges too. This case whips neatly through procedural aspects of
a fraud case, declining to dismiss Hobbs’ complaint that Gerber falsely
marketed its Good Start Gentle infant formula as reducing the risk that infants
would develop allergies to cow’s milk and decrease incidences of the most
common manifestation of such allergies, atopic dermatitis (eczema) and as
having FDA endorsement of these claims.
Among other things, Hobbs pointed to a “tamper-evident seal”
placed on the lid of a plastic container of GSG formula, which stated: “1 &
A TV ad allegedly included the statement: “But if you introduce formula, choose
the Gerber Good Start Comfort Proteins Advantage. It’s what makes Good Start
formula easy to digest and may also provide protective benefits for your baby.”
 Similarly, a magazine ad allegedly
stated: “If you have allergies in your family, breastfeeding your baby can help
reduce their risk. And, if you decide to introduce formula, research shows the
formula you first provide your baby may make a difference. In the case of
Gerber® Good Start® Gentle Formula, it’s the Comfort Proteins® Advantage that
is easy to digest and may also deliver protective benefits.”

Gerber has a history with the FDA on this.  After a lot of back and forth, the FDA
concluded in 2011 that “the current scientific evidence is appropriate for
considering the exercise of enforcement discretion with respect to a qualified
health claim concerning the relationship between 100% whey-protein partially
hydrolyzed infant formula and a reduced risk of atopic dermatitis for a
specific infant population who [sic] is fed such formula during a specific
period of time.” However, use of the term “emerging clinical research” was
misleading based on the limited research (4 studies) and the fact that the
reduced risk of atopic dermatitis was observed only when infants had the
formula during their first four months.
The FDA proposed several versions of a qualified health
claim, all of which are not positive when read with careful attention.  One set of approved statements used a
“statement-then-negation” formula that, though approved by the courts, is
particularly likely to be misunderstood or misremembered: “For healthy infants
who are not exclusively breastfed and who have a family history of allergy,
feeding a 100% Whey-Protein Partially Hydrolyzed infant formula from birth up
to 4 months of age instead of a formula containing intact cow’s milk proteins
may reduce the risk of developing atopic dermatitis throughout the 1st year of
life. FDA has concluded that the relationship between 100% Whey-Protein
Partially Hydrolyzed infant formulas and the reduced risk of atopic dermatitis
is uncertain, because there is little scientific evidence for the relationship.”
The FDA letter said that FDA would consider exercising its enforcement
discretion when all the relevant information from the approved statements was
In 2014, the FDA issued a warning letter identifying
numerous ways in which the FDA deemed Gerber’s GSG to be misbranded and to
include misleading health claims that did not comply with the claims the FDA
had approved in 2011 and which restated claims about allergy reduction that the
FDA had rejected in 2006. Gerber responded to, discontinued some of its GSG
marketing (specifically, the “tamper-evident” sticker label) and the FDA closed
the matter in 2015.
Hobbs, however, alleged that “several compelling scientific
studies have concluded that partially hydrolyzed whey formula does not lower the
risk of developing allergies or allergic manifestations, including eczema,
during infancy…when compared with conventional formula.” She identified only
one such study.  Hobbs alleged violations
of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), breach
of express warranty, and common law fraudulent misrepresentation. 
Rule 9(b) applied, but the precise level of particularity
required depends on the case. The key is “to show, in detail, the nature of the
charge, so that vague and unsubstantiated accusations of fraud do not lead to
costly discovery and public obloquy.” [Y’know, under present conditions I feel
we ought to revisit this utilitarian justification for 9(b) and ask whether
accusations of fraud really are worse for reputation than other
accusations.  Thinking about various
political fraudsters and various political gropers/abusers, I don’t find the
empirical claim plausible. The mention of discovery is clearly more accurate,
but I do also wonder whether there are so many claims in which only the fraud
claim is what entitles the plaintiff to discovery.]
Hobbs alleged that she saw at least three specific ads, as
well as others, and that she relied on their shared misrepresentations. The
complaint didn’t specifically allege “where and when” Hobbs saw the ads or that
she saw them before she purchased Gerber products. But that was silly: the
complaint expressly alleged reliance, which was an allegation that she saw them
before she bought. Specific dates or the particular magazine she read for the
print ad weren’t required, at least here. 
The alleged marketing was broadly based and “essentially ubiquitous”;
this wasn’t a claim where the date was necessary to identify a single
putatively offending ad.
Gerber also invoked In re GNC Corp., 789 F.3d 505 (4th Cir.
2015) [boo!], to argue that Hobbs failed to state a claim, because she didn’t
allege that no reasonable scientist would agree with the health benefit ad, and
correctly found GNC’s analysis unpersuasive. Anyway, the claims in GNC were different. In GNC, the plaintiff alleged that the
evidence was equivocal; Hobbs didn’t equivocate, alleging that “[s]cientific
evidence concludes that ingesting infant formula made with partially hydrolyzed
whey protein does not reduce the risk of infants developing allergies.”  “Hobbs frames her claim not in terms of the
relative weight of the scientific evidence but on a factual assertion about
whether Gerber’s claims about GSG are true. ‘[T]he falsehood alleged by
Plaintiff is not that all experts agree that Defendant’s product lacks a health
benefit, but rather that the product in fact lacks that benefit.’”
Expert disagreement might create a disputed issue of fact,
but such disputes must be resolved in the nonmovant’s favor at the pleading
stage.  [So exactly right about the core GNC flaw.] Further on how wrong GNC is:
That two experts disagree at trial
about the truth or falsity of a statement does not, of course, preclude the
fact-finder from resolving the disputed fact question; no more should the
plaintiff’s acknowledgment of some competing expert opinion preclude her from
attempting to prove the fact at issue by conducting discovery and developing
the most persuasive argument possible to support her position as to the truth
or falsity of the disputed fact. Gerber cannot insulate its statements from
claims of falsity by locating a single expert who will endorse them; absolute
certainty is not the evidentiary benchmark in civil (or even criminal)
litigation. To prove that a statement by Gerber is false, Hobbs’s burden is
only to establish falsity by a preponderance of the evidence.
Even under 9(b), Hobbs’s burden was plausibility, not
probability. “In pleading her claim, the plaintiff’s burden is to allege facts
from which it is plausible to infer that the statement at issue is false, not
to allege that every expert in the world agrees that it is false or to
otherwise prove the statement’s actual falsity.”  Put another way: “That an expert believes that
GSG reduces allergies may, of course, be highly relevant evidence in GSG’s
favor, but it is not dispositive of that fact question, particularly where
competing opinions have also been introduced. Hobbs has met her burden to
plausibly allege that Gerber’s statements are false by also alleging facts that
make the inference of falsity plausible,” including the FDA’s conclusions.  Hobbs alleged enough factual detail to push her
allegations across “the line between possibility and plausibility.”
And furthermore (though it’s just gilding the lily), Hobbs
was arguing both falsity and misleadingness, and GNC didn’t bear on her misleadingness claim.
The court also reminded Gerber that 9(b)’s particularity
requirement applies to allegations of fraud, not allegations of damages. “Hobbs’
task in pleading damages is simply to plead facts that support a plausible
inference that she experienced an actual pecuniary loss as a result of Gerber’s
allegedly false statements.” Her claim that she wouldn’t have bought the
product/wouldn’t have paid as much for it absent the misrepresentation met that
ICFA exempts from liability conduct that is “specifically
authorized” by federal law, and Gerber argued that its marketing materials
complied with the claims the FDA agreed to tolerate in 2011.  Not only was this an affirmative defense that
didn’t need to be pled around. The complaint plainly and plausibly alleged that
Gerber did not comply with the limits given by the FDA “and, given the
specificity of the limited [qualified health claims] that the FDA approved, it
is difficult to fathom an argument to the contrary.” [Ouch, but seems
justified.] Even considering outside material, Gerber didn’t even try to
explain how the statements Hobbs identified complied with the FDA’s standards
or were otherwise authorized.

from Blogger

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