False Advertising/Labeling: Ninth Circuit Holds That Standard for “Literally False” is Lenient
Two recent opinions handed down by the US Ninth Circuit in San Francisco have clarified that the summary judgment legal standard for “literally false” labeling and advertising is a lenient standard — preponderance of the evidence. See Sonner v. Schwabe North America, Inc., 911 F.3d 989 (US 9th Cir. December 26, 2018) and Korolshteyn v. Costco Wholesale, Case No. 17-56435 (March 7, 2019) (unpublished).
Both cases involved makers and sellers of nutritional supplements containing ginkgo biloba leaf extract and vinpocetine. The labeling on the supplements touted the ability of the leaf extract to improve “alertness,” “mental clarity, and memory.” In both cases, the plaintiffs sought to certify classes of individuals who bought the supplements. In both cases, the plaintiffs asserted that the labeling and advertising related to the ginkgo supplements was literally false and violated California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq., the Consumers Legal Remedies Act, Cal. Civ. Code § 1750, et seq. (“CLRA”). In general, a claim that a label or advertising is “literally false” must be proven with expert opinion reports and testimony. In both cases, the plaintiffs did, in fact, have experts that opined that the leaf extract was not capable of improving various cognitive functions when compared to a placebo.
However, prior to the Ninth Circuit’s opinion in the Sonner case in December 2018, there was a split among the federal courts as to the standard to apply. Some courts held that a high standard was required to prove a “literally false” claim. These courts, including the US trial court in the Korolshteyn case, held that a plaintiff must show that the scientific evidence of falsity is “unequivocal.” This is a high standard. From a practical standpoint, this high standard meant that targets of these sorts of lawsuits could “win” by providing counter-scientific evidence and opinions. If there are countervailing and opposing opinions, then the scientific evidence is not “unequivocal.” The logical foundation for this high standard is that, where there is scientific evidence on both sides of a question, a business is making a choice between two permissible scientific judgments. According to this legal position, such a choice is not fraudulent or deceptive since fraud requires knowledge that the statement or claim is actually false.
By contrast, other courts held that if there is conflicting scientific evidence/opinion with respect to a claim, that conflicting evidence must be resolved by a jury on the basis of a preponderance of the evidence. In general, preponderance of the evidence means that jury makes a determination that one set of evidence outweighs the evidence presented for the competing position. This is a much more lenient standard that makes it much easier for plaintiffs to prove their cases.
In the two cases linked above, the Ninth Circuit held that the more lenient standard applies to claims of literal falseness. This could be bad news for San Diego businesses by potentially increasing business uncertainty, encouraging lawsuits of this sort, and increasing litigation costs.
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For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for San Diego and California businesses. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard has, for the fourth year, been honored as “Best of the Bar” by the San Diego Business Journal for 2018.