Litigating Nutrition: Class Action Battles Over Dietary Supplements – Speaking of Litigation Video Podcast

New episode of our video podcast, Speaking of Litigation: When it comes to dietary supplement class actions, there’s a little less class and a lot more action.

In this episode of Speaking of Litigation, Epstein Becker Green litigators Teddy McCormick, Jack Wenik, and Robert Lufrano explore the litigious minefield of class action battles, particularly focusing on the challenges faced by companies amid the proliferation of legal opportunists and lawsuits based on U.S. Food and Drug Administration (FDA) warning letters.

From navigating consumer protection statutes to deciphering FDA actions, our panelists discuss the legal intricacies shaping the dietary supplement industry's future. Tune in for an engaging conversation that unpacks the intersection of law, regulation, and commerce in the realm of dietary supplements.

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Transcript

[00:00:00] Teddy McCormick: Hello, my name is Teddy McCormick and I am a partner at Epstein Becker and Green in our Princeton, New Jersey office where I specialize in commercial litigation and class action defense with a particular emphasis on the dietary supplement industry. Today's topic is class action litigation and specifically some of the trends that we've seen in class action litigation involving dietary supplement companies.

[00:00:21] Teddy McCormick: This is an important topic because class action litigation continues to grow in the United States, particularly in states like California and New York, which have very expansive, some would argue too expansive, consumer protection statutes that really incentivize plaintiff's lawyers to bring these suits wherever they can.

[00:00:39] Teddy McCormick: In addition, the FDA has in recent years often sought to avoid engaging in the formal rulemaking process necessary to ban certain dietary ingredients, and instead has relied on regulated by warning letters. As a result, you have a proliferation of class action suits based on warning letters, which as we'll discuss in more detail, aren't final agency action.

[00:01:01] Teddy McCormick: This has led to difficulty for companies that have been sued in class action lawsuits where the plaintiffs are claiming that the ingredient or the product is illegal because the FDA sent the company a warning letter, but the FDA hasn't actually banned the particular ingredient and hasn't indicated whether it intends to take any further steps to do so. We've seen this with dietary supplement companies and with companies selling products that contain CBD. I'm excited to be here today and look forward to a really interesting conversation with my colleagues, Jack Wenik and Robert Lufrano. Jack is a former assistant United States attorney for the Eastern District of New York and a partner in our Newark, New Jersey office, where he represents several dietary supplement companies, health care providers, and other clients in commercial disputes, class action defense, government investigations, and white collar defense. Welcome, Jack.

[00:01:48] Jack Wenik: Thank you, Teddy. Happy to be here. It's a topic that's close to my heart as I not only represent dietary supplement companies, but actually use some of their products on occasion.

[00:02:00] Teddy McCormick: Great. Robert Lufrano is an associate in our Princeton, New Jersey office, where he specializes in commercial litigation, business torts, and class action defense on behalf of health care providers, dietary supplement companies, and other business entities. Welcome, Robert.

[00:02:13] Robert Lufrano: Thanks, Teddy. It's great to be here. I'm looking forward to the discussion.

[00:02:16] Teddy McCormick: Jack, Robert and I have all had the opportunity to defend a number of dietary supplement companies in class action lawsuits. And we're excited to talk about what class actions are, some of the strategy decisions that go into representing supplement companies in a class action, and some of the trends that we've seen in recent years.

[00:02:33] Teddy McCormick: So to start off, we'll talk a little bit about what class action litigation is. We've all seen stories and news about class action lawsuits, and all of us have probably at one point or another received a notice that we were a member of a class action and have the right to participate in a settlement that has been negotiated on behalf of the class.

[00:02:50] Teddy McCormick: I'm old enough to remember when I would receive these little cards in the mail telling me that I was a member of a class because I had a credit card with Citibank, for example, and that they had calculated interest incorrectly. I think nowadays you typically receive an email. I know I recently received an email alerting me to the fact that I'm a member of a class of Verizon Wireless consumers and potentially entitled to compensation as a member of that class.

[00:03:13] Teddy McCormick: So let me ask you, Robert, what is a class action? How does it differ from your typical civil litigation?

[00:03:19] Robert Lufrano: Class action is basically, it's a procedural device under the court rules. It allows one or more plaintiffs to act as representatives of a class. And they can pursue claims on behalf of a large group of people which is called the class.

[00:03:32] Robert Lufrano: Basically, it combines multiple suits into one, and the thought being that it expedites the legal process and may reduce costs of litigation. If you think about individual lawsuits that consumers might have in the dietary supplement context, if a consumer purchases one bottle let's say of a supplement and there's, they think they've been harmed by the product or they're misled in some way and purchasing the product.

[00:04:00] Robert Lufrano: It might not be cost effective for them to file suit on their own. The attorney's fees alone might be cost prohibitive. The idea of combining multiple suits into one, aggregating all these claims of this larger class into one suit, the idea is that it's more, as I said, more efficient. It's a device that's used commonly in dietary supplement class action litigation.

[00:04:23] Teddy McCormick: Robert, are there any downsides to participating in a class action lawsuit?

[00:04:27] Robert Lufrano: Yeah, so on the flip side, class actions are, by their definition, they're representative. As I said, there are one or more class representatives that are appointed.

[00:04:36] Robert Lufrano: They're sometimes called the named plaintiffs. And with that, it's only really those named plaintiffs and their attorneys who are involved in making the decisions on behalf of the class, for the most part, in the litigation. They control the strategy, they decide what motions to file, whether to attempt to settle with a defendant.

[00:04:58] Robert Lufrano: So in that sense the other members of the class, the absent class member, which is the vast majority, they don't have, for the most part, a say in the day-to-day carrying on of the litigation. In that sense it can be a downside. Some people would also say that a lot of consumer class actions, in particular, these days are more lawyer driven than driven by the litigants.

[00:05:23] Robert Lufrano: A lot of times you'll see creative, I would say, legal theories and litigation strategies. One example of this in the dietary supplement context, and I'm sure we'll get to this in more detail later, but just briefly, is this concept of piggyback lawsuits, as some of us call them.

[00:05:42] Robert Lufrano: So for example, you'll see a federal agency like the Federal Trade Commission or the Food and Drug Administration, they'll send a warning letter to a company saying you've done something wrong, mislabeled your product, or you've included an ingredient that's unsafe or whatever the case may be.

[00:05:58] Robert Lufrano: And they put them on the internet on the agency website so they're for the public to see. And then immediately after, these plaintiffs, class action lawyers, will send either a demand letter to the company or they'll just file a suit on behalf of the purported class, alleging basically the same conduct that's in those warning letters. Some people might see that as a downside as well. [laughter]

[00:06:23] Teddy McCormick: That's really interesting. Jack, I know you have defended a number of class action lawsuits against supplement companies. Can you give us some examples of what types of claims are typically asserted against supplement companies?

[00:06:35] Jack Wenik: Sure. As Robert alluded to, when we're talking about dietary supplements, we're usually talking about consumer class actions.

[00:06:45] Jack Wenik: The more prominent class action things that people probably see on your news are these shareholder suits where some event happens and a company's stock price dips by 10%, what have you, and all of a sudden the class action lawyers feast on that like sharks. In the dietary supplement world, typically we're talking about something related to a particular product.

[00:07:11] Jack Wenik: And I think it's important to stress, and I guess my politics will come through for a moment here, that I don't regard the plaintiff’s class action bar in the highest esteem. [laughter] Because these lawsuits, these class action law firms on the plaintiff’s side, they're not discovering anything typically. As Robert alluded to, they're piggybacking on something else.

[00:07:35] Jack Wenik: So in a dietary summit world, it could be a product recall, it could be an academic article talking about some flaw in a dietary supplement product, it's contaminated or tainted in some manner. And so the claims typically are going to either the quality or efficacy of the product, alleging that maybe the quantity of the advertised main ingredients isn't what's on the label, or that there are things in the products that are illegal, or that they're spiked with steroids or something else.

[00:08:14] Jack Wenik: So typically something about the product and then that often segues into this theory that the advertising and labeling was misleading in some fashion. But all of these have the common element in that it's not like these class action firms are sending out private investigators to buy products and root out evil consumer fraud by themselves.

[00:08:41] Jack Wenik: They're typically piggybacking on something else, some event. Like I said, a product recall, an academic article, a government action of some sort, and that's attacking what's either in the product, labeling in the product, or the quality or efficacy of the product.

[00:09:00] Teddy McCormick: Jack, I think both you and Robert have touched a little bit on this, but does FDA or FTC regulatory oversight of the supplement industry often set the stage for future class action lawsuits?

[00:09:11] Jack Wenik: Yes. And particularly the FTC, which deals more with advertising. And so you'll see if there's a prominent settlement with a dietary supplement company, as Robert alluded to, immediately there'll be this follow on litigation. When the FDA sends a warning to a company saying that there's something wrong with the product or an undisclosed ingredient in the product or that the product is making unauthorized drug claims or something like that.

[00:09:45] Jack Wenik: That often is a spur for a class action lawsuit, and there's been an interesting legal development in the last couple of years on the FTC side. The FTC historically has always brought these very wide ranging lawsuits that would seek enormous restitution and penalties for mostly improper conduct or advertising, many of these directed against dietary supplement companies.

[00:10:19] Jack Wenik: And what's changed is that very recently the Supreme Court in AMG Capital decided that the FTC Act did not give the FTC the power to seek the financial remedies. And so what the FTC is now doing, which is very interesting, is a kind of work around to this

[00:10:48] Jack Wenik: And they're sending out hundreds of potential penalty letters, supposedly putting all kinds of companies, not just in the dietary supplement world, on notice that the FTC is watching and they're looking to see if you're making false advertising. And now that segment of the FTC Act, they'll be able to impose some sort of financial penalty. So these letters, just like warning letters, are going to be the basis, I predict, of a lot of class action litigation.

[00:11:20] Teddy McCormick: Robert, let's take a step back for a moment and talk about how are class actions typically initiated? What is the process?

[00:11:26] Robert Lufrano: A lot of times before the suit is filed, before a complaint is filed in the courts, the plaintiff's lawyers, or the lawyers for the purported class representatives will send a demand letter to the dietary supplement company or whatever the target of the lawsuit might be. And they'll make certain allegations. If it's something like Jack said, let's say it's an alleged false advertising, maybe there's an allegation that the supplement manufacturer is making claims that it shouldn't be making on the labels of the products or whatever the case may be.

[00:12:00] Robert Lufrano: The letter will typically set forth whatever the factual allegations are. It will presumably state certain damage that's been suffered by the class representative and thereby by extension the entire class. And then there'll be a demand for something, usually some money or whatever.

[00:12:23] Robert Lufrano: And oftentimes it's typical to see something, you know like you need to respond within 30 days or we'll go on to file suit. So a lot of times the lawsuit will not be filed right away. There'll be this pre-litigation back and forth initiated by a demand letter from the plaintiff's attorney.

[00:12:44] Teddy McCormick: So Robert, what should a company do if it receives one of these demand letters?

[00:12:48] Robert Lufrano: Obviously, the company should take it seriously and conduct some kind of investigation to determine at the outset whether there's any merit to the claims that are being made. So that's a given.

[00:13:01] Robert Lufrano: Beyond that the company will probably want to preserve documents. We will refer to this sometimes as a litigation hold, and the company will want to do that just in case litigation doesn't sue because the company's now on notice that there's a potential claim on the horizon, so they'll want to make sure they preserve all relevant evidence and utilize their internal IT folks or whoever else needs to be notified to make sure that happens.

[00:13:27] Robert Lufrano: They'll also want to think about the claims and assume that they will go to litigation, and if they do, what's the size of the potential class that they're talking about. If it's a dietary supplement company and the product that's mentioned in the demand letter is product that, maybe the plaintiffs attorney doesn't know this, but it's a product that the company doesn't sell a lot of or maybe they don't even sell it anymore.

[00:13:50] Robert Lufrano: Maybe the class is really small. But if it's the flagship product where the allegation’s being made, and if this goes to litigation, that could be a very large class. That'll determine the next steps the company takes. And lastly, the company might want to just consider whether a settlement might be worthwhile with this one class representative that's represented by the plaintiff's attorney.

[00:14:18] Robert Lufrano: At the pre-litigation stage you can only settle with that named plaintiff who's coming forward. So the benefit of settling, maybe, might be well you get rid of this one person, this one potential plaintiff, but the downside is that that same plaintiff's attorney could come back the next day after the settlement with the first named plaintiff with another named plaintiff.

[00:14:39] Robert Lufrano: It might not be what you want to do in terms of settlement, but these are all things to consider when you get that demand letter.

[00:14:46] Teddy McCormick: That's really interesting. So Jack, have you had situations where you've been able to settle a class action against a supplement company early on for a very small amount or even persuade plaintiff's counsel to walk away?

[00:14:57] Jack Wenik: So, sure. And I think the point that people need to, watching this podcast need to understand, is that unlike most litigation, this is really lawyer driven. And so it's a real cost to benefit analysis for the law firm that's bringing that case. You hear all these plaintiffs lawyers pontificate that they're champions of the consumer.

[00:15:23] Jack Wenik: And that's all a bunch of bogusness. It’s, is this case worth their investing the time and effort into it? And so when I get a complaint, the first thing I'm looking at is the quality of the complaint. We've seen this. You'll get a complaint, and it's something [thrown together] in a word processer in about 15 minutes. They haven’t crossed out the name and put in the name of your client in there.

[00:15:53] Jack Wenik: Or it's festooned with typos or grammatical errors. And sometimes you'll see a complaint where it's literally incoherently written. You can have her heart to heart sometimes. Like any lawyer group in the profession, there's a range of quality in the class action bar. And with some of these firms, you're able to convince them, take this settlement, because what you wrote is really nonsensical or garbage.

[00:16:23] Jack Wenik: As Robert alluded to, sometimes you could just tell the lawyers, you're barking up the wrong tree. This particular product has almost no sales. Or my client, unbeknownst to you, is a much smaller entity than you think it is, and it's not some pot of gold at the end of the rainbow here. And you're really looking at what law firm has brought this case, what is the quality of that pleading.

[00:16:51] Jack Wenik: In New Jersey, I won't mention the name of the lawyer, but we have one notorious litigant, we call him litigant because what this lawyer does is he buys the product himself, whatever it is. Typically doesn't even use it and purports to bring the lawsuit in his own name. So he's the class representative, he's the lawyer, he's the plaintiff, he's everything.

[00:17:17] Jack Wenik: And he's brought hundreds of cases in New Jersey and elsewhere. And I have over the years made him go away when I point out how frivolous some of his cases are. It's an unfortunate product in the world, in the class action world. And the other extreme, if you get a case with one of these NGOs, one of these public interest organizations, that's backed by some legitimate pleading and science, then you know you have an issue.

[00:17:48] Jack Wenik: But again, sometimes right out of the box, you could tell that this law firm is just looking for a quick payday.

[00:17:56] Teddy McCormick: Robert, let's say your client has received a demand letter. You've conducted your investigation. You aren’t able to enter into an early settlement agreement. What are some of the things you want to be thinking about doing to protect your client?

[00:18:08] Robert Lufrano: If you're not able to settle the case and you're assuming a suit is going to be filed or the suit's been filed, obviously you'll want to consider what to do next. And so one of the first things you might want to do if the case is filed in the state court instead of the federal court is you'll want to consider whether it makes sense to remove the case to federal court.

[00:18:26] Robert Lufrano: You'll have to look at the Class Action Fairness Act, which is a statute that controls what types of class actions can be in federal court, and the requirements are a little different from non class actual litigation. So instead of having the $75,000 requirement, let's say for diversity cases, you have a $5 million requirement that's the aggregate of all the claims. Instead of having the complete diversity of plaintiffs and defendants, you have a minimal diversity requirement.

[00:18:58] Robert Lufrano: You don't have to have the unanimous consent of all defendants to remove the case if there is multiple defendants. You'll just want to consider whether removing the case makes sense and whether it's something you're able to do under the relevant statute. As I said earlier, you also want to make sure that you preserve all relevant documents because now you will be in a litigation almost for sure.

[00:19:19] Robert Lufrano: And then of course, like any litigation, you'll want to see if there's a basis to file a motion to dismiss the plaintiff's complaint. And with that, a lot of times with class actions, you'll also want to see if there's a basis to move to stay discovery. Staying discovery in a consumer class action can be a very important request to make, maybe even more so than a non class action.

[00:19:44] Robert Lufrano: If you’re a dietary supplement manufacturer, you have to anticipate that once you get to discovery you're going to be served with requests for sensitive, detailed information about customer lists, sales revenues on a state by state basis, product by product basis, confidential contracts with wholesalers, retailers, suppliers, all manner of discovery that is getting into the sort of the nuts and bolts of how you run your business.

[00:20:17] Robert Lufrano: If you can successfully move to stay discovery while a motion to dismiss is pending, that would be a really good idea if you're a defendant in a class action litigation.

[00:20:27] Teddy McCormick: Yeah, it sounds like that would be a huge benefit to your client if you can do that. So Jack, Robert mentioned looking into whether a motion to dismiss is a potential option.

[00:20:36] Teddy McCormick: I know we've had success getting cases dismissed or stayed on primary jurisdiction or preemption grounds. Can you talk about some of the potential grounds that might give rise to an early dismissal of a plaintiff's class action complaint?

[00:20:49] Jack Wenik: I'm happy to do so. I think it's important to remember, and Robert alluded to this earlier, class actions, they are a procedural device, so there's no cause of action in and of itself to bring a class action.

[00:21:06] Jack Wenik: And so whatever the class action asserts, those same elements of that cause of action have to be met, be it unjust enrichment, false advertising, some sort of warranty claim. And so all the typical defenses. And all the typical motion arguments one would have if you were just dealing one on one, one litigant instead of a class of hundreds or thousands, all apply.

[00:21:35] Jack Wenik: Now if the plaintiff's theory is some sort of fraud based action they have to plead fraud with particularity. Maybe they haven't done that. Or if they're going under the, some sort of consumer protection statute, whatever state it's in, they have to show actual consumer injury. A warranty claim requires some sort of privity.

[00:21:57] Jack Wenik: All these typical, whatever label one puts on it, from the class action lawyers, they have to meet the elements of these causes of action. And very frequently they can't, because they haven't done any investigation. But the real big one is preemption. Just two days ago this week, a very closely watched case out of the First Circuit, the Supreme court denied cert, which let stand the First Circuit decision in a case involving lactate products, where the class lawyers claimed that it was making deceptive and illegal drug claims, even though it was supposed to be a dietary supplement, that there was deceptive advertising, unjust enrichment, false advertising, improper trade practices, a whole litany.

[00:22:45] Jack Wenik: And the First Circuit said, you can't do any of that because it's all preempted. The FDA regulates dietary supplements, tough noogies, you get nothing. And that was basically upheld by the Supreme Court just this week in denying cert. So that really is the biggie in the class action world is, it's not a drug, but it is regulated by the Food and Drug Administration.

[00:23:11] Jack Wenik: And that is typically, that preemption argument is often going to carry the day.

[00:23:17] Teddy McCormick: So that's really interesting. So Robert, it sounds like there's a lot to consider in terms of potential defenses that you could make on a motion to dismiss. But let's say your client, your situation is that you filed your motion to dismiss, it hasn't been successful.

[00:23:32] Teddy McCormick: What is your next line of attack?

[00:23:34] Robert Lufrano: At that point, you'll want to see if there's any mechanisms available to you to at least limit the burden of discovery going forward. So you know, one thing that is not uncommon for defendants in class action cases to do is to file a motion to bifurcate discovery, so that would separate discovery into phases.

[00:23:54] Robert Lufrano: You may have class discovery first and merits after, let's say, for example. That might be a good idea for you if you think that based on your own investigation, that the plaintiff is going to be unable to satisfy the requirements of class certification. It might be a good idea to limit discovery to class related issues first so that you may not have to go into merits based discovery after the fact.

[00:24:18] Robert Lufrano: You also want to consider how to narrow an overly broad class. A lot of these class actions, they are purportedly nationwide class actions. So you'll have one class representative who's obviously a resident of one state, but they'll purport to bring a class action on behalf of all purchasers of a particular supplement or product in the entire country.

[00:24:42] Robert Lufrano: And so you'll want to think about other motions you might be able to make in terms of striking nationwide class or subclass allegations for particular jurisdictions where the plaintiffs might be asserting claims under consumer protection statutes of one particular jurisdiction or another.

[00:24:59] Robert Lufrano: There's been some interesting developments in the case law up to and including the Supreme Court in recent years, as to whether the courts, the federal courts, have personal jurisdiction over all the plaintiffs in these purported nationwide class actions. So these are all things you want to consider if the motion to dismiss is unsuccessful.

[00:25:22] Teddy McCormick: Robert, could there ever be a situation where a single phase of discovery is a better option?

[00:25:27] Robert Lufrano: It is possible that if you look, again, based on your own assessment of the plaintiff's case, this really goes to what Jack was talking about earlier about motions to dismiss, and you still have the basic analysis that you always have of the viability of any cause of action that's pled in the complaint. If you think that there is really no merit to the plaintiff's case, on the merits, that is, you might just want to proceed with all discovery and then move for summary judgment earlier than you might otherwise do, and try to get rid of the case sooner rather than later.

[00:26:00] Teddy McCormick: So Robert, let's switch gears for a moment and talk about class certification, because I know that's often an inflection point in these cases. Can you tell us what it is and why it's important?

[00:26:10] Robert Lufrano: Yeah, class certification is obviously a huge deal in the context of a class action litigation.

[00:26:16] Robert Lufrano: If a class is not certified, then obviously the value of the plaintiff's case diminishes dramatically because now you're just dealing with the named plaintiff or plaintiffs, and the value there is probably de minimis as compared to what the value of claims of an entire class would be.

[00:26:35] Robert Lufrano: Certification, that is controlled by Rule 23 of the Federal Rules of Civil Procedure. And there's really four basic requirements, and that's numerosity, commonality, typicality, and adequacy. All the courts have to do this analysis. They'll be briefing in terms of the class certification stage.

[00:26:54] Robert Lufrano: A lot of times they'll be experts. And the plaintiff at this point obviously wants to prove that they do have, meet all these requirements. So numerosity is, is the class so large that, the phrase is, is joinder of all members impracticable? Now for this prong of the rules, some courts will say there is a threshold number.

[00:27:14] Robert Lufrano: I've seen some courts say that it's 40 or 50. Other courts don't use a particular number. They go on a case by case basis. Then you have commonality. And that's, are there common questions of law or fact? So obviously you're dealing with potentially thousands, who knows, hundreds of thousands of class numbers.

[00:27:33] Robert Lufrano: The court has to determine whether common questions of law or fact predominate all the individual claims. Typicality, that one is, are the class representative's claims typical of the entire class? Are they based on the same legal theory? Do they arise from the same alleged conduct of the defendant?

[00:27:54] Robert Lufrano: So that's typicality. And then the last one is adequacy. And this one is an analysis of whether the class representative, so the individual named plaintiff or plaintiffs, and their counsel, can fairly and adequately protect the interests of the class. So here the courts might be looking for potential conflicts between the class representatives and the other members of the class. But those are the basic four things that the courts have to look at before certifying a class.

[00:28:22] Teddy McCormick: Robert, if class certification is granted, bad news for a client, the court finds that the plaintiff has demonstrated all of those requirements under Rule 23, is there anything that a defendant can do to try to, at that point, narrow the plaintiff's claims?

[00:28:37] Robert Lufrano: Yeah, so at that point you'll want to, again, proceed with discovery and you may want to serve, let's say, targeted requests for admissions. Use additional expert discovery, try and continue undercutting the plaintiff's claims, and you may get to a point where further discovery after class certification gives you a basis to move to decertify the class because something that comes out in discovery makes it obvious that actually those four elements we just talked about, or even one of them, is not actually met. That's a possibility as well if a class has already been certified.

[00:29:11] Teddy McCormick: Let's switch gears for a moment and talk about one of, I know, what is one of Jack's favorite subjects about experts. Jack, I know from working with you in the past how important experts are and how important the science is in these cases. Can you expand a little bit on that subject for us?

[00:29:25] Jack Wenik: Sure. What's interesting about class action work in the dietary supplement space is that you really get into science, and in particular, chemistry, toxicology, pharmacology. And I've been fascinated over the years that you can send the product, a sample from the same lot, to two different labs and get dramatically different results.

[00:29:51] Jack Wenik: And this happens all the time. I think the layperson people think that chemistry is black and white, science is black and white, and in reality, it never is. And so in these class actions, where it is typically an allegation of some sort of issue with the product, the experts are often going to be key.

[00:30:13] Jack Wenik: So let's say the claim is that our product is contaminated with heavy metals. So the first issue is, is that true? Are there really heavy metals in the product? And again, depending on what lab you send it to, you may find a completely different result. Then, all right, there's some heavy metal in the product, but what about the quantity?

[00:30:37] Jack Wenik: Is it parts per billion such that there is no physiological effect on a human being and therefore no damages? So you need a toxicologist, or you need a pharmacologist, or where did this result come from, the heavy metals? Is there a background rate in the atmosphere? Is there something from the packaging of the product, rather than the product itself?

[00:31:00] Jack Wenik: So these things could get very complicated, and getting back to what I talked about earlier, about the quality of the plaintiff's firm, the fact that this is a cost benefit analysis rather than these champions of the consumer. If you slap some really worthwhile expert reports on the plaintiff's lawyers to show that they've got some real problems proving their case, they may go away because they don't want to spend $50,000 on finding their own chemist, and toxicologists and pharmacologists to back up whatever nonsense they put in their complaint.

[00:31:38] Jack Wenik: So experts are absolutely crucial when we're dealing with a consumer dietary supplement class action because again, it's never black and white. And you may think that, oh, the FDA has asked for a product to be recalled. It must be poisonous.

[00:32:01] Jack Wenik: There’s any number of reasons why a recall has been ordered. There could be any number of reasons why a company agrees to a rather than fight with the FDA, for example. Again, it's crucial, the science, always crucial in these cases.

[00:32:22] Teddy McCormick: Definitely hearing that loud and clear and know it from our experience. So Jack, how do you typically go about finding an expert to defend your client in one of these cases?

[00:32:32] Jack Wenik: So they could come from any number of sources. Like any other area of the law, there are litigation support firms, rosters of potential experts that you can look to.

[00:32:46] Jack Wenik: I personally like to look for people that are known in the industry. I often find experts by reading interesting peer reviewed articles. The author of one of those articles strikes me as somebody that's going to have a frame of mind that's helpful to my clients. There are a number of trade associations in the dietary supplement industry that are a good source of information about experts.

[00:33:13] Jack Wenik: And again just being part of this industry itself. Teddy, you and I have attended numerous conferences. You hear people speak, you keep a little notepad maybe of these various individuals. And so you're looking for people that are not necessarily going to be a vocal advocate, but rather somebody who has got the credentials that you know are going to have some gravitas both with a court, with a judge. And hopefully with, last resort, with a jury.

[00:33:50] Teddy McCormick: Yeah, that's a great point. Robert, let's talk about, for a moment, in your typical civil litigation, you go through discovery and as the defendant your goal is to get to summary judgment and to prove to the court that there aren't any factual issues in dispute, so the case should be dismissed without going to a jury.

[00:34:05] Teddy McCormick: Are there any strategic decisions you need to consider when you're representing a defendant in a class action suit or particularly a supplement company?

[00:34:18] Robert Lufrano: One thing that's common and that is probably a good idea, in some instances, for defendants in a class action litigation is to wait until a class certification ruling has been made to file your motion for summary judgment.

[00:34:31] Robert Lufrano: And that's because there's always a concern that if the defendant prevails on summary judgment before class certification is decided, then a member… that's great in the sense that the case will go away at that point, but it can have other ramifications in that some other member of the proposed class, so to speak, could take up, pick up the spear, and file a copycat lawsuit. So you get out of the first lawsuit and then you're dealing with another lawsuit based on similar allegations. So that's one thing to consider for sure.

[00:35:07] Teddy McCormick: So I think we're getting to the end of the road. The moment of reckoning. You're defending a class action against a supplement company where the class has been certified. You've not been able to dismiss the pleading at the outset. You've not been able to get it out on summary judgment.

[00:35:23] Teddy McCormick: So we're now hurtling towards trial. In the past, it's typically been the case, the class action will almost always settle. Not always, but most of the time, and they were rarely tried. Jack, could you touch a little bit on why that has historically been the case?

[00:35:39] Jack Wenik: There's a number of reasons. One, candidly, is that judges hate these cases. They don't like to try them, particularly a federal court where a judge may have a heavy criminal docket, waiting trial on a criminal case while they're futzing around with a civil class action. The other factor, candidly, is Robert alluded to the costs of the class actions and the exposure.

[00:36:07] Jack Wenik: But one cost factor is the sheer cost of trying these cases. The, again, and it's strictly in the dietary supplement world, there's a very heavy expert cost that's associated with them. And you also have to consider the fact that your senior management from your company, for your client, is going to be diverting their attention to deal with some long trial.

[00:36:31] Jack Wenik: So there’s really not an appetite from a lot of clients to do battle over these cases, because typically you're able to work out some sort of settlement where, to be perfectly candid about it, you're paying off the lawyers and the consumer gets almost bupkis.

[00:36:52] Teddy McCormick: We all know that is definitely the reality we face when we're defending these actions.

[00:36:57] Teddy McCormick: Robert, let's say you've decided that settlement is in your client's best interest for many of the reasons that Jack just described. Can you tell us a little bit about some of the challenges associated with settling class actions?

[00:37:08] Robert Lufrano: Yeah. So unlike a typical civil litigation that's not a class action, you can't just enter into a private settlement like you normally would.

[00:37:18] Robert Lufrano: In class actions the settlements have to be approved by the court. The court is going to have to determine that the settlement is quote, “fair, reasonable, and adequate.” And that's because the court has to be considered about the absent class members, the class members who are, the vast majority of them, again, are not before the court.

[00:37:38] Robert Lufrano: The court only has the class representatives and their attorneys before it. The terms of the settlement have to be proposed to the court and the court has to sign off on them. And these proceedings for approving settlements can in themselves be quite lengthy. These terms of the settlement will be public.

[00:37:54] Robert Lufrano: So if you're a dietary supplement manufacturer, you won't have to worry that sensitive sort of business information, trade secrets are going to be included in the settlement, but of course the total amount that you're going to pay will be public, so that could have an impact on reputationally or otherwise, but that'll be public.

[00:38:14] Robert Lufrano: You have to consider how the settlement is going to be funded, what the notice requirements are going to be. Providing notice for class action settlements is a big process in and of itself. Addressing the fees that the plaintiff's attorneys are going to obtain from the settlement, as Jack alluded to.

[00:38:33] Robert Lufrano: One of the criticisms of some of these, especially consumer class actions, is that the biggest beneficiaries are the plaintiff's class action attorneys and not the actual class members who get pennies on the dollar. But in any event the court will have to sign off on the fees that are going to be awarded to the plaintiff's attorneys.

[00:38:51] Robert Lufrano: There might also be objectors, cause notice has to be given. There might be class members who object to the settlement. They don't think it's fair. And those objections, if they're lodged with the court, they have to be dealt with as well before the settlement can be finalized and signed off on. So it's a big process, very different than settling your typical civil litigation.

[00:39:14] Teddy McCormick: So Jack, let's say in your case, you believe strongly that you can prevail at trial, and the plaintiff's case on the merits is weak. And your client is anxious to defend itself and have its day in court. Is there anything unique about trying a class action lawsuit?

[00:39:31] Jack Wenik: Again, the theme, I think the unique aspect of a class action, a consumer class action, dietary supplement space, is it's typically very heavy science oriented. So unlike most trials, it's going to be very heavy expert oriented because there's often not going to be a factual dispute.

[00:39:51] Jack Wenik: It’s not like a breach of contract case or tort case. It's, “Here's our product, here's what we said about it.” And usually it's going to be a dispute, or whatever the label says or the advertising says it is. And then it comes to a battle of the experts as to was there anything truly wrong with the product.

[00:40:13] Jack Wenik: And so you really need lawyers that are attuned to those scientific issues, that understand how to make that science accessible to a jury. And that's going to require a lot of demonstrative exhibits, PowerPoint, charts, that sort of thing. Because it's really not like your typical lawsuit, where it’s he said, she said, or who ran the red light type of scenario. You know, what did the scientists say about the product?

[00:40:47] Teddy McCormick: So one thing I'm hearing loud and clear from both of you, Jack and Robert, is that class actions are complex. Class actions in the supplement industry are complex. They're heavily science based, they're time consuming, and they're expensive to defend. Jack, starting with you and then going to Robert, do you have any final tips for our audience on what they might be able to do to avoid getting sued in a class action in the first place?

[00:41:13] Jack Wenik: A couple of things. For dietary supplement companies, two points in that regard. The first is the saying don't be penny wise and dollar foolish. It really is a good investment to have outside counsel, or if the entity is large enough, their in-house counsel, will review all the advertising, review all the labels of all the product before it goes out there into the supply chain, into the consumer world, to make sure everything is compliant and accurate and all the rest.

[00:41:45] Jack Wenik: The other point I'd make is, in particular with dietary supplements, your products are only as good as their components. And so you really need to make sure that your raw ingredients, and what have you, are up to snuff. And given the state of the industry these days with so much of that is imported from China and India and other countries, you really need a robust foreign supplier surveillance verification program, as the FDA requires, to make sure that what you're getting is quality and is what it purports to be.

[00:42:23] Teddy McCormick: Robert, turning to you, any final tips for our audience on what they might be able to do to avoid getting sued in a class action in the first place?

[00:42:31] Robert Lufrano: Yeah, in addition to the great thoughts that Jack just offered, the companies might consider conducting regular advertising compliance audits to make sure that you're not going to run into any issues with being challenged on making implied claims about what your products may do.

[00:42:49] Robert Lufrano: Your companies will also want to be vigilant and stay up to speed on regulations, which change all the time, from the FDA and the FTC and anywhere else that might be relevant to your products. Keeping track of litigation trends and these types of class actions. Keeping track of recent FDA warning letters, the type of lawsuits that are being filed.

[00:43:10] Robert Lufrano: The warning letters are public for the most part. They're published online on agency websites so anyone can access them, including the dietary supplement companies themselves who are not the targets of those letters. So these are all good things to be aware of, and to do, to try and prevent these class actions before they start.

[00:43:31] Teddy McCormick: Thank you both. Thank you, Jack. And thank you, Robert, both for your final tips and for sharing all of your extensive knowledge about this subject. We've covered a lot of ground. This was really both super informative and really interesting.

[00:43:45] Jack Wenik: Thank you for having us.

[00:43:46] Robert Lufrano: Thank you.

[00:43:47] Teddy McCormick: Thank you to our audience for watching and listening. We hope that you enjoyed this podcast and if you did, please subscribe to Speaking of Litigation on YouTube or wherever you get your podcasts.