Federal court dismisses false advertising suit

Federal court dismisses false advertising suit

New Jersey court dismissed a class action lawsuit predicated on a NAD decision that found Bayer labeling claims were unreliable.

Last month, in Gaul v. Bayer Healthcare LLC, the U.S. District Court for the District of New Jersey dismissed a class action lawsuit predicated on a National Advertising Division decision that found that substantiation for Bayer Healthcare’s labeling claims was unreliable. The District Court relied heavily on a 2010 Third Circuit decision—Franulovic v. Coca Cola Co.—which held that allegations that a defendant lacks substantiation are insufficient to satisfy the “falsity” element of a New Jersey Consumer Fraud Act claim.

Nothing prevents a private litigant from filing a lawsuit against an advertiser or manufacturer after a federal regulatory agency, such as the Federal Trade Commission, or a self-regulatory agency, such as the NAD, takes action against the same company. In fact, in recent years, these types of “piggyback” class actions have been filed in increasing numbers. Many recent false advertising class action complaints have come on the heels of, rely heavily on, and, in some cases, are virtually verbatim to FTC complaints and NAD decisions.

The Gaul decision, however, is the latest in a series of decisions over the past three years, in which federal courts have dismissed class actions brought under state consumer protection and false advertising laws premised on the theory that a claim is false simply because the defendant has not offered adequate substantiation. While these decisions are no doubt a welcome relief to advertisers, it remains to be seen whether they will slow down the pace of follow-on class action filings or merely signal to the plaintiffs’ bar that something more than an FTC complaint or NAD case decision will be needed to overcome a motion to dismiss.


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