In July 2014, 5-Hour Energy maker Living Essentials LLC became the target of multi-state lawsuits filed by state attorneys general from Oregon, Washington and Vermont. The complaints allege that several of the claims made in the company’s ubiquitous advertisements are false. Specifically targeted were claims that 5-Hour Energy draws its effectiveness from a unique “Energy Blend” that includes B vitamins and amino acids, that users experience “no crash later,” that doctors recommend 5-Hour Energy and that the product is safe for teens. (Washington v. Living Essentials LLC [King Cnty. Super. Ct. July 17, 2014].)
Some of the 5-Hour Energy ads claimed to be backed up by surveys. In one memorable ad, a spokesperson sits next to a large stack of papers and touts the results of one responded to by 3,000 doctors that purportedly found “over 73 percent who reviewed 5-Hour Energy said they would recommend a low-calorie energy supplement to their healthy patients who use energy supplements.” After a yearlong investigation by the Washington, Oregon and Vermont attorneys general, which included a review of the survey, the false advertising lawsuit was filed.
Why were the states motivated to sue Living Essentials as opposed to any other company with questionable advertising claims? Over the past couple of decades, private litigants filed the vast majority of false advertising suits, with state attorneys general infrequently getting involved. That trend may be shifting for a very specific reason.
Overplaying Your Surveys: Clinically Proven to Get You In Trouble
5-Hour Energy is just the latest example of multi-state litigation by attorneys general targeting false advertising. A lawsuit over GlaxoSmithKline’s diabetes drug Avandia was settled in November 2012 for $90 million. Litigation targeting Dannon’s Activia concluded in December 2010 to the tune of $21 million. And a multistate investigation into for-profit colleges suspected of false advertising is underway. These actions reveal a common theme.
Pharmaceutical companies in particular often advertise with claims that are inscrutably cloaked in comforting assurances of clinical proof. GlaxoSmithKline’s Avandia settlement is a prime example. The lawsuit alleged that GSK did not have evidence to support the claims that Avandia lowered cholesterol or that it presented low cardiovascular risk. A telling remedial measure was the requirement that GSK post summaries of all company-sponsored observational studies and company-sponsored clinical trials of diabetes products.
Dannon was similarly unable to escape the attention of 39 state attorneys general despite using advertisements that proclaimed reliance on clinical studies. Ads for Dannon’s probiotic yogurt Activia claimed that its positive effects on digestion were “clinically proven with bifidis regularis.” These allusions to clinical trials might be discouraging to individual consumers who do not have the ability to challenge those studies at the pre-filing stage, but this did not pose an obstacle to the attorneys general and the Federal Trade Commission that launched the multistate litigation against Dannon. The Activia ads were deemed deceptive because studies showed that many more servings of Activia needed to be consumed than indicated to achieve the stated digestive effects. Dannon settled for more than $20 million, and we haven’t seen Jamie Lee Curtis’ ads on TV since.
The suits against for-profit colleges are particularly illustrative of an area in which consumer plaintiffs are having demonstrated difficulty in acquiring the type of information required to determine whether certain advertising claims are deceptive. The lawsuits against for-profit schools are premised on deceptive statistics about employment prospects after graduation. Individual consumers looking to make their case will likely not have access to the data underlying the colleges’ claims. This is precisely the problem faced by the Law School Transparency organization, made up of would-be consumer plaintiffs interested in challenging claims made by law schools. LST, however, has been hesitant to bring lawsuits in part because they are often unable to obtain the employment data and surveys used by law schools to come up with their employment statistics. Without seeing how the numbers are derived, any claim of false advertising appears dangerously speculative. State attorneys general, on the other hand, can obtain such data and surveys through pre-filing investigatory tools.
The unique role that state attorneys general play in cases involving undisclosed facts or data is underscored by the willingness and ability of consumers to bring false advertising claims wherever and whenever they are able. Consider consumer class actions targeting “all natural” labeling. Regulation by the U.S. Food and Drug Administration that requires certain disclosures in labeling enables individuals to access the information that provides the basis for a lawsuit. For example, consumer suits against the manufacturers of Snapple and Arizona Iced Tea for misleading use of the term “all natural” were premised on the use of high-fructose corn syrup in those drinks, an ingredient identified right on the label. Conversely, the dearth of consumer class actions premised on deceptive advertising claims allegedly supported by studies and data confirms that this is an arena in which state AGs are better suited to engage.
Pre-Filing Investigations Are Key
It is the unique set of tools available to state attorneys general that positions them to address false advertising in a way that consumer class actions cannot. State AGs have the power to issue civil investigative demands and subpoenas before the filing of a lawsuit. This is particularly important when companies allege that their advertising claims are based on a survey or clinical trial that is not publicly available. It may be prohibitively difficult for a consumer in a pre-filing investigation to determine whether a survey or study truly supports the claims made in a company’s advertising. Companies like the makers of 5-Hour Energy will often keep surveys and studies out of the public eye. Private litigants risk having sanctions imposed against them if they file claims alleging false advertising without first developing a good-faith basis for believing that the claims are indeed false. This is not an obstacle to state attorneys general, who can confirm this before filing an action. In fact, the complaint filed by the Washington attorney general against 5-Hour Energy explicitly dissects the 3,000-doctor survey touted in the advertising, reflecting the likelihood that the survey was obtained by the AG’s office through a pre-filing civil investigative demand.
“Survey Says?” Hopefully What You Said It Says
The moral of the story is that while vague allusions to studies and surveys may impede consumer suits for false advertising, they are not obstacles to state attorneys general, who can acquire and analyze those studies by virtue of their special investigative powers. If a company’s advertising doesn’t match what the survey says, the full force of government-imposed statutory fines and penalties, not just a disapproving look from Family Feud host Steve Harvey, may be the outcome.
Peter E. Masaitis is a partner at Alston & Bird’s Los Angeles office. His practice concentrates primarily on complex litigation, with a focus on products liability and toxic torts. He has successfully defended large-scale consumer class actions, product liability, mass toxic torts and unfair business practice claims for clients in a wide variety of industries. Evan W. Woolley is an associate in Alston & Bird’s intellectual property litigation group. He graduated from UCLA School of Law in 2012. Neither Masaitis nor Woolley had any involvement in the litigation mentioned in this article.