N.J. High Court Approves Class Action Suit Alleging Relacore Ad Fraud

Michael Booth

New Jersey Law Journal

A class action suit is the best method for resolving multiple consumer fraud claims against a drug manufacturer over its allegedly deceptive product advertising, New Jersey's Supreme Court held unanimously on Thursday.

The ruling allows thousands of dissatisfied users of the dietary supplement Relacore to sue collectively, overturning lower court findings that there are too many possible variables to satisfy the class action commonality requirement.

"We are satisfied that the class action is a superior vehicle -- and perhaps the only practical vehicle -- for consumers who were allegedly deceived into purchasing Relacore," wrote Justice Barry Albin for the court.

The holding, Lee v. Carter-Reed Co., A-38-09, potentially unleashes the full fury of New Jersey's Consumer Fraud Act -- with its potent treble damages remedy -- against pharmaceutical companies on a class-wide basis, foiling any divide-and-conquer strategy.

"The whole point of a class action is to provide a diffuse group of persons, whose claims are too small to litigate individually, the opportunity to engage in collective action and to balance the scale of power between the putative class members and a corporate entity," Albin said.

"Class actions by their very nature are complicated creatures, but they provide an efficiency of scale and an equitable means of relief for individuals who might otherwise not have access to the courthouse or the incentive or ability to right a wrong," he added.

The class is comprised of thousands of New Jersey residents who have bought Relacore since Carter-Reed Co. brought it to market in 2002.

Lead plaintiff Melissa Lee alleges she bought Relacore in 2004 after seeing an ad claiming it would reduce belly fat, but after using it for 90 days, at $39.99 for each month's supply, she gained weight and her waistline increased.

However, the marketing campaign varied. Some ads claimed Relacore could reduce belly fat while others touted its ability to reduce stress, enhance mood or fight metabolic syndrome.

Union County Superior Court Judge Katherine Dupuis denied class certification, identifying 14 factors that would necessitate an evidentiary hearing for each plaintiff on the Consumer Fraud Act claims. The factors included the reason for buying Relacore; which ad induced the purchase; whether the buyer was influenced by a personal recommendation; how the buyer's health might have affected the product's efficacy; how much the buyer paid; and whether a refund was sought or obtained.

Appellate Division Judges Mary Catherine Cuff, Clarkson Fisher Jr. and Linda Baxter affirmed, finding the variables would make the class action unmanageable. They acknowledged, though, that the small losses suffered by class members, about $40 to $120, made it unlikely they would sue individually.

When the case was argued to the Supreme Court last April, Carter-Reed's attorney, Gary Bendinger, insisted that the varying claims about why the plaintiffs purchased the drug and how performance fell short of their expectations failed to satisfy the class action requirement that questions of law or fact common to the class predominate over questions affecting only individual members.

But the court accepted plaintiffs lawyer Jeffrey Carton's argument that all the claims boil down to one central allegation: fraudulent advertising for a product that did nothing as advertised.

"Significantly, to establish predominance, plaintiff does not have to show that there is an absence of individual issues or that the common issues dispose of the entire dispute, or that all issues are identical among class members or that each class member is affected precisely in the same manner," Albin said.

"If Relacore offered none of the benefits claimed by Carter-Reed's multi-media advertising campaign, then it would make little difference whether a class member purchased the product because of one false promise, e.g., belly-fat reduction, or another, e.g., anxiety reduction, or whether Carter-Reed communicated its deceptions through magazines, commercial advertisements, or packaging and labeling, or through third persons who were themselves deceived by the overall marketing scheme."

The allegations "paint a picture of far-flung fraud," Albin said. "A corporate defendant engaged in a marketing scheme founded on a multiplicity of deceptions should not be in a better position in fending off a motion for class certification than a defendant engaged in a sole marketing deception."

Bendinger, of Howrey in New York, says the court failed to engage in the rigorous analysis necessary to determine whether the plaintiffs truly qualify as a class with common interests. He says rulings such as this are what prompted Congress to enact the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d), aimed at expanding federal diversity jurisdiction and reducing plaintiff "forum shopping."

"We are confident on remand that we will prevail on the merits," he says.

Carton, of White Plains, N.Y.'s Meiselman, Denlea, Packman, Carton & Eberz, says there were potentially 15,000 to 20,000 plaintiffs in New Jersey at the time the action was filed, and that class has continued to grow.

"Obviously, this is a momentous decision for consumers in New Jersey," Carton says.