One of the disturbing trends for advertisers over the last few years has been the class action bar's interest in NAD decisions and its review of such decisions to provide fodder for consumer fraud cases. As a result, advertisers and challengers have had to consider the risk of a class action pile-on when engaging in cases at NAD. A recent court decision, however, may help to dampen the class action bar's interest in using the self-regulatory forum's decisions as a weapon.
On February 11, 2013, Judge Stanley R. Chesler, United States District Judge for the District of New Jersey, held in an unpublished decision that a report from the National Advertising Division of the Better Business Bureau ("NAD") provided insufficient support for class action plaintiffs' claims of false advertising and misrepresentation under the New Jersey Consumer Fraud Act ("NJCFA").
In early 2012, the NAD issued a report finding unreliable the sole study Bayer Healthcare, LLC ("Bayer") offered to support labeling claims for its calcium supplement product, Citrical SR. The NAD recommended Bayer discontinue any and all labeling claims based on the evidence provided by this study.
Class action plaintiffs filed suit soon after, claiming that Bayer's Citracal SR advertising was false in violation of the NJCFA. Plaintiffs argued that the NAD''s findings provided sufficient factual basis to support claims that Bayer''s advertising was false and misleading.
Bayer moved to dismiss plaintiffs' complaint, and the court granted Bayer's motion. See Gaul et al v. Bayer Healthcare, LLC, No. 12-5110, 2013 U.S. Dist. LEXIS 22637 (D.N.J. February 11, 2013). In his decision, Judge Chesler explicitly stated that "unreliability" for purposes of claim substantiation was a "very big leap" from a finding of "falsity" in the consumer class action context, and thus plaintiffs had not met their burden of pleading a violation of the NJCFA.
For advertisers who rely on NAD to adjudicate their disputes with competitors, the court's decision, albeit unpublished and therefore of limited precedential value, may help parties feel more confident about participating in this useful alternative to litigation. This is good news too for regulators who tout the self-regulatory forum as an important tool for keeping advertisers in line.
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