Ruling that a California federal court incorrectly relied upon a Wikipedia link when considering a summary judgment motion in a false advertising suit, the Ninth Circuit Court of Appeals reversed dismissal of a suit against GNC Corporation.
Michael Bitton and other consumers filed suit against GNC, Gencor Nutrients, related entities, and corporate executives in connection with Testofen, an extract of the herb fenugreek. The defendants manufactured nutritional supplements containing the extract and marketed them as a testosterone supplement that could increase muscle mass, strength, and libido in males, the plaintiffs said.
The putative class action complaint alleged that the defendants violated California and New York false advertising laws as well as the federal Racketeer Influenced and Corrupt Organizations Act (RICO), by working together to promote fraudulent claims to dupe consumers.
To market their products, the defendants claimed they conducted a "double-blind, randomized, placebo-controlled human clinical study" that established "statistically significant results" showing increases in "free testosterone" in study participants. The plaintiffs alleged that they relied on this representation, which they further said was false.
The plaintiffs conceded that a clinical trial occurred, but according to their complaint, the trial's results did not establish a statistically significant increase in free testosterone levels in study participants when subjected to "universally-accepted principles of statistical analysis." To support this contention, the plaintiffs provided an expert report relying upon what they characterized as the most common method of making a statistical adjustment, the Bonferroni correction.
A federal district court judge granted the defendants' motion to dismiss all counts. As part of its reasoning, the court cited an article found online for the proposition that "[t]he Bonferroni correction is the simplest and most conservative approach used to correct for" multiple variables. Failing the Bonferroni correction test does not necessarily mean that a study's results are not statistically significant, the court said, and less conservative methods of correction could show that the results of the Testofen study were statistically significant.
The plaintiffs appealed and the Ninth Circuit reversed as to the false advertising and deceptive business practices claims.
"The district court erred in relying on its interpretation of the Bonferroni correction," the panel wrote in an unpublished memorandum. Although the complaint incorporated by reference a Wikipedia page on the Bonferroni correction, "the district court relied on a different publication (a link to which was apparently embedded in the cited Wikipedia page) for the proposition that it is the 'most conservative' correction. The latter article was not before the court, which should have ruled only on the sufficiency of the allegations in the complaint."
"More importantly, the accuracy of statements on the Wikipedia page and in the article, and the court's assumption that application of other corrections would confirm that the Gencor study produced statistically significant results, are not proper subjects for judicial notice," the Ninth Circuit declared.
The panel did affirm the district court's dismissal of the plaintiffs' RICO claims, however, finding that the complaint lacked plausible allegations of a fraudulent scheme. "The complaint contains no factual allegations plausibly suggesting that the results of the study were altered or that any Defendant knew that the study was either falsified or unreliable," the court said.
To read the memorandum in Bitton v. Gencor Nutrients, Inc., click here.
Why it matters: While the Ninth Circuit reinstated the false advertising and deceptive business practices claims against the defendants (providing a reminder about the proper subjects for judicial notice), the court was not persuaded that the complaint's allegations were sufficient to state a criminal enterprise occurred in violation of the federal RICO statute.
