Court Orders $70 Million in Consumer Redress In Case Against Supplement Makers

By JP Ellison & Ricardo Carvajal –

A Massachusetts district court has ordered marketers of calcium and herbal  supplements touted as effective in preventing, treating, or curing diseases such as cancer, heart disease, and diabetes to pay $70 million in consumer redress.  The court’s order dated August 13, 2009 did not come until more than 6 years after the date of the last sales of the products, but in this case, justice delayed does not seem to have led to justice denied, at least not from the perspectives of the FTC or consumer purchasers of the products.

The case, against several corporations and individuals associated with those corporations, alleged false representations about the safety and efficacy of two dietary supplements and related violations of law.  The court granted FTC’s motion for summary judgment last year on six of eight counts. The court found that the defendants had made various claims without any substantiation, and thus had engaged in deceptive advertising in violation of the FTC Act.  Thus, the liability of the defendants had largely been resolved by the court.  The issue that the court resolved earlier this month was the nature and amount of equitable relief to grant.  The court’s two orders, covering different corporate and individual defendants, order restitution in an amount designed to fully deprive the defendants of any funds derived from the sale of these supplements.

In addition to the monetary relief, the court’s orders include injunctive provisions that prevent the defendants from making the same type of representations at issue in this case in connection with other products.  Furthermore, the court’s order contains compliance reporting and monitoring provisions.  Finally, the orders contain “fencing in provisions” that go beyond granting relief with respect to the products at issue in the case and are designed to prevent the defendants from engaging in similar conduct in the future.

The court’s order does not seem likely to be the last word on consumer redress, however.  At several points in the decision, the court suggests that the defendants have not been completely transparent about their finances.  This appears to be, at least in part, a basis for the court rejecting an argument that ability to pay should be considered in ordering restitution.  In addition, the court order permits discovery in aid of the judgment, suggesting that neither FTC nor the court is satisfied that there is a clear picture of the defendants’ finances.