Dismissed Class Action Against Vitamin Shoppe to Continue

Wednesday, August 2, 2017

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Dismissed Class Action Against Vitamin Shoppe to Continue

Ninth Circuit Reinstates Three Causes of Action Over Alleged Mislabeling

By a MetNews Staff Writer

Vitamin Shoppe products are alleged to be deceptively labeled.

The Ninth U.S. Circuit Court of Appeals yesterday revived a class action alleging the misleading labeling of Vitamin Shoppe products, declaring that the district court improperly dismissed causes of action for unjust enrichment, fraud, and unfair trade practices.

It upheld the dismissal of causes of action for breach of contract and breach of warranty.

The gist of the complaint is that labels on Vitamin Shoppe products state the number of capsules or tablets in a bottle or package, and the strength, implying that each capsule or tablet is of that strength, but advising in small print on the backs of the products that the “serving size” is greater than one.

The complaint was brought on July 23, 2014, in Oregon by Lee Walters, a medical doctor, who said he purchased a Vitamin Shoppe product based on what he was led to believe by the packaging to be the potency, and would not have made the purchase had he not been misled. In particular, he bought a package of “Calcium 1000 mg Caramel Chews” in May 2014.

Serving Size

According to the complaint, the front of the package of such chews “represented that the package contained ‘Calcium 1000 mg Caramel Chews’ and that ‘60 SOFT CHEWS’ were inside the package” but that “the package contained 60 soft chews that each contained only 500 mg of calcium.” On the back of the package, in “much smaller type”—and facing away from the purchaser when viewing the product on a shelf—it is noted that “a ‘serving size’ was two soft chews.”

Nothing on the front of the package, the complaint said, “indicated that the 1000 mg dosage was predicated on consumption of more than one soft chew, or that it was not an accurate representation of the quantity of Calcium per each soft chew.”

Walters was originally joined as a named plaintiff by a “Jane Roe,” a resident of California, who sued under California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law. Oregon plaintiffs and California plaintiffs were to be subclasses of a nationwide class, but the Roe allegations were eliminated in the operative pleading, and the action has proceeded under Oregon law.

Defendant Vitamin Shoppe Industries, Inc. (“VSI”), a New Jersey corporation, sells its products in more than 700 retail stores in 45 states—including 90 in California—as well as on the Internet and by catalogues. Products include, according to the complaint, “vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products.”

Memorandum Opinion

On an appeal from a district court dismissal, the Ninth Circuit reinstated the action in a memorandum opinion signed by Circuit Judges Paul J. Watford and John B. Owens and by Chief Judge Gloria M. Navarro of the District of Nevada, sitting by designation.

The judges said that the district court was correct in disallowing a cause of action based on breach of contract, explaining:

“We have found no authority under Oregon law holding that the mere purchase of a consumer good, without more, suffices to establish a valid and enforceable contract. To accept Walters’ theory of contract formation, we would have to conclude that the display of a price term and quantity information on or immediately surrounding a product’s packaging constitutes an offer to sell.”

They said this would be contrary to “the traditional rule.”

The judges also declared that a cause of action for breach of warranty was properly barred because the requirements are not met under state or federal law.

Unjust Enrichment

However, the jurists found, the unjust enrichment cause of action was erroneously excised. Their opinion said:

“Under Oregon law, once a court determines that a valid contract exists, an unjust enrichment claim must fail….The district court dismissed Walters’ unjust enrichment claim on this basis, after concluding that a contract had been formed. Because the parties’ transaction did not form a contract, the unjust enrichment claim is not precluded.”

U.S. District Court Judge Anna J. Brown of the District of Oregon had adopted the findings and recommendations of Magistrate Judge Paul Papak, who found that Walters’s purchase did constitute entail a contract. He found, however, “that Walters’ failure to account for the information contained in the terms printed on the packaging, whether on the front facing portion or the reverse-side, does not place VSI in breach of the contract formed by Walters’ purchase of the product.”

A cause of action was also stated for false representation, the panel held yesterday. It said:

“Contrary to VSI’s contention, the operative question is not whether Walters unreasonably failed to read the terms of a contract—as explained above, no contract exists in this case. Instead, the question is whether Walters was required, as a matter of law, to cross-reference statements on a product’s label against information found in small print elsewhere on the product. This court has answered that question in the negative. Consumers review the small print on a product’s label to learn additional details about a product, not to correct potentially misleading representations found on the front.”

A cause of action for an unfair trade practice was also restored. The memorandum opinion set forth that Walters alleged that false representations were made, in violation of a state statute, and that if he had known of the falsity he would not have purchased the chews.

“The ascertainable loss, therefore, is the monetary value of a product that Walters would not otherwise have bought,” the judges’ memorandum said. “Because Walters alleges that he relied on VSI’s representations, he
sufficiently pleaded that VSI’s conduct caused his loss.”

The case is Walters v. Vitamin Shoppe Industries, Inc., No. 15-35592.

Unsettled is whether Walter’s suit may proceed as a class action. In recommending that the entire action be dismissed without leave to amend, Papak found that VSI’s motion to strike the class allegations was moot.

The complaint states that there are more than 100,000 class members nationwide and the controversy exceeds $5 million.

The chart above was contained in the complaint.