NBTY, Retailers Named in Amended Herbal Supplement Class-Action Lawsuit

More than 20 consumers from across the United States have filed an amended class-action lawsuit in Illinois against national retailers in reliance on an herbal supplement investigation that was announced nine months ago by New York Attorney General Eric Schneiderman.

The proposed class-action complaint, which reflects a consolidation of lawsuits that have been pending against the retailers, was filed Nov. 11 in federal court against Walgreen Boots Alliance Inc. (Walgreens), Target Corp., Walmart Stores Inc. and NBTY Inc. The named plaintiffs hail from California, Florida, Illinois, Iowa, Ohio, Oregon, Minnesota, Mississippi, Missouri, New Jersey and New York.

The lawsuit cited findings from Schneiderman’s office that store-brand nutritional supplements sold by Walgreens, Target and Walmart failed to contain the labeled ingredients such as Echinacea, St. John’s Wort and Ginkgo biloba.

NBTY manufactures herbal supplements and sells them wholesale to a number of retailers including Target, Walgreens and Walmart, according to the 107-page complaint, which accused the defendants of violating consumer protection laws in more than 30 states. The lawsuit also asserted breaches of express and implied warranties and unjust enrichment.

“Notwithstanding their superior position of knowledge and experience, defendants turned a blind eye to a supply and testing chain known as ‘the wild wild west,’ allowing third parties to manufacture, test and label their store-branded products without independent verification at each step in the supply chain," the lawsuit alleged. “Why? Because the profit margin on supplements is nearly 10 times as high as that for food items. Further, virtually no regulations govern the herbal supplement industry, leaving defendants to self-police themselves."

Andrea Staub, an NBTY spokeswoman, declined to comment on the lawsuit, and the three retailers had no immediate comment.

The complaint seeks to represent three distinct classes: consumers who purchased the relevant herbal supplements from Target; individuals who purchased affected products from Walgreens; and Walmart customers who paid for the relevant herbal supplements.

Complaint Relies on NYAG Findings

The complaint’s sole reliance on Schneiderman’s findings could be problematic, according to two defense lawyers with the New York law firm Rivkin Radler LLP who are not involved in the litigation, but familiar with the allegations.

“I see absolutely nothing there," said Marc Ullman, Of Counsel to Rivkin Radler and an expert on the regulations governing the dietary supplement industry. “I [don’t] understand how you can file a complaint like that based on a cease-and-desist letter from an attorney general that hasn’t released any data on the actual tests."

Industry critics have questioned the reliability of the DNA technology that Schneiderman used to identify the herbs since DNA can become degraded or lost when an herbal product is processed into an extract.

But the complaint sought to address such criticisms.

“Even if the DNA molecule is fragmented in the extraction process, the DNA can be detectable because a fragment as small as 200 base pairs may be enough DNA to allow for the identification of the plant species from which the DNA came," the lawsuit asserted. “Indeed, the New York Attorney General had found DNA in most of the finished herbal supplements tested—all of which were extracts—but not the DNA of plants listed on the label."

John Darrah, the federal judge in the Northern District of Illinois who is overseeing the litigation, encouraged the parties during a hearing in August to conduct tests of the products by an independent company. Elizabeth Fegan, a lawyer in Chicago who is representing the plaintiffs with the class-action law firm Hagens Berman Sobol Shapiro LLP, confirmed in an email over the summer that plaintiffs have conducted their own tests on products.

But in the lawsuit, plaintiffs only referenced Schneiderman’s findings that various products failed to contain herbs and were contaminated with other substances not listed on the label, such as house plants, rice and wild carrot. The affected herbal supplements were marketed for such conditions as heart health, urinary health and immune function, but they were “worthless and had no value" as a result of the retailers’ deceptive and misleading statements, the lawsuit alleged.

“The whole suit is premised on the press release by the New York Attorney General, and I think that the defense strategy would certainly be attacking this right out of the box," said Michael C. Mulè, a partner and litigator with Rivkin Radler. “The complaint itself is really based on hearsay allegations. It doesn’t mean a complaint can’t be based on information and belief" but typically such information is solely within the defendants’ control.

Mulè also questioned whether the consolidated lawsuit could meet the requirements for a class action, an issue that typically is challenged by the defense. A class-action must share common issues of fact and law, he said, but the herbal supplements complaint references state laws across the country.

“Definitions are going to be different" under the state laws, Mulè said. “There is going to be different levels of proof. There is going to be separate defenses as to the underlying claims."

For instance, he cited a defense available under the New York General Business Law if a disputed action complies with the federal government’s regulations.

GNC’s settlement with Schneiderman, which was announced in March, recognized that New York authorities found no evidence that the retailer deviated from federal regulations. GNC was a named defendant in a number of putative class-action lawsuits that relied on Schneiderman’s findings, but the plaintiffs agreed to drop the company from the cases.

Last week during a conference hosted by the United Natural Products Alliance (UNPA), GNC’s chief legal officer Jim Sander said the company cooperated with the attorney general's office, turning over raw material specs, batch records and other documents that revealed the products contained all the listed ingredients on the product labels.