Class actions have become sad part of doing business, attorney says

By Hank Schultz

- Last updated on GMT

Related tags Class action Plaintiff

Having to deal with class actions suits has become an unfortunate fact of life for many dietary supplement companies, an attorney says.

Ivan Wasserman, a partner in the law firm Amin Talati Upadhye who has just opened the firm’s new Washington, DC office, spoke with NutraIngredients-USA at the recent SupplySide West trade show in Las Vegas, NV.  Wasserman said that there is little hard data to point to, but he said he felt confident in saying that the class action tide is not ebbing.

“The tide certainly has been rising over the last decade. Is it rising more? It’s hard to say because it is so common now,”​ Wasserman said.

One reason the number of suits is hard to pin down is that many such actions are settled long before the filing the suit stage.  The filers first make themselves known to their potential targets in the form of a demand letter.  Then the companies that could potentially be sued either pony up an agreed upon amount of money to make the plaintiffs’ lawyers go away, or they convince the firm that sent the letter that it has no case.  In either scenario, that action never becomes public, Wasserman said.

To pay, or to fight

Nipping the action in the bud by successfully squelching the demand letter is the best outcome, but difficult to achieve because plaintiffs’ attorneys have become so sophisticated in their approach. Clumsy demands that are easily shot down are in the minority.  Whether then to adopt a policy of paying out demands quickly so as to be done with it depends on the size of the demand and a company’s stomach for litigation, Wasserman said.

“Defending a class action in court is incredibly expensive, it’s incredibly burdensome and it’s incredibly disruptive to your business,”​ he said.

So the question becomes, should companies in the dietary supplement industry just learn to live with this irritation? Has having a budget line item for class action payouts become standard procedure?

“The cynical but truthful answer is probably yes. Obviously you want to make sure your claims are reviewed by counsel. You want to make sure that your are not giving an easy target. But in this day and age even with the best review these suits are so common, so prevalent, odds are that if you have a successful product at some point you will find yourself having to deal with a plaintiffs’ attorney,” ​Wasserman said.

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1 comment

It's called "extortion"...

Posted by WK,

This is the legalese mentality today. Free money. Pick a company, make up a threatening PR campaign, knock on their door, then kick the door in a wait for their CEO to cut you a check.

They do this game in places like Russia and Ukraine. Actually, the Mafia ran rackets like this... actually.. this is all a copycat scam borrowed from the IRS.

Demand letters with no substance... KaCHING!!

Scammers.. coming soon to a city near you.
American lawyers need to clean up their act.

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