Edit ModuleShow Tags
Edit ModuleShow Tags

Retailer Responsibility

Wrongful death suit shines unwanted light on GNC stores


Published:

Beth Ewen

The GNC store at the Fort Bliss, Texas, military base is popular with soldiers, who load up on dietary supplements promising to pump up their bodies and boost their stamina during intense training drills.

Now the death of a soldier who bought the supplement Jack3d at the store, and the wrongful death lawsuit filed by his parents this spring, is shining new attention on a loosely regulated industry—and putting a target squarely on General Nutrition Centers’ more than 5,700 stores that contribute to more than $2.4 billion in annual sales. More than half of those stores are franchised.

 “Every time you get a bad headline about the brand, every franchisee of that brand loses money,” points out Seattle franchise attorney Howard Bundy, a regular blogger who is not involved in the lawsuit. The headlines about Jack3d and GNC can’t get much worse.

In Sparling v. Doyle, the parents of Michael Lee Sparling are suing USPLabs, the Dallas-based maker of the dietary supplement Jack3d (pronounced “jacked”) and other supplements that contain the ingredient DMAA. The suit also names Natural Alternatives International, in San Marcos, California, which makes one of the ingredients. 

But they’re going beyond the product manufacturers, naming GNC Corp. of Pittsburgh as a defendant because that corporate-owned GNC store at Fort Bliss sold their son the product. Leanne Sparling told the New York Times she now regularly visits GNC stores near her home in California, wearing her deceased son’s military dogtags and urging the stores’ owners to stop selling Jack3d if they’re still doing so.

Jack3d and other supplements such as OxyElite Pro contained DMAA, otherwise known as dimethylamylamine and “promoted to increase workout energy efficiency,” according to the Andrews Thornton website, the Irvine, California, law firm representing the Sparlings. Jack3d is the supplement—featured as a “hot buy, hot buy, hot buy” on the GNC website as recently as this spring—Sparling took before a training exercise at Fort Bliss, and then died in 2011 after cardiac arrest, the lawsuit alleges. The complaint alleges negligence, product liability, breach of warranty, unlawful business acts, punitive damages and wrongful death. 

“In fact, DMAA is a dangerous, synthetic additive. DMAA has been banned by numerous sports organizations, including the international body that regulates Olympic athletes and several professional sports,” writes attorney Anne Andrews on the site, who noted the Department of Defense removed all products containing DMAA from military base stores in late 2011. Andrews didn’t return numerous calls for comment.

GNC executives won’t comment on the suit, either, referring reporters’ inquiries via voicemail to an outside public relations firm, Marketcom PR in New York. Laura Brophy at that firm sent the same reply to Franchise Times as she sent to others: “GNC does not comment on pending litigation.”

It’s a theme in the business. USPLabs, whose CEO Jacob Geissler is named in the lawsuit as a defendant, declined to comment via a spokesman who called himself a consultant to its outside PR firm, Qorvis, in Washington, D.C. The outside attorney for Natural Alternatives, also a named defendant, did not reply to requests for comment.

One outside expert believes GNC would do well to step up and start talking, because as a leader in its industry it will continue to be targeted. “GNC has a ton of suits against it. This is certainly the most celebrated and sets a precedent,” says Gene Grabowski, executive vice president at the crisis communications firm Levick in Washington, D.C.

GNC is named, along with other defendants, in two lawsuits over DMAA including Sparling’s, and 73 pending lawsuits related to Hydroxycut, after the FDA issued a warning on that product on May 1, 2009, according to its Franchise Disclosure Document for 2013.

Grabowski says it’s only recently that product liability lawsuits have included retailers on the defendant list. Before 2007 or so, retailers weren’t generally named in product liability suits; those were reserved for manufacturers. Then came “the year of the recall,” when toys from China and scores of other products were pulled from shelves, and consumer product safety improvement acts went into place. “They are all stricter, and they all have sanctions against retailers. Retailers are now held to a higher standard,” Grabowski says.

He points to Walmart as a smart retailer that polices every aspect of its supply chain, and then touts its efforts to be a good steward. “Be very careful what you sell. Follow Walmart’s example and set standards and procedures that manufacturers have to meet to be sold in your store. Let the world know that that’s what you do,” he says.

As for GNC’s current lack of comment, “I think it’s a bit short-sighted. I think eventually GNC is going to have to create a program so they regulate the products they sell. As a leader in the industry there’s an expectation,” he says.

The dietary supplement industry has operated outside strictures that govern other product categories. Manufacturers are required to put the ingredients they use on the label, for example, but unlike drug makers they are not required to prove the products are safe for human use.

“Supplements are not regulated,” confirms Kevin Hein, a Faegre Baker Daniels attorney in Denver who works with many healthcare and medical franchise brands. “Franchisees sell a lot of these products and they don’t know what the effects are.” And if a substance is banned, “the lab in China—they’ll change the molecular structure” of the product so it’s not covered by the ban.

“It’s impossible to know if it’s safe. That sector is particular interesting and dangerous,” he says about supplements, adding GNC franchisees are likely much better protected than independent retailers. 

Jerry Marks is an attorney with Marks & Klein in Red Bank, New Jersey, who represented GNC franchisees in the mid-2000s, in a lawsuit over advertising funds and fees. He says he hasn’t heard any complaints from franchisees regarding this latest lawsuit, and he doesn’t expect to, because people are used to product lawsuits.

“It happens all over. There are recalls for everything. Supermarkets recall tainted shrimp—who knows?” he says. “I think that if there is liability established here then there will be liability all up and down the chain. But that doesn’t mean that a franchisee in New Jersey or Florida is going to be liable for this.”

Further, everyone will be insured, and indeed GNC’s 10Q for the quarter ended March 31, 2013, states it maintains product liability insurance with a  deductible/retention of $4 million per claim and an aggregate cap on retained loss of $10 million. 

“The franchisee has liability insurance. GNC has liability insurance. And I would also assume that the manufacturer has liability insurance,” Marks says. “Professionals have liability insurance. People make mistakes. Last time I went to Staples I noticed they still had erasers on the ends of their pencils.”

True enough, but the effects of the case may resonate longer—due to the death of a young military soldier, his mother’s sad quest to publicize the case, a long-standing controversy over an industry, and the rise of retailer responsibility. For GNC stores, this may not be a controversy easily erased. 

Beth Ewen is managing editor of Franchise Times. Send interesting legal and public policy cases to bewen@franchisetimes.com

 
Edit ModuleShow Tags
Edit ModuleShow Tags
Edit ModuleShow Tags

Development Deal Tracker Newsletter

Receive our free e-newsletter and learn what the fastest growing franchises are up to.

Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags

Find Us on Social Media


 
Edit ModuleShow Tags