Mar 10 2011
During my continuing education about so-called “complementary and alternative” medicine one question presents itself in my mind over and over: Isn’t that fraud? Well, is it?
And by “CAM,” I mean …
The book Snake Oil Science, by R. Barker Bausell, defines “Complementary and Alternative” therapies as “physical, mental, chemical, or psychic interventions … practiced in the absence of both
- scientific evidence proving their effectiveness and
- a plausible biological explanation for why they should be effective,
and their practice continues unabated even after
- …there is scientific evidence that they are ineffective and
- …their biological basis is discredited.”
Unfortunately for ‘CAM” products and practitioners, there is no equivalent of “alternative medicine” in the law. “Conventional law” will have to do for our analysis. In “conventional law,” fraud can be a crime, a breach of contract or a tort. Here we will confine our analysis to fraud as a tort, that is, a private or civil wrong, independent of contract, and more particularly the tort of fraudulent misrepresentation.
Tort law varies from state to state, and a discussion of the law of fraudulent misrepresentation in all 50 states (plus assorted other U.S. jurisdictions) is beyond the scope of this post. However, the Restatement of Law 2d, Torts,1 [hereinafter, the Restatement] is widely regarded as the best compilation of current law on the subject. “The Restatements … are famous as an effort to bring analytical coherence into nonstatutory fields of law otherwise marked by a flood of discrete instances and judicial rationalizations of divergent results.”2 Where the law is in flux, they offer recommendations based on policy grounds. The Restatements of various areas of the law (Torts, Contracts, Agency, and so on) are highly respected and often cited in court opinions.
According to the Restatement, Sec. 525, if A
- fraudulently makes a misrepresentation of fact, opinion, intention or law to B
- for the purpose of inducing B to act (or refrain from acting),
- A is liable to B for B’s monetary loss
- caused by B’s justifiable reliance on the misrepresentation.
“Monetary loss” includes loss caused by physical harm in cases where there is a duty to disclose a fact. Restatement, Sec. 557A. “Misrepresentation,” as you might guess, means that the representation is “untrue,” “not in accordance with the facts.”3 Actions for fraudulent misrepresentation (as distinct from malpractice) have been successfully maintained against health care providers, including M.D.s, dentists and chiropractors.4
Let’s consider more closely that first element: under what conditions is a misrepresentation considered fraudulent? That is largely a question of intent (or “scienter”). But, contrary to what some may think, actual lying is not required to hold one accountable. According to the Restatement, Sec. 526,
A misrepresentation is fraudulent if the maker
- knows or believes that the matter is not as he represents it to be,
- does not have the confidence in the accuracy of his representation that he states or implies, or
- knows that he does not have the basis for his representation that he states or implies.
Subsection (a.) describes what we colloquially call “lying.” But subsection (b.) and (c.) do not require actual knowledge that one’s statement is false to impose liability. According to the Restatement’s comments to Sec. 526, which further explain its meaning, A cannot state to B that X is a fact when A merely believes it is a fact but recognizes there is a good chance it is not true. This is sometimes referred to as making a statement “recklessly,” careless as to whether it is true or false. Nor can A tell B that he knows X to be a fact based on his personal knowledge or investigation, or imply that this is the case, when A actually has no personal knowledge or has not made an investigation, even where A is honestly convinced of the truth of his representation.
Lack of scientific evidence as misrepresentation
To understand “CAM” in the context of fraudulent misrepresentation, let us first consider the sale of goods and services outside the “CAM” area. Will the lack of scientific evidence for a product’s or service’s claims support a cause of action for fraud?
The tobacco cases provide an excellent example of how one industry misrepresented the scientific evidence and got burned for its efforts. Here, we’ll look at just one of the many cases brought against a tobacco company for, among other things, fraudulent misrepresentation.
In Henley v. Philip Morris,5 the defendant tobacco company claimed on appeal that there was insufficient evidence to support the jury’s finding of liability on plaintiff’s claim of fraudulent misrepresentation. The court thoroughly rejected that argument:
Our review of the record satisfies us that there was substantial evidence that [defendant] engaged in a conscious, deliberate scheme to deceive the public, … about the health hazards and addictive effects of cigarette smoking. The jury could properly find that … defendant and other cigarette manufacturers acted both in concert and individually to issue innumerable false denials and assurances concerning the dangers of smoking, deliberately fostering a false impression by the public … that assertions of health risk were overblown … , that any real hazards had yet to be shown, and that the industry itself was acting and would act diligently to discover the scientific truth of the matter and promptly disclose its findings, good or bad. The jury could also find that plaintiff … was falsely led to believe, as defendant intended, that there was a legitimate ‘controversy’ about whether cigarettes actually caused cancer or carried any other serious health risks.
In addition, defendant argued that its statements were “opinions,” not statements of fact, and were therefore not actionable. That argument was equally unpersuasive to the court:
This argument relies on the general rule that statements of opinion will not support an action for fraud, while ignoring the exception … applicable to any statements of opinion: ‘[W]hen one of the parties possesses, or assumes to possess, superior knowledge or special information regarding the subject matter of the representation, and the other party is so situated that he may reasonably rely upon such supposed superior knowledge or special information, a representation … though it might be regarded as but the expression of an opinion if made by any other person, is not excused if it be false. … Further, if a statement of opinion ‘misrepresents the facts upon which it is based or implies the existence of facts which are nonexistent, it constitutes an actionable misrepresentation.’ … The jury here was entitled to find that insofar as any of defendant’s statements constituted opinions, they implied the existence of superior knowledge as well as a state of facts that did not exist.
In another example, a number of claims for fraud were brought against Amoco for false advertising arising out of Amoco’s assertions regarding its gasoline’s benefits.6 In one of these cases, plaintiff claimed that the following representations were “made without any competent and/or scientific substantiation”:
‘The clear color of Amoco Ultimate gasoline demonstrates the superior
engine performance and environmental benefits Amoco Ultimate provides compared to other premium brands of gasolines that are not clear in color;
A single tankful of Amoco Silver or Ultimate gasoline will make dirty or clogged fuel injectors clean … ’
Do you notice a certain similarity between Amoco’s second claim and those made for colonic irrigation?
Thus, the answer is yes, as common sense would indicate, lack of scientific evidence, or distortion of the actual evidence, for a product or service will support a cause of action for fraudulent misrepresentation. Even if the misstatement would otherwise qualify as an opinion, it is actionable fraud if the statements imply superior knowledge and are based on non-existent “facts.”
Implausibility as misrepresentation
It is difficult to find cases discussing the other element of Dr. Bausell’s “CAM” definition—lack of a plausible basis in science (as opposed to lack of scientific evidence for claims about the product or service). Of course, outside of ‘CAM,” what sort of product or service would fit that description? Levitation lessons? A perpetual motion machine? Man-capturing perfumes? In fact, yes, all of these have elicited the judicial equivalent of “you gotta be kidding!”
In Hendel v. World Plan Executive Council and Maharishi International University,7 plaintiff sued for fraud arising out of defendants’ claims that, according to her complaint, courses in Transcendental Meditation would allow her to “attain certain extraordinary powers, such as clairvoyance, ability to levitate, ability to fly, invisibility, and superhuman strength.” In addition, she “would ultimately become a ‘Master of Creation’ with the ability to manipulate the physical world and the laws of nature.”
The court did not reach the merits of her fraud claim, finding instead that her suit was barred by the statute of limitations. However, in reaching that conclusion, the court did remark that defendants’ representations were such that “any reasonable person would recognize as being contrary to common human experience and, indeed, to the laws of physics.” This meant plaintiff should have been on notice earlier that she was being defrauded.
Similarly, in Waterman v. Haumaier,8 the laws of physics prevented one party from claiming he could justifiably rely on representations in an agreement which “closely approach the concept of the perpetual motion machine … [S]uch machines … are impossible in light of the First Law of Thermodynamics,” citing Handbook of Chemistry and Physics (64th ed. Weast 1983).
Less specifically, but equally based on scientific implausibility, in Gottlieb v. Schaffer,9 the court found that various perfumes the seller claimed would allow the wearer to “control men” (“Desire” perfume), to make a man “stay close to you” (“Nirvana”), “make men obey you” (“Command”), and so on, were so “patently absurd” that no proof of their falsity or intent to deceive was necessary due to “the universality of scientific belief that [such] advertising representations are wholly unsupportable.” The Gottlieb case was decided in 1956, which makes me think the perfume seller was simply ahead of his time and could have marketed his product as a combination of aromatherapy and energy medicine in today’s market.
Thus, both the lack of a plausible basis in science and the lack of scientific evidence for claims made for products or services are well-recognized as “misrepresentations” which will support a cause of action for fraud. Now let’s apply the law of fraudulent misrepresentation to a few hypotheticals involving “CAM.”
B, the poor devil10
Imagine that A is an M.D. practicing family medicine. His patient, B, has long complained of back pain, but has not found relief in any of the remedies A has prescribed. The doctor, being an “integrative” practitioner, suggests acupuncture, which he has learned to perform, might help B’s pain, adding that he has “seen it work” in other patients. B justifiably takes all of this to mean that acupuncture is an effective treatment for back pain, and relies on that representation. B undergoes a series of 12 treatments, which costs about $1,200. In fact, A is aware, from his undergraduate education in the sciences and his medical education and training, that the basic principles of acupuncture are highly implausible and, having reviewed the literature, knows there is no good evidence that it is effective. Thus, A knows that his express and implied representations of the effectiveness of acupuncture for back pain are “not as he represents [them] to be” within the meaning of Sec. 526(a). Therefore, all the elements of a cause of action for fraudulent misrepresentation under Sec. 525, are present.
Next, let’s suppose that A is an N.D. licensed to practice naturopathy in her state. B, her patient, has the flu, so A prescribes oscillococcinum, which she describes to B as a homeopathic flu remedy. A, having taken classes in chemistry and physics, has her doubts about homeopathy, but she does not express them to B. B justifiably relies on A’s advice because A is a licensed health care provider. B takes the homeopathic remedy, but continues to suffer because, as we know, homeopathic remedies cannot be, and have proven not to be, effective. As a result, B is out the cost of the remedy plus additional monetary losses due to the physical harm caused by ineffective treatment, which delays her seeking medical care for the flu, which progresses into pneumonia. A’s conduct has thus satisfied the definition of fraudulent misrepresentation under Sec. 526, subsection (b), as she knew when she prescribed oscillococcinum that homeopathy is inconsistent with the laws of chemistry and physics and therefore could not be confident that it was, in fact, an effective remedy. In other words, she did “not have the confidence in the accuracy of [her] representation that [she] states or implies.” All the elements of a cause of action under Sec. 525 are present.
Assume A is a D.C. B visits his office for the first time, complaining of headaches. A explains to B that he is suffering from subluxation of a cervical vertebrae, the cause of his “cerviocogenic headache,” and that cervical manipulation will reduce the subluxation, thereby allowing the body’s self-healing ability to function properly. B asks A about the safety and effectiveness of this treatment. A responds that “the scientific evidence for the safety and effectiveness of chiropractic care is overwhelming.” He adds that “over the past twenty years, many controlled clinical research studies have shown that chiropractic care is safe and effective for back pain, neck pain and headaches.”11 B justifiably relies on these statements due to the chiropractor’s presumed superior knowledge on these subjects.
In fact, A has not reviewed the recent literature on the scientific validity of the chiropractic subluxation, which does not support its existence. Nor has he reviewed the recent literature on the safety and effectiveness of cervical manipulation for headaches, which does not support his unequivocal statement. He is simply repeating statements in a patient brochure he purchased in bulk for his office. Unfortunately, the cervical manipulation causes B to suffer a vertebral artery dissection and subsequent stroke, resulting in lifelong disability. A’s conduct satisfies the definition of fraudulent misrepresentation as he did not actually investigate the literature and therefore “knows that he does not have the basis for his representation that he states or implies.” This is so even though he “is honestly convinced of its truth from hearsay or other sources that he believes to be reliable.” Restatement, Sec. 526(c), and comment (f). All the elements of a cause of action for fraudulent misrepresentation under Sec. 525 of the Restatement are present.
Finally, assume A, a licensed massage therapist in her state and a reiki practitioner, places an ad for her services in the newspaper, and is contacted by B, who asks for more information. A tells B that reiki is based on the idea that there is a universal, or source, energy that supports the body’s innate healing abilities. Practitioners seek to access this energy, allowing it to flow to the body and facilitate healing. A adds that people use reiki for relaxation, stress reduction, and symptom relief, in efforts to improve overall health and well-being and that reiki has been used by people with anxiety, chronic pain, HIV/AIDS, and other health conditions, as well as by people recovering from surgery or experiencing side effects from cancer treatments. A tells B that if it is inconvenient for her to come in, A can practice reiki from a distance, that is, when B is not physically present in the office. B tells A she suffers from chronic anxiety and pain and schedules an appointment. A tells B after her first session that the standard for treatment is at least four sessions of 30 to 90 minutes each.12 B ultimately ends up attending 10 sessions, and having reiki performed without her presence twice, which costs her $1,000 total.
In a departure from the previous hypotheticals, it is not certain that B can satisfy all the elements of proof to succeed on a claim of fraudulent misrepresentation against A. A’s description of reiki’s purported mechanism of action is clearly contrary to the laws of physics, so much so that one can argue the average person should be aware of its implausibility. Even if B can prove that A knew, or should have known this, reiki’s very implausibility might keep B from being able to prove she justifiably relied on A’s statements, as was the case in Waterman. Hendel, although decided on a different issue, points to the same result. However, for the purposes of our discussion below, let’s assume the facts in this hypothetical satisfy all the elements of a cause of action for fraudulent misrepresentation under Sec. 525.
A license to defraud?
I’ve concluded that all the elements of a cause of action for fraudulent misrepresentation are present in each hypothetical. However, that is not the same as concluding the plaintiff will succeed (assuming he or she can prove the allegations of the complaint) because in any suit the defendant can plead and prove an “affirmative defense” which defeats the plaintiff’s claim. By way of example, one common affirmative defense is failure to bring an action within the time provided by the statute of limitations, as was the case in Hendel, above. Ms. Hendel may have had a textbook claim of fraudulent misrepresentation against the defendants, but because she waited too long to bring her suit, the defendants won on their affirmative defense that her claim was barred by the statute of limitations.
So what affirmative defense might be raised to defeat claims of fraudulent misrepresentation brought by B against A?
Again we turn to the …
“Sec. 890 Privileges
“One who otherwise would be liable for a tort is not liable if he acts in pursuance of and within the limits of a privilege …”
Sec. 10 of the Restatement further describes the types of consent and how they are created. Some privileges are based on the consent of another. The most familiar of these to readers of SBM is likely consent to medical treatment, so that the person who cuts one open with a sharp object will not be liable for battery if that person is a surgeon and one has consented to the surgery. We are not talking about that kind of privilege here even if consents to treatment were obtained as consent induced by fraud is invalid.
Other privileges are nonconsensual, and they can be either conditional or absolute. These privileges allow the A’s of the world to adversely affect the legally protected interests of the B’s of the world without their consent and to avoid liability for doing so. Absolute privilege is not applicable here. It is the conditional privilege which may form the basis of an affirmative defense in our hypotheticals.
“A person ‘who otherwise would be liable for a tort is not liable if he acts in pursuance of and within the limits of a privilege.’ … The term ‘privilege’ denotes the existence of circumstances that justify, or excuse, conduct that would ordinarily subject the actor to liability… . Conduct that would otherwise be actionable is held to be privileged as a matter of law where, under the circumstances, it furthers an interest of social importance.” Schultz v. Elm Beverage Shoppe,13 quoting, Restatment, Sec. 890.
However, a person is liable for any acts that are in excess of those permitted by the privilege. Thus, if A acts in self-defense during an attack by B, the privilege of self-defense against attack by another would protect him from liability for injury to B. But if A uses excessive force he has exceeded the scope of his privilege and the privilege will not protect him from liability for injuries caused by his use of unnecessary force. Restatement, Sec. 890, comment e.
Privileges can be based on a constitutional or statutory provision protecting the alleged wrongdoer’s interests even where the creation of the privilege is not specifically mentioned.14 A familiar example is the privilege protecting the media from a claim of defamation where the defamatory statement was published without malice or reckless disregard of the truth (and a few other requirements). This privilege is recognized by the courts to protect First Amendment freedoms, although obviously you don’t find actual language to that effect in the First Amendment.
The defendants in our hypotheticals can raise the affirmative defense of conditional privilege. The M.D., N.D., D.C. and L.M.T. would all argue that because their practice acts incorporate a right to perform the procedures which the patients claim are fraudulent, the practice acts create a privilege. In other words, the state legislatures, by incorporating implausible and evidence-free practices into the law, are protecting these practitioners from liability even if their patients can prove their representations are untrue and were made with the requisite intent to deceive.
The D.C. and the N.D. appear to have the best case for defeating the patient’s claim of fraudulent misrepresentation, as their practice acts incorporate their science-and-evidence-free procedures. All state chiropractic acts either explicitly or implicitly allow chiropractors to detect and correct “subluxations.”15 However, any privilege afforded by the practice act obviously would not extend to statements regarding the safety of cervical manipulation as that subject is not specifically addressed in the act. Likewise, because the naturopathy practice acts allow the use of homeopathy, the N.D. can plead privilege as an affirmative defense, although it could be argued that she exceeded the scope of her privilege by not disclosing her doubts about homeopathy.
The L.M.T’s claim of privilege would depend on whether her state included reiki in the definition of massage practice. If it does, the court could find that the statute creates a privilege. If not, there would no statutory basis for it, although she might argue that by virtue of the state’s allowing practices “taught in massage schools” (as some do) the practice act implicitly affords a privilege if her massage school training included reiki.
The M.D. is on shakier ground. While some states have enacted statutes protecting physicians to a certain extent in using “CAM”16 it is unlikely those would protect an M.D. who believed in neither the plausibility nor effectiveness of the treatment but, at least impliedly, represented otherwise to the patient. In addition, some of these statutes protect a physician solely from disciplinary action for using CAM and arguably create no privilege in a civil action. Thus, even though the M.D.’s scope of practice is broad, it does not insulate physicians from knowingly making false claims about a therapy.
In response to claims of privilege, plaintiffs could argue that a nonconsensual privilege which defeats their right to recover damages for fraudulent misrepresentation should not be recognized unless it protects some important public interest. Restatement, Sec. 10, comment (d.); Sec. 890, comment (a.). Certainly there is no important public interest served by allowing health care practitioners to make demonstrably false representations to patients.
So, is ‘CAM’ fraud? According to the Snake Oil Science definition, it most certainly is misrepresentation. Whether it is fraudulent misrepresentation depends on whether one of the three elements required for establishing fraudulent intent can be proved: knowing misrepresentation, reckless misrepresentation, or stating (or implying) a basis for the misrepresentation that one does not actually have. As criticism of CAM for scientific implausibility grows and study after study fails to support claims of effectiveness, we may reach a point where it becomes impossible for the CAM practitioner to avoid knowing that CAM is based on misrepresentations, making it much harder to defeat claims of fraudulent misrepresentation. Key to this will be the courts’ refusal to interpret the state practice acts as creating a privilege which allows CAM practitioners to avoid liability for defrauding their patients.
- Restatement of the Law 2d, Torts, American Law Institute (1979) Return to text
- U.S. Nat. Bank of Oregon v. Fought, 630 P.2d 337, 352 (Or. 1982) (Linde, J., concurring). Return to text
- Black’s Law Dictionary (4th Ed. 1968) Return to text
- Ohlsson GL, Malpractice Considerations in Complementary Medicine, in Louisell & Williams, Medical Malpractice, Sec. 17D.04 (Matthew Bender 2010) Return to text
- 114 Cal. App. 4th 1429, 1465-66, 9 Cal. Rptr. 3d 29, 62 (Cal. App. 1st Dist. 2004), cert. den., 544 U.S. 92, 125 S. Ct. 1640 (2005) Return to text
- Oliveira v. Amoco Oil Co., 776 N.E.2d 151, 156, n. 2 (Ill. 2002) Return to text
- 705 A.2d 656 (D.C. App. 1997) Return to text
- 222 B.R. 40, 1998 U.S. Dist. LEXIS 10124 (S.D.N.Y. 1998)141 F.Supp. 7 (S.D. N.Y. 1956) Return to text
- Because B, through no fault of his own, is the second letter in the alphabet, he is constantly subjected to A’s actions, both devious and innocent, in the legal literature: A sells B real property A doesn’t own, rear ends B in traffic, shoots B in self-defense, fails to deliver goods B has purchased, and so on. Return to text
- This is actually a direct quote taken from a video about the safety and effectiveness of chiropractic featuring Rick McMichael, D.C., described as the president of the American Chiropractic Association. The video appears on the Sharecare website. http://www.sharecare.com/question/chiropracticcareeffective According a Sharecare press release, the site was created by Dr. Mehmet Oz and Jeff Arnold. Return to text
- http://static.sharecare.com/docs/SharecareLaunchRelease100710.pdf?v=47 Return to text
- This description is taken almost verbatim from the NCCAM website. “Reiki: An Introduction,” http://nccam.nih.gov/health/reiki/introduction.htm. Return to text
- 40 Ohio St. 3d 326; 533 N.E.2d 349, 351 (1988) Return to text
- See, e.g., New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710 (1964) Return to text
- Bellamy JJ, Legislative Alchemy: the state chiropractic practice acts, Focus Alt & Comp Ther; 15: 214-222 Return to text
- Cal Bus & Prof Code Sec. 2234.1 (2010); Fla.Stat. Sec. 456.41 (2010) Return to text
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