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NAD Dispute Resolution Process: Secret Until It’s Not

by | Aug 17, 2021

by Ross Weiner

I wrote a June 2021 article in Law360 describing how competitor advertising disputes brought to the National Adverting Division (NAD) are often a precursor to civil litigation.  But a recent decision out of the Northern District of California confirms another worry for NAD participants: what happens in the NAD will not necessarily stay there.

Civil Litigation Concerning Woolite Follows an NAD Proceeding

In Prescott v. Reckitt Benckiser LLC, six consumers filed a 2020 class action against Reckitt Benckiser, the manufacturer of Woolite Laundry Detergent, alleging that Woolite’s promise to “bring[] the color back” is false and misleading. This lawsuit came on the heels of Proctor & Gamble, a Reckitt competitor, bringing Reckitt to the NAD in 2019 over the same issue.

During discovery in the federal court litigation, plaintiffs sought from Reckitt documents and communications relating to NAD’s investigation of Woolite as well as deposition testimony from a Reckitt executive on her meeting with NAD.  Reckitt objected, arguing that any such documents, communications, and testimony would violate its “confidentiality agreement with a third-party pursuant to the Procedures set forth by [NAD].”  Indeed, Reckitt argued that the confidentiality requirement “is important to facilitate NAD’s dispute resolution process.”  Plaintiffs moved to compel. 

How Did the Court Rule?

First, the court ruled that any such documents or communications concerning Reckitt’s “testing methodology” or the basis of its color renewal claims would satisfy FRCP 26(b)(1), as they would “likely…include information relevant to the claims and defenses in this case.”

Second, the court held that Reckitt had failed to establish “good cause” to preclude discovery of the communications, noting that it was pure speculation that NAD would prohibit Reckitt from future participation in NAD proceedings if Reckitt was required to produce its communications in discovery.  The court sympathized with Reckitt’s confidentiality concerns but ultimately found them misplaced, stating that they “can be protected by invoking the provisions of the protective order in this case, so that individual plaintiffs, the public, and [Reckitt’s] competitors do not have access to the communications.”

Third, the court ordered Reckitt to produce its executive to testify further in deposition concerning the communications about which she was ordered not to testify.

Why Does This Decision Matter?

The Reckitt discovery dispute should help crystallize for companies the risk of the NAD dispute resolution process.  While confidentiality has always been one of its main selling points (along with speed and efficiency), participants should not be fooled.  Unlike the famous Las Vegas tagline, what happens in NAD proceedings will not necessarily stay there. 

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About the Author

Ross Weiner is the Legal Director at Risk Settlements, where he helps evaluate new business, assess legal and financial risk, and create optimal settlement designs and risk transfer options.

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