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Trudeau v. Federal Trade Commission

August 25, 2005

KEVIN TRUDEAU, PLAINTIFF,
v.
FEDERAL TRADE COMMISSION, DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiff Kevin Trudeau is an advocate of alternative health products, a producer of infomercials, and a vocal critic of the defendant Federal Trade Commission ("FTC"). On September 2, 2004, the FTC entered into a settlement agreement with Trudeau that resolved an enforcement action the agency had commenced against him for alleged deceptive trade practices. Several days later, the FTC issued a press release that Trudeau believes mischaracterizes the settlement agreement. Trudeau then proceeded to bring this action against the FTC, alleging that the press release exceeds the agency's statutory authority and reflects an effort to retaliate against his criticism of the agency in violation of his First Amendment rights. Trudeau has now filed a motion for a preliminary injunction, and the FTC has filed a motion to dismiss. For the reasons set out below, the Court concludes that Trudeau does not state a viable cause of action as a matter of law. The Court therefore denies Trudeau's motion for a preliminary injunction, and grants the FTC's motion to dismiss.

BACKGROUND

Plaintiff Kevin Trudeau is a prominent author and producer of television infomercials, through which he promotes and markets alternative health products to the public. Compl. ¶¶ 1-2. He is also an outspoken critic of the FTC. Id. ¶ 8. For several years, the FTC has been pursuing legal action against Trudeau, alleging that his infomercials mislead consumers about supposed cures for serious diseases (such as cancer and multiple sclerosis) and common conditions (such as hair loss and obesity). This case arises out of a press release the FTC issued in the wake of a settlement of one of those legal proceedings.

In January 1998, the FTC filed a complaint against Trudeau in the United States District Court for the Northern District of Illinois, claiming that he had engaged in the false and deceptive marketing of certain products in violation of the Federal Trade Commission Act ("FTC Act"). As just one example, the complaint alleged that Trudeau had promoted a product known as "Eden's Secret Nature's Purifying Product," which Trudeau claimed would cause significant weight loss; prevent or cure ailments such as arthritis, depression, premenstural syndrome, immune suppression, fatigue and headaches; cleanse the body of harmful toxins; and purify the body's blood supply. At the same time that the FTC filed the complaint, it submitted a stipulated order for permanent injunction and final judgment settling all charges against Trudeau. Trudeau had signed and agreed to the terms of this order, which, among other things, prohibited him from making the claims challenged in the complaint with regard to the products described in the complaint or any similar products, and required him to pay $500,000 into a fund for purchasers of the products. The FTC issued a press release announcing the settlement. See Mem. Supp. of FTC's Mot. to Dismiss ("Def. Mem.") at 4-5.

In late 2001 and again in August 2002, Trudeau produced and appeared in infomercials for a product called "Coral Calcium Supreme."*fn1 Compl. ¶¶ 11-12; Def. Mem. at 6-7. Trudeau also produced infomercials during this period to sell a product called "Biotape." Def. Mem. at 7. The FTC took two steps in response to these infomercials. First, the FTC filed a motion in June 2003 for an order to show cause why Trudeau should not be held in contempt of the 1998 order. Second, the FTC initiated a new action against Trudeau and several other defendants in the United States District Court for the Nothern District of Illinois alleging that the marketing of these products was false and deceptive. According to that complaint, Trudeau marketed Coral Calcium Supreme as an effective treatment for cancer, multiple sclerosis, lupus, other autoimmune diseases, and heart disease and high blood pressure, and alleged that Biotape, a substance similar in appearance to electrical tape, contained "space age mylar" that "connects the broken circuits" in the body that cause pain. Def. Mem. at 7.*fn2

On July 1, 2003, the parties agreed to, and the court entered, a stipulated preliminary injunction that prohibited Trudeau from making any of the challenged claims for Coral Calcium Supreme and Biotape. Compl. ¶ 15; Def. Mem. at 8. A year later, on June 7, 2004, the FTC moved that Trudeau be held in civil contempt for violating the terms of the preliminary injunction by continuing to promote Coral Calcium Supreme. On June 29, 2004, the court granted the FTC's motion, and again ordered Trudeau to cease all advertising for Coral Calcium Supreme. Def. Mem. at 8. Several weeks later, the FTC and Trudeau entered into a "stipulated final order for permanent injunction and settlement of claims for monetary relief" resolving the FTC's motion to have Trudeau held in contempt of the 1998 order, the FTC's motion to have Trudeau held in contempt of the 2003 stipulated preliminary injunction, and the 2003 complaint. Compl. ¶ 18, Ex. A. The court entered a final order on September 2, 2004. Id.

The order bars Trudeau "from producing, disseminating, making or assisting others in making any representation in an infomercial aired or played on any television or radio media." Compl., Ex. A, at 8. The order recognizes an exception to this ban for representations in any television or radio media in connection with the marketing of "any book, newsletter or other informational publication" provided that the publication does not reference any product or service that Trudeau is marketing, does not advertise any product or service related to the content of the publication, and is not sold or marketed in conjunction with a product or service related to the content of the publication. Id. The order also bars Trudeau from manufacturing or marketing "any product containing coral calcium" or any of the products challenged in the 1998 lawsuit, or from making representations regarding the benefits of any product unless the representation is true and not misleading. Id. at 10-13. Finally, the order enters "[j]udgment for equitable monetary relief in the amount of two million dollars" against Trudeau and the other defendants. Id. at 16.

The order provides that the United States District Court for the Northern District of Illinois "shall retain jurisdiction of this matter for purposes of construction, modification and enforcement of this Order." Id. at 29. The order resolves the FTC's motion to have Trudeau held in contempt of the 1998 order, the FTC's motion to have Trudeau held in contempt of the 2003 stipulated preliminary injunction, and the 2003 complaint. Id. at 28; Def. Mem. at 8. The order finally provides that the defendants "expressly deny any wrongdoing or liability for any of the matters alleged in the Complaint and the civil contempt action. There have been no findings or admissions of wrongdoing or liability by the Defendants or Relief Defendants other than the finding against Kevin Trudeau for contempt of Part I of the Stipulated Preliminary Injunction, entered by the Court on June 29, 2004." Id. at 3-4.

Five days later, on September 7, 2004, the FTC issued a press release announcing the stipulated order. Compl. ¶ 19, Ex. B. The press release bears the title "Kevin Trudeau Banned from Infomercials," and the subtitle "Trudeau Settles Claims in Connection with Coral Calcium Supreme and Biotape." Compl., Ex. B, at 1. The first sentence of the press release states:

A Federal Trade Commission settlement with Kevin Trudeau -- a prolific marketer who has either appeared in or produced hundreds of infomercials --broadly bans him from appearing in, producing, or disseminating future infomercials that advertise any type of product, service, or program to the public, except for truthful infomercials for informational publications.

Id. The first paragraph of the press release closes with the statement that "Trudeau agreed to these prohibitions and to pay the FTC $2 million to settle charges that he falsely claimed that a coral calcium product can cure cancer and other serious diseases and that a purported analgesic called Biotape can permanently cure or relieve severe pain." Id.

The third paragraph of the press release quotes an FTC official about the case:

"This ban is meant to shut down an infomercial empire that has misled American consumers for years," said Lydia Parnes, Acting Director of the FTC's Bureau of Consumer Protection. "Other habitual false advertisers should take a lesson; mend your ways or face serious consequences."

Id. The remainder of the press release describes in greater detail the allegations against Trudeau and the terms of the settlement. See id. The fifth paragraph explains that the court had earlier found Trudeau in contempt of court for violating a preliminary injunction and "ordered Trudeau to cease all marketing for coral calcium products." Id.

The sixth paragraph describes the stipulated final order announced that day as a "settlement," and reminds the reader again that the "order's ban on future infomercials exempts infomercials for books, newsletters, and other informational publications." Id. The eighth paragraph provides that the "stipulated final order for permanent injunction was entered in the U.S. District Court for the Northern District of Illinois, Eastern Division on September 3, 2004." Id. at 2. Finally, a note at the bottom of the press release states in full:

Note: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order has the force of law when signed by the judge.

Id. at 2. The press release was placed on the FTC's website in September 2004, and remains there to this day.*fn3

A substantial number of news outlets reported on the settlement, most of them appearing to rely in large measure on the FTC press release. Stories about the settlement appeared on CNN, and in the New York Times, Los Angeles Times, and Washington Post, among others. Mem. Supp. Pl. App. Prelim. Inj. (Pl. Mem.), Ex. C. Several reports described the order without qualification as a "ban" on infomercials and a "fine" of Trudeau. E.g., Pl. Mem., Ex. C, at 22-24. An Associate Press article picked up by numerous other media outlets characterized the stipulated final order as a "ban" and a "fine[]," and quoted FTC Official Lydia Parnes characterizing Trudeau as a "habitual false advertiser." Pl. Mem., Ex. C, at 33-46. However, the article also described the order as a "settlement," and explains at the close of the piece that the prohibition on infomercials "exempts infomercials for books, newsletters and other informational publications." Id. The majority of the news reports that Trudeau submitted to the Court mention the exception to the order's prohibition on infomercials. Pl. Mem., Ex. C, at 21, 28, 33-46, 51-58.

Several other reports also described the exception in the order for publications and referred to the order as a settlement. For example, one day after the press release, the Washington Post reported that "the Federal Trade Commission largely kicked Trudeau off television," and that the "settlement" allows Trudeau to "continue to sell products such as the book for sale on his Web site . . . unless he makes claims favoring one cure or another." Frank Ahrens, FTC Pulls Plug on Infomercial Giant, Washington Post, Sept. 8, 2004, at E1. ABC News recently reported that "the agreement imposes on Trudeau an unprecedented lifetime ban from the infomercial industry, except infomercials for publications, including books," and the Associated Press recently again described the ...


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