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United States of America v. Daniel Chapter One

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


June 22, 2011

UNITED STATES OF AMERICA, PLAINTIFF,
v.
DANIEL CHAPTER ONE, AND JAMES FEIJO, DEFENDANTS.

The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge

MEMORANDUM OPINION

This action involves certain dietary supplements that defendants claim can treat, cure, or prevent cancer, inhibit tumors, and ameliorate the adverse effects of radiation and chemotherapy. Pending before the Court is the government's motion for a preliminary injunction. In its motion, the government asks the Court to preliminarily enjoin Daniel Chapter One and James Feijo (the "defendants") from violating the final cease and desist order issued by the Federal Trade Commission (the "FTC") on January 25, 2010 regarding the marketing of these dietary supplements (the "Modified Final Order"). Plaintiff argues that emergency injunctive relief is necessary in order to "prevent continuing harm to individuals suffering from cancer and other tumors." Pl.'s Mot. at 1. Upon consideration of the motion, the response and reply thereto, the applicable law, and the limited record currently before the Court, the Court hereby GRANTS plaintiff's motion.

I. BACKGROUND

This penalty suit arises from an FTC proceeding, in which defendants were charged with violating §§ 5(a) and 12 of the FTC Act by allegedly engaging in deceptive acts and practices with regards to their marketing of certain dietary supplements. See Compl. ¶ 7. Following a trial, an administrative law judge concluded that defendants violated the FTC Act by making unsubstantiated claims that four of the dietary supplements marketed and sold by defendants -- BioShark, 7 Herb Formula, GDU, and BioMixx -- prevented, treated, or cured tumors or cancer. Compl. ¶ 7.*fn1 This decision was appealed to the FTC, who subsequently affirmed it. Compl. ¶ 7.

The FTC issued a Final Order to cease and desist practices on December 24, 2009. Compl. ¶ 7. Soon thereafter, on January 25, 2010, the Commission issued a Modified Final Order, see Pl.'s Ex. A, which made non-substantive modifications to clarify required time periods in the Final Order. Compl. ¶ 7. Among other things, the Modified Final Order prohibits defendants from representing that BioShark, 7 Herb Formula, GDU, or BioMixx (hereinafter, the "covered products") prevent, treat, or cure any type of tumor or cancer without possessing and relying upon competent and reliable scientific evidence that substantiates the representation. Compl. ¶ 8. The Modified Final Order also requires defendants to send a letter to past purchasers of the covered products informing them of the FTC's conclusion that defendants' advertising claims were deceptive because they lacked substantiation. Compl. ¶ 8. The Modified Final Order was served on defendants on February 1, 2010. Compl. ¶ 7.

On February 25, 2010, defendants applied to the FTC for a stay of the Modified Final Order. This request was denied on March 23, 2010.

Defendants also filed an appeal with the United States Court of Appeals for the District of Columbia Circuit contesting the legality and constitutionality of the Modified Final Order. Defendants argued, among other things, that the FTC's Modified Final Order violates defendants' First Amendment rights and free exercise of religion under the Religious Freedom Restoration Act ("RFRA"). After their request for a stay of the Modified Final Order was denied by the FTC, defendants filed an emergency motion for a stay of the Modified Final Order with the D.C. Circuit.

This motion was denied on April 1, 2010. See Daniel Chapter One v. FTC, No. 10-1064 (D.C. Cir. Apr. 1, 2010)

Because defendants failed to obtain a stay, the Modified

Final Order became effective on April 2, 2010. See Compl. ¶ 7; see also 15 U.S.C. § 45(g)(2) ("An order of the Commission to cease and desist shall become final . . . upon the sixtieth day after such order is served, if a petition for review has been duly filed; except that any such order may be stayed, in whole or in part and subject to such conditions as may be appropriate by --

(A) the Commission; (B) an appropriate court of appeals of the United States . . . ; or (C) the Supreme Court, if an applicable petition for certiorari is pending.").

On August 13, 2010, the government filed a complaint in this Court seeking civil penalties and other injunctive relief pursuant to §§ 5(l), 13(b), and 16(a) of the FTC Act. Simultaneous therewith, the government also filed a motion for a preliminary injunction seeking an order enjoining defendants from violating the Modified Final Order. The Court denied this request without prejudice on September 14, 2010, finding that the Court lacked jurisdiction to enforce the Modified Final Order while defendants' action challenging the legality of the Modified Final Order was pending before the D.C. Circuit. See Order at Docket No. 11; see also 15 U.S.C. § 45(d) ("Upon the filing of the record with it, the jurisdiction of the [circuit] court of appeals of the United States to affirm, enforce, modify, or set aside orders of the Commission shall be exclusive.").*fn2 The Court then stayed this action pending resolution of defendants' appeal before the D.C. Circuit. See Order at Docket No. 11.

Following this Court's denial of its motion for a preliminary injunction, the government filed an emergency motion for an order of enforcement pendente lite with the D.C. Circuit. That court granted the government's request on November 22, 2010. See Daniel Chapter One v. FTC, No. 10-1064 (D.C. Cir. Nov. 22, 2010) ("Daniel Chapter One is hereby enjoined to obey forthwith the modified final order of the Federal Trade Commission issued January 25, 2010, in Docket No. 9329, In the Matter of Daniel Chapter One and James Feijo."). In addition, on December 7, 2010, the D.C. Circuit denied defendants' request for a "partial stay of enforcement order pendente lite pending final action by this court and possible review by the U.S. Supreme Court." Daniel Chapter One v. FTC, No. 10-1064 (D.C. Cir. Dec. 7, 2010).

Shortly thereafter, on December 10, 2010, the D.C. Circuit denied defendants' petition for review of the Modified Final Order. That court found, among other things, that "the Commission properly exercised jurisdiction over [Daniel Chapter One]" and that "[Daniel Chapter One]'s arguments based upon the Constitution and the Religious Freedom Restoration Act are wholly without merit." See Daniel Chapter One v. FTC, 405 Fed. Appx. 505, 506 (D.C. Cir. 2010). Defendants then filed a petition for writ of certiorari, which was denied on May 23, 2011. See Daniel Chapter One v. FTC, 79 U.S.L.W. 3661 (U.S. May 23, 2011) (No. 10-1292).

Following issuance of the D.C. Circuit's mandate, plaintiff filed a motion to lift the stay in this case. The Court granted this motion on March 7, 2011. Plaintiff subsequently renewed its request for a preliminary injunction.*fn3 This motion is now ripe for determination by the Court.*fn4

II. STANDARD FOR PRELIMINARY INJUNCTIVE RELIEF

The FTC Act provides for an injunction "[u]pon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest[.]" 15 U.S.C. § 53(b). This standard departs from the traditional equity standard for preliminary injunctive relief.*fn5 See FTC v. H.J. Heinz Co., 246 F.3d 708, 714 (D.C. Cir. 2001) (explaining that "Congress determined that the traditional standard was not appropriate for the implementation of a Federal statute by an independent regulatory agency where the standards of the public interest measure the propriety and the need for injunctive relief" (internal quotation marks omitted)). "[T]o obtain a § 53(b) preliminary injunction, the FTC need not show any irreparable harm, and the 'private equities' alone cannot override the FTC's showing of likelihood of success." FTC v. Whole Foods Mkt., 548 F.3d 1028, 1034-35 (D.C. Cir. 2008) (citing FTC v. Weyerhaeuser Co., 665 F.2d 1072, 1082 (D.C. Cir. 1981)). Instead, the court must balance the likelihood of the FTC's success against the equities, under a sliding scale. Id. (citing cases).*fn6

III. ANALYSIS

The government argues that a preliminary injunction is warranted because it has a substantial likelihood of success on the merits and the equities weigh strongly in favor of such interim relief. Specifically, with regards to the likelihood of success on the merits, the government asserts that "Defendants have violated, and continue to violate, the Order in two ways. First, they refuse to send a letter to purchasers of the Products, that Part V.B of the Order required Defendants to send nearly ten months ago.*fn7 Second, the Defendants continue to make representations in violation of Part II of the Order, including by soliciting and using endorsements to make these prohibited claims." Pl.'s Mot. at 9.*fn8 Next, with regards to the equities, the government asserts that "[t]he very real, imminent, and substantial harms that cancer patients face as a result of Defendants' misleading claims outweigh any equities that Defendants may claim support their position." Pl.'s Mot. at 21. Relatedly, the government asserts that the issuance of emergency injunctive relief is in the public interest, arguing, among other things, that "there is great public interest in preventing the harm that arises when those who have been previously deceived by Defendants' representations do not receive corrective information and continue to use the unproven products Defendants market."

Pl.'s Mot. at 22.

Defendants do not object to or otherwise respond to any of these arguments. Instead, the only argument raised in defendants' 3-page opposition brief is the contention that it is "inappropriate" for this Court to issue a preliminary injunction in light of the government's failure to seek an enforcement order from the D.C. Circuit. See Defs.' Opp'n at 1 ("The FTC had the opportunity in the Court of Appeals to seek the same enforcement orders it now seeks in this Court. . . . [T]he FTC did not seek a permanent order against DCO or James Feijo which was within the statutory power of the Court of Appeals to issue. In light of the FTC's failure to seek those orders before that court of competent jurisdiction, wherein an action was pending and adjudicated, it is inappropriate for the FTC to ask this Court to now issue the orders."). The Court finds this argument unpersuasive.

As noted by the government, the FTC Act expressly provides district courts with the authority to "grant mandatory injunctions and such other and further equitable relief as they deem appropriate in the enforcement of such final orders of the Commission." Pl.'s Reply at 4-5 (quoting 15 U.S.C. § 45(l)). The order at issue in this case became final on April 2, 2010, and appellate review is now complete. This Court, therefore, is the appropriate forum for the government to seek emergency injunctive relief in support of its enforcement action for civil penalties.

Accordingly, in the absence of any other objection from defendants, the Court concludes that interim injunctive relief is warranted. As discussed briefly below, the Court finds that the government is substantially likely to succeed on the merits, and that the balance of equities support granting an interim injunction.

With regards to the merits of this enforcement action, the Court concludes that the government is likely to demonstrate that defendants have violated the Modified Final Order.*fn9 First, in view of the fact that defendants admitted during the hearing held on May 9, 2011 that they had not yet sent the letters required by Part V.B of the Modified Final Order, the Court concludes that the government is likely to establish that defendants violated Part V.B of the Modified Final Order. See also Pl.'s Mot. at 9- 12 and the exhibits cited therein. In addition, and substantially for the reasons set forth in the government's motion, the Court finds that the government is likely to establish that defendants violated Part II of the Modified Final Order by soliciting and using endorsements to make prohibited representations regarding the covered products. See Pl.'s Mot. at 12-21 and the exhibits cited therein (discussing defendants' representations and endorsements on the Daniel Chapter One Censored radio show as well as in various online forums and websites).

The Court further finds that the equities weigh in favor of emergency injunctive relief. Specifically, and in view of the fact that plaintiff is likely to succeed on the merits, the Court finds that there is no strong interest in not granting the preliminary relief sought here. Indeed, the Court agrees that "'[t]here is no hardship to [defendants] in requiring them merely to follow the law - to refrain from making misrepresentations to consumers they contact.'" Pl.'s Mot. at 21 (quoting FTC v. City West Advantage, Inc., No. 08-609, 2008 WL 2844696, at *6 (D. Nev. July 22, 2008)). By contrast, the Court finds that there is a significant public interest in preventing the harms that result when (i) "consumers forego beneficial and effective therapy for untested therapies such as those Defendants promote"; (ii) "consumers risk their health to potential side effects and harmful interactions between the Products and other therapies"; and (iii) "those who have been previously deceived by Defendants' representations do not receive corrective information and continue to use the unproven Products Defendants market." Pl.'s Mot. at 22. This is particularly true in light of the fact that defendants "target" their advertising messages to cancer patients and their families. Pl.'s Mot. at 21-22. The equities, therefore, weigh strongly in favor of protecting these vulnerable consumers from defendants' representations.*fn10

IV. CONCLUSION

The Modified Final Order at issue in this case became final on April 2, 2010. Defendants' attempts to have the order set aside have been rejected by both the D.C. Circuit and the United States Supreme Court. Accordingly, having weighed the equities and considered the plaintiff's likelihood of success on the merits, the Court concludes that it is in the public interest to preliminarily enjoin defendants from violating the Modified Final Order. Plaintiff's motion for a preliminary injunction is therefore GRANTED. A separate Order accompanies this Memorandum Opinion.

SO ORDERED.


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