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United States Department of Justice v. Daniel Chapter One

United States District Court, D. Columbia.

March 31, 2015

UNITED STATES OF AMERICA DEPARTMENT OF JUSTICE, Plaintiff,
v.
DANIEL CHAPTER ONE, et al., Defendants

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For United States of America Department of Justice, Plaintiff: Jessica R. Gunder, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Washington, DC USA.

For Daniel Chapter One, James Feijo, individually, and as an officer of Daniel Chapter One, Defendants: Robert M. Sanger, LEAD ATTORNEY, SANGER SWYSEN & DUNKLE, Santa Barbara, CA USA; Stephen Kerr Dunkle, SANGER SWYSEN & DUNKLE, Santa Barbara, CA USA.

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MEMORANDUM OPINION

Emmet G. Sullivan, United States District Judge.

This case involved certain dietary supplements that defendants claimed could treat, cure, or prevent cancer, inhibit tumors, and ameliorate the adverse effects of radiation and chemotherapy. Plaintiff United States of America Department of Justice (" United States" or the " government" ) brought this action against Daniel Chapter One and James Feijo (the " defendants" ) under Sections 5(l), 13(b), and 16(a) of the Federal Trade Commission Act, 15 U.S.C. § § 45(l), 53(b), and 56(a), alleging that the defendants violated a final cease and desist order of the Federal Trade Commission (" FTC" or the " Commission" ).

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On September 30, 2011, the United States filed a motion for summary judgment on liability. On September 24, 2012, the Court granted the United States' motion, concluding that " there is no genuine issue as to any material fact and the United States is entitled to judgment as a matter of law on liability." See United States v. Daniel Chapter One, 896 F.Supp.2d 1, 17 (D.D.C. 2012).

Pending before the Court is the United States' motion for entry of final judgment. The United States requests that the Court enter a final order that includes injunctive relief, equitable monetary relief in the amount of $1,345,832.43 and a civil penalty award of $3,528,000. Upon consideration of the motion, the response and reply thereto, supplemental briefing by the parties, the applicable law, and the entire record in this case, the Court GRANTS the United States' motion.

I. Background

Defendant Daniel Chapter One is incorporated under the laws of the State of Washington, with its principal place of business in Portsmouth, Rhode Island. Id. at 2. Defendant James Feijo is the sole member and overseer of Daniel Chapter One. Id. The defendants advertise and sell dietary supplements, including BioShark, 7 Herb Formula, GDU, and BioMixx (the " Products" ), which they claim can treat, cure, or prevent cancer. Id.

On September 18, 2008, the FTC initiated an administrative proceeding alleging that the defendants' marketing of the Products constituted deceptive acts and practices in violation of Sections 5(a) and 12 of the Federal Trade Commission Act (the " FTC Act" ), 15 U.S.C. § § 45(a) and 52. Id. at 2-3. Following a trial, an administrative law judge concluded that the defendants had violated the FTC Act by making unsubstantiated claims that the Products prevented, treated, or cured tumors or cancer. Id. Defendants appealed this decision to the Commission, and on December 24, 2009, the Commission upheld the decision and issued a Final Order to cease and desist certain practices. Id.

On January 25, 2010, the FTC issued a Modified Final Order (" FTC Order" ). Id. at 3. Part II of the FTC Order prohibits the defendants (referred to in the FTC Order as " Respondents" ) from making " any representation, in any manner, expressly or by implication, including through the use of product or program names or endorsements" [1] that any product marketed by the defendants:

[P]revents, treats, or cures or assists in the prevention, treatment, or cure of any type of tumor or cancer, including but not limited to representations that:
1. BioShark inhibits tumor growth;
2. BioShark is effective in the treatment of cancer;
3. 7 Herb Formula is effective in the treatment or cure of cancer;
4. 7 Herb Formula inhibits tumor formation;
5. GDU eliminates tumors;
6. GDU is effective in the treatment of cancer;
7. BioMixx is effective in the treatment of cancer; or
8. BioMixx heals the destructive effects of radiation or chemotherapy;

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un less the representation is true, non-misleading, and, at the time it is made, Respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

Id. 3-4. In addition, Part V.B of the FTC Order requires that:

Within forty-five (45) days after the final and effective date of this order, Respondents shall send by first class mail, postage prepaid, an exact copy of the notice . . . to all persons [who purchased the Products between January 1, 2005 and the date of the order.]

Id. The notice, which is attached to the FTC Order, informs consumers of the FTC's conclusion that the defendants' advertising claims were deceptive because they were not substantiated by competent and reliable scientific evidence. Id.

Defendants filed an appeal with the United States Court of Appeals for the District of Columbia Circuit, contesting the legality and constitutionality of the FTC Order. See Petition for Review, Daniel Chapter One v. FTC, No. 10-1064 (D.C. Cir. Mar. 17, 2010). Defendants also applied to the FTC for a stay of the FTC Order pending the outcome of their appeal, but their request was denied. Daniel Chapter One, 896 F.Supp.2d at 3-4. Defendants then filed with the D.C. Circuit an emergency motion for a stay of the FTC Order. This motion was denied on April 1, 2010. See Per Curiam Order Denying Emergency Motion to Stay Case, Daniel Chapter One, No. 10-1064 (D.C. Cir. Apr. 1, 2010). Because the defendants failed to obtain a stay, the FTC Order became effective on April 2, 2010. See Daniel Chapter One, 896 F.Supp.2d at 3-4; 15 U.S.C. § 45(g)(2).

On August 13, 2010, the United States filed its complaint in this Court seeking civil penalties and other injunctive relief pursuant to Sections 5(l), 13(b), and 16(a) of the FTC Act. Simultaneous therewith, the United States filed a motion for a preliminary injunction seeking an order enjoining the defendants from violating the FTC Order. Daniel Chapter One, 896 F.Supp.2d at 3-4. The Court denied the United States' motion for a preliminary injunction without prejudice on September 14, 2010, finding that the Court lacked jurisdiction to enforce the FTC Order while defendants' appeal challenging the legality of the FTC Order was pending before the D.C. Circuit. See Order, Sept. 14, 2010, ECF No. 11.[2] The FTC then filed an emergency motion for an order of enforcement pendente lite with the D.C. Circuit. The D.C. Circuit granted the United States' motion on November 22, 2010. See Per Curiam Order, Daniel Chapter One, 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." ). Defendants then filed a motion with the D.C. Circuit seeking a stay of the enforcement of Part V.B of the FTC Order. The D.C. Circuit rejected this request on December 7, 2010. See Per Curiam Order, Daniel Chapter One, No. 10-1064 (D.C. Cir. Dec. 7, 2010).

On December 10, 2010, the D.C. Circuit denied the defendants' petition for review of the FTC Order, concluding that " the Commission properly exercised jurisdiction over [Daniel Chapter One]," and that " [Daniel Chapter One]'s arguments based

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upon the Constitution and the Religious Freedom Restoration Act are wholly without merit." Daniel Chapter One v. FTC, 405 F.App'x 505, 505-06 (D.C. Cir. 2010) (emphasis added). Defendants then filed a petition for a writ of certiorari, which was denied on May 23, 2011. See Daniel Chapter One v. FTC, No. 10-1292, 131 S.Ct. 2917, 179 L.Ed.2d 1248 (2011).

Following issuance of the D.C. Circuit's mandate, the United States renewed its motion for a preliminary injunction in this Court. On June 22, 2011, the Court granted the United States' motion for preliminary injunction and enjoined the defendants from violating the FTC Order. See Order and Memorandum Opinion, ECF Nos. 31 and 32.

On July 29, 2011, the United States filed a motion for an order to show cause why Daniel Chapter One, James Feijo, and Patricia Feijo[3] should not be held in contempt of the Court's June 22, 2011 Order. The Court subsequently ordered the defendants to show cause why they should not be held in contempt. The Court held a contempt hearing on May 9, 2012. During that hearing, the United States presented evidence and testimony regarding the defendants' purported violations of the FTC Order. After receiving evidence and hearing argument, the Court found Daniel Chapter One, James Feijo, and Patricia Feijo in civil contempt. Specifically, the Court concluded that James Feijo, Patricia Feijo, and Daniel Chapter One (the " Contemnors" ) had continued to violate the FTC Order by (1) continuing to make representations on their radio show that their products treat or cure cancer without competent and reliable scientific evidence to substantiate those representations, (2) encouraging potential customers to visit websites containing Daniel Chapter One publications that contain prohibited information and endorsements of the prohibited supplements, (3) not removing certain representations from the websites within their control, which Contemnors conceded included www.danielchapterone.com, www.dc1ministry.com, and www.dc1freedom.com, and (4) failing to ...


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