United States District Court, D. Nevada
ORDER PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
(ECF NO. 73)
RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE.
the Court is a Motion for Summary Judgment by the Federal
Trade Commission (“the Commission”) and Proposed
Order seeking equitable monetary and permanent injunctive
relief. ECF No. 73. For the reasons discussed below, the
Court GRANTS the Commission's motion and ENTERS the
Amended Proposed Order. ECF Nos. 113, 114.
1, 2014 the Commission brought this action under Section
13(b) of the Federal Trade Commission Act (“FTC
Act”), 15 U.S.C. § 53(b), to obtain permanent
injunctive relief, rescission of contracts, restitution, the
refund of monies paid, disgorgement of ill-gotten monies, and
other equitable relief for Defendants' acts or practices
in violation of Sections 5(a) and 12 of the FTC Act, 15
U.S.C. §§ 45(a) and 52, in connection with the
advertising, marketing, and sale of purported weight-loss
pills “Citra-Slim 4” and/or
“W8-B-Gone” and/or “Quick &
Easy.” ECF No. 1. The Commission filed an Amended
Complaint on May 14, 2014. ECF No. 17. The advertisements
made the following representations:
1. Defendants' Weight Loss Product would cause consumers
to lose 20 pounds of fat in 16 days without diet or exercise;
2. “Sweden's Top Weight Loss Expert”
conducted clinical research that supports these claims; and
3. Defendants provided a 100% nostrings- attached refund
1, 2015 the Commission filed its Motion for Summary Judgment
against Defendants Crystal Ewing, Classic Productions, Ricki
Black, Health Nutrition Products, Howard Raff, David Raff,
Shirley Murphy, and Ronald Boyde. ECF No. 73.
November 2, 2015, the following defendants entered a
stipulation for final judgment: Crystal Ewing, Ricki Black,
and Classic Productions, LLC. ECF Nos. 103, 104. The Court
entered these judgments after receiving oral confirmation
from the parties at the hearing on February 24, 2016. ECF No.
the remaining defendants pertaining to the Commission's
Motion (ECF No. 73) are: David and Howard Raff, Health
Nutrition Products, Shirley Murphy, and Ronald Boyde.
judgment is appropriate when the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show “that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a); accord Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). In ruling on a motion for summary judgment,
the court views all facts and draws all inferences in the
light most favorable to the nonmoving party. Johnson v.
Poway Unified Sch. Dist., 658 F.3d 954, 960 (9th Cir.
the party seeking summary judgment does not have the ultimate
burden of persuasion at trial, it “has both the initial
burden of production and the ultimate burden of persuasion on
a motion for summary judgment.” Nissan Fire &
Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d
1099, 1102 (9th Cir. 2000). “In order to carry its
[initial] burden of production, the moving party must either
produce evidence negating an essential element of the
nonmoving party's claim or defense or show that the
nonmoving party does not have enough evidence of an essential
element to carry its ultimate burden of persuasion at
trial.” Id. If the movant has carried its
initial burden, “the nonmoving party must produce
evidence to support its claim or defense.” Id.
at 1103. In doing so, the nonmoving party “must do more
than simply show that there is some metaphysical doubt as to
the material facts . . . . Where the record taken as a whole
could not lead a rational trier of fact to find for the
nonmoving party, there is no genuine issue for trial.”
Scott v. Harris, 550 U.S. 372, 380 (2007)
(alteration in original) (internal quotation marks omitted).
However, the ultimate burden of persuasion on a motion for
summary judgment rests with the moving party, who must
convince the court that no genuine issue of material fact
exists. Nissan Fire, 210 F.3d at 1102.
respect to motions for summary judgment under the FTC Act,
“[o]nce the FTC has made a prima facie case for summary
judgment, the defendant cannot rely on general denials but
must demonstrate with evidence that is ‘significantly
probative' or more than ‘merely colorable' that
a genuine issue of material fact exists for trial.”
F.T.C. v. Gill, 265 F.3d 944, 954 (9th Cir. 2001).
Section 5(a) of the FTC Act
5(a) of the Act declares unlawful ‘unfair or deceptive
acts or practices in or affecting commerce' and empowers
the Commission to prevent such acts or practices. 15 U.S.C.
§ 45(a)(1) & (2).” F.T.C. v. Pantron I
Corp., 33 F.3d 1088, 1095 (9th Cir. 1994). “[A]
practice falls within this prohibition (1) if it is likely to
mislead consumers acting reasonably under the circumstances
(2) in a way that is material.” F.T.C. v.
Cyberspace.Com LLC, 453 F.3d 1196, 1199 (9th Cir. 2006)
(internal citation omitted). Courts look to the overall
impression conveyed by a representation, and not merely to
literal truth. Id. at 1200.
Section 12 of the FTC Act
12 of the FTC Act prohibits the dissemination of any false
advertisement “for the purpose of inducing, or which is
likely to induce, directly or indirectly, the purchase in or
having an effect upon commerce, of food, drugs, devices,
services, or cosmetics.” 15 U.S.C. § 52(a)(2).
to 15 U.S.C. § 52(b), the dissemination of a false
advertisement also constitutes a violation of 15 U.S.C.
§ 45, prohibiting unfair or deceptive acts or practices
in or affecting commerce. The FTC Act defines “false
advertisement” as one that is “misleading in a
material respect, ” taking into account the
representations the advertisement makes or suggests as well
as any material facts which the advertisement fails to
reveal. 15 U.S.C. § 55(a)(1). A claim that a product is
effective is “false” under Section 12 of the FTC
Act “if evidence developed under accepted standards of
scientific research demonstrates that the product has no
force beyond its placebo effect.” F.T.C. v. Pantron
I Corp., 33 F.3d 1088, 1097 (9th Cir. 1994). In such a
case, a claim that the product is effective constitutes a
false advertisement “even though some consumers may
experience positive results.” Id. at 1100. An
advertisement is misleading “only if it fails to
disclose facts necessary to dissipate false assumptions
likely to arise in light of the representations actually
made” by the advertisement. F.T.C. v. Simeon Mgmt.
Corp., 532 F.2d 708, 716 (9th Cir. 1976).
Individual Liability under the FTC Act
are liable for injunctive relief for violations of the FTC
Act if they directly participate in the deceptive acts or
have the authority to control them. F.T.C. v. Publ'g
Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir.
1997); F.T.C. v. Stefanchik, 559 F.3d 924, 931 (9th
Cir. 2009). “Under the FTC Act, a principal is liable
for the misrepresentations of his agent acting within the
scope of the agent's actual or apparent authority.”
Stefanchik, 559 F.3d at 930. In addition, an
individual defendant's status as a corporate officer or
“authority to sign documents on behalf of the
corporation demonstrate [that defendant has] the requisite
control over the corporation” for the purpose of
establishing individual liability for a corporation's
acts. Publ'g Clearing House, 104 F.3d at
subject an individual to monetary liability, there must be an
additional showing: that the individual (1) had knowledge of
the misrepresentations, (2) was recklessly indifferent to the
truth or falsity of the misrepresentation, or (3) was aware
of a high probability of fraud and intentionally avoided the
truth. Publ'g Clearing House, 104 F.3d at 1171;
Stefanchik, 559 F.3d at 931. “[T]he FTC is not
required to show that a defendant intended to defraud
consumers in order to hold that individual personally
liable.” Publ'g Clearing House, 104 F.3d
Court focuses its discussion on Defendants David and Howard
Raff, Health Nutrition Products, Shirley Murphy, and Ronald
in 2007, Defendants advertised, marketed, and sold one
identical weight-loss pill under three names: Citra-Slim 4,
W8-B-Gone, and Quick & Easy (the “Subject
Products”). These products had the same formulation and
identical instructions for use.
Ronald Boyde and Shirley Murphy
Murphy and Ronald Boyde were employees of the company Classic
Productions, LLC (“Classic”). Beginning in 2007,
Classic, together with Global Access Management Systems, Inc.
(“GAM”) began marketing the pill Citra-Slim 4.
mailer touted the pill's “Amazing RAPID FAT
meltdown diet program” and claimed users could lose 16
pounds in 20 days without changing their diet or exercise
routine. The mailer prominently featured “Sweden's
top weight loss” doctor who cited extensive clinical
2010, Boyde and Murphy started a new company, Omni Processing
Center (“Omni”). Omni handled customer service,
order fulfillment, and refunds for the pills W8-B-Gone and
Quick & Easy, which featured the same claims as the pill
the office manager of Classic, and later, as an owner of
Omni, Murphy performed the full range of customer service
activities, including taking orders for the products, and
responding directly to complaints and requests for refunds.
cases, she repeated and reinforced the claims in the
advertising by urging people seeking refunds to continue to
take the product to see if they might lose weight.
received and responded to complaints filed with the Better
Business Bureau (BBB). The complaining consumers attached
exemplars of the deceptive marketing, and complained about
the products' efficacy and wanted refunds.
dealt directly with consumers who complained about the fact
that they had made multiple refund requests and had received
delayed refunds and lied about protocols for processing
refunds. Only Murphy decided whether, and when to issue a
refund. Murphy entered telephone orders for the products
using the W8-B-Gone website, where claims were also logged.
Murphy did not possess any substantiation related to the
claims made for the products.
a longtime employee of Classic, was a 50% owner and secretary
of Omni. He set up and had signatory power over Omni's
accounts with Wells Fargo. This included an account that
received payments from HNP, including refund allowances, and
payments to cover the cost of Omni's services. Boyde was
the signatory on Omni's Refund Account. As the signatory
for Omni's Refund Account, Boyde was aware of the
multiple requests for refunds that had been made by
unsatisfied consumers, i.e., consumers who had purchased the
products and had failed to lose the promised weight.
had access to the Atlantis database in which Murphy recorded
her notes of calls with consumers complaining about the
products and the refund delays.