Published on:

California Court Grants Preliminary Injunctions in FTC Case Alleging Violations of Federal Consumer Protection Law

tape-403595_640.jpgA California federal judge has granted preliminary relief to the Federal Trade Commission (FTC) in its lawsuit against a company that markets weight-loss pills and other products. FTC v. Sale Slash, LLC, et al, No. 2:15-cv-03107 (C.D. Cal., Apr. 27, 2015). The court issued a preliminary injunction in May 2015, followed by a second injunction in November. A preliminary injunction is an extreme remedy, which restrains a defendant in some way before they have had a full opportunity to defend themselves in court. See Fed. R. Civ. P. 65. In granting the plaintiff’s request for the injunctions, the court found that the FTC established good cause to believe the defendants have violated federal consumer law, that they are likely to continue doing so unless restrained, and that an injunction is necessary to prevent further harm to consumers.

The lawsuit asserts claims under the FTC Act, 15 U.S.C. § 41 et seq.; and the Controlling the Assault of Non-Solicited Pornography And Marketing (CAN-SPAM) Act of 2003, 15 U.S.C. § 7701 et seq. The FTC Act is one of the nation’s oldest consumer protection laws, first enacted in 1913. It created the FTC, and empowered it to investigate and bring claims against individuals and businesses that “us[e] unfair methods of competition…and unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a)(2).

Congress passed the CAN-SPAM Act in order to address the much newer issue of unsolicited email communications for marketing purposes, commonly known as “spam.” In addition to causing annoyance, spam messages can be deceptive, thanks to efforts by “spammers” to conceal the source of the message. The law establishes a national policy that marketing emails “should not mislead recipients as to the source or content of such mail,” and that people should have the right to opt out of receiving messages. 15 U.S.C. § 7701.

After obtaining a temporary restraining order (TRO) against the defendants, the FTC sought a preliminary injunction. While a TRO has a limited duration, a preliminary injunction typically remains in force at least as long as the litigation is pending. Since a preliminary injunction might restrain an individual or business from a wide range of conduct without a formal finding of liability in a court of law, courts are often hesitant to grant them. A plaintiff must establish four factors:
1. Likelihood of success on the merits of their claims;
2. Irreparable harm without the preliminary injunction;
3. That “the balance of equities” favors the plaintiff; and
4. “[T]hat an injunction is in the public interest.”
Winter v. Natural Resources Defense Council, 555 U.S. 7, 20 (2008).

The FTC alleges a variety of deceptive acts by the defendant, including unsolicited emails, unauthorized and fake celebrity endorsements, and banner ads that direct consumers to websites that appear to be independent news sites, but which are actually paid advertisements. It states that it is ultimately seeking to provide refunds to consumers who purchased the defendant’s diet pills. The injunctions prohibit further deceptive and unlawful acts, freeze the defendant’s assets, and disclose financial information for the business.

For more than 38 years, business attorney James G. Schwartz has advocated for the rights and interests businesses and business owners in the Bay Area, helping them deal with a wide range of litigation and transactional matters. Please contact us online or at (925) 463-1073 today to schedule a free and confidential consultation with an experienced and knowledgeable advocate.

More Blog Posts:

Antitrust Lawsuits in California and Elsewhere Target Professional Baseball, Pleasanton Business & Commercial Law Blog, October 30, 2015

Ninth Circuit Rules in Business Bankruptcy Case on Liability of Corporate Insider Who Personally Guaranteed Loan, Pleasanton Business & Commercial Law Blog, September 15, 2015

Corporations Are “Persons” Under Federal Debt Collection Statute, According to One Appellate Court, Pleasanton Business & Commercial Law Blog, August 17, 2015

Photo credit: mojzagrebinfo [Public domain, CC0 1.0], via Pixabay.