It's been a busy couple of months for the FTC in court. There've been some highs and some lows for the agency and over the next few blogs we'd like to catch you up on what's been going on. We'll start with what seems like mostly a win for the agency.
Back in 2010 the FTC entered an order against Daniel Chapter One which prohibited the company from making various cancer and tumor related claims for its dietary supplements (and other products). In March 2011 the FTC (through the Department of Justice) asked a federal district court to find the company in contempt of the order. In June 2011 the court agreed and entered an injunction requiring the company to obey the Commission's order. Last month the same court found that the company had still not come into compliance with the order. The court held that it has broad discretion to fashion contempt remedies and that monetary sanctions can be imposed to coerce compliance and compensate for losses. Although it noted that monetary sanctions to coerce compliance were appropriate in this case the court also held that a "coercive, civil contempt penalty is one that is 'avoidable through obedience.'" Thus, the court gave Daniel Chapter One two weeks to purge its contempt and avoid escalating monetary fines and ultimately imprisonment. (sort of like when you tell your kids "I'm going to count to 10 and if you haven't done what I already asked you to do then no access to your smart phone for the rest of the day.") Perhaps not surprisingly, the Company filed the requisite notice with the court that it had purged its complaint and all appears well for now.
We, at least, have not seen many opportunities in federal court for clients to "purge" their contempt and we certainly wouldn't advise companies to count on that opportunity but it will be interesting to see whether other courts begin to emulate the ruling in this matter.