F.T.C. v. Cyberspace.Com LLC, No. 04-35428.
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
| Writing for the Court | O'Scannlain |
| Citation | 453 F.3d 1196 |
| Docket Number | No. 04-35431.,No. 04-35428. |
| Decision Date | 13 July 2006 |
| Parties | FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. CYBERSPACE.COM LLC; French Dreams N.V.; Electronic Publishing Ventures LLC; Olympic Telecommunications Inc; Ian Eisenberg, Defendants, and Coto Settlement; Chris Hebard, Defendants-Appellants. Federal Trade Commission, Plaintiff-Appellee, v. Cyberspace.com LLC; Coto Settlement; Electronic Publishing Ventures Llc; Chris Hebard, Defendants, and French Dreams N.V.; Olympic Telecommunications Inc; Ian Eisenberg, Defendants-Appellants. |
v.
CYBERSPACE.COM LLC; French Dreams N.V.; Electronic Publishing Ventures LLC; Olympic Telecommunications Inc; Ian Eisenberg, Defendants, and
Coto Settlement; Chris Hebard, Defendants-Appellants.
Federal Trade Commission, Plaintiff-Appellee,
v.
Cyberspace.com LLC; Coto Settlement; Electronic Publishing Ventures Llc; Chris Hebard, Defendants, and
French Dreams N.V.; Olympic Telecommunications Inc; Ian Eisenberg, Defendants-Appellants.
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Roger M. Townsend, Newman & Newman, LLP, Seattle, WA, argued the cause for appellants Ian Eisenberg, French Dreams, N.V., and Olympic Telecommunications, Inc. Derek A. Newman, Newman & Newman, LLP, Seattle, WA, was on the briefs.
Ernest Leonard, Friedman & Feiger, LLP, Dallas, TX, argued the cause for appellants Coto Settlement and Christopher L. Hebard. Lawrence J. Friedman, Friedman & Feiger, LLP, Dallas, TX, and Sarah K. Johnson and Stacy A. Connole, Foster, Pepper & Shefelman, Seattle, WA, were on the briefs.
Marilyn E. Kerst, Federal Trade Commission, Washington, D.C. argued the cause for appellees. Willian E. Kovacic, General Counsel, John F. Daly, Deputy General Counsel for Litigation, Collot Guerard, and Michael Goodman, Federal Trade Commission, Washington, D.C., were on the brief.
Appeal from the United States District Court for the Western District of Washington, Robert S. Lasnik, District Judge, Presiding. D.C. No. CV-00-01806-RSL.
Before: O'SCANNLAIN, SILVERMAN, and GOULD, Circuit Judges.
O'SCANNLAIN, Circuit Judge:
We must decide whether a mail solicitation for internet service is deceptive as a matter of law within the meaning of the Federal Trade Commission Act.
In the late nineties, Ian Eisenberg and Chris Hebard formed Electronic Publishing Ventures, LLC ("EPV") and its four subsidiaries: Cyberspace.com, LLC, Essex Enterprises, LLC, Surfnet Services, LLC, and Splashnet.net, LLC. Two offshore entities, French Dreams Investments, N.V. (owned by Eisenberg) and Coto Settlement (controlled by Hebard) owned EPV in equal parts.
Between January 1999 and mid-2000, EPV's four subsidiaries mailed approximately 4.4 million solicitations offering internet access to individuals and small businesses. The solicitations included a check, usually for $3.50, attached to a form resembling an invoice designed to be detached from the check by tearing at the perforated line. The check was addressed to the recipient and the recipient's phone number appeared on the "re" line. The attached invoice-type form included columns labeled "invoice number," "account number," and "discount taken." The back of the check and invoice contained small-print disclosures revealing that cashing or depositing the check would constitute agreement to pay a monthly fee for internet access, but the front of the check and the invoice contained no such disclosures. Along with the check/invoice document, most of the solicitations also included an advertising insert touting the importance of good internet access. The back of the
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insert explained in small print that a monthly fee would be billed to the customer's local phone bill after the check was cashed or deposited.
At least 225,000 small businesses and individuals cashed or deposited the solicitation checks. The EPV subsidiaries used a billing aggregation service to place charges for $19.95 or $29.95 a month on the small businesses' and individuals' ordinary telephone bills. Internet usage records show, however, that less than one percent of the 225,000 individuals and businesses billed for internet service actually logged on to the service.
Eisenberg and Hebard were aware that the solicitation had misled some consumers. The companies received complaints from recipients of the solicitations which indicated that some customers had deposited the solicitation check without realizing that they had contracted for internet services. Materials that Eisenberg and Hebard prepared in an attempt to sell one of the subsidiaries in 1999 informed prospective buyers that "the Company believes that a number of customers sign up for the [sic] without realizing that when they deposit the check that they have ordered Internet service." In June 2000, after the companies had ceased mailing solicitations to consumers, Cyberspace.com, the largest of the four subsidiaries, commissioned a consumer research study which found that 87.9 percent of 256 participants who actually read the language on the back of the solicitation understood that the act of cashing or depositing the check would constitute agreement to purchase internet service.
Based on its belief that the solicitations were deceptive in violation of Section 5 of the Federal Trade Commission Act ("FTCA"), the Federal Trade Commission ("FTC") sought an injunction and consumer redress in the district court pursuant to FTCA § 13(b). The district court entered two stipulated permanent injunctions in which the defendants agreed to cease the practices at issue without admitting to a FTCA § 5 violation. The parties then filed cross-motions for summary judgment on the issues of liability and consumer redress.
After denying the defendants' motions for summary judgment, the district court granted the FTC's motion in part. The court concluded that the solicitation violated FTCA § 5 as a matter of law. The district court further concluded that Ian Eisenberg was liable for the § 5 violation in his individual capacity as a matter of law. The district court then held a one-day bench trial on consumer redress in which it concluded that the proper amount of consumer redress was $17,676,897.
The Eisenberg defendants—Ian Eisenberg, French Dreams Investments, N.V., and Olympic Telecommunications, Inc., a billing aggregator owned by Eisenberg (collectively, "EFO")—and the Hebard defendants—Chris Hebard and Coto Settlement (collectively, "Hebard")—filed timely separate appeals, which we consolidated for review.1
Section 5 of the Federal Trade Commission Act prohibits "deceptive acts or practices in or affecting commerce." FTCA § 5(a)(1), 15 U.S.C. § 45(a). As we have previously explained, 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.2 FTC v. Gill, 265 F.3d 944, 950
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Part III
...the representation is deceptive even if other, non-deceptive interpretations are possible.\31\ \28\ See, e.g., FTC v. Cyberspace.com, 453 F.3d 1196, 1200 Cir. 2006); Gill, 265 F.3d at 956; Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989). \29\ See FTC v. Kraft, Inc., 970 F......
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Part II
...the representation is deceptive even if other, non-deceptive interpretations are possible.\38\ \35\ See, e.g., FTC v. Cyberspace.com, 453 F.3d 1196, 1200 Cir. 2006); Gill, 265 F.3d at 956; Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989). \36\ See FTC v. Kraft, Inc., 970 F......
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State v. Mandatory Poster Agency, Inc., No. 74978-1-I
..., 138 Wash.2d 248, 978 P.2d 505 (1999) ).33 Panag , 166 Wash.2d at 50, 204 P.3d 885 (quoting Fed. Trade Comm'n v. Cyberspace.Com LLC , 453 F.3d 1196, 1200 (9th Cir. 2006) ).34 131 Wash.2d 133, 150, 930 P.2d 288 (1997) (emphasis added) (citations omitted).35 166 Wash.2d 27, 47, 204 P.3d 885 ......
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Keegan v. Am. Honda Motor Co., Case No. CV 10–09508 MMM (AJWx).
...misrepresentation or omission is “likely to mislead consumers acting reasonably under the circumstances.” See FTC v. Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th Cir.2006) (“An act or practice is deceptive if first, there is a representation, omission, or practice that, second, is likely to......
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State v. Mandatory Poster Agency, Inc., No. 74978-1-I
..., 138 Wash.2d 248, 978 P.2d 505 (1999) ).33 Panag , 166 Wash.2d at 50, 204 P.3d 885 (quoting Fed. Trade Comm'n v. Cyberspace.Com LLC , 453 F.3d 1196, 1200 (9th Cir. 2006) ).34 131 Wash.2d 133, 150, 930 P.2d 288 (1997) (emphasis added) (citations omitted).35 166 Wash.2d 27, 47, 204 P.3d 885 ......
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Keegan v. Am. Honda Motor Co., Case No. CV 10–09508 MMM (AJWx).
...misrepresentation or omission is “likely to mislead consumers acting reasonably under the circumstances.” See FTC v. Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th Cir.2006) (“An act or practice is deceptive if first, there is a representation, omission, or practice that, second, is likely to......
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Fed. Trade Comm'n v. Adept Mgmt., Inc., Case No: 1:16-cv-00720-CL
...104 F.3d 1168, 1170-71 (9th Cir. 1997)); see also FTC v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009) (citing FTC v. Cyberspace.com, 453 F.3d 1196, 1202 (9th Cir. 2006)). 10. FTC v. Grant Connect LLC, 763 F.3d at 1101-02 (quoting FTC v. Am. Standard Credit Sys., Inc., 874 F. Supp. 1080, 10......
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Fed. Trade Comm'n v. AMG Servs., Inc., Case No. 2:12–cv–00536–GMN–VCF.
...accurate and complete. Commerce Planet, 878 F.Supp.2d at 1063 (citing Gill, 265 F.3d at 956 )); see also F.T.C. v. Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th Cir.2006) (stating that a representation “may be likely to mislead by virtue of the net impression it creates even though the [repr......
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This Week At The Ninth: Deceptive Financial Advisory Services And Religious Speech
...courts to determine whether a solicitation is misleading by considering 'the net impression it creates.' FTC v. Cyberspace.com LLC, 453 F.3d 1196, 1200 (9th Cir. 2006). In this case, the Court held that the district court did not err in applying the net impression test to defendants' conduc......