Federal Trade v. Enforma Natural Products

Decision Date01 April 2004
Docket NumberNo. 02-57078.,No. 02-56842.,02-56842.,02-57078.
Citation362 F.3d 1204
PartiesFEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. ENFORMA NATURAL PRODUCTS, INC.; Andrew Grey, Defendants-Appellants, Twenty-Four Seven, LLC; Donna Diferdinando, Respondents-Appellants. Federal Trade Commission, Plaintiff-Appellee, v. Enforma Natural Products, Inc.; Andrew Grey, Defendants-Appellants, Michael Ehrman, Respondent-Appellant, and Fred Zinos, Defendant.
CourtU.S. Court of Appeals — Ninth Circuit

John L. Quinn and Eric L. Dobberteen, Arnold & Porter, for the appellants.

Lawrence DeMille-Wagman, Federal Trade Commission, for the appellee.

Before BEEZER, FISHER, Circuit Judges, and ENGLAND, JR., District Judge.**

BEEZER, Circuit Judge:

We consolidate these appeals for purposes of review and this opinion. Enforma Natural Products, Inc. ("Enforma") asks us to quash two separate preliminary injunctions issued by District Judge J. Spencer Letts (before this case was reassigned to District Judge Stephen V. Wilson) restricting the sale and marketing of Enforma's diet supplement products. Both appeals focus on irregular procedures employed by the district court. In appeal No. 02-56842, Enforma argues that the district court improperly relied on a court-appointed expert and issued insufficient findings of fact and conclusions of law to support the first preliminary injunction against Enforma. In appeal No. 02-57078, Enforma contends that the district court's unilateral substantive amendment of the parties' stipulated proposed preliminary injunction was an abuse of discretion, particularly where the district court added an erroneous contempt finding. Enforma also argues that the findings and conclusions issued in support of the second injunction are insufficient and that the court's reliance on the court-appointed expert was improper.

We vacate both injunctions and remand both appeals. In appeal No. 02-56842, we remand for proper findings of fact supported by a record made in open court and we instruct the district court to clarify the status and role of the court-appointed expert in accord with this opinion. In appeal No. 02-57078 we instruct the district court to review the parties' stipulated proposed preliminary injunction, to identify the court's objections, and to provide the parties an opportunity to respond to the court's concerns. Alternatively, the district court may, upon notice, enter a different form of preliminary injunction supported by findings of fact and conclusions of law on the record.

I Background and Procedural History for Both Appeals1

Enforma markets and sells diet supplement products. In April 2000, the Federal Trade Commission ("FTC") brought an action against Enforma and Andrew Grey, Enforma's President and Chief Executive Officer (collectively "Enforma") in the United States District Court for the Central District of California alleging that Enforma violated the Federal Trade Commission Act ("Act") by making false and unsubstantiated claims for products distributed under the trade names: Fat Trapper, Fat Trapper Plus and Exercise in a Bottle. In broad outline, the FTC's complaint challenged Enforma's claims that its products (1) enable consumers to lose weight and maintain weight loss without the need to reduce the intake of calories or to engage in physical exercise; (2) prevent the absorption of fat in the human body; (3) increase metabolism at the cellular level, leading to lower levels of fat in the human body; and (4) enable consumers to lose weight even if they eat high-fat foods.

The parties resolved the complaint in May 2000 through entry of a Stipulated Final Order. As part of the Stipulated Final Order, Enforma admitted no liability, but agreed to pay the FTC $10 million. Enforma also agreed not to sell or market any product making the above or similar claims unless it possessed and relied upon "competent and reliable scientific evidence that substantiates" any such representation at the time the claim was made.2

In January 2002, the FTC applied for an Order to Show Cause why Enforma and Michael Ehrman, an Enforma officer, should not be held in civil contempt for violating the May 2000 Order ("the first contempt action"). The FTC alleged that Enforma continued to use misleading advertising for its products despite a lack of adequate substantiation for its claims.3

The district court held a status conference on the first contempt action in March 2002. At the conference, the district court indicated that its preliminary review of the evidence failed to support Enforma's weight loss claims, but did appear to support its claims concerning the fat-binding ability of chitosan, the active ingredient in Fat Trapper Plus. Enforma expressed a desire to present expert witness testimony. The district court indicated that it intended to appoint a third-party expert to aid the court. The district court stated that the court-appointed expert would review the work of both parties' experts, advise the court regarding how much discovery was needed, advise the court as to the proper methodology for examining the claims, and determine which of the parties' experts had presented the stronger scientific views. The court explained that before the experts' opinions were refined by counsel and before the parties deposed one another's experts, the court wanted the parties' experts to meet informally with the court-appointed expert to discuss the science and to narrow the range of the dispute. The parties agreed to have their experts propose and select a mutually agreeable candidate to serve as the court-appointed expert. The court also ordered the parties to submit in writing the issues that the court-appointed expert should examine.

On March 28, 2002, Dr. Heber, who was selected by the parties, was appointed by the court to serve as the court's expert. The order appointing Dr. Heber states that the expert is appointed "to evaluate matters related to the science at issue, and to advise the Court with respect to his opinions related to the science." The FTC and Enforma lodged significantly different proposed orders specifying scientific issues for consideration and evaluation by Dr. Heber. The record discloses that the district court did not enter either proposed order. There is no record before us identifying what matters, if any, the district court submitted to Dr. Heber.

On July 23, 2002, while the first contempt action was still under consideration, the FTC filed a second application for an Order to Show Cause why Enforma should not be held in civil contempt for violating the May 2000 Stipulated Final Order ("the second contempt action"). The defendants in the second contempt action are Enforma Natural Products, Inc., Twenty-Four Seven, LLC, an Enforma subsidiary, and Donna DiFerdinando, Vice-President of Marketing and Development for Enforma and Vice President of Research and Development for Twenty-Four Seven, LLC (collectively also "Enforma"). The FTC alleged that Enforma was marketing Acceleron and Chitozyme, two products that made the same general claims associated with Exercise in a Bottle and Fat Trapper Plus, respectively. In its supporting memorandum, the FTC requested the initiation of contempt proceedings and a temporary restraining order ("TRO") to prevent Enforma from making and disseminating allegedly unsubstantiated claims regarding its products through marketing and packaging.

On July 25, 2002, the district court denied the TRO request associated with this second contempt proceeding, but scheduled a preliminary injunction hearing for September 16, 2002. The parties completed briefing on the injunction issue related to the second contempt action by September 20, 2002. The hearing was continued to September 30, 2002 and then to October 8, 2002.

On September 30, 2002, the court conducted an on-the-record status conference with regard to the second preliminary injunction request. During the conference, the district court stated that the merits of the contempt issues would involve a bench trial. Nothing was resolved during this status conference.

Following the September 30, 2002 status conference, the district court scheduled an October 30, 2002 meeting, which the court initially called a hearing. The court's calendar designated the meeting as a status conference. It is unclear what, exactly, occurred at the October 30, 2002 proceeding, which took place off the record. It is also not clear whether the proceeding was directed at both contempt actions or only the second action, but it appears that the proceeding involved discussion of issues common to both actions. According to the parties, the meeting began as an informal conference between the district court judge, counsel, the experts of both parties, and the court-appointed expert, Dr. Heber. Dr. Heber and the parties' experts discussed the scientific issues involved in the case. Dr. Heber was not under oath during the meeting, nor was he cross-examined by the parties.4 The parties report that at one point, the district court judge left the meeting and then returned. It appears that there were also ex parte communications between the district court and Dr. Heber. The district court later indicated that Dr. Heber opined during the October 30, 2002 conference that Enforma's sources provided inadequate substantiation of its claims. Enforma, on the other hand, claims that when the district court judge was not present, Dr. Heber actually "confirmed that Fat Trapper Plus does, in fact, trap fat."

At the end of the conference, the district court indicated that it would grant the FTC's preliminary injunction request related to the second contempt action. Later that day, the...

To continue reading

Request your trial
114 cases
  • Stormans, Inc. v. Selecky, 07-36039.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 8 Julio 2009
    ...court based "its decision on an erroneous legal standard or on clearly erroneous findings of fact." FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1211-12 (9th Cir.2004). "[W]e consider a finding of fact to be clearly erroneous if it is implausible in light of the record, viewed in its......
  • USA v. State of Ariz.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 11 Abril 2011
    ...erroneous findings of fact.' " Stormans, Inc. v. Selecky, 586 F.3d 1109, 1119 (9th Cir. 2009) (quoting FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1211-12 (9th Cir. 2004)). We review de novo the district court's conclusions on issues of law, including "the district court's decision ......
  • Stormans, Inc. v. Selecky
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 28 Octubre 2009
    ...court based "its decision on an erroneous legal standard or on clearly erroneous findings of fact." FTC v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1211-12 (9th Cir.2004). "[W]e consider a finding of fact to be clearly erroneous if it is implausible in light of the record, viewed in its......
  • Delia v. City Of Rialto
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 8 Noviembre 2010
    ...rights. 2 This court has previously noted its disapproval of this practice. Federal Trade Comm'n v. Enforma Natural Prods., Inc., 362 F.3d 1204, 1215 (9th Cir.2004); Unt v. Aerospace Corp., 765 F.2d 1440, 1444 (9th Cir.1985); Lumbermen's Underwriting Alliance v. Can-Car, Inc., 645 F.2d 17, ......
  • Request a trial to view additional results
2 books & journal articles
  • Experts
    • United States
    • ABA Antitrust Library Antitrust Evidence Handbook
    • 1 Enero 2016
    ...April 2, 2014) (in patent case, providing for the parameters of a technical expert to advise the court); FTC v. Enforma Natural Prods., 362 F.3d 1204, 1213 (9th Cir. 2004) (courts may appoint technical advisors who are not subject to Rule 706; suggesting procedures to fairly select a neutra......
  • Table of Cases
    • United States
    • ABA Antitrust Library Antitrust Evidence Handbook
    • 1 Enero 2016
    ...FTC v. Church & Dwight Co., 747 F. Supp. 2d 3 (D.D.C. 2010), aff’d , 665 F.3d 1312 (D.C. Cir. 2010), 51 FTC v. Enforma Natural Prods., 362 F.3d 1204 (9th Cir. 2004), 217 FTC v. Foster, No. CIV 07-352 JB/ACT, 2007 U.S. Dist. LEXIS 47606 (D.N.M. May 29, 2007), 51 FTC v. GlaxoSmithKline, 202 F......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT