FTC v. Simeon Management Corporation
| Decision Date | 11 March 1975 |
| Docket Number | No. C-74-2226 WHO.,C-74-2226 WHO. |
| Citation | 391 F. Supp. 697 |
| Court | U.S. District Court — Northern District of California |
| Parties | FEDERAL TRADE COMMISSION, Petitioner, v. SIMEON MANAGEMENT CORPORATION, a corporation, et al. |
COPYRIGHT MATERIAL OMITTED
Calvin J. Collier, Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, James P. Timony, Atty., Federal Trade Commission, Washington, D. C., for petitioner; Raymond J. Lloyd, Regional Director, Alfred Lindeman, San Francisco Regional Office, Federal Trade Commission, San Francisco, Cal., of counsel.
Melvin K. Najarian, Josef D. Cooper, Cooper & Scarpulla, San Francisco, Cal., Marvin Gross, Los Angeles, Cal., Darrel P. Simpson, Medical Weight Loss, Inc., Los Angeles, Cal., Leo Shaw, Asaro & Keagy, San Diego, Cal., for respondents.
Sections 13(a) and (b) of the Federal Trade Commission Act (the Act), 15 U. S.C. § 53(a) and (b),1 provide that the Federal Trade Commission (the FTC) may seek a preliminary injunction restraining the dissemination of advertisements whenever the FTC has reason to believe (1) that a person, partnership, or corporation is disseminating false or misleading advertisements or is violating or about to violate any provision of law enforced by the FTC and (2) that it would be in the public interest to enjoin the dissemination of such advertisements pending the issuance of an administrative complaint by the FTC and until there is a final administrative or court ruling on the complaint. The FTC is entitled to preliminary injunctive relief upon a proper showing that, weighing the equities and considering the FTC's likelihood of ultimate success, the granting of the injunction would be in the public interest.
In the case at bar, petitioner, the FTC, issued an administrative complaint against respondents on October 15, 1974.2 In the administrative complaint, the FTC alleged that respondents were violating Sections 45 and 52 of the Act by disseminating false and misleading advertisements. The FTC now seeks a preliminary injunction restraining respondents from advertising their obesity and weight control treatments as long as respondents use the drug Human Chorionic Gonadotropin (HCG), or any other drug, in their treatment, and as long as HCG or such other drug has not been approved by the Food and Drug Administration (FDA) for use in weight reduction.
Respondents are corporations and individuals in the business of setting up, operating and promoting weight reduction clinics within (and in some instances outside of) the State of California. They provide management and support services to the licensed physicians and nurses who administer the treatments offered by the weight loss clinics. Respondents place advertisements for their clinics in newspapers, magazines, and on television.
The matter came on regularly for hearing on December 9, 1974. The Court having considered the pleadings, affidavits and briefs on file in this action and all the evidence, both oral and documentary as well as extensive oral argument, and good cause appearing, the motion for a temporary injunction is denied for the reasons hereinafter set forth. It is to be emphasized that nothing in this Memorandum Opinion and Order is to be taken as affecting in any wise the decision on the merits of the administrative complaint filed by the FTC. No doubt much more evidence from both sides will be presented at the hearings on the administrative complaint. Everything stated herein refers solely to the motion for a temporary injunction.
In evaluating a motion for a preliminary injunction under the Act, the Court does not apply the traditional equity standards of judicial review. Section 53 of the Act permits the issuance of a preliminary injunction upon a proper showing that weighing the equities, and considering the FTC's likelihood of ultimate success, such action would be in the public interest. The statute does not define "proper showing" and there is sparse judicial interpretation of the requisites of a "proper showing". The legislative history of Section 53 makes it clear that since the FTC is a public agency, suing on behalf of the public, it is excused from making the traditional equity showing of irreparable injury. Joint Statement of the Committee Conference, H.R.Rep.No.93-617, 93d Cong., 2d Sess. (1973), page 31.
There is a split in judicial opinion whether the Court, in evaluating the motion for a preliminary injunction, need only determine that the FTC has reason to believe that the alleged violation has taken place (Federal Trade Commission v. Rhodes Pharmacal Co., 191 F.2d 744 (7th Cir. 1971) or whether the Court must also balance the equities. FTC v. National Health Aids, 108 F. Supp. 340 (D.C.Md.1952). Considering that the statute specifically directs the Court to weigh the equities and considering the extraordinary and important nature of injunctive relief, I am of the view that the District Court must do more than determine if the administrative agency had reasonable cause to believe that the alleged violation had taken place. Reasonable belief of a violation is enough to justify the FTC seeking a preliminary injunction, but in evaluating the motion for preliminary injunction the District Court must look to the FTC's reasonable cause to believe that a violation has taken place, and must also as a separate factor weigh the equities in favor of granting or denying the preliminary injunction. FTC v. National Health Aides, supra.
The following facts are adduced from the evidence, both oral and documentary, taken at the hearing. They are generally applicable to all respondents and are pertinent for the purpose of deciding this motion for preliminary injunction. The operation of the clinics owned by the individual respondents vary in certain details from others, but such details are not significant in deciding this motion.
Respondents' weight reduction clinics utilize the "Simeons" or "Simeon's" method for weight loss. The method consists of a four to six week treatment program of a 500 calorie diet, continuous medical counseling, and daily injection of HCG in a 125 I.U. dosage. HCG is a hormone or endocrine drug derived from the urine of pregnant women. HCG is marketed by a number of pharmaceutical houses and has been approved for the treatment of several conditions other than weight loss. For example, HCG is labeled for, and FDA approved for, use in the treatment of sterility due to anovulation, sterility due to hypogonadism, and for delayed onset of puberty. HCG has not been certified by the FDA for use in the treatment of obesity. However, HCG has been used for many years by physicians throughout the United States in the treatment of obesity.
Prospective patients of the clinics are sometimes given other drugs which are not approved by the FDA for weight reduction such as diuretics. The patients are not told that HCG or the other drugs employed lack FDA approval for the treatment of obesity or weight control.
The weight reduction treatment is administered by licensed physicians and nurses. Respondents only manage the clinics, they do not administer the treatments. On the initial visit to the clinic, a prospective patient is examined by a physician and given diagnostic tests to determine if the individual is eligible for the treatment program. Individuals suffering from diseases for which HCG is contraindicated are rejected from the program. If accepted into the program, the patient is placed on the diet and injection regimen. Dosages and frequency of injections are sometimes varied to suit the individual patient's needs.
The cost of the clinics' programs ranges from $100 to $300 for a course of treatment. Simeons Weight Clinics Foundation charges from $188 to $368 or more for their obesity treatment. Medical Weight Loss, Inc. charges $245 for their average obesity treatment. Bariatric Medical Clinics Management Corporation charges from $135 to $185 for their obesity treatment. Weight Reduction Medical Clinic charges from $170 to $240 for their obesity treatment. HCG Weight Clinics Foundation charges between $200 and $300 on the average for their obesity treatment. These average charges include the cost of various laboratory tests, a medical history, and the HCG injections.
The cost of respondents' obesity treatments is comparable to, or less than, charges by other private physicians or by university clinics for weight reduction treatments. Assuming a treatment program based on daily visits were available at other private or university clinics, the cost would be about $400 to $500.
Respondents advertise their weight loss clinics in magazines, newspapers, and on television. The advertisements suggest that the treatment method is safe, effective, and medically approved. The following are illustrative of the advertisements disseminated by respondents:
1. Simeon Weight Clinics Foundation:
Simeon Weight Clinics Foundation Declares War on Weight. Medically Supervised Weight Loss. Lose weight safely, quickly and effortlessly through our proven weight reduction program.
2. Medical Weight Loss, Inc.:
Losing Weight is a Doctor's Business. Now You Can Lose Weight . . . Through a Proven Method—Fast . . . using the safe and practical Dr. A. T. W. Simeons method of weight reduction.
3. Bariatic Medical Clinics Management Corporation:
Medical Weight Reduction. Bariatrics individual program is a safe and practical method for the entire family to lose weight . . . .
4. Weight Reduction Medical Clinic:
Look At Me Now. I Lost 26 lbs. in 6 weeks! I didn't sign any contracts or take any pills!
5. HCG Weight Clinics Foundation:
Lose Weight Now—to look better—to feel better—to perform better.
Featuring Dr. A. T. W. Simeon's "Pounds & Inches" Method. HCG Weight Clinics Foundation can improve your appearance and attractiveness—and help you stay that...
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