United States v. Feijo

• Decision Date: 24 September 2012
• Docket Number: Civil Action No. 10–1362 (EGS).
• Citation: 896 F.Supp.2d 1
• Parties: UNITED STATES of America, Plaintiff, v. DANIEL CHAPTER ONE, and James Feijo, Defendants.
• Court: U.S. District Court — District of Columbia

896 F.Supp.2d 1

UNITED STATES of America, Plaintiff,

v.DANIEL CHAPTER ONE, and James Feijo, Defendants.

Civil Action No. 10–1362 (EGS).

United States District Court,

District of Columbia.

Sept. 24, 2012.

Jessica R. Gunder, U.S. Department of Justice, Washington, DC, for Plaintiff.

Robert M. Sanger, Sanger & Swysen, Santa Barbara, CA, Stephen Kerr Dunkle, Sanger & Swysen, Santa Barbara, CA, for Defendant.

MEMORANDUM OPINION

EMMET G. SULLIVAN, District Judge.

Plaintiff United States brings this action against Daniel Chapter One and James Feijo (“Defendants”) under Sections 5( l ), 13(b), and 16(a) of the Federal Trade Commission Act, 15 U.S.C. §§ 45( l ), 53(b), and 56(a), alleging that Defendants have violated a final cease and desist order of the Federal Trade Commission (“FTC” or the “Commission”). Pending before the Court is the United States' Motion for Summary Judgment on Liability. The United States requests that the Court find that Defendants have violated the FTC's order and accordingly are liable for civil penalties, injunctive relief, and consumer redress. Upon consideration of the motion, the opposition and reply thereto, the relevant case law, and the entire record in this case, the Court will GRANT the United States' Motion for Summary Judgment on Liability.

I. BACKGROUND¹

Defendant Daniel Chapter One is incorporated under the laws of the State of Washington, with its principal place of business in Portsmouth, Rhode Island. See Pl.'s SMF ¶ 1. Defendant James Feijo is the sole member and overseer of Daniel Chapter One. Pl.'s SMF ¶ 2. Defendants advertise and sell dietary supplements, including BioShark, 7 Herb Formula, GDU, and BioMixx (the “Products”), which Defendants claim can treat, cure, or prevent cancer. Pl.'s SMF ¶¶ 3–4.

A. Procedural Background

On September 18, 2008, the FTC initiated an administrative proceeding alleging that Defendants' marketing of the Products constituted deceptive acts and practices in violation of Sections 5(a) and 12 of the Federal Trade Commission Act (the “FTC Act”), 15 U.S.C. §§ 45(a) and 52. Pl.'s SMF ¶¶ 4–5. Following a trial, an administrative law judge concluded that Defendants had violated the FTC Act by making unsubstantiated claims that the Products prevented, treated, or cured tumors or cancer. Pl.'s SMF ¶ 6. Defendants appealed this decision to the Commission,and on December 24, 2009, the Commission upheld the decision and issued a Final Order to cease and desist certain practices. Pl.'s SMF ¶¶ 7–8.

On January 25, 2010, the FTC issued a Modified Final Order, copies of which were served on Defendants and their attorneys on January 29, January 30, and February 1, 2010. Pl.'s SMF ¶¶ 9–10; see also Pl.'s Mem. in Supp. of Mot. for Summ. J. on Liability (hereinafter, “Pl.'s MSJ”), Exs. D and V. Part II of the Modified Final Order prohibits Defendants (referred to in the Modified Final Order as “Respondents”) from making “any representation, in any manner, expressly or by implication, including through the use of product or program names or endorsements” ² that any product marketed by Defendants:

[P]revents, treats, or cures or assists in the prevention, treatment, or cure of any type of tumor or cancer, including but not limited to representations that:

1. BioShark inhibits tumor growth;

2. BioShark is effective in the treatment of cancer;

3. Herb Formula is effective in the treatment or cure of cancer;

4. 7 Herb Formula inhibits tumor formation;

5. GDU eliminates tumors;

6. GDU is effective in the treatment of cancer;

7. BioMixx is effective in the treatment of cancer; or

8. BioMixx heals the destructive effects of radiation or chemotherapy;

unless the representation is true, non-misleading, and, at the time it is made, Respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

Pl.'s SMF ¶ 11; see also Pl.'s MSJ, Ex. D, at 2. In addition, Part V.B of the Modified Final Order requires that:

Within forty-five (45) days after the final and effective date of this order, Respondents shall send by first class mail, postage prepaid, an exact copy of the notice ... to all persons [who purchased the Products between January 1, 2005 and the date of the order.]

Pl.'s SMF ¶ 12; see also Pl.'s MSJ, Ex. D, at 3. The notice, which is attached to the Modified Final Order, informs consumers of the FTC's conclusion that Defendants' advertising claims were deceptive because they were not substantiated by competent and reliable scientific evidence. See Pl.'s MSJ, Ex. D, at 7.

Defendants filed an appeal with the United States Court of Appeals for the District of Columbia Circuit, contesting the legality and constitutionality of the Modified Final Order. See Pl.'s SMF ¶ 13; Petition for Review, Daniel Chapter One v. FTC, No. 10–1064 (D.C.Cir. Mar. 17, 2010). Defendants also applied to the FTC for a stay of the Modified Final Order pending the outcome of their appeal, but their request was denied. Pl.'s SMF ¶ 14. Defendants then filed with the D.C. Circuit an emergency motion for a stay of the Modified Final Order. This motion was denied on April 1, 2010. See Per Curiam Order Denying Emergency Motion to Stay Case, Daniel Chapter One, No. 10–1064 (D.C.Cir. Apr. 1, 2010); see also Pl.'s MSJ, Ex. F. Because Defendants failed to obtain a stay, the Modified Final Order became effective on April 2, 2010. See Pl.'s MSJ at 4; see also15 U.S.C. § 45(g)(2) (“An order of the Commission to cease and desist shall become final ... upon the sixtieth day after such order is served, if a petition for review has been duly filed; except that any such order may be stayed, in whole or in part and subject to such conditions as may be appropriate, by—(A) the Commission; (B) an appropriate court of appeals of the United States ...; or (C) the Supreme Court, if an applicable petition for certiorari is pending.”).

On August 13, 2010, the United States filed its Complaint in this Court seeking civil penalties and other injunctive relief pursuant to §§ 5( l ), 13(b), and 16(a) of the FTC Act. Simultaneous therewith, the United States filed a Motion for a Preliminary Injunction seeking an order enjoining Defendants from violating the Modified Final Order. Pl.'s SMF ¶ 16. The Court denied the United States' Motion for a Preliminary Injunction without prejudice on September 14, 2010, finding that the Court lacked jurisdiction to enforce the Modified Final Order while Defendants' appeal challenging the legality of the Modified Final Order was pending before the D.C. Circuit. See Order, Sept. 14, 2010, Docket No. 11.³ The FTC then filed an emergency motion for an order of enforcement pendente lite with the D.C. Circuit. The Circuit granted the United States' motion on November 22, 2010. See Per Curiam Order, Daniel Chapter One, No. 10–1064 (D.C.Cir. Nov. 22, 2010) (“Daniel Chapter One is hereby enjoined to obey forthwith the modified final order of the Federal Trade Commission issued January 25, 2010, in Docket No. 9329, In the Matter of Daniel Chapter One and James Feijo.”); see also Pl.'s SMF ¶ 17. Defendants then filed a motion with the D.C. Circuit seeking a stay of the enforcement of Part V.B of the Modified Final Order. The D.C. Circuit rejected this request on December 7, 2010. See Per Curiam Order, Daniel Chapter One, No. 10–1064 (D.C.Cir. Dec. 7, 2010); Pl.'s SMF ¶ 18.

On December 10, 2010, the D.C. Circuit denied Defendants' petition for review of the Modified Final Order, concluding that “the Commission properly exercised jurisdiction over [Daniel Chapter One],” and that “[Daniel Chapter One]'s arguments based upon the Constitution and the Religious Freedom Restoration Act are wholly without merit.” Daniel Chapter One v. FTC, 405 Fed.Appx. 505, 505–06 (D.C.Cir.2010). Defendants then filed a petition for a writ of certiorari, which was denied on May 23, 2011. See Daniel Chapter One v. FTC, ––– U.S. ––––, 131 S.Ct. 2917, 179 L.Ed.2d 1248 (2011).

Following issuance of the D.C. Circuit's mandate, the United States renewed its Motion for a Preliminary Injunction in this Court. In addition, Defendants filed a Motion to Stay the proceedings pending completion of a federal criminal investigation, and disposition of any resulting indictments and prosecutions, of James Feijo and Daniel Chapter One in the State of Rhode Island. See Defs.' Mot. to Stay, Docket No. 22. The Court denied Defendants' Motion to Stay without prejudice during a hearing held on May 9, 2011. On June 22, 2011, 793 F.Supp.2d 157 (D.D.C.2011), the Court granted the United States' Motion for Preliminary Injunction and enjoined Defendants from violating the FTC's Modified Final Order. See Order and Memorandum Opinion, Docket Nos. 31 and 32.

On July 29, 2011, the United States filed a Motion for an Order to Show Cause why Daniel Chapter One, James Feijo, and Patricia Feijo ⁴ should not be held in contempt of the Court's June 22, 2011 Order. The Court subsequently ordered Defendants to show cause why they should not be held in contempt. The Court held a contempt hearing on May 9, 2012. During that hearing, the United States presented evidence and testimony regarding Defendants' purported violations of the Modified Final Order. After receiving evidence and hearing argument, the Court found Daniel Chapter One, James Feijo, and Patricia Feijo in civil contempt. Specifically, the Court concluded that James Feijo, Patricia Feijo, and Daniel Chapter One (the “Contemnors”) had continued to violate the Modified Final Order by (1) continuing to make representations on their radio show that their products treat or cure cancer without competent and reliable scientific evidence to substantiate those representations, (2) encouraging potential customers to visit websites containing Daniel Chapter One publications that contain prohibited information and endorsements of the prohibited supplements, (3) not removing certain representations from the websites within their control, which...