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Federal Trade Commission v. Health Research Laboratories LLC

United States District Court, D. Maine

January 16, 2018

FEDERAL TRADE COMMISSION and STATE OF MAINE, Plaintiffs,
v.
HEALTH RESEARCH LABORATORIES, LLC, a limited liability company, and KRAMER DUHON, individually and as an owner and officer of HEALTH RESEARCH LABORATORIES, LLC, Defendants.

          DAVID C. SHONKA Acting General Counsel, Elizabeth K. Nach James A. Prunty Attorneys for Plaintiff FEDERAL TRADE COMMISSION

          JANET T. MILLS Attorney General, State of Maine, Brendan F.X. O'Neil Linda J. Conti, Assistant Attorney General Office of the Attorney General of Maine

          STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

          JON D. LEVY U.S. DISTRICT JUDGE.

         Plaintiffs, the Federal Trade Commission (“FTC” or “Commission”) and the State of Maine, as represented in this matter by the Office of the Attorney General of Maine (“Maine AG”) (collectively, “Plaintiffs”), filed a Complaint for Permanent Injunction and Other Equitable Relief against Defendants pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), pursuant to Section 4(a) of the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. § 6103(a), and pursuant to Section 209 of the Maine Unfair Trade Practices Act (“Maine UTPA”), 5 M.R.S.A. § 209, to obtain permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief for Defendants' acts or practices in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52, the Telemarketing Act, 15 U.S.C. §§ 6101-6108, the FTC's Trade Regulation Rule entitled “Telemarketing Sales Rule” (“TSR”), 16 C.F.R. Part 310, the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. §§ 1693-1693r, and its implementing Regulation E, 12 C.F.R. § 1005.10, and Section 207 of the Maine UTPA, 5 M.R.S.A. § 207, in connection with the labeling, advertising, marketing, distribution, and sale of products purported to cause weight loss, treat arthritis and relieve joint and back pain, and prevent or mitigate cognitive decline.

         The Commission, the State of Maine, and Defendants Health Research Laboratories, LLC and Kramer Duhon (hereafter collectively, “Defendants”), stipulate to the entry of this Final Judgment and Order for Permanent Injunction and Other Equitable Relief to resolve all matters in dispute in this action between them, including the allegations in the Complaint.

         FINDINGS

         1. This Court has jurisdiction over this matter.

         2. The Complaint charges that Defendants participated in deceptive acts or practices in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52, the Telemarketing Act, 15 U.S.C. §§ 6101-6108, the TSR, 16 C.F.R. Part 310, the EFTA, 15 U.S.C. §§ 1693-1693r, and its implementing Regulation E, 12 C.F.R. § 1005.10, and Section 207 of the Maine UTPA, 5 M.R.S.A. § 207, in connection with the labeling, advertising, marketing, distribution, and sale of products purported to cause weight loss, treat arthritis and relieve joint and back pain, and prevent or mitigate cognitive decline.

         3. Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order. Defendants admit the facts necessary to establish jurisdiction only for purposes of this action.

         4. Defendants waive any claim that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Order. The parties agree to bear their own costs and attorney fees.

         5. Defendants and Plaintiffs waive all rights to appeal or otherwise challenge or contest the validity of this Order.

         DEFINITIONS

         For the purpose of this Order, the following definitions apply:

1. “Charge” or “Charged” means any attempt to collect money or other consideration from a consumer, including but not limited to causing billing information to be submitted for payment, including against the consumer's credit card, debit card, bank account, telephone bill, or other account.
2. “Clear(ly) and Conspicuous(ly)” means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways:
A. In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means;
B. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood;
C. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it;
D. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable;
E. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears;
F. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications;
G. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication; and H. When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, “ordinary consumers” includes reasonable members of that group.
3. “Close Proximity” means that the disclosure is very near the triggering representation. For example, a disclosure made through a hyperlink, pop-up, interstitial, or other similar technique is not in close proximity to the triggering representation.
4. “Corporate Defendant” means Health Research Laboratories, LLC, and its successors and assigns.
5. “Covered Product” means any Dietary Supplement, Food, or Drug, including BioTherapex and NeuroPlus.
6. “Defendants” means the Individual Defendant and the Corporate Defendant, individually, collectively, or in any combination.
7. “Dietary Supplement” means: (1) any product labeled as a dietary supplement or otherwise represented as a dietary supplement; or (2) any pill, tablet, capsule, powder, softgel, gelcap, liquid, or other similar form containing one or more ingredients that are a vitamin, mineral, herb or other botanical, amino acid, probiotic, or other dietary substance for use by humans to supplement the diet by increasing the total dietary intake, or a concentrate, metabolite, constituent, extract, or combination of any ingredient described above, that is intended to be ingested, and is not represented to be used as a conventional food or as a sole item of a meal or the diet.
8. “Drug” means: (1) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; (2) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or other animals; (3) articles (other than food) intended to affect the structure or any function of the body of humans or other animals; and (4) articles intended for use as a component of any article specified in (1), (2), or (3); but does not include devices or their components, parts, or accessories.
9. “Essentially Equivalent Product” means a product that contains the identical ingredients, except for inactive ingredients (e.g., binders, colors, fillers, excipients), in the same form and dosage, and with the same route of administration (e.g., orally, sublingually), as the Covered Product; provided that the Covered Product may contain additional ingredients if reliable scientific evidence generally accepted by experts in the field indicates that the amount and combination of additional ingredients is unlikely to impede or inhibit the effectiveness of the ingredients in the Essentially Equivalent Product.
10. “Food” means: (1) any article used for food or drink for humans or other animals; (2) chewing gum; and (3) any article used for components of any such article.
11. “Including” means including but not limited to.
12. “Individual Defendant” means Kramer Duhon.
13. “Negative Option Feature” means, in an offer or agreement to sell or provide any good, program, or service, a provision under which the consumer's silence or failure to take an affirmative action to reject a good, program, or service, or to cancel the agreement, is interpreted by the seller or provider as acceptance or continuing acceptance of the offer.
14. “Person” means a natural person, an organization, or other legal entity, including a corporation, partnership, sole proprietorship, limited liability company, association, cooperative, or any other group or combination acting as an entity.
15. “Preauthorized Electronic Fund Transfer” as defined by the Electronic Fund Transfer Act, 15 U.S.C. § 1693a(10), means an electronic fund transfer authorized in advance to recur at substantially regular intervals.

         I. BANNED WEIGHT-LOSS CLAIMS

         IT IS HEREBY ORDERED that Defendants, Defendants' officers, agents, employees, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Dietary Supplement, over-the-counter Drug, patch, cream, wrap, or other product worn on the body or rubbed into the skin, are permanently restrained and enjoined from representing, or assisting others in representing, in any manner, expressly or by implication, including through the use of a product name, endorsement, depiction, illustration, trademark, or trade name, that such product:

A. Causes weight loss of two pounds or more a week for a month or more without dieting or exercise;
B. Causes substantial weight loss no matter what or how much the consumer eats;
C. Causes permanent weight loss;
D. Blocks the absorption of fat or calories to enable consumers to lose substantial weight;
E. Safely enables consumers to lose more than three pounds per week for more than four weeks;
F. Causes substantial weight loss for all users; or
G. Causes substantial weight loss by wearing a product on the body or rubbing it into the skin.

         II.

         PROHIBITED REPRESENTATIONS: OTHER WEIGHT-LOSS CLAIMS, JOINT-RELATED DISEASE CLAIMS, AND ALZHEIMER'S DISEASE, MEMORY, AND COGNITIVE PERFORMANCE CLAIMS

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product, are permanently restrained and enjoined from making, or assisting others in making, expressly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation, other than representations covered under the Section of this Order entitled Banned Weight-Loss Claims, that, in humans, such product:

A. Causes or assists in causing weight loss, including any specific amount of weight loss;
B. Causes or assists in causing fat loss, including any specific amount of fat loss;
C. Treats or cures rheumatism, arthritis, or osteoarthritis;
D. Relieves joint pain, back pain, or muscle pain;
E. Protects the brain against Alzheimer's disease or dementia;
F. Reverses memory loss;
G. Improves memory, concentration, or cognitive performance; or
H. Cures, mitigates, or treats any disease,

         unless the representation is non-misleading and, at the time of making such representation, they possess and rely upon competent and reliable scientific evidence substantiating that the representation is true. For purposes of this Section, competent and reliable scientific evidence shall consist of human clinical testing of the Covered Product, or of an Essentially Equivalent Product, that is sufficient in quality and quantity based on standards generally accepted by experts in the relevant disease, condition, or function to which the representation relates, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true. Such testing must be: (1) randomized, double-blind, and placebo-controlled; and (2) conducted by researchers qualified by training and experience to conduct such testing. In addition, all underlying or supporting data and documents generally accepted by experts in the field as relevant to an assessment of such testing as described in the Section entitled Preservation of Records Relating to Competent and Reliable Human Clinical Tests or Studies must be available for inspection and production to Plaintiffs. Persons covered by this Section have the burden of proving that a product satisfies the definition of Essentially Equivalent Product.

         III. PROHIBITED REPRESENTATIONS: OTHER HEALTH-RELATED CLAIMS

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, and employees, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product, are permanently restrained and enjoined from making, or assisting others in making, expressly or by implication, including through the use of a product name, endorsement, depiction, or illustration, any representation about the health benefits, safety, performance, or efficacy of any Covered Product, other than representations covered under the Sections of this Order entitled Banned Weight-Loss Claims and Prohibited Representations: Other Weight-Loss Claims, Joint-Related Disease Claims, and Alzheimer's Disease, Memory, and Cognitive Performance Claims, unless the representation is non-misleading, and, at the time of making such representation, they possess and rely upon competent and reliable scientific evidence that is sufficient in quality and quantity based on standards generally accepted by experts in the relevant disease, condition, or function to which the representation relates, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true.

         For purposes of this Section, competent and reliable scientific evidence means tests, analyses, research, or studies (1) that have been conducted and evaluated in an objective manner by experts in the relevant disease, condition, or function to which the representation relates; (2) that are generally accepted by such experts to yield accurate and reliable results; and (3) that are randomized, double-blind, and placebo-controlled human clinical testing of the Covered Product, or of an Essentially Equivalent Product, when such experts would generally require such human clinical testing to substantiate that the representation is true. In addition, when such tests or studies are human clinical tests or studies, all underlying or supporting data and documents generally accepted by experts in the field as relevant to an assessment of such testing as set forth in the Section entitled Preservation of Records Relating to ...


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