Gloria M. Navarro, Chief Judge.
Pending before the Court is the Motion for Summary Judgment, (ECF No. 86), filed by Plaintiff Federal Trade Commission ("the FTC"). Defendants OMICS Group Inc. ("OMICS"), iMedPub LLC ("iMedPub"), Conference Series LLC ("Conference Series"), and Srinubabu Gedela ("Gedela") (collectively "Defendants") filed a Response, (ECF No. 110), and the FTC filed a Reply, (ECF No. 115). Also, before the Court is the Motion for Summary Judgment, (ECF No. 89), filed by Defendants. The FTC filed a Response, (ECF No. 97),
The FTC brings this action pursuant to Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), alleging that Defendants engaged in unfair and deceptive practices with respect to the publication of online academic journals and organization of scientific conferences. (See Compl., ECF No. 1). Defendants claim to operate hundreds of online academic journals on a wide variety of topics, including medicine, chemistry, nursing, engineering, and genetics. (Id. ¶ 20); (Gedela Decl. ¶¶ 14-15, Ex. 1 to Defs.' MSJ, ECF No. 89-1). In order to persuade consumers to submit articles for publication, the FTC alleges that Defendants make numerous misrepresentations regarding the nature and reputation of their journals. (Compl. ¶¶ 11, 12). The FTC also alleges that Defendants fail to disclose the significant fees associated with their publishing services. (Id. ¶ 13). Finally, the FTC alleges that Defendants make numerous misrepresentations in connection with the marketing of their scientific conferences. (Id. ¶ 14).
The FTC asserts that Defendants OMICS, iMedPub, and Conference Series (collectively "Corporate Defendants") have operated as a common enterprise in violating Section 5(a) and therefore are jointly and severally liable. (Id. ¶ 10). The FTC further asserts that Gedela has "formulated, directed, controlled, had the authority to control, or participated in the acts and practices of the Corporate Defendants that constitute the common enterprise." (Id.). Based on these allegations, the FTC initiated this action against Defendants on August 25, 2016. On September 29, 2017, the Court granted the FTC's request for a preliminary injunction, requiring Defendants to preserve records, provide financial accounting to the FTC, and refrain from engaging in deceptive practices. (Prelim. Inj. Order, ECF No. 46). The parties now submit their respective motions for summary judgment on the FTC's unfair and deceptive practices claim.
Academic or scholarly journals are peer-reviewed publications that focus on a
Under the traditional model, publishers charge libraries and individuals "user subscription fees" to gain access to the published material. (Id. ¶ 6). The articles remain accessible to the extent users remain subscribed to the journal. (See id.). In contrast, under the newer "open access" model, journals make their content available to the public at no cost, subsidizing their operations primarily through author-funded publication fees. (Id. ¶ 7); (Gedela Decl. ¶ 9, Ex. 1 to Defs.' MSJ). By removing price and permission barriers, this model increases access to a broader community. (SJX18 Backus Decl. ¶ 9); (Gedela Decl. ¶ 10).
"Peer-review" is the process of subjecting an author's scholarly work, research, or ideas to the scrutiny of qualified experts in the same field prior to publishing in a journal. (SJX18 Backus Decl. ¶ 12). When an author submits their work for publication, the journal makes an initial determination regarding whether to accept the article for peer review or reject it outright. (Id.). If accepted, authors are expected to respond to peer reviewer commentary, implement recommendations, and, if necessary, justify the rejection of any proposed revisions. (See id. ¶¶ 14-15). The peer-review process typically takes several months. (Id.). Prior to publishing, authors are usually required to sign a publication agreement that gives the journal the right to publish the submitted article. (Id. ¶ 14).
In the academic publishing industry, a journal's "impact factor" is often used as an objective measure of the prestige or relative importance of a journal in its field. (Id. ¶ 15). "Impact factor" typically measures the average number of scholarly citations that articles receive in a published journal. (See id. ¶ 16). A higher impact factor indicates a more reputable journal. (Id. ¶ 15). Amongst those in the industry, the term is specifically understood to mean the proprietary citation measure calculated and published by Thomson Reuters in its Journal Citation Reports. (Id. ¶ 16).
Aside from impact factors, "indexing" also serves as an indicator of a journal's reputation. (Id. ¶¶ 17-22). The United States National Library of Medicine ("NLM") produces and manages three freely accessible bibliographical resources: PubMed, Medline, and PubMed Central. (SJX11 Admissions Nos. 42, 43). Journals must apply for inclusion in Medline and
Defendants OMICS, iMedPub, and Conference Series are corporate entities registered in the United States with a principle place of business located in Hyderabad, India. (SJX02 Answer ¶¶ 6-8); (Gedela Decl. ¶ 6).
Gedela is the sole owner and founding director of the three Corporate Defendants. (SJX02 Answer ¶ 9); (SJX03 OMICS Int. Resp. 2); (SJX04 iMedPub Int. Resp. 2); (SJX05 Conference Series Int. Resp. 2); (Defs.' MSJ 5:3-4, ECF No. 89). Gedela first began using the fictitious business name "OMICS Publishing Group" for his publishing and conference services in 2009. (SJX23 Gedela Dep. 23:1-18, 30:1-25); (Defs.' MSJ 5:3-11). Until at least 2015, Gedela held revenue from the Corporate Defendants in a Citibank account set up in Palo Alto for OMICS Publishing Group. (See SJX23 Gedela Dep. 27:1-30:25). As founding director, Gedela has authority and control over Defendants' conference and publishing practices. (SJX10 Admission Nos. 1-4, 20); (See FTC's MSJ 4:26-5:22). Furthermore, Gedela has signatory authority over OMICS and iMedPub's financial accounts. (SJX02 Answer ¶ 9); (SJX10 Admission No. 22). Gedela operates as the main contact for the Corporate Defendants' servicers, including their payment processor. (PX12 Att. P at 1007; Att. O at 997, 999; Att. D at 109).
Defendants advertise throughout their websites and email solicitations that they strictly adhere to standard peer-review practices. (See SJX11 Admission No. 60); (SJX12 Admission Nos. 61-64); (SJX13 at 6-14); (SJX 15 at 4-8, 11-14); (See SJX1 Solicitation Email at 8); (SJX26 Att. Q at 576, 585, 588, 630, 698); (See PX12 Att. L at 657). For example, in 2014, Defendants published web pages stating that OMICS had 25,000 experts serving as editorial
In contradiction to these assertions, however, the FTC submits evidence indicating that Defendants' peer review practices are a "sham." (FTC's MSJ 24:4-5). For example, in certain instances, consumers who submitted articles were approved for publication within just several days of submission. (SJX 26 Att. A at 20, 53, 69, 84, 86, 114). In others, consumers reported receiving no comments or proposed revisions from peer reviewers. (See id. at 37, 53, 73, 93, 114, 124). The consumers who did receive feedback from reviewers have noted that it was not substantive. (Id. at 53); (PX09 Hoevet Decl. ¶ 4); (PX10 Davidson Decl. ¶¶ 6, 10).
In 2012, John Bohannon—a scientist and writer for Science magazine—submitted two articles to Defendants' journals with intentionally "egregious" scientific flaws. (PX14 Bohannon Decl. ¶ 3).
In addition to consumer commentary, the FTC also submits statements from multiple of Defendants' journal editors. (FTC's MSJ 25:15-25). In these statements, the editors indicate that they never received any manuscripts to review. (PX01 Woods Decl. ¶¶ 3-4, 9); (PX03 Everett Decl. ¶¶ 3-4). Based on documents received through discovery, the FTC asserts that out of 69,000 published articles, only 49% indicate that some form of review was conducted. (See FTC's MSJ 26:8-14).
Defendants advertise that their publications are reviewed and edited by as many as 50,000 experts. (SJX26 Att. Q at 576, 586); (Gedela Decl. ¶¶ 14-15, Ex. 1 to Defs.' MSJ).
Defendants advertise throughout their websites and solicitation emails that their publications have high "impact factors." (SJX26 Att. Q at 741-768); (PX12 Att. L 657, 691, 762, 766, 768-769, 881-935); (SJX15 Admissions Nos. 196, 197). These advertisements include express representations, such as "OMICS International journals are among the top high impact factor academic journals which are publishing scholarly articles constantly." (SJX26 Att. Q. 820). Defendants admit that their journals do not have Thomson Reuters impact factors. (SJX04 iMedPub Int. Resp. 8); (SJX07 OMICS Int. Resp. 15). Rather, Defendants' impact factors are self-calculated ratios based on the number of citations found through a Google Scholar search. (See PX12 Att. L at 770); (SJX14 Admission No. 103); (SJX26 Att. P at 467, 763).
Defendants' websites contain inconsistent descriptions of how their impact factors are calculated. In some places, the impact factors are described as based on Journal Citation Reports, which is consistent with the Thomson Reuters Impact Factor. (SJX15 Admissions 198-211). In other places, Defendants describe them as an "unofficial impact factor" based on Google Scholar Citations. (See, e.g., SJX14 Admission No. 103); (Internet Archives at 93, ECF No. 84). Although Defendants provide their alternate definition in disclosures, such explanations often appear buried underneath their journal marketing. (See PX12 Att. L at 881-931); (SJX26 Att. P at 450-467). In some instances, Defendants' websites make the general claim that their journals have "high impact factors" without any qualification. (See PX12 Att. L at 657, 762); (SJX26 Att. Q at 820). Similarly, Defendants have sent solicitation emails referring to their journals' impact factors without qualification. (See SJX27 Email at 3).
Defendants represent that their publications are indexed in reputable indexing services. (See PX12 Att. L at 643, 657, 694). For example, Defendants repeatedly indicate that their journals are indexed in Medline and PubMed Central. (PX10 Att. D at 16); (SJX26 Att. Q at 589, 820, 916, 923). At various points, Defendants have even utilized PubMed and Medline's logos on their websites. (Internet Archives at 8, 11, 14, 17, 20, 24).
Despite these representations, Defendants admit that none of their journals are indexed in PubMed Central or Medline. (See SJX07 Admission Nos. 13, 14); (SJX08 Admission Nos. 13, 14). Instead, Defendants claim that more than 900 well-respected scientists have recommended OMICS' journals to be published in PubMed central. (Gedela Decl. ¶ 17, Ex. 1 to Defs.' MSJ). Nonetheless, NLM has explicitly refused to index Defendants' publications due to questionable publishing practices and requested that Defendants cease indicating any affiliation. (SJX18 ¶¶ 32-36, Att. B at 25, Att. C at 28, Att. D at 31, Att. E at 33-34). Despite NLM's requests, Defendants have continued to indicate their journals' inclusion in Medline and PubMed Central. (See PX10 Att. D at 16); (SJX26 Att. Q at 589).
Defendants frequently send out solicitation emails inviting individuals to submit articles to Defendants' online publications. (See PX04 Att. A at 6); (PX09 Att. A at 4);
Some consumers only learn of Defendants' fees after Defendants have accepted their articles for publication. (See, e.g., PX04 ¶ 5); (SJX26 Att. A at 20, 26, 33, 45, 59). Furthermore, when consumers contest Defendants' publication fees and ask their articles to be withdrawn, Defendants have ignored the requests and continued demanding payment. (See, e.g., PX04 ¶¶ 6-8); (PX06 ¶¶ 6, 8); (PX07 ¶¶ 5, 8). In some instances, Defendants only removed the articles after the threat of legal action. (See, e.g., PX07 ¶¶ 9-10). In addition to economic harm, this conduct prevents authors from submitting their work to other journals. (See SJX18 Backus Decl. ¶ 11). The Court notes, however, that at least one consumer has found the publication fees to be clearly disclosed. (See Orser Decl. ¶ 14, Ex. B to Defs.' Resp., ECF No. 110-4).
In addition to online publishing, Defendants also organize conferences on various scientific topics. (See SJX16 Gedela Decl. ¶¶ 6, 8); (SJX26 Att. B at 170, 185, 188). Defendants note that they have received "appreciation and invitation letters for hosting [their] conferences in many major cities." (Defs.' MSJ 8:15-16); (Letters, Ex. 3 to Defs.' MTD, ECF No. 31). Many of these conferences occur in the United States. (SJX26 ¶¶ 10-14).
In order to attract consumers, Defendants advertise the attendance and participation of prominent academics and researchers. (See PX05 ¶¶ 3,5); (PX12 Att. U at 1045); (SJX26 Att. A at 22, 56, 170). The FTC has provided evidence, however, that Defendants advertise the attendance and participation of these individuals without their permission or actual affiliation. (See PX05 ¶¶ 3,5); (PX12 Att. U at 1045). In numerous instances, individuals have requested unsuccessfully to have their names removed from Defendants' conference advertising materials. (See, e.g., PX03 ¶¶ 6-12); (SJX26 Att. N at 370). In some instances, Defendants did not remove an individuals' name until the threat of legal action. (See, e.g., PX05 ¶ 7). According to the FTC's sampling of 100 conferences, approximately 60% advertised organizers or participants who had not agreed to serve in such capacity. (SJX25 McAlvanah Decl. ¶ 7).
The Federal Rules of Civil Procedure provide for summary adjudication when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ.
In determining summary judgment, a court applies a burden-shifting analysis. "When the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case." C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). In contrast, when the nonmoving party bears the burden of proving the claim or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323-24, 106 S.Ct. 2548. If the moving party fails to meet its initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
If the moving party satisfies its initial burden, the burden then shifts to the opposing party to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). To establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial. See Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548.
At summary judgment, a court's function is not to weigh the evidence and determine the truth but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505. The evidence of the non-movant is "to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255, 106 S.Ct. 2505. But if the evidence of the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted. See id. at 249-50, 106 S.Ct. 2505.
The FTC moves to strike the declaration of Defendants' Indian counsel, Kishore Vattikoti ("Vattikoti"), which is attached to Defendants' Motion for Summary Judgment. (FTC Mot. to Strike 1:22-24, ECF No. 96). In the declaration, Koshore Vattikoti makes numerous broad assertions regarding the validity of Defendants' conference and publishing practices. (Vattikoti Decl. ¶¶ 6-9, Ex. 3 to Defs.' MSJ, ECF No. 89-3). Additionally, Vattikoti testifies that "all consumer complaints [against Defendants] have been resolved." (Id. ¶ 10). Attached to the declaration is what appears to be a summary exhibit of consumer complaints. (Id. at Ex. C). The summary exhibit contains notations regarding the manner in which Defendants purportedly resolved the complaints. (Id.).
The FTC asserts that this declaration violates Federal Rule of Civil Procedure ("FRCP") 56(c)(4) because it fails to include "specific facts" of which the declarant has personal knowledge. (FTC Mot. to Strike 2:7-9). Specifically, the FTC notes that Gedela has previously testified that Vattikoti's responsibilities are limited to helping Defendants with this specific action, and he is not involved in the business. (Id. 2:24-3:4). In response, Defendants claim that Vattikoti has sufficient personal knowledge as Defendants' legal counsel and through assisting in Defendants' prior transactional and marketing matters. (See Defs.' Resp. 2:25-3:15).
FRCP 56(c)(4) states that an affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated. Fed. R. Civ. P. 56(c)(4). Here, Defendants fail to articulate how Vattikoti's role as Defendants' legal counsel gives him personal knowledge of whether 74 specific consumer complaints have been resolved. Defendants also fail to identify the source of the notations on Vattikoti's summary exhibit, thus giving no basis to the evidence he is relying upon. The Court therefore strikes these portions as violating Rule 56.
The FTC asserts that Defendants engaged in deceptive practices in violation of Section 5 by: (1) misrepresenting the nature of their academic journals; (2) misrepresenting their scientific conferences; and (3) failing to adequately disclose that consumers must pay publishing fees. (See FTC's MSJ 32:2-6). The Court addresses each contention below.
Section 5 of the FTC Act prohibits "unfair or deceptive practices in or affecting commerce." 15 U.S.C. § 45. An act or practice is deceptive under Section 5 if it involves a material misrepresentation
In considering whether a claim is deceptive, the Court must consider the "net impression" created by the representation, even when the solicitation contains some truthful disclosures. See Cyberspace, 453 F.3d at 1200. The FTC need not prove that Defendants' misrepresentations were made with an intent to defraud or deceive or in bad faith. See, e.g., Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 1495 (1st Cir. 1989); FTC v. World Travel Vacation Brokers, 861 F.2d 1020, 1029 (7th Cir. 1988). A representation is also deceptive if the maker of the representation lacks a reasonable basis for the claim. See FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 8 (1st Cir. 2010). Where the maker lacks adequate substantiation evidence, they necessarily lack any reasonable basis for the claims. Id. Furthermore, any disclaimers must be prominent and unambiguous to change the apparent meaning and leave an accurate impression. See Kraft, Inc. v. FTC, 970 F.2d 311, 325 (7th Cir. 1992). The FTC Act is violated if a seller "induces the first contact through deception, even if the buyer later becomes fully informed before entering the contract." Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 1975).
The FTC moves for summary judgment on the basis that no genuine dispute exists as to Defendants' deceptive journal publishing practices. (FTC's MSJ 43:7-44:10). The Court agrees. In their websites and email solicitations, Defendants represent that their journals follow standard peer review processes in the academic journal industry. (See SJX11 Admission No. 60); (SJX12 Admission Nos. 61-64); (SJX13 at 6-14); (SJX 15 at 4-8, 11-14); (See SJX1 Solicitation Email at 8); (SJX26 Att. Q at 576, 585, 588, 630, 698); (See PX12 Att. L at 657). Under standard industry practice, however, the peer review process takes several weeks/months and involves multiple rounds of substantive feedback from experts in that field. (SJX18 Backus Decl. ¶¶ 14-15). In this case, the FTC has submitted uncontroverted evidence showing that Defendants' peer review practices often took a matter of days and contained no comments or substantive feedback. (See SJX 26 Att. A at 20, 53, 69, 84, 86, 114). Although Defendants challenge the length of time required for peer review, Defendants fail to provide any evidence to support such a short review time. Furthermore, the FTC has submitted uncontroverted statements from purported "editors" indicating that they never even received manuscripts to review or else even agreed to be listed as an editor. (See PX02 Grace Decl. ¶¶ 4-7); (PX08 Howland Decl. ¶ 7); (PX11 Rusu Decl. ¶ 11).
Defendants also expressly represent that their publications have high impact factors. (SJX26 Att. Q at 741-768); (PX12 Att. L 657, 691, 762, 766, 768-769, 881-935); (SJX15 Admissions Nos. 196,
Defendants further represent that their publications are included in reputable indexing services, such as Medline and PubMed Central. (See PX10 Att. D at 16); (SJX26 Att. Q at 589, 820, 916, 923). These representations are rendered false by Defendants' own admissions. (See SJX07 Admission Nos. 13, 14); (SJX08 Admission Nos. 13, 14). Moreover, NLM itself refuses to index Defendants' publications due to questionable publishing practices. (See SJX18 ¶¶ 32-36, Att. B at 25, Att. C at 28, Att. D at 31, Att. E at 33-34). Despite NLM's requests to disassociate with Defendants, Defendants continue to misrepresent their inclusion in Medline and PubMed Central. (See PX10 Att. D at 16); (SJX26 Att. Q at 589). The uncontroverted evidence in the record therefore demonstrates that Defendants have made numerous express and material misrepresentations regarding their journal publishing practices. As Defendants have failed to raise any genuine issues of material fact, the Court grants the FTC summary judgment on this count.
The FTC moves for summary judgment on the basis that no genuine dispute exists as to Defendants' deceptive conference practices. (FTC's MSJ 44:11-45:3). The FTC is correct. Here, the uncontroverted evidence produced by the FTC demonstrates that Defendants engaged in material misrepresentations regarding their conferences. Notably, the FTC has submitted evidence showing that Defendants advertise the attendance and participation of prominent academics and researchers without their permission or actual affiliation. (See PX05 ¶¶ 3,5; PX12 Att. U at 1045); (SJX26 Att. A at 22, 56, 170). In fact, based on a sampling of 100 conferences, approximately 60% advertised organizers or participants who had not agreed to serve in such capacity. (SJX25 McAlvanah Decl. ¶ 7). Had consumers known of Defendants' misrepresentations, it is likely they would not have agreed to attend, participate in, or be affiliated with Defendants' conferences. The fact that some cities may have sent Defendants generic appreciation or invitation letters does not negate Defendants' underlying deception. See Stefanchik, 559 F.3d at 928. Accordingly, as Defendants have failed to raise any genuine issues of material fact, the Court grants the FTC summary judgment on this count.
The FTC moves for summary judgment on the basis that no genuine dispute exists as to Defendants' failure to adequately disclose publishing fees. (FTC's MSJ 45:4-46:4). The Court again agrees. As noted above, Defendants frequently
Defendants also solicit article submissions through their online portals. (See SJX15 at 25-26). In many instances, however, Defendants' article homepages do not contain clear references to fees. (See, e.g., PX12 Att. L at 652-654, 734-738); (SJX26 Att. Q at 631-640). In other instances, Defendants' fee disclosures are contained on secondary webpages but are difficult to find and lack specificity. (PX12 Att. K at 375-381). While Defendants assert that fees are clearly disclosed on their general home page, multiple avenues exist to submit an article without navigating through this page. Additionally, Defendants have provided no evidence to support the assertion that reasonable consumers would check their home page for specific fee disclosures, rather than the actual article submission pages. Indeed, Defendants' Response to the FTC's Motion for Summary Judgment merely asserts broad conclusions based on inadmissible hyperlinks to Defendants' purported websites. (See Defs.' Resp. 32:1-33:17, ECF No. 110). Regardless, the fact that some consumers may have seen Defendants' fee information prior to submitting an article does not negate the overall deceptive nature of Defendants' fee disclosures. See SlimAmerica, Inc., 77 F.Supp.2d at 1275; Figgie Int'l, Inc., 994 F.2d at 605. As Defendants have failed to raise any genuine issues of material fact, the Court grants the FTC summary judgment on this count.
"[E]ntities constitute a common enterprise when they exhibit either vertical or horizontal commonality—qualities that may be demonstrated by a showing of strongly interdependent economic interests or the pooling of assets and revenues." F.T.C. v. Network Servs. Depot, Inc., 617 F.3d 1127, 1142-43 (9th Cir. 2010). In deciding whether a common enterprise exists, courts may consider such factors as whether the companies were under common ownership and control; whether they pooled resources and staff; whether they shared phone numbers, employees, and email systems; and whether they jointly participated in a "common venture" in which they benefited from a shared business scheme or referred customers to one another. Id. at 1143. Where the same individuals transact business through a "maze of interrelated companies," the whole enterprise may be held liable as a joint enterprise. FTC v. John Beck Amazing Profits, LLC, 865 F.Supp.2d 1052, 1082 (C.D. Cal. 2012).
Here, the undisputed evidence demonstrates that no real distinction exists between the Corporate Defendants. Notably, each Corporate Defendant shares the same principal place of business in India and has at various points utilized common addresses in the United States. (See SJX02 Answer ¶¶ 6-8); (Gedela Decl. ¶ 6). Furthermore, Defendants do not dispute that Gedela is the sole owner and founding director of the three Corporate Defendants and has maintained control over
Personal liability for violations of the FTC Act fall into two categories: liability for injunctive relief and liability for monetary relief. Individuals are liable for injunctive relief if they directly participate in the deceptive acts or have the authority to control them. F.T.C. v. Publ'g Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir. 1997); F.T.C. v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009). To subject an individual to monetary liability, the FTC must show that the individual had knowledge of the misrepresentations, was recklessly indifferent to the truth or falsity of the misrepresentation, or was aware of a high probability of fraud and intentionally avoided the truth. Publ'g Clearing House, 104 F.3d at 1171; Stefanchik, 559 F.3d at 931. "[T]he extent of an individual's involvement in a fraudulent scheme alone is sufficient to establish the requisite knowledge for personal restitutionary liability." F.T.C. v. Affordable Media, 179 F.3d 1228, 1235 (9th Cir. 1999).
The undisputed evidence in this case clearly demonstrates that Gedela's participation and control over the Corporate Defendants meets the standard for full personal liability. As detailed above, Gedela is the founder, principal, and owner of the Corporate Defendants. He has signatory authority over the corporations' financial accounts and is the billing contact for Defendants' websites. (See SJX02 Answer ¶ 9); (SJX10 Admission No. 22). He is also the main contact for the Corporate Defendants' servicers, including their payment processor. (PX12 Att. P at 1007; Att. O at 997, 999; Att. D at 109). The OMICS website itself openly proclaims Gedela as the "CEO and Managing Director," and states that iMedPub LLC and Conference Series LLC are subsidiaries of OMICS International. (PX12 Att. L at 937; PX22 Att. C at 17). In aggregate, the evidence in the record conclusively establishes Gedela's knowledge, control, and participation in Defendants' deceptive acts. The Court therefore finds Gedela liable for monetary and injunctive relief.
The FTC requests both a permanent injunction against defendants and monetary equitable relief. (See FTC's MSJ 49:16-57:3). Under § 13(b) of the FTC Act, the FTC "may seek, and after proper proof, the court may issue, a permanent injunction." 15 U.S.C. § 53(b); see also F.T.C. v. Evans Prods., 775 F.2d 1084, 1086 (9th Cir. 1985). "This provision gives the federal courts broad authority to fashion appropriate remedies for violations of the Act," F.T.C. v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994), including "any ancillary relief necessary to accomplish complete justice," F.T.C. v. H. N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir. 1982).
A permanent injunction is justified if there exists "some cognizable danger of recurrent violation," United States
The Court finds that a permanent injunction against Defendants is appropriate under the circumstances to enjoin them from engaging in similar misleading and deceptive activities. Here, Defendants did not participate in an isolated, discrete incident of deceptive publishing, but rather sustained and continuous conduct over the course of years. An injunction is therefore necessary to prevent future misconduct and protect the public interest. Moreover, the FTC's requested conduct provisions bear a reasonable relationship to Defendants' unlawful practices in this case, and the monitoring provisions are necessary to ensure compliance. See FTC v. Colgate-Palmolive Co., 380 U.S. 374, 395, 85 S.Ct. 1035, 13 L.Ed.2d 904 (1965); FTC v. Ideal Fin. Solutions, Inc., 2016 WL 756527, at *, 2016 U.S. Dist. LEXIS 23102, at *19 (D. Nev. Feb. 23, 2016). Defendants object to the injunction on the basis that it is overbroad but fail to provide any actual arguments to support this assertion. (See Defs.' Resp. 43:13-19). Defendants have therefore failed to present a basis to depart from the proposed injunction.
Section 13(b) permits a panoply of equitable remedies, including monetary equitable relief in the form of restitution and disgorgement, as well as miscellaneous reliefs such as asset freezing, accounting, and discovery to aid in providing redress to injured consumers. Pantron I Corp., 33 F.3d at 1103 n. 34 (9th Cir. 1994); F.T.C. v. Figgie Int'l, Inc., 994 F.2d 595, 606-08 (9th Cir. 1993); H.N. Singer, 668 F.2d at 1113. The FTC Act is designed to protect consumers from economic injuries. Stefanchik, 559 F.3d at 931. To effect that purpose, courts may award restitution to redress consumer injury. F.T.C. v. Gill, 265 F.3d 944, 958 (9th Cir. 2001) ("We have held that restitution is a form of ancillary relief available to the court in these circumstances to effect complete justice."). Restitution may be measured by the "the full amount lost by consumers rather than limiting damages to a defendant's profits." Stefanchik, 559 F.3d at 931 (affirming restitution of over $17 million for the full amount of consumer loss); see also FTC v. Febre, 128 F.3d 530, 536 (7th Cir. 1997) (affirming restitution for more than $16 million against company and officer as consumer loss under section 13(b)). Consumer loss is calculated by "the amount of money paid by the consumers, less any refunds made." FTC v. Direct Mktg. Concepts,
Irrespective of the measure used to calculate monetary equitable relief, courts apply a burden-shifting framework to determine the specific amount to award. Direct Mktg. Concepts, 624 F.3d at 15. First, the FTC bears the initial burden of providing the Court with a reasonable approximation of the monetary relief to award. FTC v. Commerce Planet, 815 F.3d 593, 603 (9th Cir. 2016). A reasonable estimate, rather than an exact amount, is proper because that may be the only information available, as when defendants do not maintain data necessary to calculate the precise amount. FTC v. QT, Inc., 512 F.3d 858, 864 (7th Cir. 2008) ("A court is entitled to proceed with the best available information[.]"); FTC v. Verity Int'l, Ltd., 443 F.3d 48, 69 (2d Cir. 2006) ("Of course, the reasonableness of an approximation varies with the degree of precision possible."), cert. denied, 549 U.S. 1278, 127 S.Ct. 1868, 167 L.Ed.2d 317 (2007).
Second, once the FTC satisfies this burden, "the burden then shifts to the defendant to show that the FTC's figures overstate the amount of the defendant's unjust gains." Commerce Planet, 815 F.3d at 604. "Any fuzzy figures due to a defendant's uncertain bookkeeping cannot carry a defendant's burden to show inaccuracy." Direct Mktg. Concepts, 624 F.3d at 15; see also Commerce Planet, 815 F.3d at 604 ("Any risk of uncertainty at this second step `fall[s] on the wrongdoer whose illegal conduct created the uncertainty.'") (quoting F.T.C. v. Bronson Partners, LLC, 654 F.3d 359, 368 (2d Cir. 2011)).
Here, the FTC requests an amount of $50,130,811.00 in consumer loss between August 25, 2011, through July 31, 2017. (FTC's MSJ 56:26-27). The FTC reaches this amount by calculating Defendants' gross revenue during the at-issue period and subtracting the $609,289.13 that Defendants paid out in chargebacks and refunds. (SJX26 ¶¶ 21-25). The FTC's calculations are consistent with the consumer loss formula, and the Court finds this approximation reasonable.
In Response, Defendants argue that the FTC's figure is overstated because it: (1) "assumes that every single author/consumer was misled by Defendants' publishing process;" and (2) erroneously includes "repeat authors" who were "demonstrably unconfused." (Defs.' Resp. 40:1-27).
In their Answer, Defendants advanced twenty affirmative defenses to liability. (Answer, ECF No. 48). The Court has already stricken nine of these for lack of merit. (Order Adopting R&R, ECF No. 62). Additionally, the Court has already addressed Defendants' defense regarding public interest in the injunction section above. With respect to Defendants' third, fourth, fifth, sixth, eighth, and eleventh affirmative defenses, these assertions are mere denials of wrongful conduct and do not state a valid affirmative defense. With respect to Defendants' affirmative defense for "failure to state a claim," the Court denied this argument in its prior Order on Defendants' Motion to Dismiss. (Order, ECF No. 46). With respect to Defendants' statute of limitations, laches, first amendment, and due process defenses, these are legally erroneous. See F.T.C. v. Ivy Capital, Inc., No. 2:11-CV-283 JCM GWF, 2011 WL 2470584, at *2 (D. Nev. June 20, 2011) ("Section 13(b) of the Federal Trade Commission Act specifies no statute of limitations period."); See F.T.C. v. Am. Microtel, Inc., No. CV-S-92-178-LDG(RJJ), 1992 WL 184252, at *1 (D. Nev. June 10, 1992) ("[T]he law is well established that principles of laches and equitable estoppel are not available as defenses in a suit brought by the government to enforce a public right or a public interest."); See United States v. Schiff, 379 F.3d 621, 629-30 (9th Cir. 2004) (government may prevent dissemination of false or misleading commercial speech). To the extent any affirmative defenses remain, Defendants have failed to support them in response to the FTC's Motion and therefore the Court finds these defenses abandoned. See Local Rule 7-2.
For the purpose of this Order, the following definitions apply:
2. 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.
3. 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.
4. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable.
5. 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.
6. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications.
7. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.
The Clerk of Court shall enter judgment accordingly and close the case.
