For two decades, the Federal Trade Commission has been battling Georgia-based dietary supplement maker Hi-Tech Pharmaceuticals.
The fight came to a head earlier this month when the U.S. Supreme Court decided not to review Hi-Tech's appeal of a lower court decision that denied Hi-Tech's request to be exempt from $40 million in penalties imposed on the company and two other defendants, including Hi-Tech's owner, Jared Wheat.
On June 3, the country's highest court Hi-Tech's Writ PetitionThat means we won't be covering this case.
The Federal Trade Commission (FTC), which had collected about $2.3 million of the $40 million penalty as of last year, declined to comment on the Supreme Court's decision. HiTec did not immediately comment.
The dispute began in 2004, when the Commission brought enforcement actions against Hi-Tec for advertising its dietary supplements in violation of the FTC Act. Four years later, the district court granted summary judgment to the Commission and ordered the defendants to “jointly and severally” return to consumers the gross revenues from the sale of Hi-Tec's products — more than $15 million.
The district court also issued a permanent injunction enjoining the defendants from making unsubstantiated advertising claims about the supplements.
Eleventh Circuit Court of Appeals
Last year's Court of Appeal HiTec's bailout request rejected The $40 million penalty imposed in 2017 followed a court ruling that Hi-Tech and others violated a 2008 injunction. According to the Commission, the violation of the injunction related to a national marketing campaign that made unsubstantiated weight-loss claims for four Hi-Tech products introduced in 2009. The penalty was imposed against Wheat, Hi-Tech, and the company's sales director, Steven Smith.
HITECH sought $40 million in contempt relief following the U.S. Supreme Court's 2021 decision in AMG Capital Mgmt. LLC v. FTC. In that case, the Supreme Court ruled that the FTC lacked the authority to seek equitable monetary relief, such as disgorgement or damages, under Section 13(b) of the FTC Act, which grants the Commission the right to seek permanent injunctions in federal district court.
HITECH argued that because the government cannot directly seek equitable monetary damages under Section 13(b), the district court lacked authority to indirectly award monetary relief as a contempt sanction for violating the injunction.
in A 16-page opinion published in August 2023But the U.S. Court of Appeals for the Eleventh Circuit was not convinced.
“We reject defendants' argument that the district court lacked the authority to enter a contempt judgment after AMG,” Circuit Judge Jill Pryor wrote for a three-judge appeals panel. “Regardless of how this ruling affected the district court's authority to order equitable monetary relief of $16 million, the court retained its authority to issue a future injunction under §13(b), as it did in the original FTC action. And after defendants violated the injunction, the court had inherent authority to justify its authority by entering a contempt judgment of $40 million.”
Petition for leave to appeal
In a petition filed with the U.S. Supreme Court in December 2023, HITECH defined one of the issues as follows: “A fundamental change in sentencing law, standing alone, [Federal] rule [of Civil Procedure] 60(b)(6)?
“This Court's precedents strongly suggest that clear, authoritative changes in case law, such as the AMG Capital decision, may, in and of themselves, constitute special circumstances justifying relief under Rule 60(b)(6),” Hitec wrote in the petition through its lawyers. “Some circuits agree with these precedents, and some do not. Courts should grant review and hold that fundamental changes in case law may, in and of themselves, constitute special circumstances justifying relief under Rule 60(b)(6).”
the Response submitted in AprilThe Commission urged the Supreme Court to dismiss the petition for writ of certiorari.
“As the Court of Appeals correctly recognized, our decision in AMG does not call into question a district court's authority to impose compensatory contempt sanctions against a defendant who violates a lawfully issued injunction under Section 13(b) of the FTC Act,” the FTC's lawyers wrote. “The lower court's decision follows directly from our longstanding precedent on contempt relief.”
The FTC's lawyers cited the 1966 Supreme Court decision, Siritani v. United States, adding that district courts “have the inherent power to compel compliance with lawful orders through civil contempt actions.”
