FTC v. Kimoto, No. 11-18023 (9th Cir. 2014)
Annotate this CaseDefendant appealed from the district court's grant of summary judgment to the FTC and its order permanently enjoining defendant from engaging in a variety of marketing tactics, and ordering him to pay restitution. The court concluded that the district court properly held defendant personally liable for both injunctive relief and the requirement to pay restitution with respect to all of the marketing schemes at issue, with the exception of the Acai Total Burn scheme; individual liability for corporate malfeasance is available for violations of the Electronic Funds Transfer Act (EFTA), 15 U.S.C. 1693, because such violations are also deemed to be violations of the Federal Trade Commission Act (FTC Act), 15 U.S.C. 41-58, and that defendant is liable for Vertek's, defendant's wholly controlled company, violations of the EFTA because of his personal involvement in concocting and carrying out the several schemes that violated the EFTA; and defendant's challenges to the scope of the district court's injunction are unavailing. Accordingly, the court affirmed the district court's grant of summary judgment to the FTC in part, and vacated the district court's grant of summary judgment to the FTC with respect to the Acai Total Burn scheme. The court remanded so that the district court could modify its permanent injunction and the amount of restitution.
Court Description: Federal Trade Commission. The panel affirmed in part and vacated in part the district court’s summary judgment in favor of the Federal Trade Commission, and its order permanently enjoining Kyle Kimoto from engaging in a variety of marketing tactics and ordering him to pay restitution. The district court found that Vertek, Kimoto’s wholly controlled company, had committed multiple violations of the Federal Trade Commission Act, through its misleading advertising and various marketing schemes. The panel held that the district court properly held Kimoto personally liable for both injunctive relief and the requirement to pay restitution with respect to Vertek’s Line of Credit Scheme, Grant Connect Scheme, and Work From Home Scheme. The panel also held that Kimoto could not be held liable for either injunctive relief or restitution with respect to the Acai Total Burn Scheme. The panel vacated that part of the district court’s grant of summary judgment and permanent injunction based on Vertek’s violations of the FTC Act in connection with the Acai Total Burn Scheme. The panel held that individual liability for corporate malfeasance was available for violations of the Electronic Fund Transfer Act because such violations are also deemed to be violations of the FTC Act, and that Kimoto was liable for Vertek’s violations of the Electronic Fund Transfer Act because of his personal involvement in concocting and carrying out the several schemes that violated the Act. The panel held that the scope of the district court’s permanent injunction was not overbroad. The panel remanded so that the district court could modify the permanent injunction and the amount of restitution as required by this decision.
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