Federal Trade Commission v. Lights of America Inc et al, No. 8:2010cv01333 - Document 363 (C.D. Cal. 2013)

Court Description: FINAL JUDGMENT AND ORDER FOR INJUNCTIVE AND OTHER RELIEF by Judge James V. Selna. (MD JS-6, Case Terminated). (twdb)

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Federal Trade Commission v. Lights of America Inc et al 1 2 3 4 5 6 7 8 9 10 11 12 13 Doc. 363 KIMBERLY L. NELSON (VA Bar No. 47224) GREGORY J. MADDEN SANDHYA P. BROWN Federal Trade Commission 600 Pennsylvania Ave., NW, Rm. M-8102B Washington, DC 20580 (202) 326-3304 (tel.) (Nelson (202) 326-2426 (tel.) (Madden) (202) 326-2040 (tel.) (Brown) (202) 326-2558 (fax) knelson@ftc.gov; gmadden@ftc.gov; sbrown5@ftc.gov JS-6 BARBARA CHUN, Bar No. 186907 bchun@ftc.gov Federal Trade Commission 10877 Wilshire Boulevard, Suite 700 Los Angeles, CA 90024 (310) 824-4312 (tel.) (310) 824-4380 (fax) ATTORNEYS FOR PLAINTIFF FEDERAL TRADE COMMISSION UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, SOUTHERN DIVISION 14 15 FEDERAL TRADE COMMISSION, 16 17 Plaintiff, v. Case No. SACV10-01333 JVS (MLGx) FINAL JUDGMENT AND ORDER FOR INJUNCTIVE AND OTHER RELIEF 18 19 20 LIGHTS OF AMERICA, INC., et al., Defendants. Hearing Date: None Judge: Hon. James V. Selna 21 22 23 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 1 Dockets.Justia.com On September 7, 2010, Plaintiff, Federal Trade Commission (“FTC” or 1 2 “Commission”) brought this action for injunctive and equitable monetary relief 3 against Lights of America, Inc. (“LOA”), Usman Vakil, and Farooq Vakil 4 (collectively, “Defendants”) for deceptive business practices related to their 5 marketing and sale of light bulbs that use light-emitting diodes (“LEDs”) as a light 6 source. (Docket No. 1) In the Complaint and First Amended Complaint (Docket 7 Nos. 1 and 38), the FTC asserted that Defendants’ activities violated Section 5(a) 8 of the Federal Trade Commission Act, 15 U.S.C. § 45(a) (the “FTC Act”), and 9 requested injunctive and equitable monetary relief against all Defendants pursuant 10 to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b). The parties filed cross-motions for summary judgment on February 13, 11 12 2102. (Docket Nos. 164, 165, 170, 184, and 167) On April 25, 2012, the Court 13 granted Plaintiff’s motion for partial summary judgment on Count I of the 14 Amended Complaint, granted in part LOA’s motion for summary judgment with 15 respect to Count II of the Amended Complaint, and denied the Vakils’ motion for 16 summary judgment. (Docket No. 243 (the “MSJ Order”))1 The Court conducted a four-day bench trial between October 30 and 17 18 November 2, 2012. Four claims were tried before the Court: (1) whether 19 Defendants violated Section 5 of the FTC Act by engaging in deceptive acts or 20 practices in making false claims with regard to LED lamps replacing certain 21 wattage incandescent lamps; (2) whether Defendants violated Section 5 of the FTC 22 Act by engaging in deceptive acts or practices in making unsubstantiated and/or 23 false claims with regard to the lifetime of their LED lamps; (3) whether injunctive 24 relief against all Defendants is proper; and (4) whether Defendants are liable for 25 26 27 28 1 On September 17, 2012, Defendants filed a motion for reconsideration of the Court’s order granting the FTC’s motion for partial summary judgment. (Docket No. 264) After further briefing, the Court denied Defendants’ motion for reconsideration on October 24, 2012. (Docket No. 317) PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 2 1 equitable monetary relief and/or disgorgement of ill-gotten gains. The Court 2 received evidence in the form of exhibits, designated portions of deposition 3 transcripts, and witness testimony. After carefully reviewing all of the evidence, 4 testimony, and arguments presented by the parties’ counsel, the Court concluded in 5 its Findings of Fact and Conclusions of Law that the FTC had proven by a 6 preponderance of the evidence that Defendants are liable for the deceptive 7 marketing and sale of certain LED lamps in violation of Section 5(a) of the FTC 8 Act. (Docket No. 361) The Court entered its Findings of Fact and Conclusions of 9 Law pursuant to Federal Rule of Civil Procedure 52(a). The Court also found that 10 injunctive relief against all Defendants is appropriate because: (1) it is reasonably 11 likely that Defendants will commit the kinds of deceptive practices at issue in this 12 case in the future; (2) Defendants acted with sufficient deliberateness; (3) 13 Defendants have had prior experience with false claims; and (4) Defendants are in 14 a position to repeat their deceptive acts with other lighting products they sell. 15 Further, the Court ruled that equitable monetary relief against all Defendants in the 16 amount of $21,165,863.47 is appropriate in this case. 17 The Court directed the FTC to file a proposed judgment embodying its 18 ruling as set forth in the Findings of Fact and Conclusions of Law entered on 19 September 17, 2013 (Docket No. 361) (the “Findings”). On September 23, 2013, 20 the FTC filed its proposed final judgment and order for permanent injunction 21 against Defendants. Based upon the record established in this case, the Court 22 enters this Final Judgment and Order for Injunctive and Other Relief pursuant to 23 Federal Rule of Civil Procedure 58. 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 3 SUMMARY OF FINDINGS AND JUDGMENT 1 2 3 4 5 6 1. This Court has jurisdiction over the subject matter of this case and each of the parties. Venue lies properly with this Court. 2. Pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), the Commission has the authority to seek the relief contained herein. 3. At all relevant times, the acts and practices of Defendants have been 7 in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act, 8 15 U.S.C. § 44. 9 4. The evidence admitted on summary judgment established that 10 Defendants made unsubstantiated claims that their LED Lamps provided the same 11 or comparable light output as incandescent lamps. MSJ Order, at 7-9. 12 5. The evidence admitted at trial established that Defendants made false 13 claims that their LED Lamps provided the same or comparable light output as 14 incandescent lamps. Findings, ¶¶ 85, 90, 94-97, 103, 243-244. 15 6. The evidence admitted at trial established that Defendants made 16 unsubstantiated and false claims about the lifetime of their LED Lamps. Findings, 17 ¶¶ 150, 158, 165-166, 168, 173-174, 176, 181, 183-184, 187, 189-190, 196-199, 18 204-205, 207-209, 218, 227, 243-244. 19 7. The evidence admitted at trial and the evidence admitted during 20 summary judgment established that Defendants violated Section 5(a) of the FTC 21 Act, 15 U.S.C. § 45(a), in making unsubstantiated and false claims about the light 22 output and lifetime of their LED Lamps. 23 8. The evidence admitted at trial established that there is a reasonable 24 likelihood that Defendants would continue to engage in the activities alleged unless 25 permanently enjoined from such acts and practices. Thus, this Court held that 26 injunctive relief was warranted against all Defendants. Findings, ¶¶ 472-486. 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 4 9. 1 2 The evidence admitted at trial established that equitable monetary relief against Defendants was warranted. Findings, ¶¶ 487-516. 10. 3 LOA’s gross revenue is a conservative, yet proper measure of 4 monetary liability in this case. Findings, ¶¶ 517-522. Equitable monetary relief 5 under both restitution and disgorgement theories is the same in this case: 6 Defendants’ gross revenues from the deceptively advertised products. 11. 7 Total consumer harm and total ill-gotten gains in this case equals 8 $21,165,863.47. Findings, ¶¶ 523-535. LOA, Usman Vakil, and Farooq Vakil are 9 jointly and severally liable for equitable monetary relief in the amount of twenty- 10 one million, one hundred sixty-five thousand, eight hundred sixty-three dollars and 11 forty-seven cents ($21,165,863.47), plus post-judgment interest which will accrue 12 upon entry of this Final Judgment. 12. 13 14 Entry of this Final Judgment is in the public interest. There being no just reason for delay, the Clerk is directed to enter judgment immediately. 15 DEFINITIONS 16 For the purposes of this Final Judgment, the following definitions shall 17 apply: 18 1. “Individual Defendants” means Usman Vakil and Farooq Vakil. 19 2. “Corporate Defendant” means Lights of America, Inc., and its successors and assigns. 20 21 3. “Defendants” means all of the Individual Defendants and the 22 Corporate Defendant, individually, collectively, or in any 23 combination. 24 4. “FTC” or “Commission” means the Federal Trade Commission. 25 5. “Competent and reliable scientific evidence” means tests, analyses, 26 research, or studies that have been conducted and evaluated in an 27 objective manner by qualified persons, that are generally accepted in 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 5 1 the relevant scientific field to yield accurate and reliable results, and 2 that are sufficient in quality and quantity based on standards 3 generally accepted in the field, when considered in light of the entire 4 body of relevant and reliable scientific evidence, to substantiate that 5 a representation is true. 6 6. “Light-emitting diode lamp” or “LED Lamp” shall mean all 7 product(s) advertised, marketed, offered for sale, or sold that 8 include, or are advertised, marketed, offered for sale, or sold as 9 including, a light-emitting diode(s) as a light source. 10 7. “Lifetime,” as established in the Court’s Findings, means the period 11 at which an LED Lamp reaches seventy (70) percent of its original 12 light output (known as L70), which shall be based upon competent 13 and reliable scientific evidence. 14 8. “Light Output” means the measure of light emanating from an LED 15 Lamp, which amount shall be based upon competent and reliable 16 scientific evidence. 17 18 19 9. “Incandescent Lamp” means any light bulb in which light is produced by an electric current. 10. “Covered product” means any lamp, LED Lamp, luminaire, light 20 bulb, or any other light-emitting device that is intended for lighting 21 and manufactured, assembled, or placed into the stream of 22 commerce by Defendants, regardless of base size, bulb size, bulb 23 shape, or technology. 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 6 I. PROHIBITED REPRESENTATIONS 1 2 IT IS HEREBY ORDERED that Defendants and their officers, agents, 3 servants, employees, and attorneys, and all persons and entities in active concert or 4 participation with any of them who receive actual notice of this Final Judgment by 5 personal service or otherwise, whether acting directly or indirectly, in connection 6 with the manufacturing, marketing, labeling, advertising, promotion, offering for 7 sale, sale, or distribution of any covered product in or affecting commerce, are 8 permanently restrained and enjoined from: 9 (A) Making any misrepresentation or assisting others in misrepresenting, 10 expressly or by implication, any fact material to consumers 11 concerning any covered product. 12 (B) Making any misrepresentation or assisting others in misrepresenting, 13 expressly or by implication: 14 (1) Light output or brightness in lumens; 15 (2) Light output equivalency to incandescent or any general service lamp; 16 17 (3) Lifetime of the product; or 18 (4) Energy costs, energy savings, energy consumption, or energyrelated efficacy. 19 20 At the time of making such representation, Defendants must possess and rely upon 21 competent and reliable evidence that substantiates that the representation is true. 22 If, in general, experts in the relevant scientific fields would conclude it is 23 necessary, such evidence must be competent and reliable scientific evidence. II. MONETARY JUDGMENT 24 25 IT IS FURTHER ORDERED that: 26 A. 27 Judgment is hereby entered in favor of the Commission and against Defendants Lights of America, Inc., Usman Vakil, and Farooq Vakil, jointly and 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 7 1 severally, for equitable monetary relief, including but not limited to consumer 2 redress, in the amount of twenty-one million, one hundred sixty-five thousand, 3 eight hundred sixty-three dollars and forty-seven cents ($21,165,863.47), which is 4 the amount of injury suffered by consumers, or unjust enrichment obtained by 5 Defendants, resulting from Defendants’ violations of the FTC Act. 6 B. All funds paid to the Commission pursuant to this Section shall be 7 deposited into a fund administered by the Commission or its designee to be used 8 for equitable relief, including consumer redress and any attendant expenses for the 9 administration of any redress fund. In the event that direct restitution to consumers 10 is wholly or partially impracticable or money remains after redress is completed, 11 the Commission may apply any remaining money for such equitable relief 12 (including consumer information remedies) as it determines to be reasonably 13 related to Defendants’ practices as alleged in the Complaint. Any money not used 14 for such equitable relief will be deposited to the U.S. Treasury as disgorgement. 15 Defendants have no right to challenge any actions the Commission or its 16 representatives may take pursuant to this Subsection. The preceding sentence shall 17 no effect on Defendants’ right to challenge the substance of this subparagraph on 18 appeal. 19 C. Defendants acknowledge that their Taxpayer Identification Numbers 20 (Social Security Numbers or Employer Identification Numbers), which Defendants 21 must submit to the Commission within ten (10) days of entry of this Final 22 Judgment, may be used for collecting and reporting on any delinquent amount 23 arising out of this Order, in accordance with 31 U.S.C. § 7701. 24 25 26 III. FINAL JUDGMENT ACKNOWLEDGMENTS IT IS FURTHER ORDERED that Defendants obtain acknowledgments of receipt of this Final Judgment: 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 8 1 (A) Each Defendant, within seven (7) business days of entry of this Final 2 Judgment, must submit to the Commission an acknowledgement of 3 receipt of this Final Judgment sworn under penalty of perjury. 4 (B) For five (5) years after entry of this Final Judgment, each Individual 5 Defendant (for any business that such Defendant, individually or 6 collectively with any other Defendants, is the majority owner or 7 controls directly or indirectly), and each Corporate Defendant, must 8 deliver a copy of this Final Judgment to: 9 (1) All principals, officers, directors, and LLC managers and members; 10 (2) All employees, agents, and representatives who participate in 11 12 activities related to Defendants’ marketing and sale of covered 13 products; and (3) Any business entity resulting from any change in structure as set 14 forth in the Section titled Compliance Reporting. 15 16 Delivery must occur within seven (7) days of entry of this Final 17 Judgment for current personnel. For all others, delivery must occur 18 before they assume their responsibilities. 19 (C) From each individual or entity to which a Defendant delivered a copy 20 of this Final Judgment, Defendant must obtain, within thirty (30) 21 days, a signed and dated acknowledgment of receipt of this Final 22 Judgment. IV. 23 24 COMPLIANCE REPORTING IT IS FURTHER ORDERED that Defendants make timely submissions to 25 the Commission: 26 (A) 27 One year after entry of this Final Judgment, each Defendant must submit a compliance report, sworn under the penalty of perjury: 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 9 (1) Each Defendant must: (a) identify the primary physical, postal, 1 2 and email and telephone number, as designated points of contact, 3 which representatives of the Commission may use to 4 communicate with Defendant; (b) identify all of that Defendant’s 5 businesses by all of their names, telephone numbers, and 6 physical, postal, email, and Internet addresses; (c) describe the 7 activities of each business, including any goods and services 8 offered, the means of advertising, marketing, and sales, and the 9 involvement of any other Defendant (which Individual 10 Defendants must describe if they know or should know due to 11 their own involvement); (d) describe in detail whether and how 12 that Defendant is in compliance with each Section of this Final 13 Judgment; and (e) provide a copy of each Acknowledgment 14 obtained pursuant to this Final Judgment, unless previously 15 submitted to the Commission. (2) Additionally, each Individual Defendant must: (a) identify all 16 17 telephone numbers, and all email, Internet, physical, and postal 18 addresses, including all residences; (b) identify all business 19 activities, including any business for which such Defendant has 20 any ownership interest; and (c) describe in detail such 21 Defendant’s involvement in each such business, including title, 22 role, responsibilities, participation, authority, control, and any 23 ownership. 24 (B) For ten (10) years following entry of this Final Judgment, each 25 Defendant must submit a compliance notice, sworn under penalty of 26 perjury, within 14 days of any change in the following: 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 10 (1) Each Defendant must report any change in: (a) any designated 1 2 point of contact; or (b) the structure of any Corporate Defendant 3 or any entity that Defendant has any ownership interest in or 4 controls directly or indirectly that may affect compliance 5 obligations arising under this Final Judgment, including: 6 creation, merger, sale, or dissolution of the entity or any 7 subsidiary, parent, or affiliate that engages in any acts or 8 practices subject to this Final Judgment. (2) Additionally, each Individual Defendant must report any change 9 10 in: (a) name, including aliases or fictitious names, or residence 11 address; or (b) title or role in any business activity, including any 12 business for which such Defendant performs services whether as 13 an employee or otherwise and any entity in which such 14 Defendant has any ownership interest, and identify the name, 15 physical address, and any Internet address of the business or 16 entity. 17 (C) Each Defendant must submit to the Commission notice of the filing of 18 any bankruptcy petition, insolvency proceeding, or any similar 19 proceeding by or against such Defendant within fourteen (14) days of 20 its filing. 21 (D) Any submission to the Commission required by this Final Judgment to 22 be sworn under penalty of perjury must be true and accurate and 23 comply with 28 U.S.C. § 1746, such as by concluding: “I declare 24 under penalty of perjury under the laws of the United States of 25 America that the foregoing is true and correct. Executed on: 26 _______” and supplying the date, signatory’s full name, title (if 27 applicable), and signature. 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 11 1 (E) Unless otherwise directed by a Commission representative in writing, 2 all submissions to the Commission pursuant to this Final Judgment 3 must be emailed to Debrief@ftc.gov or sent by overnight courier (not 4 the U.S. Postal Service) to: Associate Director for Enforcement, 5 Bureau of Consumer Protection, Federal Trade Commission, 600 6 Pennsylvania Avenue NW, Washington, D.C. 20580. The subject line 7 must begin: FTC v. Lights of America, Inc. V. 8 9 10 11 COMPLIANCE MONITORING IT IS FURTHER ORDERED that, for the purpose of monitoring Defendants’ compliance with this Final Judgment: (A) Within fourteen (14) days of receipt of a written request from a 12 representative of the Commission, each Defendant must: submit 13 additional compliance reports or other requested information, which 14 must be sworn under penalty of perjury; appear for depositions; and 15 produce documents for inspection and copying. The Commission is 16 also authorized to obtain discovery, without further leave of court, 17 using any of the procedures prescribed by Federal Rules of Civil 18 Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 19 45, and 69. 20 (B) The Commission may use all other lawful means, including posing, 21 through its representatives, as consumers, suppliers, or other 22 individuals or entities, to Defendants or any individual or entity 23 affiliated with Defendants, without the necessity of identification or 24 prior notice. Nothing in this Final Judgment limits the Commission’s 25 lawful use of compulsory process, pursuant to Sections 9 and 20 of 26 the FTC Act, 15 U.S.C. §§ 49, 57b-1. 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 12 VI. 1 2 RECORDKEEPING IT IS FURTHER ORDERED that Defendants must create certain records 3 for ten (10) years after entry of the Final Judgment, and retain each such record for 4 5 years. Specifically, Corporate Defendant and each Individual Defendant for any 5 business in which that Defendant, individually or collectively with any other 6 Defendants, is a majority owner or controls directly or indirectly, must create and 7 retain the following records: 8 (A) sold; 9 10 Accounting records showing the revenues from all goods or services (B) Personnel records showing, for each person providing services, 11 whether as an employee or otherwise, that person’s: name, addresses, 12 telephone numbers, job title or position, dates of service, and (if 13 applicable) the reason for termination; 14 (C) Records of all consumer complaints and refund requests, whether 15 received directly or indirectly, such as through a third party, and any 16 response; 17 (D) All records necessary to demonstrate full compliance with each 18 provision of this Final Judgment, including all submissions to the 19 Commission; and 20 21 (E) A copy of each unique advertisement or other marketing material for any covered product. 22 23 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 13 VII. RETENTION OF JURISDICTION 1 2 IT IS FURTHER ORDERED that this Court retains jurisdiction of this 3 matter for purposes of construction, modification, and enforcement of this Final 4 Judgment. 5 6 7 8 Dated: September 30, 2013 ____________________________ 9 HON. JAMES V. SELNA 10 UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 14 1 Date: September 23, 2013 Respectfully submitted, /s/ Kimberly L. Nelson KIMBERLY L. NELSON GREGORY J. MADDEN SANDHYA P. BROWN Federal Trade Commission 600 Pennsylvania Avenue, NW Room M-8102B Washington, DC 20580 (202) 326-3304 (tel.) (Nelson) (202) 326-2426 (tel.) (Madden) (202) 326-2040 (tel.) (Brown) (202) 326-2558 (fax) knelson@ftc.gov, gmadden@ftc.gov, sbrown5@ftc.gov 2 3 4 5 6 7 8 9 BARBARA CHUN (Local Counsel) Federal Trade Commission 10877 Wilshire Boulevard, Suite 700 Los Angeles, CA 90024 (310) 824-4312 (tel.) (310) 824-4380 (fax) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROPOSED FINAL JUDGMENT AND ORDER FOR INJUNCTIVE RELIEF 15

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