United States of America Department of Justice v. Daniel Chapter One

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

________________________________
)
UNITED STATES OF AMERICA )
DEPARTMENT OF JUSTICE, )
)
Plaintiff, )
) Civil Action No. 10-1362 (EGS)
v. )
)
DANIEL CHAPTER ONE, et al., )
)
Defendants. )
)

MEMORANDUM OPINION

This case involved certain dietary supplements that

defendants claimed could treat, cure, or prevent cancer, inhibit

tumors, and ameliorate the adverse effects of radiation and

chemotherapy. Plaintiff United States of America Department of

Justice (“United States” or the “government”) brought this

action against Daniel Chapter One and James Feijo (the

“defendants”) under Sections 5(l), 13(b), and 16(a) of the

Federal Trade Commission Act, 15 U.S.C. §§ 45(l), 53(b), and

56(a), alleging that the defendants violated a final cease and

desist order of the Federal Trade Commission (“FTC” or the

“Commission”). On September 30, 2011, the United States filed a

motion for summary judgment on liability. On September 24,

2012, the Court granted the United States’ motion, concluding

that “there is no genuine issue as to any material fact and the
United States is entitled to judgment as a matter of law on

liability.” See United States v. Daniel Chapter One, 896 F.

Supp. 2d 1, 17 (D.D.C. 2012).

Pending before the Court is the United States’ motion for

entry of final judgment. The United States requests that the

Court enter a final order that includes injunctive relief,

equitable monetary relief in the amount of $1,345,832.43 and a

civil penalty award of $3,528,000. Upon consideration of the

motion, the response and reply thereto, supplemental briefing by

the parties, the applicable law, and the entire record in this

case, the Court GRANTS the United States’ motion.

I. Background

Defendant Daniel Chapter One is incorporated under the laws

of the State of Washington, with its principal place of business

in Portsmouth, Rhode Island. Id. at 2. Defendant James Feijo

is the sole member and overseer of Daniel Chapter One. Id. The

defendants advertise and sell dietary supplements, including

BioShark, 7 Herb Formula, GDU, and BioMixx (the “Products”),

which they claim can treat, cure, or prevent cancer. Id.

On September 18, 2008, the FTC initiated an administrative

proceeding alleging that the defendants’ marketing of the

Products constituted deceptive acts and practices in violation

of Sections 5(a) and 12 of the Federal Trade Commission Act (the

“FTC Act”), 15 U.S.C. §§ 45(a) and 52. Id. at 2-3. Following a

2
trial, an administrative law judge concluded that the defendants

had violated the FTC Act by making unsubstantiated claims that

the Products prevented, treated, or cured tumors or cancer. Id.

Defendants appealed this decision to the Commission, and on

December 24, 2009, the Commission upheld the decision and issued

a Final Order to cease and desist certain practices. Id.

On January 25, 2010, the FTC issued a Modified Final Order

(“FTC Order”). Id. at 3. Part II of the FTC Order prohibits

the defendants (referred to in the FTC Order as “Respondents”)

from making “any representation, in any manner, expressly or by

implication, including through the use of product or program

names or endorsements”1 that any product marketed by the

defendants:

[P]revents, treats, or cures or assists in the prevention,
treatment, or cure of any type of tumor or cancer,
including but not limited to representations that:
1. BioShark inhibits tumor growth;
2. BioShark is effective in the treatment of cancer;
3. 7 Herb Formula is effective in the treatment or
cure of cancer;
4. 7 Herb Formula inhibits tumor formation;
5. GDU eliminates tumors;
6. GDU is effective in the treatment of cancer;
7. BioMixx is effective in the treatment of cancer; or
8. BioMixx heals the destructive effects of radiation
or chemotherapy;

1
The FTC Order states that the term “endorsement” shall be
defined as in 16 C.F.R. § 255.0(b), which states that “an
endorsement means any advertising message . . . that consumers
are likely to believe reflects the opinions, beliefs, findings,
or experiences of a party other than the sponsoring advertiser,
even if the views expressed by that party are identical to those
of the sponsoring advertiser.” 16 C.F.R. § 255.0(b).

3
 unless the representation is true, non-misleading, and, at
the time it is made, Respondents possess and rely upon
competent and reliable scientific evidence that
substantiates the representation.

Id. 3-4. In addition, Part V.B of the FTC Order requires that:

Within forty-five (45) days after the final and effective
date of this order, Respondents shall send by first class
mail, postage prepaid, an exact copy of the notice . . . to
all persons [who purchased the Products between January 1,
2005 and the date of the order.]

Id. The notice, which is attached to the FTC Order, informs

consumers of the FTC’s conclusion that the defendants’

advertising claims were deceptive because they were not

substantiated by competent and reliable scientific evidence. Id.

Defendants filed an appeal with the United States Court of

Appeals for the District of Columbia Circuit, contesting the

legality and constitutionality of the FTC Order. See Petition

for Review, Daniel Chapter One v. FTC, No. 10-1064 (D.C. Cir.

Mar. 17, 2010). Defendants also applied to the FTC for a stay

of the FTC Order pending the outcome of their appeal, but their

request was denied. Daniel Chapter One, 896 F. Supp. 2d at 3-4.

Defendants then filed with the D.C. Circuit an emergency motion

for a stay of the FTC Order. This motion was denied on April 1,

2010. See Per Curiam Order Denying Emergency Motion to Stay

Case, Daniel Chapter One, No. 10-1064 (D.C. Cir. Apr. 1, 2010).

Because the defendants failed to obtain a stay, the FTC Order

4
became effective on April 2, 2010. See Daniel Chapter One, 896

F. Supp. 2d at 3-4; 15 U.S.C. § 45(g)(2).

On August 13, 2010, the United States filed its complaint

in this Court seeking civil penalties and other injunctive

relief pursuant to Sections 5(l), 13(b), and 16(a) of the FTC

Act. Simultaneous therewith, the United States filed a motion

for a preliminary injunction seeking an order enjoining the

defendants from violating the FTC Order. Daniel Chapter One,

896 F. Supp. 2d at 3-4. The Court denied the United States’

motion for a preliminary injunction without prejudice on

September 14, 2010, finding that the Court lacked jurisdiction

to enforce the FTC Order while defendants’ appeal challenging

the legality of the FTC Order was pending before the D.C.

Circuit. See Order, Sept. 14, 2010, ECF No. 11.2 The FTC then

filed an emergency motion for an order of enforcement pendente

lite with the D.C. Circuit. The D.C. Circuit granted the United

States’ motion on November 22, 2010. See Per Curiam Order,

Daniel Chapter One, No. 10-1064 (D.C. Cir. Nov. 22, 2010)

(“Daniel Chapter One is hereby enjoined to obey forthwith the

modified final order of the Federal Trade Commission issued

January 25, 2010, in Docket No. 9329, In the Matter of Daniel

2
The Court also denied the defendants’ motion to dismiss,
concluding that the United States’ penalty suit was properly
before the Court. See 15 U.S.C. § 45(l); see also United States
v. Standard Educ. Soc’y, 55 F. Supp. 189, 193 (N.D. Ill. 1943).

5
Chapter One and James Feijo.”). Defendants then filed a motion

with the D.C. Circuit seeking a stay of the enforcement of Part

V.B of the FTC Order. The D.C. Circuit rejected this request on

December 7, 2010. See Per Curiam Order, Daniel Chapter One, No.

10-1064 (D.C. Cir. Dec. 7, 2010).

On December 10, 2010, the D.C. Circuit denied the

defendants’ petition for review of the FTC Order, concluding

that “the Commission properly exercised jurisdiction over

[Daniel Chapter One],” and that “[Daniel Chapter One]’s

arguments based upon the Constitution and the Religious Freedom

Restoration Act are wholly without merit.” Daniel Chapter One

v. FTC, 405 F. App’x 505, 505-06 (D.C. Cir. 2010) (emphasis

added). Defendants then filed a petition for a writ of

certiorari, which was denied on May 23, 2011. See Daniel

Chapter One v. FTC, No. 10-1292, 131 S. Ct. 2917 (2011).

Following issuance of the D.C. Circuit’s mandate, the

United States renewed its motion for a preliminary injunction in

this Court. On June 22, 2011, the Court granted the United

States’ motion for preliminary injunction and enjoined the

defendants from violating the FTC Order. See Order and

Memorandum Opinion, ECF Nos. 31 and 32.

On July 29, 2011, the United States filed a motion for an

order to show cause why Daniel Chapter One, James Feijo, and

6
Patricia Feijo3 should not be held in contempt of the Court’s

June 22, 2011 Order. The Court subsequently ordered the

defendants to show cause why they should not be held in

contempt. The Court held a contempt hearing on May 9, 2012.

During that hearing, the United States presented evidence and

testimony regarding the defendants’ purported violations of the

FTC Order. After receiving evidence and hearing argument, the

Court found Daniel Chapter One, James Feijo, and Patricia Feijo

in civil contempt. Specifically, the Court concluded that James

Feijo, Patricia Feijo, and Daniel Chapter One (the “Contemnors”)

had continued to violate the FTC Order by (1) continuing to make

representations on their radio show that their products treat or

cure cancer without competent and reliable scientific evidence

3 Although Patricia Feijo is not a defendant in this action, the
United States argued that she was bound by the preliminary
injunction pursuant to Federal Rule of Civil Procedure 65(d)(2),
which provides that a preliminary injunction binds:

(A) the parties;
(B) the parties’ officers, agents, servants, employees,
and attorneys; and
(C) other persons who are in active concert or
participation with anyone described in Rule
65(d)(2)(A) or (B) as long as those individuals
“receive actual notice of it by personal service or
otherwise[.]”

Fed. R. Civ. P. 65(d)(2). The United States argued that
Patricia Feijo received actual notice of the Order and that she
was “in active concert or participation” with James Feijo and
Daniel Chapter One. Daniel Chapter One, 896 F. Supp. 2d at 5-6.
Defendants did not dispute that Patricia Feijo is an agent,
representative, or employee of Daniel Chapter One. Id.

7
to substantiate those representations, (2) encouraging potential

customers to visit websites containing Daniel Chapter One

publications that contain prohibited information and

endorsements of the prohibited supplements, (3) not removing

certain representations from the websites within their control,

which Contemnors conceded included www.danielchapterone.com,

www.dc1ministry.com, and www.dc1freedom.com, and (4) failing to

mail the required notice to all consumers who purchased the

Products between January 1, 2005, and April 2, 2010. Daniel

Chapter One, 896 F. Supp. 2d at 5-6. The Court allowed the

Contemnors two weeks to attempt to purge the contempt and

scheduled another hearing in order to determine whether or not

the contempt had been purged. Id.

On May 22, 2012, James Feijo submitted a certification of

compliance with the Court’s Order. In that certification, Mr.

Feijo stated that all notices had been sent out in compliance

with the Court’s Order; that prohibited representations had been

removed from www.dc1freedom.com, www.danielchapterone.com, the

dc1 online store, and www.dc1ministry.com; that Contemnors had

ceased answering health questions on their radio show or

inviting other callers to answer questions; and that Contemnors

were not mentioning other people’s websites containing Daniel

Chapter One information. See James Feijo’s Certification of

Compliance, ECF No. 51. At a subsequent hearing on May 23,

8
2012, the United States presented additional evidence that

Contemnors had not purged the contempt, but the Court gave

Contemnors until May 24, 2012 at 3:30 p.m. to make a showing to

the Court sufficient to demonstrate their compliance with the

Court’s Order. Daniel Chapter One, 896 F. Supp. 2d at 6-7. On

May 24, 2012, the defendants filed a supplemental certification

of compliance with the Court’s Order, and the United States

filed a notice of failure to purge. See Defs.’ Supplemental

Certification of Compliance with Order, ECF No. 52; Pl.’s Notice

of Failure to Purge, ECF No. 53. The Court determined that

Contemnors had taken sufficient actions to purge themselves of

contempt, and therefore the Court vacated its Contempt Order.

See Minute Order, May 24, 2012.

On September 30, 2011, the United States filed a motion for

summary judgment on liability. On September 24, 2012, the Court

granted the United States’ motion, concluding that “there is no

genuine issue as to any material fact and the United States is

entitled to judgment as a matter of law on liability as to

Counts I (Prohibited Representations) and II (Failure to Mail

Notice).” Daniel Chapter One, 896 F. Supp. 2d at 17. On

November 27, 2012, the Court granted the United States’ request

for limited discovery concerning the defendants’ ability to pay

a civil penalty under the FTC Act. See Minute Order, Nov. 27,

2012. Discovery closed on June 4, 2013.

9
 On April 14, 2014, the United States filed the pending

motion for entry of final judgment. See Pl.’s Mot., ECF No. 68.

The United States requests that the Court enter a final order

that includes injunctive relief, equitable monetary relief in

the amount of $1,345,832.43 and a civil penalty award of

$3,528,000. On May 19, 2014, the defendants filed their

opposition.4 See Defs.’ Opp., ECF No. 70. On June 6, 2014, the

United States filed its reply. See Pl.’s Reply, ECF No. 72.

The United States’ motion is now ripe for determination by the

Court.

II. The FTC Act

The FTC Act authorizes district courts to award civil

penalties and to grant injunctions and other equitable relief

where an FTC order or consent decree has been violated. See 15

U.S.C. § 45 (“United States district courts are empowered to

grant mandatory injunctions and such other and further equitable

4 On January 22, 2013, the defendants filed a motion to stay the
proceedings pending completion of a federal criminal
investigation, and disposition of any resulting indictments and
prosecutions, of James Feijo and Daniel Chapter One in the State
of Rhode Island. See Defs.’ Mot. to Stay, ECF No. 22. The
Court denied the defendants’ motion to stay. See May 5, 2013
Minute Order. On May 20, 2014, the defendants file a renewed
motion to stay the proceedings pending the resolution of the
criminal proceedings in United States v. James Feijo, Patricia
Feijo and Daniel Chapter One in Case No. 1:14-cr-00048-M-LDA.
The Court denied the defendants’ renewed motion to stay. See
October 6, 2014 Minute Order. The Court also directed the
defendants to supplement their opposition to the United States’
motion for entry of final judgment. Id.

10
relief as they deem appropriate in the enforcement of such final

orders of the Commission.”); Id. (The district court is

authorized to impose civil penalties upon “[a]ny person,

partnership or corporation who violates an order of the

Commission”).

Although the FTC Act “does not expressly authorize a

district court to grant consumer redress (i.e., refund,

restitution, rescission, or other equitable monetary relief),

Section 13(b)’s grant of authority to provide injunctive relief

carries with it the full range of equitable remedies,” see FTC

v. Freecom Communications, Inc., 401 F.3d 1192, 1202 n.6 (10th

Cir. 2005), including disgorgement of profits. FTC v. Gem

Merch. Corp., 87 F.3d 466, 468 (11th Cir. 1996); see also CFTC

v. Wilshire Inv. Mgmt. Corp., 531 F.3d 1339, 1344 (11th Cir.

2008) (the FTC Act’s “grant of authority to issue an injunction

carried the full range of equitable remedies, among which ‘is

the power to grant restitution and disgorgement’” (internal

citations omitted)). “An order for disgorgement may be

considered an equitable adjunct to an injunction decree.” FTC

v. Bronson Partners, LLC, 654 F.3d 359, 365 (quoting Porter v.

Warner Holding Co., 328 U.S. 395, 399 (1946)); see also Freecom

Communications, 401 F.3d at 1203 n.6 (“In cases where the FTC

seeks injunctive relief, courts deem any monetary relief sought

as incidental to injunctive relief.”).

11
 In other words, a district court’s authority to award

monetary relief under Section 13(b) falls within its general

equitable jurisdiction to “decide all relevant matters in

dispute and to award complete relief.” Porter, 328 U.S. at 399;

see also FTC v. Cantkier, 767 F. Supp. 2d 147, 160 (D.D.C. 2011)

(“Every court that has considered the issue thus far appears to

have ruled that Section 13(b) does entitle the FTC to seek

equitable monetary relief, including courts in this district and

multiple Courts of Appeals.” (emphasis in original)); FTC v.

Mylan Labs, Inc., 62 F. Supp. 2d 25, 37 (D.D.C. 1999); FTC v.

Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994); FTC v. Sec.

Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991);

FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 571-72 (7th Cir.

1989).

III. Analysis

The United States requests that the Court enter a final

order that includes injunctive relief, equitable monetary relief

in the amount of $1,345,832.43 and a civil penalty award of

$3,528,000. See Pl.’s Mot., ECF No. 68. The Court will address

each requested form of relief sought in turn.

A. A Permanent Injunction Is Necessary to Protect The
Public.

On June 22, 2011, the Court granted the United States’

motion for a preliminary injunction. The Court ordered the

12
following: “defendants are hereby enjoined to obey forthwith

the Modified Final Order of the Federal Trade Commission issued

on January 25, 2010, in Docket No. 9329, In the Matter of Daniel

Chapter One and James Feijo.” See United States v. Daniel

Chapter One, 793 F. Supp. 2d 157, 164 (D.D.C. 2011). In its

motion, the United States asserted that the permanent injunction

should encompass the preliminary injunction – which required the

defendants to comply with the FTC Order – with “additional

restrictions and requirements.” See Pl.’s Mot., ECF No. 68 at

5. Specifically, the United States argued that “there is an

overwhelming need to: (1) broaden coverage of the FTC Order

provisions to ban the defendants from selling any dietary

supplement and from marketing any product or service with

disease claims; and (2) enhance the compliance monitoring

provisions to help the FTC guard against order violations in the

future.” Id. In support of its motion, the government states

that the defendants’ “pervasive and flagrant order violations

evidence that the FTC Order did not achieve its purpose of

protecting the public and demonstrate that they likely will

repeat their fraudulent activities and victimize consumers

unless their practices are more significantly curtailed.” Id.

This Court is “empowered to grant mandatory injunctions and

such other and further equitable relief as [it] deem[s]

appropriate in the enforcement of such final orders of the

13
Commission.” 15 U.S.C. § 45(l). “A federal court has broad

power to restrain acts which are of the same type or class as

unlawful acts which the court has found to have been committed

or whose commission in the future, unless enjoined, may fairly

be anticipated from the defendant’s conduct in the past.”

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100,

132 (1969); NLRB v. Express Publ’g Co., 312 U.S. 426, 435

(1941). The breadth of the injunction must depend upon the

circumstances of the particular case, “the purpose being to

prevent violations, the threat of which in the future is

indicated because of their similarity or relation to those

unlawful acts . . . found to have been committed . . . in the

past.” Express Publ’g, 312 U.S. at 436–37. Courts in equitable

actions may enjoin otherwise lawful conduct to ensure that the

final relief ordered is effective. See United States v. Loew’s,

Inc., 371 U.S. 38, 53 (1962) (“Some of the practices which the

government seeks to have enjoined with its requested

modifications are acts which may be entirely proper when viewed

alone. To ensure, however, that relief is effectual, otherwise

permissible practices connected with the acts found to be

illegal must sometimes be enjoined.”); EEOC v. Wilson Metal

Casket Co., 24 F.3d 836, 842 (6th Cir. 1994) (“The proper scope

of an injunction is to enjoin conduct which has been found to

have been pursued or is related to the proven unlawful

14
conduct.”); United States v. Holtzman, 762 F.2d 720, 726 (9th

Cir. 1985) (“A federal court’s equity jurisdiction affords it

the power to enjoin otherwise lawful activity when necessary and

appropriate in the public interest to correct or dissipate the

evil effects of past unlawful conduct.”); Kentucky Fried Chicken

Corp. v. Diversified Packaging Corp., 549 F.2d 368, 390 (5th

Cir. 1977) (“In fashioning relief against a party who has

transgressed the governing legal standards, a court of equity is

free to proscribe activities that, standing alone, would have

been unassailable.”).

A “court’s power to grant injunctive relief survives

discontinuance of the illegal conduct,” and because the “purpose

. . . is to prevent future violations,” injunctive relief is

appropriate when there is a “cognizable danger of recurrent

violation, something more than the mere possibility.” United

States, v. W.T. Grant Co., 345 U.S. 629, 633 (1953). Once a

violation is demonstrated, all that need be shown is that “there

is some reasonable likelihood of future violations,” and past

unlawful conduct is “highly suggestive of the likelihood of

future violations.” Commodity Futures Trading Comm’n v. Hunt,

591 F.2d 1211, 1220 (7th Cir. 1979).

In addition, courts can order broad “fencing in” injunctive

relief in actions brought under the FTC Act. See FTC v. Think

Achievement Corp., 144 F. Supp. 2d 1013, 1016 (N.D. Ind. 2000).

15
Indeed, the Supreme Court has held that, when entering orders,

the FTC “cannot be required to confine its road block to the

narrow lane the transgressor has traveled; it must be allowed

effectively to close all roads to the prohibited goal, so that

its order may not be bypassed with impunity.” FTC v. Ruberoid

Co., 343 U.S. 470, 473 (1952); see also FTC v. Colgate–Palmolive

Co., 380 U.S. 374, 395 (1965) (“The Commission is not limited to

prohibiting the illegal practice in the precise form in which it

is found to have existed in the past. Having been caught

violating the [FTC] Act, respondents must expect some fencing

in.”); FTC v. Nat’l Lead Co., 352 U.S. 419, 429 (1957).

Further, courts may order record-keeping and monitoring to

ensure compliance with a permanent injunction. See, e.g., FTC

v. SlimAmerica, Inc., 77 F. Supp. 2d 1263, 1276 (S.D. Fla. 1999)

(holding that record-keeping and monitoring provisions were

appropriate to permit the Commission to police the defendants’

compliance with the order); FTC v. U.S. Sales Corp., 785 F.

Supp. 737, 753–54 (N.D. Ill. 1992) (indicating that monitoring

by the Commission may be necessary to ensure adequate

compliance); FTC v. Sharp, 782 F. Supp. 1445, 1456–57 (D. Nev.

1991) (judgment included monitoring provisions).

In deciding whether to issue an injunction in light of past

violations, courts consider “the totality of the circumstances

surrounding the defendant[s] and [their] violations[,]”

16
including: (1) the degree of scienter involved; (2) whether the

infraction was isolated or recurrent; (3) whether the defendants

recognize “the wrongful nature of [their] conduct;” (4) “the

sincerity of [the defendants] assurance against future

violations[;]” (5) the degree of consumer harm caused by the

defendants; and (6) “whether defendants are positioned to commit

future violations[.]” SEC v. Murphy, 626 F.2d 633, 655 (9th

Cir. 1980); FTC v. Medical Billers Network, Inc., 543 F. Supp.

2d 283, 323 (S.D.N.Y. 2008).

The record in this case is crystal clear: From April 2,

2010, when the FTC Order went into effect, until May 24, 2012,

when the defendants came into compliance with the FTC Order, the

defendants intentionally and knowingly violated the FTC Order.

From November 22, 2010, when the D.C. Circuit issued an Order

enjoining the defendants to “obey forthwith the modified final

order,” until May 24, 2012, the defendants intentionally and

knowingly violated the D.C. Circuit’s Order. See Per Curiam

Order, Daniel Chapter One, No. 10-1064 (D.C. Cir. Nov. 22,

2010). From June 22, 2011, when this Court issued a preliminary

injunction, until May 24, 2012, the defendants intentionally and

knowingly violated this Court’s preliminary injunction. See

Order and Memorandum Opinion, ECF Nos. 31 and 32. The

defendants were well aware of what they were required to do to

comply with the various orders, yet deliberately chose to

17
continuously ignore and violate all orders. The record is

replete with evidence that the defendants – during the relevant

dates noted above – among other things, continued to make

representations on their radio show that their products treat or

cure cancer without competent and reliable scientific evidence

to substantiate those representations and encouraged potential

customers to visit websites containing Daniel Chapter One

publications that contain prohibited information and

endorsements of the prohibited supplements. See Daniel Chapter

One, 896 F. Supp. 2d at 17.

Rather than grapple with the mountain of precedent cited by

the United States or the factual record in this case, the

defendants, in a very cursory response – which cites no

authority – asserted that the United States has not proffered

any evidence that the defendants “have engaged in improper

activities since the Court found they were in compliance with

the FTC Order on May 24, 2012.” See Defs.’ Opp., ECF No. 70 at

2. It is well established, however, that current compliance

does not preclude the entry of a permanent injunction, and a

permanent injunction is justified if “there exists some

cognizable danger of recurrent violation” or “some reasonable

likelihood of future violations.” W.T. Grant Co., 345 U.S. at

633; Hunt, 591 F.2d at 1220 (internal citations omitted); see

also Am. Bar Ass’n v. FTC, 636 F.3d 641, 648 (D.C. Cir. 2011)

18
(“[A] defendant’s voluntary cessation of allegedly illegal

conduct does not deprive [a court] of power to hear and

determine the case.”).

Considering the fact that preliminary injunctive relief has

already been ordered against the defendants in this case, the

Court now determines, based on the factual record, that a

permanent injunction is necessary and appropriate to protect

consumers. The Court concludes that – in order to protect the

public – the permanent injunction should encompass the

preliminary injunction with the modifications suggested by the

United States. Specifically, the permanent injunction will ban

the defendants from selling any dietary supplement and from

making disease claims. Additionally, the permanent injunction

will enhance the United States’ monitoring authority. See e.g.,

FTC v. Gill, 265 F.3d 944, 957-58 (9th Cir. 2001) (affirming the

district court’s order prohibiting defendant from engaging in

the credit repair business).

Defendants’ pattern of deceiving consumers in complete

disregard of orders from the FTC, this Court and the D.C.

Circuit raises serious concerns that the defendants would

inflict further injury on consumers in the future without these

modifications. Further, the defendants have made widely-

disseminated efficacy claims for a multitude of products without

possessing reliable scientific evidence to substantiate those

19
representations. Undoubtedly, the defendants’ dietary

supplement marketing involves deliberate, deceptive strategies

that are easily adaptable or transferable to other products, and

the evidence in this case shows that – in addition to their

claims that the Products cure cancer – the defendants also make

health-related representations about their other products. See

e.g., http://dc1store.com/products/apple-pectin-50-off (“This

gentle and nourishing fiber also helps support healthy

cholesterol levels and a healthy heart and gallbladder.” (last

visited March 12, 2015));

http://dc1store.com/products/carniplex-60-cap-2-or-more

(“Carniplex can help support healthy liver, heart, and blood

triglyceride levels. It may assist in fat loss and muscle

health, and enhance the effectiveness of antioxidants C and E.”

(last visited March 12, 2015)).

In order to ensure enforcement of this Memorandum Opinion,

and the accompanying Order, the Court adopts the enhanced

compliance monitoring provisions recommended by the United

States, which would require the defendants to: dispose of

customer information, acknowledge receipt of the Final Order in

this case and distribute it to certain company representatives,

provide a written report on their business activities and

periodic updates such as change of address notifications,

maintain specified records in future businesses and produce

20
information to the Commission upon request about their

compliance. Stringent compliance monitoring provisions are

appropriate to ensure the defendants’ compliance in the future.

FTC v. Neiswonger, 494 F. Supp. 2d 1067, 1084 (E.D. Mo. 2007)

(adopting enhanced compliance monitoring provisions in response

to FTC defendant’s order violations); see also Think Achievement

Corp., 144 F. Supp. 2d at 1018; FTC v. U.S. Sales Corp., 785 F.

Supp. 737, 753 (N.D. Ill. 1992); FTC v. Sharp, 782 F. Supp.

1445, 1456-57 (D. Nev. 1991). The requested provisions will

provide an oversight mechanism to better ensure that the

defendants do not engage in future recidivism.

B. Equitable Monetary Relief Is Appropriate In This Case.

The defendants challenge this Court’s authority to award a

money judgment under Section 13(b) of the FTC Act. Because the

Court concludes that Section 13(b) permits a district court to

order ancillary equitable relief, including monetary relief, and

that such relief may be calculated on the basis of proceeds that

the defendants received from their unlawful activity, the Court

will award equitable monetary relief in the amount of

$1,345,832.43.

1. Ancillary Remedies Under Section 13(b) of the FTC Act

Section 13(b) of the FTC Act provides: “in proper cases the

[FTC] may seek, and after proper proof, the court may issue, a

permanent injunction.” 15 U.S.C. § 53(b). While the

21
provision’s express text refers only to injunctive relief,

courts have consistently held that “the unqualified grant of

statutory authority to issue an injunction under [S]ection 13(b)

carries with it the full range of equitable remedies, including

the power to grant consumer redress and compel disgorgement of

profits.” Gem Merch. Corp., 87 F.3d at 468; see also Bronson,

654 F.3d at 365; Pantron I Corp., 33 F.3d at 1102; FTC v. Sec.

Rare Coin & Bullion Corp., 931 F.2d at 1316; Freecom

Communications, 401 F.3d at 1202 n.6; Amy Travel Serv., Inc.,

875 F.2d at 571-72; FTC v. Sw. Sunsites, Inc., 665 F.2d 711,

718–19 (5th Cir. 1982); Cantkier, 767 F. Supp. 2d at 160; FTC v.

Swish Mktg, 2010 WL 653486, at *6-10 (N.D. Cal. Feb. 22, 2010);

FTC v. Davison Assocs., 431 F. Supp. 2d 548, 560 (W.D. Pa.

2006); FTC v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502, 533

(S.D.N.Y. 2000); FTC v. Mylan Labs, Inc. 62 F. Supp. 2d at 37;

FTC v. Minuteman Press, 53 F. Supp. 2d 248, 261-62 (E.D.N.Y.

1998). This Court joins with these courts and holds that

Section 13(b) of the FTC Act permits district courts to grant

ancillary equitable relief, including equitable monetary relief.

In Porter v. Warner Holding Co., 328 U.S. 395 (1946), the

Supreme Court held that the Emergency Price Control Act of 1942

– which permitted a federal administrator to seek a “permanent

or temporary injunction, restraining order, or other order” –

authorized the administrator to obtain not just injunctive

22
relief but also a money judgment. The Supreme Court provided

two independent reasons for its conclusion. First, the Supreme

Court explained:

[An order for disgorgement] may be considered an
equitable adjunct to an injunction decree. Nothing is
more clearly a part of the subject matter of a suit for
an injunction than the recovery of that which has been
illegally acquired and which has given rise to the
necessity for injunctive relief. . . . [W]here, as here,
the equitable jurisdiction of the court has properly
been invoked for injunctive purposes, the court has the
power to decide all relevant matters in dispute and to
award complete relief even though the decree includes
that which might be conferred by a court of law.

Id. at 399.5 Second, relying on the text of the Emergency

Price Control Act, the Supreme Court reasoned that a money

judgment could be an “other order” that is “appropriate and

necessary to enforce compliance with the act.” Id. at 400.

The Supreme Court subsequently made clear that the two

bases for its holding in Porter were indeed independent. In

Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960),

the Supreme Court concluded that a provision of the Fair Labor

Standards Act that authorized the district court to “restrain

violations of [the statute]” carried with it the power to award

5 Monetary damages were not traditionally available in equity
because “[m]oney damages are, of course, the classic form of
legal relief.” Mertens v. Hewitt Assocs., 508 U.S. 248, 255
(1993). The power of equitable courts to afford “complete
relief,” Porter, 328 U.S. at 399, meant, however, that equitable
courts could afford monetary relief when necessary to provide a
complete equitable remedy.

23
backpay to employees who had been wrongfully discharged. After

citing Porter’s holding that a district court empowered to

enjoin statutory violations may award such ancillary remedies as

necessary to afford complete relief, the Supreme Court went on

to note:

The applicability of this principle is not to be denied,
either because the Court there considered a wartime
statute, or because, having set forth the governing
inquiry, it went on to find in the language of the
statute affirmative confirmation of the power to order
reimbursement.

Id. at 291.

Like the provision at issue in Mitchell, Section 13(b)

contains no reference to “other orders.” Nonetheless, the

principle that “the comprehensiveness of [the district court’s]

equitable jurisdiction is not to be denied or limited in the

absence of a clear and valid legislative command,” Mitchell, 361

U.S. at 291 (quoting Porter, 328 U.S. at 398), applies with

equal force to actions under Section 13(b). By empowering

district courts to issue injunctive relief, Section 13(b)

invokes the equitable jurisdiction of the Court. A money

judgment is thus permitted as a form of ancillary relief because

– once its equitable jurisdiction has been invoked – “the court

24
has the power to decide all relevant matters in dispute and to

award complete relief.” Porter, 328 U.S. at 399.

Accordingly, Section 13(b) of the FTC Act permits this

Court to award not only injunctive relief but also ancillary

relief, including monetary relief. Bronson, 654 F.3d at 365.

2. Monetary Relief Under Section 13(b)

Equitable monetary relief is calculated using a “two-step

burden-shifting framework . . . [that] requires a court to look

first to the FTC to ‘show that its calculations reasonably

approximated the amount of the defendant[s’] unjust gains’ and

then shift the burden ‘to the defendants to show that those

figures were inaccurate.’” Id. at 364 (quoting FTC v. Verity

Int’l, Ltd., 443 F.3d 48, 67 (2d Cir. 2006)).

At the first step of the burden-shifting analysis, the

United States calculated the defendants’ unjust gains as

$1,345,832.43. This amount, the United States asserted, equals

the amount consumers spent on the Products between April 2,

2010, when the FTC Order went into effect, and May 24, 2012,

when the defendants purged itself of contempt. See Pl.’s Mot.,

ECF No. 68 at 9-10 (citing sales records provided by the

defendants).

At the second step of the burden-shifting analysis, the

defendants do not proffer any evidence to show that the United

States’ calculations were inaccurate. See Defs.’ Opp., ECF No.

25
70 at 2-3. Therefore, the defendants concede that the United

States’ calculation of their unjust gains is accurate. McGinnis

v. District of Columbia, 2014 WL 4243542, at *15 (D.D.C. Aug.

28, 2014) (when a party “fails to address [an argument] in its

[opposition] . . . the Court will deem it abandoned”).

Accordingly, the Court will award equitable monetary relief

in the amount of $1,345,832.43.

C. Civil Penalty

Under the FTC Act, the Court is authorized to impose civil

penalties upon “[a]ny person, partnership or corporation who

violates an order of the Commission[.]” 15 U.S.C. § 45(l). The

statute originally provided for “a civil penalty of not more

than $10,000 for each violation;” that sum, however, was

modified pursuant to the Federal Civil Penalties Inflation

Adjustment Act, and is now $16,000 per violation. 15 U.S.C. §

45(l); 28 U.S.C. § 2461; 16 C.F.R. § 1.98(d). The FCT Act

further provides that “[e]ach separate violation of such an

order shall be a separate offense[.]” 15 U.S.C. § 45(l). Here,

the defendants intentionally and knowingly violated the FTC

Order from April 2, 2010, when the FTC’s Order went into effect,

to May 24, 2012, when the defendants came into compliance.

During each of these 784 days, the defendants committed

multiple violations of the FTC Order. See generally Daniel

Chapter One, 896 F. Supp. 2d at 1-17. For example, the

26
defendants promoted the Products as cancer treatments in

multiple locations, including placing misrepresentations on

several websites under their control and on online forums. Id.

Further, the defendants represented to customers that the

Products treat and cure cancer on their radio show, and would

then post the shows online so that others could access the

information. Id. In addition, the defendants neglected to send

the required corrective notices to their prior customers. Id.

Each individual misrepresentation is a separate violation, and

every corrective notice they failed to send is a separate

violation. See, e.g., United States v. Nat’l Fin. Servs. Inc.,

98 F.3d 131, 141 (4th Cir. 1996) (finding that each letter sent

was a separate violation). This adds up to thousands of

violations and an enormous civil penalty sum.

Where the violation is a “continuing failure to obey or

neglect to obey a final order of the Commission, each day of

continuance of such failure or neglect shall be deemed a

separate offense.” 15 U.S.C. § 45. Under this provision, each

day that the defendants failed to comply with the FTC Order

should be deemed a separate violation. While the defendants

would certainly be liable for a much higher penalty amount if

the Court were to count each individual violation, the Court is

of the opinion that the “continuing failure” calculation is the

appropriate calculation in this case. At the statutory maximum

27
of $16,000 per violation, the defendants would be liable for a

civil penalty up to the amount of $12,544,000 for the 784 days

they failed to comply with the FTC Order.

While the defendants are subject to a $12,544,000 statutory

maximum civil penalty, which the defendants do not dispute, see

generally Defs.’ Opp., ECF No. 60, the Court determines the

appropriate civil penalty to be imposed by considering five

separate factors. See United States v. Danube Carpet Mills,

Inc., 737 F.2d 988, 993 (11th Cir. 1984); United States v.

Reader’s Digest Ass’n, 662 F.2d 955, 967 (3d Cir. 1981).

Specifically, courts consider: “(1) the good or bad faith of the

defendants; (2) the injury to the public; (3) the defendants’

ability to pay; (4) the desire to eliminate the benefits derived

by the violations; and (5) the necessity of vindicating the

authority of the FTC.” Danube Carpet Mills, Inc., 737 F.2d at

994. The United States asserted that, based upon an analysis of

these factors, a civil penalty award in the amount of $3,528,000

– a sum which equals a $4,500 penalty every day in which the

defendants failed to comply with the FTC Order – is appropriate.

See Pl.’s Mot., ECF No. 68 at 11-12. The Court agrees.

1. The Defendants Acted in Bad Faith.

There is no doubt that the defendants acted with “actual

knowledge” that their conduct was unlawful and violated orders

from the FTC, this Court and the D.C. Circuit. See 15 U.S.C. §

28
45. In other words, the defendants knew – at the time they

intentionally violated each order – that their conduct was

unlawful and yet continued to engage in that conduct. This is

bad faith.

The FTC Order became effective on April 2, 2010. Rather

than comply with the FTC Order, the defendants knowingly and

deliberately continued to represent on websites, online forums,

and their radio show that the Products would treat or cure

cancer. Defendants’ own statements demonstrate that their

conduct was willful and deliberate. For example, as previously

found by this Court,

[D]uring a radio show broadcast on June 23, 2011, the
Feijos took a call from an individual who identified
himself as Curtis, and who said that his daughter had
cancer. James Feijo advised Curtis to go online and
read the testimonies the Daniel Chapter One website to
learn more, and stated that they support “God’s way”
of treating cancer through the use of 7 Herb Formula,
BioShark, and GDU. In addition, James Feijo told
Curtis that “the government is trying to stop us from
helping you and your daughter . . . they want to not
let us tell you about 7 Herb Formula, BioShark, and
GDU, that God has given us to help people around the
world.” Patricia Feijo added:

[“W]e do care about your daughter . . . we just heard
from our lawyer that a judge ruled in favor of the
Trade Commission, and so, you know, basically we can
be fined out of existence tonight or, or, put into
prison, and we want people to know the reality that
we’re sitting here, willing to risk even our lives, to
serve the lord and to serve you, right, but the
situation is such that I would say get the product
while you can, even stock up while you can, and if one
day you won’t be able to get our products then just,
you know, try to continue to follow pretty much what

29
 those products are, the herbs, the enzymes, because
that’s what we have seen work for many years.[”]

James Feijo then gave Curtis information on how to
order the products, and directed Curtis to the
healthfellowship.org website for more information. At
other times during this same show, James Feijo stated
that Daniel Chapter One’s products, including GDU,
were created and intended by God “for you, for your
health and healing, as a prevention, to mitigate, to
treat, to heal, to cure.” Patricia Feijo told
listeners that they did not share their experiences
with the products had used it for a while and saw that
it did indeed work, and then we began to share with
people, hey, this is what works for this and that.”
Patricia Feijo stated that the testimonies the Feijos
had received from their customers and placed on their
website and in their BioGuide were a sampling of their
customers’ experiences and that the results in the
testimonials were “very typical of what people
experience.” James and Patricia Feijo went on to
describe how 7-Herb Formula had cured a man who had
renal cancer.

Daniel Chapter One, 896 F. Supp. 2d at 11-12.

Additionally, the defendants knowingly and deliberately

ignored provisions in the FTC Order that required them to send a

corrective notice to past purchasers. Id. Moreover, the

defendants utterly failed to comply with the orders from the

D.C. Circuit (for over one year) and this Court (for about a

year) directing them to “obey forthwith” the FTC Order. The

defendants did not send the corrective notice until,

conveniently, five days before the contempt hearing in this

case. See Pl.’s Mot., ECF No. 68 at 13.

Further, the defendants’ own statements make it clear that

they knew what they were required to do, and that they were

30
deliberately not complying with the FTC Order. For example,

after the D.C. Circuit issued its decision denying the

defendants’ petition for review of the FTC Order, the defendants

posted the following message on their website:

Daniel Chapter One is being tortured right now for its
opinion – its knowledge – about healing that is different
from conventional medicine. Overseeer Jim Feijo has been
threatened with bankrupting fines and incarceration for
refusing to sign a government agency letter saying, in
essense, the earth is flat. Literally, the letter
denounces what Mr. Feijo knows to be true -- that Daniel
Chapter One natural products are safe and effective in
helping fight cancer and there is science supporting
efficacy of their various ingredients -- and states what
Mr Feijo and countless others know to be FALSE: that
conventional cancer treatment has been proven safe and
effective.

Pl.’s Mot., ECF No. 68 at Ex. D (typographic errors in

original).

In addition, the introduction to the Daniel Chapter One

Freedom website stated that:

They ordered that we sign a letter they wrote, a
deceptive letter saying that only conventional cancer
treatment has been proven safe and effective in humans,
and send it to thousands of people.

But Daniel Chapter One cannot bear false witness...

Id. (emphasis in original).

Certainly, the defendants engaged in multiple violations over

many years and their actions were intentional, willful and

deliberate. Indeed, the defendants failed to demonstrate any

intent to comply with the orders from the FTC, the D.C. Circuit or

31
this Court; the defendants only agreed to comply with the FTC Order

because they were facing significant civil contempt sanctions.

Accordingly, the defendants’ bad-faith violations of the

orders from the FTC, this Court and the D.C. Circuit warrant the

maximum civil penalty.6

2. Defendants Have Injured the Public.

The public harm in this case is significant and it occurred

in several ways. First, consumers who purchased the Products

suffered financial harm. Second, the defendants caused harm by

publicizing deceptive information about their products and by

failing to send the corrective notice to prior purchasers.

Third, the defendants injured the public when they instructed

6 The defendants’ argument that they engaged in “good faith” is
nothing short of ridiculous. See Defs.’ Opp., ECF No. 70 at 4.
On December 10, 2010, the D.C. Circuit denied the defendants’
petition for review of the FTC Order, concluding that “the
Commission properly exercised jurisdiction over [Daniel Chapter
One],” and that “[Daniel Chapter One]’s arguments based upon the
Constitution and the Religious Freedom Restoration Act are
wholly without merit.” Daniel Chapter One, 405 F. App’x at 505-
06. The defendants reason that, because of their “heartfelt
religious beliefs,” they could continue to advance their
position, which the D.C. Circuit held was “wholly without
merit,” in violation of the orders from the FTC, this Court and
the D.C. Circuit. The standard, however, is not whether the
defendants had a “heartfelt belief,” but whether the defendants
acted with “actual knowledge” that their conduct was unlawful;
as previously discussed, the facts in this case make clear that
the defendants had actual knowledge that their conduct was
unlawful yet continued to engage in that conduct. 15 U.S.C. §
45; see also POM Wonderful, LLC v. FTC, 777 F.3d 478, 498 (D.C.
Cir. 2015).

32
consumers to stop using conventional, proven treatments and

instead use the defendants’ products.

Injury to the public can be found when consumers have lost

money due to the defendants’ violative conduct. See, e.g.,

United States v. Prochnow, No. 07-10273, 2007 WL 3082139, at *4

(11th Cir. Oct. 22, 2007) (“[C]ustomers [of a magazine

telemarketer] were harmed by both the payments made for the

magazine packages and the frustration, inconvenience, and

expense involved in cancelling their subscription.”). The

financial harm is easily calculated in this case. As previously

discussed, the defendants collected $1,345,832.43 from the sale

of the Products between April 2, 2010, when the FTC’s Order went

into effect, and May 24, 2012, when the defendants stopped

violating the FTC Order.

In addition to the financial harm, injury to the public

occurred whenever the defendants’ deceptive and violative

materials reached the public. See Danube Carpet Mills, 737 F.2d

at 994; Reader’s Digest, 662 F.2d at 969. Contrary to the

defendants’ assertion, the United States does not need to

introduce “evidence of consumer confusion or deception” because

“(t)he principal purpose of a cease and desist order is to

prevent material having a capacity to confuse or deceive from

reaching the public . . . (t)hus, whenever such promotional

items reach the public, that in and of itself causes harm and

33
injury.” Reader’s Digest, 662 F.2d at 969 (internal citations

omitted). Undoubtedly, the defendants caused substantial public

harm by using deceptive promotional information on websites,

online forums, and their radio show. This injury to the public

was further exacerbated because the defendants refused to mail

the required notice informing consumers that the defendants’

advertising claims were found by the FTC to be deceptive; such

claims were not substantiated by competent and reliable

scientific evidence.

Finally, after the D.C. Circuit ordered the defendants to

“obey forthwith” the FTC Order, see Per Curiam Order, Daniel

Chapter One, No. 10-1064 (D.C. Cir. Nov. 22, 2010), the

defendants continued to advise people with cancer to stop

conventional medical treatment and take the defendants’ products

instead. For example, as previously found by this Court,

During a radio show broadcast on February 22, 2011,
Defendants accepted a call from a caller named Patricia,
who stated that her doctor had found a mass on her
breast. . . . James and Patricia Feijo instructed the
caller not to get a biopsy, and Patricia Feijo stated
that “if it is cancer, it can stir up the cells and can
get them to spread[.]” . . . Patricia Feijo told the
caller that she should take products “to treat it worst
case scenario.” . . . Defendants then asked someone to
call in to help answer the caller’s questions, and
accepted a call from a caller named Greg, who said that,
for “cancer . . . one thing I would add is BioShark to

34
 that.” . . . Patricia Feijo confirmed this suggestion,
stating, “yeah, definitely.”

Daniel Chapter One, 896 F. Supp. 2d at 11-12. This demonstrates

the third way the public was harmed by the defendants’ conduct;

consumers suffered harm when they followed the defendants’

advice, stopping conventional proven treatments to use the

defendants’ products. Accordingly, the Court finds that this

factor weights strongly in favor of a substantial civil penalty.

3. A Civil Penalty Is Necessary to Eliminate Benefits
Derived by the Defendants.

The third factor courts consider when entering a civil

penalty is the need to eliminate any benefits a defendant

received from the violation, and this factor is completely

separate from any consumer redress or disgorgement ordered by

the Court. “Elimination of the benefits of noncompliance is an

essential element of the penalty, so that there is no incentive

to violate the law[.]” United States v. Mac’s Muffler Shop,

Inc., 1986 WL 15443, *10 (N.D. Ga. Nov. 5, 1986); see also

Reader’s Digest, 662 F.2d at 969. Indeed, because a civil

penalty should “be more than . . . an acceptable cost of doing

business,” the civil penalty should be higher than the amount

the defendants benefited and the amount of any consumer redress

35
award. FTC v. Onkyo U.S.A. Corp., No., 1995 WL 579811, at *4

n.6 (D.D.C. Aug. 21, 1995).

Defendants claim that if the Court imposes equitable

monetary relief, no civil penalty should be imposed. This

argument treats civil penalties and equitable monetary relief as

mutually exclusive remedies. This is simply not correct. See

Prochnow, 2007 WL 3082139, at *3 (affirming order of district

court assessing civil penalties and disgorgement); FTC v. PayDay

Fin. LLC, No., 2013 WL 5442387, at *17 (D.S.D. Sept. 30, 2013)

(imposing disgorgement remedy, and postponing a determination on

an appropriate civil penalty until after trial); FTC v.

Navestad, No., 2012 WL 1014818, at *9 (W.D.N.Y. Mar. 23, 2012)

(entering judgment that included $20,000,000 in civil penalties

and $1,105,078.96 as disgorgement). Therefore, the Court finds

that this factor weighs in favor of a substantial civil penalty.

4. A Civil Penalty Is Necessary to Vindicate the
Authority of the FTC.

“Since the Commission has no plenary power to enforce its

own orders, it must enlist the aid of the federal district

courts for that purpose. The penalty to be assessed must

therefore be a significant one.” FTC v. Consolidated Food

Corp., 396 F. Supp. 1353, 1357 (S.D.N.Y. 1975). Defendants’

conduct has implications beyond this case. As the court

described in Mac’s Muffler Shop, “[i]f the regulated community

36
perceives that violations of the law are treated lightly, the

government’s regulatory program is subverted.” Mac’s Muffler

Shop, Inc., 1986 WL 15443 at *10. If a penalty is “[t]o have

any deterrent effect, [it] must be large enough to be more than

just . . . an acceptable cost of doing business.” Onkyo U.S.A.

Corp., 1995 WL 579811, at *4 n.6. For the penalty award to

provide meaningful deterrence, it “‘should be large enough to

hurt, and to deter anyone in the future from showing as little

concern as [the defendants] did for the need to [comply].’”

United States v. Phelps Dodge Indus., 589 F. Supp. 1340, 1367

(S.D.N.Y. 1984) (quoting United States v. Swingline, Inc., 371

F. Supp. 37, 47 (E.D.N.Y. 1974)); United States v. ITT

Continental Banking Co., 420 U.S. 223, 231-33 (1975).

The defendants have flouted the authority of the FTC, this

Court and the D.C. Circuit by ignoring the FTC Order. Defendants

continued to represent the Products as a treatment for cancer

despite the FTC Order prohibiting them from doing so. Even

after receiving orders from this Court and the D.C. Circuit, the

defendants continued to make unsubstantiated claims that the

Products treat cancer. Defendants’ flagrant disregard for the

FTC’s authority merits a substantial penalty in order to

37
vindicate the United States’ authority and deter future

violations.

5. The Defendants Are Able to Pay a Civil Penalty.

Courts look at a variety of data points when assessing a

defendant’s ability to pay. In Danube Carpet Mills, the

Eleventh Circuit affirmed the district court’s calculation of

ability to pay based on the defendant’s yearly profits and net

worth, including both liquid and illiquid assets. Danube Carpet

Mills, Inc., 737 F.2d at 994-95. However, other courts

considering this factor have looked beyond the funds and assets

currently in a defendant’s possession. For example, in United

States v. Lasseter, the district court imposed a civil penalty

award after finding that the defendant received a “significant

benefit” from the sale of his business, despite the defendant’s

assertion that he could not afford to pay a civil penalty

because he was in Chapter 7 Bankruptcy. United States v.

Lasseter, 2005 WL 1638735, at *6 (M.D. Tenn June 30, 2005).

On November 11, 2012, the Court granted the United States’

request for limited discovery concerning the defendants’ ability

to pay a civil penalty under the FTC Act. While the defendants

acknowledged possessing assets and funds totaling $2,001,959.73,

the United States argued that discovery revealed that the

defendants have dissipated approximately $2.7 million dollars of

proceeds and assets since commencement of the lawsuit. Pl.’s

38
Mot., ECF No. 10-24. Specifically, the United States, very

carefully, listed the defendants’ assets and dissipated funds,

which total $4,705.936.09. Id.

The United States requests that this Court consider both

the listed assets and the dissipated funds in determining

whether the defendants can pay a civil penalty. Id. The

defendants do not dispute that the discovery conducted in this

case supports the United States’ calculations. See generally

Defs.’ Opp., ECF No. 70. Further, the defendants fail to

respond to the United States’ argument that the Court should

consider both listed assets and dissipated funds in reaching a

determination on whether the defendants can pay a civil penalty.

Id. Thus, the defendants concede that the factual record, as

detailed in the United States’ motion, see Pl.’s Mot., ECF No.

19-24, including the United States’ calculation of total assets

and dissipated assets, is accurate and correct and that the

Court should include the defendants’ dissipated assets in

determining the defendants’ ability to pay a civil penalty.

McGinnis, 2014 WL 4243542 at *15. Even assuming, arguendo, that

the defendants did dispute the inclusion of their dissipated

assets in the overall calculation in determining the defendants’

ability to pay a civil penalty, the Court will not allow the

defendants to benefit from their blatant attempt to dissipate

their assets during this litigation. See SEC v. Metcalf, 2012

39
WL 5519358, at *8 (S.D.N.Y. Nov. 13, 2012) (discounting the

defendants’ claims of poverty where the defendant “knowing that

he faced the very real possibility of civil financial penalties,

chose to spend down his assets or failed to adjust his

lifestyle”). Accordingly, the Court finds that the defendants’

known assets and dissipated funds total $4,705,936.09.

Rather than dispute the factual record developed by the

United States, the defendants make the following blanket

statement, without providing any reliable evidence:

“Defendants’ financial resources have been dissipated by the

need to pay attorneys’ fees to defend against [criminal charges

filed against defendants].” See Defs’ Supp., ECF No. 77 at 1.

The defendants attempt to change previous discovery responses

concerning its ability to pay by attaching an affidavit signed

by Mr. Feijo. The defendants’ supplemental filing, among other

things, violates the “sham affidavit rule,” which precludes a

party from creating an issue of material fact by contradicting

prior sworn testimony “merely by pointing to a self-serving,

contradictory declaration[.]” Glass v. Lahood, 786 F. Supp. 2d

189, 216 (D.D.C. 2011) (citing Pyramid Sec. Ltd. v. IB

Resolution, Inc., 924 F.2d 1114, 1123 (D.C. Cir. 1991)). A

party must “‘offer persuasive reasons for believing the supposed

40
correction’ is more accurate than the prior testimony.” Galvin

v. Eli Lilly and Co., 488 F.3d 1026, 1030 (D.C. Cir. 2007)

(quoting Pyramid Sec. Ltd., 924 F.2d at 1123).

The defendants provide no evidence to support any statement

contained in the declaration, from the revised bank account

information, to the attorneys’ fees paid, to the transfer of

real property, to the value of their inventory. The defendants

could have easily provided evidentiary support. For example,

the defendants simply could have attached bank statements,

receipts from their attorneys, charitable gift receipts, or

other similar documents. Instead, the defendants have provided

absolutely no evidentiary support and have failed to “offer

persuasive reasons for believing the supposed correction is more

accurate than the prior testimony.” Galvin, 488 F.3d at 1030.

Therefore, the Court will not consider the defendants’

supplemental filing in determining the defendants’ ability to

pay a civil penalty. In any event, the Court finds that the

defendants’ arguments raised in their supplemental filing

unpersuasive because courts considering a defendant’s ability to

pay a civil penalty look beyond the funds and assets currently

in the defendant’s possession. See e.g., Lasseter, 2005 WL

41
1638735, at *6. Accordingly, the Court finds that this factor

weighs in favor of a substantial civil penalty.

*****

Based on a careful consideration of each factor, the Court

determines that a civil penalty in the amount of $3,528,000 is

appropriate in this case.

IV. The Court Will Not Consider the Defendants’ Cursory Eighth
Amendment Argument.

The defendants raised the following cursory argument:

“Defendants respectfully submit that imposing a civil penalty of

$3,528,000 would violate the Eight Amendment’s prohibition

against cruel and unusual punishment. See United States v.

Bajakajian, 524 U.S. 321, 336-37 (1998).” See Defs.’ Opp., ECF

No. 70 at 6. That is the extent of the defendants’ argument;

they do not articulate any basis to support their argument and

wholly fail to analyze Bajakajian. Specifically, the defendants

do not address whether a civil penalty under the FTC Act is

punitive or remedial in nature and whether, assuming the civil

penalty is punitive and thus subject to the Eighth Amendment,

the civil penalty requested by the United States in this case is

“grossly disproportional to the gravity of [the] offense.”

Bajakajian, 524 U.S. at 334. The Court gave the defendants

every opportunity to supplement their opposition. See October

6, 2014 Minute Order. Because the defendants raised this issue

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in “such a cursory fashion,” the Court declines to resolve it.

See Washington Legal Clinic for the Homeless v. Barry, 107 F.3d

32, 39 (D.C. Cir. 1997); Railway Labor Executives' Ass'n v.

United States R.R. Retirement Bd., 749 F.2d 856, 859 n.6 (D.C.

Cir. 1984) (declining to resolve issue “on the basis of briefing

which consisted of only three sentences . . . and no discussion

of the relevant statutory text, legislative history, or relevant

case law”).

V. Conclusion

For the foregoing reasons, the Court hereby GRANTS the

United States’ motion for entry of final judgment. An

appropriate Order accompanies this Memorandum Opinion.

SO ORDERED.

SIGNED: Emmet G. Sullivan
United States District Judge
March 31, 2015

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