Federal Trade Commission v. Trudeau
579 F.3d 754 (2009)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An advertiser violates a court order not to misrepresent a book's "content" by selectively quoting isolated, positive phrases (e.g., that a diet is "easy") while failing to disclose the book's actual, contradictory substance (e.g., an arduous protocol), thereby creating a misleading overall impression. Civil contempt sanctions for such a violation must be either compensatory (calculated to redress actual loss and administered for victim benefit) or coercive (allowing the contemnor an opportunity to purge the sanction through compliance), not purely punitive.
Facts:
- Kevin Trudeau and the Federal Trade Commission (FTC) entered into a 2004 Consent Order.
- The Consent Order prohibited Trudeau from appearing in infomercials for any product, with an exception for books.
- The exception for books was conditioned on the requirement that any infomercial "must not misrepresent the content of the book."
- Trudeau subsequently promoted his book, The Weight Loss Cure, through a series of infomercials.
- In the infomercials, Trudeau repeatedly described the diet protocol in the book as "easy," "simple," and something that could be completed at home.
- Trudeau also claimed that after completing the program, dieters could eat "everything they want" without restriction.
- The actual protocol detailed in Trudeau's book required a severe 500-calorie-per-day diet, daily injections of a prescription hormone (hCG), and numerous other arduous lifestyle restrictions, including colonics and lifelong dietary limitations.
Procedural Posture:
- The Federal Trade Commission (FTC) filed a petition in the U.S. District Court for the Northern District of Illinois, seeking to hold Kevin Trudeau in civil contempt for violating a 2004 Consent Order.
- The district court (a court of first instance) found Trudeau in contempt, concluding that his infomercials misrepresented the content of his book.
- As sanctions, the district court initially ordered Trudeau to pay over $5.1 million in disgorged royalties and imposed a three-year ban on appearing in infomercials.
- Following an FTC motion to correct a mathematical error, the district court increased the monetary award to $37.6 million, representing consumer loss, and reiterated the three-year infomercial ban.
- Trudeau, as appellant, appealed the contempt finding and the sanctions to the U.S. Court of Appeals for the Seventh Circuit, with the FTC as appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an advertiser violate a court order prohibiting the misrepresentation of a book's 'content' when his infomercials selectively quote positive phrases from the book, such as calling a diet 'easy,' while omitting the book's actual description of an extremely arduous and restrictive protocol?
Opinions:
Majority - Tinder, Circuit Judge.
Yes. An advertiser violates a court order prohibiting the misrepresentation of a book's 'content' by selectively quoting favorable phrases while omitting the book's contradictory and arduous requirements, as this creates a deceptively false overall impression. The court found that the term 'content' in the consent order refers to the book's essential meaning and substance, not just a few 'cherry-picked phrases.' Trudeau's infomercials misrepresented the book's content by describing the protocol as 'easy' while failing to mention the 500-calorie-per-day diet, prescription hCG injections, colonics, or the lifelong dietary restrictions. The court rejected Trudeau's argument that his claims were mere 'puffery,' holding that a reasonable consumer would rely on statements about the ease of a weight loss program, and Trudeau's statements were factually contradicted by the book itself. The court also found Trudeau made patently false statements, such as the claim that dieters could eat 'anything they want' afterward. While affirming the contempt finding, the court vacated the sanctions. The $37.6 million monetary sanction was improper as a civil compensatory fine because the district court failed to explain its calculation methodology or detail how the funds would be administered to compensate consumers. The three-year infomercial ban was improper as a civil coercive sanction because it was a 'flat, unconditional' penalty that did not provide Trudeau an opportunity to 'purge' the sanction by complying with the court's order.
Analysis:
This decision clarifies that 'misrepresentation' under a consent decree includes creating a misleading overall impression through material omissions, not just making literally false statements. It sets a precedent that advertisers cannot 'cherry-pick' favorable but unrepresentative quotes from a source to deceive consumers about its true content. The court's detailed analysis of civil contempt sanctions reinforces the crucial distinction between remedial civil penalties and punitive criminal ones, providing a clear framework for lower courts. This holding strengthens the FTC's enforcement power against deceptive advertising that relies on context and omission, while also imposing strict procedural requirements on courts fashioning civil contempt remedies to ensure they remain compensatory or coercive, not punitive.
