767 F. Supp. 2d 147
D.D.C.2011Background
- FTC sued Scot Lady for deceptive online ads misrepresenting affiliation with federal homeowner relief programs.
- Ads used program names/URLs but directed users to Lady’s private lead-generation sites.
- Lead sites solicited personal/financial information and sold leads to mortgage-modification/foreclosure relief providers.
- Second Amended Complaint alleges three deceptive-acts/intent representations (Counts I–III) under FTC Act §5(a).
- Court previously granted preliminary injunction; now addresses Rule 12(b)(6) and Rule 12(f) motions to dismiss/strike.
- Counts seek permanent injunction and equitable monetary relief under §13(b); Lady challenges both the sufficiency of pleading and the authority to strike monetary-relief references.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §5(a) deception claims require §5(n) substantial-injury test. | FTC relies on deception test, §5(n) not applicable to deception claims. | Lady argues §5(n) applies to all §5 claims and requires substantial injury. | §5(n) does not apply to deception claims; §5(a) suffices. |
| Whether Rule 9(b) applies to FTC Act §5 deception claims. | FTC asserts sufficiency under Rule 9(b) or aligns with §5 deception pleading. | Lady argues heightened pleading may apply as fraud-oriented. | Rule 9(b) may apply in this context; pleaded with sufficient particularity. |
| Whether the Second Amended Complaint states a plausible §5 deception claim. | Allegations show misrepresentations about government affiliation and outcome claims. | Arguments about labeling and non-imitation negate likelihood of deception. | Counts I–III state plausible, material misrepresentations likely to mislead a reasonable consumer. |
| Whether the court should strike equitable monetary-relief allegations under §13(b). | Equitable relief claims are proper under controlling precedent. | Striking is appropriate to limit relief to non-monetary remedies. | Court declines to strike; retains equitable monetary-relief allegations. |
Key Cases Cited
- In re Cliffdale Associates, Inc., 103 F.T.C. 110 (1984) (tests for deception under FTC Act §5(a))
- FTC v. Cyberspace.Com LLC, 453 F.3d 1196 (9th Cir. 2006) (material misrepresentation likely to affect consumer conduct)
- FTC v. Verity Int'l Ltd., 443 F.3d 48 (2d Cir. 2006) (deception standard does not require proof of intent)
- U.S. ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251 (D.C. Cir. 2004) (Rule 9(b) standards for fraud-like claims; notice to defendant)