FTC v. Hoyal & Associates, Inc.
19-35668
| 9th Cir. | Jun 11, 2021Background
- Defendants (Reality Kats, Hoyal & Associates, Dennis Simpson, Jeffrey and Lori Hoyal) ran a subscription-mailer business that sent offers implying automatic renewal and lowest price.
- The FTC sued under §5 of the FTC Act alleging deceptive mailers and obtained a permanent injunction and a monetary judgment in district court.
- The district court found the corporate entities operated as a common enterprise and held Simpson and the Hoyals personally liable based on participation/control plus knowledge or reckless indifference.
- The court held the mailers deceptive as a matter of law under the “net impression” test; disclaimers on the mailer backs did not cure the misleading impression.
- The court found a likelihood of recurrence (asset transfers, continued involvement by Simpson and relatives) and entered a permanent injunction; after appeal the Ninth Circuit vacated the monetary award under AMG Capital Management.
Issues
| Issue | FTC's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether §13(b) authorizes equitable monetary relief | §13(b) permits courts to award monetary relief in proper cases | §13(b) does not authorize equitable monetary relief (citing AMG) | Monetary judgment vacated under AMG; injunction review unaffected |
| Whether individuals (Simpson, Jeffrey & Lori Hoyal) are personally liable under §5 | Individuals participated in or controlled corporate conduct and had actual knowledge or were recklessly indifferent | Individuals lacked participation/knowledge or control | Affirmed: factual findings support personal liability under Com. Planet standard |
| Whether the corporate defendants operated a common enterprise | Entities acted together in the mailing operation so are jointly liable | Entities were separate or had ceased to exist | Affirmed: common-enterprise finding sustained; entities liable for each other’s acts |
| Whether the mailers were deceptive as a matter of law | Mailers created a misleading “net impression” of automatic renewal and lowest price; material misrepresentations | Disclaimers on reverse cured any misleading impression | Affirmed: mailers deceptive under net-impression test; disclaimers insufficient |
| Whether injunction was proper (likelihood of recurrence) | Defendants’ long history, asset transfers, and ongoing involvement show likely recurrence | Defendants had ceased some practices; reliance on Shire ViroPharma (no recurrence) | Affirmed: likelihood of recurrence supported; injunction appropriate |
| Whether the injunction is vague or overbroad | N/A (FTC sought relief tailored to prevent recurrence) | Injunction is impermissibly vague/overbroad | Affirmed: injunction neither vague nor overbroad; scope reasonably related to prevention |
Key Cases Cited
- AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021) (§13(b) does not authorize equitable monetary relief)
- FTC v. Com. Planet, Inc., 815 F.3d 593 (9th Cir. 2016) (standard for individual liability: participation/control plus knowledge or reckless indifference)
- FTC v. Gill, 265 F.3d 944 (9th Cir. 2001) (net-impression test for deception)
- FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) (materiality and deceptive-practice principles)
- Sears, Roebuck & Co. v. FTC, 676 F.2d 385 (9th Cir. 1982) (likelihood-of-recurrence standard for injunctions)
- FTC v. Evans Prods. Co., 775 F.2d 1084 (9th Cir. 1985) (injunction principles; recurrence analysis)
- H. N. Singer, Inc. v. FTC, 668 F.2d 1107 (9th Cir. 1982) (FTC may seek injunctive relief in district court without prior administrative proceedings)
- Colgate-Palmolive Co. v. FTC, 380 U.S. 374 (1965) (scope of injunction must reasonably relate to preventing future violations)
- FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019) (contrast—no injunction where practice ceased and no evidence of recurrence)