Fanning v. Fed. Trade Comm'n , 821 F.3d 164 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1520
JOHN FANNING,
Petitioner,
v.
FEDERAL TRADE COMMISSION,
Respondent.
PETITION FOR REVIEW OF AN ORDER
OF THE FEDERAL TRADE COMMISSION
Before
Torruella, Lynch, and Barron,
Circuit Judges.
Peter F. Carr, II, with whom Pamela C. Rutkowski and Eckert
Seamans Cherin & Mellott, LLC, were on brief, for petitioner.
Bradley Grossman, Attorney, Federal Trade Commission, with
whom Jonathan E. Nuechterlein, General Counsel, Joel Marcus,
Director of Litigation, Leslie Rice Melman, Assistant General
Counsel for Litigation, Sarah Schroeder and Boris Yankilovich,
Attorneys, were on brief, for respondent.
May 9, 2016
TORRUELLA, Circuit Judge. Defendant-Appellant John
Fanning petitions this court for review of the Federal Trade
Commission's ("the Commission") summary decision finding him
personally liable for misrepresentations contained on the website
Jerk.com in violation of the Federal Trade Commission Act ("FTC
Act"). We agree with the Commission's findings that Jerk.com
materially misrepresented the source of its content and its
membership benefits. Nonetheless, we agree with Fanning that
portions of the Commission's remedial order are overbroad. We
affirm the finding of liability and the remedial order
recordkeeping provisions and order acknowledgment requirement.
Because we conclude the remedial order's compliance monitoring
provisions as to Fanning are overbroad, we vacate that portion of
the Commission's order and remand for proceedings consistent with
this opinion.
I. Background1
In 2009, Fanning founded Jerk LLC ("Jerk") and Jerk.com.2
From 2009 to 2014, Jerk operated Jerk.com.3
1 Unless otherwise noted, the facts in this case are undisputed.
2 Jerk also operated Jerk.be and Jerk.org. For simplicity, we
refer to these websites collectively as Jerk.com.
3 Jerk.com ceased operation in 2014.
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Jerk.com was a self-proclaimed reputation management
website. Its homepage greeted users by asking them if they were
"[l]ooking for the latest scoop on a world filled with jerks" and
stated that "millions" of people "use[d] Jerk for important
updates, business, dating, and more." The homepage listed several
benefits Jerk.com offered, including tracking one's own and other
people's reputations, "enter[ing] comments and reviews for [other]
people," "[h]elp[ing] others avoid the wrong people," and
"prais[ing] those who help you."
Jerk.com's main feature was its profile pages. Each
page corresponded with a particular individual and displayed that
person's name. The profiles allowed users to vote on whether
someone was a "Jerk" or "not a Jerk" and displayed the total number
of "Jerk" and "not a Jerk" votes received. Jerk.com users could
also post anonymous reviews about a person, which were visible on
that person's profile page. By 2010, Jerk.com contained 85
million profiles pages. Very few of these profile pages had
reviews posted and those reviews that were posted were largely
derogatory.
Jerk.com also had a "Remove Me!" page, which stated that
individuals could "manage [their] reputation and resolve disputes"
regarding content on their profile pages through a paid
subscription. The "Remove Me!" page contained a link to a separate
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subscription page where users could enter their billing and credit
card information to purchase a $30 membership. The subscription
page reiterated that only paid members could "create a dispute"
about the content of a profile.
Despite its large number of profile pages, Jerk.com had
relatively few users. Jerk.com had a "Post a Jerk" page that
allowed users to create a profile for themselves or others by
entering a person's first and last name, e-mail address, university
affiliation, and location. But Jerk created the vast majority of
profiles by using a computer program that populated profile pages
with names, photos, and other content obtained from searching
Facebook -- a fact Jerk.com did not disclose on any of its pages.
In April 2014, the Federal Trade Commission's
enforcement arm ("FTC") filed a two-count administrative complaint
charging Jerk and Fanning with engaging in "deceptive acts or
practices in or affecting commerce" in violation of section 5(a)
of the FTC Act. 15 U.S.C. § 45(a)(2). The first count alleged
that Jerk.com misrepresented the source of its content by claiming
that it was entirely user generated. The second count alleged
that Jerk.com misrepresented the benefits of purchasing a $30
membership.
The FTC moved for summary decision (the administrative
equivalent of summary judgment) on both counts in September 2014.
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The Commission granted the motion on both counts and found Fanning
personally liable4 for Jerk's misrepresentations. The Commission
also issued an order enjoining Jerk and Fanning from making certain
misrepresentations and imposing monitoring and recordkeeping
requirements. Fanning (but not Jerk) filed this timely petition.
II. Liability
The FTC Rules of Practice and Procedure allow the
Commission to grant "summary decision," which is reviewed under
the same standard as summary judgment before a district court.
See 16 C.F.R. § 3.24(a)(2); P.R. Aqueduct & Sewer Auth. v. EPA, 35
F.3d 600, 607 (1st Cir. 1994). Under the summary judgment
standard, we "draw all reasonable inference in favor of the non-
moving party," but disregard "conclusory allegations, improbable
inferences, and unsupported speculation." Méndez-Aponte v.
Bonilla, 645 F.3d 60, 64 (1st Cir. 2011) (quoting Del Toro Pacheco
v. Pereira, 633 F.3d 57, 62 (1st Cir. 2011)). This court then
asks whether a reasonable decision maker could conclude there was
4 Fanning makes some statements in his brief proclaiming that he
was merely an advisor to Jerk. In no part of his brief, however,
does Fanning state that he is petitioning for review of the
Commission's finding of personal liability, nor does he develop
any arguments about why the Commission's finding was wrong. We
therefore view this argument as waived. See Rodríguez v.
Municipality of San Juan, 659 F.3d 168, 175 (1st Cir. 2011)
(finding waived claims that are "adverted to in a cursory fashion,
unaccompanied by developed argument").
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no "genuine issue of material fact" that "may affect the outcome
of the case." P.R. Aqueduct, 35 F.3d at 605. Nonetheless,
judicial review of FTC findings is deferential. See Kraft, Inc.
v. FTC, 970 F.2d 311, 316 (7th Cir. 1992). Although "the words
'deceptive practices' set forth a legal standard" and "must get
their final meaning from judicial construction," "the Commission
is often in a better position than are courts to determine when a
practice is 'deceptive'" and "the Commission's judgment is to be
given great weight by reviewing courts." FTC v. Colgate-Palmolive
Co., 380 U.S. 374, 385 (1965).
In determining whether a defendant has engaged in
deceptive acts or practices, the Commission uses a three-part test
considering (1) "what claims are conveyed;" (2) "whether those
claims are false, misleading, or unsubstantiated;" and (3)
"whether the claims are material to prospective consumers." POM
Wonderful, LLC v. FTC, 777 F.3d 478, 490 (D.C. Cir. 2015); see
also Kraft, 970 F.2d at 314; Novartis Corp., 127 F.T.C. 580, 679
(1999). As explained below, Jerk.com contained false and material
statements about the source of its content and the benefits of a
paid membership such that the Commission's grant of summary
decision was proper.
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A. Count I
Under Count I, the FTC alleged that Jerk.com contained
material misrepresentations that its content was user generated.
We agree.
1. The Misrepresentation
Fanning does not dispute that if Jerk.com claimed all of
its profile pages were user generated, that claim would be false.
Rather, he argues that Jerk.com made no such claim. In determining
whether a claim has been made, the Commission looks at the "overall
net impression," POM Wonderful, 777 F.3d at 490 (quoting Kraft,
970 F.2d at 314), left with "consumers acting reasonably under the
circumstances," id. (quoting Thompson Med. Co., 104 F.T.C. 648,
788 (1984)).
"Claims can either be express or implied." Novartis,
127 F.T.C. at 680. "[I]mplied claims fall on a continuum, ranging
from the obvious to the barely discernable." Kraft, 970 F.2d at
319; see also Novartis, 127 F.T.C. at 680; Thompson Med. Co., 104
F.T.C. at 788-89. Although the Commission may look at extrinsic
evidence of consumer perceptions to guide its interpretation, this
is not required. Kraft, 970 F.2d at 319-20. "When confronted with
claims that are implied, yet conspicuous, . . . common sense and
administrative experience provide the Commission with adequate
tools to make its findings." Id. at 320.
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Moreover, the Commission need not find that all, or even
a majority, of consumers found a claim implied. The Commission
has previously stated that if "a[] [claim] conveys more than one
meaning, only one of which is misleading, a seller is liable for
the misleading interpretation even if nonmisleading
interpretations are possible." Telebrands Corp., 140 F.T.C. 278,
291 (2005), aff'd, 457 F.3d 354 (4th Cir. 2006). Liability may
be imposed if "at least a significant minority of reasonable
consumers [would be] likely to take away the misleading claim."
Id.
Starting with Jerk.com's content, the Commission viewed
Jerk.com's references to its "millions" of users; its disclaimers
that it could not be held liable for content because its content
reflected the views of its users; and the "Post a Jerk" page
inviting users to create profile pages as creating a "net
impression" that implied Jerk.com contained wholly user generated
content. 5 Based on its logical interpretation of Jerk.com's
5 Fanning also argues that the Commission violated his due process
rights by finding an implied misrepresentation when the FTC's
motion for summary decision focused primarily on an express
misrepresentation theory. As Fanning conceded at oral argument,
the FTC's complaint and motion for summary decision contained
references to both implied and express misrepresentations. We
therefore find no merit in his claim that he lacked notice that
the Commission could impose liability based on an implied
misrepresentation theory.
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content, we see no basis for setting aside the Commission's
conclusion that at least a significant minority of users could
reasonably view Jerk.com as claiming its content was wholly user
generated.
Fanning's main argument is that the statements on
Jerk.com's "About Us" page that the Commission relied upon were
"part of standard terms and conditions of use" such that "[n]o
reasonable consumer . . . could possibly have been misled to
believe that all content [on Jerk.com] was created by individual
'users.'" Jerk.com's "About Us" page was divided into twelve
sections, three of which stated that users were responsible for
the content they posted.6 Subsection 2 of that page, "Online
Conduct," restricted what users could post on profiles pages and
stated that Jerk.com users agreed to be "solely responsible for
the content or information [they] publish[ed] or display[ed]."
Subsection 4, "Online Content," stated "[o]pinions, advice,
statements, offers or other information or content" on Jerk.com
were "those of their respective authors and not of Jerk LLC."
Subsection 5, "Removal of Information," told users they were
6 The other nine sections discussed limitations on Jerk's
liability ("Indemnity," "Disclaimer of Warranty," and "Limitation
of Liability"), privacy policy ("Information Supplied by You"),
and general legal terms ("Proprietary Rights," "Membership Terms
& Conditions," "State by State Variations," "General Provisions,"
and "Copyright Policy").
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"solely responsible for the content of [their] postings on
jerk.com."
Fanning is correct that the disclaimers on the "About
Us" page would be insufficient to support an implied
misrepresentation claim standing on their own. But the Commission
did not view these statements in isolation -- rather, it looked at
statements made throughout Jerk.com and noted that the statements
on the "About Us" page contributed to an overall net impression
that all content was user generated. Even if the "About Us" page
generally consisted of legal disclaimers, the Commission focused
its analysis on Jerk.com's homepage and "Post a Jerk" pages. The
Commission viewed Jerk.com's homepage, referencing its "millions"
of existing users, as "introduc[ing] the website as a vibrant
source of user participation and social interaction." The
Commission also noted that the benefits Jerk.com advertised on its
homepage -- "[e]nter[ing] comments and reviews for people you
interact with," "[h]elp[ing] others avoid the wrong people," and
"[p]rais[ing] those who help you" -- all "convey[ed] the essential
message that Jerk.com is based on content generated by its users."
This message, the Commission continued, was "further underscored
by the 'Post a Jerk' feature which invited consumers to post
profiles of other individuals to the site." Only after noting
these features did the Commission cite the statements on Jerk.com's
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"About Us" page as also enforcing the impression Jerk.com's content
was user generated.
As the Commission concluded, these pages all "sp[oke] in
terms of user-posted content." Moreover, even if Jerk.com never
expressly represented that its profile pages were created
exclusively by users, it never expressly stated how the pages were
created. The only information regarding the origin of the profile
pages was the "Post a Jerk" page allowing users to create profiles
for other people.7 Given Jerk.com's emphasis on user-generated
content and the lack of information to the contrary, reasonable
consumers could conclude other Jerk.com users created their
profile pages.
7 Fanning briefly suggests that Jerk.com disclosed the source of
its content in the "Remove Me" page. That page stated "No one's
profile is ever removed because Jerk is based on searching free
open internet searching databases and it's not possible to remove
things from the Internet." Disclaimers, however, can mitigate
false statements only if "they are sufficiently prominent and
unambiguous to change the apparent meaning of the claims and to
leave an accurate impression." FTC v. Direct Mktg. Concepts,
Inc., 624 F.3d 1, 12 (1st Cir. 2010) (quoting Removatron, 884 F.2d
at 1497). As discussed above, Jerk.com contained several
statements on its homepage and "About Us" page (those pages that
described Jerk.com for users) stating its content was user
generated. The single statement on a separate page is not
prominent enough to counteract these statements. Thus, we agree
with the Commission that the ambiguous language on the "Remove Me"
page did little to dispel the net impression that Jerk.com's
content was entirely user generated.
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The Commission's interpretation is further bolstered by
extrinsic evidence. 8 Consumers complained to the FTC about
Jerk.com and in many of these complaints, consumers stated concern
that someone they knew created their profile page. The Commission
need only rely on "its own reasoned analysis" in determining
whether a claim has been made, Kraft 970 F.2d at 319, but this
additional evidence is further proof that reasonable consumers
believed Jerk.com claimed its content was user generated. In
light of this record, we see no genuine issue of material fact as
to whether Jerk.com contained an implied misrepresentation about
the source of its content.
2. Materiality
The FTC Act imposes liability for misrepresentations
only if they are material. See POM Wonderful, 777 F.3d at 490.
"A claim is considered material if it 'involves information that
is important to consumers and, hence, likely to affect their choice
of, or conduct regarding a product.'" Kraft, 970 F.2d at 322
(quoting Cliffdale Assocs., 103 F.T.C. 110, 165 (1984)). The
Commission presumes materiality with at least four types of claims:
(1) express claims; (2) intended implied claims; (3) claims
8 Based on the adequacy of the record to support the other findings
made, we do not analyze the contention that Jerk and Fanning fully
intended to convey at least implicitly that profiles were user
generated.
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involving health or safety; and (4) claims pertaining to a central
characteristic of the product about "which reasonable consumers
would be concerned." Id.; see Cliffdale Assocs., 103 F.T.C. 110
(1984) (noting that "information pertaining to the central
characteristic of the product or service will be presumed
material").
Fanning argues that the Commission relied upon
"advertising cases" in which "consumers made product purchasing
decisions in reliance upon purported implied representations
within the advertisements at issue," and that nothing on Jerk.com
could be construed as an advertisement. There is no requirement
that a misrepresentation be contained in an advertisement. The
FTC Act prohibits "deceptive acts or practices," 15 U.S.C.
§ 45(a)(2) (emphasis added), and we have upheld the Commission
when it imposed liability based on misstatements not contained in
advertisements, see, e.g., Sunshine Art Studios, Inc. v. FTC, 481
F.2d 1171, 1173-74 (1st Cir. 1973) (finding FTC Act violation based
on company's practice of sending customers excess merchandise and
using "a fictitious collection agency to coerce payment"). We see
no reason why it would not be a deceptive act or practice to place
misrepresentations on websites if those misrepresentations
"affect[ed] [consumers'] choice of, or conduct" regarding the
website. Kraft, 970 F.2d at 322.
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On this point, Fanning does not provide us with any
arguments as to why the Commission concluded incorrectly that
consumers altered their behavior based on Jerk.com's
misrepresentation that its content was user generated. The
Commission concluded that a presumption of materiality applied
because Jerk.com misrepresented one of its central
characteristics. We see no logical gap in the Commission's view
that the source of profile pages goes to a central characteristic
of a social networking website. A consumer's belief that Jerk.com
had many users or that an acquaintance made his or her profile
page would influence that consumer's decision to use Jerk.com or
purchase a membership. The Commission also cited evidence that
some consumers, in fact, purchased memberships from Jerk.com based
on concerns that someone they knew created their profile pages and
it would be seen by others. We thus conclude summary decision was
proper on Count I.
B. Count II
We also agree with the Commission that Jerk.com
contained material and false statements about the benefits of its
$30 paid membership. Jerk.com's "Remove Me" and "billing
information" pages stated that a $30 paid membership would allow
users to "manage [their] reputation and "create a dispute" about
the content of a profile page. As the Commission found, Jerk.com
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expressly represented that a $30 membership would allow users to
contest and potentially remove negative reviews on their profile
pages.
Fanning has failed to create a genuine dispute about the
falsity of this claim. Two FTC investigators paid the $30
membership fee and never received any communication from Jerk.
The FTC received numerous complaints stating the same. Fanning
adduces no evidence showing Jerk.com provided services to (or even
communicated with) users who paid the membership fee. He argues
only that there was a factual dispute about whether Jerk or Fanning
engaged in a "pattern [or] practice . . . to take money from
consumers without providing benefits as promised." Fanning,
however, fails to cite any evidence to the contrary -- the record
is bereft of any evidence that Jerk.com provided even one paid
member the opportunity to contest information on a profile page.
There is no evidence suggesting the people who paid but received
no benefits were an aberration or mistake. "[C]onclusory
allegations . . . are insufficient to defeat summary judgment" and
Fanning has failed to provide more than that. Margarian v.
Hawkins, 321 F.3d 235, 240 (1st Cir. 2003) (quotation mark
omitted).
We also conclude Jerk.com's misrepresentation was
material. As the Commission found, this misstatement triggers two
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separate presumptions of materiality -- it was both express and
about a central characteristic of the $30 membership. See Kraft,
970 F.2d at 322. The Commission also found ample evidence that
the misrepresentation affected consumer behavior, as reflected in
the numerous complaints from consumers stating they paid the
membership fee so that they could have their profiles (or reviews
contained therein) removed. We find summary decision proper on
Count II as well.
III. The FTC's Order
Even if the Commission properly held him liable, Fanning
argues that the Commission's injunctive order against him is
overbroad on both statutory and First Amendment grounds. In Part
I of its order, the Commission enjoins Jerk and Fanning from
misrepresenting the "source of any content on a website" and "the
benefits of joining any service." Fanning argues that this
provision abridges his First Amendment right to free speech. In
addition, the Commission subjects Fanning to several monitoring
and reporting provisions, which Fanning challenges as overbroad.
The Commission may enter a cease and desist order if it
finds that a method of competition or practice violates other parts
of the FTC Act. 15 U.S.C. § 45(b). The Supreme Court has
interpreted the FTC Act as giving the Commission "wide discretion
in determining the type of order that is necessary to cope with
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the unfair practices found." Colgate-Palmolive, 380 U.S. at 391.
Thus, the Commission may "frame its order broadly enough to prevent
respondents from engaging in similarly illegal practices" in the
future. Id. at 395. The Court has similarly held that "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.
If the Commission is to attain the objectives Congress envisioned
. . . it must be allowed effectively to close all roads to the
prohibited goal." FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952).
A. Injunction on Misleading Speech
We find no merit to Fanning's objections to the
Commission's order enjoining him from making any
misrepresentations about the "source of any content on a website"
and "the benefits of joining any service." Fanning's only
objection to this provision is on First Amendment grounds. The
First Amendment, however, does not protect misleading commercial
speech. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of
N.Y., 447 U.S. 557, 563 (1980); see also Wine & Spirits Retailers,
Inc. v. Rhode Island, 481 F.3d 1, 8 (1st Cir. 2007) ("[A]dvertising
that is actually misleading 'may be prohibited entirely.'"
(quoting In re R.M.J., 455 U.S. 191, 203 (1982))).
Fanning counters that the Commission erred by
categorizing the content of Jerk.com as commercial speech because
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it "did not solely involve economic interests." Even if Jerk.com
did not contain only commercial speech, the Commission's order
explicitly states Fanning may not engage in two types of
misrepresentations "in connection with the marketing, promoting,
or offering for sale of any good or service." This language
unambiguously limits the order's reach to commercial speech.
In the alternative, Fanning argues that commercial
speech is still subject to First Amendment protection. Although
that statement is true, as we previously noted, the First Amendment
does not protect misleading commercial speech. Contrary to
Fanning's assertions, the Commission's order reaches only
misrepresentations. We recognize that the First Amendment
requires the Commission's order to have a "'reasonable fit' between
the restriction and the government interest it serves," but that
requirement has been satisfied. Id. at 117 (quoting Bd. Of Trs.
v. Fox, 492 U.S. 469, 480 (1989)). The Commission limited its
injunction to misrepresenting a website's source of content and
the benefits of joining a service, the two violations related to
its findings regarding Jerk.com. We therefore uphold Part I of
the Commission's order.
B. Monitoring Provisions
More problematic, however, are the order's monitoring
provisions. We may interfere with a Commission order if "the
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remedy selected bears no reasonable relation to the unlawful
practices found to exist," Removatron Int'l Corp. v. FTC, 884 F.2d
1489, 1499 (1st Cir. 1989) (quoting FTC v. Nat'l Lead Co., 352
U.S. 419, 428 (1957)), or "the order's prohibitions are not
sufficiently 'clear and precise in order that they may be
understood by those against whom they are directed,'" id. (quoting
Colgate-Palmolive, 380 U.S. at 392). On this former
reasonableness prong, we have found seven factors as instructive
in guiding our analysis:
(1) the deliberateness of the violation; (2) the
violator's past record . . . ; (3) the adaptability
or transferability of the unfair practice to other
products; (4) the seriousness of potential
violations, including health hazards; (5) the length
of time the deceptive ad [or practice] has been used;
(6) the difficulty for the average consumer to
evaluate such claims through personal experience;
and (7) whether the pervasive nature of government
regulation of the product at issue is likely to
create a climate in which questionable claims have
all the more power to mislead.
Id. (quotations marks and citations omitted). We evaluate these
factors using a "sliding scale" approach. Telebrands Corp., 457
F.3d at 358-59. "[N]o single factor [is] determinative" and the
"more egregious the facts with respect to a particular element,
the less important it is that another negative factor be present."
Removatron, 884 F.2d at 1499 (second alteration in original)
(quoting Sterling Drug, Inc. v. FTC, 741 F.2d 1146, 1155 (9th Cir.
1984)).
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Parts III, IV, and VI of the Commission's order contained
various monitoring provisions and Fanning challenges them all. We
address their validity in turn.
1. Recordkeeping Provisions
Part III of the FTC order contains two monitoring
provisions for which Fanning now seeks review. First, Fanning
challenges the provision requiring him to "maintain" and "make
available" "advertisements and promotional materials containing
any representation covered by [the] order" for a period of five
years. Fanning argues that compliance with this provision is
"unmanageable" and "nonsensical" because Jerk.com did not contain
any advertisements or promotional material. Second, Fanning
argues that the Commission's requirement that he notify it of any
"[c]omplaints or inquiries relating to any website or other online
service" for a period of five years are overly punitive in light
of the Commission's finding of an implied misrepresentation.
We conclude these recordkeeping provisions are
reasonably related to Fanning's FTC Act violations. They ensure
the Commission will know about Fanning's other business ventures,
how Fanning portrays them to the public, and how the public
perceives them. These requirements are also tied to the subject
matter of Fanning's violation -- misrepresenting the source of
Jerk.com's content and the benefit of its membership subscription.
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Under the Commission's order, Fanning need only maintain
advertisements and promotional material containing representations
about the content on a website or the benefits of joining a
service. These monitoring provisions seem particularly reasonable
based on "the adaptability or transferability of the unfair
practice to other products." Removatron, 884 F.2d at 1499. As
the Commission noted, Jerk.com appeared under different domain
names. Fanning also started a similar website called "Reper"
while running Jerk.com. The ease with which Jerk.com's practices
could be transferred to other websites weighs in favor of requiring
Fanning to comply with some reporting requirements.
Moreover, we reject Fanning's contention that the
complaint monitoring provision must be invalidated because it is
disproportionate to an implied misrepresentation claim. Although
Jerk.com contained only an implied misrepresentation of the source
of its content, it expressly misrepresented the benefits of paying
for a membership subscription. The deliberateness of Jerk.com's
express representation that it provided membership services also
favors allowing the Commission to engage in tailored monitoring.
2. Order Acknowledgment & Compliance Monitoring
Finding the Commission's recordkeeping provisions
reasonable, we turn our attention to the broader reporting
requirements. Part IV of the order requires Fanning to give "a
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copy of [the Commission's] order to all current and future
principals, officers, directors, and managers, and to all current
and future employees, agents, and representative having
responsibilities with respect to the subject matter of [the] order,
and shall secure from each such person a signed and dated statement
acknowledged receipt" for a period of twenty years. Fanning
argues this provision is "overly-broad" and does not serve a
legitimate government interest. Part VI of the order, "compliance
monitoring," requires Fanning to "notify the Commission of . . .
his affiliation with any new business or employment," and submit
information including the new business's "address and telephone
number and a description of the nature of the business" for a
period of ten years. Fanning argues that requiring him to report
all "affiliation[s]" with any business venture is both overly vague
and onerous. He also argues that this reporting lacks a reasonable
relation to his violation.
Although we uphold the order acknowledgment provisions,
we conclude the compliance monitoring provisions are not
reasonably related to Fanning's violation. In response to
Fanning's argument that the order acknowledgment provisions are
overly broad, the Commission notes that Fanning need only notify
individuals who have responsibilities related to the subject
matter of its order. As with the recordkeeping provisions, we
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view the transferability of Jerk.com's deceptive practices and the
deliberateness of Fanning's violations as key. Distribution of
the order to individuals with related responsibilities puts them
on notice of the prohibited conduct and thus makes it more
difficult for Fanning to receive assistance in replicating
Jerk.com's deceptive practices. Rather than serving no legitimate
government interest, as Fanning claims, the order acknowledgment
provisions are permissible fencing-in provisions that help "close
all roads to the prohibited goal." Ruberoid, 343 U.S. at 473.
In contrast, Fanning's compliance monitoring provisions
do not contain a similar restriction. Fanning must notify the
Commission of all business affiliations and employment --
regardless of whether or not the affiliate or employer has
responsibilities relating to the order. Notably, the compliance
monitoring provisions applicable to Jerk require it to report only
those changes in its structure "that may affect compliance
obligations arising under this order." Both the order
acknowledgment and Jerk's compliance monitoring provisions are
tied to Jerk.com's FTC Act violations. Fanning's compliance
monitoring provisions are the only parts of the order not
containing such a requirement of relevance. When asked at oral
argument, the Commission conceded that this provision would
ostensibly require Fanning to report if he was a waiter at a
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restaurant. The only explanation offered by the Commission for
this breadth is that it has traditionally required such reporting.
The Commission cites several district courts approving proposed
orders by the FTC containing similar provisions. The orders,
however, are not only less onerous 9 than the one imposed on
Fanning, but also almost entirely bereft of analysis that might
explain the rationale for such a requirement. 10 Without any
9 The Commission cites several orders that require individuals to
report any change of business and that business's contact
information for twenty years. See FTC v. HES Merchant Servs. Co.,
No. 6:12-cv-1618, 2015 WL 892394, at *8 (M.D. Fla. Feb. 11, 2015)
(requiring defendant to report change in title or role and identify
name, physical address, and any Internet address of the business
for twenty years); FTC v. Wellness Support Network, Inc., No. 10-
cv-4879, 2014 WL 644749, at *20-22 (N.D. Cal. Feb. 19, 2014)
(same); FTC v. Ivy Capital, Inc., No. 2:11-cv-283, ECF No. 409, at
17 (D. Nev. July 5, 2013), aff'd in part and vacated and remanded
in part on unrelated grounds, 616 F. App'x 360 (9th Cir. 2015)
(same); FTC v. John Beck Amazing Profits LLC, No 2:09-cv-4719, ECF
No. 643, at 27-28 (C.D. Cal. Aug. 21, 2012) (same); FTC v.
Navestad, No. 09-cv-6329, 2012 WL 1014818, at *11 (W.D.N.Y.
Mar. 23, 2012) (same). Those orders that do require individuals
to also provide descriptions of their employers and business last
only for three to five years. See FTC v. Neovi, No. 3:06-cv-1952,
ECF No. 118, at 10 (S.D. Cal. Jan. 7, 2009) (requiring defendant
to report change in employment with name, address, and description
of business for five years); FTC v. Pac. First Benefit, 472 F.
Supp. 2d 981, 988 (N.D. Ill. 2007) (requiring defendant to report
name, address, and description of employment or business for five
years); FTC v. Gill, 71 F. Supp. 2d 1030, 1051 (C.D. Cal. 1999)
(requiring defendant to report name, address, and description of
employment or business for three years).
10 Of the cited cases, only FTC v. Wellness Support Network, Inc.
contains an explanation for the compliance reporting requirements.
The defendants in that case made misleading representations about
diabetes products over the course of eight years. Wellness
Support, 2014 WL 644749, at *2. The district court concluded that
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guidance from the Commission, we cannot find these provisions are
reasonably related to Fanning's violation. As a result, we
conclude the Commission's order, in this respect, must be vacated
and remanded.
IV. Conclusion
We affirm the Commission's entry of summary decision as
to liability and all provisions of its remedial order except for
compliance monitoring as to Fanning. As to that, we vacate and
remand that portion of its order for proceedings consistent with
this opinion. The parties shall bear their own costs.
Vacated and Remanded.
lengthy monitoring was necessary because the defendants had been
"personally involved in serious violations of the FTC Act over a
period of many years." Id. at *22. The district court simply
states that the Commission must know the defendant's business
affiliation "in order. . . to monitor Defendants' compliance."
Id. We do not find this bare analysis persuasive.
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