Gravity Defyer Medical Technology Corp. v. Federal Trade Commission

Citation: Not availableDocket: Civil Action No. 2022-1157

Court: District Court, District of Columbia; March 20, 2023; Federal District Court

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Gravity Defyer Medical Technology Corporation and its founder, Alexander Elnekaveh, are involved in a legal dispute with the Federal Trade Commission (FTC) regarding advertising claims related to their footwear, which allegedly provide significant pain reduction as supported by a study conducted at Olive View UCLA Medical Center. The FTC contends that these advertisements are false or deceptive, violating the Federal Trade Commission Act. Gravity Defyer argues that the FTC's actions are unfounded and that their advertisements are protected commercial speech under the First Amendment.

In the case No. 22-1157, Gravity Defyer seeks a declaratory judgment asserting that the FTC's efforts to restrict their advertising infringe on their First Amendment rights and violate their Fifth Amendment due process rights. They also request a permanent injunction against the FTC's actions. The FTC, however, argues that such claims should be raised as defenses in the ongoing enforcement action against them in case No. 22-1464 and has moved to dismiss the amended complaint in this case.

The Court accepted the factual allegations from the Plaintiffs' complaint as true for the purpose of evaluating the FTC's motion. Gravity Defyer is described as a California corporation specializing in comfort footwear, including shoes with "VersoShock" technology designed to lessen pain caused by walking and running. The FTC initiated a Civil Investigative Demand in July 2019 to examine the company's pain reduction claims, particularly focusing on a study commissioned by Gravity Defyer that indicated significant pain reduction for participants using their footwear compared to a control group. The Court has granted the FTC's motion to dismiss the case.

The FTC raised concerns regarding a study related to Gravity Defyer's advertising claims, citing its inadequate size, duration, lack of proper double-blinding, and reliance on self-reported pain levels without functional testing. In an attempt to avoid litigation, Gravity Defyer and its founder, Alexander Elnekaveh, proposed modifying their advertising language, but the FTC deemed this proposal unacceptable and suggested alternative claims instead. The FTC expressed a desire for a settlement including monetary compensation and a stipulated order, contingent on Gravity Defyer ceasing claims based on the study. Settlement talks failed, leading the FTC to refer the case to the Department of Justice. Subsequently, Gravity Defyer filed a lawsuit seeking declaratory and injunctive relief, claiming the FTC's actions were unconstitutional. The FTC then initiated an enforcement action against Gravity Defyer, alleging violations of the FTC Act and a previous 2001 order prohibiting misrepresentation in advertising. After the FTC's enforcement action, it moved to dismiss Gravity Defyer's lawsuit as moot. Gravity Defyer responded with an amended complaint and a motion to dismiss the FTC's enforcement action, contesting the FTC's claims and the applicability of the 2001 order. The court consolidated the two cases, with the FTC's motion to dismiss the amended complaint currently under consideration.

Plaintiffs' claim for injunctive relief regarding the FTC's completed investigation is deemed moot, as they do not demonstrate a likelihood of recurrent cognizable harm, leading the Court to conclude it lacks jurisdiction for such relief. The remaining request seeks to prevent the FTC from future actions that may ban Plaintiffs' speech based on a UCLA study, particularly in relation to ongoing enforcement actions. To qualify for a permanent injunction, Plaintiffs must prove four criteria: (1) imminent irreparable injury, (2) inadequacy of legal remedies like monetary damages, (3) that equitable relief is warranted considering the balance of hardships, and (4) that the public interest would not be harmed by the injunction. Failure to meet any of these criteria warrants a denial of relief, and if a less drastic remedy suffices, an injunction is unnecessary.

The Court references the case of Morgan Drexen, Inc. v. Consumer Fin. Prot. Bureau, where the D.C. Circuit affirmed the denial of injunctive relief because the plaintiff could address its constitutional challenges as a defense in pending enforcement actions. The Morgan Drexen case highlights that once enforcement action is initiated, the plaintiff is relieved of the dilemma of choosing between violating the law or facing penalties. Similarly, since the FTC has initiated its enforcement action against Plaintiffs, they can now assert their constitutional defenses in that context.

Gravity Defyer and Elnekaveh present a limited First Amendment argument in their motion to dismiss the enforcement action, which the Court indicates can be expanded in a future motion if they choose to refile. Plaintiffs assert they face a "dilemma" regarding continuing their advertising amid potential penalties or ceasing it entirely during the FTC enforcement process, claiming irreparable harm. However, the Court finds this claim unconvincing for several reasons: 

1. The Plaintiffs have not sought expedited judicial treatment nor temporary relief, undermining their claims of urgency.
2. They fail to demonstrate ongoing First Amendment injury, as they continue advertising based on their interpretation of the UCLA Study.
3. Allegations regarding their bank's concerns and potential withdrawal of credit lack support in their amended complaint and do not constitute imminent irreparable harm as they are speculative.
4. The Court emphasizes that irreparable harm must be significant and immediate, not merely based on potential future losses or the burdens of litigation. 

In conclusion, without evidence of an imminent threat to Gravity Defyer's existence, delays from litigation do not equate to irreparable harm.

Maintaining two separate lawsuits would increase litigation costs without providing any additional meaningful relief, as the plaintiffs already have an adequate remedy available through a separate enforcement action. Consequently, the court will grant the FTC’s motion to dismiss the plaintiffs' claims for injunctive relief.

Regarding the plaintiffs' declaratory judgment claims, the court considers the FTC's argument to decline jurisdiction under the Declaratory Judgment Act. This Act allows federal courts to declare rights in cases of actual controversy but grants them discretion in whether to exercise this jurisdiction. The D.C. Circuit has outlined several factors to guide this discretion, including the potential for a declaratory judgment to settle the controversy, the availability of other remedies, and the convenience for the parties involved.

In this case, the factors strongly indicate against exercising jurisdiction. A declaratory judgment would not efficiently resolve the dispute, as the plaintiffs could raise their constitutional challenges as defenses in the enforcement action. Thus, allowing the declaratory action would not expedite the situation and would merely duplicate efforts already available in the other legal context.

The pending coercive action initiated by the natural plaintiff encompasses all issues relevant to the declaratory judgment action, rendering the use of the declaratory judgment remedy unjustified. The Declaratory Judgment Act is intended for cases where actual controversies exist but have not yet reached a stage for coercive relief, or where a party eligible for such relief has not yet initiated action. Since the enforcement action allows the plaintiffs to present all their arguments and provides a forum for the FTC to introduce additional arguments, the need for a separate declaratory judgment action is diminished. 

Previous case law supports this position, as seen in POM Wonderful LLC v. Fed. Trade Comm’n, where the court declined to exercise jurisdiction under the Declaratory Judgment Act, noting unresolved issues regarding the plaintiff’s health claims. Similarly, in this case, resolving the plaintiffs' claims would still leave significant questions regarding the FTC's enforcement action unanswered, such as the implications of a 2001 Commission Order on advertising claims. 

Plaintiffs argue that consolidation of their case with the enforcement action justifies separate proceedings; however, consolidation does not merge the cases, and maintaining their distinct identities is necessary for effective case management. The court must evaluate which action serves the parties' needs and addresses the broader conflict comprehensively. 

Moreover, plaintiffs have not demonstrated a specific interest in maintaining two separate suits that could not be adequately addressed through defenses in the enforcement action. The D.C. Circuit suggests that courts typically refrain from granting declaratory relief if it does not clearly benefit the party alleging injury. Additionally, considerations regarding equitable conduct and preventing procedural fencing further weigh against exercising jurisdiction under the Declaratory Judgment Act, particularly given the plaintiffs' mixed arguments concerning the merits of their claims and the procedural implications.

Plaintiffs are permitted to raise their concerns regarding the UCLA Study in the FTC's enforcement action, but the court finds that allowing Plaintiffs to maintain a separate defensive action would encourage procedural manipulation in the future. The FTC had informed Plaintiffs about the enforcement referral prior to their lawsuit. Courts are generally skeptical of declaratory actions filed shortly before enforcement actions, as these can disrupt the traditional choice of forum and lead to premature litigation. The court notes that the conditions of both cases are similar, with neither having progressed beyond the motion-to-dismiss stage, and both parties being equally adversarial. While the First and Fifth Amendment claims raised by Plaintiffs are deemed significant, they can be addressed in the enforcement action, thus avoiding unnecessary constitutional determinations. The court declines to exercise jurisdiction over the Plaintiffs' declaratory judgment claim and grants the FTC's motion to dismiss. Plaintiffs will have the opportunity to refile their motion in the enforcement action, with a status report due by March 24, 2023, regarding their intentions. The current docket will be closed, and future pleadings will be directed to the enforcement action docket.