Vemma prohibited from blaming consumers for losses
When Vemma, BK Boreyko and Tom Alkazin filed their defenses to the FTC’s case against them, one of the more disturbing defenses raised was that somehow consumers were to blame for their losses.
The FTC and/or the consumers it purports to represent have failed to mitigate their losses, if any.
Any losses sustained by the FTC and/or the consumers it purports to represent were caused by the acts or omissions of third parties over whom the Corporate Defendants had no control or right to control.
Consumers represented by the FTC knowingly and voluntarily, and possibly unreasonably, exposed themselves to any claimed losses with knowledge or appreciation of the risk involved.
The above is how Vemma worded the defense. Boreyko and Alkazin filed similarly worded defenses.
The FTC objected to this shirking of responsibility onto consumers (many of which were/are Vemma affiliates).
The FTC argues that these are not valid affirmative defenses because relief under the FTC Act is equitable and dependent on the amount of gain by Defendants, not loss by consumers.
The good news is the court has agreed, with neither Vemma, Boreyko or Alkazin permitted to defend themselves by blaming Vemma consumers for their own losses.
In their objection to defenses raised, the FTC sought ‘to strike all but one of the affirmative defenses raised in the Answers filed by‘ Vemma, Boreyko and Alkazin.
Here they weren’t so successful, with the court ruling that only one affirmative defense be struck.
The Court finds that Defendants gave the FTC fair notice of their affirmative defenses with one exception: Defendants’ allegations that the FTC’s claims for injunctive and other relief are unconstitutional or otherwise not authorized or available at law or equity.
These allegations lack any specificity and thus provide the FTC with inadequate information to prepare its case—indeed, it was only in Defendants’ briefs that the Court could begin to discern these affirmative defenses.
Accordingly, the Court will grant the FTC’s Motion with regard to these affirmative defenses.
Vemma, Boreyko and Alkazin have been granted leave to ‘amend their Answers if they can state these affirmative defenses with enough specificity to give fair notice to the FTC‘.
In their filed defenses, Vemma, Boreyko and Alkazin all claimed that the FTC failed to state a claim for relief.
The FTC argued this was ‘not a proper affirmative defense‘, with Judge Tuchi agreeing.
the Court agrees with the conclusion of other district courts in the Ninth Circuit that failure to state a claim is properly raised as a challenge to a plaintiff’s prima facie claim, not as an affirmative defense to it.
The “failure to state a claim defense” was ordered struck with ‘no leave to amend‘.
Another defense raised by Vemma, Boreyko and Alkazin was that they “acted in good faith”.
The FTC objected to this, claiming it ‘is not a valid affirmative defense because good faith is not a defense to FTC Act liability.‘
While this is true, the Court agrees with other district courts in the Ninth Circuit that have found that good faith may be asserted against the granting of a permanent injunction.
Because the FTC seeks a permanent injunction in this case, good faith is to that extent a valid affirmative defense.
Accordingly, the Court will deny the FTC’s Motion in this regard.
The final defense the FTC objected to was on the grounds it was negative rather than affirmative in nature.
that is, (it is) not grounded in Defendants’ admission of the essential facts of the FTC’s claims coupled with a statement of some other justification, but rather are denials of the essential facts.
The defense in question pertained to Vemma, Boreyko and Alkazin’s
allegation that the losses sustained by the FTC or consumers were not caused by Vemma, Boreyko and Alkazin, but rather third parties over whom Vemma, Boreyko and Alkazin had no control or right to control.
The court sided with the FTC on this one, agreeing
that this is simply Defendants’ denial of their own liability and thus wrapped up in the denials contained in Defendants’ Answers.
If you’re still a bit confused, basically Vemma, Boreyko and Alkazin had tried to present a blanket denial as a defense. The FTC pointed out this wasn’t proper and the court agreed.
The Court will therefore grant the FTC’s Motion to Strike these affirmative defenses, and because Defendants cannot cure the defect, they may not amend.
With respect to the claim the FTC’s lawsuit is ‘unconstitutional or otherwise not authorized or available at law or equity‘, Vemma, Boreyko and Alkazin have been given till July 15th to file an amendment.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Judge Tuchi’s 30th June order.