Court of Appeals Remands Case; Despite Victory, Hi-Tech not out of the Woods

May 11, 2015

By Riëtte van Laack

The Court of Appeals for the Eleventh Circuit overturned a contempt order against Hi-Tech, Jared Wheat, Stephen Smith, and Dr. Terrill Mark Wright (“Hi-Tech”) because, according to the Court, the order was incorrectly premised on collateral estoppel. 

As we discussed in a previous post, since 2004, Hi-Tech has been involved in a lawsuit by the Federal Trade Commission (FTC) regarding Hi-Tech’s advertising claims for certain weight loss dietary supplements.  Pursuant to a 2008 permanent injunction, Hi-Tech was prohibited from making claims about weight-loss products unless they “possess[] and rel[y] upon competent and reliable scientific evidence that substantiates” the claim.  According to FTC, Hi-Tech continued to promote weight loss products without having the required substantiation.  In 2011, the FTC moved the district court to order Hi-Tech to show cause why they should not be held in contempt for making unsubstantiated claims. 

Hi-Tech submitted evidence and an expert declaration in support of the challenged representations.  However, this evidence did not include randomized placebo controlled double blind studies (RCTs), and the district court refused to consider this evidence.  According to the district court, the doctrine of collateral estoppel applied.  It reasoned that because it previously had determined that nothing but RCTs would be sufficient to support claims, it need not review evidence that fell short of that standard. 

However, the Court of Appeals concluded that this was incorrect; and the district court misapplied the doctrine of collateral estoppel.  The Court explained that  the 2008 permanent injunction order  involved different representations, different products, and the interpretation of a different legal standard.  According to the Court, the level of substantiation required for the representations at issue in the contempt proceedings was not “identical” to any issue the district court decided in the earlier litigation and, thus, collateral estoppel did not apply.  Accordingly, the Court of Appeals vacated the order and remanded for further proceedings.

Although the ruling appears a win for Hi-Tech, the reversal does not mean that Hi-Tech is out of the woods. The reversal is a procedural, not a substantive victory.  The Court of Appeals merely determined that the district court should have considered the evidence of substantiation.  It did not consider or rule on whether the evidence constituted competent and reliable scientific evidence.  In fact, the Court of Appeals specifically stated that, on remand, the district court is “to determine the admissibility of any evidence offered by [the FTC] and by [Hi-Tech] and make findings about whether any evidence of substantiation, if admissible, satisfies the standard of the injunctions for ‘competent and reliable scientific evidence.’”