Last June, the Federal Trade Commission (FTC) brought a lawsuit against Gravity Defyer and its owner in federal court, alleging that the defendants were making deceptive pain-relief claims for Gravity Defyer footwear. The lawsuit alleged violations of the FTC Act as well as violations of a prior FTC administrative order that had been entered against the owner back in 2001. (And, as you may know, FTC administrative orders last 20 years, so this was quite a close call on the timing front.)
The FTC had attempted to negotiate a settlement before filing the case. The company and owner, however, had a different idea and instead raced to the courthouse. They filed an action seeking a declaratory judgment that the FTC’s action was “unconstitutional under the First and Fifth Amendments” as well as an injunction barring the FTC from taking actions to “ban [Plaintiff’s] speech” based on a study involving the footwear in question. Soon after this action was filed, the FTC filed its lawsuit, and both matters were consolidated before the same court.
The FTC quickly moved to dismiss Gravity Defyer’s action. And just a few days ago, the court issued its decision; it was a resounding victory for the agency. The court struck down all the company’s arguments, finding that, among other things, the company would be able to raise all its issues and concerns as defenses to the FTC’s lawsuit. It also did not look too fondly on the fact that the company was well aware that the FTC lawsuit was imminent, which provoked its “disorderly race to the courthouse.”
This is a strategy that happens perhaps a handful of times per year, and it doesn’t have a particularly high success rate. We saw this strategy used last year in another FTC case, involving Kochava, which also preemptively sued the agency. That case is still in litigation and involves some interesting allegations relating to Kochava’s role in the sale of consumer geolocation data.
Now, we are not saying that this strategy will never work, but the odds are decidedly not in your favor in such a preemptive action, particularly during the latter stages of an FTC investigation. Never say never –perhaps there will be a unique set of facts and circumstances that warrant such an action, but it will more likely be a waste of time and resources.
And for a bit of FTC trivia: Claims involving footwear have surprisingly played a pretty significant role in FTC practice. Indeed, at the oral argument in the AMG case, Justice Stephen Breyer raised questions about an earlier FTC footwear case by name – the 2012 Skechers case that challenged, among other things, weight loss and butt-toning claims made in ads that featured, among others, Kim Kardashian and Brooke Burke.