Covid-19 Act gives government more options in proceeding against supplement seller

U.S. v. Nepute, 2023 WL 4623089, No. 4:21-CV-437 RLW (E.D. Mo. Jul. 19, 2023)

The US sued Nepute (a chiropractor) and Quickwork (a company of which he is a member/co-manager). for deceptive advertising of dietary supplements in violation of the FTCA and the COVID-19 Consumer Protection Act. Here, the court excluded/limited Nepute’s proposed experts, denied partial summary judgment to Nepute, and granted partial summary judgment to the US on a few issues, including whether the challenged materials were ads.

“Since early 2020, Defendant Nepute and Quickwork have used several platforms, including social media, emails, and radio, to tout the purported benefits of Vitamin D and zinc and to promote Wellness Warrior supplements.” The government alleged that Nepute made false and misleading claims about the supplements, including that Wellness Warrior supplements containing Vitamin D and/or zinc are effective for the treatment, cure, prevention, or mitigation of coronavirus disease 2019 (“COVID-19”), and that they provide equal or better protection against COVID-19 than available vaccines. Given its powers under the COVID-19 Act, the government sought not just a permanent injunction, but damages, including recission/restitution/disgorgement, as well as civil penalties.

The court excluded the testimony of Dr. Parks, who had (as relevant) a Ph.D. in cellular and molecular biology in 1999 but hadn’t conducted academic or peer-reviewed research since 2000; none of this research related to zinc or any dietary supplement, or to covid.  Since 2004, she worked as a high school teacher at a homeschool co-op in Michigan. Her education and research were insufficient to qualify her to testify as to the clinical benefits of zinc and the prevention and treatment of COVID-19.

Defendant Nepute also couldn’t testify as an expert (as opposed to as a fact witness). He has a 2007 Doctor of Chiropractic degree and some post-doctorate training, including certification as a Doctor of Natural Medicine and as a Certified Nutrition Specialist. He conducted no studies or research, led/participated in no clinical trials, and published no academic papers in any peer-reviewed journal. The primary focus of his practice is the treatment of neuromusculoskeletal complaints and fatigue; he does not treat disease in his chiropractic practice, and there was no record of any experience treating infectious diseases or covid. He lacked the education, training, and experience to testify regarding the clinical benefits of Vitamin D and zinc to prevent or treat COVID-19.

As a fact witness, the government agreed that he could supply what he claims is “the scientific basis upon which he made the alleged misstatements” for the purpose of assessing whether he had sufficient substantiation for his claims.  But he couldn’t testify as an expert on whether such evidence was sufficient to satisfy the relevant scientific community that Vitamin D and zinc can treat and/or prevent COVID-19.

Were the publications at issue ads? “In general, advertisements provide consumers with information regarding products or services for sale in commerce.” Under Section 12 of the FTC Act, an “advertisement” is a publication that has the “tendency or capability to induce the sale of [a] product.” Publications “designed to convey the point that consumption of a particular product [will convey a health benefit] are clearly likely to induce the purchase of that product.” It was undisputed that Nepute used several platforms to share the purported benefits of Vitamin D and zinc and his Wellness Warrior supplements, including Facebook videos, emails, and FM radio shows. Along with the claims, consumers were directed to websites where they could get a “free” bottle and buy additional bottles.

Nepute argued that these were just educational materials and argued that, “in many cases, listeners were directed to the Quickwork website[s] for the express purpose of providing further health information.” Because the websites do more than simply sell vitamins and supplements – they are “interconnected with the exposition of ideas about how to live a healthy life” – he argued that references to the websites in the publications didn’t make them ads, and that his content was “infused with political speech.” First, Nepute didn’t offer a First Amendment defense in the answer and couldn’t do so now. But even if he had, his speech was not entitled to First Amendment protection: The publications were commercial speech, and there were fact issues on falsity/misleadingness, for which he could be held liable.

The evidence didn’t support the claim that the websites were used as educational references. E.g.:

So here’s what I want you to do. Go to freevitamindeals.com – that’s freevitamindeals.com so that you can get the products that you need. I’m giving you a bottle of zinc for free, a bottle of D3 for free. I need you to buy that immune pack. You’d be silly not to get it. If you don’t want to, that’s fine. But I’m just telling you what you need to do. According to the research, it’s what you should be doing.

By the delivering the message about the benefits of Vitamin D and zinc in conjunction with providing the websites where viewers and readers could purchase Vitamin D and zinc, the videos and emails were clearly likely to induce the purchase of these products.

The radio shows were a closer call; they were two hours long and weren’t limited to Vitamin D and zinc, or even COVID-19, vaccines, or other available treatments. But the parts that the government was challenging were ads: “During the radio programs themselves – outside the scheduled commercial breaks – Defendant Nepute made statements that the consumption of Vitamin D and/or zinc will provide certain health benefits; he delivered his message in conjunction with providing websites where listeners could purchase Wellness Warrior Vitamin D and zinc supplements; and he instructed, either explicitly or by clear implication, that listeners should purchase vitamins and/or supplements.”

The government can show either falsity/misleadingness or lack of substantiation to prevail. The government was entitled to summary judgment on the issue that there is no substantiation for representing that Vitamin D and/or zinc provide equal or better protection against COVID-19 than the vaccines, to the extent Nepute made such a claim in his advertisements. (He argued that he didn’t, and that he was just attacking the efficacy of the vaccines without making comparisons. Sure.) It also received summary judgment that there was no substantiation for a claim that zinc is effective for preventing and treating COVID-19.

Materiality: there was no dispute that the challenged claims were material. “This would be especially true during the COVID-19 pandemic.” Also summary judgment for the government.

However, there was a fact issue of whether all the ads at issue made those claims.  

The videos and radio shows appear to have been unscripted, impromptu performances, which at times were rambling and disorganized. Certainly, Defendant Nepute made assertions about Vitamin D, zinc, COVID-19, and the vaccines, among other things, in his advertisements, but he often jumped from topic to topic and did not make connections between his statements. Furthermore, some of the representations he made about Vitamin D and zinc were vague or ambiguous. Drawing inferences most favorable to Defendant Nepute, the Court finds the issue of whether representations made in each of the 64 advertisements created the net impression that either (1) Vitamin D and/or zinc provide equal or better protection against COVID-19, or (2) that zinc is effective for preventing and/or treating COVID-19, is a matter for the Government’s presentation of evidence at trial and determination by the jury.

Nepute’s individual liability: An individual is liable for a company’s violations of the FTC Act if he (1) “either participated directly in the deceptive acts or practices or had the authority to control them”; and (2) “either knew or should have known about the deceptive practices.” It was undisputed that he both controlled and participated in the practices and knew about the contents, so the government also got summary judgment here.  

Number of violations: The government calculated that the 16 Facebook videos, 33 emails, and 15 radio shows have been disseminated 10,175,234 times for purposes of the COVID-19 Act, apparently by adding the number of “views” for the videos on Facebook, the number of email addresses to which the email advertisements were sent, and the number of “views” the radio shows had after they were posted on Facebook and CloutHub. But there were factual disputes about how “views” are counted on Facebook, and the court signaled its discomfort with that kind of raw counting. Even if each unlawful letter in a mass mailing is a separate violation, “[p]osting videos and radio shows on social media is entirely different than calling consumers or sending letters, … as the latter are targeted forms of communication where the number of intended recipients is readily calculable.” [That would seem to give a premium to using mass/social media to disseminate false ads, which seems like the opposite of the right incentive.] The court wanted more from the government when it asked the jury to find liability for a number of violations.

Nepute argued that the government wasn’t entitled to civil penalties under the COVID-19 Act, because the evidence didn’t support a finding that he knowingly violated the Act. The relevant standard required a showing that Nepute acted “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited” by the COVID-19 Act. Knowledge can be “fairly implied” where “a reasonable and prudent man under the circumstances would have known of the existence” of a statute or regulation, and “that the action charged violated that provision.”

The COVID-19 Act was enacted on December 27, 2020. On March 30, 2021, the FTC sent a letter enclosing a copy of the COVID-19 Act to Nepute’s attorney, informing Nepute that the Act “provides that marketers who make deceptive claims about the treatment, cure, prevention, or mitigation of COVID-19 are subject to a civil penalty[.]” It filed suit on April 15, 2021. Nepute argued that he didn’t know about the COVID-19 Act before March 30, 2021, and he had no knowledge that he might be in violation of it prior to the filing of this lawsuit. But, in May 2020, the FTC sent a letter to him stating he was unlawfully advertising that supplements Vitamin C and D can treat or prevent COVID-19. It is undisputed that he was advised in this letter to review “all other claims for your products and services and immediately cease making claims that are not supported by competent and reliable scientific evidence.” Also there was evidence that Nepute had marketed vitamins and supplements for at least a decade, and that he kept abreast of the news and participated in legislative decision-making related to Vitamin D, zinc, and COVID-19. A jury could accept that “a reasonably prudent person, with over a decade of experience in vitamin and supplement marketing, and who advertises on behalf of a multimillion-dollar supplement enterprise, would have been aware of a major federal consumer protection statute implicating his business and marketing.”