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.”
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