Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 1 of 21
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`IN THE XJNITED STATES DISTRICT COURT FOR THE,
`SOUTHERN DISTRICT OF GEORGIA
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`STATESBORO DIVISION
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`mi n A. 3^
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`•.l... -
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`CV 620-073
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`* H
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`H
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`"k
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`+ *
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`FEDERAL TRADE COMMISSION,
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`Plaintiff,
`
`V.
`
`F&G INTERNATIONAL GROUP
`HOLDINGS, LLC; FG
`INTERNATIONAL, LLC; and J.
`GLENN DAVIS,
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`Defendants.
`
`ORDER
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`Before the Court is Plaintiff Federal Trade Commission's
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`("FTC") motion for summary judgment (Doc. 46), Defendants' motion
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`to dismiss the FTC's request for equitable monetary relief and
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`alternative motion for summary judgment (Doc. 48), and Defendants'
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`motion to preserve Daubert challenge for trial (Doc. 50),
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`I. BACKGROUND
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`Defendant F&G International Group Holdings, LLC ("FG Group")
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`and Defendant FG International, LLC ("FG International")
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`(collectively, the "Corporate Defendants") are entities owned and
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`operated by Defendant J, Glenn Davis in Collins, Georgia. (Compl.,
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`Doc. 2, at 2-3.) The FTC filed suit against Defendants on July
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`28, 2020 under Section 13(b) of the FTC Act ("FTCA"), 15 U.S.C. §
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`
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`IN THE XJNITED STATES DISTRICT COURT FOR THE,
`SOUTHERN DISTRICT OF GEORGIA
`
`STATESBORO DIVISION
`
`mi n A. 3^
`
`•.l... -
`
`CV 620-073
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`* H
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`*
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`H
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`*
`
`"k
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`*
`*
`*
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`+ *
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`FEDERAL TRADE COMMISSION,
`
`Plaintiff,
`
`V.
`
`F&G INTERNATIONAL GROUP
`HOLDINGS, LLC; FG
`INTERNATIONAL, LLC; and J.
`GLENN DAVIS,
`
`Defendants.
`
`ORDER
`
`Before the Court is Plaintiff Federal Trade Commission's
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`("FTC") motion for summary judgment (Doc. 46), Defendants' motion
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`to dismiss the FTC's request for equitable monetary relief and
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`alternative motion for summary judgment (Doc. 48), and Defendants'
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`motion to preserve Daubert challenge for trial (Doc. 50),
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`I. BACKGROUND
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`Defendant F&G International Group Holdings, LLC ("FG Group")
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`and Defendant FG International, LLC ("FG International")
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`(collectively, the "Corporate Defendants") are entities owned and
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`operated by Defendant J, Glenn Davis in Collins, Georgia. (Compl.,
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`Doc. 2, at 2-3.) The FTC filed suit against Defendants on July
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`28, 2020 under Section 13(b) of the FTC Act ("FTCA"), 15 U.S.C. §
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`
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 2 of 21
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`53(b), to obtain permanent injunctive relief, rescission or
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`reformation of contracts, restitution, the refund of monies paid,
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`disgorgement of ill-gotten monies, and other equitable relief for
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`Defendants' acts or practices in violation of Section 5(a) of the
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`FTCA, 15 U.S.C. § 45(a). (Id. at 1.) The FTC alleges Defendants
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`market FGI-4440 (''the Product"), an insulation coating, using
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`deceptive claims related to R-values.
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`(Id.)
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`The Court has
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`jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331,
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`1337(a), and 1345. (I^ at 2.)
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`Before providing an overview of the underlying facts, the
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`Court must first address an issue regarding the statement of
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`undisputed material facts ("SUMF"). For summary judgment motions,
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`the Local Rules require:
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`Upon any motion for summary judgment pursuant to Rule 56
`of the Federal Rules of Civil Procedure, in addition to
`the brief, there shall be annexed to the motion a
`separate, short, and concise statement of the material
`facts as to which it is contended there exists no genuine
`dispute to be tried as well as any conclusions of law
`thereof.
`Each statement of material fact shall be
`supported by a citation to the record. All material
`facts set forth in the statement required to be served
`by the moving party will be deemed to be admitted unless
`controverted by a statement served by the opposing
`party.
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`L.R. 56.1, SDGa. The FTC argues Defendants do not contest the
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`bulk of its SUMF (Doc. 46-1), including those supported by its
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`expert Dr. David W. Yarbrough, and therefore those facts should be
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`deemed admitted. (Doc. 60, at 1.) However, Defendants did file
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 3 of 21
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`a ''Statement of Material Facts to Which Exist Genuine Disputes to
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`be Tried.
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`{Doc. 54.) While other districts, such as the Northern
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`District of Georgia, require the opposing party to file an
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`individually numbered response to the movant's SUMF, this
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`District's Local Rules are not that explicit. As stated in Local
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`Rule 56.1, facts are deemed admitted "unless controverted by a
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`statement served by the opposing party." L.R. 56.1, SDGa. "This
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`District's rule does not define what constitutes a 'statement,'
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`nor can the Court locate a case doing so. Absent more direct
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`guidance, the Court declines to import the Northern District's
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`language requiring of such a statement individually numbered
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`responses to a SUMF." Ratchford v. F.D.I.C., No. 6:11-CV-107,
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`2013 WL 2285805, at *4 (S.D. Ga. May 23, 2013). Based on this
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`holding, to the extent Defendants' filing and responses controvert
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`the FTC's SUMF, the Court will not deem the FTC's SUMF admitted.
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`However, if Defendants failed to controvert any aspects of the
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`FTC's SUMF, those facts will be deemed established as a matter of
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`law. See id.
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`With this clarification, an overview of the underlying facts
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`is as follows. Starting in 2004 or 2005, and through the date of
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`filing of this suit. Defendant FG International began advertising.
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`1 Defendants also filed an Affidavit by Defendant Davis (Doc. 55) which the FTC
`filed objections to, or in the alternative moved to exclude (Doc. 59). Based
`on the wealth of information and undisputed facts elsewhere in the record, the
`Court did not reach the merits of the FTC's objections or exclusion of this
`Affidavit.
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`
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 4 of 21
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`marketing, distributing, and selling the Product to consumers in
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`the United States. (Doc. 46-1, at 2.) FG International is now a
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`registered trade name of FG Group. (Id. at 3.) Defendant Davis
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`is the Corporate Defendants' principal, sole owner, and only
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`employee, and since starting the Corporate Defendants he has
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`formulated, directed, controlled, had the authority to control,
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`and participated in their acts and practices. (Id. )
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`Defendants manufacture and market coatings, including the
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`Product, for use in commercial applications.
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`(Id. at 4.)
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`Specifically, the Product is an epoxy-ceramic coating that is a
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`thermal barrier and provides moisture and corrosion protection.
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`(Doc. 54, at 2.)
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`Defendants claim an individual named Bill
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`Bradshaw, who is now deceased, invented the Product and named it
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`TAR-007. (Doc. 46-1, at 4.) The Product sold by Defendants is
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`the same as TAR-007, and Defendant Davis uses Mr. Bradshaw's
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`representations as to its proper application thickness and
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`substantiation. (Id. at 4-5.) In fact. Defendants have never
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`themselves tested the Product or commissioned any thermal
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`insulation testing on it - they simply rely on data provided by
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`Mr. Bradshaw. (Id. at 5.)
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`The representations regarding the R-value of the Product are
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`the main issue in this case.
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`R-value is a measurement of
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`resistance to heat flow. (Id. at 10.) The FTC's Complaint alleges
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`Defendants claim the Product provides '"an equivalent R value
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 5 of 21
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`greater than 30;" however, the FTC argues the claims are false,
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`Defendants cannot substantiate them, and the Product in fact has
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`an R-value substantially less than one. (Compl., at 1-2.) The
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`greater the R-value, the greater the reduction in heat flow, and
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`the more energy can be saved when heating or cooling a building.
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`(Doc. 46-1, at 10.) The FTC's expert. Dr. Yarbrough, provides
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`that ASTM C518 is the ''Standard Test Method for Steady-State
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`Thermal Transmission Properties by Means of the Heat Flow Meter
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`Apparatus" and is a standard test method to determine a material's
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`R-value and thermal properties. (I^ at 14.) Dr. Yarbrough
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`oversaw multiple tests of the Product and found it did not meet
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`the R-value represented by Defendants. (Id. at 15; Doc. 46-4, at
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`24 . )
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`Defendants have disseminated advertising and promotional
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`materials for the Product through online and other means, as well
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`as directly corresponding with potential buyers stating that
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`testing reveals the Product has an insulation value greater than
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`R-30 when used as directed. (Doc. 46-1, at 17-19.) They have
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`also provided prospective customers with ASTM test results
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`completed by a third party. South West Labs ("SWL") - but, this
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`referenced test was in fact conducted by Mr. Bradshaw on his TAR-
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`007 product.
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`(Id. at 18, 21-22.)
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`Defendants know their
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`representations concern the Product's efficacy in insulating and
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`that prospective customers are interested in the R-value and
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 6 of 21
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`insulative value. (Id. at 21.) Defendants are unaware how SWL
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`conducted the tests and at what thickness the Product was tested.
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`(Id. at 22.) Additionally, Defendants have altered the SWL report
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`over time - removing and adding various data points prior to
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`sending to customers. (Id. at 30.)
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`Defendants also distributed a marketing document called the
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`''Engineering Evaluation Services Report" (the "EES document")
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`which claimed to review the Product's ASTM procedures and reports.
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`(Id. at 19.) However, the EES document was created by Defendants
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`and their second-largest customer, Mr. Ghiorso. (Id. at 23.)
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`There is no entity called Engineering Evaluation Services - Mr.
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`Ghiorso used the SWL data Defendant Davis provided him and drafted
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`the EES document himself.
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`(Id. at 23-24.)
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`Therefore, this
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`document contains false information; nevertheless. Defendants sent
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`the EES document to prospective customers without informing them
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`it was not in fact drafted by EES and EES was not even a real
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`entity. (Id. at 25.) There were numerous other publications
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`issued by Defendants that contained false information; however,
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`the Court will not belabor itself with addressing each one.
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`In April 2019, the FTC informed Defendants of its
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`investigation into their R-value and insulation claims and
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`requested substantiation for the claims. (Id. at 34.) Defendants
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`assert there were no misleading or false statements about the
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`Product; nevertheless, they notified the FTC on October 25, 2019
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 7 of 21
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`they would cease and desist all advertisements for the Product
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`that mentioned R-value. (Doc. 54, at 8.) Defendants represent
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`they removed all R-value language from their marketing materials
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`in June 2019 and have continued to omit R-value from their
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`marketing material, sales material, and internet material since
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`then. (Id.) However, the FTC believes Defendants continued to
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`share false information regarding the R-value of the Product to
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`potential and current customers after the initiation of the
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`investigation. (Doc. 46-1, at 36-37.) The FTC has continued to
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`monitor Defendants' website since the filing of this suit, and
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`there are still active pages and documents containing claims about
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`the Product's insulation and R-value. (Id.)
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`During discovery, the FTC learned Defendants had not
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`preserved electronically stored information (^^ESI") relevant to
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`the case and filed a motion for spoliation sanctions. (Doc. 26,
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`at 1.)
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`The FTC sought ''all [d]ocuments and communications
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`concerning [the Product] or R-value" between Defendants and
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`individuals or entities the FTC identified and all documents and
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`communications since January 1, 2014 to prospective or actual
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`purchasers of the Product. (Doc. 45, at 3-4 (citing Doc. 26-3, at
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`8-9).) Despite the FTC's instructions. Defendants did not produce
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`all responsive documents - in fact, through third-party discovery,
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`the FTC obtained copies of a communication between Defendant Davis
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`and the president of one of Defendants' largest customers in which
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 8 of 21
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`Defendant Davis responded to a specific challenge about the
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`Product's R-value. (Id. at 4.) After the FTC inquired about
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`missing documents. Defendants admitted to not preserving email
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`communications with current and potential customers. (Id. at 5.)
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`Defendant Davis additionally admitted Defendants have no document
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`retention policy and his practice of deleting emails continued
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`even after the filing of this Complaint. (Id. at 6.) United
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`States Magistrate Judge Christopher Ray's September 20, 2021 Order
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`(the ''Spoliation Order") found "Defendants acted 'with the intent
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`to deprive' [the FTC] of relevant evidence by affirmatively
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`deleting emails with customers and potential customers after being
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`on notice of this investigation and subsequent lawsuit." (Id. at
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`19.) Based on this finding. Judge Ray granted the FTC its
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`requested sanctions and ordered:
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`1) Defendants are precluded from disputing the FTC's
`evidence of their marketing claims; and
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`2) Defendants are precluded from arguing they were
`unaware that consumers were questioning their R-value
`claims; and
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`3) There is a rebuttable presumption that [Defendant]
`Davis knew that the Corporate Defendants' claims about
`[the Product's] R-value were false and unsubstantiated;
`and
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`4) There is a rebuttable presumption that the destroyed
`ESI was relevant and favorable to the FTC and unfavorable
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`to Defendants.
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`(Id. at 20.) These sanctions and rulings will be used by the Court
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`to decide the pending motions in this case.
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`8
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 9 of 21
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`II. DEFENDANTS' MOTION TO DISMISS OR MOTION FOR SUMMARY JDUGMENT
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`On October 15, 2021, Defendants filed a motion to dismiss the
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`FTC s request for equitable monetary relief, and in the alternative
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`a motion for summary judgment as to such claim. {Doc. 48.) The
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`FTC argues this motion should be denied as moot because it is no
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`longer seeking a monetary judgment against Defendants following
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`the Supreme Court's decision in AMG Cap. Mgmt., LLC v. FTC, 141 8.
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`Ct. 1341 (2021). (Doc. 52, at 1.) It argues that following the
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`AMG decision, ^^on three separate occasions, the FTC notified both
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`Defendants and the Court through affirmative filings that the FTC
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`is no longer seeking equitable monetary relief under Section 13(b)
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`of the [FTCA]." (Id. ) On August 5, 2021, the FTC filed a
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`supplemental notice regarding the AMG decision stating "the FTC
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`hereby provides notice to the Court and Defendants that it is not
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`currently seeking equitable monetary relief under Section 13(b) of
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`the [FTCA] as to any defendant in this matter. However, the FTC
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`continues to seek injunctive conduct relief under 13(b)." (Doc.
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`44, at 1.) Based on this, the Court finds the FTC has already
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`clarified the issue regarding its claim for equitable monetary
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`relief and that it is not seeking such. However, there was no
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`Amended Complaint filed; therefore, the FTC s claim seeking a
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`monetary judgment is technically still pending before the Court.
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`Based on the FTC's August 5, 2021 Notice, the Court DISMISSES
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`WITHOUT PREJUDICE the FTC's claim for monetary relief; therefore.
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 10 of 21
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`the only claim remaining before the Court is for injunctive relief
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`under Section 13(b). Pursuant to this finding. Defendants' motion
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`to dismiss, or in the alternative, motion for summary judgment
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`(Doc. 48) is DENIED AS MOOT.
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`III. SX»4MARY JUDGMENT STANDARD
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`Under Federal Rule of Civil Procedure 56, motions for summary
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`judgment are granted ^^if the movant shows that there is no genuine
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`dispute as to any material fact and the movant is entitled to
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`judgment as a matter of law." Fed. R. Civ. P. 56(a). '^'An issue
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`of fact is 'material' if . . . it might affect the outcome of the
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`case . . . [and it] is 'genuine' if the record taken as a whole
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`could lead a rational trier of fact to find for the nonmoving
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`party." Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259-60
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`(11th Cir. 2004) (citing Anderson v. Liberty Lobby, Inc., 477 U.S.
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`242, 248 (1986); Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998
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`(11th Cir. 1992) ) . The Court must view factual disputes in the
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`light most favorable to the non-moving party, Matsushita Elec.
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`Indus. Co. V. Zenith Radio Corp., 475 U.S. 574, 587 (1986), and
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`must draw "all justifiable inferences in [the non-moving party's]
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`favor." United States v. Four Parcels of Real Prop., 941 F.2d
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`1428, 1437 (11th Cir. 1991) (en banc) (internal punctuation and
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`citations omitted). The Court should not weigh the evidence or
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`determine credibility. Anderson, 477 U.S. at 255.
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`10
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 11 of 21
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`As explained above, the Local Rules require the movant to
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`include a statement of undisputed material facts with its motion.
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`See L.R. 56.1, SDGa. "Parties may not, by the simple expedient of
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`dumping a mass of evidentiary material into the record, shift to
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`the Court the burden of identifying evidence supporting their
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`respective positions." Preis v. Lexington Ins. Co., 508 F. Supp.
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`2d 1061, 1068 (S.D. Ala. 2007). Essentially, the Court has no
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`duty "to distill every potential argument that could be made based
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`upon the materials before it on summary judgment." Id. {citing
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`Resol. Trust Corp. v. Dunmar Corp., 43 F.Sd 587, 599 (11th Cir.
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`1995)). Accordingly, the Court will only review the materials the
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`Parties have specifically cited and legal arguments they have
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`expressly advanced. See id.
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`In this action, the Clerk of Court provided Defendants notice
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`of the summary judgment motion, the right to file affidavits or
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`other materials in opposition, and the consequences of default.
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`(Doc. 47.) For that reason, the notice requirements of Griffith
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`V. Wainwright, 772 F.2d 822, 825 (11th Cir. 1985) (per curiam) ,
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`are satisfied.
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`Defendants responded to the FTC's motion for
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`summary judgment (Doc. 53) and the FTC replied in support (Doc.
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`60) . The time for filing materials has expired, the issues have
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`been thoroughly briefed, and the motions are now ripe for
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`consideration. In reaching its conclusions herein, the Court has
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`11
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 12 of 21
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`evaluated the Parties' briefs, other submissions, and the
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`evidentiary record in the case.
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`IV. FTC'S MOTION FOR SUMMARY JUDGMENT
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`The FTC moves for summary judgment on its claims that
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`Defendants violated Section 5 of the FTCA, 15 U.S.C. § 45(a), which
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`prohibits ''deceptive acts or practices in or affecting commerce."
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`(Doc. 46, at 14-20.) Specifically, the FTC argues Defendants made
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`R-value and testing claims that are material, likely to mislead
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`consumers, and are both false and unsubstantiated.
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`(Id.)
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`Defendants do not dispute they made these statements in the past.
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`(Doc. 53, at 2.) However, they argue they ceased making any R-
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`value claims prior to the initiation of the suit - therefore, the
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`only issue before the Court is "whether genuine issues of material
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`fact exist as to whether these prior statements are false.
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`(Id.)
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`Additionally, Defendants argue their "previous statements
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`regarding R-value were supported by test results procured by the
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`originator of the product and by the product's performance in the
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`field." (I^ at 11. )
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`A. Corporate Liability
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`"To establish liability under Section 5 of the FTCA, the FTC
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`must establish that (1) there was a representation; (2) the
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`2 The Spoliation Order provides a rebuttable presumption that Defendant Davis
`knew the claims about the Product's R-value were false and unsubstantiated.
`(Doc. 45, at 20.)
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`12
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 13 of 21
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`representation was likely to mislead customers acting reasonably
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`under the circumstances, and (3) the representation was material."
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`FTC V. Partners In Health Care Ass^n, Inc., 189 F. Supp. 3d 1356,
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`1364 (S.D. Fla. 2016) {quoting FTC v. Tashman, 318 F.3d 1273, 1277
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`(11th Cir. 2003)) .
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`Defendants do not dispute there were representations made
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`about the Product's R-value, so element one is satisfied. (See
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`Doc. 53, at 2.) To determine whether a representation is likely
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`to mislead a reasonably acting consumer, courts must consider the
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`net impression created. Partners In Health Care, 189 F. Supp. 3d
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`at 1364 (citing FTC v. RCA Credit Servs., LLC, 727 F. Supp. 2d
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`1320, 1329 (M.D. Fla. 2010)). This goes to the falsity of the
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`statement, which Defendants argue is a genuine issue of material
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`fact. The Court will address this element below. And as for
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`element three, "[a] representation or omission is material if it
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`is the kind usually relied on by a reasonably prudent person."
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`FTC V. Nat'l Urological Grp., Inc., 645 F. Supp. 2d 1167, 1190
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`(N.D. Ga. 2008) (citations omitted).
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`''Express claims, or
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`deliberately made implied claims, used to induce the purchase of
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`a particular product or service are presumptively material." Id.
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`(citation omitted). The R-value claims for the Product are clearly
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`material because Defendants provided them to customers and
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`potential customers through marketing materials, as well as direct
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`communications, proving such information was important in buying
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`13
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 14 of 21
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`decisions and used to induce the Product's purchase. Based on
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`this, element three is satisfied and the Court will turn its
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`attention to element two.
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`^^To demonstrate that a claim is likely to mislead a reasonable
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`customer, the FTC may proceed under a ^falsity theory,' a
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`^reasonable basis theory,' or both. Id. (citation omitted). ''^If
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`the FTC proceeds under a falsity theory, it must demonstrate either
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`that the express or implied message conveyed by the ad is false."
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`Id. (citations and quotations omitted). If it proceeds under a
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`reasonable basis theory, '^^it must demonstrate that the advertiser
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`lacked a reasonable basis - or adequate substantiation - for
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`asserting that the message was true." Id. In this case, the FTC
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`proceeds under both theories. As to falsity, the FTC argues
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`Defendants' claims are provably false because (1) properly
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`conducted tests demonstrate the Product's R-value is far less than
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`advertised, and (2) correct calculations of R-value using
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`Defendants' own data supports the same miniscule R-value,
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`substantially lower than advertised. (Doc. 46, at 16.) As to
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`substantiation, the FTC argues although Defendants claim their
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`C518 laboratory tests establish the Product's insulative
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`properties, they do not even possess any tests illustrating the
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`alleged results. (Id. at 18.) The FTC also argues Defendants
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`lack expert evidence supporting their claims or contesting Dr.
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`Yarbrough's methodology or conclusions. (Id. at 19.)
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`14
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`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 15 of 21
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`Defendants assert SWL performed the ASTM C518 tests for Bill
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`Bradshaw and they convert the K-value from that test into an R-
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`value for marketing purposes. (Doc. 53, at 12.) Additionally,
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`they argue the Product will never cure at the thickness Dr.
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`Yarbrough opines the SWL testing occurred, so his testing is
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`incomparable. (Id. at 13.) Defendants do not move to exclude Dr.
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`Yarbrough's opinions; however, they have filed a motion to preserve
`
`a Daubert challenge for trial. (See Doc. 50.) Defendants also
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`argue Defendant Davis has sold the Product to at least 25 different
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`customers in hundreds of transactions, yet he ^^has never had a
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`customer complain about the [P]roduct[Ms performance other than
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`one instance when the [PJroduct was applied at a cured thickness
`
`[less than recommended]."^ (Doc. 53, at 15.) Defendants believe
`
`this establishes the Product acts as an excellent insulator. (Id.)
`
`As to the FTC's claims explicitly regarding the R-value,
`
`Defendants admit they ^''have never liked using R-value in material,
`
`have stopped using R-value, will consent to an injunction to not
`
`use R-value going forward and will take steps to make old marketing
`
`material unavailable on the internet." (Id. at 16.) Defendants
`
`believe that since they have stopped making R-value claims, the
`
`FTC cannot seek a judicial remedy for a past violation of the FTCA.
`
`3 The Spoliation Order precludes Defendants from arguing they were unaware that
`consumers were questioning their R-value claims; therefore, this line of
`argument is in violation of that Order and will be ignored. (See Doc. 45, at
`20. )
`
`15
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 16 of 21
`
`(Id.) Overall, however, Defendants do not dispute the FTC's
`
`ability to seek some level of injunctive relief for more than just
`
`the Product's current formulation but argue it should only include
`
`R-value representations for the Product or any products derived
`
`from it. (Id. at 16-17.) In response, the FTC argues Defendants
`
`have conceded injunctive relief is appropriate but their proposed
`
`injunction exempts Defendant Davis and would not stop their ongoing
`
`deceptive conduct. (Doc. 60, at 1.) Therefore, the FTC requests
`
`the Court enter its proposed final order of injunction which
`
`applies to all Defendants, including Defendant Davis. (Id.)
`
`Primarily, the Court turns back to the falsity and reasonable
`
`basis theories and finds Dr. Yarbrough has established that based
`
`on overseeing multiple tests of the Product, the samples returned
`
`an average R-value of R-.0076 at the suggested 10-mils thickness.
`
`(Doc. 46-1, at 16.) However, Defendants marketed the Product as
`
`having an R-value of R-30 at 10 mils. (Id. at 17-18.) While there
`
`is some speculation by Defendants that Dr. Yarbrough does not
`
`conduct his tests correctly or use the Product at the proper
`
`thickness, they admit two of his panels achieved the recommended
`
`thickness of 10 mils. (See Doc. 53, at 13.) Defendants also do
`
`not contest the R-values associated with these ^'correct" panels,
`
`which come out to R-values of less than one. (See Doc. 4 6-4, at
`
`24.) Defendants also admit they market the Product at a value of
`
`R-30 and higher; therefore, the Court finds there is no question
`
`16
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 17 of 21
`
`the Corporate Defendants' claimed R-values were false and
`
`unsubstantiated.
`
`This satisfies element two.
`
`Based on the
`
`foregoing, there is no genuine dispute of material fact the
`
`Corporate Defendants violated Section 5 of the FTCA.
`
`B. Individual Liability
`
`The only remaining question is Defendant Davis' individual
`
`liability for these acts. ''Individuals can be held liable for
`
`corporate practices that violate the FTCA . . . , but only if the
`
`FTC has first established the corporation's liability." Partners
`
`In Health Care, 189 F. Supp. 3d at 1364 (citation omitted) . "After
`
`establishing a corporate violation, the FTC can establish
`
`individual liability under Section 5 of the [FTCA] by showing that
`
`(1) an individual participated directly in the deceptive acts or
`
`practices or had authority to control them, and (2) that the
`
`individual had some knowledge of the corporation's improper
`
`practices." Id. at 1367 (quotations and citation omitted). "An
`
`individual's status as a corporate officer gives rise to a
`
`presumption of ability to control a small, closely-held
`
`corporation." Id. (citation omitted).
`
`In this case, it is undisputed Defendant Davis is the sole
`
`owner and only employee of the Corporate Defendants; therefore,
`
`there is no question he individually participated in the deceptive
`
`acts or practices at issue here and had the authority to control
`
`them. (See Doc. 53, at 3.) As to element two. Defendants already
`
`17
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 18 of 21
`
`admitted ''[Defendant] Davis is the only person who takes any action
`
`for the [Corporate Defendants]" and that in the event the Court
`
`finds the Corporate Defendants violated the FTCA, "the only
`
`individual who participated, controlled and had knowledge of the
`
`acts would be Defendant Davis." (Doc, 31, at 6.) Therefore, there
`
`is no dispute Defendant Davis meets the requirements necessary to
`
`hold an individual liable for a violation of the FTCA. Based on
`
`the foregoing, the Court finds Defendants have engaged in the
`
`deceptive acts and practices as alleged by the FTC and GRANTS the
`
`FTC's motion for summary judgment (Doc. 46). The Court also finds
`
`injunctive relief is appropriate and will review the Parties'
`
`proposed injunction orders below.
`
`V. PERMANENT INJUNCTION
`
`Pursuant to 15 U.S.C. § 53(b), the FTC moves to obtain
`
`permanent injunctive relief for Defendants' acts or practices in
`
`violation of Section 5(a) of the FTCA. (Compl., at 1.) Section
`
`13(b) of the FTCA provides: "in proper cases the [FTC] may seek,
`
`and after proper proof, the court may issue, a permanent
`
`injunction." 15 U.S.C. § 53(b)(2). "Pursuant to this statute,
`
`the [FTC] may bring suit for injunctive relief when it has reason
`
`to believe that any person, partnership, or corporation is
`
`violating, or is about to violate, any provision of law enforced
`
`by the [FTC]." FTC v. Citigroup, Inc., 239 F. Supp. 2d 1302, 1304
`
`18
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 19 of 21
`
`(N.D. Ga. 2001) (quoting 15 U.S.C. § 53(b)(1)). "The authority to
`
`grant permanent injunctive relief also includes the power to grant
`
`any ancillary relief necessary to accomplish complete justice."
`
`Id. at 1304-05 (citation omitted). "Permanent injunctive relief
`
`is appropriate when the defendant's past conduct indicates that
`
`there is a reasonable likelihood of further violations in the
`
`future." Partners In Health Care, 189 F. Supp. 3d at 1369 (quoting
`
`RCA Credit Servs., 727 F. Supp. 2d at 1335). "[CJourts have
`
`discretion to include ^fencing-in' provisions which extend beyond
`
`the specific violations at issue in the case to prevent Defendants
`
`from engaging in similar deceptive practices in the future. These
`
`provisions must bear a reasonable relation to the unlawful
`
`practices found to exist." Id. at 1370 (internal citations and
`
`quotations omitted).
`
`In this situation, the Court finds permanent injunctive
`
`relief is appropriate, especially in light of the fact Defendants
`
`continued to disseminate false R-values to customers after the FTC
`
`notified Defendants of its investigation and after the initiation
`
`of this suit. (Doc. 46-1, at 34-37.) Defendants argue they have
`
`stopped making claims regarding R-value, so the Court is simply
`
`dealing with a past violation of the FTCA; however. Defendants
`
`destroyed emails with potential customers and as part of the
`
`Spoliation Order, there is a rebuttable presumption the destroyed
`
`ESI was relevant and unfavorable to Defendants, so the Court will
`
`19
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 20 of 21
`
`assume Defendants continued to send false R-values to customers.
`
`(See Doc. 53, at 16; Doc. 45, at 20.) Both Parties submitted
`
`proposed orders for permanent injunction. (Doc. 46-6, Doc. 53-
`
`1.)
`
`Defendants ^Mo not dispute the ability of the FTC to seek
`
`some level of injunctive relief for more than the current
`
`formulation of [the Product]" but argue the FTC cannot use
`
`"fencing" and its proposed order to escape the pleading
`
`requirements of Federal Rule of Civil Procedure 15. (Doc. 53, at
`
`16-17.)
`
`The FTC argues "[t]he Complaint is replete with
`
`recitations of Defendants' extensive R-value, insulation, and
`
`testing claims both numeric and qualitative alike" and it is able
`
`to use "fencing" to seek relief beyond the specific allegations.
`
`(Doc. 60, at 14-15.) Further, the FTC argues Defendants' proposed
`
`order "exempts [Defendant] Davis entirely and would not halt
`
`Defendants' ongoing deceptive conduct." (Id. at 1.)
`
`The Supreme Court has found "it reasonable for the [FTC] to
`
`frame its order broadly enough to prevent [Defendants] from engaging
`
`in similarly illegal practices in future advertisements." FTC v.
`
`Colgate-Palmolive Co., 380 U.S. 374, 395 (1965). The FTC "is not
`
`limited to prohibiting the illegal practice in the precise form in
`
`which it is found to have existed in the past. Having been caught
`
`violating the [FTCA], [Defendants] must expect some fencing in."
`
`Id. (citations omitted). The FTC "cannot be required to confine
`
`20
`
`
`
`Case 6:20-cv-00073-JRH-BKE Document 65 Filed 08/19/22 Page 21 of 21
`
`its road block to the narrow lane the transgressor has traveled; it
`
`must be allowed effectively to close all roads to the prohibited
`
`goal, so that its order may not be by-passed with impunity." FTC
`
`V. Ruberoid Co., 343 U.S. 470, 473 (1952). Based on these
`
`guidelines, the Court finds it appropriate to allow the FTC to reach
`
`beyond the simple allegations of the Complaint to prevent Defendants
`
`from violating the FTC in a similar fashion in the future. The
`
`Court therefore GRANTS the FTC's motion for permanent injunction
`
`and adopts the FTC's proposed order. The Permanent Injunction Order
`
`will be entered separately on the docket.
`
`VI. CONCLUSION
`
`For the foregoing reasons, IT IS HEREBY ORDERED that the FTC's
`
`motion for summary judgment (Doc. 46) is GRANTED, Defendants'
`
`motion to dismiss (Doc. 48) is DENIED AS MOOT, and Defendants'
`
`motion to preserve Daubert challenge (Doc. 50) is DENIED AS MOOT,
`
`The Clerk is DIRECTED to ENTER JUDGMENT in favor of the FTC,
`
`TERMINATE all other pending motions, if any, and CLOSE this case.
`
`ORDER ENTERED at Augusta, Georgia, this
`
`ay of August,
`
`2022.
`
`;f judge
`UNITED^TATES DISTRICT COURT
`:RN DISTRICT OF GEORGIA
`
`21
`
`
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