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Dutchman battled a vicious attack from the FTC and won!
The FTC (Federal Trade Commission) went exparte, to a federal judge and was able to get Dutchman's bank accounts frozen, and the company shut down, based upon a report from a physicist who said it was impossible for our technology to work.
On the 5th of February 2009 Dutchman had an opportunity to present their own expert witnesses.
In Dutchman's lawyer's own words... "The FTC's motion was defeated in its entirety and Dutchman Enterprises was vindicated in Federal District Court."
It is amazing... President Obama orders the auto industry to increase fuel economy by 10 more miles per gallon by 2011 and then the FTC gets a judge to inflict a Temporary Restraining order, to kill the one company that is currently capable of achieving it! What is really going on?
The FTC's "case" was based on a scientist's report that getting 50% or more mileage gain is impossible, even though we are now getting at least 50% more mileage on hundred's, if not thousands of gasoline powered cars and trucks!
There's an old Chinese proverb: "Man who says it cannot be done should not interrupt man who is doing it."
In the courtroom, the FTC's witness, Dr. Halperin, admitted he had no education related to internal combustion engines and that his report is based only on his expertise in Cryogenics.
During cross examination Dr. Halperin was challenged by evidence that gasoline engines are much less than 95% efficient when confronted by documentation from MIT, the EPA, the Military and other credible sources as well as the President's office, since Obama wants automotive mileage to be increased by at least 10 mpg by the year 2011.
Dutchman's mechanic Mike Holler explained on the stand that the problem with burning fuel in an engine is that you have to get the energy out of the fuel by burning it during the short duration of the power stroke, so that it can add power to the wheels.
Our Hydro Assist Fuel Cell system volitizes the fuel causing it to burn faster and more completely during that short power stroke thus producing more power which can then be converted to economy, while it reduces pollution and helps keep the engine clean. Less fuel is wasted as it burns later in the catalytic converter before hitting the environment.
For the long version of this story scroll down.
To see learn more about or to order a MMPG (soon to be the Genesis Fuel Enhancement System), and to see the rest of exciting revolutionary technologies we offer, go to http://befreetech.com or http://befreetech.com/xcart/catalog
Kurt Annaheim
Distributor for
Dutchman Enterprises
To see the MMPG quote page go to http://befreetech.com/quote.htm
Regarding the future PICC:
The MMPG is the first step in a two step upgrade, to the future PICC. Those who own a MMPG will be the first to be offered the "Pre-Ignition Catalytic Converter" system when it becomes available. If you're in America or Canada then Click Here to get a PICC quote prior to ordering your MMPG
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We’ve been busy!
We Won Our Right to Do Business in a Legal Contest with the FTC in a Battle of the Experts
This has been a really rocky road. It is so amazing that President Obama has ordered all the American car makers to get another 10 miles per gallon out of their cars, and we typically increase the mileage just with the MMPG kit by at least that, with just about anything we do when it’s done right.
In other words, right now there is only ONE entity in this country that can take just about any make and model of car and exceed the Presidents order RIGHT NOW!
That is incredible, because in January the FTC tried to shut our main company the supplier of the MMPG kits down. In a one-of-a-kind expert report, the FTC has an expert physicist that claimed that it is IMPOSSIBLE for anyone (not just us) to get more than a 4% improvement in the fuel economy of any American made car! Because of that purported FACT, it made all our representations of getting over a 50% improvement the majority of the time - impossible!
This expert claimed that about 96% of the gasoline in a vehicle is burned, leaving only 4% to leave the tailpipe.
While this is not untrue, that does not mean that the burned fuel is putting any power on the wheels, instead most of it is being burning in the catalytic converter UNDER the vehicle for NO mechanical benefit to the car owner.
This report, while technically true, was irrelevant to the nature of the internal combustion engine process and the overall fuel economy of a vehicle. The FTC's expert report became the justification to put us out of business. Imagine the President of the United States and all his expert advisors ordering the car makers to do what this FTC expert is claiming is impossible. Imagine the FTC of this administration trying to shut down the company that can give the President what he wants.
The FTC came in and on the strength of this expert got a judge, exparte (means they ONLY heard ONE side of the story), to order that all of Dutchman Enterprises' bank accounts be frozen and the company’s assets be confiscated and the company be restricted from making any claims or doing any business.
They froze the accounts with hundreds of thousands of dollars in them on Thursday, and would not even allow the paychecks for the employees to be paid on Friday. All the employees went home and the business was shut down based upon no complaints at all to the FTC, ONLY this report from the expert that stated that what we were claiming (and what the President was ordering to happen by 2011) was impossible.
It was a disaster for us!
We tried to get the judge to at least give us access to a portion of our funds to be able to hire a lawyer, but the FTC refused to grant us even that one small right to counsel. So, the leader of our project tried to mount a defense without any legal counsel. They even froze his personal accounts and the company had nothing to operate on or use to defend itself. Our guys went to court and the judge soon realized the injustice of it all and allowed us to have money for our defense.
We also asked if we could use some of our own money to hire our own expert physicist to rebut their Doctor of physics. The judge allowed us to spend $5,000 for that purpose. That turned out to be enough, because a Harvard engineer that had been following this project volunteered to help out for free, and it turned out, his father has a double doctorate in materials and in physical engineering with a master’s degree in internal combustion engine design, and is world renown with almost 100 scientific abstracts published and books translated into most languages of the world.
The father was overseas and volunteered to come to the USA to give his opinion if we would just pay his expenses. We also got the ex Vice President of the Society of Automotive Engineers who designs internal combustion engines for GM, Volvo and Saab give us a report on his opinion as well. The cost for both of these experts came to $5,000.
So, on February 5th, after a month of no activity and frozen accounts that almost destroyed our business, we finally were ready to be heard in opposition to the FTC's heavy handed and totally unjustified attack on us. We had a hearing before judge Shipp in Federal District Court.
In the morning they put on their expert who stood by his report. The judge was originally shocked to discover that the FTC had not ever gotten even one complaint to justify this action.
Our lawyer cross examined their expert and actually got him to agree with every single point our experts were going to prove that day. He showed him a report from the department of Energy showing that it was possible for the fuel efficiency of cars to be increased by 50% by just injecting hydrogen into the combustion chamber to help the gasoline burn better.
Our lawyer asked the expert if he thought the DOE was also lying about that fact. Our lawyer pointed out government web sites that state that vehicles are only 15%-20% efficient while this expert was saying that vehicles are 96% efficient. Our lawyer showed their expert facts and reports from car makers, NASA, MIT, and even the encyclopedia to prove the folly of his assumptions. It was not a very good day for their physicist. He was caught in defending physical principles that are, on their face, true, but not relevant.
Then our experts explained to the judge why the report of their expert was not relevant to the issue of fuel economy, and it became clear to the judge that their cryogenics expert (even by his own admissions) was a poor selection on the part of the FTC for an expert to give an opinion on internal combustion engines.
The long and short of it is that we PROVED in that courtroom on the 5th of February that our MMPG technology could actually increase the efficiency of vehicles (in the unanimous opinions of all our experts) by at least as much as 200% without violating even one of the laws of physics.
The judge was convinced, and ruled that our bank accounts be unfrozen and that we not be restrained from doing any activity that we are currently doing and that we do not, in his opinion, pose a danger to consumers.
If you want to read the whole story, here is a link to PESN.com - Article -_Dennis_Lee_victorious_against_FTC
Isn’t it Time for the Government that Claims to Want Energy Independence and To Stop Pollution to Hear from The American People?
Why is it that for us to try to bring our answers to the energy problems we are constantly being harassed by the very people who claim to be looking out for them?
Look at the history of our struggle in a world that is looking for what we have. In our formative stages we developed the PICC breakthrough. The Bush administration was so impressed that they sent an advisor to the president to see what we were doing. He got so excited about what we showed him that he went back to the President and supposedly was going to host a demonstration with the Chief of Staff at the White House to get us with the DOE and the EPA and sort of force them to test our pollution free device.
That ended up wasting a year on promises (all of which are on tape) none of which were ever delivered. Then the advisor became part of a department to find alternative energy sources and their top advisor had to confirm the interest of the President’s man who came here, originally. ACORE's expert reluctantly came from DC and when we showed him what we could do he got very excited.
He wanted to set us up with the Pentagon and we refused to deal with them. His excitement and his phone calls were also caught on tape. That became another series of promises and then we were suddenly dropped like a hot potato. It was clear that we were on our own. We then announced the PICC project and our research revealed that it had far more potential than even we had ever imagined.
You got involved from ads to encourage you to give us the public support base we needed since it was obvious that conservation talk was just that, talk. We had a major breakthrough and so we went to DC on our own without an invitation and at the ACORE Renewable Energy Expo, we rallied some excitement from the people, and did our best to embarrass the government phonies who insist on finding solutions that big business will be able to use to control the people.
We are developing the PICC now to actually be able to run any vehicle at well over ten times the current mileage even on unrefined crude oil with near zero pollution!
In the meantime we could take our MMPG and provide double mileage on the average by just getting car makers to stop their planned obsolescence program in which, through unburned fuel, they make carbon build up and sludge to wear down their engines thereby destroying the fuel economy of their cars with their computer controls.
We made major inroads with Ford. They really wanted a relationship with us on the PICC, but we insisted that they get involved in the MMPG to earn the bigger relationship. We even provided them with 50 MMPG units to test over a 60 day test period. It was going great until one of our dealers misused the Ford Logo and that brought the ford family into the program.
With the car makers trying to get bail out money from the government, a relationship with Ford was not possible. Ford denies they ever tested the units we sent to them and all the talks and meetings we tape recorded. They did not want to upset the government by actually working with us to deliver what all of them SAY they want.
Now, along comes President Obama (a new President from the other aisle.) He has ordered the car makers they are bailing out, that within three years, they MUST increase mileage by less than we have demonstrated time after time we can deliver now.
His administration’s own agency (the FTC) is trying to kill us. Will you please help us now?
We have been struggling against everyone who claims to want what we are doing that is in your best interests for close to a decade now. How much longer must we fight the officials who claim to be looking out for you? I ask who we can get to protect us from the people we the people have elected to protect us?
Will you please at least write a letter to Rahm Emmanuel, the White House Chief of Staff, and ask him why the administration’s FTC is trying to put a company out of business that is trying to provide the answer to President Obama’s directive to the auto industry?
This is a technology that can exceed the President’s expectations by even retrofitting not only new cars, but also includes an answer for every car on the road. The FTC has attempted to stop it on the basis of an expert report with a firm stance that what President Obama has ordered is technically impossible to do, making it look like President Obama and his advisors are also misrepresenting what is possible to the public.
So far it has resulted in evidence offered in a court of law that impressed the judge that this company really may have the answer. The judge ruled against the FTC and in favor of this little company, Dutchman Enterprises, LLC, in New Jersey.
So, why would the government be trying to stop them rather than looking into what they have and giving them every opportunity to prove they really can deliver?
Something is not right here! PLEASE, IMMEDIATELY, WRITE THAT LETTER TO THE WHITE HOUSE CHIEF OF STAFF AND SEND A COPY TO PRESIDENT OBAMA. Whether you voted for them or not – they are the administration!
The address for both letters is 1600 Pennsylvania Avenue, Washington D.C. 20502.
Please forward this to everyone you know and get everyone to read this letter and write their own letter to the Chief of Staff, Rahm Emmanuel, and the Commander in Chief, President Obama!
Let’s get some answers before it is too late! We only want a fair chance to prove what we can do for the American people! We can and will, provide the White House with expert opinions and scientific evidence that we are the real deal.
The really good news is that you can still get a 50% increase in fuel economy, or greater guaranteed right NOW! Read More
To read the 13 page report from the Honorable Judge Shipp in http://acrobat.com PDF format. Click Here
It's a pleasure to refer to Judge Shipp as Honorable because Judge Shipp really is honorable. You can't say that about very many of the judges in the country today.
The following is the judge's report when he ruled to exxonerate Dutchman Enterprises.
If you can believe it -- the FTC's "persecuting" attorney "Josh Millard" claimed that the the court reporting equipment recorded badly and that the recording is "inaudible in parts" so a complete transcript of the trial which would show what a slam dunk win it was for Dutchman - could not be produced -- (bull....) of course.
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
FEDERAL TRADE COMMISSION,
Plaintiff,
Civ. Action No. 09-141(FSH)(MAS)
v.
DUTCHMAN ENTERPRISES, LLC;
UNITED COMMUNITY SERVICES
OF AMERICA, INC., also doing Report and Recommendation
business as UCSA DEALERS GROUP,
LLC; AND DENNIS LEE,
Defendants.
Appearances:
FEDERAL TRADE COMMISSION SILLS CUMMIS & GROSS PC By: Joshua Millard By: Jack Wenick By: Malini Mithal By: Paula Tuffin 600 Pennsylvania Avenue NW One Riverfront Plaza Suite NJ-2122 Newark, NJ Washington, DC
Attorneys for Plaintif
Attorneys for Defendants
SHIPP, United States Magistrate Judge
On January 14, 2009, the Honorable Faith S. Hochberg, U.S.DJ., granted the Ex Parte
Motion of the Federal Trade Commission ("FTC" or "Plaintiff') for a Temporary Restraining Order
("TRO") against Defendants Dutchman Enterprises, LLC ("Dutchman"), United Community
Services of America, also doing business as UCSA Dealers Group, LLC ("UCSA"), and Dennis Lee ("Lee") (collectively "Defendants") pursuant to Federal Rule of Civil Procedure 65(b)(1).
The TRO provided, in pertinent part, that a hearing would be held on January 26, 2009, at which time Defendants could show cause why the Court should not enter a preliminary injunction.' With the consent of the parties, the Court adjourned that hearing until February 5, 2009 in order for Defendants to retain adequate counsel.
This Report and Recommendation is issued pursuant to 28 USc. § 636(b)(l)(B). The Court has jurisdiction over this action pursuant to 28 USc. §§ 1331, 1337(a) and 1345, and 15 USc. § 53(b).
I. PARTIES
The FTC is an independent agency of the United States Government created by statute. 15 USc. § 41 et seq. The FTC is charged with, inter alia. enforcement of 15 U.S.C.A. § 45 (a)(1) which prohibits unfair and/or deceptive acts or practices affecting commerce.
The FTC is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the Federal Trade Commission Act, 15 USC. § 45, ("FTCA"), and to secure such equitable relief as may be appropriate in each case, including consumer redress. 15 USc. § 53(b). (PI. Compl.
~ 4.)
Defendant Dutchman is a Delaware limited liability company with headquarters loeated at 3002 Route 23 North, Newfoundland, New Jersey 07435. (PI.'s Compl. ~ 5.) Dutchman transacts or has transacted business in the District of New Jersey and throughout the United States. ld.
'Despite reference to the hearing as Defendants' opportunity to 'show cause', the Court notes that the burden of proof remains on the FTC to justify issuance of the preliminary injunction.
Defendant UCSA is a Delaware corporation with headquarters located at 3002 Route 23
North, Newfoundland, New Jersey 07435. (PI. 's Compl. , 6.) UCSA transacts or has transacted
business in the District of New Jersey and throughout the United States. [d.
Defendant Lee is the Chief Operating Officer and Direetor of Marketing of Dutchman and
President of UCSA (P!.'s Comp!. '1 7.) Plaintiff alleges that at all times relevant to this
complaint, acting alone or in concert with others, Defendant Lee has formulated, directed,
controlled, or participated in the acts and practices of Corporate Defendants Dutchman and UCSA,
including the acts and practices set forth in this complaint. Id. Defendant Lee resides in and
transacts or has transacted business in the District of New Jersey. [d.
II. BACKGROUND AND FACTS
Plaintiff filed its Complaint for Injunctive Relief and Equitable Relief ("Complaint") on January 12, 2009 and, at the same time, filed an Ex Parte Motion for a TRO and an Order to Show Cause, including provisions for expedited discovery and preservation of assets and evidence. (Ex Parte Mot. 22.) The Court required Plaintiff to serve its motion on Defendants and scheduled a hearing on Plaintiffs application for January 26,2009. (Ct. 's TRO 12.)
Defendants were unable to obtain adequate counsel for the hearing because of the asset freeze and after hearing opening statements from both Plaintiff and Defendants, the Court determined that in the interest of justice it would adjourn the hearing until February 5, 2009 to allow Defendants to obtain adequate counsel.
(Ct. 's Order to Modify TRO 3-4, Jan. 28, 2009.) The Court modified the TRO and released certain funds to be used exclusively for attorneys and expert fees in connection with the preliminary hearing. [d. The Court then instructed Defendants to submit an opposition brief to Plaintiffs Ex Parte Motion and Plaintiff to submit a reply brief.
(Ct.'s Order 1, Jan. 28, 2009.) The Court conducted a preliminary injunction hearing on February 5,2009.
Defendants are engaged in the business of manufacturing, advertising, selling and distributing a product called the "Hydro-Assist Fuel Cell" ("MMPG") that purportedly increases automobile gas mileage. (Defs.' Opp'n Br. 3.) In its Complaint, Plaintiff alleges that the practices Defendants employ in marketing and selling the MMPG violate Section 5(a) of the FTCA which prohibits unfair or deceptive acts or practices in or affecting commerce. (PI. 's Compl. '1 4.)
Plaintiffs first count alleging false and unsubstantiated efficacy claims is based on Defendants' representations that the "MMPG substantially increases gas mileage, including from 50% to 261%." (PI. 's Compl. " 14.) Plaintiffs second count of false establishment arises from Defendants' assertions that "[t]he MMPG system will likely double your gas mileage!
The kit is ABSOLUTELY GUARANTEED to increase your gas mileage by at least 50% ...." Id. at ~ 10(B). Plaintiff asserts that Defendants' claims "for the MMPG violate basic scientific laws and well-established physical principles -their claims are false and cannot be sustained." (PI. 's Ex Parte Mot. 1.)
Defendants deny these allegations and stand behind their advertisements.
III. SUMMARY OF ARGUMENTS
The FTC argues that it is entitled to a preliminary injunction because: (I) the FTC has probable cause to believe that Defendants are in violation of the FTCA, 15 u.s. CA. § 45(a)(I), by falsely advertising the MMPG kit; (2) there is a reasonable likelihood that Defendants will continue to violate the FTCA; and (3) it is in the public interest to issue a preliminary injunction. (PI. 's Ex Parte Mot. 18.)
William P. Halperin, PhD., an expert in the field of physics, testified on behalf of the FTC and opined that Defendant's product violates the laws of thermodynamics, principles of physics, and has no foundation in science.
(Halperin Hr'ing Test. on Feb. 5, 2009). According to Plaintiffs expert, the MMPG cannot possibly do what Defendants state that it can do. (PI.'s Ex Parte Mot. 19.)
The FTC contends that the FTCA requires a vendor to support its advertising claims with scientific proof. (PI. 's Reply Br. 12.) The FTC further contends that Defendant Lee's history of illegal conduct, which includes prior sanctions and violations of court orders, indicates that there is a reasonable likelihood that Defendants will continue to illegally market his product in violation of § 45. Id. at 20.
Lastly, the FTC contends that there is a strong public interest in enjoining Defendants; the FTC is concerned that if tbe TRO is lifted, Defendant Lee will abscond with the assets of Defendants making consumer redress impossible. Id. at 22.
Conversely, Defendants make four arguments in opposition to the motion for a preliminary injunction: (I) the FTC has failed to demonstrate that Defendants violated the FTCA; (2) even if Defendants violated the FTCA, it is not reasonably likely that these violations will continue; (3) balancing the equities for issuing an injunction strongly favors Defendants; and (4) the requested injunction is overly broad and burdensome. (Def.s.' Opp'n Br. 8, 15.)
Defendants' contend that the results of their proprietary rating system called the "orange test" is scientific proof that the MMPG increases fuel economy. (Defs.' Opp'n Br. 5). Defendants argue that in order to advertise their product, a vendor must only have a reasonable basis for believing the advertising claims they make to the public. (Defs.' Opp'n Br. 9.)
Defendants claim that based upon test results they have submitted to this Court, both standards have been satisfied and that any discrepancy is moot. Id. at 10. Defendants maintain that Defendant Lee's past offenses should not weigh against him, as they are irrelevant to the marketing of the MMPG. Id. at
12. According to Defendants, when balancing the equities, tbe device is not harmful to the public and even the purported harm alleged by the FTC is exclusively monetary. (Defs.' Opp'n Br. 13.)
Granting an injunction would in effect put Defendants out of business without affording them a full opportunity to prove their case in court. Id. at
14. Finally, Defendants maintain that the FTC's request for injunctive relief is overly broad. Id. at
15.
In reply, the FTC states that (1) Defendants fail to prove that their tests are accepted within the field, (2) Defendants' affiants are biased, (3) a money back guarantee does not defeat allegations of deceptive marketing, and (4) the requested relief is not overbroad. (PI. 's Reply Br.)
IV. LEGAL STANDARD
A. Preliminary Injunction
"Where an injunction is sought pursuant to a statutory provision, the moving party must establish that (I) probable cause exists to believe that the statute in question is being violated, and
(2) there is some reasonable likelihood of future violations." FTC v. Check Investors, Inc., 2003
U.S.
Dis!. LEXIS 26941, at *12 (D.N.J. 2003) (citing Us. v. Focht, 882 F.2d 55, 57 (3d Cir. 1989); In re Nat'l Credit Mgmt., 21 F. Supp. 2d 424, 439-40 (D.N.J. 1998); Us. v. Toys "R" Us, Inc., 754
F. Supp. 1050, 1053 (D.N.J. 1991)). "Proving a violation of the statute sued upon is akin to the traditional requirement of proving likelihood of success on the merits." Check Investors, Inc., 2003
U.S. Dis!. LEXIS 26941, at *13-14. "Additionally, the public interest must also be examined." Check Investors, Inc., 2003 U.S. Dis!. LEXIS 26941, at *13 (citing Nat'l Credit Mgmt., 21 F. Supp. 2d at 440-41).
B. Relevant Statute
The relevant portion of the FTCA, 15 US.CA. § 45(0)(1), provides that "unfair or deceptive acts or practices in or affecting commercc, are hereby declared unlawful." Id.
e. Legal Standard to Establish a Violation of the FTCA, 15 U.S.e.A. § 45(a)(I)
An advertisement is "deceptive if (1) there is a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is material." FTC v. QT, Inc., 448 F. Supp. 2d 908,959 (N.D. Ill. 2006) (citing FTC. v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir. 1994); Kraft, Inc. v. FTC, 970 F.2d 311, 314 (7th Cir. 1992)). The FTC may prove that an advertisement is deceptive under both (1) the "falsity" theory and (2) the "reasonable basis" theory. QT, Inc., 448 F. Supp. 2d at 957 (citing Pantron, 33 F.3d at 1096; FTCv. Sabal, 32 F. Supp. 2d 1004,1007 (N.D. Ill. 1998)).
"Under the falsity theory, the FTC has the burden of proving that the express or implied claim in the advertisement is false." QT, Inc., 448 F. Supp. 2d at 959 (citing Pantron, 33 F.3d at 1096). Under the reasonable basis theory concerning establishment claims, "the advertiser must possess the level of proof claimed in the ad[vertisement]." QT, Inc., 448 F. Supp. 2d at 959 (citing Thompson Medical Co. v. FTC, 791 F.2d 189, 194 (D.C. Cir. 1986)).
An express or implied claim is a claim that contains express or implied representations about the level of support for a particular claim, for example, that a product is determined to be of higher quality based on scientific testing.
Id.
V. DISCUSSION
The Court recommends that the FTC's motion for preliminary injunction be denied for the following reasons. First, the FTC has not established that there is probable cause that the Defendants' representations regarding the MMPG violated the FTCA2 An injunction is improper when the plaintiff fails to make a proper showing that it had reason to believe the public would be
'The FTC argues that since Judge Hochberg found probable cause when granting FTC's Ex Parte Motion for the TRO, then this Court should also find that probable cause exists. However, "[a]lthough the standards governing temporary and preliminary injunctions are the same, the procedures for obtaining them differ. The grant of a temporary restraining order is frequently ex parte, generally made on papers alone and in an expedited manner under severe time constraints. The issuance of a preliminary injunction requires notice, an evidentiary hearing and more extensive review of the underlying merits of the case. A temporary stay may validly issue although, under heightened scrutiny, a preliminary injunction should not ..." In re Keene Corp., 168 B.R. 285, 292 (Bnkr. S.D.N.Y. 1994).
misled. FTC v. Sterling Drug, Inc., 317 F.2d 669, 678 (2d CiL 1963). Second, the FTC has not established that there is a reasonable likelihood that Defendants will continue to violate the FTCA. Finally, the balance of the equities does not favor the public interest. Therefore, it is recommended that Plaintiffs motion for a preliminary injunction be denied.
A. Probable cause does not exist to believe that the statute in question is being violated.
"Proving a violation of the statute sued upon is akin to the traditional requirement of proving likelihood of success on the merits." Check Investors, Inc., 2003 U.S. Dist. LEXIS 26941, at *13
14. An advertisement is "deceptive if (I) there is a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is materiaL" QT, Inc., 448 F. Supp. 2d at 957 (citing Pmltron, 33 F.3d at 1095); Kraft, Inc., 970 F.2d at 314). Under the FTC Deception Policy Statement, an express claim is presumed to be materiaL QT, Inc., 448 F. Supp. 2d at 960 (citing Kraft, Inc., 970 F.2d at 322).
First, it is undisputed that Defendants made representations. Second, these representations were material because they were express claims. Therefore, the Court must decide if those material representations were misleading. Although the FTC is clearly proceeding under a falsity theory, for the reason stated below, the Court will address both the falsity and the reasonable basis theories.
1. Falsity Theory
"Under the falsity theory, the FTC has the burden of proving that the express or implied claim in the advertisement is false." QT, Inc., 448 F. Supp. 2d at 959 (citing Pmltron, 33 F.3d at 1096). The claims in issue are: (I) "MMPG substantially increases gas mileage, including from 50% to 261%" (PL's CompL ~ 14) and (2) "[t]he MMPG system will likely double your gas mileage! The kit is ABSOLUTELY GUARANTEED to increase your gas mileage by at least 50% ..." Id. at ~ 10(B).
This Court is skeptical of Defendants' representations regarding the MMPG. However, to carry its burden of proving that Defendants' representations are false, the FTC relied exclusively on the sworn testimony of Dr. William P. Halperin.
The Court finds this evidence inadequate for four reasons.
First, Defendants offered the results of their proprietary rating system called the "orange test" as scientific proof that the MMPG increases fuel economy. (Defs.' Opp'n Br. 4) Although the FTC suggests the "orange test" is not "an accepted, reliable scientific protocol for fuel economy tests," the FTC fails to explain why the "orange test" is unacceptable. (PI.'s Reply Br. at 13.)
Notably, any critique of the "orange test" was conspicuously absent from Dr. Halperin's sworn hearing testimony. Moreover, after Mr. Holler, a defense expert, described the "orange test" protocol on direct examination, the FTC chose not to challenge its acceptability or reliability on cross-examination. (Halperin Hr'g Test.)
This is significant because when granting the FTC's Motion for Preliminary Injunction in F. T. C. v. Sabal, the Court relied heavily on the testimony of the FTC's expert who refuted the defendant's proffered scientific evidence with specificity. For instance, the FTC expert in Sabal noted that the defendant's scientific:
study was neither published nor peer reviewed, . . . [that it] was inadequate to permit a thorough review of his research methods or independent verification of his test results. .. [that it] did not contain sufficient data from which it could be determined that the results were statistically significant, [and that it] did not explain how the control groups differed ...
Sabal, 32 F. Supp. at 1008. Therefore, the Court finds it significant that the FTC failed to rebut Defendants' proffered scientific data with any specificity.
Second, this case centers on the intricacies of automotive internal combustion engines. By his own admission, Dr. Halperin is not an expert on automotive internal combustion engines. (Halperin Hr'g Test.) Dr. Halperin's testimony included the following: (I) he has never designed an internal combustion engine, (2) he has never constructed an internal combustion engine, (3) he does not consider himself to be an expert in the design of intemal combustion engines, and (4) he has never worked in the automotive industry. Id. Therefore, although Dr. Halperin is undoubtedly an accomplished physicist, his expertise in this case is inadequate.3
Third, and not insignificantly, Dr. Halperin never physically examined the MMPG at issue in this case. (Halperin Hr'g Test.) In the six months that Dr. Halperin worked with the FTC on this investigation, he never once physically touched an actual MMPG unit, he never tested it in a lab, and he never examined its component parts. Id. This is a fatal defect in the FTC's proofs. Instead, the FTC and Dr. Halperin deemed it sufficient to abstractly conclude the MMPG simply cannot work. Id. The FTC's lack of thoroughness calls into question the basis of its arguments.
Fourth, Dr. Halperin actually agrees that adding hydrogen to fuel, which is what the MMPG purportedly does, could increase fuel efficiency. (Halperin Hr'g Test.) Furthermore, Dr. Halperin acknowledged the potential of a similar device being developed by Arvin Meritor and the Massachusetts Institute of Technology. Id. at Exh. 3. The fact that the FTC's expert concedes that the technology employed by the Defendants' has potential to meet Defendants' challenged representations further handicaps the FTC's claim.
Because the FTC failed to meet its burden due to inadequate evidence, the Court recommends Plaintiffs Motion for Preliminary Injunction be denied. However, this Court Dilly asserts that Plaintiff failed to meet its burden at the preliminary injunction stage. 3
The Court found Dr. Halperin to be knowledgeable in his field of expertise. Dr. Halperin displayed an obvious command of physics and, in particular, the laws of thermodyuamics. Dr. Halperin also displayed a strong command of his source materials.
However, the Court did not find Dr. Halperin's testimony persuasive as it related to the internal combustion engine. While the Court acknowledgcs that at times experts may cross-over fields, the attempted cross-over in the present case was not appropriate considering all of the factors discussed.
This case clearly deals with internal combustion engines and Dr. Halperin's testimony failed to convince the Court that probable cause exists to believe that the statute in question is being violated.
2. Reasonable Basis Theory
Since the Court finds Dr. Halperin's testimony inapplicable and the remaining "substance of the FTC's case focuse[s] on the alleged lack of substantiation for Defendants' claims ... the Court [will] analyze Defendants' claim under the reasonable basis theory." QT, Inc., 448 F. Supp. 2d at 961 n.25.
Under the reasonable basis theory concerning establishment claims, that is claims containing express or implied representations about the level of support for a particular claim (i.e., the claim states that a product has been found to be superior by scientific tests), "the advertiser must possess the level of proof claimed in the ad[vertisement]." QT, Inc., 448 F. Supp. 2d at 959 (citing Thompson Medical Co., 791 F.2d at 194).
Here, Defendants make express representations that the MMPG is scientifically proven to increase fuel efficiency. (Pl.'s Ex Parte Mot. Ex. PX9 I.) Therefore, Defendants must possess scientific proof.
Defendants rely on the results of a proprietary rating system called the "orange test" as scientific proof. (Defs.' Opp'n Br. 9.) The FTC suggests the "orange test" is not "an accepted, reliable scientific protocol for fuel economy tests." (PI.'s Reply Br. at 13).
However, any critique of this testing process was conspicuously absent from Dr. Halperin's sworn hearing testimony. Moreover, after Mr. Holler, a defense expert, described the "orange test" protocol on direct examination, the FTC chose not to challenge its acceptability or reliability on crossexamination. (Halperin Hr'g Test.). As stated above, in order to meet its burden the FTC was obligated to challenge Defendants' proffered scientific evidence with at least a modicum of specificity. Sabal, 32 F. Supp. 2d at 1008.
Because the FTC failed to meet its burden due to inadequate evidence, the Court recommends Plaintiffs Motion for Preliminary Injunction be denied.
Again, this Court only asserts that Plaintiff failed to meet its burden at the preliminary injunction stage.
B. Future Violations
Although a defendant's past history is "highly suggestive" of future violations, it is not conclusive.
(PI.'s Ex Parte Mot. 20.)
The Court agrees that Defendant Lee has a checkered past and the similarities between prior offenses and the current allegations are striking.
However, it is insufficient to use this history as the only means of proving this necessary element.
C. Granting the Motion for a Preliminary Injunction does not serve the public interest.
"The statutory test for issuance of a preliminary injunction also involves a balancing of the equities ..." In re Nat'l Credit Mgmt., 21 F. Supp. 2d 424, 460 (D.N.J. 1998) (citing FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1029 (7th Cir.1988)). "Although the court may consider private equities ... public equities receive far greater weight." FTC v. SabaI, 32 F. Supp. at 1009 (citing World Travel, 861 F.2d at 1029).
That said, the Court finds the balance of the equities militates in favor of Defendants because (I) there is no threat of further injury to the public and (2) they would suffer oppressive hardship if a preliminary injunction were entered.
First, there is no threat of further injury to the public. In World Travel, the Court affirmed the magistrate judge's recommendation "that the public interest required that the defendants' allegedly illegal business practices be enjoined to prevent further injury." World Travel, 861 F.2d at 1030.
Here, as stated above, the FTC has failed to show a likelihood that Defendants have violated the FTCA, much less that they will continue to violate the FTCA.
Although the FTC correctly states that it "need not prove seienter, reliance, or injury to establish a § 5 violation," the mere faet that Defendants do not sell directly to the public and not a single complaining consumer has come forward demanding relief speaks directly to the minimal, if any, harm to public interests and warrants some consideration in weighing the public interests. FTC v. Freedom Commc 'ns, 401 F.3d 1192, 1204 n.7 (10th Cif. 2005).
Second, the equities weigh in favor of the Defendants since they would suffer oppressive hardship if a preliminary injunction were entered. In FTC v. World Wide Factors, Ltd., the Court found that the equities weighed in favor of the public where "there [was] no oppressive hardship to [the] defendants in requiring them to comply with the FTCA, refrain from fraudulent representation or preserve assets from dissipation or concealment," because, inter alia, the defendant had already been "convicted [of] the criminally fraudulent activities alleged in thc FTC's complaint." ld. at 347. This case is easily distinguishable because Defendants have not been convicted of the activities alleged in this particular complaint. Furthennore, issuing a preliminary injunction will effectively close down the Defendants' business. Therefore, the balancing of the equities favors denying the motion for preliminary injunction.
VI. CONCLUSION
For the foregoing reasons, it is recommended that Plaintiffs Motion for a Preliminary
Injunction be DENIED.'
sl Michael A. Shipp
Michael A. Shipp UNITED STATES MAGISTRATE JUDGE
Dated: February 9, 2009
'This Report and Recommendation was to be issued at 5 PM on February 6, 2009. However, without leave of court Defendants filed a letter with the Court raising new arguments. The Court allowed the FTC to file a response. Therefore, out of an abundance of caution the Court delayed entering the Order until today in order to consider the late submissions by the parties.