Hi Tech Pharmaceuticals, Inc. v. Federal Trade Commission

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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HI TECH PHARCEUTICALS, INC., )
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Plaintiff, )
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v. ) Civ. Action No. 13-489 (EGS)
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FEDERAL TRADE COMMISSION, )
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Defendant. )
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MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
Plaintiff Hi-Tech Pharmaceuticals, Inc. (“Hi-Tech”) has
brought an action for declaratory and injunctive relief against
the Federal Trade Commission (“FTC”). On April 12, 2013, the
Court ordered Hi-Tech to show cause why the case should not be
transferred to the United States District Court for the Northern
District of Georgia, where an underlying Enforcement Action at
issue in this case has been pending before Judge Charles A.
Pannell, Jr. since 2004. See Fed. Trade Comm’n v. Nat’l
Urological Group, Inc., No. 04-cv-3294 (CAP) (hereinafter, the
“Enforcement Action”). Plaintiff filed a response to the
Court’s order on April 26, 2013. The FTC filed its own response
on June 5, 2013 arguing that the case should be transferred to
the Northern District of Georgia, and Hi-Tech filed a reply on
June 20, 2013. Upon review of the parties’ filings, the
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applicable law, and the entire record, the Court hereby
TRANSFERS this action to the Northern District of Georgia.
II. BACKGROUND
Hi-Tech is a Georgia corporation that manufactures and
distributes dietary supplements, including weight loss products.
Compl. ¶ 1; Plaintiff’s Mem. of Law Showing Cause (“Show Cause
Mem.”) at 2. In this action, Hi-Tech seeks an order declaring
that the term “competent and reliable scientific evidence,” as
used in a Final Judgment and Permanent Injunction issued in the
Enforcement Action, “has no fixed meaning” and “requires case,
product and claim specific adjudication and may result in
different meanings even in the same case.” Compl. ¶ 3a. Hi-
Tech alleges that the FTC has adopted a new standard for
“competent and reliable scientific evidence” that requires “two
double blind, placebo controlled, product specific studies.”
Id. Hi-Tech argues instead that a particular claim about a
product is substantiated by “competent and reliable scientific
evidence” if it is supported by evidence that: “(i) is based on
the expertise of professionals in the relevant area; (ii) is
conducted and evaluated in an objective manner by a person
qualified to do so; (iii) uses procedures generally accepted in
the profession to yield accurate and reliable results; and (iv)
has a causal connection to the particular claim being challenged
as interpreted by the Court.” Compl. ¶ 3b.
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The parties have a long history of litigating the
substantiation standard for product claims and Hi-Tech has
raised similar arguments regarding the FTC’s purported attempt
to change the standard several times before. In 2008, the Court
granted summary judgment for the FTC in the Enforcement Action
and held that Hi-Tech had violated Section 5 of the FTC Act.
See Fed. Trade Comm’n v. Nat’l Urological Group, Inc., 645 F.
Supp. 2d 1167 (N.D. Ga. 2008), aff’d, 356 F. App’x 368 (11th
Cir. 2009), cert. denied, 131 S. Ct. 505 (2012). The Court
accepted the FTC expert’s conclusions regarding the appropriate
level of substantiation for any claims made by Hi-Tech regarding
its products, holding that to substantiate weight loss claims,
including those for dietary supplements, a party must present
“appropriately analyzed results of independent, well-designed,
randomized, double-blind, placebo-controlled clinical trials,
given at the recommended dosage involving an appropriate sample
population in which reliable data on appropriate end points are
collected over an appropriate period of time.” Id. at 1202.
Moreover, the Court ruled that “some form of clinical trial must
have been conducted on the product itself or an exact duplicate
of the product to substantiate the defendants’ claims regarding
the overall product.” Id. at 1202-03. These standards were
incorporated in a permanent injunction entered in December 2008.
See Enforcement Action, ECF No. 230.
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In May 2012, in an Order granting a motion by the FTC for
an order to show cause why Hi-Tech should not be held in
contempt, the Court again noted that it had already adopted the
FTC’s definition as to what constituted “competent and reliable
scientific evidence” in its 2008 opinion. See Fed. Trade Comm’n
v. Nat’l Urological Group, Inc., No. 04-cv-3294, ECF No. 390 at
7. In granting the FTC’s motion for an order to show cause, the
Court noted that the FTC’s substantiation standard was “part of
the law of the case” and therefore “not subject to
relitigation.” Id. at 8-9. Following extensive briefing in
which Hi-Tech made almost identical arguments to those it has
made in its Complaint regarding the substantiation standard, the
Court granted the FTC’s motion to hold Hi-Tech and other
defendants in the Enforcement Action liable for contempt of the
December 2008 permanent injunction in August 2013. See FTC’s
Notice of Filing.
In addition to the litigation in the Enforcement Action,
Hi-Tech brought a substantially similar action to the one
currently before this Court in the Northern District of Georgia
in June 2012. See Hi-Tech Pharmaceuticals, Inc. v. Federal
Trade Commission, No. 12-cv-2043 (CAP). That action was
voluntarily dismissed on Plaintiff’s motion after the FTC filed
a motion to dismiss. In its motion to dismiss the FTC argued
that the level of substantiation for advertising claims was not
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a “rule” promulgated by the FTC, and that Hi-Tech was
collaterally estopped from re-litigating an issue that had
already been litigated in the Enforcement Action. Moreover, the
FTC argued that even if Hi-Tech could re-litigate the issue, the
proper forum would be the Enforcement Action and not a separate
action. See FTC Mot. to Dismiss, ECF No. 7, Hi-Tech
Pharmaceuticals, Inc. v. Federal Trade Commission, No. 12-cv-
2043 (CAP).
III. STANDARD OF REVIEW
Pursuant to 28 U.S.C. § 1404(a), “[f]or the convenience of
the parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other
district where it might have been brought.” In so doing, the
district court has discretion to transfer a case based on an
“‘individualized case-by-case consideration of convenience and
fairness.’” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29
(1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964));
see also Demery v. Montgomery County, 602 F. Supp. 2d 206, 210
(D.D.C. 2009) (“Because it is perhaps impossible to develop any
fixed general rules on when cases should be transferred[,] . . .
the proper technique to be employed is a factually analytical,
case-by-case determination of convenience and fairness.”)
(internal quotation marks omitted)). The moving party bears the
burden of establishing that transfer of the action is proper.
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Devaughn v. Inphonic, Inc., 403 F. Supp. 2d 68, 71 (D.D.C.
2005); see also SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1154
(D.C. Cir. 1978) (noting that the district court’s denial of a
motion to transfer “was effectively a ruling that [the
appellant] had failed to shoulder his burden”).
In order to justify a transfer, defendants must make two
showings. First, they must establish that the plaintiff could
have brought suit in the proposed transferee district.
Devaughn, 403 F. Supp. 2d at 71-72; Trout Unlimited v. United
States Dep’t of Agric., 944 F. Supp. 13, 16 (D.D.C. 1996).
Second, defendants must demonstrate that considerations of
convenience and the interests of justice weigh in favor of a
transfer. Devaughn, 403 F. Supp. 2d at 72; Trout Unlimited, 944
IV. DISCUSSION
Plaintiff argues that venue is proper in the District of
Columbia pursuant to 28 U.S.C. § 1391(e), which provides that
“[a] civil action in which a defendant is . . . an agency of the
United States . . . may, except as otherwise provided by law, be
brought in any judicial district in which (A) a defendant to the
action resides, (B) a substantial part of the events or
omissions giving rise to the claim occurred . . . or (C) the
plaintiff resides if no real property is involved in the
action.” Under this standard, Hi-Tech contends that venue is
not improper in the District of Columbia because the FTC is
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headquartered in the District. The FTC argues that the case
should be transferred because “Hi-Tech has already litigated, in
the enforcement action, the issue it seeks to raise here and,
even if it could relitigate the issue, the proper forum would be
the enforcement action.” Response to Hi-Tech at 3.
A. Private Interest Factors
The private interest factors the court will consider in
deciding whether to transfer an action include, inter alia: (1)
the plaintiff’s choice of forum, unless the balance of
convenience is strongly in favor of the defendant; (2) the
defendant’s choice of forum; (3) whether the claim arose
elsewhere; and (4) the convenience of the parties. See Spurlock
v. Lappin, 870 F. Supp. 2d 116, 122 (D.D.C. 2012) (citing Trout
Unlimited v. Dep’t of Agric., 944 F. Supp. 13, 16 (D.D.C.
1996)).
Hi-Tech argues that “the District of Columbia is a more
appropriate forum to address the constitutional and statutory
issues raised in the complaint,” Plaintiff’s Show Cause Mem. at
7, though it has proffered few reasons why that might be the
case. Indeed, Hi-Tech’s principal argument against transfer is
essentially that this Court should not transfer the action
because its choice of forum should be afforded deference. In
its response to the Court’s April 12, 2013 Minute Order, Hi-Tech
makes no mention of the similar complaint it filed in the
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Northern District of Georgia in June 2012, which it later
voluntarily dismissed, nor does it address the similarities
between the arguments it presents here and those that were at
issue in contempt proceedings in the Enforcement Action.
In addressing the private interest factors, Hi-Tech argues
that the claim arose in the District of Columbia because the FTC
has made relevant decisions in this jurisdiction. However, it
does not address the fact that the Injunction at issue in this
matter was entered after litigation in the Northern District of
Georgia, or how that fact affects where the claim arose.
Plaintiff’s Show Cause Mem. at 7. Hi-Tech also argues that a
District of Columbia forum would not only be more convenient for
its New Jersey based counsel, but also for the FTC. Id. at 7-8.
According to Hi-Tech, after years of costly litigation it can no
longer afford to pay counsel to travel to Georgia. Id. at 8.
As a result, it argues that as the plaintiff in this action, it
is “seeking the advantage of a more conveniently located forum.”
Id. Finally, Hi-Tech claims that the fact that the parties have
litigated in the Northern District of Georgia in the past has no
bearing on this Court’s transfer analysis. Id.
The FTC argues that in this case, the Defendant’s choice of
forum should take precedence because of the existing Enforcement
Action pending in the Northern District of Georgia. Response to
Plaintiff’s Show Cause Mem. at 8. According to the FTC, its
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choice of forum is further supported by the fact that the claim,
contrary to Hi-Tech’s assertion that it arose in the District of
Columbia, actually arose in the Enforcement Action. Id.
Moreover, according to the FTC, Hi-Tech “seeks to make the same
arguments here that the Court in Georgia has repeatedly
addressed and rejected.” Id.
The Court agrees. While Hi-Tech is correct that a
plaintiff’s choice of forum is generally accorded deference,
“where the chosen forum is not plaintiff’s home forum” or “where
there is an insubstantial factual nexus between the case and
plaintiff’s chosen forum, deference to the plaintiff’s choice of
forum is . . . weakened.” New Hope Power Co. v. U.S. Army Corps
of Eng’rs, 724 F. Supp. 2d 90, 95 (D.D.C. 2010). This deference
is further lessened where, as here, the transferee forum has
“substantial ties” to both the plaintiff and “the subject matter
of the lawsuit.” Trout Unlimited, 944 F. Supp. at 17. Indeed,
as Hi-Tech concedes in its response to the Court’s show cause
order, “this case is about how the FTC may or may not enforce
the Injunction” entered in the Enforcement Action. Plaintiff’s
Show Cause Mem. at 7. As such, the Court concludes that the
claims Hi-Tech is attempting to bring arise directly out of the
Enforcement Action pending before Judge Pannell in the Northern
District of Georgia. The only tie to the District of the
Columbia seems to be that the FTC is headquartered here, which
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is not sufficient, on its own, for this Court to maintain
jurisdiction. See Sheffer v. Novartis Pharmaceuticals, 873 F.
Supp. 2d 371, 376 (D.D.C. 2012) (finding that transfer was
warranted where the only tie to the District of Columbia was
that the court had in personam jurisdiction over the defendant).
Therefore, the deference usually afforded to the Plaintiff’s
choice of forum has been greatly diminished and weighs in favor
of transfer.
Moreover, in this case, the Defendant would prefer the
transferee forum, and with good reason. Given the inextricable
links between this action and the Enforcement Action, the
Northern District of Georgia would be more convenient for the
parties despite Hi-Tech’s argument regarding the cost of
litigating in Georgia. 1 See Plaintiff’s Show Cause Mem. at 8.
Hi-Tech cannot circumvent Judge Pannell’s multiple rulings on
the substantiation standard, made after years presiding over the
case, by trying to re-litigate an already-decided question in
this Court. Contrary to Plaintiff’s allegations that the FTC
has somehow amended the substantiation standard and now requires
“in all cases, a double blind, placebo-controlled, product
1
As the FTC points out, the Enforcement Action is still pending
and counsel in this matter have entered appearances in the
Enforcement Action. Response to Plaintiff’s Show Cause Mem. at
9. Given that, the Court fails to see how litigating this issue
in the Northern District of Georgia would significantly increase
Hi-Tech’s legal fees.
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specific study,” Plaintiff’s Show Cause Mem. at 3, that
requirement was imposed by the Court and is the law of the case
in the Enforcement Action. Any issues that Hi-Tech may have
with that standard or how the FTC enforces the Injunction as a
whole must therefore be litigated in the Enforcement Action, not
in this Court.
B. Public Interest Factors
In addition to the private interest factors discussed
above, the Court must also consider several public interest
factors before transferring the case to another forum. These
factors include: “1) the transferee’s familiarity with the
governing laws, 2) the relative congestion of each court, and 3)
the local interest in deciding local controversies at home.”
Montgomery v. STG Int’l, Inc., 532 F. Supp. 2d 29, 34 (D.D.C.
2008) (citing Liban v. Churchkey Group II, L.L.C., 305 F. Supp.
2d 136, 143 (D.D.C. 2004)).
Neither party disputes that all of Plaintiff’s claims arise
under various federal statutes and the United States
Constitution, or that both districts have the requisite
familiarity with the law and are equally able to resolve the
present dispute. See Plaintiff’s Show Cause Mem. at 9; FTC
Response at 10. See also Montgomery, 532 F. Supp. 2d at 34
(citing In re Korean Air Lines Disaster of Sept. 1, 1983, 829
F.2d 1171, 1175 (D.C. Cir. 1987)). While there may be no local
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interest in deciding the case in Georgia, because, as Hi-Tech
argues, the Injunction applies nationally, there is an interest
in having issues related and arising out of the Injunction
litigated in the forum in which they were originally brought. To
the extent that Hi-Tech is challenging enforcement of the
Injunction, over which the Georgia Court has retained
jurisdiction, that Court is more familiar with the particular
issues raised by Hi-Tech than this one. See e.g., United States
ex rel Westrick v. Second Chance Body Armor, Inc., 771 F. Supp.
2d 42, 46-47 (D.D.C. 2011) (declining to transfer a case to
another forum because the Court was “familiar with the multiple
issues and lengthy procedural history of the case, and [had]
decided [defendants’] dispositive motions,” and because it would
have taken another court “a substantial amount of time to
familiarize itself with the case”). Because “[l]itigation of .
. . related claims in the same forum is strongly favored,” the
Court finds that the public interest factors weigh in favor of
transfer as well. Id. (quoting Islamic Republic of Iran v.
Boeing Co., 477 F. Supp. 142, 144 (D.D.C. 1979)).
V. CONCLUSION AND ORDER
The Court concludes that the interests of justice would be
best served by transferring this case to the Northern District
of Georgia. Accordingly, it is hereby
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ORDERED that, pursuant to 28 U.S.C. § 1404(a), the Clerk’s
Office is directed to TRANSFER this case to the United States
District Court for the Northern District of Georgia.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
December 20, 2013
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