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Plaintiff v. Lights of America, Inc.

United States District Court, C.D. California, Southern Division

January 15, 2014

FEDERAL TRADE COMMISSION Plaintiff,
v.
LIGHTS OF AMERICA, INC., et al., Defendants.

KIMBERLY L. NELSON (VA Bar No. 47224), GREGORY J. MADDEN, SANDHYA P. BROWN, Federal Trade Commission, Washington, DC.

BARBARA CHUN, Bar No. 186907, Federal Trade Commission, Los Angeles, CA, ATTORNEYS FOR PLAINTIFF, FEDERAL TRADE COMMISSION.

WILLIAM J. ROBINSON (State Bar No. 83729), JEAN-PAUL CIARDULLO (State Bar No. 284170), FOLEY & LARDNER LLP, Los Angeles, CA, Attorneys for LIGHTS OF AMERICA, INC., USMAN VAKIL, and FAROOQ VAKIL.

FINAL JUDGMENT AND ORDER FOR INJUNCTIVE AND OTHER RELIEF

JAMES V. SELNA, District Judge.

On September 7, 2010, Plaintiff, Federal Trade Commission ("FTC" or "Commission") brought this action for injunctive and equitable monetary relief against Lights of America, Inc. ("LOA"), Usman Vakil, and Farooq Vakil (collectively, "Defendants") for deceptive business practices related to their marketing and sale of light bulbs that use light-emitting diodes ("LEDs") as a light source. (Docket No. 1) In the Complaint and First Amended Complaint (Docket Nos. 1 and 38), the FTC asserted that Defendants' activities violated Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a) (the "FTC Act"), and requested injunctive and equitable monetary relief against all Defendants pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b).

The parties filed cross-motions for summary judgment on February 13, 2102. (Docket Nos. 164, 165, 170, 184, and 167) On April 25, 2012, the Court granted Plaintiff's motion for partial summary judgment on Count I of the Amended Complaint, granted in part LOA's motion for summary judgment with respect to Count II of the Amended Complaint, and denied the Vakils' motion for summary judgment. (Docket No. 243 (the "MSJ Order"))[1]

The Court conducted a four-day bench trial between October 30 and November 2, 2012. Four claims were tried before the Court: (1) whether Defendants violated Section 5 of the FTC Act by engaging in deceptive acts or practices in making false claims with regard to LED lamps replacing certain wattage incandescent lamps; (2) whether Defendants violated Section 5 of the FTC Act by engaging in deceptive acts or practices in making unsubstantiated and/or false claims with regard to the lifetime of their LED lamps; (3) whether injunctive relief against all Defendants is proper; and (4) whether Defendants are liable for equitable monetary relief and/or disgorgement of ill-gotten gains. The Court received evidence in the form of exhibits, designated portions of deposition transcripts, and witness testimony. After carefully reviewing all of the evidence, testimony, and arguments presented by the parties' counsel, the Court concluded in its Findings of Fact and Conclusions of Law that the FTC had proven by a preponderance of the evidence that Defendants are liable for the deceptive marketing and sale of certain LED lamps in violation of Section 5(a) of the FTC Act. (Docket No. 361) The Court entered its Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52(a). The Court also found that injunctive relief against all Defendants is appropriate because: (1) it is reasonably likely that Defendants will commit the kinds of deceptive practices at issue in this case in the future; (2) Defendants acted with sufficient deliberateness; (3) Defendants have had prior experience with false claims; and (4) Defendants are in a position to repeat their deceptive acts with other lighting products they sell. Further, the Court ruled that equitable monetary relief against all Defendants in the amount of $21, 165, 863.47 is appropriate in this case.

The Court directed the FTC to file a proposed judgment embodying its ruling as set forth in the Findings of Fact and Conclusions of Law entered on September 17, 2013 (Docket No. 361) (the "Findings"). On September 23, 2013, the FTC filed its proposed final judgment and order for permanent injunction against Defendants. Based upon the record established in this case, the Court enters this Final Judgment and Order for Injunctive and Other Relief pursuant to Federal Rule of Civil Procedure 58.

SUMMARY OF FINDINGS AND JUDGMENT

1. This Court has jurisdiction over the subject matter of this case and each of the parties. Venue lies properly with this Court.

2. Pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), the Commission has the authority to seek the relief contained herein.

3. At all relevant times, the acts and practices of Defendants have been in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

4. The evidence admitted on summary judgment established that Defendants made unsubstantiated claims that their LED Lamps provided the same or comparable light output as incandescent lamps. MSJ Order, at 7-9.

5. The evidence admitted at trial established that Defendants made false claims that their LED Lamps provided the same or comparable light output as incandescent lamps. Findings, ¶¶ 85, 90, 94-97, 103, 243-244.

6. The evidence admitted at trial established that Defendants made unsubstantiated and false claims about the lifetime of their LED Lamps. Findings, ¶¶ 150, 158, 165-166, 168, 173-174, 176, 181, 183-184, 187, 189-190, 196-199, 204-205, 207-209, 218, 227, 243-244.

7. The evidence admitted at trial and the evidence admitted during summary judgment established that Defendants violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), in making unsubstantiated and false claims about the light output and lifetime of their LED Lamps.

8. The evidence admitted at trial established that there is a reasonable likelihood that Defendants would continue to engage in the activities alleged unless permanently enjoined from such acts and practices. Thus, this Court held that injunctive relief was warranted against all Defendants. Findings, ¶¶ 472-486.

9. The evidence admitted at trial established that equitable monetary relief against Defendants was warranted. Findings, ¶¶ 487-516.

10. LOA's gross revenue is a conservative, yet proper measure of monetary liability in this case. Findings, ¶¶ 517-522. Equitable monetary relief under both restitution and disgorgement theories is the same in this case: Defendants' gross revenues from the deceptively advertised products.

11. Total consumer harm and total ill-gotten gains in this case equals $21, 165, 863.47. Findings, ¶¶ 523-535. LOA, Usman Vakil, and Farooq Vakil are jointly and severally liable for equitable monetary relief in the amount of twenty-one million, one hundred sixty-five thousand, eight hundred sixty-three dollars and forty-seven cents ($21, 165, 863.47), plus post-judgment interest pursuant to 28 U.S.C. § 1961, which will accrue upon entry of this Final Judgment.

12. Entry of this Final Judgment is in the public interest. There being no just reason for delay, the Clerk is directed to enter judgment immediately.

DEFINITIONS

For the purposes of this Final Judgment, the following ...


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